REG - NatWest Group plc - Final Results - NWG plc
16/02/2024 07:15
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RNS Number : 4130D NatWest Group plc 16 February 2024
Annual Results
For the year ended 31 December 2023
natwestgroup.com
NatWest Group 2023 Page
Results
Highlights 2
Group Chief Executive's review 3
Outlook 5
Business performance summary
Chief Financial Officer review 7
Retail Banking 9
Private Banking 10
Commercial & Institutional 11
Central items & other 12
Segment performance 13
Risk and capital management
Capital, liquidity and funding risk 18
Credit risk 20
Condensed consolidated financial statements 24
Notes to the financial statements 30
Statement of directors' responsibilities 35
Additional information 36
Appendix - Non-IFRS financial measures 40
NatWest Group plc
2023 NatWest Group performance summary
Chief Executive, Paul Thwaite, commented:
"We have delivered a strong performance in an exceptional macro environment.
Our operating profit was up 20% on the year before, with a return on tangible
equity of 17.8% and £3.6 billion of distributions to shareholders.
The strength of our balance sheet allows us to support our customers and our
performance is grounded in the services we have provided to help them reach
their financial goals and manage their money better.
As we look ahead, I am ambitious and confident for the future of NatWest
Group. We should not underestimate the strength of our foundations or the
opportunity to build deeper relationships with our 19 million customers. Our
number one priority is to serve our customers well and provide them with the
products, services, and expertise they need.
This year we are focussed on the things we can control; delivering profitable
growth, becoming more efficient, more productive, and simpler to deal with,
whilst managing our cost and capital efficiently. Together, these actions will
drive long-term, sustainable value for our customers, shareholders, and the
wider UK economy."
Strong financial performance and delivery against our targets
- Full year attributable profit of £4.4 billion and a return on
tangible equity (RoTE) of 17.8%, above our guided range.
- Total income excluding notable items((1)) of £14.3 billion increased
by £1.3 billion, or 9.8%, compared with 2022 principally reflecting the
impact of favourable yield curve movements, higher income in our markets
business and lending growth partially offset by reduced deposit balances and
mix changes and lending margin pressure.
- Bank net interest margin (NIM) of 3.04% was 19 basis points higher
than 2022 with the increase reflecting favourable yield curve movements
partially offset by lending margin pressure, reduced deposits balances and mix
changes.
- Other operating expenses of £7.6 billion increased by £339 million,
or 4.6%, compared with 2022. The cost:income ratio (excl. litigation and
conduct) was 51.8% for 2023 compared with 55.5% for 2022.
- A net impairment charge of £578 million for 2023, or 15 basis points
of gross customer loans, principally reflects continued low and stable levels
of stage 3 defaults across the portfolio and good book charges related to
unsecured lending.
Robust balance sheet with strong capital and liquidity levels
- Net loans to customers excluding central items increased by £8.9
billion, or 2.6%, to £355.6 billion during 2023 reflecting a £7.6 billion
increase in Retail Banking and £2.0 billion in Commercial & Institutional
as term loan facilities and private financing increased. Retail Banking gross
new mortgage lending was £29.8 billion for the year compared with £41.4
billion in 2022 reflecting the smaller mortgage market.
- Up to 31 December 2023 we have provided £61.9 billion against our
target to provide £100 billion climate and sustainable funding and financing
between 1 July 2021 and the end of 2025.
- Customer deposits excluding central items reduced £13.8 billion, or
3.2%, during 2023 to £419.1 billion principally reflecting the competitive
environment for deposits and an overall market liquidity contraction. Term
balances now account for 16% of our book, up from 15% at the end of the third
quarter and 6% at Q4 2022.
- The loan:deposit ratio (LDR) (excl. repos and reverse repos) was 84%
with customer deposits exceeding net loans to customers by around £66
billion.
- The liquidity coverage ratio (LCR) of 144%, representing £45.4
billion headroom above 100% minimum requirement, decreased by 1 percentage
point compared with 2022.
- TNAV per share increased by 28 pence in the year to 292 pence
primarily reflecting the attributable profit for the period and movements in
cash flow hedging reserves as rate expectations lowered.
Shareholder return supported strong capital generation
- A final dividend of 11.5 pence per share is proposed and we intend to
commence an on-market buyback programme of up to £300 million in 2024, taking
total distributions deducted from capital in the year to £3.6 billion, or
around 40 pence per share.
- Common Equity Tier 1 (CET1) ratio of 13.4% was 80 basis points lower
than 31 December 2022 principally reflecting distributions of c.200 basis
points and increased RWAs of c.50 basis points partially offset by the
attributable profit, c.220 basis points.
- RWAs of £183.0 billion increased £6.9 billion during the year
primarily due to lending growth in Commercial & Institutional and a £3.0
billion increase due to CRD IV model updates partially offset by a £4.0
billion reduction as we continue our exit from the Republic of Ireland.
(1) Refer to the Non-IFRS financial measures appendix for details of
notable items.
Group Chief Executive's review
NatWest Group performed well in 2023, delivering for our customers, our
shareholders, and the wider UK economy.
Despite the macroeconomic uncertainty, our customers remained resilient,
navigating both inflation and rising interest rates. Throughout the year, we
supported them to manage their finances, meeting our goal to help 2 million
customers save over £100 for the first time((1)), and lent an additional £9
billion to the UK economy. Our investment in digital and data capabilities
continues to make it easier for our customers to manage their money, and for
our colleagues to provide great service.
As we look to 2024 and beyond, I am optimistic about the opportunities ahead
for NatWest Group, building on our UK heritage, leading customer businesses,
deep regional connections and financial strength. It is therefore an honour
to be asked to lead the bank and to have the opportunity to shape the future
of NatWest Group.
Business performance
Our overall operating profit of £6.2 billion was up 20% on 2022 and our
return on tangible equity was 17.8%, compared with 12.3% at the end of 2022.
Income, excluding notable items, was up 10% on 2022 at £14.3 billion, with
costs up 5%.
Our disciplined approach to capital allocation and balance sheet management
delivered attractive returns and distributions for our shareholders in 2023.
We announced £3.6 billion of capital returns to shareholders, including an
interim dividend of 5.5p at the half year and a proposed final dividend of
11.5p, bringing the total for 2023 to 17.0p, representing a 26% increase on
2022.
Our business performance was grounded in helping customers. In 2023, we
increased our lending to customers by £9 billion, opened over 100,000 new
start-up accounts for entrepreneurs, and over a million new personal current
accounts, as well as helping 379,000 Retail banking customers to buy or
re-mortgage their home.
We also made progress against our Climate transition plan in 2023, helping to
build a more sustainable economy. We are working to support our customers'
transition to net zero across a range of sectors and we have been a leading
loan arranger to the UK power infrastructure((2)) and renewables sector over
the last 10 years((3)). We have now provided £61.9 billion in climate and
sustainable funding and financing against our target of £100 billion between
1 July 2021 and the end of 2025.
Supporting our customers
During a year of macroeconomic uncertainty, we focused on supporting our
customers to better manage their finances. In 2023, we helped six million
customers by conducting financial health checks, providing improved personal
insights on credit scores, and helping customers to save for the first time.
We were also one of the first high street banks to sign up to the Mortgage
Charter in July 2023 to ease the pressure of increasing mortgage costs, and we
allowed our customers to lock in their next mortgage up to six months before
the end of a fixed-rate deal.
Over 1.5 million new savings accounts were opened in 2023. By making our fixed
term savings accounts available to more people, including those without an
existing account with NatWest Group, and providing a broad range of flexible
savings accounts, we met our goal to help two million people save more than
£100 for the first time.
We are the biggest supporter of UK businesses, serving more than 1.5 million
business across the country. During 2023, our extensive network of
relationship managers continued to help corporate customers grow, manage
costs, find the right funding solutions, and reduce risk in volatile markets.
In the context of macroeconomic volatility, we also provided centralised
resources such as a cashflow tool, energy calculator and supply chain
navigator to manage costs, in response to business customers' demand for help
on managing high energy prices. In response to broader concerns from our SME
customers, we collaborated with the Federation of Small Business to give them
access to independent support and advice on topics such as obtaining funding
and managing late payments.
Our 19 million customer base means we are well placed to support our customers
to make sustainable choices, while driving value and growth from the
commercial opportunities arising from the transition to a net-zero economy.
Through initiatives such as partnering with WWF-UK and food manufacturer
McCain we are reducing financial barriers for farmers transitioning to
sustainable agricultural practices. Through Lombard, no.1 in UK asset finance,
we supported customers with financing for electric vehicles, renewables, and
cleaner energy alternatives.
Simple for customers
We want to make it easier for customers to do business with us and are
investing in technology and partnerships to be a simple, safe, and smart bank,
driven by data and digital innovation.
In 2023, our Retail Banking mobile app was used by more than 9.8 million
customers and there were 10.9 million active digital users((4)) of our online
and mobile banking platforms. 94% of our retail customer needs are now met
digitally - up from 53% in 2019. In Commercial & Institutional, 86% of
customers are now actively using digital channels to interact with us, and our
innovative card and payments solution, Tyl, continued to grow. We were one of
the first banks to offer Apple and Android Tap to Pay, a low-cost service
removing the need for businesses to use hardware to accept payments.
We are also making it easier and quicker for our business customers to access
financing with the launch of a new online lending platform, enabling customers
to apply for a loan digitally in a matter of minutes.
By harnessing digital capabilities, we have also improved our customer service
and productivity. In 2023, we collaborated with technology partners to
responsibly use artificial intelligence (AI) to enhance customer engagement
and improve efficiency. This led to the development of new AI capabilities,
analysing customer behaviour to help us detect scams and fraud earlier to
reduce financial loss.
Investing for the future
As set out in our Investment Case, we have capacity for disciplined growth
across our three customer businesses. Our focus is on delivering long-term
value for our shareholders by putting our customers at the heart of our
strategy and deepening our relationships with them to better meet their needs.
Using data and technology will make the business more efficient and effective,
making it easier for our customers to do business with us and improving
engagement and productivity for our colleagues. Accompanied by a disciplined
approach to cost, investment, and capital allocation, I am confident that
these actions will deliver long-term sustainable value for our customers,
shareholders, and the wider UK economy.
Building our team and culture
It is clear to me that our people are at the heart of our business, and I am
grateful to our colleagues for their hard work, enthusiasm, and dedication
throughout 2023. We have an engaged and resilient colleague base, and I am
particularly pleased that our colleagues feel proud to deliver a great service
to our customers.
We are also continuing to invest in future talent by providing colleagues with
the skills and capabilities to fulfil their potential and build a
high-performing culture. This includes offering reskilling programmes to build
skills in software and data engineering, testing automation and human-centred
designs, supporting future talent through our early career programmes and
developing a new approach to performance management. These initiatives are
equipping our people with the tools and opportunities to develop their own
careers.
Conclusion
Our leading positions across our three customer businesses, and 19 million
customer base provide strong foundations on which to create further long-term
value for shareholders. In 2024, we will focus on disciplined growth,
improving bank-wide simplification to make it easier to do business with us,
and deploying capital efficiently while maintaining strong risk management to
drive strong capital generation. This will enable us to continue supporting
our customers, reinvest in the business, generate attractive distributions to
shareholders, and make a meaningful contribution to the UK economy.
Paul Thwaite
Group Chief Executive Officer
(1) 2020 goal: To help two million customers save over £100 for
the first time with NatWest Group since 2020.
(2) Power infrastructure comprise battery storage, electricity
distribution, electricity smart meter and electricity transmission.
(3) NatWest Group ranked first among Loan Arrangers by deal value
for the period 2014-2023. Source: Infralogic 31 December 2023.
(4) An active digital user is a customer who has accessed either
their online banking platform or mobile banking app.
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.
In 2024 we expect:
- to achieve a return on tangible equity of around 12%.
- income excluding notable items to be in the range of £13.0-13.5
billion.
- Group operating costs, excluding litigation and conduct costs, to be
broadly stable compared with 2023.
- our loan impairment rate to be below 20 basis points.
In 2026 we expect:
- to achieve a return on tangible equity for the Group of greater than
13%.
Capital
- target a CET1 ratio in the range of 13-14%.
- expect RWAs to be around £200 billion at the end of 2025, including
the impact of Basel 3.1, however this remains subject to final rules and
approval.
- expect to pay ordinary dividends of around 40% of attributable profit
and maintain capacity to participate in directed buybacks from the UK
Government, recognising that any exercise of this authority would be dependent
upon HMT's intentions. We will also consider further on-market buybacks as
appropriate.
