REG - NatWest Group plc - Final Results - NatWest Group plc
17/02/2023 07:00
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RNS Number : 2355Q NatWest Group plc 17 February 2023
Annual Results
For the year ended 31 December 2022
natwestgroup.com
NatWest Group plc
2022 NatWest Group performance summary
Chief Executive, Alison Rose, commented:
"NatWest Group delivered a strong performance in 2022, with pre-tax profit up
more than a third to £5.1 billion. We made considerable progress against our
strategic goals, maintained a well-balanced loan book and distributed
significant capital to our shareholders, including the UK Government.
Despite not yet seeing significant signs of financial distress among our
customers, we are acutely aware that many people and businesses are struggling
right now and that many more are worried about what the future holds. Our
robust balance sheet, responsible lending and continued capital generation
allow us to proactively support those who need it, whilst helping others to
get ahead of the challenges to come.
As well as supporting our customers, this financial strength also allows us to
continue investing in our business to meet the changing needs of our
customers. By building long term relevance, trust and value through our
purpose-led strategy, we will deliver sustainable returns and, ultimately,
help to drive economic growth across the UK."
Strong financial performance and delivery against our targets
- Full year attributable profit of £3,340 million and a return on
tangible equity of 12.3%.
- Excluding notable items, income increased by £2,877 million, or
28.3%, compared with 2021 principally reflecting volume growth, higher trading
income and the improved rate environment.
- Bank NIM of 2.85% was 55 basis points higher than 2021. Q4 2022 Bank
NIM increased by 21 basis points to 3.20% compared with Q3 2022.
- Total operating expenses were £71 million lower than 2021. Other
operating expenses for the Go-forward group((1)) were £201 million, or 2.9%,
lower than 2021, in line with our cost reduction target of around 3%.
- A net impairment charge of £337 million, or 9 basis points of gross
customer loans, principally reflects the latest macro-economics, including
updated scenarios and their associated weighting, with more weight being
placed on the downside scenario. Underlying book performance remains strong,
with credit conditions remaining benign and levels of default remaining low.
- The tax charge for the year includes a £267 million credit in the
carrying value of the deferred tax asset in respect of tax losses and a credit
of £135 million in respect of an inflationary uplift in the value of UK
Government Index Linked Gilt assets that is not subject to corporation tax.
- A final dividend of 10 pence per share is proposed, and we intend to
commence an ordinary share buyback programme of up to £800 million in the
first half of 2023, taking total distributions deducted from capital in the
year to £5.1 billion, or 53 pence per share.
Robust balance sheet with strong capital and liquidity levels
- Net lending increased by £7.3 billion to £366.3 billion during 2022
primarily reflecting £14.4 billion of growth in Retail Banking mortgages,
with gross new mortgage lending of £41.4 billion, and a £5.7 billion
increase in Commercial & Institutional, partially offset by a £14.6
billion reduction in Central items & other, which included a £6.4 billion
decrease as we continued our exit from the Republic of Ireland.
- Customer deposits decreased by £29.5 billion during 2022 to £450.3
billion, principally reflecting a £14.2 billion reduction in Commercial &
Institutional due to an overall market liquidity contraction in the second
half of the year and reductions in Corporate and Institutions, particularly
non-operational accounts in Financial Institutions and professional services
with relatively low margin and funding value, and a £12.2 billion reduction
associated with our withdrawal from the Republic of Ireland.
- The liquidity coverage ratio (LCR) of 145%, representing £52.0
billion headroom above 100% minimum requirement, decreased by 27 percentage
points compared with 2021. Total wholesale funding decreased by £2.3 billion
in the year to £74.4 billion.
- The CET1 ratio of 14.2% was 170 basis points lower than the position
on 1 January 2022 principally reflecting distributions and linked pension
accruals of c.310 basis points partially offset by the attributable profit,
c.190 basis points.
- RWAs of £176.1 billion were £0.2 billion lower than 1 January 2022
as lending growth and model changes were offset by a £5.7 billion reduction
in the Republic of Ireland.
(1) Go-forward group excludes Ulster Bank RoI and discontinued operations.
2022 NatWest Group performance summary continued
Our purpose in action
We champion potential, helping people, families, and businesses to thrive. By
working to benefit our customers, colleagues, and communities, we will deliver
long-term value and drive sustainable returns to our shareholders. Some key
achievements in 2022 include:
People and families
- We carried out c.0.7 million financial health checks in 2022 and
launched our credit score feature in our mobile app to help customers
understand their credit score.
- Together with footballer and campaigner, Marcus Rashford MBE, and the
National Youth Agency we launched NatWest Thrive, which aims to help young
people build their confidence with money.
- MoneySense has helped over 1.1 million young people learn about money
and our CareerSense programme reached over 16,000 young people in 2022.
- In Retail Banking, we have completed £2.9 billion of Green
Mortgages((1)), which incentivise customers purchasing, porting or
re-mortgaging a property with an EPC rating of A or B, since they were
launched in Q4 2020, including £826 million in Q4 2022.
Businesses
- We provided £24.5 billion of climate and sustainable funding and
financing during 2022, bringing the cumulative contribution to £32.6 billion
against our target to provide £100 billion between 1 July 2021 and the end of
2025.
- We announced a £1.25 billion lending package for the UK farming
community and our c.40,000 agriculture customers within it, building on an
earlier set of measures, such as capital repayment holidays and increased
overdraft limits.
- To support SME customers, Business Current Accounts remain available
without a minimum charge, and we froze the standard published tariffs on these
accounts for 12 months. We also offered free card machine hire on our payment
service, Tyl, for new customers.
- As part of our support for female entrepreneurs, we launched the 100
Female Entrepreneurs to Watch with The Telegraph to highlight some of the UK's
most exciting female-led businesses. We also collaborated with social
technology company Meta to offer training and support to female business
owners.
- We lowered the application threshold for our universal Green Loan((2))
offering for SMEs from £50,000 to £25,001, helping more businesses
transition to net zero.
- We launched the NatWest Carbon Planner in Q3 2022, a free-to-use
digital platform designed to help UK businesses identify potential cost and
carbon savings.
Colleagues
- Building on our campaign to support priority future skills, our
colleagues can now take two dedicated learning-for-the-future days each year
to support their development.
- We announced our new partner leave policy((3)), which supports all
eligible colleagues with significantly more time away from work to help their
partner look after their new child, whether the child has arrived through
birth, adoption or surrogacy.
- We took targeted action to provide long-term support through a
permanent increase in base pay for our lowest-paid colleagues, globally.
c.22,000 colleagues received a pay rise, effective from 1 September 2022, and
in the UK, this resulted in a 4% salary rise for those earning less than
£32,000.
- We retained our place in Bloomberg's Gender Equality Index and were
listed as one of The Times Top 50 Employers for Women 2022.
Communities
- During 2022 we developed the initial iteration of our Climate
transition plan, which is published alongside our 2022 annual results.
- During 2022, NatWest Group became the first UK bank, and one of
the largest banks globally to date, to have science-based targets validated by
the Science Based Targets initiative (SBTi).
- Our colleagues and customers donated over £12 million (including
£2.7 million from NatWest Group) in 2022 to three appeals launched by the
Disasters Emergency Committee (DEC) for the humanitarian relief efforts in
Afghanistan, Ukraine and Pakistan.
- With our Sustainable Homes and Buildings Coalition partners,
British Gas and Worcester Bosch, we published the Home is Where the Heat is -
Progress Report, which documents the first phases of our greener homes
retrofit project.
(1) Green Mortgages are available to all intermediaries for all residential and
Buy to Let properties with an energy performance rating of A or B and specific
new build developer properties. Available for Purchase, Porting and
Re-mortgage applications.
(2) Green Loans with no arrangement fee are open to applications from eligible UK
businesses with an annual turnover of less than £25 million (other than for
eligible UK Real Estate Finance businesses for whom alternative eligibility
criteria may apply) who are seeking to take out a loan to acquire assets that
fall within the eligible list developed by the bank and subject to review and
change on an ongoing basis. Eligibility does not imply compliance with any
green or similar taxonomy or standard.
(3) Our partner leave policies will replace existing paternity leave policies from
1 January 2023 across our operations in the UK, Offshore, Republic of Ireland,
US, Poland and India.
Group Chief Executive's review
In 2022, as the country recovered from the COVID-19 pandemic, we witnessed
economic conditions not seen in generations. The highest inflation rate in
decades, rising interest rates, a steep increase in energy costs and supply
chain disruption had a huge impact on people's lives. This meant that being
guided by our purpose to support our stakeholders and drive long-term
sustainable value was as important as ever.
In light of these challenging economic circumstances, we focused on putting in
place proactive support to help people, families and businesses to manage and
to help alleviate the financial pressures being felt by those who were most
vulnerable. The strength of our balance sheet has allowed us to stand
alongside our customers and help them to navigate this heightened uncertainty,
as well as delivering a strong financial performance for NatWest Group and
value for shareholders.
Support for the cost of living
We responded quickly and meaningfully, proactively contacting our customers to
offer support and information on the cost of living. In addition, we carried
out c.0.7 million financial health checks in 2022 and launched our credit
score feature in our mobile app to help customers understand their credit
score. Our online cost of living hub was also established to share resources
and tools, informing customers of the support that is available to them, as
well as support through third parties. These measures were in addition to £4
million in donations to provide grants and support, delivered in collaboration
with organisations including Citizens Advice, The Trussell Trust, Step Change
and PayPlan.
As one of the leading banking partners of UK business, we have taken a range
of actions on charges, waiving fees on some products where appropriate,
including freezing standard published tariffs on Business Current Accounts for
12 months to help SMEs, and offering free card machine hire for new customers
on our payment service Tyl.
For our commercial customers, we were able to deliver tailored support to the
most impacted sectors, including a £1.25 billion lending package for our
c.40,000 agriculture customers, as well as providing c.51,700 financial health
checks for our business customers.
Supporting our colleagues during this period has continued to be a key focus.
In addition to the pay review in April 2022, and following consultation with
our recognised employee representatives in September 2022, we put in place
targeted action to provide long-term support for colleagues through a
permanent increase in base pay for our lowest-paid colleagues, globally. This
brought total investments in pay of around £115 million per annum in 2022, an
increase of 85% on 2021.
We agreed further measures for 2023 which include a one-off £1,000 cost of
living cash payment for c.42,000 colleagues in the UK, Republic of Ireland and
Channel Islands, and c.60,000 people globally. The 2023 pay proposal also
includes a minimum increase of £2,000 for almost all of the colleagues
covered by it. Taken together, this will mean that c.80% of lower-paid
colleagues covered by our negotiated pay approach will receive an increase,
plus a cash payment, equivalent to 10% or more of their fixed pay. In the UK,
our rates of pay continue to exceed the 'Living Wage Foundation' benchmarks
and, for our major hubs outside the UK, we continue to pay above the minimum
and living wage rates in the Republic of Ireland as well as exceeding the
minimum wage benchmarks in India and Poland.
Delivering on our strategy
Of course, these actions - driven by our purpose - are not just the right
thing to do, but they are key to building a long-term, profitable organisation
and are underpinned by the strong foundations of our strategy. Our operating
profit for 2022 of £5.1 billion increased from £3.8 billion the year before.
Pleasingly, this was driven by strong performance across all business segments
and enabled from a position of responsible and sustainable lending. We also
continued to make progress against our financial targets. Other operating
expenses, for the Go-forward group((1)), were £201 million, or 2.9% lower
than 2021, in line with our cost reduction target of around 3%((2)), and we
retain a CET1 ratio of 14.2%, in line with our target.
Against an uncertain economic outlook, the strength of our balance sheet and
the quality of our loan and deposit base allow us to continue lending
responsibly while also helping our customers to navigate the challenges they
are facing. Net lending balances increased by £7.3 billion, 2.0%, with growth
balanced across the bank. Mortgage growth continued and wholesale lending was
strong across the whole book. Customer deposits did decrease by £29.5
billion, or 6.1%. However, this principally reflected a reduction in our
Commercial & Institutional segment, and a £12.2 billion reduction due to
our withdrawal from the Republic of Ireland.
This strong capital position and continued capital generation means that we
are well placed to invest for growth, to provide the support our customers
need as the economy recovers and to drive sustainable returns to shareholders,
with £5.1 billion shareholder distributions paid and proposed for 2022
through dividends and buybacks. Against this backdrop, we also returned to
majority private ownership during 2022 with the UK Government's stake falling
below 50%, which was a symbolic milestone for our bank.
It is from this basis of progress and profitability that we are amplifying our
strategy, accelerating what we're doing but also being mindful of new
opportunities and challenges we and our customers face. We aim to create ever
closer and deeper relationships with our customers at every stage of their
lives - support that starts earlier, reflects their values and meets their
changing needs. It is a simple principle: if our customers thrive, so will we.
And our purpose, to champion potential, helping people, families and
businesses to thrive, which has guided us through the last few years, is here
to stay. Through our three areas of focus - climate, enterprise, and learning
- we believe we can make a meaningful contribution to our customers and
society and create long-term value for all our stakeholders. This allows us to
build on our track record of delivery, to move forward with confidence and
pace and to compete effectively in a rapidly changing external market. The
result will be a more sustainable business with more diverse income streams,
able to support our customers and generate sustainable growth.
Group Chief Executive's review continued
New and emerging social, commercial and economic trends are shaping our
customers' financial lives and there are important opportunities to transform
our relevance and value to customers, building on their trust. We will do this
by delivering personalised solutions throughout customers' lifecycles;
embedding our services in our customers' digital lives; and supporting
customers' sustainability transitions.
Our values in action
Our values are at the heart of how we deliver our purpose-led strategy. In
2021, we engaged with colleagues, customers and communities to re-envision a
modernised set of values that fully align with our strategic priorities. These
collaborative and evolved values of being inclusive, curious, robust,
sustainable and ambitious were launched in 2022 and now form an integral part
of our identity.
Indeed, these values are evident in the contributions we have been making to
communities and wider society during 2022. With the tragic events from
Russia's invasion of Ukraine dominating our thoughts for most of the year, it
has been incredibly humbling to witness the collective response for those
affected. Donations from NatWest Group colleagues and customers to the DEC
Ukraine Humanitarian Appeal exceeded £10 million. In addition, NatWest Group
pledged £100,000 to support 500 Ukrainian students to continue their studies
at Polish universities and polytechnics. We also made Gogarburn House, in the
grounds of our head office in Edinburgh, available to the Scottish Government
and Edinburgh City Council as a welcome centre for people displaced from
Ukraine and offered assistance to refugees wishing to open bank accounts.
Meanwhile, our colleagues provided relief aid at the Polish-Ukrainian border
and opened their homes to Ukrainian families.
We continue to invest in the future of not just our colleagues, but future
generations. We have been delighted to collaborate with footballer and
campaigner Marcus Rashford MBE and the National Youth Agency (NYA) to provide
NatWest Thrive, a unique programme for young people to develop their
self-belief as well as their money confidence. Early feedback from the pilot
scheme was incredibly encouraging, delivering a 63% uplift in participants'
confidence about their futures.
NatWest Thrive has since been rolled out to 15 clubs, reaching over 800 young
people across the UK with plans to scale much further. NatWest Group will also
transfer £3 million of its apprenticeship levy to the NYA to support the
training of 200 youth workers.
Learning is a key focus area for the business. And whether this is through the
ongoing successes of our MoneySense and CareerSense schemes helping young
people with financial advice and employability, our Talent Academy, or our
social mobility apprenticeship programmes, we have ensured that we continue to
help break down the barriers for people to succeed and thrive.
To help build financial capability early on, we also launched NatWest Rooster
Money. The pocket money product helps children develop money confidence and
positive habits around saving and spending, nurturing financial resilience in
the next generation. We have built a smooth connection to Rooster Money via
the main mobile app and there have been c.89,000 Rooster Money card openings
in 2022.
