NWG plc Q1 2023 Interim Management Statement

NatWest Group plc
28 April 2023
 

 

F2A4E6A5-86EA-4413-90D6-619423C4A8DF|3|Oracle.SmartView.EPRCS|{8aac9318-9703-42f8-9baa-d10809f127f1}

 

 

 

 

           

Q1 2023

            Interim Management Statement

 

 

 

 

 

 

 

 

 

natwestgroup.com

 

 


NatWest Group Q1 2023 Results

 


Page

Highlights

2

Business performance summary


  Chief Financial Officer review

4

  Retail Banking

5

  Private Banking

6

  Commercial & Institutional

7

  Central items & other

8

  Segment performance

Error! Bookmark not defined.

Risk and capital management


  Credit risk

12

  Capital, liquidity and funding risk

19

Condensed consolidated financial statements

Error! Bookmark not defined.

Notes to the financial statements

29

Additional information

31

Appendix - Non-IFRS financial measures

34

 



NatWest Group plc

Q1 2023 Interim Management Statement

Chief Executive, Alison Rose, commented:

"NatWest Group's strong performance in Q1 2023 is underpinned by our robust balance sheet, our high levels of capital and liquidity and our well-diversified loan book. Through a period of significant macro disruption and uncertainty, we continue to stand alongside the people, families and businesses we serve, providing targeted support and growing our lending responsibly.

Our disciplined and consistent approach to risk management means that arrears and impairments remain low. By monitoring customer behaviour and looking closely for signs of financial distress, we are able to put in place proactive measures to help those who are struggling right now and those who are worried about the future.

As we continue to make progress against our strategic priorities, NatWest Group is well positioned to navigate this challenging operating environment and to deliver sustainable growth and returns by responding to new and emerging trends that are shaping the lives of our customers."

Strong Q1 2023 performance

-    Q1 2023 attributable profit of £1,279 million and a return on tangible equity of 19.8%.

-    Total income, excluding notable items, increased by £1,036 million, or 37.2%, compared with Q1 2022 principally reflecting the impact of volume growth and yield curve movements.

-    Bank net interest margin (NIM) of 3.27% was 7 basis points higher than Q4 2022.

-    Other operating expenses were £214 million, or 12.5%, higher than Q1 2022 driven by increased staff costs due to a one-off cost of living payment of around £60 million, increased costs in areas of strategic investment and costs in relation to our withdrawal from the Republic of Ireland. The cost:income ratio (excl. litigation and conduct) was 49.8% at Q1 2023.

-    A net impairment charge of £70 million, or 7 basis points of gross customer loans, principally reflected the continued strong performance of our lending book. Levels of default remain stable and at low levels across the portfolio.

Robust balance sheet with strong capital and liquidity levels

-    Net loans to customers excluding central items increased by £5.7 billion to £352.4 billion, or 1.6%, primarily reflecting £3.9 billion of mortgage growth in Retail Banking and a £1.6 billion increase in Commercial & Institutional.

-    Customer deposits excluding central items reduced by £11.1 billion, or 2.6%, in the quarter reflecting around £8 billion higher customer tax payments, competition for deposits and an overall market liquidity contraction.

 

-    The loan:deposit ratio (LDR) (excl. repos and reverse repos) was 83% at Q1 2023, with customer deposits exceeding net loans to customers by around £55 billion.

-    The liquidity coverage ratio (LCR) of 139%, representing £43.4 billion headroom above 100% minimum requirement, decreased by 6 percentage points compared with Q4 2022 primarily due to reduced customer deposits and lending growth.

-    Common Equity Tier (CET1) ratio of 14.4% was 20 basis points higher than Q4 2022 principally reflecting the attributable profit partially offset by a £2.0 billion increase in risk-weighted assets (RWAs) and a £0.5 billion ordinary dividend accrual.

-    As at 26 April 2023 we had completed £458 million of the £800 million share buyback programme announced as part of our year end 2022 results.

-    RWAs increased by £2.0 billion in the quarter to £178.1 billion largely reflecting lending growth and a £1.1 billion increase associated with the annual update to operational risk balances.

Outlook (1)

-      We retain the outlook guidance provided in the 2022 Annual Report and Accounts.

 

(1)     The guidance, targets, expectations and trends discussed in this section represent NatWest Group plc management's current expectations and are subject to change, including as a result of the factors described in the NatWest Group plc Risk Factors in the 2022 Annual Report and Accounts and Form 20-F. These statements constitute forward-looking statements. Refer to Forward-looking statements in this announcement.

 



 


Business performance summary

 


Quarter ended


31 March

31 December

31 March


2023

2022

2022

Summary consolidated income statement

£m 

£m 

£m 

Net interest income

2,902

2,868

2,027

Non-interest income

974

840

981

Total income

3,876

3,708

3,008

Litigation and conduct costs

(56)

(91)

(102)

Other operating expenses

(1,932)

(2,047)

(1,718)

Operating expenses

(1,988)

(2,138)

(1,820)

Profit before impairment losses/releases

1,888

1,570

1,188

Impairment (losses)/releases

(70)

(144)

36

Operating profit before tax

1,818

1,426

1,224

Tax charge

(512)

(46)

(386)

Profit from continuing operations

1,306

1,380

838

Profit/(loss) from discontinued operations, net of tax

35

(56)

63

Profit for the period

1,341

1,324

901

 




Performance key metrics and ratios




Notable items within income (1)

£56m

£(58)m

£224m

Total income excluding notable items (1)

£3,820m

£3,766m

£2,784m

Climate and sustainable funding and financing (2)

£7.6bn

£6.4bn

£5.6bn

Bank net interest margin (1)

3.27%

3.20%

2.45%

Bank average interest earning assets (1)

£360bn

£356bn

£335bn

Cost:income ratio (excl. litigation and conduct) (1)

49.8%

55.2%

57.1%

Loan impairment rate (1)

7bps

16bps

(4)bps

Profit attributable to ordinary shareholders

£1,279m

£1,262m

£841m

Total earnings per share attributable to ordinary shareholders - basic (3)

13.2p

13.1p

8.1p

Return on tangible equity (RoTE) (1)

19.8%

20.6%

11.3%


As at


31 March

31 December

31 March


2023

2022

2022

Balance sheet

£bn

£bn

£bn

Total assets

695.6

720.1

785.4

Net loans to customers - amortised cost

374.2

366.3

365.3

Net loans to customers excluding central items (1)

352.4

346.7

330.2

Loans to customers and banks - amortised cost and FVOCI 

385.8

377.1

375.7

Total impairment provisions (4)

3.4

3.4

3.6

Expected credit loss (ECL) coverage ratio

0.9%

0.9%

1.0%

Assets under management and administration (AUMA) (1)

35.2

33.4

35.0

Customer deposits 

430.5

450.3

482.9

Customer deposits excluding central items (1,5)

421.8

432.9

447.9

Liquidity and funding

 



Liquidity coverage ratio (LCR)

139%

145%

167%

Liquidity portfolio

210

226

275

Net stable funding ratio (NSFR)

141%

145%

152%

Loan:deposit ratio (excl. repos and reverse repos) (1)

83%

79%

73%

Total wholesale funding

79

74

76

Short-term wholesale funding

25

21

22

Capital and leverage

 



Common Equity Tier (CET1) ratio (6)

14.4%

14.2%

15.2%

Total capital ratio (6)

19.6%

19.3%

20.4%

Pro forma CET1 ratio (excl. foreseeable items) (7)

15.7%

15.4%

16.1%

Risk-weighted assets (RWAs)

178.1

176.1

176.8

UK leverage ratio

5.4%

5.4%

5.5%

Tangible net asset value (TNAV) per ordinary share (8)

278p

264p

269p

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

9,581

9,659

10,622

 

(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 criteria to determine the assets, activities and companies that are eligible to be included within its climate and sustainable funding and financing targets. This includes both provision for funding and financing, including provision of services for underwriting issuances and private placements. Up to 31 March 2023 we have provided £40.2 billion against our target to provide £100 billion climate and sustainable funding and financing between 1 July 2021 and the end of 2025. As part of this, we aim to provide at least £10 billion in lending for EPC A- and B-rated residential properties between 1 January 2023 and the end of 2025. During Q1 2023 we provided £7.6 billion climate and sustainable funding and financing, which included £1.3 billion in lending for EPC A- and B-rated residential properties.

(3)

On 30 August 2022 the issued ordinary share capital was consolidated in the ratio of 14 existing shares for 13 new shares. The average number of shares for earnings per share has been adjusted retrospectively.

(4)

Includes £0.1 billion relating to off-balance sheet exposures (31 December 2022 - £0.1 billion; 31 March 2022 - £0.1 billion).

(5)

Central items includes Treasury repo activity and Ulster Bank Republic of Ireland.

(6)

Refer to the capital, liquidity and funding risk section for details of basis of preparation.

(7)

The pro forma CET1 ratio at 31 March 2023 excludes foreseeable items of £2,351 million; £1,479 million for ordinary dividends and £872 million foreseeable charges (31 December 2022 excludes foreseeable items of £2,132 million; £967 million for ordinary dividends and £1,165 million foreseeable charges; 31 March 2022 excludes foreseeable charges of £1,623 million, £1,096 million for ordinary dividends and £527 million foreseeable charges).

(8)

The number of ordinary shares in issue excludes own shares held. Comparatives for the number of shares in issue and TNAV per ordinary share have not been adjusted for the effect of the share consolidation referred to in footnote 3 above.

Business performance summary

Chief Financial Officer review

We delivered a strong operating performance in the first quarter with a RoTE of 19.8%. Total income, excluding notable items, was up by 37.2% on the prior year and we continue to see low levels of default across our portfolio. We have seen strong lending growth in the first quarter balanced across the book and, whilst we have seen outflows in customer deposits as a result of tax payments, market movements and customer behaviour, we remain in a strong liquidity position, with a LCR of 139%, representing £43.4 billion headroom above 100% minimum requirement, and an LDR of 83%. Our CET1 ratio remains strong at 14.4%. We remain on track to achieve the targets we announced as part of the full year results in February 2023.

Financial performance

Total income increased by 28.9% to £3,876 million compared with Q1 2022. Total income, excluding notable items, was £1,036 million, or 37.2%, higher than Q1 2022 driven by volume growth, favourable yield curve movements and a strong performance in Commercial & Institutional trading income.

Bank NIM of 3.27% was 7 basis points higher than Q4 2022, principally reflecting the beneficial impact of recent base rate rises partially offset by reduced mortgage margins.

In line with our expectations, other operating expenses were £214 million, or 12.5%, higher than Q1 2022 principally driven by increased staff costs due to a one-off cost of living payment of around £60 million, increased strategic investment costs, such as Financial Crime and Data, and exit costs in relation to our withdrawal from the Republic of Ireland. We remain on track to deliver on our full year cost guidance.

A net impairment charge of £70 million principally reflects a £114 million charge in Retail Banking partially offset by modelled good book releases in Commercial & Institutional. Levels of default remain stable and at low levels across the portfolio. Compared with Q4 2022, our ECL provision remained flat at £3.4 billion and our ECL coverage ratio has decreased from 0.91% to 0.89%. We retain post model adjustments of £0.3 billion related to economic uncertainty, or 9.7% of total impairment provisions. Whilst we are comfortable with the strong credit performance of our book, we will continue to assess this position regularly and are closely monitoring the impacts of inflationary pressures on the UK economy and our customers.