(1) The guidance, targets, expectations, and trends discussed in this
section represent NatWest Group plc management's current expectations and are
subject to change, including as a result of the factors described in the Risk
Factors section of the 2023 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
2023 2022 2023 2023 2022
Summary consolidated income statement £m £m £m £m £m
Net interest income 11,049 9,842 2,638 2,685 2,868
Non-interest income 3,703 3,314 899 803 840
Total income 14,752 13,156 3,537 3,488 3,708
Litigation and conduct costs (355) (385) (113) (134) (91)
Other operating expenses (7,641) (7,302) (2,041) (1,793) (2,047)
Operating expenses (7,996) (7,687) (2,154) (1,927) (2,138)
Profit before impairment losses 6,756 5,469 1,383 1,561 1,570
Impairment losses (578) (337) (126) (229) (144)
Operating profit before tax 6,178 5,132 1,257 1,332 1,426
Tax (charge)/credit (1,434) (1,275) 5 (378) (46)
Profit from continuing operations 4,744 3,857 1,262 954 1,380
(Loss)/profit from discontinued operations, net of tax (112) (262) 26 (30) (56)
Profit for the period 4,632 3,595 1,288 924 1,324
Performance key metrics and ratios
Notable items within total income (1) £413m £95m £95m (£26m) (£58m)
Total income excluding notable items (1) £14,339m £13,061m £3,442m £3,514m £3,766m
Bank net interest margin (1) 3.04% 2.85% 2.86% 2.94% 3.20%
Bank average interest earning assets (1) £363bn £345bn £367bn £363bn £356bn
Cost:income ratio (excl. litigation and conduct) (1) 51.8% 55.5% 57.7% 51.4% 55.2%
Loan impairment rate (1) 15bps 9bps 13bps 24bps 16bps
Profit attributable to ordinary shareholders £4,394m £3,340m £1,229m £866m £1,262m
Total earnings per share attributable to ordinary
shareholders - basic 47.9p 33.8p 13.9p 9.8p 13.1p
Return on tangible equity (RoTE) (1) 17.8% 12.3% 20.1% 14.7% 20.6%
Climate and sustainable funding and financing (2) £29.3bn £24.5bn £8.7bn £4.6bn £6.4bn
As at
31 December 30 September 31 December
2023 2023 2022
£bn £bn £bn
Balance sheet
Total assets 692.7 717.1 720.1
Loans to customers - amortised cost 381.4 377.3 366.3
Loans to customers excluding central items (1,3) 355.6 354.5 346.7
Loans to customers and banks - amortised cost and FVOCI 392.0 389.5 377.1
Total impairment provisions (4) 3.6 3.5 3.4
Expected credit loss (ECL) coverage ratio 0.93% 0.94% 0.91%
Assets under management and administration (AUMA) (1) 40.8 38.2 33.4
Customer deposits 431.4 435.9 450.3
Customer deposits excluding central items (1,3) 419.1 423.5 432.9
Liquidity and funding
Liquidity coverage ratio (LCR) 144% 145% 145%
Liquidity portfolio (5) 223 236 233
Net stable funding ratio (NSFR) 133% 138% 145%
Loan:deposit ratio (excl. repos and reverse repos) (1) 84% 83% 79%
Total wholesale funding 80 82 74
Short-term wholesale funding 28 29 21
Capital and leverage
Common Equity Tier 1 (CET1) ratio (6) 13.4% 13.5% 14.2%
Total capital ratio (6) 18.4% 18.7% 19.3%
Pro forma CET1 ratio (excl. foreseeable items) (7) 14.2% 14.1% 15.4%
Risk-weighted assets (RWAs) 183.0 181.6 176.1
UK leverage ratio 5.0% 5.1% 5.4%
Tangible net asset value (TNAV) per ordinary share (1,8) 292p 271p 264p
Number of ordinary shares in issues (millions) (8) 8,792 8,871 9,659
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of
preparation and reconciliation of non-IFRS financial measures and performance
metrics.
(2) NatWest Group uses its climate and sustainable funding and financing inclusion
(CSFFI) criteria to determine the assets, activities and companies that are
eligible to be included within its climate and sustainable funding and
financing target. This includes both provision of committed (on and
off-balance sheet) funding and financing, including provision of services for
underwriting issuances and private placements.
(3) Central items includes Treasury repo activity and Ulster Bank Republic of
Ireland.
(4) Includes £0.1 billion relating to off-balance sheet exposures (30 September
2023 - £0.1 billion; 31 December 2022 - £0.1 billion).
(5) Comparative periods have been re-presented on an LCR basis in line with the
Liquidity portfolio definition as of 31 December 2023.
(6) Refer to the Capital, liquidity and funding section for details of the basis
of preparation.
(7) The pro forma CET1 ratio at 31 December 2023 excludes foreseeable items of
£1,538 million: £1,013 million for ordinary dividends and £525 million
foreseeable charges. (30 September 2023 excludes foreseeable items of £1,004
million: £643 million for ordinary dividends and £361 million foreseeable
charges. 31 December 2022 excludes foreseeable items of £2,132 million: £967
million for ordinary dividends and £1,165 million foreseeable charges).
(8) The number of ordinary shares in issue excludes own shares held.
Business performance summary continued
Chief Financial Officer review
We have delivered a strong operating performance in 2023 with a RoTE of 17.8%,
above our guided range. Total income excluding notable items of £14.3 billion
was up by 9.8% on prior year and levels of default remain stable across our
portfolio, with a net impairment charge of 15 basis points of gross customer
loans. We remain focused on cost discipline and have achieved our cost target
of around £7.6 billion, with a cost:income ratio of 51.8%.
Our robust balance sheet has allowed us to continue to lend to our personal
and business customers despite a competitive environment for deposits. We
retain strong liquidity and capital positions with an LCR of 144%,
representing £45.4 billion headroom above 100% minimum requirement, and an
LDR (excl. repos and reverse repos) of 84%. CET1 ratio was 13.4%, with total
distributions deducted from capital of £3.6 billion, around 200 basis points
of CET1, or c.40 pence per share. TNAV per share increased by 28 pence to 292
pence.
Financial performance
Total income increased by 12.1% to £14.8 billion compared with 2022. Total
income excluding notable items of £14.3 billion was 9.8% higher than the
prior year principally driven by lending growth, higher income in our markets
business and favourable yield curve movements partially offset by the change
in deposit mix from non-interest bearing to interest bearing and lower deposit
balances.
Bank NIM of 3.04% was 19 basis points higher than 2022 primarily due to
benefits from yield curve movements, net of changes in deposit mix, partially
offset by lending margin pressure. Q4 2023 Bank NIM was 2.86%, 8 basis points
down in the quarter reflecting asset margin pressure of 2 basis points and
deposit balance and mix impacts of 6 basis points.
Total operating expenses were £309 million higher than 2022. Other operating
expenses were £339 million, or 4.6%, higher for the year at £7.6 billion, in
line with our full year guidance. The increase was principally due to higher
staff costs, including a payment to support our colleagues with cost of living
challenges and inflationary pressures on utility and contract costs. In
addition, depreciation and amortisation costs increased by £101 million
reflecting capitalised technology investment and a property impairment.
FTE((1)) reduced by c.300 to c.61,200 principally reflecting reductions as we
continue our exit from the Republic of Ireland and automation and
simplification in Retail Banking, partially offset by investment in technology
and data roles.
A net impairment charge of £578 million, or 15 basis points of gross customer
loans, primarily reflects continued low and stable levels of stage 3 defaults
across the portfolio and good book charges related to unsecured lending.
Compared with 2022, our ECL provision increased by £0.2 billion to £3.6
billion and our ECL coverage ratio has increased from 0.91% to 0.93%. We
retain post model adjustments of £0.4 billion related to economic
uncertainty, or 11.8% of total impairment provisions. Whilst we are
comfortable with the strong credit performance of our book, we will assess
this position regularly and are closely monitoring the impacts of inflationary
pressures on the UK economy and our customers.
As a result, we are pleased to report an attributable profit for 2023 of £4.4
billion, with earnings per share of 47.9 pence and a RoTE of 17.8%, above our
guided range, the profit for the year includes a deferred tax asset write back
of £385 million in respect of tax losses.
Net loans to customers excluding central items increased by £8.9 billion in
the year largely reflecting a £7.6 billion increase in Retail Banking and
£2.0 billion of growth in Commercial & Institutional due to an increase
in term loan facilities and private financing within Corporate &
Institutions, net of £2.7 billion of UK Government scheme repayments. Retail
Banking mortgage lending increased by £5.9 billion, with gross new mortgage
lending of £29.8 billion in 2023 compared with £41.4 billion in 2022
reflecting the smaller mortgage market, and unsecured lending increased by
£2.0 billion with continued strong customer demand. Private Banking net loans
to customers decreased by £0.7 billion driven by higher repayments on
mortgages.
Up to 31 December 2023 we have provided £61.9 billion against our target to
provide £100 billion climate and sustainable funding and financing between 1
July 2021 and the end of 2025. As part of this we aim to provide at least £10
billion in lending for residential properties with Energy Performance
Certificate (EPC) ratings A and B between 1 January 2023 and the end of 2025.
During 2023 we provided £29.3 billion climate and sustainable funding and
financing, which included £3.9 billion in lending for residential properties
with EPC ratings A and B.
Customer deposits excluding central items decreased by £13.8 billion during
2023 to £419.1 billion principally reflecting the competitive environment for
deposits and an overall market liquidity contraction. In the fourth quarter
customer deposit balances reduced by £4.5 billion largely within Corporate
& Institutions as a result of active management, with growth in Retail
Banking and Private Banking partially offsetting. We have continued to see the
mix of our book shift towards interest bearing and term balances, with
non-interest bearing balances now accounting for 34% of balances and term at
16%, although the movement was broadly in line with our expectations and the
guidance we provided at our Q3 results announcement.
TNAV per share increased by 28 pence in the year to 292 pence primarily
reflecting the attributable profit for the period and an £872 million
movement in cash flow hedging reserves as rate expectations lowered, partially
offset by the impact of distributions. Intangible assets increased by £498
million in the year primarily reflecting software capitalisation and the
acquisition of Cushon.
(1) Full Time Equivalents of our permanent and internal fixed term
resource. Each full-time employee is one FTE, with part-time employees
recorded based on hours worked.
Business performance summary continued
Capital and leverage
The CET1 ratio remains strong at 13.4%, or 13.2% excluding IFRS 9 transitional
relief. The 80 basis point reduction compared with 31 December 2022
principally reflected distributions deducted from capital of c.200 basis
points, and increased RWAs of c.50 basis points, partially offset by the
attributable profit, NatWest Group's minimum requirement for own funds and
eligible liabilities (MREL) ratio was 30.5%.
RWAs increased by £6.9 billion during 2023 to £183.0 billion principally
reflecting lending growth in Commercial & Institutional and a £3.0
billion uplift associated with CRD IV model updates, partially offset by a
£4.0 billion reduction as we continue our exit from the Republic of Ireland.
Funding and liquidity
The LCR of 144%, representing £45.4 billion headroom above 100% minimum
requirement, decreased by 1 percentage point during the year, driven by growth
in customer lending and reduced customer deposits offset by an increase in
wholesale funding and UBIDAC asset sale.
Business performance summary
Retail Banking
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2023 2022 2023 2023 2022
£m £m £m £m £m
Total income 5,931 5,646 1,369 1,442 1,617
Operating expenses (2,828) (2,593) (681) (780) (658)
of which: Other operating expenses (2,711) (2,484) (647) (721) (670)
Impairment losses (465) (229) (103) (169) (87)
Operating profit 2,638 2,824 585 493 872
Return on equity (1) 23.8% 28.6% 20.2% 17.5% 34.7%
Net interest margin (1) 2.68% 2.74% 2.39% 2.56% 3.02%
Cost:income ratio (excl. litigation and conduct) (1) 45.7% 44.0% 47.3% 50.0% 41.4%
Loan impairment rate (1) 22bps 11bps 20bps 33bps 17bps
As at
31 December 30 September 31 December
2023 2023 2022
£bn £bn £bn
Net loans to customers (amortised cost) 205.2 205.2 197.6
Customer deposits 188.0 184.5 188.4
RWAs 61.6 58.9 54.7
(1) Refer to the Non-IFRS financial measures appendix for details of
the basis of preparation and reconciliation of non-IFRS financial measures and
performance metrics.
During 2023, Retail Banking continued to pursue sustainable lending growth,
increasing £7.6 billion, whilst taking a measured approach to risk. Retail
Banking delivered operating profit of £2.6 billion and a return on equity of
23.8%, against a more challenging operating environment and inflationary cost
impacts. Retail Banking provided £3.7 billion of climate and sustainable
funding and financing in 2023 from lending to properties with an EPC rating of
A or B.
2023 performance
- Total income was £285 million, or 5.0%, higher than 2022 reflecting higher
lending growth and the impact of rate rises on deposit income, partly offset
by mortgage margin dilution, higher treasury funding costs and impact of the
deposit balance mix shift from non-interest bearing current accounts to
interest bearing term balances.
- Net interest margin was 6 basis points lower than 2022 largely reflecting the
movements impacting total income, partly offset by the impact of pass-through
management and hedges on deposit income as interest rates increased.
- Other operating expenses were £227 million, or 9.1%, higher than 2022
reflecting higher pay awards to support our colleagues with cost of living
challenges, property lease termination losses, increased restructuring costs
and continued investment in the business. This was partly offset by savings
from a 6.3% reduction in headcount.
- An impairment charge of £465 million in 2023, £236 million higher than 2022,
reflecting higher stage 3 inflows and increased good book charges driven by
both lending growth and normalisation of risk parameters.
- Net loans to customers increased by £7.6 billion, or 3.8%, in 2023 reflecting
mortgage growth of £5.9 billion, with gross new mortgage lending of £29.8
billion, representing flow share of around 13%. Cards balances increased by
£1.5 billion and personal advances increased by £0.5 billion in 2023 with
continued strong customer demand.
- Customer deposits decreased by £0.4 billion in 2023 reflecting lower current
accounts of £10.2 billion, partly offset by higher fixed term deposits
driving savings growth of £9.8 billion. Term deposits now represents 11% of
deposit balances.