Elsewhere, in collaboration with Meta, we launched a package of support for
female entrepreneurs through the #SheMeansBusiness programme, which selected
50 of the most promising female entrepreneurs from c.3,600 applicants to form
a dedicated support community, with sessions delivered by our Enterprise
Delivery Team over a six-month period. And to shine a light on women running
thriving businesses in the face of current economic challenges, we were
delighted to launch with The Telegraph, the '100 Female Entrepreneurs to
Watch' list. Alongside Aston University, we also published the report 'Time to
change: A blueprint for advancing the UK's ethnic minority businesses', which
sets out recommendations for policymakers, companies and entrepreneurs to
advance the growth potential of ethnic minority businesses.
I was also immensely proud of the announcement of our new partner leave
policy((3)), which supports all eligible colleagues with significantly more
time away from work to help their partner look after their new child, whether
the child has arrived through birth, adoption or surrogacy.
The net-zero opportunity
Through funding, refinancing and supporting people, families and businesses to
transition to net zero, we want to help create a sustainable future for our
customers, communities and our planet. It is why addressing the climate
challenge - one of the biggest issues of our time - is a key strategic
priority for the bank. It sits at the heart of our purpose, because we know
that tackling climate change is the right thing to do both societally and
commercially.
We have made significant progress in turning our climate ambition into action
since setting out our climate strategy in 2020. As a founding member of the
Net Zero Banking Alliance (NZBA) and the Glasgow Financial Alliance for Net
Zero (GFANZ), and as a principal partner of COP26, in 2021 NatWest Group
established itself as one of the leading voices for finance on tackling
climate change.
During 2022, I was delighted to see that our momentum continued. Our global
approach was again in evidence at COP27, where we worked alongside the UK
Government to support the UK Pavilion, co-hosting several high-profile events
with customers and key stakeholders such as the Sustainable Markets
Initiative. Closer to home, through our first climate resolution, the Board
gave shareholders their 'Say on Climate', asking them to support our strategic
direction on climate change at the AGM. 92.58% of votes cast were in favour of
the resolution, indicating strong support for our climate strategy.
Group Chief Executive's review continued
NatWest Group has also become the first UK bank, and one of the largest banks
globally, to have science-based targets validated by the Science Based Targets
initiative (SBTi). These targets underpin the initial iteration of our Climate
transition plan (published in our 2022 Climate-related Disclosures Report),
which outlines the steps we aim to take to at least halve the climate impact
of our financing activity by 2030, thereby contributing to the UK's net-zero
strategy, and to reach net zero by 2050 across our financed emissions, assets
under management and operational value chain.
But we know that we can, and must, do more. We also want to provide the
practical solutions to help our customers transition to net zero. By
delivering initiatives such as our Greener Homes Retrofit pilot, launching our
EPC rating tool in our digital mortgage hub and launching our new Carbon
Planner for UK business, we are enabling our customers to identify potential
cost and carbon savings.
Importantly, I believe these actions are not only good for the planet, but
good for business too. With the right support, the UK's SMEs could create up
to 260,000 new jobs, produce around 40,000 new businesses and deliver an
estimated £175 billion revenue opportunity for the UK economy by 2030((4)).
Of course, this is not something any individual organisation can do on its
own. Support from policymakers as well as collaboration across the private
sector will be vital for mobilising the finance necessary to fund the
infrastructure of future green economies. Initiatives such as Carbonplace,
where NatWest Group has joined forces with other financial institutions to
create a global carbon credit transaction network, or the Sustainable Homes
and Buildings Coalition, which NatWest Group launched with British Gas and
Worcester Bosch to improve UK buildings' energy efficiency, are great examples
of how this cross-industry collaboration can have meaningful real-world
impact.
We have now provided £32.6 billion of climate and sustainable funding and
financing against our target to provide £100 billion between 1 July 2021 and
the end of 2025, which includes £27.2 billion across Commercial &
Institutional (C&I), as well as mortgage lending for EPC A and B homes
totalling £5.1 billion in Retail Banking and £0.2 billion in Private
Banking. And, delivered in collaboration with fintech firm Cogo our
carbon-tracking tool for retail customers had 334,500 unique users in 2022, a
clear indication of the demand that our customers have for understanding the
carbon footprint of their daily spending.
Conclusion
2022 has shown us the importance of being a purpose-led bank. But it has also
shown us what it takes to be purpose-led. Against a volatile economic
backdrop, we continue to demonstrate the strength and resilience of our
business, delivering a strong financial performance while supporting our
customers and putting in place proactive support to help those who are most
vulnerable.
To continue to do this, we are evolving our capabilities. Underpinned by the
strong foundations of our strategy, we are investing in our technology and
colleagues so we can serve our customers in new ways that make their lives
easier. Our focus now is on the opportunities those relationships offer for
growth: for our customers, for our economy and, as a result, for the bank.
Sustainable growth will come from building closer relationships that better
serve our customers at every stage of their lives. These relationships will be
based on insight, understanding, and shared goals, powered by data-driven
innovation. This will enable us to make a real difference to our customers'
lives by providing the right advice, products and support to unlock potential.
We will also strengthen our relationships by working with partners to ensure
we deliver the services and products customers expect, when they want them,
tailored to fit their lives.
By getting closer to our customers, by offering them an ever-better service,
day in, day out, we create sustainable growth for the bank because those
customers, over a lifetime, will recommend us to others and use us in more
parts of their lives.
We've always known relationships matter, and now we are doing more than ever
before to harness them. By providing the support and security our customers,
colleagues, economy and society need, together we can help build a more
sustainable future for people, families, businesses and the planet.
Alison Rose DBE
Group Chief Executive Officer
(1) Go-forward group excludes Ulster Bank RoI and discontinued operations
(2) Go-forward group expenses excluding litigation and conduct costs were £6,648
million (2021 - £6,849 million).
(3) Our partner leave policies will replace existing paternity leave policies from
1 January 2023 across our operations in the UK, Offshore, Republic of Ireland,
US, Poland and India.
(4) This Springboard to Sustainability Report (i) has been prepared by NatWest
Group for information and reference purposes only; (ii) is intended to provide
non-exhaustive, indicative and general information only; (iii) does not
purport to be comprehensive; and (iv) does not provide any form of legal, tax,
investment, accounting, financial or other advice. The key findings, estimates
and projections in this report are based on various industry and other
information and are based on assumptions and estimates and the result of
market research, and are not statements of historical fact. Whilst the
information of this report is believed to be reliable, it has not been
independently verified by NatWest Group and NatWest Group makes no
representation or warranty (express or implied) of any kind, as regards the
accuracy or completeness of this information, nor does it accept any
responsibility or liability for any loss or damage arising in any way from any
use made of or reliance placed on, this information. Unless otherwise stated,
any views, forecasts, or estimates included in this report are solely those of
the NatWest Group Economics Department, as of this date and are subject to
change without notice.
(5) Green Mortgages are available to all intermediaries for all residential and
Buy to Let properties with an energy performance rating of A or B and specific
new build developer properties. Available for Purchase, Porting and
Re-mortgage applications.
Outlook((1))
The economic outlook remains uncertain. We 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.
Outlook 2023
- We continue to expect to achieve a return on tangible equity for
the Group of 14-16%.
- Income excluding notable items for the Group is expected to be
around £14.8 billion and full year NIM around 3.20%, based on a Bank of
England base rate of 4.00% through the remainder of 2023.
- We expect to deliver a Group cost:income ratio (excl. litigation
and conduct) below 52% or around £7.6 billion of Group operating costs,
excluding litigation and conduct costs.
- Impairment losses in 2023 are expected to be in line with our
through the cycle guidance of 20-30 basis points.
Capital and Funding
- We expect to generate and return significant capital to
shareholders through 2023.
- We expect to pay ordinary dividends of 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 and limited to 4.99% of issued share capital in any
12-month period.
- We will also consider further on-market buybacks as part of our
overall capital distribution approach as well as inorganic opportunities where
the strategic case and returns are suitably compelling.
- As part of the Group's capital and funding plans we intend to
issue between £3 billion to £5 billion of MREL-compliant senior instruments
in 2023, with a continued focus on issuance under our Green, Social and
Sustainability Bond Framework, and up to £1 billion of Tier 2 capital
instruments. NatWest Markets plc's funding plan targets £3 billion to £5
billion of public benchmark issuance.
Medium term
- We continue to target a sustainable return on tangible equity for
the group of 14-16% over the medium term.
- We expect to deliver a Group cost:income ratio (excl. litigation
and conduct) of less than 50%, by 2025.
- We expect that RWAs could increase by a further 5-10% by the end
of 2025, including the impact of Basel 3.1.
- We expect to continue to generate and return significant capital
via ordinary dividends and buybacks to shareholders over the medium term and
continue to expect that the CET1 ratio will be in the range of 13-14%.
(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
Risk Factors section of the 2022 NatWest Group plc Annual Report and Accounts.
These statements constitute forward-looking statements. Refer to
Forward-looking statements in this document.
Business performance summary
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021((1)) 2022 2022 2021((1))
£m £m £m £m £m
Continuing operations
Total income 13,156 10,429 3,708 3,229 2,602
Total income excluding notable items (2,3) 13,061 10,184 3,766 3,397 2,540
Operating expenses (7,687) (7,758) (2,138) (1,896) (2,328)
Profit before impairment losses/releases 5,469 2,671 1,570 1,333 274
Operating profit before tax 5,132 3,844 1,426 1,086 543
Go-forward group (4)
Total income excluding notable items (2) 13,063 10,074 3,764 3,434 2,517
Other operating expenses (2) (6,648) (6,849) (1,746) (1,661) (2,034)
Performance key metrics and ratios
Bank net interest margin (2,5) 2.85% 2.30% 3.20% 2.99% 2.30%
Bank average interest earning assets (2,5) £345m £327m £356m £351m £332m
Cost:income ratio (excl. litigation and conduct) (2,6) 55.5% 69.9% 55.2% 54.8% 82.2%
Loan impairment rate (2) 9bps (32bps) 16bps 26bps (30bps)
Profit attributable to ordinary shareholders 3,340 2,950 1,262 187 434
Total earnings per share attributable to ordinary
shareholders - basic (7) 33.8p 27.3p 13.1p 1.9p 4.1p
Return on tangible equity (2) 12.3% 9.4% 20.6% 2.9% 5.6%
31 December 30 September 31 December
2022 2022 2021
£bn £bn £bn
Balance sheet
Total assets 720.1 801.5 782.0
Funded assets (2) 620.5 660.5 675.9
Net loans to customers - amortised cost 366.3 371.8 359.0
Loans to customers and banks - amortised cost and FVOCI 377.1 384.5 369.8
Total impairment provisions (8) 3.4 3.3 3.8
Expected credit loss (ECL) coverage ratio 0.9% 0.9% 1.0%
Assets under management and administration (AUMA) (2) 33.4 32.3 35.6
Customer deposits 450.3 473.0 479.8
Liquidity and funding
Liquidity coverage ratio (LCR) 145% 156% 172%
Liquidity portfolio 226 251 286
Net stable funding ratio (NSFR) (9) 145% 148% 157%
Loan:deposit ratio (excl. repos and reverse repos) (2) 79% 75% 72%
Total wholesale funding 74 75 77
Short-term wholesale funding 21 24 23
Capital and leverage
Common Equity Tier (CET1) ratio (10) 14.2% 14.3% 18.2%
Total capital ratio (10) 19.3% 19.2% 24.7%
Pro forma CET1 ratio, pre foreseeable items (11) 15.4% 14.7% 19.5%
Risk-weighted assets (RWAs) 176.1 178.5 157.0
UK leverage ratio 5.4% 5.2% 5.9%
Tangible net asset value (TNAV) per ordinary share (12) 264p 250p 272p
Number of ordinary shares in issues (millions) (2, 12) 9,659 9,650 11,272
(1) Comparative results have been re-presented from those previously published to
reclassify certain operations as discontinued operations as described in Note
4.
(2) 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.
(3) Refer to page 9 for details of notable items within total income.
(4) Go-forward group excludes Ulster Bank RoI and discontinued operations.
(5) NatWest Group excluding liquid asset buffer.
(6) Total expenses excluding litigation and conduct costs divided by total income.
(7) At the General Meeting and Class Meeting on 25 August 2022, the shareholders
approved the proposed special dividend and share consolidation. On 30 August
2022 the issued ordinary share capital was consolidated in the ratio of 14
existing shares for 13 new shares. The average number of shares for earnings
per share has been adjusted retrospectively.
(8) Includes £0.1 billion relating to off-balance sheet exposures (30 September
2022 - £0.1 billion; 31 December 2021 - £0.1 billion).
(9) The NSFR is presented on spot basis.
(10) Refer to the Capital, liquidity and funding risk section for details of basis
of preparation. On 1 January 2022 the proforma CET1 ratio was 15.9% following
regulatory changes.
(11) The pro forma CET1 ratio at 31 December 2022 excludes foreseeable items of
£2,132 million; £967 million for ordinary dividends and £1,165 million
foreseeable charges (30 September 2022 excludes foreseeable items of £668
million; £386 million for ordinary dividends and £282 million foreseeable
charges; 31 December 2021 excludes foreseeable charges of £2,036 million:
£846 million for ordinary dividends and £1,190 million foreseeable charges
and pension contributions).
(12) The number of ordinary shares in issue excludes own shares held. Comparatives
for the number of shares in issue and TNAV per ordinary share have not been
adjusted for the effect of the share consolidation referred to in footnote 7
above.
Business performance summary continued
Chief Financial Officer review
We have delivered a strong operating performance in 2022 with a RoTE of 12.3%.
Total income excluding notable items was 28.3% higher in the year.
Go-forward income, excluding notable items, was £13.1 billion, exceeding our
income guidance for the year, and we achieved our cost reduction target of
around 3%. A net impairment charge of 9 basis points was in line with guidance
and, whilst default levels remain low, we continue to monitor the evolving
economic outlook, particularly the impacts on our customers of higher interest
rates and inflationary pressures. This strong operating performance was net of
a £1.0 billion attributable loss from our continued withdrawal from the
Republic of Ireland. Our capital and liquidity levels remain strong, and total
distributions deducted from capital were £5.1 billion.
Financial performance
Total income increased by 26.1% to £13,156 million compared with 2021.
Excluding notable items, income was £2,877 million, or 28.3%, higher than
2021 driven by volume growth, increased transactional-related fees, higher
trading income and favourable yield curve movements.
Bank NIM of 2.85% was 55 basis points higher than 2021. Q4 2022 Bank NIM of
3.20% was 21 basis points higher than Q3 2022 principally reflecting the
impact of recent base rate increases.
Total operating expenses were £71 million lower than 2021. Other operating
expenses, for the Go-forward group, were £201 million, or 2.9%, lower than
2021, in line with our cost reduction target of around 3%. The decrease in the
year principally reflects property exits, continued focus on customer journeys
and strategic efficiency initiatives. This has been supported by ongoing
strategic investment in key areas, including Data, Technology and Financial
Crime.
A net impairment charge of £337 million principally reflects the latest
macro-economics, including updated scenarios and their associated weighting,
with more weight being placed on the downside scenario. Underlying book
performance remains strong, with credit conditions remaining benign and levels
of default remaining low. Compared with 2021, our ECL provisions have reduced
by £0.4 billion to £3.4 billion, and our ECL coverage ratio has decreased
from 1.03% to 0.91%. The element of our economic uncertainty post model
adjustments (PMA) that relates to COVID-19 risks has been reduced, which, when
combined with revisions to our scenario weightings, has allowed us to reduce
the amount we hold as economic uncertainty PMA to £0.4 billion, or 10.3% of
total impairment provisions. Whilst we are comfortable with the strong credit
performance of our book, we will continue to assess this position regularly
and are closely monitoring the impacts of inflationary pressures on the UK
economy and our customers.
The tax charge for the year includes a £267 million credit in the carrying
value of the deferred tax asset in respect of tax losses, reflecting an
improvement in the outlook when compared with the position at the end of 2021.
In addition, the charge also includes a credit of £135 million in respect of
an inflationary uplift in the value of UK Government Index Linked Gilt assets
that is not subject to corporation tax.
We are pleased to report an attributable profit in 2022 of £3,340 million,
with earnings per share of 33.8 pence and a RoTE of 12.3%.