As a result, we are pleased to report an attributable profit for Q1 2023 of £1,279 million, with earnings per share of 13.2 pence and a RoTE of 19.8%.

Net loans to customers increased by £7.9 billion in Q1 2023 primarily reflecting £3.9 billion of mortgage lending growth in Retail Banking, a £1.6 billion increase in Commercial & Institutional and a £2.3 billion increase in Treasury reverse repo balances. Retail Banking gross new mortgage lending was £9.5 billion in the quarter compared with £9.1 billion in Q1 2022 and £11.5 billion in Q4 2022. Within Commercial & Institutional, growth was largely in Corporate & Institutions partly offset by UK Government Scheme repayments of £0.7 billion in the quarter.

Up to 31 March 2023 we have provided £40.2 billion against our target to provide £100 billion climate and sustainable funding and financing between 1 July 2021 and the end of 2025. As part of this we aim to provide at least £10 billion in lending for EPC A- and B-rated residential properties between 1 January 2023 and the end of 2025. During Q1 2023 we provided £7.6 billion climate and sustainable funding and financing, which included £1.3 billion in lending for EPC A- and B-rated residential properties.

Customer deposits decreased by £19.8 billion in the quarter, including an £8.7 billion reduction in Central items & other related to our exit from the Republic of Ireland and Treasury repo activity. Customer deposits excluding central items reduced by £11.1 billion reflecting customer tax payments which were higher than previous years, competition for deposits and an overall market liquidity contraction. 68% of personal(1) deposits and 39% of total customer deposits were insured at the end of Q1 2023. Looking ahead, we now expect full year 2023 customer deposits excluding central items to be stable to modestly lower than the £432.9 billion reported at full year 2022, although we recognise that balance movements are challenging to predict with significant uncertainties around macroeconomic factors, customer behaviour and market dynamics.

TNAV per share increased by 14 pence in the quarter to 278 pence primarily reflecting the attributable profit.

Capital and leverage

The CET1 ratio remains robust at 14.4%, or 14.3% excluding IFRS 9 transitional relief, and increased by 20 basis points in the quarter principally reflecting the attributable profit, partially offset by a £2.0 billion increase in RWAs and an £0.5 billion ordinary dividend accrual. NatWest Group's total loss absorbing capacity ratio was 32.4%.

We have made good progress on the £800 million share buyback programme announced as part of our 2022 year end results, with £458 million completed as at 26 April 2023.  

RWAs increased by £2.0 billion in the quarter to £178.1 billion largely reflecting lending growth and a £1.1 billion increase associated with the annual update to operational risk balances.

Funding and liquidity

The LCR decreased by 6 percentage points to 139%, representing £43.4 billion headroom above 100% minimum requirements primarily due to reduced customer deposits and lending growth, partially offset by new issuances during the quarter. Our primary liquidity at Q1 2023 was £149 billion and £120 billion, or 81%, of this was cash at central banks. Total wholesale funding increased by £5.0 billion in the quarter to £79.5 billion.

 

(1)

Personal deposits are ring fenced bank deposits attributable to individuals and sole traders, and excludes Ulster Bank RoI.




Business performance summary

Retail Banking


Quarter ended


31 March

31 December

31 March


2023

2022

2022


£m

£m

£m

Total income

1,604

1,617

1,217

Operating expenses

(696)

(658)

(645)

   of which: Other operating expenses

(693)

(670)

(591)

Impairment losses

(114)

(87)

(5)

Operating profit

794

872

567


 



Return on equity (1)

30.0%

34.7%

23.1%

Net interest margin (1)

2.99%

3.02%

2.43%

Cost:income ratio (excl. litigation and conduct) (1)

43.2%

41.4%

48.6%

Loan impairment rate (1)

22bps

17bps

1bp

 


As at


31 March

31 December

31 March


2023

2022

2022


£bn

£bn

£bn

Net loans to customers (amortised cost)

201.7

197.6

184.9

Customer deposits

184.0

188.4

189.7

RWAs

55.6

54.7

52.2

 

(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.

 

In Q1 2023, Retail Banking continued to pursue sustainable growth with an intelligent approach to risk, delivering a return on equity of 30.0% and an operating profit of £794 million.  

Retail Banking provided £1.2 billion of climate and sustainable funding and financing in Q1 2023. 

-

Total income was £387 million, or 31.8%, higher than Q1 2022 reflecting continued strong loan growth and higher deposit income supported by interest rate rises, partially offset by a reduction in mortgage margins, lower deposit balances and non-repeat of insurance profit share from Q1 2022.

-

Net interest margin was 3 basis points lower than Q4 2022 reflecting lower mortgage margins, largely offset by higher deposit returns and non-repeat of the Q4 2022 review of mortgage customer repayment behaviour.

-

Other operating expenses were £102 million, or 17.3%, higher than Q1 2022 reflecting continued investment in the business and higher pay awards to support our colleagues with cost of living challenges, increased investment in financial crime prevention, increased data costs and increased restructuring costs.

-

A net impairment charge of £114 million in Q1 2023 as stage 3 defaults remain stable.

-

Customer deposits decreased by £4.4 billion, or 2.3%, in Q1 2023 reflecting the impact of customer tax payments which were higher than previous years, lower household liquidity and increased competition for savings balances. Personal current account balances decreased by £2.6 billion and personal savings decreased by £1.8 billion in Q1 2023. We have seen growth in our fixed term savings products in Q1 2023.

-

Net loans to customers increased by £4.1 billion, or 2.1%, in Q1 2023 mainly reflecting continued mortgage growth of £3.9 billion, or 2.1% with gross new mortgage lending of £9.5 billion, representing flow share of around 16%, particularly benefitting from elevated application volumes received in September and October 2022.  Cards balances increased by £0.2 billion, or 4.5%, and personal advances increased by £0.1 billion, or 1.3% in Q1 2023 with strong customer demand and disciplined credit risk appetite.

-

RWAs increased by £0.9 billion or 1.6% primarily reflecting lending volume growth and an increase associated with the annual update to operational risk balances.

 



 

Business performance summary

Private Banking


Quarter ended


31 March

31 December

31 March


2023

2022

2022


£m

£m

£m

Total income

296

310

216

Operating expenses

(155)

(198)

(139)

   of which: Other operating expenses

(152)

(188)

(138)

Impairment (losses)/releases

(8)

(2)

5

Operating profit

133

110

82


 



Return on equity (1)

28.5%

24.2%

18.2%

Net interest margin (1)

4.83%

5.19%

3.07%

Cost:income ratio (excl. litigation and conduct) (1)

51.4%

60.6%

63.9%

Loan impairment rate (1)

17bps

4bps

(11)bps

Net new money (£bn) (1)

0.6

0.3

0.8

 

 


As at


31 March

31 December

31 March


2023

2022

2022


£bn

£bn

£bn

Net loans to customers (amortised cost)

19.2

19.2

18.7

Customer deposits

37.3

41.2

40.3

RWAs

11.4

11.2

11.5

Assets under management (AUMs) (1)

29.6

28.3

29.6

Assets under administration (AUAs) (1)

5.6

5.1

5.4

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

35.2

33.4

35.0

 

(1)

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

 

In Q1 2023, Private Banking provided a strong operating performance, delivering a return on equity of 28.5%, and an operating profit of £133 million.

Private Banking provided £0.1 billion of climate and sustainable funding and financing in Q1 2023.

-

Total income was £80 million, or 37.0%, higher than Q1 2022 reflecting higher deposit income supported by interest rate rises, partially offset by a reduction in mortgage margins and lower deposit balances.

-

Net interest margin was 36 basis points lower than Q4 2022 reflecting lower mortgage margins, lower deposit volumes and increased capital issuance and funding costs.

-

Other operating expenses were £14 million, or 10.1%, higher than Q1 2022 due to the impact of pay awards to support colleagues with cost of living challenges, and increased investment in technology and FTE to support AUMA growth propositions.

-

A net impairment charge of £8 million in Q1 2023 reflects good book increases predominantly generated from probability of default movements.

-

AUMAs increased by £1.8 billion, or 5.4%, in Q1 2023 primarily reflecting AUM net new money of £0.6 billion, representing 7.3% of opening AUMA balances and positive investment market movements.

-

Customer deposits decreased by £3.9 billion, or 9.5% in Q1 2023 driven by tax outflows which were higher than previous years, as well as increased competition for savings balances. We have seen growth in our fixed term savings products in Q1 2023.

-

Net loans to customers remained flat in Q1 2023.

 

 


Business performance summary

Commercial & Institutional


Quarter ended


31 March

31 December

31 March


2023

2022

2022


£m

£m

£m

Net interest income

1,261

1,276

803

Non-interest income

692

543

572

Total income

1,953

1,819

1,375


 



Operating expenses

(1,003)

(1,031)

(922)

   of which: Other operating expenses

(959)

(989)

(880)

Impairment releases/(losses)

44

(62)

11

Operating profit

994

726

464


 



Return on equity (1)

19.5%

13.7%

8.8%

Net interest margin (1)

3.90%

3.89%

2.69%

Cost:income ratio (excl. litigation and conduct) (1)

49.1%

54.4%

64.0%

Loan impairment rate (1)

(13)bps

19bps

(3)bps

 


As at


31 March

31 December

31 March


2023

2022

2022


£bn

£bn

£bn

Net loans to customers (amortised cost)

131.5

129.9

126.6

Customer deposits

200.5

203.3

217.9

Funded assets (1)

320.4

306.3

334.6

RWAs

104.8

103.2

100.3

 

(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 Q1 2023, Commercial & Institutional delivered a strong performance with a return on equity of 19.5% and an operating profit of £994 million.

Commercial & Institutional provided £6.3 billion of climate and sustainable funding and financing in Q1 2023.

-

Total income was £578 million, or 42.0%, higher than Q1 2022 reflecting higher deposit returns from an improved interest rate environment, lending volume growth, credit and debit card fees and higher markets income.

-

Net interest margin was 1 basis point higher than Q4 2022 driven by higher deposit returns partly offset by increased capital issuance and funding costs.

-

Other operating expenses were £79 million, or 9.0%, higher than Q1 2022 as expected reflecting continued investment in the business and ongoing support to our colleagues with cost of living challenges.

-

A net impairment release of £44 million in Q1 2023 reflecting modelled good book releases. Stage 3 defaults remain stable and at low levels.

-

Customer deposits decreased by £2.8 billion, or 1.4% in Q1 2023 primarily due to overall market liquidity contraction. The impact was mainly in Business Banking and Commercial Mid-market, partly offset by growth in Corporate & Institutions balances.

-

Net loans to customers increased by £1.6 billion, or 1.2%, in Q1 2023 due to strong performance from origination deals and private financing activity within Corporate & Institutions and Commercial Mid-market growth in revolving credit facility utilisation, partly offset by UK Government scheme repayments of £0.7 billion.

-

RWAs increased by £1.6 billion, or 1.6%, in Q1 2023 primarily reflecting increased client lending facilities, partly offset by a reduction in market risk RWAs.

 



 

Business performance summary

Central items & other


Quarter ended


31 March

31 December

31 March


2023

2022

2022


£m

£m

£m

Continuing operations

 



Total income

23

(38)

200

Operating expenses (1)

(134)

(251)

(114)

   of which: Other operating expenses

(128)

(200)

(109)

   of which: Ulster Bank RoI

(145)

(310)

(113)

Impairment releases

8

7

25

Operating (loss)/profit

(103)

(282)

111

   of which: Ulster Bank RoI

(159)

(354)

(63)


 




As at


31 March

31 December

31 March


2023

2022

2022


£bn

£bn

£bn

Net loans to customers (amortised cost) (2)

21.8

19.6

35.1

Customer deposits

8.7

17.4

35.0

RWAs

6.3

7.0

12.8

 

(1)

Includes withdrawal-related direct program costs of £49 million for the quarter ended 31 March 2023 (31 December 2022 - £151 million; 31 March 2022 - £10 million).