- RWAs increased by £6.9 billion, or 12.6%, in 2023 driven by both lending
growth in the period and IRB temporary model adjustments.
Q4 performance
- Total income was £73 million, or 5.1%, lower than Q3 2023 reflecting timing
of pass-through on interest bearing savings accounts, deposit balance mix
shift from non-interest bearing to interest bearing balances, continued
mortgage margin dilution, as well as higher treasury funding costs, partly
offset by increasing structural hedge benefit and higher fee income.
- Net interest margin was 17 basis points lower than Q3 2023 largely reflecting
timing of pass-through on interest bearing savings accounts, deposit mix shift
from non-interest bearing to interest bearing balances and mortgage margin
dilution, partly offset by increasing structural hedge benefit.
- Other operating expenses were £74 million, or 10.3%, lower than Q3 2023
reflecting non repeat of property lease termination losses, partly offset by
higher restructuring costs and the inclusion of the annual UK bank levy
charge.
- An impairment charge of £103 million in Q4 2023 largely reflects stage 3
defaults, which remained broadly stable. Benefits from the Q4 IFRS 9 multiple
economic scenarios (MES) update more than offset the impact of growth in
unsecured lending, leading to lower good book charges in the quarter.
- Net loans to customers balances were in line with Q3 2023 reflecting lower
mortgage balances of £0.4 billion with higher redemptions in the quarter
offset by increases in Cards balances of £0.3 billion and personal advances
of £0.1 billion with continued strong customer demand. Mortgage gross new
lending of £5.3 billion, representing flow share of around 10% in the
quarter, down from around 13% in Q3 2023 as we sought to actively manage the
balance sheet.
- Customer deposits increased by £3.5 billion, or 1.9%, in Q4 2023 reflecting
growth in fixed term savings and instant access savings growth of £5.4
billion, partially offset by lower current account balances of £1.9 billion.
- RWAs increased by £2.7 billion, or 4.6%, in Q4 2023 primarily due to IRB
temporary model adjustments.
Business performance summary
Private Banking
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2023 2022 2023 2023 2022
£m £m £m £m £m
Total income 990 1,056 209 214 310
Operating expenses (685) (622) (206) (157) (198)
of which: Other operating expenses (676) (610) (208) (157) (188)
Impairment (losses)/releases (14) 2 (5) 2 (2)
Operating profit/(loss) 291 436 (2) 59 110
Return on equity (1) 14.8% 24.5% (1.8%) 11.7% 24.2%
Net interest margin (1) 3.74% 4.07% 2.94% 3.02% 5.19%
Cost:income ratio (excl. litigation and conduct) (1) 68.3% 57.8% 99.5% 73.4% 60.6%
Loan impairment rate (1) 8bps (1)bp 11bps (4)bps 4bps
AUM net flows (£bn) (1) 1.3 2.0 0.3 - 0.3
As at
31 December 30 September 31 December
2023 2023 2022
£bn £bn £bn
Net loans to customers (amortised cost) 18.5 18.8 19.2
Customer deposits 37.7 37.2 41.2
RWAs 11.2 11.6 11.2
Assets Under Management (AUMs) (1) 31.7 29.8 28.3
Assets Under Administration (AUAs) (1) 9.1 8.4 5.1
Assets Under Management and Administration (AUMA) (1) 40.8 38.2 33.4
(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 2023, Private Banking continued to support customers to meet their
financial goals and manage their wealth responsibly, delivering a return on
equity of 14.8% which reflected the impact of a more challenging operating
environment. AUMA was 22.2% higher at £40.8 billion and is now greater than
customer deposits of £37.7 billion which fell as a result of competitive
pressure and a change in customer behaviour. Private Banking provided £0.2
billion of climate and sustainable funding and financing in 2023, principally
in relation to mortgages on residential properties with EPC A or B
certificates.
2023 performance
- Total income was £66 million, or 6.3%, lower than 2022 reflecting lower
deposit balances with mix shifting from non-interest bearing to interest
bearing balances, as customers migrated to savings products offering higher
returns, combined with reduced lending volumes and mortgage margin dilution.
- Net interest margin was 33 basis points lower than 2022 reflecting lower
deposit balances with mix shift from non-interest bearing to interest bearing
balances and an increase in pass-through of interest rate increases to
customers, partly offset by the impact of rate rises on deposit income.
- Other operating expenses were £66 million, or 10.8%, higher than 2022
reflecting an increase in pay awards to support our colleagues with cost of
living challenges, an additional VAT charge, property revaluation costs and
strategic spend to increase operational efficiency.
- The impairment charge of £14 million in 2023, compared with a £2 million
release in 2022, largely reflects non-recurrence of good book releases in 2022
whilst overall impairments remain at low levels.
- Net loans to customers decreased by £0.7 billion, or 3.6%, in 2023 as higher
levels of customer repayments more than offset gross new lending.
- Customer deposits decreased by £3.5 billion, or 8.5%, in 2023 reflecting an
increase in competition and higher tax outflows in Q1 2023. Changes in
customer behaviour drove a shift in mix of deposits with a decrease in instant
access savings and current accounts, and a switch to term and notice accounts
which now represent 30% of deposit balances.
- AUMA increased by £7.4 billion to £40.8 billion, reflecting net inflows of
£1.3 billion for AUM, and £0.4 billion AUA: strong market performance of
£3.4 billion and £2.3 billion Cushon balances following the acquisition in
June 2023.
Q4 performance
- Total income was £5 million, or 2.3%, lower than Q3 2023 reflecting the
impacts of changes in deposit product mix as customers continue to shift from
non-interest bearing to interest bearing balances along with lower lending
volumes offset in part by an increase in deposit volumes and improved mortgage
margins.
- Net interest margin was 8 basis points lower than Q3 2023 largely reflecting
the continued change in the deposit book mix partially offset by improved
lending margins and an increase in deposit volumes.
- Other operating expenses were £51 million, or 32.5%, higher than Q3 2023
primarily reflecting the inclusion of the annual UK bank levy charge, an
additional VAT charge and strategic spend to increase operational efficiency.
- A net impairment charge of £5 million in Q4 2023 largely reflects good book
charges whilst stage 3 defaults remain at low levels.
- Net loans to customers decreased by £0.3 billion, or 1.6%, in Q4 2023 driven
by higher customer mortgage repayments.
- Customer deposits increased by £0.5 billion, or 1.3%, compared with Q3 2023
driven by seasonal increases in instant access, partially offset by a
reduction in current accounts.
- AUMA increased by £2.6 billion in Q4 2023, driven by new inflows of £0.3
billion AUM and positive market movements of £2.1 billion.
Business performance summary
Commercial & Institutional
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2023 2022 2023 2023 2022
£m £m £m £m £m
Net interest income 5,044 4,171 1,269 1,271 1,276
Non-interest income 2,377 2,242 563 570 543
Total income 7,421 6,413 1,832 1,841 1,819
Operating expenses (4,091) (3,744) (1,092) (1,012) (1,031)
of which: Other operating expenses (3,867) (3,563) (1,014) (960) (989)
Impairment losses (94) (122) (15) (59) (62)
Operating profit 3,236 2,547 725 770 726
Return on equity (1) 15.4% 12.2% 13.5% 14.7% 13.7%
Net interest margin (1) 3.84% 3.31% 3.77% 3.88% 3.89%
Cost:income ratio (excl. litigation and conduct) (1) 52.1% 55.6% 55.3% 52.1% 54.4%
Loan impairment rate (1) 7bps 9bps 4bps 18bps 19bps
As at
31 December 30 September 31 December
2023 2023 2022
£bn £bn £bn
Net loans to customers (amortised cost) 131.9 130.5 129.9
Customer deposits 193.4 201.8 203.3
Funded assets (1) 306.9 325.2 306.3
RWAs 107.4 107.9 103.2
(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.
During 2023, Commercial & Institutional continued to support customers
with an increase in lending of 1.5% and delivered a strong performance with
growth in revenues and operating profit supporting a return on equity of
15.4%, an increase from 12.2% in 2022. Commercial & Institutional provided
£25.4 billion of climate and sustainable funding and financing in 2023 to
support customers investing in the transition to net zero.
2023 performance
- Total income was £1,008 million, or 15.7%, higher than 2022 primarily
reflecting higher deposit returns supported by interest rate rises, growth in
lending and higher markets income partly offset by higher funding costs.
- Net interest margin was 53 basis points higher than 2022 reflecting higher
deposit returns partly offset by higher funding costs.
- Other operating expenses were £304 million, or 8.5%, higher than 2022
reflecting higher pay awards to support our colleagues with cost of living
challenges and continued investment in the business.
- An impairment charge of £94 million in 2023, £28 million lower than 2022,
reflecting good book releases and lower stage 3 charges.
- Net loans to customers increased by £2.0 billion, or 1.5%, in 2023 reflecting
an increase of £4.7 billion from growth in private financing activity, an
increase in term loan facilities including an increase in revolving credit
utilisations within Corporate & Institutions and asset finance growth
within Commercial Mid-market, partly offset by £2.7 billion of UK Government
scheme repayments.
- Customer deposits decreased by £9.9 billion, or 4.9%, in 2023 primarily due
to overall market liquidity contraction, particularly in Commercial
Mid-market. We have seen strong growth in term deposits balances in 2023 which
now represent 19% of deposit balances. Across the year we continued to see a
reduction in non-interest bearing balances which now represent 36% of deposit
balances.
- RWAs increased by £4.2 billion, or 4.1%, in 2023 primarily reflecting lending
facility growth, partly offset by capital optimisation activity and foreign
exchange benefits.
Q4 performance
- Total income was broadly stable compared to Q3 2023.
- Net interest margin was 11 basis points lower than Q3 2023 largely reflecting
non-repeat of one-off items in Q3 2023, deposit mix and higher funding costs.
- Other operating expenses were £54 million, or 5.6%, higher than Q3 2023
largely due to the inclusion of the annual bank levy charge.
- An impairment charge of £15 million in Q4 2023 reflects continued low levels
of stage 3 charges largely offset by good book releases as a result of the Q4
2023 MES update.
- Net loans to customers increased by £1.4 billion, or 1.1%, in Q4 2023
reflecting an increase of £2.1 billion largely due to strong performance from
private financing activity within Corporate & Institutions, partly offset
by UK Government scheme repayments of £0.7 billion.
- Customer deposits decreased by £8.4 billion, or 4.2%, in Q4 2023 primarily
due to reductions in Corporate & Institutions as we managed down low value
deposits.
- RWAs decreased by £0.5 billion, or 0.5%, in Q4 2023 primarily due to lower
market risk, lower traded risk and foreign exchange benefits, partially offset
by lending facility growth and changes in book mix.
Business performance summary
Central items & other
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2023 2022 2023 2023 2022
£m £m £m £m £m
Continuing operations
Total income 410 41 127 (9) (38)
Operating expenses (1) (392) (728) (175) 22 (251)
of which: Other operating expenses (387) (645) (172) 45 (200)
of which: Ulster Bank RoI direct expenses (275) (433) (69) (43) (213)
Impairment (losses)/releases (5) 12 (3) (3) 7
Operating profit/(loss) 13 (675) (51) 10 (282)
of which: Ulster Bank RoI (473) (723) (124) (54) (354)
As at
31 December 30 September 31 December
2023 2023 2022
£bn £bn £bn
Net loans to customers (amortised cost) (2) 25.8 22.8 19.6
Customer deposits 12.3 12.4 17.4
RWAs 2.8 3.2 7.0
(1) Includes withdrawal-related direct program costs of £91 million
for the year ended 31 December 2023 (31 December 2022 - £195 million) and
£17 million for the quarter ended 31 December 2023 (30 September 2023 - £10
million and 31 December 2022 - £151 million).
(2) Excludes £0.3 billion of loans to customers held at fair value
through profit or loss (30 September 2023 - £0.3 billion and 31 December 2022
- £0.5 billion).
2023 performance
- Total income was £369 million higher than 2022 primarily
reflecting notable items including foreign exchange recycling gains of £484
million, lower losses on redemption of own debt, business growth fund gains
and lower losses on liquidity asset bond sales partially offset by lower gains
on interest and foreign exchange risk management derivatives not in accounting
hedge relationships and losses associated with property lease terminations.
- Other operating expenses were £258 million, or 40.0%, lower than
2022 principally reflecting the reduction in cost due to our withdrawal of
operations from the Republic of Ireland.
- Net loans to customers increased by £6.2 billion, to £25.8
billion, over the year mainly due to reverse repo activity in Treasury,
combined with withdrawal of our operations from the Republic of Ireland.
- Customer deposits decreased by £5.1 billion 2023 primarily
reflecting our withdrawal of our operations from the Republic of Ireland.
Ulster Bank RoI customer deposit balances were £0.2 billion as at Q4 2023.
Q4 performance
- Total income was £136 million higher than Q3 2023 primarily
reflecting notable items including foreign exchange recycling gains and losses
associated with property lease terminations in Q3 2023 not repeated in this
quarter, partially offset with lower gains on interest and foreign exchange
risk management derivatives not in accounting hedge relationships and lower
business growth fund gains.
- Net loans to customers increased by £3.0 billion in Q4 2023
mainly due to reverse repo activity in Treasury.
- Customer deposits decreased £0.1 billion in the quarter mainly
due to repo activity in Treasury.