Net lending increased by £7.3 billion, or 2.0%, in 2022 primarily reflecting
£14.4 billion of mortgage lending growth in Retail Banking and £5.7 billion
of growth in Commercial & Institutional, partially offset by a £14.6
billion reduction in Central items & other, which included a £6.4 billion
decrease as we continued our exit from the Republic of Ireland. Retail Banking
gross new mortgage lending for the year was £41.4 billion compared with
£36.0 billion in 2021. Unsecured balances in Retail Banking grew £1.1
billion across the year. Within Commercial & Institutional, growth was
largely within Corporate & Institutions whilst UK Government Scheme
lending reduced by £3.4 billion.
Customer deposits reduced by £29.5 billion in the year to £450.3 billion
principally reflecting a £14.2 billion reduction in Commercial &
Institutional, due to an overall market liquidity contraction in the second
half of the year and reduction in Corporate and Institutions, particularly
non-operational accounts in Financial Institutions and professional services
with relatively low margin and funding value, and a £12.2 billion reduction
due to our withdrawal from the Republic of Ireland.
TNAV per share reduced by 8 pence in the year to 264 pence principally
reflecting movements in cash flow hedging reserves of 34 pence per share,
dividend payments and other reserve movements partially offset by the
attributable profit.
Capital and leverage
The CET1 ratio remains robust at 14.2%, or 14.0% excluding IFRS 9 transitional
relief. The 170 basis point reduction compared with 1 January 2022 primarily
reflected distributions and linked pension accruals of c.310 basis points
partially offset by the attributable profit, c.190 basis points. The total
capital ratio was 19.3%.
Compared with the 1 January 2022 position, RWAs reduced by £0.2 billion as
lending growth and model changes were offset by a £5.7 billion reduction in
the Republic of Ireland.
We reached agreement with our pension trustees to restructure the previous
agreement to make dividend linked contributions and we will no longer pay
£471 million in 2023. We have agreed to create a trust structure to hold
those assets and that gives the pension fund rights to assets in the value of
£471 million in the event a future funding requirement arises based on
pre-agreed triggers. These assets will remain on the Group balance sheet in
the meantime. We continue to hold the same deduction against capital.
Funding and liquidity
LCR reduced to 145% during the year driven by a decrease in the liquidity
portfolio, primarily reflecting lending growth and reduced customer deposits
along with shareholder distributions, and a relatively lower reduction in net
outflows.
Business performance summary continued
Summary consolidated income statement for the period ended 31 December 2022
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021(1) 2022 2022 2021(1)
£m £m £m £m £m
Net interest income 9,842 7,535 2,868 2,640 1,922
Non-interest income 3,314 2,894 840 589 680
Total income 13,156 10,429 3,708 3,229 2,602
Litigation and conduct costs (385) (466) (91) (125) (190)
Other operating expenses (7,302) (7,292) (2,047) (1,771) (2,138)
Operating expenses (7,687) (7,758) (2,138) (1,896) (2,328)
Profit before impairment losses/releases 5,469 2,671 1,570 1,333 274
Impairment (losses)/releases (337) 1,173 (144) (247) 269
Operating profit before tax 5,132 3,844 1,426 1,086 543
Tax charge (1,275) (996) (46) (434) (234)
Profit from continuing operations 3,857 2,848 1,380 652 309
(Loss)/profit from discontinued operations, net of tax (262) 464 (56) (396) 189
Profit for the period 3,595 3,312 1,324 256 498
Attributable to:
Ordinary shareholders 3,340 2,950 1,262 187 434
Preference shareholders - 19 - - 5
Paid-in equity holders 249 299 61 67 58
Non-controlling interests 6 44 1 2 1
Notable items within total income (2)
Private Banking
Consideration on the sale of the Adam & Company
Investment Management Ltd - 54 - - 54
Commercial & Institutional
Fair value, disposal losses and asset disposals/
strategic risk reduction (45) (86) - - (16)
Tax variable lease repricing - 32 - - -
Own credit adjustments 42 6 (19) 9 3
Central items & other
Loss on redemption of own debt (161) (138) - (137) -
Effective interest rate adjustment as a
result of redemption of own debt (41) - (41) - -
Profit from insurance liabilities 92 - 92 - -
Ulster Bank RoI gain arising from the
restructuring of structural hedges - 35 - - -
Ulster Bank RoI fair value mortgage adjustments (51) - (51) - -
Liquidity asset bond sale (losses)/gains (88) 120 - (124) 50
Share of associate (losses)/profits for Business Growth
Fund (22) 219 7 (16) 11
Property strategy update - (44) - - (44)
Interest and FX risk management derivatives not in
accounting hedge relationships (3) 369 47 (46) 100 3
Own credit adjustments - - - - 1
Total 95 245 (58) (168) 62
(1) Comparative results have been re-presented from those previously
published to reclassify certain operations as discontinued operations as
described in Note 4 on page 33.
(2) Refer to the Non-IFRS measures appendix for details of basis of
preparation and reconciliation of non-IFRS measures and performance metrics.
(3) Included in income from trading activities.
Business performance summary
Retail Banking
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
£m £m £m £m £m
Total income 5,646 4,445 1,617 1,475 1,164
Operating expenses (2,593) (2,513) (658) (693) (774)
of which: Other expenses (2,484) (2,437) (670) (630) (722)
Impairment (losses)/releases (229) 36 (87) (116) (5)
Operating profit 2,824 1,968 872 666 385
Return on equity 28.6% 26.1% 34.7% 27.0% 19.7%
Net interest margin 2.74% 2.27% 3.02% 2.85% 2.28%
Cost:income ratio (excl. litigation and conduct) 44.0% 54.8% 41.4% 42.7% 62.0%
Loan impairment rate 11bps (2)bps 17bps 24bps 1bp
As at
31 December 30 September 31 December
2022 2022 2021
£bn £bn £bn
Net loans to customers (amortised cost) 197.6 192.8 182.2
Customer deposits 188.4 190.9 188.9
RWAs 54.7 53.0 36.7
In 2022, Retail Banking continued to pursue sustainable growth with an
intelligent approach to risk, delivering a return on equity of 28.6% and an
operating profit of £2,824 million. Retail Banking provided £4.0 billion of
climate and sustainable funding and financing in 2022.
2022 performance
- Total income was £1,201 million, or 27.0%, higher than 2021 reflecting strong
loan growth and higher transactional-related fee income, higher deposit
income, supported by interest rate rises, partially offset by lower mortgage
margins.
- Net interest margin was 47 basis points higher than 2021 reflecting higher
deposit returns, partly offset by mortgage margin pressure.
- Other operating expenses were £47 million, or 1.9%, higher than 2021
primarily driven by higher fraud losses, increased investment in financial
crime prevention, increased data related costs and the impact of pay awards to
support colleague cost of living challenges. This was partly offset by a 4.1%
headcount reduction as a result of the continued digitalisation, automation
and improvement of end-to-end customer journeys.
- Impairment losses of £229 million in 2022 primarily reflect continued low
level of stage 3 defaults as well as updated economic outlook scenarios partly
offset by provision releases in stage 2. Provision coverage of 0.81% remains
strong.
- Customer deposits decreased by £0.5 billion, or 0.3%, in 2022 driven by
higher outflows in H2 2022 as customers started to spend following relaxation
of Covid-related restrictions and competition for deposit balances increased.
Personal savings balances decreased by £0.9 billion partly offset by personal
current accounts balance growth of £0.4 billion in 2022.
- Net loans to customers increased by £15.4 billion, or 8.5%, in 2022 mainly
reflecting continued mortgage growth of £14.4 billion, with gross new
mortgage lending of £41.4 billion representing flow share of around 13%.
Cards balances increased by £0.6 billion and personal advances increased by
£0.5 billion in 2022 reflecting continued strong customer demand.
- RWAs increased by £2.6 billion, or 5.0% versus 1 January 2022 reflecting
lending growth and a further increase of 1 January 2022 mortgage regulatory
changes of £1.0 billion, partly offset by quality improvements. No material
impact of procyclicality evident
Q4 performance
- Total income was £142 million, or 9.6%, higher than Q3 2022 reflecting strong
loan growth and higher deposit income, supported by interest rate rises,
partially offset by a £23 million charge following the review of mortgage
customer repayment behaviour and lower mortgage margins.
- Net interest margin was 17 basis points higher than Q3 2022 reflecting higher
deposit returns, partly offset by mortgage margin pressure. Mortgage back book
margin was 123 basis points in the period.
- Other operating expenses were £40 million, or 6.3%, higher than Q3 2022
primarily due to the inclusion of the annual UK bank levy charge and timing of
investment and other non-staff costs.
- Impairment losses of £87 million in Q4 2022 primarily reflect updated
economic outlook scenarios and continued low level of stage 3 defaults. During
the quarter there was a small increase observed in stage 3 defaults as
economic conditions started to impact some customers.
- Customer deposits decreased by £2.5 billion, or 1.3%, in Q4 2022 driven by
higher outflows as customers started to spend following relaxation of
Covid-related restrictions and competition for deposit balances increased.
Personal current account balances decreased by £2.1 billion and personal
savings decreased by £0.4 billion in Q4 2022
- Net loans to customers increased by £4.8 billion, or 2.5%, in Q4 2022 mainly
reflecting continued mortgage growth of £4.6 billion, with gross new mortgage
lending of £11.5 billion representing flow share of around 14%. Cards
balances increased by £0.2 billion and personal advances increased by £0.1
billion in Q4 2022 reflecting continued strong customer demand.
- RWAs increased by £1.7 billion, or 3.2% in Q4 2022 reflecting lending growth
and a further increase of 1 January 2022 mortgage regulatory changes of £1.0
billion.
Business performance summary
Private Banking
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
£m £m £m £m £m
Total income 1,056 816 310 285 253
Operating expenses (622) (520) (198) (139) (155)
of which: Other expenses (610) (523) (188) (138) (150)
Impairment releases/(losses) 2 54 (2) (7) 12
Operating profit 436 350 110 139 110
Return on equity 24.5% 17.0% 24.2% 31.8% 21.3%
Net interest margin 4.07% 2.63% 5.19% 4.37% 2.67%
Cost:income ratio (excl. litigation and conduct) 57.8% 64.1% 60.6% 48.4% 59.3%
Loan impairment rate (1)bp (29)bps 4bps 15bps (26)bps
Net new money (£bn) (1) 2.0 3.0 0.3 0.3 0.7
As at
31 December 30 September 31 December
2022 2022 2021
£bn £bn £bn
Net loans to customers (amortised cost) 19.2 19.1 18.4
Customer deposits 41.2 42.2 39.3
RWAs 11.2 11.1 11.3
Assets Under Management (AUMs) (1) 28.3 27.6 30.2
Assets Under Administration (AUAs) (1) 5.1 4.7 5.4
Assets Under Management and Administration (AUMA) (1) 33.4 32.3 35.6
(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.
During 2022, Private Banking provided a strong operating performance with
continued balance growth, delivering a return on equity of 24.5%, 7.5
percentage points higher than 2021, and operating profit of £436 million.
Despite volatile markets throughout the year, our 2022 AUM net new money of
£2.0 billion, 5.6% of opening AUMA balances on an annualised basis represents
a strong performance relative to the overall UK investment market.
Private Banking provided £0.2 billion of climate and sustainable funding and
financing in 2022. At the end of 2022, £6.5 billion of AUM are invested in
funds that are on net-zero trajectory and are decarbonising at an average rate
of 7% per annum.
2022 performance
- Total income of £1,056 million was £240 million, or 29.4%, higher than 2021
driven by higher deposit and lending balances and improved deposit returns
supported by interest rate rises. This represents a particularly strong
performance given that Q4 2021 reflected the £54 million consideration from
the sale of Adam & Company Investment Management Ltd.
- Net interest margin was 144 basis points higher than 2021 reflecting higher
deposit returns and lending growth. Mortgage book margin was 163 basis points
in the year.
- Other operating expenses were £87 million, or 16.6%, higher than 2021 due to
continued investment in people and technology to enhance AUMA growth
propositions and increased investment in financial crime prevention.
- Impairment releases of £2 million in 2022 primarily reflect continued low
level of stage 3 defaults and release of post model adjustments, partly offset
by a revision of the economic outlook scenario assumptions.
- AUM net new money was £2.0 billion during 2022, which represented 5.6% of
opening AUMA balances on an annualised basis, demonstrating a strong
performance given volatile investment market conditions. Digital net new money
was £0.3 billion, which represented 20.6% of opening Digital AUMA balances.
AUMAs decreased by £2.2 billion, or 6.2%, in 2022 primarily reflecting
adverse investment market movements of £4.0 billion.
- Customer deposits increased by £1.9 billion, or 4.8%, largely driven by
strong savings growth, particularly during H1 2022.
- Net loans to customers increased by £0.8 billion, or 4.3%, in 2022 due to
above market mortgage growth of 8%, whilst RWAs decreased by £0.1 billion, or
0.9% driven by capital optimisation initiatives.
Q4 performance
- Total income of £310 million was £25 million, or 8.8%, higher than Q3 2022
reflecting higher deposit income, partly offset by mortgage margin pressure.
The £54 million consideration from the sale of Adam & Company Investment
Management Ltd is reflected in Q4 2021.
- Net interest margin was 82 basis points higher than Q3 2022 reflecting higher
deposit returns, partly offset by mortgage margin pressure. Mortgage book
margin was 144 basis points in the quarter.
- Other operating expenses were £50 million, or 36.2%, higher than Q3 2022
primarily due to the annual bank levy in Q4 of £19m and continued investment
in people and technology to enhance AUMA growth propositions.
- AUMAs increased by £1.1 billion, or 3.4%, in Q4 2022 primarily reflecting
positive investment market movements and AUM net new money of £0.3
billion.
- Net loans to customers increased by £0.1 billion, or 0.5%, in Q4 2022 mainly
reflecting continued mortgage growth.
- Customer deposits decreased by £1.0 billion, or 2.4% in Q4 2022 driven by
current account balances. In addition, some client balances have migrated to
term products with higher customer rates as interest rates rise.
Business performance summary
Commercial & Institutional
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
£m £m £m £m £m
Net interest income 4,171 2,974 1,276 1,131 764
Non-interest income 2,242 1,864 543 526 404
Total income 6,413 4,838 1,819 1,657 1,168
Operating expenses (3,744) (3,757) (1,031) (893) (1,059)
of which: Other operating expenses (3,563) (3,646) (989) (840) (1,012)
Impairment (losses)/releases (122) 1,160 (62) (119) 317
Operating profit 2,547 2,241 726 645 426
Return on equity 12.2% 10.9% 13.7% 12.2% 8.3%
Net interest margin 3.31% 2.46% 3.89% 3.46% 2.52%
Cost:income ratio (excl. litigation and conduct) 55.6% 75.4% 54.4% 50.7% 86.6%
Loan impairment rate 9bps (92)bps 19bps 36bps (101)bps
As at
31 December 30 September 31 December
2022 2022 2021
£bn £bn £bn
Net loans to customers (amortised cost) 129.9 131.9 124.2
Customer deposits 203.3 215.2 217.5
Funded assets 306.3 325.5 321.3
RWAs 103.2 104.8 98.1
During 2022, Commercial & Institutional delivered a strong performance
with a return on equity of 12.2% and an operating profit of £2,547 million.
Commercial & Institutional provided £20.3 billion of climate and
sustainable funding and financing in 2022.
2022 performance
- Total income was £1,575 million, or 32.6%, higher than 2021 reflecting net
loan growth, higher deposit returns from an improved interest rate
environment, improved card payment fees and higher markets income. Markets
income((1)) of £698 million, was £231 million, or 49.5%, higher than 2021
reflecting stronger performance across the product suite.
- Net interest margin was 85 basis points higher than 2021 reflecting higher
deposits returns.
- Other operating expenses were £83 million, or 2.3%, lower than 2021
reflecting cost efficiencies whilst continuing to invest in the business. A
4.2% headcount increase was a result of continuing to build capability
including the take payment proposition.
- A net impairment charge of £122 million in 2022 was predominantly driven by
the downward revision of economic outlook assumptions in the scenarios
compared to a £1,160 million credit in 2021.
- Customer deposits decreased by £14.2 billion, or 6.5% in 2022 due to overall
market liquidity contraction in the second half of the year following
heightened levels built up during Covid in 2020 and 2021 and reductions in
Corporate and Institutions, particularly non-operational accounts in Financial
Institutions and professional services with relatively low margin and funding
value.