(2)

Excludes £0.5 billion of loans to customers held at fair value through profit or loss (31 December 2022 - £0.5 billion; 31 March 2022 - nil).

 

-

Total income was £177 million lower than Q1 2022 primarily reflecting lower gains on interest and FX risk management derivatives not in accounting hedge relationships, reduced Business Growth Fund gains, lower gains on liquidity asset bond sales, and the effect of withdrawing operations from the Republic of Ireland.

-

Other operating expenses were £19 million, or 17.4%, higher than Q1 2022 primarily reflecting higher costs in relation to programme withdrawal costs in the Republic of Ireland.

-

Customer deposits decreased by £8.7 billion, or 50.0%, in Q1 2023 primarily reflecting the continued withdrawal of our operations from the Republic of Ireland and Treasury repo activity. Ulster Bank RoI customer deposit balances were £1.8 billion as at Q1 2023.

-

Net loans to customers increased £2.2 billion in Q1 2023 mainly due to reverse repo activity in Treasury.



 


Segment performance


Quarter ended 31 March 2023


Retail

Private

Commercial &

Central items

Total NatWest


Banking

Banking

Institutional

& other

Group


£m

£m

£m

£m

£m

Continuing operations

 

 

 

 

 

Income statement

 

 

 

 

 

Net interest income

1,492

229

1,261

(80)

2,902

Non-interest income

112

67

692

103

974

Total income

1,604

296

1,953

23

3,876

Direct expenses

(209)

(56)

(358)

(1,309)

(1,932)

Indirect expenses

(484)

(96)

(601)

1,181

-

Other operating expenses

(693)

(152)

(959)

(128)

(1,932)

Litigation and conduct costs

(3)

(3)

(44)

(6)

(56)

Operating expenses

(696)

(155)

(1,003)

(134)

(1,988)

Operating profit/(loss) before impairment losses/releases

908

141

950

(111)

1,888

Impairment (losses)/releases

(114)

(8)

44

8

(70)

Operating profit/(loss) 

794

133

994

(103)

1,818

 

 

 

 

 

 

Total income excluding notable items (1)

1,604

296

1,947

(27)

3,820

 

 

 

 

 

 

Additional information

 

 

 

 

 

Return on tangible equity (1)

na

na

na

na

19.8%

Return on equity (1)

30.0%

28.5%

19.5%

nm

na

Cost:income ratio (excl. litigation and conduct) (1)

43.2%

51.4%

49.1%

nm

49.8%

Total assets (£bn)

227.2

28.1

399.0

41.3

695.6

Funded assets (£bn) (1)

227.2

28.1

320.4

40.5

616.2

Net loans to customers - amortised cost (£bn)

201.7

19.2

131.5

21.8

374.2

Loan impairment rate (1)

22bps

17bps

(13)bps

nm

7bps

Impairment provisions (£bn)

(1.7)

(0.1)

(1.5)

(0.1)

(3.4)

Impairment provisions - stage 3 (£bn)

(1.0)

-

(0.7)

(0.1)

(1.8)

Customer deposits (£bn)

184.0

37.3

200.5

8.7

430.5

Risk-weighted assets (RWAs) (£bn)

55.6

11.4

104.8

6.3

178.1

RWA equivalent (RWAe) (£bn)

56.4

11.4

106.2

6.9

180.9

Employee numbers (FTEs - thousands)

13.9

2.2

12.4

33.3

61.8

Third party customer asset rate (1)

2.94%

4.07%

5.38%

nm

nm

Third party customer funding rate (1)

(0.83%)

(1.15%)

(0.87%)

nm

nm

Bank average interest earning assets (£bn) (1)

202.1

19.2

131.3

na

360.0

Bank net interest margin (1)

2.99%

4.83%

3.90%

na

3.27%

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


Quarter ended 31 December 2022


Retail

Private

Commercial &

Central items

Total NatWest


Banking

Banking

Institutional

& other

Group


£m

£m

£m

£m

£m

Continuing operations






Income statement

 

 

 

 

 

Net interest income

1,505

251

1,276

(164)

2,868

Non-interest income

112

59

543

126

840

Total income

1,617

310

1,819

(38)

3,708

Direct expenses

(202)

(62)

(396)

(1,387)

(2,047)

Indirect expenses

(468)

(126)

(593)

1,187

-

Other operating expenses

(670)

(188)

(989)

(200)

(2,047)

Litigation and conduct costs

12

(10)

(42)

(51)

(91)

Operating expenses

(658)

(198)

(1,031)

(251)

(2,138)

Operating profit/(loss) before impairment losses/releases

959

112

788

(289)

1,570

Impairment (losses)/releases

(87)

(2)

(62)

7

(144)

Operating profit/(loss)

872

110

726

(282)

1,426

 






Total income excluding notable items (1)

1,617

310

1,838

1

3,766

 






Additional information






Return on tangible equity (1)

na

na

na

na

20.6%

Return on equity (1)

34.7%

24.2%

13.7%

nm

na

Cost:income ratio (excl. litigation and conduct) (1)

41.4%

60.6%

54.4%

nm

55.2%

Total assets (£bn)

226.4

29.9

404.8

59.0

720.1

Funded assets (£bn) (1)

226.4

29.9

306.3

57.9

620.5

Net loans to customers - amortised cost (£bn)

197.6

19.2

129.9

19.6

366.3

Loan impairment rate (1)

17bps

4bps

19bps

nm

16bps

Impairment provisions (£bn)

(1.6)

(0.1)

(1.6)

(0.1)

(3.4)

Impairment provisions - stage 3 (£bn)

(0.9)

-

(0.7)

(0.1)

(1.7)

Customer deposits (£bn)

188.4

41.2

203.3

17.4

450.3

Risk-weighted assets (RWAs) (£bn)

54.7

11.2

103.2

7.0

176.1

RWA equivalent (RWAe) (£bn)

54.7

11.2

104.6

7.5

178.0

Employee numbers (FTEs - thousands)

14.0

2.1

12.3

33.1

61.5

Third party customer asset rate (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.

 



 

Segment performance


Quarter ended 31 March 2022


Retail

Private

Commercial &

Central items

Total NatWest


Banking

Banking

Institutional

& other

Group


£m

£m

£m

£m

£m

Continuing operations






Income statement

 

 

 

 

 

Net interest income

1,112

143

803

(31)

2,027

Non-interest income

105

73

572

231

981

Total income

1,217

216

1,375

200

3,008

Direct expenses

(161)

(49)

(407)

(1,101)

(1,718)

Indirect expenses

(430)

(89)

(473)

992

-

Other operating expenses

(591)

(138)

(880)

(109)

(1,718)

Litigation and conduct costs

(54)

(1)

(42)

(5)

(102)

Operating expenses

(645)

(139)

(922)

(114)

(1,820)

Operating profit before impairment losses/releases

572

77

453

86

1,188

Impairment (losses)/releases

(5)

5

11

25

36

Operating profit

567

82

464

111

1,224

 






Total income excluding notable items (1)

1,217

216

1,357

(6)

2,784

 






Additional information






Return on tangible equity (1)

na

na

na

na

11.3%

Return on equity (1)

23.1%

18.2%

8.8%

nm

na

Cost:income ratio (excl. litigation and conduct) (1)

48.6%

63.9%

64.0%

nm

57.1%

Total assets (£bn)

210.7

29.6

433.5

111.6

785.4

Funded assets (£bn) (1)

210.7

29.6

334.6

110.5

685.4

Net loans to customers - amortised cost (£bn)

184.9

18.7

126.6

35.1

365.3

Loan impairment rate (1)

1bp

(11)bps

(3)bps

nm

(4)bps

Impairment provisions (£bn)

(1.5)

(0.1)

(1.6)

(0.4)

(3.6)

Impairment provisions - stage 3 (£bn)

(0.9)

-

(0.7)

(0.4)

(2.0)

Customer deposits (£bn)

189.7

40.3

217.9

35.0

482.9

Risk-weighted assets (RWAs) (£bn)

52.2

11.5

100.3

12.8

176.8

RWA equivalent (RWAe) (£bn)

52.2

11.5

102.6

13.1

179.4

Employee numbers (FTEs - thousands)

14.0

1.9

11.8

30.5

58.2

Third party customer asset rate (1)

2.59%

2.53%

2.83%

nm

nm

Third party customer funding rate (1)

(0.05%)

(0.01%)

(0.02%)

nm

nm

Bank average interest earning assets (£bn) (1)

185.5

18.9

121.0

na

334.9

Bank net interest margin (1)

2.43%

3.07%

2.69%

na

2.45%

nm = not meaningful, na = not applicable

(1)

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

 



 


Risk and capital management


Page

Credit risk


   Segment analysis - portfolio summary

13

   Segment analysis - loans

14

   Movement in ECL provision

14

   ECL post model adjustments

15

   Sector analysis - portfolio summary

16

   Wholesale support schemes

17

Capital, liquidity and funding risk

19

 

 

 



 

Risk and capital management

Credit risk

Segment analysis - portfolio summary

The table below shows gross loans and ECL, by segment and stage, within the scope of the IFRS 9 ECL framework.


Retail

Private

Commercial &

Central items

 


Banking

Banking

Institutional

& other

Total

31 March 2023

£m

£m

£m

£m

£m

Loans - amortised cost and FVOCI (1)






Stage 1

174,806

18,468

114,862

25,750

333,886

Stage 2

25,636

735

20,241

178

46,790

Stage 3

2,666

223

2,117

109

5,115

Of which: individual

-

175

855

35

1,065

Of which: collective

2,666

48

1,262

74

4,050

Subtotal excluding disposal group loans

203,108

19,426

137,220

26,037

385,791

Disposal group loans

 

 

 

1,195

1,195

Total

 

 

 

27,232

386,986

ECL provisions (2)

 

 

 

 

 

Stage 1

243

27

395

16

681

Stage 2

498

14

444

28

984

Stage 3

971

28

719

64

1,782

Of which: individual

-

28

237

8

273

Of which: collective

971

-

482

56

1,509

Subtotal excluding ECL provisions on disposal group loans

1,712

69

1,558

108

3,447

ECL provisions on disposal group loans

 

 

 

49

49

Total

 

 

 

157

3,496

ECL provisions coverage (3)

 

 

 

 

 

Stage 1 (%)

0.14

0.15

0.34

0.06

0.20

Stage 2 (%)

1.94

1.90

2.19

15.73

2.10

Stage 3 (%)

36.42

12.56

33.96

58.72

34.84

ECL provisions coverage excluding disposal group loans

0.84

0.36

1.14

0.41

0.89

ECL provisions coverage on disposal group loans

 

 

 

4.10

4.10

Total

 

 

 

0.58

0.90

 







31 December 2022






Loans - amortised cost and FVOCI (1)






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 (2)






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 provisions on disposal group loans

 

 

 

53

53

Total




185

3,487

ECL provisions coverage (3)






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

 

(1)

Fair value through other comprehensive income (FVOCI). Includes loans to customers and banks.

(2)

Includes £5 million (31 December 2022 - £3 million) related to assets classified as FVOCI and £0.1 billion (31 December 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 third party loans and total ECL provisions.