Segment performance
Year ended 31 December 2023
Total
Retail Private Commercial Central items NatWest
Banking Banking & Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 5,496 710 5,044 (201) 11,049
Non-interest income 435 280 2,377 611 3,703
Total income 5,931 990 7,421 410 14,752
Direct expenses (815) (255) (1,510) (5,061) (7,641)
Indirect expenses (1,896) (421) (2,357) 4,674 -
Other operating expenses (2,711) (676) (3,867) (387) (7,641)
Litigation and conduct costs (117) (9) (224) (5) (355)
Operating expenses (2,828) (685) (4,091) (392) (7,996)
Operating profit before impairment losses (1) 3,103 305 3,330 18 6,756
Impairment losses (465) (14) (94) (5) (578)
Operating profit (1) 2,638 291 3,236 13 6,178
Income excluding notable items 5,931 990 7,420 (2) 14,339
Additional information
Return on tangible equity (1) na na na na 17.8%
Return on equity (1) 23.8% 14.8% 15.4% nm na
Cost:income ratio (excl. litigation and conduct) (1) 45.7% 68.3% 52.1% nm 51.8%
Total assets (£bn) 228.7 26.9 385.0 52.1 692.7
Funded assets (£bn) (1) 228.7 26.9 306.9 51.3 613.8
Net loans to customers - amortised cost (£bn) 205.2 18.5 131.9 25.8 381.4
Loan impairment rate (1) 22bps 8bps 7bps nm 15bps
Impairment provisions (£bn) (1.9) (0.1) (1.5) (0.1) (3.6)
Impairment provisions - stage 3 (£bn) (1.1) - (0.9) - (2.0)
Customer deposits (£bn) 188.0 37.7 193.4 12.3 431.4
Risk-weighted assets (RWAs) (£bn) 61.6 11.2 107.4 2.8 183.0
RWA equivalent (RWAe) (£bn) 61.6 11.2 108.6 3.6 185.0
Employee numbers (FTEs - thousands) 13.3 2.3 12.5 33.1 61.2
Third party customer asset rate (1) 3.23% 4.54% 6.15% nm nm
Third party customer funding rate (1) (1.42%) (2.17%) (1.40%) nm nm
Bank average interest earning assets (£bn) (1) 205.4 19.0 131.5 na 362.9
Bank net interest margin (1) 2.68% 3.74% 3.84% na 3.04%
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details
of the basis of preparation and reconciliation of non-IFRS financial measures
and performance metrics
Segment performance continued
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 (709) (235) (1,506) (4,852) (7,302)
Indirect expenses (1,775) (375) (2,057) 4,207 -
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 (1) 3,053 434 2,669 (687) 5,469
Impairment (losses)/releases (229) 2 (122) 12 (337)
Operating profit/(loss) (1) 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) 14.2 2.2 12.4 32.7 61.5
Third party customer asset rate (1) 2.64% 3.01% 3.53% nm nm
Third party customer funding rate (1) (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%
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details
of the basis of preparation and reconciliation of non-IFRS financial measures
and performance metrics
Segment performance continued
Quarter ended 31 December 2023
Total
Retail Private Commercial Central items NatWest
Banking Banking & Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 1,254 138 1,269 (23) 2,638
Non-interest income 115 71 563 150 899
Total income 1,369 209 1,832 127 3,537
Direct expenses (211) (74) (392) (1,364) (2,041)
Indirect expenses (436) (134) (622) 1,192 -
Other operating expenses (647) (208) (1,014) (172) (2,041)
Litigation and conduct costs (34) 2 (78) (3) (113)
Operating expenses (681) (206) (1,092) (175) (2,154)
Operating profit/(loss) before impairment losses (1) 688 3 740 (48) 1,383
Impairment losses (103) (5) (15) (3) (126)
Operating profit/(loss) (1) 585 (2) 725 (51) 1,257
Income excluding notable items 1,369 209 1,834 30 3,442
Additional information
Return on tangible equity (1) na na na na 20.1%
Return on equity (1) 20.2% (1.8%) 13.5% nm na
Cost:income ratio (excl. litigation and conduct) (1) 47.3% 99.5% 55.3% nm 57.7%
Total assets (£bn) 228.7 26.9 385.0 52.1 692.7
Funded assets (£bn) (1) 228.7 26.9 306.9 51.3 613.8
Net loans to customers - amortised cost (£bn) 205.2 18.5 131.9 25.8 381.4
Loan impairment rate (1) 20bps 11bps 4bps nm 13bps
Impairment provisions (£bn) (1.9) (0.1) (1.5) (0.1) (3.6)
Impairment provisions - stage 3 (£bn) (1.1) - (0.9) - (2.0)
Customer deposits (£bn) 188.0 37.7 193.4 12.3 431.4
Risk-weighted assets (RWAs) (£bn) 61.6 11.2 107.4 2.8 183.0
RWA equivalent (RWAe) (£bn) 61.6 11.2 108.6 3.6 185.0
Employee numbers (FTEs - thousands) 13.3 2.3 12.5 33.1 61.2
Third party customer asset rate (1) 3.50% 4.88% 6.65% nm nm
Third party customer funding rate (1) (1.94%) (3.02%) (1.87%) nm nm
Bank average interest earning assets (£bn) (1) 208.0 18.7 133.4 na 366.5
Bank net interest margin (1) 2.39% 2.94% 3.77% na 2.86%
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details
of the basis of preparation and reconciliation of non-IFRS financial measures
and performance metrics
Segment performance continued
Quarter ended 30 September 2023
Total
Retail Private Commercial Central items NatWest
Banking Banking & Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 1,334 144 1,271 (64) 2,685
Non-interest income 108 70 570 55 803
Total income 1,442 214 1,841 (9) 3,488
Direct expenses (206) (63) (377) (1,147) (1,793)
Indirect expenses (515) (94) (583) 1,192 -
Other operating expenses (721) (157) (960) 45 (1,793)
Litigation and conduct costs (59) - (52) (23) (134)
Operating expenses (780) (157) (1,012) 22 (1,927)
Operating profit before impairment losses/releases (1) 662 57 829 13 1,561
Impairment (losses)/releases (169) 2 (59) (3) (229)
Operating profit (1) 493 59 770 10 1,332
Income excluding notable items 1,442 214 1,847 11 3,514
Additional information
Return on tangible equity (1) na na na na 14.7%
Return on equity (1) 17.5% 11.7% 14.7% nm na
Cost:income ratio (excl. litigation and conduct) (1) 50.0% 73.4% 52.1% nm 51.4%
Total assets (£bn) 229.1 26.8 411.6 49.6 717.1
Funded assets (£bn) (1) 229.1 26.8 325.2 48.5 629.6
Net loans to customers - amortised cost (£bn) 205.2 18.8 130.5 22.8 377.3
Loan impairment rate (1) 33bps (4)bps 18bps nm 24bps
Impairment provisions (£bn) (1.9) (0.1) (1.5) - (3.5)
Impairment provisions - stage 3 (£bn) (1.1) - (0.8) - (1.9)
Customer deposits (£bn) 184.5 37.2 201.8 12.4 435.9
Risk-weighted assets (RWAs) (£bn) 58.9 11.6 107.9 3.2 181.6
RWA equivalent (RWAe) (£bn) 58.9 11.6 109.1 3.9 183.5
Employee numbers (FTEs - thousands) 13.4 2.4 12.6 33.3 61.7
Third party customer asset rate (1) 3.34% 4.80% 6.72% nm nm
Third party customer funding rate (1) (1.69%) (2.80%) (1.65%) nm nm
Bank average interest earning assets (£bn) (1) 206.9 18.9 129.8 na 362.8
Bank net interest margin (1) 2.56% 3.02% 3.88% na 2.94%
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details
of the basis of preparation and reconciliation of non-IFRS financial measures
and performance metrics
Segment performance continued
Quarter ended 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 (204) (66) (397) (1,380) (2,047)
Indirect expenses (466) (122) (592) 1,180 -
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 (1) 959 112 788 (289) 1,570
Impairment (losses)/releases (87) (2) (62) 7 (144)
Operating profit/(loss) (1) 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) 14.2 2.2 12.4 32.7 61.5
Third party customer asset rate (1) 2.72% 3.62% 4.44% nm nm
Third party customer funding rate (1) (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%
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
Business performance summary
Capital and leverage ratios
The table below sets out the key capital and leverage ratios and measures.
These are calculated on current PRA rules and presented on a transitional
basis for the remaining IFRS 9 transitional relief in respect of ECL. The
remaining Tier 2 instruments subject to CRR2 grandfathering provisions were
derecognised during Q3 2023 following regulatory approvals.
31 December 30 September 31 December
2023 2023 2022
Capital adequacy ratios (1) % % %
CET1 13.4 13.5 14.2
Tier 1 15.5 15.7 16.4
Total 18.4 18.7 19.3
Capital £m £m £m
Tangible equity 25,653 24,015 25,482
Prudential valuation adjustment (279) (272) (275)
Deferred tax assets (979) (688) (912)
Own credit adjustments (10) (24) (58)
Pension fund assets (143) (246) (227)
Cash flow hedging reserve 1,899 2,967 2,771
Foreseeable ordinary dividends (1,013) (643) (967)
Adjustment for trust assets (2) (365) (365) (365)
Foreseeable charges (525) (361) (800)
Adjustments under IFRS 9 transitional arrangements 202 223 361
Insufficient coverage for non-performing exposures - (21) (18)
Total regulatory adjustments (1,213) 570 (490)
CET1 capital 24,440 24,585 24,992
Additional AT1 capital 3,875 3,875 3,875
Tier 1 capital 28,315 28,460 28,867
End-point Tier 2 capital 5,317 5,485 4,978
Grandfathered instrument transitional arrangements - - 75
Tier 2 capital 5,317 5,485 5,053
Total regulatory capital 33,632 33,945 33,920
Risk-weighted assets
Credit risk 147,598 143,974 141,963
Counterparty credit risk 7,830 8,001 6,723
Market risk 7,363 9,380 8,300
Operational risk 20,198 20,198 19,115
Total RWAs 182,989 181,553 176,101
(1) 31 December 2023 includes the transitional arrangements for the capital impact
of IFRS 9 expected credit loss (ECL) accounting and prior periods also include
the transitional relief on grandfathered capital instruments. The impact of
the IFRS 9 transitional adjustments at 31 December 2023 was £0.2 billion for
CET1 capital, £54 million for total capital and £17 million RWAs (30
September 2023 - £0.2 billion CET1 capital, £48 million total capital and
£28 million RWAs; 31 December 2022 - £0.4 billion CET1 capital, £36 million
total capital and £71 million RWAs). Excluding these adjustments, the CET1
ratio would be 13.2% (30 September 2023 - 13.4%; 31 December 2022 - 14.0%).
The transitional relief on grandfathered instruments at 31 December 2023 was
nil (30 September 2023 - nil; 31 December 2022 - £0.1 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 15.4% (30
September 2023 - 15.6%; 31 December 2022 - 16.2%) and the end-point Total
capital ratio would be 18.4% (30 September 2023 - 18.7%; 31 December 2022 -
19.3%).
(2) Prudent deduction in respect of agreement with the pension fund to establish
new legal structure to remove dividend linked contribution. Refer to Notes 5
and 33 in the 2023 consolidated financial statements of NatWest Group plc
Annual Report and Accounts.
Business performance summary
Capital and leverage ratios continued
31 December 30 September 31 December
2023 2023 2022
Leverage £m £m £m
Cash and balances at central banks 104,262 119,590 144,832
Trading assets 45,551 49,621 45,577
Derivatives 78,904 87,504 99,545
Financial assets 439,449 432,451 404,374
Other assets 23,605 26,891 18,864
Assets of disposal groups 902 1,084 6,861
Total assets 692,673 717,141 720,053
Derivatives
- netting and variation margin (79,299) (86,657) (100,356)
- potential future exposures 17,212 17,226 18,327
Securities financing transactions gross up 1,868 2,245 4,147
Other off balance sheet items 50,961 50,528 46,144
Regulatory deductions and other adjustments (16,043) (16,647) (7,114)
Claims on central banks (100,735) (116,157) (141,144)
Exclusion of bounce back loans (3,794) (4,198) (5,444)
UK leverage exposure 562,843 563,481 534,613
UK leverage ratio (%) (1) 5.0 5.1 5.4
(1) Excluding the IFRS 9 transitional adjustment, the UK leverage ratio would be
5.0% (30 September 2023 - 5.0%, 31 December 2022 - 5.3%).
Business performance summary
Credit risk
Economic loss drivers
The main macroeconomic variables for each of the four scenarios used for
expected credit loss (ECL) modelling are set out in the main macroeconomic
variables table below.
Main macroeconomic variables 2023 2022
Extreme Weighted Extreme Weighted
Upside Base case Downside downside average Upside Base case Downside downside average
Five-year summary % % % % % % % % % %
GDP 1.8 1.0 0.5 (0.3) 0.9 2.2 1.3 0.8 0.4 1.2
Unemployment 3.5 4.6 5.2 6.8 4.8 3.9 4.5 4.9 6.7 4.8
House price index 3.9 0.3 (0.4) (5.7) 0.3 5.1 0.8 (0.7) (4.4) 0.6
Commercial real estate price 3.1 (0.2) (2.0) (6.8) (0.6) 1.2 (1.9) (2.8) (9.1) (2.5)
Consumer price index 1.7 2.6 5.2 1.8 2.8 3.6 4.2 4.4 8.2 4.8
Bank of England base rate 3.8 3.7 5.6 2.9 4.0 2.4 3.1 1.5 4.5 2.8
UK stock price index 4.8 3.3 1.2 (0.4) 2.8 3.0 1.4 (1.1) (3.7) 0.5
World GDP 3.7 3.2 2.7 1.8 3.0 3.7 3.3 1.7 1.1 2.7
Probability weight 21.2 45.0 20.4 13.4 18.6 45.0 20.8 15.6
(1) The five-year summary runs from 2023-27 for 31 December 2023 and
from 2022-26 for 31 December 2022.