- Net loans to customers increased by £5.7 billion, or 4.6%, in 2022 due to
increased term loans and funds activity within Corporate and Institutions,
growth in invoice and asset finance balances within the Commercial Mid-market
business partly offset by UK Government scheme balance reductions of £3.4
billion across Commercial Mid-market and Business Banking.
- RWAs increased by £5.1 billion, or 5.2%, in 2022 primarily reflecting 1
January 2022 regulatory changes and lending growth partly offset by a
reduction in counterparty credit risk, operational risk and management
actions.
Q4 performance
- Total income was £162 million, or 9.8% higher than Q3 2022 reflecting growth
in lending balances and higher deposit returns.
- Net interest margin was 43 basis points higher than Q3 2022 reflecting higher
deposit returns as base rates continued to increase.
- Other operating expenses were £149 million, or 17.7% higher than Q3 2022
largely due to the inclusion of the annual bank levy charge and the impact of
wage awards and strategic costs.
- A net impairment charge of £62 million in Q4 2022 was predominantly driven by
the downward revision of economic outlook assumptions in the scenarios partly
offset by post model adjustments.
- Customer deposits decreased by £11.9 billion, or 5.5%, in Q4 2022 due to
overall market liquidity contraction and reductions in Corporate and
Institutions, particularly non-operational accounts in Financial Institutions
and professional services with relatively low margin and funding value.
- Net loans to customers decreased by £2.0 billion, or 1.5%, in Q4 2022
primarily reflecting £1.4 billion of Government scheme balance reductions and
deleveraging in Corporate and Institutions. In the quarter, growth in
Commercial Mid-market was supported by asset finance balances and an increase
in term loan facilities.
- RWAs decreased by £1.6 billion, or 1.5%, in Q4 2022 reflecting lower levels
of market, counterparty credit risk and business mix alongside minimal risk
degradation.
(1) Markets income excludes asset disposals/strategic risk
reduction, own credit risk adjustments and central items
Business performance summary
Central items & other
Following good progress with respect to the phased withdrawal from the RoI,
announced in February 2021, Ulster Bank RoI continuing operations are now
included in Central items & other.
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
Continuing operations £m £m £m £m £m
Total income 41 330 (38) (188) 17
Operating expenses (1) (728) (968) (251) (171) (340)
of which: other operating expenses (645) (686) (200) (163) (254)
of which: Ulster Bank RoI (678) (482) (310) (114) (131)
Impairment releases/(losses) 12 (77) 7 (5) (55)
Operating loss (675) (715) (282) (364) (378)
of which: Ulster Bank RoI (723) (414) (354) (156) (167)
As at
31 December 30 September 31 December
2022 2022 2021
£bn £bn £bn
Net loans to customers (amortised cost) (2) 19.6 28.0 34.2
Customer deposits 17.4 24.7 34.1
RWAs 7.0 9.6 10.9
(1) Includes withdrawal-related direct program costs of £195
million for the year ended 31 December 2022 (£17 million - 31 December 2021)
and £151 million for the quarter ended 31 December 2022 (£21 million - 30
September 2022 and £17 million - 31 December 2021).
(2) Excludes £0.5 billion of loans to customers held at fair value
through profit or loss (£0.6 billion - 30 September 2022 and nil - 31
December 2021).
- Total income for the year included £369 million of gains from risk management
derivatives not in hedge accounting relationships, partially offset by £202
million of losses on redemption of own debt and £88 million of bond disposal
losses.
- Operating expenses included £678 million in Ulster Bank RoI, of which £195
million were withdrawal-related direct programme costs.
Segment performance
Two changes to reportable segments have been made.
- On 27 January 2022, NatWest Group announced that a new
business segment, Commercial & Institutional, would be created, bringing
together the Commercial, NatWest Markets and RBSI businesses to form a single
business segment, with common management and objectives, to best support our
customers across the full non-personal customer lifecycle.
- Following good progress with respect to the phased withdrawal
from the Republic of Ireland, announced in February 2021, Ulster Bank RoI
continuing operations are now included in Central items & other.
Comparatives have been re-presented. The re-presentation of operating segments
does not change the consolidated financial results of NatWest Group.
Year ended 31 December 2022
Total
Retail Private Commercial Central items NatWest
Banking Banking & Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 5,224 777 4,171 (330) 9,842
Non-interest income 422 279 2,242 371 3,314
Total income 5,646 1,056 6,413 41 13,156
Direct expenses (700) (219) (1,497) (4,886) (7,302)
Indirect expenses (1,784) (391) (2,066) 4,241 -
Other operating expenses (2,484) (610) (3,563) (645) (7,302)
Litigation and conduct costs (109) (12) (181) (83) (385)
Operating expenses (2,593) (622) (3,744) (728) (7,687)
Operating profit/(loss) before impairment losses/releases 3,053 434 2,669 (687) 5,469
Impairment (losses)/releases (229) 2 (122) 12 (337)
Operating profit/(loss) 2,824 436 2,547 (675) 5,132
Income excluding notable items 5,646 1,056 6,416 (57) 13,061
Additional information
Return on tangible equity (1) na na na na 12.3%
Return on equity (1) 28.6% 24.5% 12.2% nm na
Cost:income ratio (excl. litigation and conduct) (1) 44.0% 57.8% 55.6% nm 55.5%
Total assets (£bn) 226.4 29.9 404.8 59.0 720.1
Funded assets (£bn) (1) 226.4 29.9 306.3 57.9 620.5
Net loans to customers - amortised cost (£bn) 197.6 19.2 129.9 19.6 366.3
Loan impairment rate (1) 11bps (1)bp 9bps nm 9bps
Impairment provisions (£bn) (1.6) (0.1) (1.6) (0.1) (3.4)
Impairment provisions - stage 3 (£bn) (0.9) - (0.7) (0.1) (1.7)
Customer deposits (£bn) 188.4 41.2 203.3 17.4 450.3
Risk-weighted assets (RWAs) (£bn) 54.7 11.2 103.2 7.0 176.1
RWA equivalent (RWAe) (£bn) 54.7 11.2 104.6 7.5 178.0
Employee numbers (FTEs - thousands) 14.0 2.1 12.3 33.1 61.5
Third party customer asset rate (2) 2.64% 3.01% 3.53% nm nm
Third party customer funding rate (2) (0.20%) (0.27%) (0.21%) nm nm
Bank average interest earning assets (£bn) (1) 190.8 19.1 126.1 na 345.2
Bank net interest margin (1) 2.74% 4.07% 3.31% na 2.85%
For the notes to this table, refer to page 18. nm = not meaningful, na = not
applicable.
Segment performance continued
Year ended 31 December 2021 (3)
Total
Retail Private Commercial Central items NatWest
Banking Banking & Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 4,074 480 2,974 7 7,535
Non-interest income 371 336 1,864 323 2,894
Total income 4,445 816 4,838 330 10,429
Direct expenses (805) (200) (1,773) (4,514) (7,292)
Indirect expenses (1,632) (323) (1,873) 3,828 -
Other operating expenses (2,437) (523) (3,646) (686) (7,292)
Litigation and conduct costs (76) 3 (111) (282) (466)
Operating expenses (2,513) (520) (3,757) (968) (7,758)
Operating profit/(loss) before impairment releases/losses 1,932 296 1,081 (638) 2,671
Impairment releases/(losses) 36 54 1,160 (77) 1,173
Operating profit/(loss) 1,968 350 2,241 (715) 3,844
Income excluding notable items 4,445 762 4,886 91 10,184
Additional information
Return on tangible equity (1) na na na na 9.4%
Return on equity (1) 26.1% 17.0% 10.9% nm na
Cost:income ratio (excl. litigation and conduct) (1) 54.8% 64.1% 75.4% nm 69.9%
Total assets (£bn) 210.0 29.9 425.9 116.2 782.0
Funded assets (£bn) (1) 210.0 29.8 321.3 114.8 675.9
Net loans to customers - amortised cost (£bn) 182.2 18.4 124.2 34.2 359.0
Loan impairment rate (1) (2)bps (29)bps (92)bps nm (32)bps
Impairment provisions (£bn) (1.5) (0.1) (1.7) (0.5) (3.8)
Impairment provisions - stage 3 (£bn) (0.9) - (0.7) (0.4) (2.0)
Customer deposits (£bn) 188.9 39.3 217.5 34.1 479.8
Risk-weighted assets (RWAs) (£bn) 36.7 11.3 98.1 10.9 157.0
RWA equivalent (RWAe) (£bn) 36.7 11.3 99.9 11.2 159.1
Employee numbers (FTEs - thousands) 14.6 1.9 11.8 29.6 57.9
Third party customer asset rate (2) 2.66% 2.36% 2.71% nm nm
Third party customer funding rate (2) (0.06%) - (0.02%) nm nm
Bank average interest earning assets (£bn) (1) 179.1 18.3 121.0 na 327.3
Bank net interest margin (1) 2.27% 2.63% 2.46% na 2.30%
For the notes to this table, refer to page 18. nm = not meaningful, na = not
applicable.
Segment performance continued
Quarter ended 31 December 2022
Total
Retail Private Commercial Central items NatWest
Banking Banking & Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 1,505 251 1,276 (164) 2,868
Non-interest income 112 59 543 126 840
Total income 1,617 310 1,819 (38) 3,708
Direct expenses (202) (62) (396) (1,387) (2,047)
Indirect expenses (468) (126) (593) 1,187 -
Other operating expenses (670) (188) (989) (200) (2,047)
Litigation and conduct costs 12 (10) (42) (51) (91)
Operating expenses (658) (198) (1,031) (251) (2,138)
Operating profit/(loss) before impairment losses/releases 959 112 788 (289) 1,570
Impairment (losses)/releases (87) (2) (62) 7 (144)
Operating profit/(loss) 872 110 726 (282) 1,426
Income excluding notable items 1,617 310 1,838 1 3,766
Additional information
Return on tangible equity (1) na na na na 20.6%
Return on equity (1) 34.7% 24.2% 13.7% nm na
Cost:income ratio (excl. litigation and conduct) (1) 41.4% 60.6% 54.4% nm 55.2%
Total assets (£bn) 226.4 29.9 404.8 59.0 720.1
Funded assets (£bn) (1) 226.4 29.9 306.3 57.9 620.5
Net loans to customers - amortised cost (£bn) 197.6 19.2 129.9 19.6 366.3
Loan impairment rate (1) 17bps 4bps 19bps nm 16bps
Impairment provisions (£bn) (1.6) (0.1) (1.6) (0.1) (3.4)
Impairment provisions - stage 3 (£bn) (0.9) - (0.7) (0.1) (1.7)
Customer deposits (£bn) 188.4 41.2 203.3 17.4 450.3
Risk-weighted assets (RWAs) (£bn) 54.7 11.2 103.2 7.0 176.1
RWA equivalent (RWAe) (£bn) 54.7 11.2 104.6 7.5 178.0
Employee numbers (FTEs - thousands) 14.0 2.1 12.3 33.1 61.5
Third party customer asset rate (2) 2.72% 3.62% 4.44% nm nm
Third party customer funding rate (2) (0.49%) (0.65%) (0.53%) nm nm
Bank average interest earning assets (£bn) (1) 197.4 19.2 130.3 na 355.8
Bank net interest margin (1) 3.02% 5.19% 3.89% na 3.20%
For the notes to this table, refer to page 18. nm = not meaningful, na = not
applicable.
Segment performance continued
Quarter ended 30 September 2022
Total
Retail Private Commercial Central items NatWest
Banking Banking & Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 1,379 211 1,131 (81) 2,640
Non-interest income 96 74 526 (107) 589
Total income 1,475 285 1,657 (188) 3,229
Direct expenses (178) (55) (365) (1,173) (1,771)
Indirect expenses (452) (83) (475) 1,010 -
Other operating expenses (630) (138) (840) (163) (1,771)
Litigation and conduct costs (63) (1) (53) (8) (125)
Operating expenses (693) (139) (893) (171) (1,896)
Operating profit/(loss) before impairment losses 782 146 764 (359) 1,333
Impairment losses (116) (7) (119) (5) (247)
Operating profit/(loss) 666 139 645 (364) 1,086
Income excluding notable items 1,475 285 1,648 (11) 3,397
Additional information
Return on tangible equity (1) na na na na 2.9%
Return on equity (1) 27.0% 31.8% 12.2% nm na
Cost:income ratio (excl. litigation and conduct) (1) 42.7% 48.4% 50.7% nm 54.8%
Total assets (£bn) 221.3 29.8 465.3 85.1 801.5
Funded assets (£bn) (1) 221.3 29.8 325.5 83.9 660.5
Net loans to customers - amortised cost (£bn) 192.8 19.1 131.9 28.0 371.8
Loan impairment rate (1) 24bps 15bps 36bps nm 26bps
Impairment provisions (£bn) (1.5) (0.1) (1.6) (0.1) (3.3)
Impairment provisions - stage 3 (£bn) (0.9) - (0.7) (0.1) (1.7)
Customer deposits (£bn) 190.9 42.2 215.2 24.7 473.0
Risk-weighted assets (RWAs) (£bn) 53.0 11.1 104.8 9.6 178.5
RWA equivalent (RWAe) (£bn) 53.0 11.1 106.5 10.1 180.7
Employee numbers (FTEs - thousands) 13.6 2.1 12.1 32.2 60.0
Third party customer asset rate (2) 2.64% 3.09% 3.53% nm nm
Third party customer funding rate (2) (0.17%) (0.29%) (0.19%) nm nm
Bank average interest earning assets (£bn) (1) 192.1 19.2 129.8 na 350.7
Bank net interest margin (1) 2.85% 4.37% 3.46% na 2.99%
For the notes to this table, refer to the following page. nm = not meaningful,
na = not applicable.
Segment performance continued
Quarter ended 31 December 2021 (3)
Total
Retail Private Commercial Central items NatWest
Banking Banking & Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 1,057 126 764 (25) 1,922
Non-interest income 107 127 404 42 680
Total income 1,164 253 1,168 17 2,602
Direct expenses (281) (61) (482) (1,314) (2,138)
Indirect expenses (441) (89) (530) 1,060 -
Other operating expenses (722) (150) (1,012) (254) (2,138)
Litigation and conduct costs (52) (5) (47) (86) (190)
Operating expenses (774) (155) (1,059) (340) (2,328)
Operating profit/(loss) before impairment losses/releases 390 98 109 (323) 274
Impairment (losses)/releases (5) 12 317 (55) 269
Operating profit/(loss) 385 110 426 (378) 543
Income excluding notable items 1,164 199 1,181 (4) 2,540
Additional information
Return on tangible equity (1) na na na na 5.6%
Return on equity (1) 19.7% 21.3% 8.3% nm na
Cost:income ratio (excl. litigation and conduct) (1) 62.0% 59.3% 86.6% nm 82.2%
Total assets (£bn) 210.0 29.9 425.9 116.2 782.0
Funded assets (£bn) (1) 210.0 29.8 321.3 114.8 675.9
Net loans to customers - amortised cost (£bn) 182.2 18.4 124.2 34.2 359.0
Loan impairment rate (1) 1bp (26)bps (101)bps nm (30)bps
Impairment provisions (£bn) (1.5) (0.1) (1.7) (0.5) (3.8)
Impairment provisions - stage 3 (£bn) (0.9) - (0.7) (0.4) (2.0)
Customer deposits (£bn) 188.9 39.3 217.5 34.1 479.8
Risk-weighted assets (RWAs) (£bn) 36.7 11.3 98.1 10.9 157.0
RWA equivalent (RWAe) (£bn) 36.7 11.3 99.9 11.2 159.1
Employee numbers (FTEs - thousands) 14.6 1.9 11.8 29.6 57.9
Third party customer asset rate (2) 2.58% 2.34% 2.75% nm nm
Third party customer funding rate (2) (0.05%) - (0.01%) nm nm
Bank average interest earning assets (£bn) (1) 183.5 18.7 120.4 na 331.7
Bank net interest margin (1) 2.28% 2.67% 2.52% na 2.30%
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.