(4)

The table shows gross loans only and excludes amounts that were outside the scope of the ECL framework. Other financial assets within the scope of the IFRS 9 ECL framework were cash and balances at central banks totalling £122.2 billion (31 December 2022 - £143.3 billion) and debt securities of £30.9 billion (31 December 2022 - £29.9 billion).

 



 

Risk and capital management

Credit risk continued

Segment analysis - loans

-   Total ECL coverage reduced to 0.89% in Q1 2023, from 0.91% in Q4 2022 reflecting growth in exposures to financial institutions where coverage is significantly lower and some positive trends in underlying risk metrics in Commercial & Institutional. This was partially offset by an increase in Retail Banking coverage as a result of increased ECL on unsecured portfolios and reduced write-off activity in the quarter.

-   The economic scenarios driving the ECL requirement, as well as model performance considerations, were consistent with those described in the NatWest Group plc 2022 Annual Report and Accounts.

-   Retail Banking - Balance sheet growth during Q1 2023 mainly reflected continued mortgage growth. Unsecured balances increased by £0.3 billion, primarily in credit cards, as a result of customer demand alongside disciplined credit risk appetite. Total ECL coverage increased from 0.81% to 0.84% during the quarter. The increase in coverage was reflective of increased Stage 3 ECL on unsecured portfolios, mainly due to reduced write-off activity in the quarter. Stable good book coverage captures continued stable portfolio performance, while maintaining sufficient ECL coverage given the increased inflationary and economic pressures on customers. Stage 2 balances increased as a result of the predicted rise in unemployment, therefore increasing IFRS 9 probability of defaults on a forward-looking basis.   

-   Commercial & Institutional - Balance sheet growth in Q1 2023 was driven by a number of corporate and financial institutions sectors. Sector appetite continues to be reviewed regularly, with particular focus on sector clusters and sub-sectors that are vulnerable to inflationary pressures or deemed to represent a heightened risk.

-   Total ECL coverage reduced, reflecting some positive trends in underlying risk metrics and a decrease in COVID-19 post model adjustments resulting in ECL releases. The coverage remains sufficient for the expected increase in charges from inflationary pressures and increases in early problem debt trends. Stage 2 ECL reduced significantly as a number of customers migrated back into Stage 1 due to the positive trends in underlying risk metrics which also resulted in an increase in Stage 1 ECL. Stage 3 ECL decreased with write-offs and releases more than offsetting flows into default.

Movement in ECL provision

The table below shows the main ECL provision movements during the quarter.


ECL provision


£m

At 1 January 2023

3,434

Transfers to disposal groups and reclassifications

(10)

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

15

Changes in risk metrics and exposure: Stage 3

81

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

(17)

Write-offs and other

(56)

At 31 March 2023

3,447

 

-   ECL marginally increased in Q1 2023, with increases in Stage 3 largely offset by write-offs and reductions in post model adjustments.

-   Stage 3 new defaults remained low during the quarter. Stage 3 ECL balances in Retail Banking and Business Banking portfolios have increased, mainly due to reduced write-off activity.

 

 



 

Risk and capital management

Credit risk continued

ECL post model adjustments

The table below shows ECL post model adjustments.


Retail Banking

Private

Commercial &

Central

 


Mortgages

Other

Banking

Institutional

items & other

 

Total

31 March 2023

£m

£m

£m

£m

£m

 

£m

Economic uncertainty

96

53

6

173

5

333

Other adjustments

7

21

-

17

16

 

61

Total

103

74

6

190

21

 

394


 

 

 

 

 

 

Of which:

 

 

 

 

 

 

- Stage 1

42

26

3

67

5

143

- Stage 2

46

48

3

119

16

232

- Stage 3 

15

-

-

4

-

 

19


 

 

 

 

 

 

 

31 December 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

16

 

234

- Stage 3 

16

-

-

5

1

 

22

 

(1)

Excludes £0.3 million (31 December 2022 - £18 million) of post model adjustments for Ulster Bank RoI disclosed as transfers to disposal groups.

 

-   Retail Banking - The post model adjustments for economic uncertainty were held at a broadly consistent level since 31 December 2022, totalling £149 million (31 December 2022 - £153 million). The primary element of the economic uncertainty adjustment was a £123 million ECL uplift (31 December 2022 - £127 million) to capture the risk on segments of the portfolio that are more susceptible to the effects of a high-inflation environment and the effects on affordability. This focuses on key affordability lenses, including customers with lower incomes in fuel poverty, over-indebted borrowers, and customers vulnerable to a potential mortgage rate shock effect on their affordability. The small reduction in post model adjustments is supported by underlying high-risk population movements, notably in fuel poverty. Other judgmental overlays included a £20 million uplift for EAD modelling dynamics in credit cards.

-   Commercial & Institutional - The post model adjustments for economic uncertainty have seen small decreases since 31 December 2022, now totalling £173 million (31 December 2022 - £191 million). It included an adjustment of £91 million, a £16 million reduction, to cover the residual risks from COVID-19, including the risk that UK Government support schemes could affect future recoveries and concerns surrounding associated debt, to customers that have utilised UK Government support schemes. Inflation and supply chain issues continue to present significant headwinds for a number of sectors which are not fully captured in the models. An £82 million mechanistic adjustment, via a sector-level downgrade, was applied to the sectors that were considered most at risk from these headwinds.

 



 

Risk and capital management

Credit risk continued

Sector analysis - portfolio summary

The table below shows ECL by stage, for the Personal portfolio and selected sectors of the Wholesale portfolio.


 

Off-balance sheet

 

 


Loans - amortised cost and FVOCI

Loan

 

Contingent

 

ECL provisions 


Stage 1

Stage 2

Stage 3

Total

commitments

 

liabilities

 

Stage 1

Stage 2

Stage 3

Total

31 March 2023

£m

£m

£m

£m

£m

 

£m

 

£m

£m

£m

£m

Personal

192,382

25,953

2,910

221,245

39,072

 

47

 

256

516

1,013

1,785

  Mortgages

182,239

22,652

1,944

206,835

14,300

 

-

 

58

77

242

377

  Credit cards

3,310

1,242

114

4,666

16,243

 

-

 

63

144

79

286

  Other personal

6,833

2,059

852

9,744

8,529

 

47

 

135

295

692

1,122

Wholesale

141,504

20,837

2,205

164,546

88,863

 

4,526

 

425

468

769

1,662

   Property

28,172

3,644

717

32,533

15,729

 

481

 

110

94

225

429

   Financial institutions

49,684

2,207

36

51,927

17,387

 

1,511

 

40

16

12

68

   Sovereign

5,341

115

28

5,484

652

 

-

 

13

1

4

18

   Corporate

58,307

14,871

1,424

74,602

55,095

 

2,534

 

262

357

528

1,147

   Of which:

 

 

 

 

 

 

 

 

 

 

 

 

      Agriculture

3,897

947

114

4,958

949

 

25

 

22

30

50

102

      Airlines and aerospace

1,030

786

17

1,833

1,544

 

67

 

7

15

7

29

      Automotive

6,334

992

44

7,370

4,053

 

85

 

19

13

12

44

      Chemicals

368

75

1

444

887

 

12

 

2

1

1

4

      Health

4,068

878

120

5,066

589

 

10

 

21

27

44

92

      Industrials

2,390

758

57

3,205

3,128

 

191

 

12

15

18

45

      Land transport & logistics

4,435

659

67

5,161

3,325

 

189

 

18

17

17

52

      Leisure

3,971

3,198

247

7,416

1,773

 

98

 

34

113

97

244

      Mining & metals

217

226

5

448

418

 

5

 

-

1

5

6

      Oil and gas

898

109

30

1,037

1,969

 

291

 

4

3

29

36

      Power utilities

4,532

438

2

4,972

8,003

 

755

 

14

18

1

33

      Retail

6,595

1,192

143

7,930

4,552

 

370

 

23

27

68

118

      Shipping

205

58

4

267

98

 

26

 

1

3

2

6

      Water & waste

3,286

554

15

3,855

1,793

 

98

 

5

5

4

14

Total

333,886

46,790

5,115

385,791

127,935

 

4,573

 

681

984

1,782

3,447

 














31 December 2022













Personal

192,438

21,854

2,831

217,123

43,126


51


260

466

957

1,683

   Mortgages

182,245

18,787

1,925

202,957

18,782


-


81

62

233

376

   Credit cards

3,275

1,076

109

4,460

15,848


-


62

122

73

257

   Other personal

6,918

1,991

797

9,706

8,496


51


117

282

651

1,050

Wholesale

132,786

24,979

2,265

160,030

88,886


4,963


372

577

802

1,751

   Property

27,542

4,316

716

32,574

15,302


491


107

105

229

441

   Financial institutions

46,738

1,353

47

48,138

18,223


1,332


32

14

17

63

   Sovereign

5,458

157

26

5,641

710


-


15

1

3

19

   Corporate

53,048

19,153

1,476

73,677

54,651


3,140


218

457

553

1,228

   Of which:













      Agriculture

3,646

1,034

93

4,773

968

 

24

 

21

31

43

95

      Airlines and aerospace

483

1,232

19

1,734

1,715

 

174

 

2

40

8

50

      Automotive

5,776

1,498

30

7,304

4,009

 

99

 

18

18

11

47

      Chemicals

384

117

1

502

650

 

12

 

1

2

1

4

      Health

3,974

1,008

141

5,123

475

 

8

 

19

30

48

97

      Industrials

2,148

1,037

82

3,267

3,135

 

195

 

10

16

24

50

      Land transport & logistics

3,788

1,288

66

5,142

3,367

 

190

 

13

33

17

63

      Leisure

3,416

3,787

260

7,463

1,907

 

102

 

27

147

115

289

      Mining & metals

173

230

5

408

545

 

5

 

-

1

5

6

      Oil and gas

953

159

60

1,172

2,157

 

248

 

3

3

31

37

      Power utilities

4,228

406

6

4,640

6,960

 

1,182

 

9

11

1

21

      Retail

6,497

1,746

150

8,393

4,682

 

416

 

21

29

68

118

      Shipping

161

151

14

326

110

 

22

 

-

7

6

13

      Water & waste

3,026

335

7

3,368

2,143

 

101

 

4

4

4

12

Total

325,224

46,833

5,096

377,153

132,012


5,014


632

1,043

1,759

3,434

 

(1)

As at 31 March 2023, £142.5 billion, 69%, of the total residential mortgages portfolio had Energy Performance Certificate (EPC) data available (31 December 2022 - £138.8 billion, 68%). Of which, 42% were rated as EPC A to C (31 December 2022 - 42%). EPC data source and limitations are provided on page 69 of the 2022 NatWest Group plc Climate-related Disclosures Report.

 



 

Risk and capital management

Credit risk continued

Wholesale support schemes

The table below shows the sector split for the Bounce Bank Loan Scheme (BBLS) as well as associated debt split by stage. Associated debt refers to the non-BBLS lending to customers who also have BBLS lending.