(2) The table shows CAGR for annual GDP, average levels for the
unemployment rate and Bank of England base rate and Q4 to Q4 CAGR for other
parameters.
ECL post model adjustments
The table below shows ECL post model adjustments.
Retail Banking Private Commercial & Central items &
Mortgages Other Banking Institutional other (1) Total
2023 £m £m £m £m £m £m
Deferred model calibrations - - 1 23 - 24
Economic uncertainty 118 39 13 256 3 429
Other adjustments 1 - - 8 23 32
Total 119 39 14 287 26 485
Of which:
- Stage 1 75 14 6 115 10 220
- Stage 2 31 25 8 167 9 240
- Stage 3 13 - - 5 7 25
2022
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
Post model adjustments increased since 31 December 2022, with notable shifts
in all categories. This reflected:
- The addition of deferred model calibration post model adjustments to account
for elevated refinance risks on deteriorated
exposures largely due to pressures from inflation and liquidity.
- The increase in the economic uncertainty post model adjustments for the
Wholesale portfolios relating to inflation, supply chain
and liquidity prompted by continued affordability risks, as a result of higher
interest rates and sustained inflation. This was partially
offset by a reduction in COVID-19 related post model adjustments.
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
2023 £m £m £m £m £m
Loans - amortised cost and FVOCI
Stage 1 182,297 17,565 119,047 29,677 348,586
Stage 2 21,208 906 15,771 6 37,891
Stage 3 3,133 258 2,162 10 5,563
Of which: individual - 186 845 - 1,031
Of which: collective 3,133 72 1,317 10 4,532
Subtotal excluding disposal group loans 206,638 18,729 136,980 29,693 392,040
Disposal group loans 67 67
Total 29,760 392,107
ECL provisions (1)
Stage 1 306 20 356 27 709
Stage 2 502 20 447 7 976
Stage 3 1,097 34 819 10 1,960
Of which: individual - 34 298 - 332
Of which: collective 1,097 - 521 10 1,628
Subtotal excluding ECL provisions on disposal group loans 1,905 74 1,622 44 3,645
ECL provisions on disposal group loans 36 36
Total 80 3,681
ECL provisions coverage (2)
Stage 1 (%) 0.17 0.11 0.30 0.09 0.20
Stage 2 (%) 2.37 2.21 2.83 nm 2.58
Stage 3 (%) 35.01 13.18 37.88 100.00 35.23
ECL provisions coverage excluding disposal group loans 0.92 0.40 1.18 0.15 0.93
ECL provisions coverage on disposal group loans 53.73 53.73
Total 0.27 0.94
Impairment losses/(releases)
ECL (release)/charge (3) 465 14 94 5 578
Stage 1 (172) (9) (222) 6 (397)
Stage 2 440 15 182 8 645
Stage 3 197 8 134 (9) 330
Of which: individual - 8 80 1 89
Of which: collective 197 - 54 (10) 241
Continuing operations 465 14 94 5 578
Discontinued operations (6) (6)
Total (1) 572
Amounts written-off 188 2 122 7 319
Of which: individual - 2 40 - 42
Of which: collective 188 - 82 7 277
Refer to the following page for the footnotes.
Business performance summary
Portfolio summary - segment analysis continued
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
(1) Includes loans to customers and banks.
(2) Includes £9 million (2022 - £3 million) related to assets classified as
FVOCI and £0.1 billion (2022 - £0.1 billion) related to off-balance sheet
exposures
(3) ECL provisions coverage is calculated as ECL provisions divided by loans -
amortised cost and FVOCI. It is calculated on loans and total ECL provisions,
including ECL for other (non-loan) assets and unutilised exposure. Some
segments with a high proportion of debt securities or unutilised exposure may
result in a not meaningful coverage ratio.
(4) Includes a £16 million release (2022 - £3 million charge) related to other
financial assets, of which £6 million charge (2022 - nil) related to assets
classified as FVOCI, and includes a £9 million release (2022 - £5 million
release) related to contingent liabilities.
(5) The table shows gross loans only and excludes amounts that were outside the
scope of the ECL framework. Refer to the Financial instruments within the
scope of the IFRS 9 ECL framework section for further details. Other financial
assets within the scope of the IFRS 9 ECL framework were cash and balances at
central banks totalling £103.1 billion (2022 - £143.3 billion) and debt
securities of £50.1 billion (2022 - £29.9 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
2023 2023 2023 2022
£m £m £m £m
Total loans 392,040 389,552 385,252 377,153
Personal 223,774 224,175 223,664 217,123
Wholesale 168,266 165,377 161,588 160,030
Value of loans in Stage 2 37,891 37,646 43,440 46,833
Personal 21,509 18,233 22,989 21,854
Wholesale 16,382 19,413 20,471 24,979
ECL provisions in Stage 2 976 1,032 991 1,043
Personal 506 493 455 466
Wholesale 470 539 536 577
ECL provision coverage in Stage 2 2.58% 2.74% 2.28% 2.23%
Personal 2.35% 2.70% 1.98% 2.13%
Wholesale 2.87% 2.78% 2.62% 2.31%
Condensed consolidated income statement
for the period ended 31 December 2023
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2023 2022 2023 2023 2022
£m £m £m £m £m
Interest receivable 21,026 12,637 5,955 5,589 4,046
Interest payable (9,977) (2,795) (3,317) (2,904) (1,178)
Net interest income 11,049 9,842 2,638 2,685 2,868
Fees and commissions receivable 2,983 2,915 770 754 770
Fees and commissions payable (653) (623) (169) (169) (155)
Income from trading activities 794 1,133 185 191 164
Other operating income 579 (111) 113 27 61
Non-interest income 3,703 3,314 899 803 840
Total income 14,752 13,156 3,537 3,488 3,708
Staff costs (3,901) (3,716) (977) (919) (1,029)
Premises and equipment (1,153) (1,112) (308) (275) (292)
Other administrative expenses (2,008) (2,026) (618) (519) (597)
Depreciation and amortisation (934) (833) (251) (214) (220)
Operating expenses (7,996) (7,687) (2,154) (1,927) (2,138)
Profit before impairment losses 6,756 5,469 1,383 1,561 1,570
Impairment losses (578) (337) (126) (229) (144)
Operating profit before tax 6,178 5,132 1,257 1,332 1,426
Tax (charge)/credit (1,434) (1,275) 5 (378) (46)
Profit from continuing operations 4,744 3,857 1,262 954 1,380
(Loss)/profit from discontinued operations, net of tax (1) (112) (262) 26 (30) (56)
Profit for the period 4,632 3,595 1,288 924 1,324
Attributable to:
Ordinary shareholders 4,394 3,340 1,229 866 1,262
Paid-in equity holders 242 249 60 61 61
Non-controlling interests (4) 6 (1) (3) 1
4,632 3,595 1,288 924 1,324
Earnings per ordinary share - continuing operations 49.2p 36.5p 13.6p 10.1p 13.7p
Earnings per ordinary share - discontinued operations (1.2p) (2.7p) 0.3p (0.3p) (0.6p)
Total earnings per share attributable to
ordinary shareholders - basic (3) 47.9p 33.8p 13.9p 9.8p 13.1p
Earnings per ordinary share - fully diluted
continuing operations 48.9p 36.2p 13.6p 10.1p 13.6p
Earnings per ordinary share - fully diluted
discontinued operations (1.2p) (2.6p) 0.3p (0.3p) (0.6p)
Total earnings per share attributable to
ordinary shareholders - fully diluted 47.7p 33.6p 13.9p 9.8p 13.0p
(1) 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 3 on page 31.
(2) 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 and earnings
per share have been adjusted retrospectively.
(3) In 2023, the unrounded Total earnings per share attributable to ordinary
shareholders - basic is 47.948p. The unrounded Earnings per ordinary share -
continuing operations was 49.170p. The unrounded Earnings per ordinary share -
discontinued operations was (1.222p).
Condensed consolidated statement of comprehensive income
for the period ended 31 December 2023
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2023 2022 2023 2023 2022
£m £m £m £m £m
Profit for the period 4,632 3,595 1,288 924 1,324
Items that do not qualify for reclassification
Remeasurement of retirement benefit schemes (280) (840) (175) (41) (158)
Changes in fair value of credit in financial liabilities
designated at FVTPL (39) 50 (12) (23) (52)
FVOCI financial assets 17 59 (19) 6 17
Tax 79 187 59 13 51
(223) (544) (147) (45) (142)
Items that do qualify for reclassification
FVOCI financial assets 49 (457) (16) 12 (6)
Cash flow hedges (1) 1,208 (3,277) 1,416 526 701
Currency translation (619) 241 (218) 68 (117)
Tax (361) 1,067 (345) (143) (192)
277 (2,426) 837 463 386
Other comprehensive income/(losses) after tax 54 (2,970) 690 418 244
Total comprehensive income for the year 4,686 625 1,978 1,342 1,568
Attributable to:
Ordinary shareholders 4,448 370 1,919 1,284 1,506
Paid-in equity holders 242 249 60 61 61
Non-controlling interests (4) 6 (1) (3) 1
4,686 625 1,978 1,342 1,568
(1) Refer to footnote 5 and 6 of the consolidated statement of changes in equity.
Condensed consolidated balance sheet as at 31 December 2023
31 December 30 September 31 December
2023 2023 2022
£m £m £m
Assets
Cash and balances at central banks 104,262 119,590 144,832
Trading assets 45,551 49,621 45,577
Derivatives 78,904 87,504 99,545
Settlement balances 7,231 10,644 2,572
Loans to banks - amortised cost 6,914 8,454 7,139
Loans to customers - amortised cost 381,433 377,268 366,340
Other financial assets 51,102 46,729 30,895
Intangible assets 7,614 7,515 7,116
Other assets 8,760 8,732 9,176
Assets of disposal groups 902 1,084 6,861
Total assets 692,673 717,141 720,053
Liabilities
Bank deposits 22,190 24,354 20,441
Customer deposits 431,377 435,867 450,318
Settlement balances 6,645 11,585 2,012
Trading liabilities 53,636 58,495 52,808
Derivatives 72,395 81,135 94,047
Other financial liabilities 55,089 56,302 49,107
Subordinated liabilities 5,714 6,210 6,260
Notes in circulation 3,237 3,144 3,218
Other liabilities 5,202 4,592 5,346
Total liabilities 655,485 681,684 683,557
Equity
Ordinary shareholders' interests 33,267 31,530 32,598
Other owners' interests 3,890 3,890 3,890
Owners' equity 37,157 35,420 36,488
Non-controlling interests 31 37 8
Total equity 37,188 35,457 36,496
Total liabilities and equity 692,673 717,141 720,053
Condensed consolidated statement of changes in equity
for the period ended 31 December 2023
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2023 2022 2023 2023 2022
£m £m £m £m £m
Called-up share capital - at beginning of period 10,539 11,468 9,788 9,852 10,539
Share cancellation( )(1, 2) (856) (929) (105) (64) -
At end of period 9,683 10,539 9,683 9,788 10,539
Paid-in equity - at beginning and end of period 3,890 3,890 3,890 3,890 3,890
Share premium account - at beginning and end of period 1,161 1,161 1,161 1,161 1,161
Merger reserve - at beginning and end of period 10,881 10,881 10,881 10,881 10,881
FVOCI reserve - at beginning of period (102) 269 (20) (42) (105)
Unrealised gains/(losses) 22 (570) (46) 8 (3)
Realised losses 43 59 12 15 14
Tax (12) 140 5 (1) (8)
At end of period (49) (102) (49) (20) (102)
Cash flow hedging reserve - at beginning of period (2,771) (395) (2,967) (3,344) (3,273)
Amount recognised in equity (5) 187 (2,973) 1,008 127 734
Amount transferred from equity to earnings (6) 1,021 (304) 408 399 (33)
Tax (336) 901 (348) (149) (199)
At end of period (1,899) (2,771) (1,899) (2,967) (2,771)
Foreign exchange reserve - at beginning of period 1,478 1,205 1,059 986 1,589
Retranslation of net assets (239) 512 (50) 119 (87)
Foreign currency gains/(losses) on hedges of net assets 107 (266) (4) (51) (29)
Tax (18) 32 - 5 6
Recycled to profit or loss on disposal of businesses (3) (487) (5) (164) - (1)
At end of period 841 1,478 841 1,059 1,478
Capital redemption reserve - at beginning of period 1,651 722 2,402 2,338 1,651
Share cancellation( )((1,2)) 856 929 105 64 -
At end of period 2,507 1,651 2,507 2,402 1,651
Retained earnings - at beginning of period 10,019 12,966 9,763 9,576 8,886
Profit/(loss) attributable to ordinary shareholders and
other equity owners
- continuing operations 4,748 3,851 1,263 957 1,379
- discontinued operations (112) (262) 26 (30) (56)
Paid-in equity dividends paid (242) (249) (60) (61) (61)
Ordinary dividends paid (1,456) (1,205) - (491) -
Special dividends paid - (1,746) - - -
Shares repurchased ((1,2)) (2,057) (2,054) (205) (139) -
Redemption of preference shares (4) - (750) - - -
Redemption/reclassification of paid-in equity
- tax - (36) - - -
Realised gains in period on FVOCI equity shares
- gross 1 113 (1) (5) -
- tax (3) (9) - - 12
Remeasurement of retirement benefit schemes
- gross (280) (840) (175) (41) (158)
- tax 81 192 54 12 40
For the notes to this table, refer to the following page.