(2) Third party customer asset rate is calculated as annualised interest
receivable on third-party loans to customers as a percentage of third-party
loans to customers. 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. Net interest
margin is calculated as net interest income as a percentage of the average
interest-earning assets, and excludes liquid asset buffer.
(3) Comparative results have been re-presented from those previously published to
reclassify certain operations as discontinued operations as described in Note
4 on page 33.
Business performance summary
Capital and leverage ratios
The table below sets out the key capital and leverage ratios. From 1 January
2022, NatWest Group is subject to the requirements set out in the PRA
Rulebook. Therefore, going forward the capital and leverage ratios are being
presented under these frameworks on a transitional basis.
31 December 30 September 31 December
2022 2022 2021
Capital adequacy ratios (1) % % %
CET1 14.2 14.3 18.2
Tier 1 16.4 16.5 21.0
Total 19.3 19.2 24.7
Capital £m £m £m
Tangible equity 25,482 24,093 30,689
Prudential valuation adjustment (275) (319) (274)
Deferred tax assets (912) (687) (761)
Own credit adjustments (58) (116) 21
Pension fund assets (227) (360) (465)
Cash flow hedging reserve 2,771 3,274 395
Foreseeable ordinary dividends (967) (668) (1,211)
Adjustment for trust assets (2) (365) - -
Foreseeable charges - on-market ordinary share buyback programme (800) - (825)
Prudential amortisation of software development costs - - 411
Adjustments under IFRS 9 transitional arrangements 361 358 621
Insufficient coverage for non-performing exposures (18) (19) (5)
Total deductions (490) 1,463 (2,093)
CET1 capital 24,992 25,556 28,596
End-point AT1 capital 3,875 3,875 3,875
Grandfathered instrument transitional arrangements - - 571
Transitional AT1 capital 3,875 3,875 4,446
Tier 1 capital 28,867 29,431 33,042
End-point Tier 2 capital 4,978 4,691 5,402
Grandfathered instrument transitional arrangements 75 108 304
Transitional Tier 2 capital 5,053 4,799 5,706
Total regulatory capital 33,920 34,230 38,748
Risk-weighted assets
Credit risk 141,963 141,530 120,116
Counterparty credit risk 6,723 8,500 7,907
Market risk 8,300 9,349 7,917
Operational risk 19,115 19,115 21,031
Total RWAs 176,101 178,494 156,971
(1) Based on current PRA rules, therefore includes the transitional relief on
grandfathered capital instruments and the transitional arrangements for the
capital impact of IFRS 9 expected credit loss (ECL) accounting. The impact of
the IFRS 9 transitional adjustments at 31 December 2022 was £0.4 billion for
CET1 capital, £36 million for total capital and £71 million RWAs (30
September 2022 - £0.4 billion CET1 capital, £23 million total capital and
£80 million RWAs, 31 December 2021 - £0.6 billion CET1 capital, £0.5
billion total capital and £36 million RWAs). Excluding these adjustments, the
CET1 ratio would be 14.0% (30 September 2022 - 14.1%, 31 December 2021 -
17.8%). The transitional relief on grandfathered instruments at 31 December
2022 was £0.1 billion (30 September 2022 - £0.1 billion, 31 December 2021 -
£0.9 billion). Excluding both the transitional relief on grandfathered
capital instruments and the transitional arrangements for the capital impact
of IFRS 9 expected credit loss (ECL) accounting, the end-point Tier 1 capital
ratio would be 16.2% (30 September 2022 - 16.3%, 31 December 2021 - 20.3%) and
the end-point Total capital ratio would be 19.2% (30 September 2022 - 19.1%,
31 December 2021 - 23.8%).
(2) Prudent deduction in respect of agreement with the pension fund to establish
new legal structure. See Notes 5 and 33 in the 2022 NatWest Group Annual
Report and Accounts.
Business performance summary
Capital and leverage ratios continued
31 December 30 September 31 December
2022 2022 2021
Leverage £m £m £m
Cash and balances at central banks 144,832 155,266 177,757
Trading assets 45,577 57,833 59,158
Derivatives 99,545 141,002 106,139
Financial assets 404,374 411,623 412,817
Other assets 18,864 23,560 17,106
Assets of disposal groups 6,861 12,209 9,015
Total assets 720,053 801,493 781,992
Derivatives
- netting and variation margin (100,356) (139,383) (110,204)
- potential future exposures 18,327 20,466 35,035
Securities financing transactions gross up 4,147 6,155 1,397
Other off balance sheet items 46,144 45,862 44,240
Regulatory deductions and other adjustments (7,114) (11,540) (8,980)
Claims on central banks (141,144) (151,725) (174,148)
Exclusion of bounce back loans (5,444) (6,462) (7,474)
UK leverage exposure 534,613 564,866 561,858
UK leverage ratio (%) (1) 5.4 5.2 5.9
(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 5.3% (30 September 2022 - 5.2%, 31
December 2021 - 5.8%).
Business performance summary
Credit Risk
Economic loss drivers
The tables and commentary below provide details of the key economic loss
drivers under the four scenarios.
The main macroeconomic variables for each of the four scenarios used for ECL
modelling are set out in the main macroeconomic variables table below. The
compound annual growth rate (CAGR) for GDP is shown. It also shows the
five-year average for unemployment and the Bank of England base rate. The
house price index and commercial real estate figures show the total change in
each asset over five years
Main macroeconomic variables 2022 2021
Extreme Weighted Extreme Weighted
Upside Base case Downside downside average Upside Base case Downside downside average
Five-year summary % % % % % % % % % %
GDP - CAGR 1.6 0.8 0.2 (0.2) 0.7 2.4 1.7 1.4 0.6 1.8
Unemployment - average 3.9 4.6 5.1 7.2 5.0 3.5 4.2 4.8 6.7 4.2
House price index - total change 21.5 (1.3) (6.0) (22.4) (1.3) 22.7 12.1 4.3 (5.3) 12.8
Bank of England base rate - average 2.6 3.3 1.5 4.9 3.1 1.5 0.8 0.7 (0.5) 0.9
Commercial real estate price - total change (0.1) (14.4) (17.2) (38.3) (16.1) 18.2 7.2 5.5 (6.4) 9.5
Consumer price index - CAGR 2.4 3.0 3.1 7.0 3.6 2.7 2.5 3.1 1.5 2.6
Equity stock index - total change 22.6 13.9 1.8 (8.5) 9.5 36.6 24.9 12.5 0.2 24.7
World GDP - CAGR 3.7 3.3 1.6 1.0 2.7 3.5 3.2 2.6 0.6 3.1
Probability weight 18.6 45.0 20.8 15.6 30.0 45.0 20.0 5.0
(1) The five year period starts after Q3 2022 for 31 December 2022
and Q3 2021 for 31 December 2021.
(2) CAGR and total change figures are not comparable with 31
December 2021 data, as the starting quarters differ
ECL post model adjustments
The table below shows ECL post model adjustments.
Retail Banking Private Commercial & Central
Mortgages Other Banking Institutional items (1) Total
2022 £m £m £m £m £m £m
Economic uncertainty 102 51 6 191 2 352
Other adjustments 8 20 - 16 15 59
Total 110 71 6 207 17 411
Of which:
- Stage 1 62 27 3 63 - 155
- Stage 2 32 44 3 139 17 235
- Stage 3 16 - - 5 1 22
2021
Deferred model calibrations 58 97 - 62 2 219
Economic uncertainty 60 99 5 391 29 584
Other adjustments 37 - - 5 156 198
Total 155 196 5 458 187 1,001
Of which:
- Stage 1 9 5 - 15 5 34
- Stage 2 126 164 5 443 33 771
- Stage 3 20 27 - - 149 196
Post model adjustments have reduced significantly since 31 December 2021, with
notable shifts in all categories. This reflected:
- The reclassification of the Ulster Bank RoI mortgage book, in Q3
2022, from amortised cost to fair value through profit or loss and continued
activity on the strategic shift to exit the market.
- Removal of deferred model calibration post model adjustments
following the implementation of new models as well as COVID-19 adjustments no
longer being required.
- Economic uncertainty adjustments significantly reduced as many
COVID-19 adjustments were no longer required, plus the deteriorating economic
outlook and improved modelling approaches, resulted in increases in modelled
ECL.
Business performance summary
Portfolio summary - segment analysis
The table below shows gross loans and ECL, by segment and stage, within the
scope of the IFRS 9 ECL framework.
Central
Retail Private Commercial items
Banking Banking & Institutional & other Total
2022 £m £m £m £m £m
Loans - amortised cost and FVOCI
Stage 1 174,727 18,367 108,791 23,339 325,224
Stage 2 21,561 801 24,226 245 46,833
Stage 3 2,565 242 2,166 123 5,096
Of which: individual - 168 905 48 1,121
Of which: collective 2,565 74 1,261 75 3,975
Subtotal excluding disposal group loans 198,853 19,410 135,183 23,707 377,153
Disposal group loans 1,502 1,502
Total 25,209 378,655
ECL provisions (1)
Stage 1 251 21 342 18 632
Stage 2 450 14 534 45 1,043
Stage 3 917 26 747 69 1,759
Of which: individual - 26 251 10 287
Of which: collective 917 - 496 59 1,472
Subtotal excluding ECL provisions on disposal group loans 1,618 61 1,623 132 3,434
ECL on disposal group loans 53 53
Total 185 3,487
ECL provisions coverage (2)
Stage 1 (%) 0.14 0.11 0.31 0.08 0.19
Stage 2 (%) 2.09 1.75 2.20 18.37 2.23
Stage 3 (%) 35.75 10.74 34.49 56.10 34.52
ECL provisions coverage excluding disposal group loans 0.81 0.31 1.20 0.56 0.91
ECL provisions coverage on disposal group loans 3.53 3.53
Total 0.73 0.92
Impairment losses/(releases)
ECL (release)/charge (3) 229 (2) 122 (12) 337
Stage 1 (146) 2 (135) (11) (290)
Stage 2 268 (7) 108 24 393
Stage 3 107 3 149 (25) 234
Of which: individual - 3 57 (6) 54
Of which: collective 107 - 92 (19) 180
Continuing operations 229 (2) 122 (12) 337
Discontinued operations - (71) (71)
Total (83) 266
Amounts written-off 216 15 224 27 482
Of which: individual - 15 153 - 168
Of which: collective 216 - 71 27 314
Business performance summary
Portfolio summary - segment analysis continued
Central
Retail Private Commercial items
Banking Banking & Institutional & other Total
2021 £m £m £m £m £m
Loans - amortised cost and FVOCI
Stage 1 168,013 17,600 107,368 37,843 330,824
Stage 2 13,594 967 18,477 943 33,981
Stage 3 1,884 270 2,081 787 5,022
Of which: individual - 270 884 61 1,215
Of which: collective 1,884 - 1,197 726 3,807
Subtotal excluding disposal group loans 183,491 18,837 127,926 39,573 369,827
Disposal group loans 9,084 9,084
Total 48,657 378,911
ECL provisions (1)
Stage 1 134 12 129 27 302
Stage 2 590 29 784 75 1,478
Stage 3 850 37 751 388 2,026
Of which: individual - 37 313 13 363
Of which: collective 850 - 438 375 1,663
Subtotal excluding ECL provisions on disposal group loans 1,574 78 1,664 490 3,806
ECL on disposal group loans 109 109
Total 599 3,915
ECL provisions coverage (2)
Stage 1 (%) 0.08 0.07 0.12 0.07 0.09
Stage 2 (%) 4.34 3.00 4.24 7.95 4.35
Stage 3 (%) 45.12 13.70 36.09 49.30 40.34
ECL provisions coverage excluding disposal group loans 0.86 0.41 1.30 1.24 1.03
ECL provisions coverage on disposal group loans 1.20 1.20
Total 1.23 1.03
Impairment (releases)/losses
ECL (release)/charge (3,4) (36) (54) (1,160) 77 (1,173)
Stage 1 (387) (45) (872) (13) (1,317)
Stage 2 157 (15) (299) (7) (164)
Stage 3 194 6 11 97 308
Of which: individual - 6 16 (2) 20
Of which: collective 194 - (5) 99 266
Continuing operations (36) (54) (1,160) 77 (1,173)
Discontinued operations (162) (162)
Total (85) (1,335)
Amounts written-off 220 6 562 88 876
Of which: individual - 6 449 - 455
Of which: collective 220 - 113 88 421
(1) Includes £3 million (2021 - £5 million) related to assets classified as
FVOCI.
(2) ECL provisions coverage is calculated as ECL provisions divided by loans -
amortised cost and FVOCI. It is calculated on third party loans and total ECL
provisions.
(3) Includes a £4 million release (2021 - £3 million release) related to other
financial assets, of which nil release (2021 - £2 million release) related to
assets classified as FVOCI; and £5 million release (2021 - £34 million
release) related to contingent liabilities.
(4) Comparative results have been re-presented from those previously published to
reclassify certain operations as discontinued operations as described in Note
4 on page 33.
(5) The table shows gross loans only and excludes amounts that are outside the
scope of the ECL framework. Refer to the Financial instruments within the
scope of the IFRS 9 ECL framework section in the NatWest Group plc 2022 Annual
Report and Accounts for further details. Other financial assets within the
scope of the IFRS 9 ECL framework were cash and balances at central banks
totalling £143.3 billion (2021 - £176.3 billion) and debt securities of
£29.9 billion (2021 - £44.9 billion).
Business performance summary
Analysis of ECL provision
The table below shows gross loans and ECL provision analysis.
31 December 30 September 30 June 31 December
2022 2022 2022 2021
£m £m £m £m
Total loans 377,153 384,413 376,442 369,827
Personal 217,123 212,199 208,650 207,380
Wholesale 160,030 172,214 167,792 162,447
Value of loans in Stage 2 46,833 34,033 28,505 33,981
Personal 21,854 13,247 11,828 14,423
Wholesale 24,979 20,786 16,677 19,558
ECL provisions in Stage 2 1,043 1,121 1,122 1,478
Personal 466 431 440 614
Wholesale 577 690 682 864
ECL provision coverage in Stage 2 2.23% 3.29% 3.94% 4.35%
Personal 2.13% 3.25% 3.72% 4.26%
Wholesale 2.31% 3.32% 4.09% 4.42%
Condensed consolidated income statement for the period ended 31 December 2022
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021 (1) 2022 2022 2021 (1)
£m £m £m £m £m
Interest receivable 12,637 9,234 4,046 3,341 2,325
Interest payable (2,795) (1,699) (1,178) (701) (403)
Net interest income 9,842 7,535 2,868 2,640 1,922
Fees and commissions receivable 2,915 2,694 770 721 724
Fees and commissions payable (623) (574) (155) (168) (149)
Income from trading activities 1,133 323 164 260 (3)
Other operating income (111) 451 61 (224) 108
Non-interest income 3,314 2,894 840 589 680
Total income 13,156 10,429 3,708 3,229 2,602
Staff costs (3,716) (3,676) (1,029) (879) (915)
Premises and equipment (1,112) (1,133) (292) (286) (368)
Other administrative expenses (2,026) (2,026) (597) (531) (735)
Depreciation and amortisation (833) (923) (220) (200) (310)
Operating expenses (7,687) (7,758) (2,138) (1,896) (2,328)
Profit before impairment losses/releases 5,469 2,671 1,570 1,333 274
Impairment (losses)/releases (337) 1,173 (144) (247) 269
Operating profit before tax 5,132 3,844 1,426 1,086 543
Tax charge (1,275) (996) (46) (434) (234)
Profit from continuing operations 3,857 2,848 1,380 652 309
(Loss)/profit from discontinued operations, net of tax (2) (262) 464 (56) (396) 189
Profit for the period 3,595 3,312 1,324 256 498
Attributable to:
Ordinary shareholders 3,340 2,950 1,262 187 434
Preference shareholders - 19 - - 5
Paid-in equity holders 249 299 61 67 58
Non-controlling interests 6 44 1 2 1
3,595 3,312 1,324 256 498
Earnings per ordinary share - continuing operations 36.5p 23.0p 13.7p 6.0p 2.3p
Earnings per ordinary share - discontinued operations (2.7p) 4.3p (0.6p) (4.1p) 1.8p
Total earnings per share attributable to
ordinary shareholders - basic 33.8p 27.3p 13.1p 1.9p 4.1p
Earnings per ordinary share - fully diluted
continuing operations 36.2p 22.9p 13.6p 6.0p 2.3p
Earnings per ordinary share - fully diluted
discontinued operations (2.6p) 4.3p (0.6p) (4.1p) 1.8p
Total earnings per share attributable to
ordinary shareholders - fully diluted 33.6p 27.2p 13.0p 1.9p 4.1p
(1) Comparative results have been re-presented from those previously published to
reclassify certain operations as discontinued operations as described in Note
4 on page 33.