Gross carrying amount

 

 

 

 


BBL

 

Associated debt

 

ECL on associated debt


Stage 1 

Stage 2

Stage 3

Total

 

Stage 1 

Stage 2

Stage 3

Total

 

Stage 1

Stage 2 

Stage 3

31 March 2023

£m

£m

£m

£m

 

£m

£m

£m

£m

 

£m

£m

£m

Wholesale 














Property 

946

185

44

1,175

 

881

209

66

1,156

 

10

15

25

Financial institutions

22

4

-

26

 

9

2

-

11

 

-

-

1

Sovereign

5

1

-

6

 

1

-

-

1

 

-

-

-

Corporate

2,904

587

354

3,845

 

2,316

809

129

3,254

 

26

55

71

Of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

   Agriculture

205

68

4

277

 

826

278

26

1,130

 

7

13

10

   Airlines and aerospace

3

1

-

4

 

2

-

-

2

 

-

-

-

   Automotive

204

31

9

244

 

101

32

6

139

 

1

3

3

   Chemicals

6

1

-

7

 

9

-

-

9

 

-

-

-

   Health

153

21

4

178

 

278

77

12

367

 

2

4

4

   Industrials

120

19

5

144

 

79

18

4

101

 

1

2

3

   Land transport & logistics

112

23

7

142

 

50

17

4

71

 

1

2

3

   Leisure

427

101

26

554

 

329

154

24

507

 

5

12

13

   Mining & metals

4

1

-

5

 

6

1

-

7

 

-

-

-

   Oil and gas

5

2

-

7

 

3

1

-

4

 

-

-

-

   Power utilities

3

1

-

4

 

3

3

1

7

 

-

-

-

   Retail

507

94

24

625

 

282

90

15

387

 

4

8

10

   Shipping

2

-

-

2

 

1

3

-

4

 

-

-

-

   Water & waste

14

2

1

17

 

10

1

2

13

 

-

-

-

Total

3,877

777

398

5,052

 

3,207

1,020

195

4,422

 

36

70

97















31 December 2022

 

 

 

 

 

 

 

 

 

 

 

Wholesale 














Property 

1,029

197

51

1,277


908

217

61

1,186


10

15

27

Financial institutions

24

4

-

28


9

2

-

11


-

-

1

Sovereign

5

1

1

7


2

-

-

2


-

-

-

Corporate

3,165

629

338

4,132


2,302

872

116

3,290


26

56

69

Of which:














   Agriculture

221

74

4

299

 

819

297

22

1,138

 

6

14

11

   Airlines and aerospace

3

1

-

4

 

-

1

-

1

 

-

-

-

   Automotive

221

34

10

265

 

100

37

5

142

 

1

2

3

   Chemicals

6

1

-

7

 

9

1

-

10

 

-

-

-

   Health

165

23

4

192

 

271

92

9

372

 

2

4

4

   Industrials

131

21

5

157

 

77

20

4

101

 

1

2

2

   Land transport & logistics

122

25

8

155

 

51

16

4

71

 

1

2

3

   Leisure

471

108

28

607

 

336

161

27

524

 

5

12

16

   Mining & metals

5

1

-

6

 

5

1

-

6

 

-

-

-

   Oil and gas

6

1

-

7

 

2

2

-

4

 

-

-

-

   Power utilities

3

1

-

4

 

3

4

-

7

 

-

-

-

   Retail

554

102

26

682

 

283

94

14

391

 

4

7

10

   Shipping

2

-

-

2

 

1

3

-

4

 

-

-

-

   Water & waste

15

2

1

18

 

10

3

-

13

 

-

-

-

Total

4,223

831

390

5,444


3,221

1,091

177

4,489


36

71

97



Risk and capital management

Credit risk continued

-   Personal - Balance sheet growth during Q1 2023 mainly reflected continued mortgage growth. Unsecured balances growth, primarily in credit cards, was driven by strong customer demand alongside disciplined credit risk appetite. Total ECL coverage increased. The increase in coverage was reflective of increased Stage 3 ECL on unsecured portfolios, mainly due to reduced write-off activity in the quarter. Stable good book coverage captures continued stable portfolio performance, while maintaining sufficient ECL coverage given increased inflationary and economic pressures on customers. Stage 2 balances increased as a result of the predicted rise in unemployment, therefore increasing IFRS 9 probability of defaults on a forward-looking basis.   

-   Wholesale - Balance sheet growth was driven by an increase in exposure to corporate and financial institutions sectors. Sector appetite continues to be reviewed regularly, with particular focus on sector clusters and sub-sectors that are vulnerable to inflationary pressures or deemed to represent a heightened risk. Repayment performance under COVID-19 UK Government lending schemes is closely tracked and the value of open accounts reduced in Q1 2023 driven by scheduled repayment activity and account closures. Exposures under the BBLS that benefit from the 100% UK Government guarantee account for the majority of remaining UK Government scheme exposures. BBLS customers with missed payments continued to rise during the quarter, and there was also a modest increase in Stage 3 exposures. Stage 2 ECL reduced significantly as a number of customers migrated back into Stage 1 due to the positive trends in underlying risk metrics, also leading to an increase in Stage 1 ECL. Stage 3 ECL reduced with write-offs and releases more than offsetting flows into default.




Risk and capital management

Capital, liquidity and funding risk

Introduction

Recent banking sector events (including those resulting from the rapid rise in global interest rates) have caused macroeconomic and market uncertainty. The future impact remains uncertain. NatWest Group takes a comprehensive approach to the management of capital, liquidity and funding, underpinned by frameworks, risk appetite and policies, to manage and mitigate capital, liquidity and funding risks. The framework ensures the tools and capability are in place to facilitate the management and mitigation of risk ensuring that NatWest Group operates within its regulatory requirements and risk appetite.

Key developments since 31 December 2022

 

CET1 ratio

The CET1 ratio increased by 20 basis points to 14.4%. The increase in CET1 ratio was due to a £0.7 billion increase in CET1 capital, partially offset by a £2.0 billion increase in RWAs.

The CET1 increase was mainly driven by an attributable profit for ordinary shareholders of £1.3 billion offset by:

-    a foreseeable ordinary dividend accrual of £0.5 billion;

-    a £0.1 billion decrease in the IFRS 9 transitional adjustment, primarily due to the annual update in the dynamic stage transition percentage and the end of transition on the static and historic stages; and

-    other movements on reserves and regulatory adjustments.

Total RWAs

Total RWAs increased by £2.0 billion to £178.1 billion mainly reflecting:

-    an increase in credit risk RWAs of £1.7 billion, primarily due to drawdowns and new facilities within Commercial & Institutional. This was partially offset by improved risk metrics within Commercial & Institutional.

-    an increase in operational risk RWAs of £1.1 billion following the annual recalculation.

-    a reduction in market risk RWAs of £0.8 billion primarily due to lower volatility than in Q4 2022, combined with the prospective adjustment of the VaR model that makes it more sensitive to recent market conditions and is capitalised as Risks Not In VaR (RNIV) RWAs.

UK leverage ratio

The leverage ratio remained static at 5.4%. There was a £0.7 billion increase in Tier 1 capital offset by a £8.9 billion increase in leverage exposure. The key driver in the leverage exposure was an increase in other financial assets.

Liquidity portfolio

The liquidity portfolio decreased by £15.6 billion to £209.9 billion, with primary liquidity decreasing by £12.9 billion to £148.7 billion. The reduction in primary liquidity is driven by a decrease in deposits, share buybacks and an increase in lending. The reduction in secondary liquidity is due to a decrease in the pre-positioned collateral at the Bank of England.

 

 



 

Risk and capital management

Capital, liquidity and funding risk continued

Maximum Distributable Amount (MDA) and Minimum Capital Requirements

NatWest Group is subject to minimum capital requirements relative to RWAs. The table below summarises the minimum capital requirements (the sum of Pillar 1 and Pillar 2A), and the additional capital buffers which are held in excess of the regulatory minimum requirements and are usable in stress.  

Where the CET1 ratio falls below the sum of the minimum capital and the combined buffer requirement, there is a subsequent automatic restriction on the amount available to service discretionary payments (including AT1 coupons), known as the MDA. Note that different requirements apply to individual legal entities or sub-groups and that the table shown does not reflect any incremental PRA buffer requirements, which are not disclosable.

The current capital position provides significant headroom above both our minimum requirements and our MDA threshold requirements.

Type

CET1

Total Tier 1

Total capital

Pillar 1 requirements

4.5%

6.0%

8.0%

Pillar 2A  requirements

1.7%

2.3%

3.0%

Minimum Capital Requirements

6.2%

8.3%

11.0%

Capital conservation buffer

2.5%

2.5%

2.5%

Countercyclical capital buffer (1,2)

0.8%

0.8%

0.8%

MDA threshold (3)

9.5%

n/a

n/a

Overall capital requirement

9.5%

11.6%

14.3%

Capital ratios at 31 March 2023

14.4%

16.6%

19.6%

Headroom (4)

4.9%

5.0%

5.3%

 

(1)

The Financial Policy Committee announced an increase in the UK CCyB rate from 1% to 2% effective from 5 July 2023.

(2)

The Central Bank of Ireland (CBI) announced the CCyB on Irish exposures will increase from 0% to 0.5%, applicable from 15 June 2023 with a further increase to 1.0% from 24 November 2023. The CBI has been looking to gradually build-up the CCyB to a level of 1.5% when risk conditions are deemed to be neither elevated nor subdued.

(3)

Pillar 2A requirements for NatWest Group are set as a variable amount with the exception of some fixed add-ons.

(4)

The headroom does not reflect excess distributable capital and may vary over time.

 

Leverage ratios

The table below summarises the minimum ratios of capital to leverage exposure under the binding PRA UK leverage framework applicable for NatWest Group.

Type

CET1

Total Tier 1

Minimum ratio

2.44%

3.25%

Countercyclical leverage ratio buffer (1)

0.3%

0.3%

Total

2.74%

3.55%

 

(1)

The countercyclical leverage ratio buffer is set at 35% of NatWest Group's CCyB. As noted above the UK CCyB is anticipated to increase from 1% to 2% from 5 July 2023. Foreign exposures may be subject to different CCyB rates depending on the rates set in those jurisdictions.

 



 

Risk and capital management

Capital, liquidity and funding risk continued

Capital and leverage ratios

The tables below set out the key capital and leverage ratios. NatWest Group is subject to the requirements set out in the UK CRR therefore capital and leverage ratios are being presented under these frameworks on a transitional basis.