Condensed consolidated statement of changes in equity
for the period ended 31 December 2023 continued
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2023 2022 2023 2023 2022
£m £m £m £m £m
Changes in fair value of credit in financial liabilities
designated at FVTPL
- gross (39) 50 (12) (23) (52)
- tax 6 (2) 3 3 8
Employee share schemes
- gross 14 6 (7) 4 (2)
Share-based payments
- gross (18) (7) 13 1 19
- tax (17) 1 (17) - 4
At end of period 10,645 10,019 10,645 9,763 10,019
Own shares held - at beginning of period (258) (371) (537) (540) (275)
Shares vested under employee share schemes 114 113 34 3 17
Own shares acquired (2) (359) - - - -
At end of period (503) (258) (503) (537) (258)
Owners' equity at end of period 37,157 36,488 37,157 35,420 36,488
Non-controlling interests - at beginning of period 8 7 37 40 12
Profit attributable to non-controlling interests (4) 6 (1) (3) 1
Acquisition of subsidiary 32 - - - -
Dividends paid (5) (5) (5) - (5)
At end of period 31 8 31 37 8
Total equity at end of period 37,188 36,496 37,188 35,457 36,496
Attributable to:
Ordinary shareholders 33,267 32,598 33,267 31,530 32,598
Paid-in equity holders 3,890 3,890 3,890 3,890 3,890
Non-controlling interests 31 8 31 37 8
37,188 36,496 37,188 35,457 36,496
(1) NatWest Group plc repurchased and cancelled 460.3 million (2022 - 379.3
million) shares, of which 2.3 million were settled in January 2024. The total
consideration of these shares excluding fees was £1,151.7 million (2022 -
£829.3 million), of which £4.9 million were settled in January 2024, as part
of the On Market Share Buyback Programmes. The nominal value of the share
cancellations has been transferred to the capital redemption reserve.
(2) In May 2023, there was an agreement to buy 469.2 million (March 2022 - 549.9
million) ordinary shares of the Company from UK Government Investments Ltd
(UKGI) at 268.4 pence per share (March 2022 - 220.5 pence per share) for the
total consideration of £1.3 billion (2022 - £1.2 billion). NatWest Group
cancelled 336.2 million of the purchased ordinary shares, amounting to £906.9
million excluding fees and held the remaining 133.0 million shares as Own
Shares Held, amounting to £358.8 million excluding fees. The nominal value of
the share cancellation has been transferred to the capital redemption reserve.
(3) Includes £460 million FX recycled to profit or loss upon completion of a
capital repayment by UBIDAC.
(4) 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.
(5) The change in the cash flow hedging reserve is driven by realised accrued
interest transferred into the income statement and a decrease in swap rates
compared to previous periods where they rose. The portfolio of hedging
instruments is predominantly received fixed swaps.
(6) The amount transferred from equity to the income statement is mostly recorded
within net interest income mainly in loans to customers, balances at central
banks and customer deposits.
Condensed consolidated cash flow statement
for the year ended 31 December 2023
Year ended
31 December 31 December
2023 2022
£m £m
Cash flows from operating activities
Operating profit before tax from continuing operations 6,178 5,132
Operating loss before tax from discontinued operations (112) (262)
Adjustments for non-cash items 3,208 1,203
Net cash flows from trading activities 9,274 6,073
Changes in operating assets and liabilities (25,679) (48,447)
Net cash flows from operating activities before tax (16,405) (42,374)
Income taxes paid (1,033) (1,223)
Net cash flows from operating activities (17,438) (43,597)
Net cash flows from investing activities (14,694) 19,059
Net cash flows from financing activities (6,304) (10,652)
Effects of exchange rate changes on cash and cash equivalents (1,189) 2,933
Net decrease in cash and cash equivalents (39,625) (32,257)
Cash and cash equivalents at 1 January 158,449 190,706
Cash and cash equivalents at 31 December 118,824 158,449
Notes
1. Presentation of condensed consolidated financial statements
The condensed consolidated financial statements should be read in conjunction
with NatWest Group plc's 2023 Annual Report and Accounts. The critical and
material accounting policies are the same as those applied in the consolidated
financial statements.
The directors have prepared the condensed consolidated financial statements on
a going concern basis after assessing the principal risks, forecasts,
projections and other relevant evidence over the twelve months from the date
they are approved.
2. 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.
2023 2022 2021
Continuing operations £m £m £m
Current tax
Charge for the year (1,373) (1,611) (1,036)
(Under)/over provision in respect of prior years (123) 100 31
(1,496) (1,511) (1,005)
Deferred tax
(Charge)/credit for the year (281) 47 (185)
UK tax rate change impact - (10) 165
Net increase in the carrying value of deferred tax assets in respect of UK,
RoI and Netherlands losses 385 267 12
(Under)/over provision in respect of prior years (42) (68) 17
Tax charge for the year (1,434) (1,275) (996)
Judgement: tax contingencies
NatWest Group's corporate income tax charge and its provisions for corporate
income taxes necessarily involve a degree of estimation and judgement. The tax
treatment of some transactions is uncertain and tax computations are yet to be
agreed with the relevant tax authorities. 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. The reduction of deferred tax asset is primarily
attributable to reduced cash flow hedge liabilities, and is taken in other
comprehensive income as part of the movements in cash flow reserves.
Analysis of deferred tax
2023 2022
£m £m
Deferred tax asset (1,894) (2,178)
Deferred tax liability 141 227
Net deferred tax asset (1,753) (1,951)
Notes
3. Discontinued operations and assets and liabilities of disposal groups
Four legally binding agreements for the sale of UBIDAC business have been
announced as part of the phased withdrawal from the Republic of Ireland. The
transaction with Allied Irish Banks, p.l.c. (AIB) for the transfer of
performing commercial loans and the transaction with Permanent TSB 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, had both been fully completed by the end of Q3 2023. Material
developments in the other two agreements during Q4 2023 are set out below.
Agreement with Allied Irish Banks, p.l.c. (AIB) for the sale of performing
tracker and linked mortgages.
There were no loan sales during Q4 2023. The remaining migrations are expected
to be complete in 2024.
Agreement with Elmscott Property Finance DAC / AB CarVal (CarVal) for the sale
of a portfolio which consists mostly of non-performing mortgages, unsecured
personal loans and commercial facilities with a gross value of c. €690
million. Pepper Finance Corporation (Ireland) DAC will become the legal owner
and servicer of the facilities.
In November 2023, c.€400 million of exposures transferred to Pepper Finance
Corporation (Ireland) DAC, with the remainder of the portfolio expected to
transfer in 2024.
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.
Ulster Bank RoI continuing operations are reported within Central items &
other.
(a) (Loss)/profit from discontinued operations, net of tax
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2023 2022 2023 2023 2022
£m £m £m £m £m
Interest receivable 22 177 - (4) 17
Net interest income 22 177 - (4) 17
Non-interest income (1) (16) (472) 26 (28) (63)
Total income 6 (295) 26 (32) (46)
Operating expenses (124) (38) - (2) (3)
(Loss)/profit before impairment releases/losses (118) (333) 26 (34) (49)
Impairment releases/(losses) 6 71 - 4 (7)
Operating (loss)/profit before tax (112) (262) 26 (30) (56)
Tax charge - - - - -
(Loss)/profit from discontinued operations, net of tax (112) (262) 26 (30) (56)
(1) Excludes gain of £20 million (€24 million) recognised by
NatWest Group as a result of acquisition of PTSB shares in relation to
disposal of UBIDAC assets to PTSB in 2022.
(b) Assets and liabilities of disposal groups
31 December 31 December
2023 2022
£m £m
Assets of disposal groups
Loans to customers - amortised cost 32 1,458
Other financial assets - loans to customers 841 5,397
Other assets 29 6
902 6,861
Liabilities of disposal groups
Other liabilities 3 15
3 15
Net assets of disposal groups 899 6,846
(c) Operating cash flows attributable to discontinued operations
31 December 31 December
2023 2022
£m £m
Net cash flows from operating activities 362 1,090
Net cash flows from investing activities 5,473 6,164
Net increase in cash and cash equivalents 5,835 7,254
Notes
4. Litigation and regulatory matters
NatWest Group plc and certain members of NatWest Group are party to various
legal proceedings and are involved in, or subject to, various regulatory
matters, including as the subject of investigations and other regulatory and
governmental action (Matters) in the United Kingdom (UK), the United States
(US), the European Union (EU) and other jurisdictions. Note 26 in the NatWest
Group plc 2023 Annual Report and Accounts, issued on 16 February 2024 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 2023 Interim Management Statement was
issued on 27 October 2023, include, but are not limited to, those set out
below.
Litigation
London Interbank Offered Rate (LIBOR) and other rates litigation
In August 2020, a complaint was filed in the United States District Court for
the Northern District of California by several United States retail borrowers
against the USD ICE LIBOR panel banks and their affiliates (including NatWest
Group plc, NWM Plc, NWMSI and NWB Plc), alleging (i) that the very process of
setting USD ICE LIBOR amounts to illegal price-fixing; and (ii) that banks in
the United States have illegally agreed to use LIBOR as a component of price
in variable retail loans. In September 2022, the district court dismissed the
complaint. The plaintiffs filed an amended complaint but in October 2023, the
district court dismissed that complaint as well, and indicated that further
amendment would not be permitted. The plaintiffs have commenced an appeal to
the United States Court of Appeals for the Ninth Circuit which is currently
pending.
FX litigation
In July and December 2019, two separate applications seeking opt-out
collective proceedings orders were filed in the UK Competition Appeal Tribunal
(CAT) against NatWest Group plc, NWM Plc and other banks. Both applications
were brought on behalf of persons who, between 18 December 2007 and 31 January
2013, entered into a relevant FX spot or outright forward transaction in the
EEA with a relevant financial institution or on an electronic communications
network. In March 2022, the CAT declined to certify as collective proceedings
either of the applications, which was appealed by the applicants, and the
subject of an application for judicial review.
In its amended judgment in November 2023, the Court of Appeal allowed the
appeal and decided that the claims should proceed on an opt-out basis.
Separately, the court determined which of the two competing applicants can
proceed as class representative, and dismissed the application for judicial
review of the CAT's decision. The case has been remitted to the CAT for
further case management and the banks have sought permission to appeal
directly to the UK Supreme Court.
In December 2021, a summons was served in the Netherlands against NatWest
Group plc, NWM Plc and NWM N.V. by Stichting FX Claims on behalf of a number
of parties, seeking declarations from the court concerning liability for
anti-competitive FX market conduct described in decisions of the European
Commission (EC) of 16 May 2019, along with unspecified damages. The claimant
amended its claim to also refer to a 2 December 2021 decision by the EC, which
described anti-competitive FX market conduct. NatWest Group plc, NWM Plc and
other defendants contested the jurisdiction of the Dutch court. In March 2023,
the district court in Amsterdam accepted that it has jurisdiction to hear
claims against NWM N.V. but refused jurisdiction to hear any claims against
the other defendant banks (including NatWest Group plc and NWM Plc) brought on
behalf of the parties represented by the claimant that are domiciled outside
of the Netherlands. The claimant is appealing that decision and the defendant
banks have brought cross-appeals which seek a ruling that the Dutch court has
no jurisdiction to hear any claims against the defendant banks domiciled
outside of the Netherlands, including claims brought on behalf of the parties
represented by the claimant that are domiciled in the Netherlands.
In September 2023, second summonses were served by Stichting FX Claims on NWM
N.V., NatWest Group plc and NWM Plc, for claims on behalf of a new group of
parties that have now been brought before the district court in Amsterdam. The
summonses seek declarations from the Dutch court concerning liability for
anti-competitive FX market conduct described in the above referenced decisions
of the EC of 16 May 2019 and 2 December 2021, along with unspecified damages.
Government securities antitrust litigation
NWMSI and certain other US broker-dealers are defendants in a consolidated
antitrust class action in the United States District Court for the Southern
District of New York (SDNY) on behalf of persons who transacted in US Treasury
securities or derivatives based on such instruments, including futures and
options. The plaintiffs allege that the defendants rigged the US Treasury
securities auction bidding process to deflate prices at which they bought such
securities and colluded to increase the prices at which they sold such
securities to the plaintiffs. In March 2022, the SDNY dismissed the complaint,
without leave to re-plead. In February 2024, the United States Court of
Appeals for the Second Circuit affirmed the SDNY's decision dismissing the
complaint.