(2) The results of discontinued operations, comprising the post-tax profit is
shown as a single amount on the face of the income statement. An analysis of
this amount is presented in Note 4 on page 33.
(3) At the General Meeting and Class Meeting on 25 August 2022, the shareholders
approved the proposed special dividend and share consolidation. On 30 August
the issued ordinary share capital was consolidated in the ratio of 14 existing
shares for 13 new shares. The average number of shares and earnings per share
have been adjusted retrospectively.
Condensed consolidated statement of comprehensive income
for the period ended 31 December 2022
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
£m £m £m £m £m
Profit for the period 3,595 3,312 1,324 256 498
Items that do not qualify for reclassification
Remeasurement of retirement benefit schemes (1) (840) (669) (158) (165) 71
Changes in fair value of credit in financial liabilities
designated at FVTPL 50 (29) (52) 11 -
FVOCI financial assets 59 13 17 39 2
Tax 187 164 51 13 (21)
(544) (521) (142) (102) 52
Items that do qualify for reclassification
FVOCI financial assets (457) (100) (6) 7 45
Cash flow hedges (2) (3,277) (848) 701 (2,421) (238)
Currency translation 241 (382) (117) 173 (115)
Tax 1,067 213 (192) 693 83
(2,426) (1,117) 386 (1,548) (225)
Other comprehensive (loss)/income after tax (2,970) (1,638) 244 (1,650) (173)
Total comprehensive income/(loss) for the period 625 1,674 1,568 (1,394) 325
Attributable to:
Ordinary shareholders 370 1,308 1,506 (1,463) 261
Preference shareholders - 19 - - 5
Paid-in equity holders 249 299 61 67 58
Non-controlling interests 6 48 1 2 1
625 1,674 1,568 (1,394) 325
(1) Following the purchase of ordinary shares from UKGI in Q1 2022, NatWest Group
contributed £500 million to its main pension scheme in line with the
memorandum of understanding announced on 17 April 2018. After tax relief, this
contribution reduced total equity by £365 million. Other material movements
came from asset underperformance relative to movements in the schemes'
liabilities over the year. In line with our policy, the present value of
defined benefit obligations and the fair value of plan assets at the end of
the reporting period, are assessed to identify significant market fluctuations
and one-off events since the end of the prior financial year.
(2) The unrealised losses on cash flow hedge reserves is mainly driven by
deferment of losses on GBP net received fixed swaps as interest rates have
increased.
Condensed consolidated balance sheet as at 31 December 2022
31 December 30 September 31 December
2022 2022 2021
£m £m £m
Assets
Cash and balances at central banks 144,832 155,266 177,757
Trading assets 45,577 57,833 59,158
Derivatives 99,545 141,002 106,139
Settlement balances 2,572 7,587 2,141
Loans to banks - amortised cost 7,139 9,554 7,682
Loans to customers - amortised cost 366,340 371,812 358,990
Other financial assets 30,895 30,257 46,145
Intangible assets 7,116 6,961 6,723
Other assets 9,176 9,012 8,242
Assets of disposal groups 6,861 12,209 9,015
Total assets 720,053 801,493 781,992
Liabilities
Bank deposits 20,441 24,713 26,279
Customer deposits 450,318 473,026 479,810
Settlement balances 2,012 7,220 2,068
Trading liabilities 52,808 64,754 64,598
Derivatives 94,047 134,958 100,835
Other financial liabilities 49,107 46,895 49,326
Subordinated liabilities 6,260 6,592 8,429
Notes in circulation 3,218 3,077 3,047
Other liabilities 5,346 5,302 5,797
Total liabilities 683,557 766,537 740,189
Equity
Ordinary shareholders' interests 32,598 31,054 37,412
Other owners' interests 3,890 3,890 4,384
Owners' equity 36,488 34,944 41,796
Non-controlling interests 8 12 7
Total equity 36,496 34,956 41,803
Total liabilities and equity 720,053 801,493 781,992
Condensed consolidated statement of changes in equity
for the period ended 31 December 2022
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
£m £m £m £m £m
Called-up share capital - at 1 January 11,468 12,129 10,539 10,583 11,642
Ordinary shares issued - 37 - -
Share cancellation (1,4) (929) (698) - (44) (174)
At 31 December 10,539 11,468 10,539 10,539 11,468
-
Paid-in equity - at 1 January 3,890 4,999 3,890 3,890 3,890
Reclassified (2) - (2,046) - - -
Issued - 937 - - -
At 31 December 3,890 3,890 3,890 3,890 3,890
Share premium account - at 1 January 1,161 1,111 1,161 1,161 1,161
Ordinary shares issued - 50 - - -
At 31 December 1,161 1,161 1,161 1,161 1,161
Merger reserve - at 1 January and 31 December 10,881 10,881 10,881 10,881 10,881
FVOCI reserve - at 1 January 269 360 (105) (67) 237
Unrealised (losses)/gains (6) (570) 32 (3) (123) 97
Realised losses/(gains) 59 (122) 14 62 (51)
Tax 140 (1) (8) 23 (14)
At 31 December (102) 269 (102) (105) 269
Cash flow hedging reserve - at 1 January (395) 229 (3,273) (1,526) (254)
Amount recognised in equity (7) (2,973) (687) 734 (2,321) (186)
Amount transferred from equity to earnings (304) (161) (33) (100) (52)
Tax 901 224 (199) 674 97
At 31 December (2,771) (395) (2,771) (3,273) (395)
Foreign exchange reserve - at 1 January 1,205 1,608 1,589 1,404 1,325
Retranslation of net assets 512 (484) (87) 292 (173)
Foreign currency (losses)/gains on hedges of net assets (266) 88 (29) (115) 48
Tax 32 (17) 6 12 (5)
Recycled to profit or loss on disposal of businesses (5) 10 (1) (4) 10
At 31 December 1,478 1,205 1,478 1,589 1,205
Capital redemption reserve - at 1 January 722 - 1,651 1,607 548
Share cancellation (1,4) 929 698 - 44 174
Redemption of preference shares (5) - 24 - - -
At 31 December 1,651 722 1,651 1,651 722
Retained earnings - at 1 January 12,966 12,567 8,886 10,963 12,835
Profit/(loss) attributable to ordinary shareholders and
other equity owners
- continuing operations 3,851 2,804 1,379 650 308
- discontinued operations (262) 464 (56) (396) 189
Equity preference dividends paid - (19) - - (5)
Paid-in equity dividends paid (249) (299) (61) (67) (58)
Ordinary dividends paid (1,205) (693) - (364) -
Special dividends paid (1,746) - - (1,746) -
Shares repurchased (1,4) (2,054) (1,423) - (96) (387)
Redemption of preference shares (5) (750) (24) - - -
Redemption/reclassification of paid-in equity (2)
- gross - 134 - - -
- tax (36) 16 - (15) -
Realised gains in period on FVOCI equity shares
- gross 113 3 - 107 1
- tax (9) - 12 (21) -
Remeasurement of retirement benefit schemes (3)
- gross (840) (669) (158) (165) 71
- tax 192 168 40 19 (16)
Condensed consolidated statement of changes in equity
for the period ended 31 December 2022 continued
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
£m £m £m £m £m
Changes in fair value of credit in financial liabilities
designated at FVTPL
- gross 50 (29) (52) 11 -
- tax (2) 3 8 (1) -
Shares issued under employee share schemes 6 8 (2) 3 8
Share-based payments
- gross (7) (55) 19 4 11
- tax 1 10 4 - 9
At 31 December 10,019 12,966 10,019 8,886 12,966
Own shares held - at 1 January (371) (24) (275) (279) (389)
Shares vested under employee share schemes 113 36 17 4 18
Own shares acquired (1) - (383) - - -
At 31 December (258) (371) (258) (275) (371)
Owners' equity at 31 December 36,488 41,796 36,488 34,944 41,796
Non-controlling interests - at 1 January 7 (36) 12 10 11
Currency translation adjustments and other movements - 4 - - -
Profit attributable to non-controlling interests 6 44 1 2 1
Dividends paid (5) (5) (5) - (5)
At 31 December 8 7 8 12 7
Total equity at 31 December 36,496 41,803 36,496 34,956 41,803
Attributable to:
Ordinary shareholders 32,598 37,412 32,598 31,054 37,412
Preference shareholders - 494 - - 494
Paid-in equity holders 3,890 3,890 3,890 3,890 3,890
Non-controlling interests 8 7 8 12 7
36,496 41,803 36,496 34,956 41,803
(1) In March 2022, there was an agreement with HM Treasury to buy 549.9 million
(March 2021 - 591 million) ordinary shares in NatWest Group plc from UK
Government Investments Ltd, at 220.5 pence per share (March 2021 - 190.5 pence
per share) for the total consideration of £1.22 billion (March 2021 - £1.13
billion). NatWest Group cancelled all 549.9 million of the purchased ordinary
shares (March 2021 - NatWest Group cancelled 391 million of the purchased
ordinary shares, and held the remaining 200 million in own shares held). The
nominal value of the share cancellation has been transferred to the capital
redemption reserve.
(2) In July 2021, paid-in equity reclassified to liabilities as the result of a
call in August 2021 of US$2.65 billion AT1 Capital notes.
(3) Following the purchase of ordinary shares from UKGI in Q1 2022, NatWest Group
contributed £500 million to its main pension scheme in line with the
memorandum of understanding announced on 17 April 2018. After tax relief, this
contribution reduced total equity by £365 million. Other material movements
came from asset underperformance relative to movements in the schemes'
liabilities over the year. In line with our policy, the present value of
defined benefit obligations and the fair value of plan assets at the end of
the reporting period, are assessed to identify significant market fluctuations
and one-off events since the end of the prior financial year.
(4) NatWest Group plc repurchased and cancelled 379.3 million (2021 - 310.8
million) shares for total consideration of £829.3 million (2022 £676.2
million) excluding fees as part of the respective 2021 and 2022 On Market
Share Buyback Programmes that concluded earlier this year. The nominal value
of the share cancellations has been transferred to the capital redemption
reserve.
(5) Following an announcement of a Regulatory Call in February 2022, the Series U
preference shares were reclassified to liabilities. A £254 million loss was
recognised in retained earnings as a result of FX unlocking.
(6) Certain assets within this category have been subject to economic hedges. The
effect of those creates a temporary difference between Other Comprehensive
income and the income statement due to the difference in recognition criteria.
This temporary difference is expected to reverse through the income statement
over the duration of the hedge.
(7) The unrealised losses on cash flow hedge reserves is mainly driven by
deferment of losses on GBP net received fixed swaps as interest rates have
increase.
Condensed consolidated cash flow statement for the year ended 31 December 2022
Year ended
31 December 31 December
2022 2021
£m £m
Operating activities
Operating profit before tax from continuing operations((1)) 5,132 3,844
Operating (loss)/profit before tax from discontinued operations((1)) (262) 467
Adjustments for non-cash items 1,203 3,623
Net cash flows from trading activities 6,073 7,934
Changes in operating assets and liabilities (48,447) 46,606
Net cash flows from operating activities before tax (42,374) 54,540
Income taxes paid (1,223) (856)
Net cash flows from operating activities (43,597) 53,684
Net cash flows from investing activities 19,059 3,065
Net cash flows from financing activities (10,652) (2,601)
Effects of exchange rate changes on cash and cash equivalents 2,933 (2,641)
Net (decrease)/increase in cash and cash equivalents (32,257) 51,507
Cash and cash equivalents at 1 January 190,706 139,199
Cash and cash equivalents at 31 December 158,449 190,706
(1) Comparative results have been re-presented from those
previously published to reclassify certain operations as discontinued
operations as described in Note 4 on page 33.
Notes
1. Presentation of condensed consolidated financial statements
The condensed consolidated financial statements should be read in conjunction
with NatWest Group plc's 2022 Annual Report and Accounts. The critical and
significant 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. Critical accounting policies and key sources of estimation uncertainty
The critical accounting policies and judgements are noted in NatWest Group
plc's 2022 Annual Report and Accounts.
Information used for significant estimates
Key financial estimates are based on management's latest five-year revenue and
cost forecasts. Measurement of deferred tax and expected credit losses are
highly sensitive to reasonably possible changes in those anticipated
conditions. Changes in judgements and assumptions could result in a material
adjustment to those estimates in future reporting periods. (Refer to the Risk
factors in NatWest Group plc's 2022 Annual Report and Accounts).
Notes
3.Tax
Analysis of the tax charge for the year
The tax charge comprises current and deferred tax in respect of profits and
losses recognised or originating in the income statement. Tax on items
originating outside the income statement is charged to other comprehensive
income or direct to equity (as appropriate) and is therefore not reflected in
the table below.
Current tax is tax payable or recoverable in respect of the taxable profit or
loss for the year and any adjustments to tax payable in prior years.
2022 2021 2020
Continuing operations £m £m £m
Current tax
Charge for the year (1,611) (1,036) (191)
Over provision in respect of prior years 100 31 86
(1,511) (1,005) (105)
Deferred tax
Credit/(charge) for the year 47 (185) 176
UK tax rate change impact (1) (10) 165 75
Net increase/(decrease) in the carrying value of deferred tax assets in
respect of UK,
RoI and Netherlands losses 267 12 (130)
(Under)/over provision in respect of prior years (2) (68) 17 (90)
Tax charge for the year (1,275) (996) (74)
(1) It was announced in the UK Government's budget on 27 October
2021 that the main UK banking surcharge will decrease from 8% to 3% from 1
April 2023. This legislative change was enacted on 24 February 2022.
(2) Prior year tax adjustments incorporate refinements to tax
computations made on submission and agreement with the tax authorities and
adjustments to provisions in respect of uncertain tax positions.
Judgment: tax contingencies
NatWest Group's corporate income tax charge and its provisions for corporate
income taxes necessarily involve a degree of estimation and judgment. The tax
treatment of some transactions is uncertain and tax computations are yet to be
agreed with the tax authorities in a number of jurisdictions. NatWest Group
recognises anticipated tax liabilities based on all available evidence and,
where appropriate, in the light of external advice. Any difference between the
final outcome and the amounts provided will affect current and deferred income
tax charges in the period when the matter is resolved.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable in respect of
temporary differences where the carrying amount of an asset or liability
differs for accounting and tax purposes. Deferred tax liabilities reflect the
expected amount of tax payable in the future on these temporary differences.
Deferred tax assets reflect the expected amount of tax recoverable in the
future on these differences. The net deferred tax asset recognised by the
NatWest Group is shown below, together with details of the accounting
judgments and tax rates that have been used to calculate the deferred tax.
Details are also provided of any deferred tax assets or liabilities that have
not been recognised on the balance sheet.
Analysis of deferred tax
2022 2021
£m £m
Deferred tax asset (2,178) (1,195)
Deferred tax liability 227 359
Net deferred tax asset (1,951) (836)
Notes
4. Discontinued operations and assets and liabilities of disposal groups
Three legally binding agreements for the sale of UBIDAC business have been
announced as part of the phased withdrawal from the Republic of Ireland.
Material developments since Q3 are set out below.
Agreement with Allied Irish Banks, p.l.c. (AIB) for the transfer of performing
commercial loans.
Successful migration of a further two tranches of performing commercial loans
to AIB was completed during Q4 2022, with €2.1 billion of gross performing
loans being fully migrated by year-end. It is expected that remaining
migrations of commercial customers will be materially completed in phases over
H1 2023. Colleagues who are wholly or mainly assigned to supporting this part
of the business have continued to transfer to AIB under Transfer of
Undertakings, Protection of Employment (TUPE) arrangements. Losses on disposal
of €123 million have been recognised in 2022 (€47 million in Q4 2022) in
respect of the migrations completed to date.