31 March

31 December

31 March


2023

2022

2022

Capital adequacy ratios (1)

%

%

%

CET1

14.4

14.2

15.2

Tier 1

16.6

16.4

17.4

Total

19.6

19.3

20.4





Capital

£m

£m

£m

Tangible equity

26,646

25,482

28,571


 



Prudential valuation adjustment

(284)

(275)

(297)

Deferred tax assets

(835)

(912)

(769)

Own credit adjustments

(45)

(58)

(27)

Pension fund assets

(235)

(227)

(476)

Cash flow hedging reserve

2,556

2,771

1,113

Foreseeable ordinary dividends

(1,479)

(967)

(1,096)

Adjustment for trust assets (2)

(365)

(365)

-

Foreseeable charges - on-market ordinary share buyback programme

(507)

(800)

(527)

Adjustments under IFRS 9 transitional arrangements

220

361

403

Insufficient coverage for non-performing exposures

(22)

(18)

(6)

Total deductions

(996)

(490)

(1,682)


 



CET1 capital

25,650

24,992

26,889


 



Additional Tier 1 Capital

3,875

3,875

3,875

Tier 1 capital

29,525

28,867

30,764


 



End-point Tier 2 capital 

5,402

4,978

5,067

Grandfathered instrument transitional arrangements

75

75

213

Tier 2 capital

5,477

5,053

5,280


 



Total regulatory capital

35,002

33,920

36,044


 



Risk-weighted assets

 



Credit risk

143,729

141,963

140,377

Counterparty credit risk

6,661

6,723

8,776

Market risk

7,547

8,300

8,550

Operational risk

20,198

19,115

19,115

Total RWAs

178,135

176,101

176,818

 

(1)

Based on current PRA rules, therefore includes the transitional relief on grandfathered capital instruments and the transitional arrangements for the capital impact of IFRS 9 expected credit loss (ECL) accounting. The impact of the IFRS 9 transitional adjustments at 31 March 2023 was £0.2 billion for CET1 capital, £29 million for total capital and £37 million RWAs (31 December 2022 - £0.4 billion CET1 capital, £36 million total capital and £71 million RWAs; 31 March 2022 - £0.4 billion CET1 capital, £44 billion total capital and £28 million RWAs). Excluding these adjustments, the CET1 ratio would be 14.3% (31 December 2022 - 14.0%; 31 March 2022 - 15.0%). The transitional relief on grandfathered instruments at 31 March 2023 was £0.1 billion (31 December 2022 - £0.1 billion; 31 March 2022 - £0.2 billion). Excluding both the transitional relief on grandfathered capital instruments and the transitional arrangements for the capital impact of IFRS 9 expected credit loss (ECL) accounting, the end-point Tier 1 capital ratio would be 16.5% (31 December 2022 - 16.2%; 31 March 2022 - 17.2%) and the end-point Total capital ratio would be 19.6% (31 December 2022 - 19.2%, 31 March 2022 - 20.2%).

(2)

Prudent deduction in respect of agreement with the pension fund to establish new legal structure.

 



 

Risk and capital management

Capital, liquidity and funding risk continued

Capital and leverage ratios continued

 

31 March

31 December

31 March

 

2023

2022

2022

Leverage

£m

£m

£m

Cash and balances at central banks

           123,399 

144,832

168,783

Trading assets

             50,457 

45,577

64,950

Derivatives

             79,420 

99,545

100,013

Financial assets

           413,998 

404,374

416,677

Other assets

             22,067 

18,864

25,750

Assets of disposal groups

               6,283 

6,861

9,225

Total assets

695,624 

720,053

785,398

Derivatives

 



   - netting and variation margin

(79,252)

(100,356)

(100,386)

   - potential future exposures

16,981

18,327

21,412

Securities financing transactions gross up

1,880

4,147

2,838

Other off balance sheet items

45,178

46,144

43,986

Regulatory deductions and other adjustments

(11,865)

(7,114)

(16,310)

Claims on central banks

(119,981)

(141,144)

(165,408)

Exclusion of bounce back loans

(5,052)

(5,444)

(7,112)

UK leverage exposure

543,513

534,613

564,418

UK leverage ratio (%) (1)

5.4

5.4

5.5

 

 

(1)

The UK leverage exposure and transitional Tier 1 capital are calculated in accordance with current PRA rules. Excluding the IFRS 9 transitional adjustment, the UK leverage ratio would be 5.4% (31 December 2022 - 5.3%; 31 March 2022 - 5.4%).

 

Capital flow statement

The table below analyses the movement in CET1, AT1 and Tier 2 capital for the three months ended 31 March 2023. It is presented on a transitional basis based on current PRA rules.


CET1

AT1

Tier 2

Total


£m

£m

£m

£m

At 31 December 2022

24,992

3,875

5,053

33,920

Attributable profit for the period

1,279

-

-

1,279

Foreseeable ordinary dividends

(512)

-

-

(512)

Foreign exchange reserve

(66)

-

-

(66)

FVOCI reserve

64

-

-

64

Own credit

13

-

-

13

Share capital and reserve movements in respect of employee

 

 

 

 

   share schemes

56

-

-

56

Goodwill and intangibles deduction

(55)

-

-

(55)

Deferred tax assets

77

-

-

77

Prudential valuation adjustments

(9)

-

-

(9)

Net dated subordinated debt instruments

-

-

386

386

Foreign exchange movements

-

-

(60)

(60)

Adjustment under IFRS 9 transitional arrangements

(141)

-

-

(141)

Other movements

(48)

-

98

50

At 31 March 2023

25,650

3,875

5,477

35,002

-    The CET1 increase was primarily due to the attributable profit of £1.3 billion, offset by foreseeable ordinary dividend of £0.5 billion, a £0.1 billion decrease in the IFRS 9 transitional adjustment and other movements in reserves and regulatory adjustments in the period. 

-    The Tier 2 movements include €700 million 5.763% Fixed to Fixed Reset Tier 2 Notes 2034 issued in February 2023 and the derecognition of the £0.2 billion in respect of the cash tender offer for the outstanding 5.125% Subordinated Tier 2 Notes 2024 announced in March 2023. Within Tier 2, there was also a £0.1 billion increase in the Tier 2 surplus provisions.



 

Risk and capital management

Capital, liquidity and funding risk continued

Risk-weighted assets

The table below analyses the movement in RWAs during the period, by key drivers.


 

Counterparty

 

Operational

 


Credit risk

credit risk

Market risk

 risk

Total


£bn

£bn

£bn

£bn

£bn

At 31 December 2022

142.0

6.7

8.3

19.1

176.1

Foreign exchange movement

(0.4)

-

-

-

(0.4)

Business movement

2.9

-

(0.8)

1.1

3.2

Risk parameter changes

(0.3)

-

-

-

(0.3)

Methodology changes 

-

-

-

-

-

Model updates

(0.3)

-

-

-

(0.3)

Acquisitions and disposals

(0.2)

-

-

-

(0.2)

At 31 March 2023

143.7

6.7

7.5

20.2

178.1

The table below analyses segmental RWAs.


 

 

 

 

Total


Retail

Private

Commercial &

Central items

NatWest


Banking

Banking

Institutional

& other (1)

Group

Total RWAs

£bn

£bn

£bn

£bn

£bn

At 31 December 2022

54.7

11.2

103.2

7.0

176.1

Foreign exchange movement

-

-

(0.4)

-

(0.4)

Business movement

0.9

0.2

2.6

(0.5)

3.2

Risk parameter changes 

-

-

(0.3)

-

(0.3)

Methodology changes 

-

-

-

-

-

Model updates

-

-

(0.3)

-

(0.3)

Acquisitions and disposals

-

-

-

(0.2)

(0.2)

At 31 March 2023

55.6

11.4

104.8

6.3

178.1







Credit risk

48.0

10.0

80.2

5.5

143.7

Counterparty credit risk

0.2

-

6.5

-

6.7

Market risk

0.2

-

7.3

-

7.5

Operational risk

7.2

1.4

10.8

0.8

20.2

Total RWAs

55.6

11.4

104.8

6.3

178.1

 

(1)

£4.6 billion of Central items & other relates to Ulster Bank RoI.

Total RWAs increased by £2.0 billion to £178.1 billion during the period mainly reflecting:

-    An increase in business movements totalling £3.2 billion, primarily driven by increased drawdowns and new facilities within Commercial & Institutional in addition to increased RWAs following the annual recalculation of operational risk. This is partially offset by a reduction in market risk driven by reduced market volatility.

-    A decrease in risk parameters of £0.3 billion, reflecting improved risk metrics within Commercial & Institutional.

-    A decrease in model updates of £0.3 billion, primarily reflecting a reduction in the IRB model adjustments following the new regulations at 1 January 2022.

-    Disposals relating to the phased withdrawal from the Republic of Ireland, reducing RWAs by £0.2 billion.



 

Risk and capital management

Capital, liquidity and funding risk continued

Liquidity portfolio

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


Liquidity value


31 March 2023


31 December 2022


31 March 2022


NatWest


NatWest


NatWest


Group (1)


Group


Group 


£m


£m


£m

Cash and balances at central banks 

120,136


140,820


166,176

   AAA to AA- rated governments

25,454


18,589


31,385

   A+ and lower rated governments

935


317


105

   Government guaranteed issuers, public sector entities and

 





      government sponsored entities

174


134


266

   International organisations and multilateral development banks

1,995


1,734


3,087

LCR level 1 bonds

28,558


20,774


34,843

LCR level 1 assets

148,694


161,594


201,019

LCR level 2 assets

-


-


121

Non-LCR eligible assets

-


-


-

Primary liquidity 

148,694


161,594


201,140

Secondary liquidity (2)

61,196


63,917


73,370

Total liquidity value

209,890


225,511


274,510

 

(1)

NatWest Group includes the UK Domestic Liquidity Sub-Group (NWB Plc, RBS plc and Coutts & Co), NatWest Markets Plc and other significant operating subsidiaries that hold liquidity portfolios. These include The Royal Bank of Scotland International Limited, NWM N.V. and Ulster Bank Ireland DAC who hold managed portfolios that comply with local regulations that may differ from PRA rules.

(2)

Comprises assets eligible for discounting at the Bank of England and other central banks.

 




 

Condensed consolidated income statement

for the period ended 31 March 2023 (unaudited)


Quarter ended


31 March

31 December

31 March


2023

2022

2022


£m 

£m 

£m 

Interest receivable

4,501

4,046

2,430

Interest payable

(1,599)

(1,178)

(403)

Net interest income 

2,902

2,868

2,027

Fees and commissions receivable

740

770

693

Fees and commissions payable

(157)

(155)

(149)

Income from trading activities

333

164

362

Other operating income 

58

61

75

Non-interest income

974

840

981

Total income

3,876

3,708

3,008

Staff costs

(1,040)

(1,029)

(901)

Premises and equipment

(286)

(292)

(251)

Other administrative expenses

(450)

(597)

(471)

Depreciation and amortisation

(212)

(220)

(197)

Operating expenses

(1,988)

(2,138)

(1,820)

Profit before impairment losses/releases

1,888

1,570

1,188

Impairment (losses)/releases

(70)

(144)

36

Operating profit before tax

1,818

1,426

1,224

Tax charge

(512)

(46)

(386)

Profit from continuing operations

1,306

1,380

838

Profit/(loss) from discontinued operations, net of tax (1)

35

(56)

63

Profit for the period

1,341

1,324

901

 

 



Attributable to:

 



Ordinary shareholders

1,279

1,262

841

Paid-in equity holders

61

61

59

Non-controlling interests

1

1

1


1,341

1,324

901


 



Earnings per ordinary share - continuing operations

12.8p

13.7p

7.5p

Earnings per ordinary share - discontinued operations

0.4p

(0.6p)

0.6p

Total earnings per share attributable to ordinary shareholders - basic

13.2p

13.1p

8.1p

Earnings per ordinary share - fully diluted continuing operations

12.8p

13.6p

7.4p

Earnings per ordinary share - fully diluted discontinued operations

0.4p

(0.6p)

0.6p

Total earnings per share attributable to ordinary shareholders - fully diluted

13.2p

13.0p

8.0p

 

(1)

The results of discontinued operations, comprising the post-tax profit, are shown as a single amount on the face of the income statement. An analysis of this amount is presented in Note 2 on page 29.

(2)

On 30 August 2022 the issued ordinary share capital was consolidated in the ratio of 14 existing shares for 13 new shares.  The number of shares for earnings per share has been adjusted retrospectively.