Swaps antitrust litigation
NWM Plc and other members of NatWest Group, including NatWest Group plc, as
well as a number of other interest rate swap dealers, are defendants in
several cases pending in the SDNY alleging violations of the US antitrust laws
in the market for interest rate swaps. There is a consolidated class action
complaint on behalf of persons who entered into interest rate swaps with the
defendants, as well as non-class action claims by three swap execution
facilities (TeraExchange, Javelin, and trueEx). The plaintiffs allege that the
swap execution facilities would have successfully established exchange-like
trading of interest rate swaps if the defendants had not unlawfully conspired
to prevent that from happening through boycotts and other means. Discovery in
these cases is complete. In December 2023, the SDNY denied the plaintiffs'
motion for class certification. The plaintiffs have filed a petition
requesting that the United States Court of Appeals for the Second Circuit
review the denial of class certification.
Notes
4. Litigation and regulatory matters continued
In June 2021, a class action antitrust complaint was filed against a number of
credit default swap dealers, in New Mexico federal court on behalf of persons
who, from 2005 onwards, settled credit default swaps in the United States by
reference to the ISDA credit default swap auction protocol. The complaint
alleges that the defendants conspired to manipulate that benchmark through
various means in violation of the antitrust laws and the Commodity Exchange
Act. The defendants filed a motion to dismiss the complaint and, in June 2023,
such motion was denied as regards NWMSI and other financial institutions, but
granted as regards to NWM Plc on the ground that the court lacks jurisdiction
over that entity. As a result, the case entered the discovery phase as against
the non-dismissed defendants. In January 2024, the SDNY issued an order
barring the plaintiffs in the New Mexico case from pursuing claims based on
conduct occurring before 30 June 2014 on the ground that such claims were
extinguished by a 2015 settlement agreement that resolved a prior class action
relating to credit default swaps.
EUA trading litigation
NWM Plc was a named defendant in civil proceedings before the High Court of
Justice of England and Wales brought in 2015 by ten companies (all in
liquidation) (the 'Liquidated Companies') and their respective liquidators
(together, 'the Claimants'). The Liquidated Companies previously traded in
European Union Allowances (EUAs) in 2009 and were alleged to be VAT defaulting
traders within (or otherwise connected to) EUA supply chains of which NWM Plc
was a party. In March 2020, the court held that NWM Plc and Mercuria Energy
Europe Trading Limited ('Mercuria') were liable for dishonestly assisting and
knowingly being a party to fraudulent trading during a seven business day
period in 2009.
In October 2020, the High Court quantified total damages against NWM Plc and
Mercuria at £45 million plus interest and costs, and permitted the defendants
to appeal to the Court of Appeal. In May 2021 the Court of Appeal set aside
the High Court's judgment and ordered that a retrial take place before a
different High Court judge. In January 2024, NWM Plc entered into an agreement
to resolve the claim against it. The settlement amount paid by NWM Plc was
covered in full by an existing provision.
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. Before that
application was heard, in April 2023, the claimant filed a notice of
discontinuance of its claim against certain defendants including Coutts &
Co Ltd. The claimant subsequently indicated that it intended to issue further
replacement proceedings. Coutts & Co Ltd challenged the claimant's ability
to take that step. In August 2023, the court disallowed the discontinuation of
the claim by the claimant (a decision that the claimant has appealed) and
directed that the application by Coutts & Co Ltd challenging the validity
of the proceedings should proceed to a hearing, which took place in February
2024. Judgment is awaited.
Coutts & Co Ltd (a subsidiary of RBS Netherlands Holdings B.V., which in
turn is a subsidiary of NWM Plc) is a company registered in Switzerland and is
in wind-down following the announced sale of its business assets in 2015.
Regulatory matters
RBSI inspection report and referral to enforcement
Following an inspection by the Isle of Man Financial Services Authority
(IOMFSA) in 2021 into The Royal Bank of Scotland International Limited's
(RBSI's) compliance with the Financial Services Rule Book 2016, the Anti-Money
Laundering and Countering the Financing of Terrorism Code 2015 (the "2015
Code") and the Anti-Money Laundering and Countering the Financing of Terrorism
Code 2019, RBSI and the IOMFSA entered into a settlement agreement in February
2024 with an agreed public statement that RBSI had contravened paragraph 7 of
the 2015 Code. RBSI did not complete its updated Customer Risk Assessment
process following the introduction of the 2015 Code until 2018, resulting in
2,239 non-personal customers (on-boarded to its Isle of Man branches between
2015 and 2018, and not rated as high risk) being on-boarded using Customer
Risk Assessments in line with earlier legislation. This constituted less than
3% of the total customer population of the Isle of Man branches. RBSI was
fined £1.0 million (after a discount for co-operation), which was covered in
full by an existing provision.
Reviews into customer account closures
In July 2023, NatWest Group plc commissioned an independent review by the law
firm Travers Smith LLP into issues that had arisen from treatment of a
customer in connection with an account closure decision that attracted
significant public attention and certain related interactions with the media.
NatWest Group plc has received reports in connection with that review (and in
October and December 2023 published summaries of the key findings and
recommendations).
In addition, NatWest Group plc is conducting internal reviews with respect to
certain governance processes, policies, systems and controls of NatWest Group
entities, including with respect to customer account closures.
The FCA is conducting supervisory work into how the governance, systems and
controls of NatWest Group and Coutts & Company are working, to identify
and address any significant shortcomings.
5. Related party transactions
UK Government
UK Government through HM Treasury is the controlling shareholder of NatWest
Group plc as per UK listing rules. The UK Government's shareholding is managed
by UK Government Investments Limited, a company wholly owned by the UK
Government. At 31 December 2023 HM Treasury's holding in the company's
ordinary shares was 37.97%. As a result the UK Government and UK
Government-controlled bodies are related parties of the 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 10% or more
of the voting rights of the investee company.
(b) NatWest Group recharges NatWest Group Pension Fund with the cost of
pension management services incurred by it.
Full details of NatWest Group's related party transactions for the year ended
31 December 2023 are included in the NatWest Group plc 2023 Annual Report and
Accounts.
6. Dividends
The company has announced that the directors have recommended a final dividend
of £1.0 billion, or 11.5p per ordinary share (2022 - £1.0 billion, or 10.0p
per ordinary share) subject to shareholder approval at the Annual General
Meeting on 23 April 2024. If approved, payment will be made on 29 April 2024
to shareholders on the register at the close of business on 15 March 2024. The
ex-dividend date will be 14 March 2024.
7. Post balance sheet events
As part of the ongoing on-market share buyback programme, NatWest Group plc
has repurchased and cancelled a further 63.9 million shares since December
2023 for a total consideration (excluding fees) of £136.9 million.
Other than as disclosed in this document, there have been no significant
events between 31 December 2023 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
2023.
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 John-Paul Thwaite Katie Murray
Chairman Group Chief Executive Officer Group Chief Financial Officer
15 February 2024
Board of directors
Chairman Executive directors Non-executive directors
Howard Davies John-Paul Thwaite Frank Dangeard
Katie Murray Roisin Donnelly
Patrick Flynn
Rick Haythornthwaite
Yasmin Jetha
Stuart Lewis
Mark Seligman
Lena Wilson
Additional information
Presentation of information
In the Annual Report and Accounts, unless specified otherwise, 'parent
company' refers to NatWest Group plc, and 'NatWest Group', 'Group' or 'we'
refers to NatWest Group plc and its subsidiaries. The term 'NWH Group' refers
to NatWest Holdings Limited ('NWH Limited') 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 'NWM N.V. Group' refers to Natwest Markets N.V.
and its subsidiary and associated undertakings 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 Ltd'
refers to The Royal Bank of Scotland International Limited.
NatWest Group publishes its financial statements in pounds sterling ('£' or
'sterling'). The abbreviations '£m' and '£bn' represent millions and
thousands of millions of pounds sterling, respectively, and references to
'pence' represent pence 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 2022 have been
filed with the Registrar of Companies and those for the year ended 31 December
2023 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 Claire Kane, Head of Investor Relations for NatWest Group plc.
Contacts
Analyst enquiries: Claire Kane, Investor Relations +44 (0) 20 7672 1758
Media enquiries: NatWest Group Press Office +44 (0) 131 523 4205
Management presentation Fixed income presentation
Date: 16 February 2024 Date: 16 February 2024
Time: 9:00 AM UK time Time: 1:00 PM UK time
Zoom ID: 983 5690 5481 Zoom ID: 957 8120 2404
Available on www.natwestgroup.com/results
(http://www.natwestgroup.com/results)
- Announcement and slides.
- NatWest Group plc 2023 Annual Report and Accounts.
- A financial supplement containing income statement, balance sheet and segment
performance for the four quarters ended 31 December 2023.
- NatWest Group and NWH Group Pillar 3 Report.
- Climate-related Disclosures Report 2023.
- Environmental, Social and Governance (ESG) Disclosures Report 2023.
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
sustainability-related performance ambitions, targets and metrics, including
in relation to initiatives to transition to a net zero economy, Climate and
Sustainable Funding and Financing (CSFF) and financed emissions. In addition,
this document includes forward-looking statements relating, but not limited
to: implementation of NatWest Group's strategy (including in relation to:
cost-controlling measures, the Commercial & Institutional segment and
achieving a number of various targets within the relevant timeframe); 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 Promoter Score; 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 affect
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 GDP growth, inflation and interest rates, political
uncertainty and instability, supply chain disruption and geopolitical tensions
and armed conflict); changes in foreign currency exchange rates; uncertainty
regarding the effects of Brexit; 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 strategy; future acquisitions and
divestments (including the 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; liquidity and funding risks; prudential regulatory
requirements for capital and MREL; reductions in the credit ratings; the
requirements of regulatory stress tests; model risk; sensitivity to accounting
policies, judgements, estimates and assumptions (and the economic, climate,
competitive and other forward looking information affecting those judgements,
estimates and assumptions); 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-related and sustainability-related risks; both the
execution and reputational risk relating to NatWest Group's climate
change-related strategy, ambitions, targets and transition plan; climate and
sustainability-related data and model risk; the failure to implement climate
change resilient governance, systems, controls and procedures; increasing
levels of climate, environmental, human rights and sustainability-related
regulation and oversight; increasing anti-greenwashing regulations; climate,
environmental and sustainability-related litigation, enforcement proceedings
investigations and conduct risk; and reductions in ESG ratings); 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 diverse
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;
the outcome of legal, regulatory and governmental actions, investigations and
remedial undertakings; and changes in tax legislation or failure to generate
future taxable profits).
Climate and sustainability-related disclosures
Climate and sustainability-related disclosures in this document are not
measures within the scope of International Financial Reporting Standards
('IFRS'), use a greater number and level of 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 materially over time, and, when
coupled with the longer time frames used in these disclosures, make any
assessment of materiality inherently uncertain. In addition, our climate risk
analysis, net zero strategy, including the implementation of our climate
transition plan remain under development, and the data underlying our analysis
and strategy remain subject to evolution over time. The process we have
adopted to define, gather and report data on our performance on climate and
sustainability-related measures is not subject to the formal processes adopted
for financial reporting in accordance with IFRS and there are currently
limited industry standards or globally recognised established practices for
measuring and defining climate and sustainability-related metrics. As a
result, we expect that certain climate and sustainability-related disclosures
made in this document are likely to be amended, updated, recalculated or
restated in the future. Please also refer to the cautionary statement in the
section entitled 'Climate-related and other forward-looking statements and
metrics' of the NatWest Group 2023 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. Non-IFRS measures and
APMs are adjusted for notable and other defined items which management
believes are not representative of the underlying performance of the business
and which distort period-on-period comparison. Non-IFRS measures provide users
of the financial statements with a consistent basis for comparing business
performance between financial periods and information on elements of
performance that are one-off in nature. Any Non-IFRS measures and/or APMs
included in this document, are not measures within the scope of IFRS, are
based on a number of assumptions that are subject to uncertainties and change,
and are not a substitute for IFRS measures.
The information, statements and opinions contained in this document do not
constitute a public offer under any applicable legislation or an offer to sell
or a solicitation of an offer to buy any securities or financial instruments
or any advice or recommendation with respect to such securities or other
financial instruments.
Appendix
Non-IFRS financial measures
Non-IFRS financial measures
NatWest Group prepares its financial statements in accordance with UK adopted
International Accounting Standards (IAS) and International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board
(IASB). This document contains a number of non-IFRS measures, also known as
alternative performance measures, defined under the European Securities and
Markets Authority guidance or non-GAAP financial measures in accordance with
SEC regulations. These measures are adjusted for notable and other defined
items which management believes are not representative of the underlying
performance of the business and which distort period-on-period comparison.
The non-IFRS measures provide users of the financial statements with a
consistent basis for comparing business performance between financial periods
and information on elements of performance that are one-off in nature. The
non-IFRS measures also include a calculation of metrics that are used
throughout the banking industry.
These non-IFRS measures are not a substitute for IFRS measures and a
reconciliation to the closest IFRS measure is presented where appropriate.
1. Total income excluding notable items
Total income excluding notable items is calculated as total income less
notable items.
The exclusion of notable items aims to remove the impact of one-offs and other
volatile items which may distort period-on-period comparisons.