Agreement with Permanent TSB Group Holdings p.l.c. (PTSB) for the sale of
performing non-tracker mortgages, the performing loans in the micro-SME
business, the UBIDAC Asset Finance business, including its Lombard digital
platform, and 25 Ulster Bank branch locations in the Republic of Ireland.
c.€5 billion of performing non-tracker mortgages migrated to PTSB in
November 2022, with the remaining balances expected to migrate during H1 2023.
In January 2023, 25 branches transferred to PTSB. The remaining performing
non-tracker mortgages, micro-SME loans, Lombard Asset Finance business and all
remaining eligible colleagues who will move under TUPE regulations, are also
expected to transfer in 2023.
Agreement with AIB for the sale of performing tracker and linked mortgages.
In 2023 the Competition and Consumer Protection Commission (CCPC) granted
approval on the portfolio sale of performing tracker and linked mortgages to
AIB. Completion of this sale is expected to occur in Q2 2023.
The business activities relating to these sales that meet the requirements of
IFRS 5 are presented as a discontinued operation and as a disposal group.
Comparatives have been re-presented from those previously published to
reclassify certain items as discontinued operations. This has resulted in a
re-presentation of 2021 comparatives: a reduction of Operating profit before
tax and Profit from continuing operations of £188 million, and an increase of
Profit from discontinued operations of £188 million. Total profit for the
year remains unchanged. Ulster Bank RoI continuing operations are now reported
within Group central items & other. In 2022 we reclassified mortgage loans
to fair value through profit or loss, which resulted in a €453 million
reduction in mortgage financial assets in UBIDAC to 31 December 2022 (€34
million in Q4 2022). This reclassification applies across both our continuing
and discontinued operations.
(a) (Loss)/profit from discontinued operations, net of tax
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
£m £m £m £m £m
Interest receivable 177 339 17 4 82
Net interest income 177 339 17 4 82
Non-interest income (1) (472) 13 (63) (405) 4
Total income (295) 352 (46) (401) 86
Operating expenses (38) (47) (3) (11) (14)
(Loss)/profit before impairment releases/losses (333) 305 (49) (412) 72
Impairment releases/(losses) 71 162 (7) 16 117
Operating (loss)/profit before tax (262) 467 (56) (396) 189
Tax charge - (3) - - -
(Loss)/profit from discontinued operations, net of tax (262) 464 (56) (396) 189
(1) Excludes gain of £20 million (€24 million) recognized by
NatWest Group as a result of acquisition of PTSB shares in relation to
disposal of UBIDAC assets to PTSB.
(b) Assets and liabilities of disposal groups
31 December 31 December
2022 2021
£m £m
Assets of disposal groups
Loans to customers - amortised cost 1,458 9,002
Other financial assets - loans to customers 5,397 -
Derivatives - 5
Other assets 6 8
6,861 9,015
Liabilities of disposal groups
Other liabilities 15 5
15 5
Net assets of disposal groups 6,846 9,010
4. Discontinued operations and assets and liabilities of disposal groups
continued
(c) Operating cash flows attributable to discontinued operations
31 December 31 December
2022 2021
£m £m
Net cash flows from operating activities 1,090 2,212
Net cash flows from investing activities 6,164 -
Net increase in cash and cash equivalents 7,254 2,212
5. Litigation and regulatory matters
NatWest Group plc and certain members of NatWest Group are party to legal
proceedings and involved in 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 26 in the NatWest Group plc 2022 Annual Report and
Accounts, issued on 17 February 2023 and available at natwestgroup.com (Note
26), discusses the Matters in which NatWest Group is currently involved and
material developments. Other than the Matters discussed in Note 26, no member
of NatWest 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 26 that have occurred since the Q3 2022 Interim
Management Statement was issued on 28 October 2022, include, but are not
limited to, those set out below.
Litigation
FX litigation
Following the 2015 settlement of the primary foreign exchange (FX) class
action in the United States, some members of the settlement class opted out of
the settlement and, in 2018, filed their own non-class complaint in the United
States District Court for the Southern District of New York (SDNY), against
NWM Plc, NWMSI, and other banks, asserting antitrust claims. In April 2019,
some of the claimants in that opt-out case, as well as others, served
proceedings in the High Court of Justice of England and Wales, asserting
competition claims against NWM Plc and several other banks. The claim was
transferred from the High Court of Justice of England and Wales in December
2021 and registered in the UK Competition Appeal Tribunal (CAT) in January
2022. In December 2022, NWM Plc reached an agreement in principle, subject to
documentation, to resolve both the SDNY and CAT cases. The settlement amount
to be paid by NWM Plc is covered by an existing provision.
US Anti-Terrorism Act litigation
On 5 January 2023, the United States Court of Appeals for the Second Circuit
affirmed the United States District Court for the Eastern District of New
York's (EDNY) 2019 dismissal of the US Anti-Terrorism Act case filed in
November 2014 against NWM N.V. and certain other financial institutions. The
case concerns an alleged conspiracy to assist Iran in transferring money to
Hezbollah and Iraqi terror cells that committed attacks in Iraq between 2003
and 2011. Similar cases, filed after the 2014 case that was the subject of the
appeal, remain pending in the EDNY and the SDNY.
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. The claimant 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. Coutts &
Co Ltd is a company registered in Switzerland and is in wind-down following
the announced sale of its business assets in 2015.
Regulatory matters
RBSI reliance regime and referral to enforcement
In January 2023, the Jersey Financial Services Commission notified The Royal
Bank of Scotland International Limited (RBSI) that it had been referred to its
Enforcement Division in relation to RBSI's operation of the reliance regime.
The reliance regime is specific to certain Crown Dependencies and enables the
bank to rely on regulated third parties for specific due diligence
information.
Notes
6. Related party transactions
UK Government
The UK Government and bodies controlled or jointly controlled by the UK
Government and bodies over which it has significant influence are related
parties of NatWest Group. NatWest 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, NatWest 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, NatWest 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) NatWest Group recharges The NatWest Group Pension Fund with the cost of
administration services incurred by it. The amounts involved are not material
to NatWest Group.
Full details of NatWest Group's related party transactions for the year ended
31 December 2022 are included in the NatWest Group plc 2022 Annual Report and
Accounts.
7. Dividends
The company has announced that the directors have recommended a final dividend
of £1.0 billion, or 10.0p per ordinary share (2021 - £844 million, or 7.5p
per ordinary share) subject to shareholder approval at the Annual General
Meeting on 25 April 2023. If approved, payment will be made on 2 May 2023 to
shareholders on the register at the close of business on 17 March 2023. The
ex-dividend date will be 16 March 2023.
8. Post balance sheet events
On 6 February 2023, NWB reached agreement with the trustees of the Main
Section of the Group pension scheme to recognise that the final distribution
linked contribution to the Main Scheme, of up to £471 million, in 2023 is not
expected to be required. In its place, agreement was reached to establish a
new legal structure to hold assets with a value equivalent to £471 million.
These assets would become transferrable to the Main section in the event that
future triggers, reflecting a funding requirement, were met. The assets are
not de-recognised from NWB balance sheet, but are recorded as encumbered. The
Group believes likelihood of triggers being met are remote given the current
funding position of the Main section.
Other than as disclosed in this document, there have been no significant
events between 31 December 2022 and the date of approval of this announcement
which would require a change to, or additional disclosure, in the
announcement.
Statement of directors' responsibilities
The responsibility statement below has been prepared in connection with
NatWest Group's full Annual Report and Accounts for the year ended 31 December
2022.
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 as issued by
the International Accounting Standards Board, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the company and
the undertakings included in the consolidated taken as a whole; and
- The Strategic report and Directors' report (incorporating the Business review)
include a fair review of the development and performance of the business and
the position of the company 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
Howard Davies Alison Rose-Slade DBE Katie Murray
Chairman Group Chief Executive Officer Group Chief Financial Officer
16 February 2023
Board of directors
Chairman Executive directors Non-executive directors
Howard Davies Alison Rose-Slade DBE Frank Dangeard
Katie Murray Roisin Donnelly
Patrick Flynn
Morten Friis
Yasmin Jetha
Mike Rogers
Mark Seligman
Lena Wilson
Additional information
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.
The term 'RBSI Holdings Limited' refers to The Royal Bank of Scotland
International (Holdings) Limited. 'Go-forward group' excludes Ulster Bank RoI
and discontinued operations.
NatWest Group publishes its financial statements in pounds sterling ('£' or
'sterling'). The abbreviations '£m' and '£bn' represent millions and
thousands of millions of pounds sterling, respectively, and references to
'pence' represent pence 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 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 2021 have been
filed with the Registrar of Companies and those for the year ended 31 December
2022 will be filed with the register of companies following the Annual General
Meeting. The report of the auditor on those statutory accounts was
unqualified, did not draw attention to any matters by way of emphasis and did
not contain a statement under section 498(2) or (3) of the Act.
MAR - Inside Information
This announcement contains information that qualified or may have qualified as
inside information for NatWest Group plc, for the purposes of Article 7 of the
Market Abuse Regulation (EU) 596/2014 (MAR) as it forms part of domestic law
by virtue of the European Union (Withdrawal) Act 2018. This announcement is
made by Alexander Holcroft, Head of Investor Relations for NatWest Group plc.
Contacts
Analyst enquiries: Alexander Holcroft, Investor Relations +44 (0) 20 7672 1758
Media enquiries: NatWest Group Press Office +44 (0) 131 523 4205
Management presentation Fixed income presentation
Date: 17 February 2023 Date: 17 February 2023
Time: 9:00 AM UK time Time: 1:00 PM UK time
Zoom ID: 950 5999 0257 Zoom ID: 958 2703 7347
Available on www.natwestgroup.com/results
(http://www.natwestgroup.com/results)
- Announcement and slides.
- NatWest Group plc 2022 Annual Report and Accounts.
- A financial supplement containing income statement, balance sheet and segment
performance for the nine quarters ended 31 December 2022.
- NatWest Group and NWH Group Pillar 3 Report.
- Climate-related Disclosures Report 2022.
- Environmental, Social and Governance (ESG) Disclosures Report 2022
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 that include 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. In particular,
this document includes forward-looking targets and guidance relating to
financial performance measures, such as income growth, operating expense,
RoTE, ROE, discretionary capital distribution targets, 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 NatWest Group's initial area of focus, climate and
ESG-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. In addition, this document
includes forward-looking statements relating, but not limited to:
implementation of NatWest Group's purpose-led strategy and other strategic
priorities (including in relation to: phased withdrawal from ROI,
cost-controlling measures, the NatWest Markets refocusing, the creation of the
Commercial & Institutional business segment and the progression towards
working as One Bank across NatWest Group to serve customers); the timing and
outcome of litigation and government and regulatory investigations; direct and
on-market buy-backs; funding plans and credit risk profile; managing its
capital position; liquidity ratio; portfolios; net interest margin and drivers
related thereto; lending and income growth, product share and growth in target
segments; impairments and write-downs; restructuring and remediation costs and
charges; NatWest Group's exposure to political risk, economic assumptions and
risk, climate, environmental and sustainability risk, operational risk,
conduct risk, financial crime risk, cyber, data and IT risk and credit rating
risk and to various types of market risk, including interest rate risk,
foreign exchange rate risk and commodity and equity price risk; customer
experience, including our Net Promotor Score (NPS); employee engagement and
gender balance in leadership positions.
Limitations inherent to forward-looking statements
These statements are based on current plans, expectations, estimates, targets
and projections, and are subject to significant inherent risks, uncertainties
and other factors, both external and relating to NatWest Group's strategy or
operations, which may result in NatWest Group being unable to achieve the
current plans, expectations, estimates, targets, projections and other
anticipated outcomes expressed or implied by such forward-looking statements.
In addition, certain of these disclosures are dependent on choices relying on
key model characteristics and assumptions and are subject to various
limitations, including assumptions and estimates made by management. By their
nature, certain of these disclosures are only estimates and, as a result,
actual future results, gains or losses could differ materially from those that
have been estimated. Accordingly, undue reliance should not be placed on these
statements. The forward-looking statements contained in this document speak
only as of the date we make them and we expressly disclaim any obligation or
undertaking to update or revise any forward-looking statements contained
herein, whether to reflect any change in our expectations with regard thereto,
any change in events, conditions or circumstances on which any such statement
is based, or otherwise, except to the extent legally required.
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 Group plc's Annual
Report on Form 20-F and its other filings with the US Securities and Exchange
Commission. The principal risks and uncertainties that could adversely NatWest
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:
political and economic risks and uncertainty in the UK and global markets,
including due to high inflation, supply chain disruption and the Russian
invasion of Ukraine); uncertainty regarding the effects of Brexit; changes in
interest rates and foreign currency exchange rates; and HM Treasury's
ownership as the largest shareholder of NatWest Group plc); strategic risk
(including in respect of the implementation of NatWest Group's purpose-led
Strategy; future acquisitions and divestments; phased withdrawal from ROI and
the transfer of its Western European corporate portfolio); financial
resilience risk (including in respect of: NatWest Group's ability to meet
targets and to make discretionary capital distributions; the competitive
environment; counterparty and borrower risk; prudential regulatory
requirements for capital and MREL; liquidity and funding risks; changes in the
credit ratings; the requirements of regulatory stress tests; model risk;
sensitivity to accounting policies, judgments, assumptions and estimates;
changes in applicable accounting standards; the value or effectiveness of
credit protection; the adequacy of NatWest Group's future assessments by the
Prudential Regulation Authority and the Bank of England; and the application
of UK statutory stabilisation or resolution powers); climate and
sustainability risk (including in respect of: risks relating to climate change
and the transitioning to a net zero economy; the implementation of NatWest
Group's climate change strategy, including publication of an initial climate
transition plan in 2023 and climate change resilient systems, controls and
procedures; climate-related data and model risk; the failure to adapt to
emerging climate, environmental and sustainability risks and opportunities;
changes in ESG ratings; increasing levels of climate, environmental and
sustainability related regulation and oversight; and climate, environmental
and sustainability-related litigation, enforcement proceedings and
investigations); 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; complex IT systems; attracting,
retaining and developing senior management and skilled personnel; NatWest
Group's risk management framework; and reputational risk); and legal,
regulatory and conduct risk (including in respect of: the impact of
substantial regulation and oversight; compliance with regulatory requirements;
the outcome of legal, regulatory and governmental actions and investigations;
the transition of LIBOR other IBOR rates to replacement risk-free rates; and
changes in tax legislation or failure to generate future taxable profits).
Forward looking statements continued
Climate and ESG disclosures
Climate and ESG disclosures in this document are not measures within the scope
of International Financial Reporting Standards ('IFRS'), use a greater number
and level of judgements, 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 judgements, assumptions and estimates are highly
likely to change 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, net zero strategy, including the
implementation of the initial interation 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 ESG 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 ESG related
metrics. As a result, we expect that certain climate and ESG 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-related data and other forward-looking statements and
metrics' of the NatWest Group 2022 Climate-related Disclosures Report.
Cautionary statement regarding Non-IFRS financial measures and APMs
NatWest Group prepares its financial statements in accordance with generally
accepted accounting principles (GAAP). 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. 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.
Appendix
RBS\
Non-IFRS financial measures
Non-IFRS financial measures
NatWest Group prepares its financial statements in accordance with generally
accepted accounting principles (GAAP). This document contains a number of
adjusted or alternative performance measures, also known as non-GAAP or
non-IFRS performance measures. These measures are adjusted for notable and
other defined items which management 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 the calculation of metrics that are used
throughout the banking industry. These non-IFRS measures are not measures
within the scope of IFRS and are not a substitute for IFRS measures.
1. Go-forward group
Further progress with respect to the phased withdrawal from the Republic of
Ireland has resulted in Ulster Bank RoI continuing operations no longer
meeting the IFRS definition of an operating segment. Therefore Ulster Bank
RoI is no longer shown separately and performance on a Go-forward group basis
(NatWest Group excluding Ulster Bank RoI) will not be reported going forward.
Selected Go-forward group metrics are still included to align with 2022
targets and guidance previously provided and the financial measures in 2022
executive director performance assessment.