 

 

 

Condensed consolidated statement of comprehensive income

for the period ended 31 March 2023 (unaudited)


 

Quarter ended



31 March

31 December

31 March



2023

2022

2022



£m

£m

£m

Profit for the period


1,341

1,324

901

Items that do not qualify for reclassification


 



Remeasurement of retirement benefit schemes (1)


(39)

(158)

(508)

Changes in fair value of credit in financial liabilities designated at fair value through


 



   profit or loss (FVTPL) 


(6)

(52)

39

Fair value through other comprehensive income (FVOCI) financial assets


43

17

9

Tax (1)


(2)

51

122



(4)

(142)

(338)

Items that do qualify for reclassification 


 



FVOCI financial assets


40

(6)

(238)

Cash flow hedges


298

701

(983)

Currency translation


(59)

(117)

35

Tax


(98)

(192)

339



181

386

(847)

Other comprehensive income/(loss) after tax


177

244

(1,185)

Total comprehensive income/(loss) for the period


1,518

1,568

(284)

 


 



Attributable to:


 



Ordinary shareholders


1,456

1,506

(345)

Paid-in equity holders


61

61

59

Non-controlling interests


1

1

2



1,518

1,568

(284)

 

(1)

Following the purchase of ordinary shares from UKGI in Q1 2022, NatWest Group contributed £500 million to its main pension scheme in line with the memorandum of understanding announced on 17 April 2018. After tax relief, this contribution reduced total equity by £365 million.



 

 



 

Condensed consolidated balance sheet as at 31 March 2023 (unaudited)

 


31 March

31 December

2023

2022


£m

£m 

Assets

 


Cash and balances at central banks

123,399

144,832

Trading assets

50,457

45,577

Derivatives

79,420

99,545

Settlement balances

6,057

2,572

Loans to banks - amortised cost

7,893

7,139

Loans to customers - amortised cost

374,214

366,340

Other financial assets

31,891

30,895

Intangible assets

7,171

7,116

Other assets

8,839

9,176

Assets of disposal groups

6,283

6,861

Total assets

695,624

720,053

 

 


Liabilities

 


Bank deposits 

20,880

20,441

Customer deposits

430,537

450,318

Settlement balances

6,674

2,012

Trading liabilities

57,724

52,808

Derivatives

73,770

94,047

Other financial liabilities

52,926

49,107

Subordinated liabilities

6,854

6,260

Notes in circulation

3,206

3,218

Other liabilities

5,337

5,346

Total liabilities

657,908

683,557

 

 


Equity

 


Ordinary shareholders' interests

33,817

32,598

Other owners' interests

3,890

3,890

Owners' equity

37,707

36,488

Non-controlling interests

9

8

Total equity

37,716

36,496

Total liabilities and equity

695,624

720,053

 

 


Condensed consolidated statement of changes in equity

for the period ended 31 March 2023 (unaudited)

 

Share 







capital and




Total

Non

 

statutory

Paid-in

Retained

Other

owners'

controlling

Total 

reserves (1)

equity

earnings

reserves*

equity

 interests

equity

£m

£m

£m

£m

£m

£m

£m

At 1 January 2023

13,093

3,890

10,019

9,486

36,488

8

36,496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,305

 

1,305

1

1,306

 

 

35

 

35

-

35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(39)

 

(39)

 

(39)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6)

 

(6)

 

(6)

 

 

 

70

70

 

70

 

 

 

230

230

 

230

 

 

 

(59)

(59)

-

(59)

 

 

 

81

81

 

81

 

 

9

(109)

(100)

 

(100)

 

 

(61)

 

(61)

 

(61)

-

 

(293)

 

(293)

 

(293)

 

 

 

 

 

 

 

-

 

7

 

7

 

7

 

 

(5)

 

(5)

 

(5)

Movement in own shares held 

54

 

 

 

54

 

54

At 31 March 2023

13,147

3,890

10,971

9,699

37,707

9

37,716













 

31 March







2023

Attributable to:





£m

Ordinary shareholders







33,817







3,890

Non-controlling interests







9








37,716

*Other reserves consist of:






 

Merger reserve







10,881







(38)







(2,556)

Foreign exchange reserve







1,412








9,699

 

(1)

Share capital and statutory reserves includes share capital, share premium, capital redemption reserve and own shares held.

(2)

NatWest Group plc repurchased and cancelled 114.0 million shares for total consideration of £306.7 million excluding fees in Q1 2023 as part of the on-market share buyback programme. Of the 114.0 million shares bought back, 7.4 million shares were settled and cancelled in April 2023.

 



Notes

1. Presentation of condensed consolidated financial statements

The condensed consolidated financial statements should be read in conjunction with NatWest Group plc's 2022 Annual Report and Accounts. The 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.

Comparative period results have been re-presented from those previously published to reclassify certain items as discontinued operations. For further details refer to Note 2 below. 

Amendments to IFRS effective from 1 January 2023 had no material effect on the condensed consolidated financial statements.


2. Discontinued operations and assets and liabilities of disposal groups

Three legally binding agreements for the sale of UBIDAC business have been announced as part of the phased withdrawal from the Republic of Ireland. Material developments since year end 2022 are set out below.

Agreement with Allied Irish Banks, p.l.c. (AIB) for the transfer of performing commercial loans.

Successful migration of a further two tranches of performing commercial loans to AIB was completed during Q1 2023, with a cumulative €2.3 billion of gross performing loans being fully migrated by the end of the quarter. It is expected that remaining migrations will be materially completed by the end of H1 2023. Colleagues who are wholly or mainly assigned to supporting this part of the business have continued to transfer to AIB under Transfer of Undertakings, Protection of Employment (TUPE) arrangements. Losses on disposal of €13 million have been recognised in respect of the migrations completed during Q1 2023 (Q4 2022 - €47 million; Q1 2022 - nil).

Agreement with Permanent TSB Group Holdings p.l.c. (PTSB) for the sale of performing non-tracker mortgages, the performing loans in the micro-SME business, the UBIDAC Asset Finance business, including its Lombard digital platform, and 25 Ulster Bank branch locations in the Republic of Ireland.

During Q1 2023, c.€160 million of performing micro-SME loans and 25 branches were transferred to PTSB. The remaining performing non-tracker mortgages, micro-SME loans, Lombard Asset Finance business and all remaining eligible colleagues who will move under TUPE regulations, are also expected to transfer during 2023.

Agreement with AIB for the sale of performing tracker and linked mortgages.

In January 2023 the Competition and Consumer Protection Commission (CCPC) granted approval for the portfolio sale of performing tracker and linked mortgages to AIB. Completion of this sale is still expected to occur in Q2 2023.

The business activities relating to these sales that meet the requirements of IFRS 5 are presented as a discontinued operation and as a disposal group. Comparatives have been re-presented from those previously published to reclassify certain items as discontinued operations. This has resulted in a re-presentation of Q1 2022 comparatives: a reduction in operating profit before tax from continuing operations of £21 million and an increase in profit from discontinued operations of £21 million. Total profit for the period remains unchanged. Ulster Bank RoI continuing operations are now reported within NatWest Group Central items & other.

(a)   Profit/(loss) from discontinued operations, net of tax


Quarter ended 


31 March

31 December

31 March


2023

2022

2022


£m

£m

£m

Interest receivable

15

17

78

Net interest income

15

17

78

Non-interest income

17

(63)

-

Total income

32

(46)

78

Operating expenses

(4)

(3)

(11)

Profit/(loss) before impairment releases/losses

28

(49)

67

Impairment releases/(losses)

7

(7)

(4)

Operating profit/(loss) before tax

35

(56)

63

Tax charge

-

-

-

Profit/(loss) from discontinued operations, net of tax

35

(56)

63

 



 

Notes

2. Discontinued operations and assets and liabilities of disposal groups continued

(b)   Assets and liabilities of disposal groups



As at 



31 March

31 December



2023

2022



£m

£m

Assets of disposal groups


 


Loans to customers - amortised cost


1,152

1,458

Other financial assets - loans to customers at fair value through profit or loss


5,131

5,397

Other assets


-

6



6,283

6,861



 


Liabilities of disposal groups


 


Other liabilities


9

15



9

15



 


Net assets of disposal groups


6,274

6,846

 

 


3. Litigation and regulatory matters

NatWest Group plc's 2022 Annual Report and Accounts, issued on 17 February 2023, included disclosures about NatWest Group's litigation and regulatory matters in Note 26. Set out below are the material developments in those matters (all of which have been previously disclosed) since publication of the 2022 Annual Report and Accounts.

Litigation

FX litigation

NWM Plc, NWMSI and/or NatWest Group plc are defendants in several cases relating to NWM Plc's foreign exchange (FX) business. In 2015, NWM Plc paid US$255 million to settle the consolidated antitrust class action filed in the United States District Court for the Southern District of New York (SDNY) on behalf of persons who entered into over-the-counter FX transactions with defendants or who traded FX instruments on exchanges. In 2018, some members of the settlement class who opted out of that class action settlement filed their own non-class complaint in the SDNY asserting antitrust claims against NWM Plc, NWMSI and other banks.

In April 2019, some of the claimants in the opt-out case described above, as well as others, served proceedings in the High Court of Justice of England and Wales, asserting competition claims against NWM Plc and several other banks. The claim was transferred from the High Court of Justice of England and Wales in December 2021 and registered in the UK Competition Appeal Tribunal (CAT) in January 2022. In March 2023, NWM Plc entered into an agreement to resolve both the SDNY and CAT cases. The settlement amount paid by NWM Plc was covered by an existing provision.

In the FX-related class action in the SDNY on behalf of 'consumers and end-user businesses', the court granted the defendants' motion for summary judgment on 30 March 2023, dismissing the plaintiffs' claims. The court's decision granting summary judgment, as well as a prior decision denying class certification in the case, are subject to appeal by the plaintiffs.

In December 2021, a claim was issued in the Netherlands against NatWest Group plc, NWM Plc and NWM N.V. by Stichting FX Claims on behalf of a number of claimants, seeking a declaration from the court that anti-competitive FX market conduct described in decisions of the European Commission (EC) of 16 May 2019 is unlawful, along with unspecified damages. The claimants amended their claim to also refer to a December 2021 decision by the EC, which also described anti-competitive FX market conduct. The 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) unless the claimants are domiciled in the Netherlands. Only certain of the claimants are so domiciled and are therefore permitted to continue with their claims against all defendants, including NatWest Group plc and NWM Plc. The claimants have until the end of June 2023 to appeal that decision.

Madoff

NWM N.V. was named as a defendant in two actions filed by the trustee for the bankrupt estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, in bankruptcy court in New York, which together seek to clawback more than US$298 million that NWM N.V. allegedly received from certain Madoff feeder funds and certain swap counterparties. The claims were previously dismissed, but as a result of an August 2021 decision by the United States Court of Appeals for the Second Circuit, they will now proceed in the bankruptcy court, where they have been consolidated into one action, subject to NWM N.V.'s legal and factual defences. In May 2022, NWM N.V. filed a motion to dismiss the amended complaint in the consolidated action and such motion was denied in March 2023. As a result, the claims will now enter the discovery phase.



 

Notes

3. Litigation and regulatory matters continued

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 was 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 sought 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.

On 20 April 2023, the claimant filed a notice of discontinuance of its claim against certain defendants including Coutts & Co Ltd. The claimant has subsequently indicated that it intends to issue further replacement proceedings. In that event, Coutts & Co Ltd will challenge the claimant's ability to take that step and the Malaysian Court has provisionally scheduled a hearing on 15 June 2023 to consider the validity of any new proceedings.

Coutts & Co Ltd is a company registered in Switzerland and is in wind-down following the announced sale of its business assets in 2015.


4. Post balance sheet events

Other than as disclosed there have been no significant events between 31 March 2023 and the date of approval of these

accounts that would require a change to or additional disclosure in the condensed consolidated financial statements.