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2023 2022 2023 2023 2022
£m £m £m £m £m
Continuing operations
Total income 14,752 13,156 3,537 3,488 3,708
Less notable items:
Commercial & Institutional
Fair value, disposal losses and asset disposals/strategic
risk reduction - (45) - - -
Own credit adjustments (OCA) (2) 42 (5) (6) (19)
Tax interest on prior periods 3 - 3 - -
Central items & other
Loss on redemption of own debt - (161) - - -
Effective interest rate adjustment as a
result of redemption of own debt - (41) - - (41)
Profit from insurance liabilities settlement - 92 - - 92
Liquidity Asset Bond sale losses (43) (88) (10) (9) -
Share of associate (losses)/gains for Business Growth Fund (4) (22) 1 10 7
Property strategy update (69) - - (69) -
Interest and FX management derivatives not in
hedge accounting relationships 79 369 (21) 48 (46)
FX recycling gains 484 - 162 - -
Ulster Bank Rol fair value mortgage adjustments - (51) - - (51)
Tax interest on prior periods (35) - (35) - -
413 95 95 (26) (58)
Total income excluding notable items 14,339 13,061 3,442 3,514 3,766
Non-IFRS financial measures continued
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 2023 31 December 2022
Litigation Other Statutory Litigation Other Statutory
and conduct operating operating and conduct operating operating
costs expenses expenses costs expenses expenses
£m £m £m £m £m £m
Continuing operations
Staff costs 62 3,839 3,901 45 3,671 3,716
Premises and equipment - 1,153 1,153 - 1,112 1,112
Depreciation and amortisation - 934 934 - 833 833
Other administrative expenses 293 1,715 2,008 340 1,686 2,026
Total 355 7,641 7,996 385 7,302 7,687
Quarter ended
31 December 2023
Litigation Other Statutory
and conduct operating operating
costs expenses expenses
£m £m £m
Continuing operations
Staff costs 16 961 977
Premises and equipment - 308 308
Depreciation and amortisation - 251 251
Other administrative expenses 97 521 618
Total 113 2,041 2,154
30 September 2023
Litigation Other Statutory
and conduct operating operating
costs expenses expenses
£m £m £m
Continuing operations
Staff costs 15 904 919
Premises and equipment - 275 275
Depreciation and amortisation - 214 214
Other administrative expenses 119 400 519
Total 134 1,793 1,927
31 December 2022
Litigation Other Statutory
and conduct operating operating
costs expenses expenses
£m £m £m
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
Non-IFRS financial measures continued
3. Cost: income ratio (excl. litigation and conduct)
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 2023 £m £m £m £m £m
Continuing operations
Operating expenses 2,828 685 4,091 392 7,996
Less litigation and conduct costs (117) (9) (224) (5) (355)
Other operating expenses 2,711 676 3,867 387 7,641
Total income 5,931 990 7,421 410 14,752
Cost:income ratio 47.7% 69.2% 55.1% nm 54.2%
Cost:income ratio (excl. litigation and conduct) 45.7% 68.3% 52.1% nm 51.8%
Year ended 31 December 2022
Continuing operations
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%
Quarter ended 31 December 2023
Continuing operations
Operating expenses 681 206 1,092 175 2,154
Less litigation and conduct costs (34) 2 (78) (3) (113)
Other operating expenses 647 208 1,014 172 2,041
Total income 1,369 209 1,832 127 3,537
Cost:income ratio 49.7% 98.6% 59.6% nm 60.9%
Cost:income ratio (excl. litigation and conduct) 47.3% 99.5% 55.3% nm 57.7%
Quarter ended 30 September 2023
Continuing operations
Operating expenses 780 157 1,012 (22) 1,927
Less litigation and conduct costs (59) - (52) (23) (134)
Other operating expenses 721 157 960 (45) 1,793
Total income 1,442 214 1,841 (9) 3,488
Cost:income ratio 54.1% 73.4% 55.0% nm 55.2%
Cost:income ratio (excl. litigation and conduct) 50.0% 73.4% 52.1% nm 51.4%
Quarter ended 31 December 2022
Continuing operations
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%
Non-IFRS financial measures continued
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.
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
2023 2022 2023 2023 2022
NatWest Group return on tangible equity £m £m £m £m £m
Profit attributable to ordinary shareholders 4,394 3,340 1,229 866 1,262
Annualised profit attributable to ordinary shareholders 4,916 3,464 5,048
Average total equity 36,201 38,210 36,134 35,081 35,866
Adjustment for other owners equity and intangibles (11,486) (11,153) (11,686) (11,583) (11,350)
Adjusted total tangible equity 24,715 27,057 24,448 23,498 24,516
Return on equity 12.1% 8.7% 13.6% 9.9% 14.1%
Return on tangible equity 17.8% 12.3% 20.1% 14.7% 20.6%
Non-IFRS financial measures continued
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 2023 Banking Banking Institutional
Operating profit (£m) 2,638 291 3,236
Paid-in equity cost allocation (£m) (55) (23) (165)
Adjustment for tax (£m) (723) (75) (768)
Adjusted attributable profit (£m) 1,860 193 2,303
Average RWAe (£bn) 57.8 11.4 107.0
Equity factor 13.5% 11.5% 14.0%
Average notional equity (£bn) 7.8 1.3 15.0
Return on equity 23.8% 14.8% 15.4%
Year ended 31 December 2022
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%
Retail Private Commercial &
Quarter ended 31 December 2023 Banking Banking Institutional
Operating profit/(loss) (£m) 585 (2) 725
Paid-in equity cost allocation (£m) (12) (6) (40)
Adjustment for tax (£m) (160) 2 (171)
Adjusted attributable profit/(loss) (£m) 413 (6) 514
Annualised adjusted attributable profit/(loss) (£m) 1,650 (23) 2,055
Average RWAe (£bn) 60.5 11.4 109.0
Equity factor 13.5% 11.5% 14.0%
Average notional equity (£bn) 8.2 1.3 15.3
Return on equity 20.2% (1.8%) 13.5%
Quarter ended 30 September 2023
Operating profit (£m) 493 59 770
Paid-in equity cost allocation (£m) (13) (6) (39)
Adjustment for tax (£m) (134) (15) (183)
Adjusted attributable profit (£m) 346 38 548
Annualised adjusted attributable profit (£m) 1,382 153 2,193
Average RWAe (£bn) 58.5 11.4 106.7
Equity factor 13.5% 11.5% 14.0%
Average notional equity (£bn) 7.9 1.3 14.9
Return on equity 17.5% 11.7% 14.7%
Quarter ended 31 December 2022
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%
Non-IFRS financial measures continued
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
2023 2022 2023 2023 2022
£m £m £m £m £m
Continuing operations
NatWest Group net interest income 11,049 9,842 2,638 2,685 2,868
Annualised NatWest Group net interest income 10,466 10,652 11,378
Average interest earning assets (IEA) 520,591 544,162 524,718 520,815 538,584
Less liquid asset buffer average IEA (157,677) (198,927) (158,192) (157,972) (182,797)
Bank average IEA 362,914 345,235 366,526 362,843 355,787
NatWest Group net interest margin 2.12% 1.81% 1.99% 2.05% 2.11%
Bank net interest margin 3.04% 2.85% 2.86% 2.94% 3.20%
Retail Banking
Net interest income 5,496 5,224 1,254 1,334 1,505
Annualised net interest income 4,975 5,293 5,971
Retail Banking average IEA 222,174 210,404 223,171 223,686 217,790
Less liquid asset buffer average IEA (16,730) (19,581) (15,130) (16,745) (20,383)
Adjusted Retail Banking average IEA 205,444 190,823 208,041 206,941 197,407
Retail Banking net interest margin 2.68% 2.74% 2.39% 2.56% 3.02%
Private Banking
Net interest income 710 777 138 144 251
Annualised net interest income 548 571 996
Private Banking average IEA 27,072 29,308 26,487 26,595 29,140
Less liquid asset buffer average IEA (8,088) (10,221) (7,835) (7,680) (9,956)
Adjusted Private Banking average IEA 18,984 19,087 18,652 18,915 19,184
Private Banking net interest margin 3.74% 4.07% 2.94% 3.02% 5.19%
Commercial & Institutional
Net interest income 5,044 4,171 1,269 1,271 1,276
Annualised net interest income 5,035 5,043 5,062
Commercial & Institutional average IEA 244,445 245,316 245,194 193,793 201,329
Less liquid asset buffer average IEA (112,931) (119,244) (111,757) (63,944) (71,039)
Adjusted Commercial & Institutional average IEA 131,514 126,072 133,437 129,849 130,290
Commercial & Institutional net interest margin 3.84% 3.31% 3.77% 3.88% 3.89%
Non-IFRS financial measures continued
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 30 September 31 December
2023 2023 2022
Ordinary shareholders' interests (£m) 33,267 31,530 32,598
Less intangible assets (£m) (7,614) (7,515) (7,116)
Tangible equity (£m) 25,653 24,015 25,482
Ordinary shares in issue (millions) (1) 8,792 8,871 9,659
TNAV per ordinary share (pence) 292p 271p 264p
(1) At the General Meeting and Class Meeting on 25 August, 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. Comparatives for the number of shares
in issue and TNAV per ordinary share have not been adjusted. The number of
ordinary shares in issue excludes own shares held.
8. Customer deposits excluding central items
Customer deposits excluding central items is calculated as total NatWest Group
customer deposits excluding Central items & other customer deposits.
Central items & other includes Treasury repo activity and Ulster Bank RoI.
The exclusion of Central items & other removes the volatility relating to
Treasury repo activity and the expected reduction of deposits as part of our
withdrawal from the Republic of Ireland. These items may distort
period-on-period comparisons and their removal gives the user of the financial
statements a better understanding of the movements in customer deposits.
As at
31 December 30 September 31 December
2023 2023 2022
£bn £bn £bn
Total customer deposits 431.4 435.9 450.3
Less Central items & other (12.3) (12.4) (17.4)
Customer deposits excluding central items 419.1 423.5 432.9
9. Net loans to customers excluding central items
Net loans to customers excluding central items is calculated as total NatWest
Group net loans to customers excluding Central items & other net loans to
customers.
Central items & other includes Treasury reverse repo activity and Ulster
Bank RoI. The exclusion of Central items & other removes the volatility
relating to Treasury reverse repo activity and the reduction of loans to
customers over 2022 as part of our withdrawal from the Republic of Ireland.
This allows for better period-on-period comparisons and gives the user of the
financial statements a better understanding of the movements in net loans to
customers.
As at
31 December 30 September 31 December
2023 2023 2022
£bn £bn £bn
Total loans to customers (amortised cost) 381.4 377.3 366.3
Less Central items & other (25.8) (22.8) (19.6)
Net loans to customers excluding central items 355.6 354.5 346.7
Non-IFRS financial measures continued
10. Loan: deposit ratio (excl. repos and reverse repos)
Loan:deposit ratio (excl. repos and reverse repos) is calculated as net
customer loans held at amortised cost excluding reverse repos divided by total
customer deposits excluding repos. 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 30 September 31 December
2023 2023 2022
£m £m £m
Loans to customers - amortised cost 381,433 377,268 366,340
Less reverse repos (27,117) (23,095) (19,749)
Loans to customers - amortised cost (excl. reverse repos) 354,316 354,173 346,591
Customer deposits 431,377 435,867 450,318
Less repos (10,844) (10,692) (9,828)
Customer deposits (excl. repos) 420,533 425,175 440,490
Loan:deposit ratio (%) 88% 87% 81%
Loan:deposit ratio (excl. repos and reverse repos) (%) 84% 83% 79%
11. 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.
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2023 2022 2023 2023 2022
Loan impairment charge (£m) 578 337 126 229 144
Annualised loan impairment charge (£m) 504 916 576
Gross customer loans (£bn) 384.9 369.7 384.9 380.8 369.7
Loan impairment rate 15bps 9bps 13bps 24bps 16bps
12. 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.
As at
31 December 30 September 31 December
2023 2023 2022
£m £m £m
Total assets 692,673 717,141 720,053
Less derivative assets (78,904) (87,504) (99,545)
Funded assets 613,769 629,637 620,508
13. AUMAs
AUMAs comprises both assets under management (AUMs) and assets under
administration (AUAs) serviced through the Private Banking segment.
AUMs comprise assets where the investment management is undertaken by Private
Banking on behalf of Private Banking, Retail Banking and Commercial &
Institutional customers.
AUAs comprise i) third party assets held on an execution-only basis in custody
by Private Banking, Retail Banking and Commercial & Institutional for
their customers, for which the execution services are supported by Private
Banking, and for which Private Banking receives a fee for providing investment
management and execution services to Retail Banking and Commercial &
Institutional business segments ii) AUA of Cushon, acquired on 1 June 2023,
which are supported by Private Banking and held and managed by third parties.
This measure is tracked and reported as the amount of funds that we manage or
administer, and directly impacts the level of investment income that we
receive.
Non-IFRS financial measures continued
14. AUM net flows
AUM net flows refers to client cash inflows and outflows relating to
investment products (this can include transfers from savings accounts). AUM
net flows excludes the impact of European Economic Area (EEA) resident client
outflows following the UK's exit from the EU and Russian client outflows since
Q1 2022.
AUM net flows is reported and tracked to monitor the business performance of
new business inflows and management of existing client withdrawals across
Private Banking, Retail Banking and Commercial & Institutional.
15. 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.
16. 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.
17. Climate and sustainable funding and financing
The climate and sustainable funding and financing metric is used by NatWest
Group to measure the level of support it provides customers, through lending
products and underwriting activities, to help in their transition towards a
net zero, climate resilient and sustainable economy. We have a target to
provide £100 billion of climate and sustainable funding and financing between
the 1 of July 2021 and the end of 2025. As part of this, we aim to provide at
least £10 billion in lending for residential properties with EPC ratings A
and B between 1 January 2023 and the end of 2025.
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