Go-forward group income excluding notable items
Go-forward group income excluding notable items is calculated as total income
excluding Ulster Bank RoI total income and excluding notable items of the
Go-forward group.
The exclusion of notable items aims to remove the impact of one-offs which may
distort period-on-period comparisons.
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
Continuing operations
Total income 13,156 10,429 3,708 3,229 2,602
Less Ulster Bank RoI total income 53 (145) 49 37 (23)
Go-forward group income 13,209 10,284 3,757 3,266 2,579
Less notable items (146) (210) 7 168 (62)
Go-forward group income excluding notable items 13,063 10,074 3,764 3,434 2,517
Go-forward group other operating expenses
Other operating expenses is calculated as total operating expenses less
litigation and conduct costs. Other operating expenses of the Go-forward group
excludes Ulster Bank RoI.
Our cost target for 2022 is based on this measure and we track progress
against it.
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
Continuing operations
Total operating expenses 7,687 7,758 2,138 1,896 2,328
Less litigation and conduct costs (385) (466) (91) (125) (190)
Other operating expenses 7,302 7,292 2,047 1,771 2,138
Less Ulster Bank RoI other operating expenses (654) (443) (301) (110) (104)
Go-forward group other operating expenses 6,648 6,849 1,746 1,661 2,034
Non-IFRS financial measures
2. Operating expenses - management view
The 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.
Year ended
31 December 2022 31 December 2021
Litigation Other Statutory Litigation Other Statutory
and conduct operating operating and conduct operating operating
Operating expenses costs expenses expenses costs expenses expenses
Continuing operations
Staff costs 45 3,671 3,716 - 3,676 3,676
Premises and equipment - 1,112 1,112 - 1,133 1,133
Depreciation and amortisation - 833 833 - 923 923
Other administrative expenses 340 1,686 2,026 466 1,560 2,026
Total 385 7,302 7,687 466 7,292 7,758
Quarter ended
31 December 2022
Litigation Other Statutory
and conduct operating operating
Operating expenses costs expenses expenses
Continuing operations
Staff costs 16 1,013 1,029
Premises and equipment - 292 292
Depreciation and amortisation - 220 220
Other administrative expenses 75 522 597
Total 91 2,047 2,138
30 September 2022
Litigation Other Statutory
and conduct operating operating
Operating expenses costs expenses expenses
Continuing operations
Staff costs 11 868 879
Premises and equipment - 286 286
Depreciation and amortisation - 200 200
Other administrative expenses 114 417 531
Total 125 1,771 1,896
31 December 2021
Litigation Other Statutory
and conduct operating operating
Operating expenses costs expenses expenses
Continuing operations
Staff costs - 915 915
Premises and equipment - 368 368
Depreciation and amortisation - 310 310
Other administrative expenses 190 545 735
Total 190 2,138 2,328
Non-IFRS financial measures
3. Cost: income ratio
NatWest Group uses cost:income ratio (excl. litigation and conduct) in the
Outlook guidance. This is calculated as other operating expenses (total
operating expenses less litigation and conduct costs) 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.
The calculation of the cost:income ratio (excl. litigation and conduct) is
shown below, along with a comparison to cost:income ratio calculated using
total operating expenses.
Central Total
Retail Private Commercial & items NatWest
Banking Banking Institutional & other Group
Year ended 31 December 2022 £m £m £m £m £m
Continuing operations
Total operating expenses 2,593 622 3,744 728 7,687
Less litigation and conduct costs (109) (12) (181) (83) (385)
Other operating expenses 2,484 610 3,563 645 7,302
Total income 5,646 1,056 6,413 41 13,156
Cost:income ratio 45.9% 58.9% 58.4% nm 58.4%
Cost:income ratio (excl. litigation and conduct) 44.0% 57.8% 55.6% nm 55.5%
Year ended 31 December 2021
Continuing operations
Total operating expenses 2,513 520 3,757 968 7,758
Less litigation and conduct costs (76) 3 (111) (282) (466)
Other operating expenses 2,437 523 3,646 686 7,292
Total income 4,445 816 4,838 330 10,429
Cost:income ratio 56.5% 63.7% 77.7% nm 74.4%
Cost:income ratio (excl. litigation and conduct) 54.8% 64.1% 75.4% nm 69.9%
Quarter ended 31 December 2022
Continuing operations
Total operating expenses 658 198 1,031 251 2,138
Less litigation and conduct costs 12 (10) (42) (51) (91)
Other operating expenses 670 188 989 200 2,047
Total income 1,617 310 1,819 (38) 3,708
Cost:income ratio 40.7% 63.9% 56.7% nm 57.7%
Cost:income ratio (excl. litigation and conduct) 41.4% 60.6% 54.4% nm 55.2%
Quarter ended 30 September 2022
Continuing operations
Total operating expenses 693 139 893 171 1,896
Less litigation and conduct costs (63) (1) (53) (8) (125)
Other operating expenses 630 138 840 163 1,771
Total income 1,475 285 1,657 (188) 3,229
Cost:income ratio 47.0% 48.8% 53.9% nm 58.7%
Cost:income ratio (excl. litigation and conduct) 42.7% 48.4% 50.7% nm 54.8%
Quarter ended 31 December 2021
Continuing operations
Total operating expenses 774 155 1,059 340 2,328
Less litigation and conduct costs (52) (5) (47) (86) (190)
Other operating expenses 722 150 1,012 254 2,138
Total income 1,164 253 1,168 17 2,602
Cost:income ratio 66.5% 61.3% 90.7% nm 89.5%
Cost:income ratio (excl. litigation and conduct) 62.0% 59.3% 86.6% nm 82.2%
Non-IFRS financial measures
4. NatWest Group return on tangible equity
Return on tangible equity comprises annualised profit or loss for the period
attributable to ordinary shareholders divided by average tangible equity.
Average tangible equity is average total equity excluding average
non-controlling interests, average other owners equity and average intangible
assets.
Go-forward group return on tangible equity is calculated as annualised profit
for the period less Ulster Bank RoI divided by Go-forward group total tangible
equity. Go-forward RWAe applying factor is the Go-forward group average RWAe
as a percentage of total Natwest Group average RWAe.
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. A reconciliation is shown below including a comparison to the
nearest GAAP measure; return on equity. This comprises profit attributable to
ordinary shareholders divided by average total equity.
Year ended or as at Quarter ended or as at
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
NatWest Group return on tangible equity £m £m £m £m £m
Profit attributable to ordinary shareholders 3,340 2,950 1,262 187 434
Annualised profit attributable to ordinary shareholders 5,048 748 1,736
Average total equity 38,210 42,727 35,866 36,956 41,887
Adjustment for other owners equity and intangibles (11,153) (11,395) (11,350) (11,200) (10,719)
Adjusted total tangible equity 27,057 31,332 24,516 25,756 31,168
Return on equity 8.7% 6.9% 14.1% 2.0% 4.1%
Return on tangible equity 12.3% 9.4% 20.6% 2.9% 5.6%
Go-forward group return on tangible equity
Profit attributable to ordinary shareholders 3,340 2,950 1,262 187 434
Less Ulster Bank RoI loss from continuing operations 723 414 354 156 167
Less loss/(profit) from discontinued operations 262 (464) 56 396 (189)
Go-forward group profit attributable to
ordinary shareholders 4,325 2,900 1,672 739 412
Annualised go-forward group profit attributable
to ordinary shareholders 6,688 2,956 1,648
Average total equity 38,210 42,727 35,866 36,956 41,887
Adjustment for other owners equity and intangibles (11,153) (11,395) (11,350) (11,200) (10,719)
Adjusted total tangible equity 27,057 31,332 24,516 25,756 31,168
Go-forward group RWAe applying factor 95% 93% 96% 95% 94%
Go-forward group total tangible equity 25,704 29,139 23,535 24,468 29,176
Return on tangible equity 16.9% 10.0% 28.4% 12.1% 5.6%
Non-IFRS financial measures
5. Segmental return on equity
Segmental return on equity comprises segmental operating profit or loss,
adjusted for preference share dividends, paid-in equity and tax, divided by
average notional equity. 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
tangible equity.
This measure shows the return generated by operating segments on equity
deployed.
Retail Private Commercial &
Year ended 31 December 2022 Banking Banking Institutional
Operating profit (£m) 2,824 436 2,547
Paid-in equity cost allocation (£m) (80) (15) (187)
Adjustment for tax (£m) (768) (118) (590)
Adjusted attributable profit (£m) 1,976 303 1,770
Average RWAe (£bn) 53.1 11.3 104.0
Equity factor 13.0% 11.0% 14.0%
Average notional equity (£bn) 6.9 1.2 14.6
Return on equity 28.6% 24.5% 12.2%
Year ended 31 December 2021
Operating profit (£m) 1,968 350 2,241
Preference share and paid-in equity cost allocation (£m) (80) (20) (236)
Adjustment for tax (£m) (529) (92) (501)
Adjusted attributable profit (£m) 1,359 238 1,504
Average RWAe (£bn) 36.0 11.2 106.0
Equity factor 14.5% 12.5% 13.0%
Average notional equity (£bn) 5.2 1.4 13.8
Return on equity 26.1% 17.0% 10.9%
Retail Private Commercial &
Quarter ended 31 December 2022 Banking Banking Institutional
Operating profit (£m) 872 110 726
Paid-in equity cost allocation (£m) (20) (6) (46)
Adjustment for tax (£m) (239) (29) (170)
Adjusted attributable profit (£m) 613 75 510
Annualised adjusted attributable profit (£m) 2,454 300 2,040
Average RWAe (£bn) 54.4 11.2 106.0
Equity factor 13.0% 11.0% 14.0%
Average notional equity (£bn) 7.1 1.2 14.8
Return on equity 34.7% 24.2% 13.7%
Quarter ended 30 September 2022
Operating profit (£m) 666 139 645
Paid-in equity cost allocation (£m) (20) (3) (48)
Adjustment for tax (£m) (181) (38) (149)
Adjusted attributable profit (£m) 465 98 448
Annualised adjusted attributable profit (£m) 1,860 392 1,791
Average RWAe (£bn) 53.0 11.2 105.0
Equity factor 13.0% 11.0% 14.0%
Average notional equity (£bn) 6.9 1.2 14.7
Return on equity 27.0% 31.8% 12.2%
Quarter ended 31 December 2021
Operating profit (£m) 385 110 426
Preference share and paid-in equity cost allocation (£m) (20) (5) (59)
Adjustment for tax (£m) (102) (29) (92)
Adjusted attributable profit (£m) 263 76 275
Annualised adjusted attributable profit (£m) 1,051 302 1,101
Average RWAe (£bn) 36.9 11.3 101.0
Equity factor 14.5% 12.5% 13.0%
Average notional equity (£bn) 5.4 1.4 13.1
Return on equity 19.7% 21.3% 8.3%
Non-IFRS financial measures
6. Bank net interest margin
Bank net interest margin is annualised net interest income, as a percentage of
bank average interest-earning assets. Bank average interest earning assets are
the average interest earning assets of the banking business of NatWest Group
excluding liquid asset buffer.
Liquid asset buffer consists of assets held by NatWest Group, such as cash and
balances at central banks and debt securities in issue, that can be used to
ensure repayment of financial obligations as they fall due. The exclusion of
liquid asset buffer presents net interest margin on a basis more comparable
with UK peers and excludes the impact of regulatory driven factors. A
reconciliation is shown below including a comparison to the nearest GAAP
measure; net interest margin. This is net interest income as a percentage of
average interest earning assets.
Year ended or as at Quarter ended or as at
31 December 31 December 31 December 30 September 31 December
2022 2021 2022 2022 2021
Go-forward group £m £m £m £m £m
Continuing operations
NatWest Group net interest income 9,842 7,535 2,868 2,640 1,922
Annualised NatWest Group net interest income 11,378 10,474 7,625
Average interest earning assets (IEA) 544,162 519,304 538,584 548,008 546,143
Less liquid asset buffer average IEA (198,927) (192,036) (182,797) (197,304) (214,412)
Bank average IEA 345,235 327,268 355,787 350,704 331,731
Net interest margin 1.81% 1.45% 2.11% 1.91% 1.40%
Bank net interest margin 2.85% 2.30% 3.20% 2.99% 2.30%
Retail Banking
Net interest income 5,224 4,074 1,505 1,379 1,057
Annualised net interest income 5,971 5,471 4,194
Retail Banking average IEA 210,404 196,043 217,790 212,179 201,546
Less liquid asset buffer average IEA (19,581) (16,913) (20,383) (20,050) (18,005)
Adjusted Retail Banking average IEA 190,823 179,130 197,407 192,129 183,541
Retail Banking net interest margin 2.74% 2.27% 3.02% 2.85% 2.28%
Private Banking
Net interest income 777 480 251 211 126
Annualised net interest income 996 837 500
Private Banking average IEA 29,308 27,224 29,140 29,309 28,499
Less liquid asset buffer average IEA (10,221) (8,949) (9,956) (10,155) (9,778)
Adjusted Private Banking average IEA 19,087 18,275 19,184 19,154 18,721
Private Banking net interest margin 4.07% 2.63% 5.19% 4.37% 2.67%
Commercial & Institutional
Net interest income 4,171 2,974 1,276 1,131 764
Annualised net interest income 5,062 4,487 3,031
Commercial & Institutional average IEA 245,316 3,270 201,329 205,021 197,148
Less liquid asset buffer average IEA (119,244) 117,686 (71,039) (75,216) (76,769)
Adjusted Commercial & Institutional average IEA 126,072 120,956 130,290 129,805 120,379
Commercial & Institutional net interest margin 3.31% 2.46% 3.89% 3.46% 2.52%
Non-IFRS financial measures
7. 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 valuing the bank and allows for
comparison with other per ordinary share metrics including the share price.
Year ended or as at
31 December 31 December
2022 2021
Ordinary shareholders' interests (£m) 32,598 37,412
Less intangible assets (£m) (7,116) (6,723)
Tangible equity (£m) 25,482 30,689
Ordinary shares in issue (millions) (1) 9,659 11,272
TNAV per ordinary share (pence) 264p 272p
(1) The number of ordinary shares in issue excludes own shares held.
Performance metrics not defined under IFRS
Metrics based on GAAP measures, included as not defined under IFRS and
reported for compliance with the European Securities and Markets Authority
(ESMA) adjusted performance measure rules.
1. Loan: deposit ratio
Adjusted loan:deposit ratio is calculated as net customer loans held at
amortised cost excluding reverse repos divided by total customer deposits
excluding repos. Prior periods have been re-presented. This is a common metric
used to assess liquidity. The removal of repos and reverse repos reduces
volatility and presents the ratio on a basis that is comparable to UK peers. A
reconciliation is shown below including a comparison to the nearest GAAP
measure; loan:deposit ratio. This is calculated as net loans to customers held
at amortised cost divided by customer deposits.
As at
31 December 31 December
2022 2021
£m £m
Loans to customers - amortised cost 366,340 358,990
Less reverse repos (19,749) (25,962)
346,591 333,028
Customer deposits 450,318 479,810
Less repos (9,828) (14,541)
440,490 465,269
Loan:deposit ratio (%) 81% 75%
Loan:deposit ratio (excl. repos and reverse repos) (%) 79% 72%
2. 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.
3. Funded assets
Funded assets is calculated as total assets less derivative assets. This
measure allows review of balance sheet trends exclusive of the volatility
associated with derivative fair values.
4. AUMAs
AUMA comprises both assets under management (AUMs) and assets under
administration (AUAs) serviced through the Private Banking business 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 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. Private Banking receives a fee for
providing investment management and execution services to Retail Banking and
Commercial & Institutional business segments.
This measure is tracked and reported as the amount of funds that we manage or
administer directly impacts the level of investment income that we receive.
5. Net new money
Net new money refers to client cash inflows and outflows relating to
investment products (this can include transfers from saving accounts). Net new
money excludes the impact of EEA resident client outflows following the UK's
exit from the EU and Russian client outflows since Q1 2022.
Net new money is reported and tracked to monitor the business performance of
new business inflows and management of existing client withdrawals across
Retail Banking, Private Banking and Commercial & Institutional Banking.
6. 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.
7. 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.
These metrics help investors better understand our net interest margin and
interest rate sensitivity.
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