 


Additional information

Presentation of information

'Parent company' refers to NatWest Group plc and 'NatWest Group' and 'we' refers to NatWest Group plc and its subsidiary and associated undertakings. The term 'NWH Group' refers to NatWest Holdings Limited ('NWH') and its subsidiary and associated undertakings. The term 'NWM Group' refers to NatWest Markets Plc ('NWM Plc') and its subsidiary and associated undertakings. The term 'NWM N.V.' refers to NatWest Markets N.V. The term 'NWMSI' refers to NatWest Markets Securities, Inc. The term 'RBS plc' refers to The Royal Bank of Scotland plc. The term 'NWB Plc' refers to National Westminster Bank Plc. The term 'UBIDAC' refers to Ulster Bank Ireland DAC.

NatWest Group publishes its financial statements in pounds sterling ('£' or 'sterling'). The abbreviations '£m' and '£bn' represent millions and thousands of millions of pounds sterling, respectively, and references to 'pence' or 'p' represent pence where the amounts are denominated in pounds sterling ('GBP'). Reference to 'dollars' or '$' are to United States of America ('US') dollars. The abbreviations '$m' and '$bn' represent millions and thousands of millions of dollars, respectively. The abbreviation '€' represents the 'euro', and the abbreviations '€m' and '€bn' represent millions and thousands of millions of euros, respectively.

Statutory 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 will be filed with the Registrar of Companies. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.

MAR - Inside Information

This announcement contains information that qualified or may have qualified as inside information for NatWest Group plc, for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR) as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018. This announcement is made by Alexander Holcroft, Head of Investor Relations for NatWest Group plc.

Contacts

Analyst enquiries:

Alexander Holcroft, Investor Relations


Media enquiries:

NatWest Group Press Office





 

Management presentation

Fixed income presentation

Date:

Time:

Zoom ID:

28 April 2023

9:00AM UK time

983 2997 1468

 

28 April 2023

1:00PM UK time

979 5240 9903





 

Available on natwestgroup.com/results

-    Q1 2023 Interim Management Statement and background slides.

-    A financial supplement containing income statement, balance sheet and segment performance for the nine quarters ended 31 March 2023.

-    NatWest Group Pillar 3 supplement at 31 March 2023.



 

Forward looking statements

This document may include forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, such as statements that include, without limitation, the words 'expect', 'estimate', 'project', 'anticipate', 'commit', 'believe', 'should', 'intend', 'will', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or variations on these expressions. These statements concern or may affect future matters, such as NatWest Group's future economic results, business plans and strategies.  In particular, this document may include forward-looking statements relating to NatWest Group plc in respect of, but not limited to: its economic and political risks, its regulatory capital position and related requirements, its financial position, profitability and financial performance (including financial, capital, cost savings and operational targets), the implementation of its purpose-led strategy, its environmental, social and governance and climate related targets, its access to adequate sources of liquidity and funding, increasing competition from new incumbents and disruptive technologies, its exposure to third party risks, its ongoing compliance with the UK ring-fencing regime and ensuring operational continuity in resolution, its impairment losses and credit exposures under certain specified scenarios, substantial regulation and oversight, ongoing legal, regulatory and governmental actions and investigations, the transition of LIBOR and IBOR rates to replacement risk free rates and NatWest Group's exposure to operational risk, conduct risk, cyber, data and IT risk, financial crime risk, key person risk and credit rating risk. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. Factors that could cause or contribute to differences in current expectations include, but are not limited to, future growth initiatives (including acquisitions, joint ventures and strategic partnerships), the outcome of legal, regulatory and governmental actions and investigations, the level and extent of future impairments and write-downs, legislative, political, fiscal and regulatory developments, accounting standards, competitive conditions, technological developments, interest and exchange rate fluctuations, general economic and political conditions and the impact of climate-related risks and the transitioning to a net zero economy. These and other factors, risks and uncertainties that may impact any forward-looking statement or NatWest Group plc's actual results are discussed in NatWest Group plc's UK 2022 Annual Report and Accounts (ARA), NatWest Group plc's Interim Management Statement for Q1 2023 and its other public filings. The forward-looking statements contained in this document speak only as of the date of this document and NatWest Group plc does not assume or undertake any obligation or responsibility to update any of the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise, except to the extent legally required.

 

 




 

 

F2A4E6A5-86EA-4413-90D6-619423C4A8DF|3|Oracle.SmartView.EPRCS|{efcdba9d-21b5-4008-a44c-5463a135874d}

 

 

 

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). 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. Income excluding notable items

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 items which may distort period-on-period comparisons.


Quarter ended 


31 March

31 December

31 March


2023

2022

2022


£m

£m

£m

Continuing operations

 



Total income

3,876

3,708

3,008

Less notable items

 

 

 

   Commercial & Institutional 

 

 

 

      Own credit adjustments (OCA)

6

(19)

18

   Central items & other

 

 

 

      Loss on redemption of own debt

-

-

(24)

      Effective interest rate adjustment as a result of redemption of own debt

-

(41)

-

      Profit from insurance liabilities

-

92

-

      Liquidity Asset Bond sale (losses)/gains

(13)

-

41

      Share of associate (losses)/profits for Business Growth Fund

(12)

7

23

      Interest and FX risk management derivatives not in accounting hedge 

 



         relationships

75

(46)

166

      Ulster Bank RoI mortgage fair value adjustments

-

(51)

-


56

(58)

224

Income excluding notable items

3,820

3,766

2,784

 



 

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 period-on-period comparisons.


Quarter ended


31 March 2023


Litigation and

Other

Statutory


conduct

operating

operating


costs

expenses

expenses


£m

£m

£m

Continuing operations

 

 

 

Staff costs

14

1,026

1,040

Premises and equipment

-

286

286

Other administrative expenses

42

408

450

Depreciation and amortisation

-

212

212

Total 

56

1,932

1,988






Quarter ended


31 December 2022


Litigation and

Other

Statutory


conduct

operating

operating


costs

expenses

expenses


£m

£m

£m

Continuing operations




Staff costs

16

1,013

1,029

Premises and equipment

-

292

292

Other administrative expenses

75

522

597

Depreciation and amortisation

-

220

220

Total 

91

2,047

2,138






Quarter ended


31 March 2022


Litigation and

Other

Statutory


conduct

operating

operating


costs

expenses

expenses


£m

£m

£m

Continuing operations




Staff costs

7

894

901

Premises and equipment

-

251

251

Other administrative expenses

95

376

471

Depreciation and amortisation

-

197

197

Total 

102

1,718

1,820



 

Non-IFRS financial measures continued

3. Cost:income ratio (excl. litigation and conduct)

NatWest Group uses the cost:income ratio (excl. litigation and conduct) in the Outlook guidance. This is calculated as other operating expenses (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 using total operating expenses.

 

 

 

 

 

Total

 

Retail

Private

Commercial & 

Central items 

NatWest

 

Banking

Banking

Institutional

& other

Group

Quarter ended 31 March 2023

£m

£m

£m

£m

£m

Continuing operations

 

 

 

 

 

Operating expenses

696

155

1,003

134

1,988

Less litigation and conduct costs

(3)

(3)

(44)

(6)

(56)

Other operating expenses

693

152

959

128

1,932


 

 

 

 

 

Total income

1,604 

296 

1,953 

23 

3,876 


 

 

 

 

 

Cost:income ratio 

43.4%

52.4%

51.4%

nm

51.3%

Cost:income ratio (excl. litigation and conduct)

43.2%

51.4%

49.1%

nm

49.8%


 

 

 

 

 

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%







Quarter ended 31 March 2022






Continuing operations






Operating expenses

645

139

922

114

1,820

Less litigation and conduct costs

(54)

(1)

(42)

(5)

(102)

Other operating expenses

591

138

880

109

1,718







Total income

1,217 

216 

1,375 

200 

3,008 







Cost:income ratio 

53.0%

64.4%

67.1%

nm

60.5%

Cost:income ratio (excl. litigation and conduct)

48.6%

63.9%

64.0%

nm

57.1%

 

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.


Quarter ended or as at


31 March

31 December

31 March

 

2023

2022

2022

NatWest Group return on tangible equity 

£m

£m

£m

Profit attributable to ordinary shareholders 

1,279

1,262

841

Annualised profit attributable to ordinary shareholders 

5,116

5,048

3,364


 



Average total equity 

37,195

35,866

40,934

Adjustment for average other owners' equity and intangible assets 

(11,319)

(11,350)

(11,067)

Adjusted total tangible equity 

25,876

24,516

29,867


 



Return on equity

13.8%

14.1%

8.2%

Return on tangible equity

19.8%

20.6%

11.3%



 

Non-IFRS financial measures continued

5. Segmental return on equity

Segmental return on equity comprises segmental operating profit or loss, adjusted for paid-in equity and preference share cost allocation 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 equity.

This measure shows the return generated by operating segments on equity deployed.


Quarter ended or as at


Retail

Private

Commercial & 

Quarter ended 31 March 2023

Banking

Banking

Institutional

Operating profit (£m)

794 

133

994 

Paid-in equity cost allocation (£m)

(15)

(5)

(44)

Adjustment for tax (£m)

(218)

(36)

(238)

Adjusted attributable profit (£m)

561 

92

713

Annualised adjusted attributable profit (£m)

2,244 

369

2,850

Average RWAe (£bn)

55.4

11.2

104.0

Equity factor

13.5%

11.5%

14.0%

Average notional equity (£bn)

7.5

1.3

14.6

Return on equity

30.0%

28.5%

19.5%





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%





Quarter ended 31 March 2022




Operating profit (£m)

567 

82 

464 

Preference share and paid-in equity cost allocation (£m)

(20)

(3)

(46)

Adjustment for tax (£m)

(153)

(22)

(105)

Adjusted attributable profit (£m)

394 

57 

314 

Annualised adjusted attributable profit (£m)

1,575 

228 

1,254 

Average RWAe (£bn)

52.6 

11.4 

102.0 

Equity factor

13.0%

11.0%

14.0%

Average notional equity (£bn)

6.8 

1.3 

14.3 

Return on equity

23.1%

18.2%

8.8%

 

6. Bank net interest margin

Bank net interest margin is defined as 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 has been introduced as a way to present net interest margin on a basis more comparable with UK peers and exclude 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.



Quarter ended



31 March

31 December

31 March



2023

2022

2022

 

 

£m

£m

£m

Continuing operations


 



NatWest Group net interest income 


2,902

2,868

2,027

Annualised NatWest Group net interest income 


11,769

11,378

8,221



 



Average interest earning assets (IEA)


522,393

538,584

543,697

Less liquid asset buffer average IEA 


(162,409)

(182,797)

(208,764)

Bank average IEA 


359,984

355,787

334,933



 



Net interest margin


2.25%

2.11%

1.51%

Bank net interest margin 


3.27%

3.20%

2.45%



 

Non-IFRS financial measures continued

6. Bank net interest margin continued

 

 



Quarter ended



31 March

31 December

31 March



2023

2022

2022

Retail Banking

 

£m

£m

£m

Net interest income 


1,492

1,505

1,112

Annualised net interest income


6,051

5,971

4,510



 



Retail Banking average IEA


220,323

217,790

204,071

Less liquid asset buffer average IEA


(18,259)

(20,383)

(18,540)

Adjusted Retail Banking average IEA


202,064

197,407

185,531



 



Retail Banking net interest margin


2.99%

3.02%

2.43%



 



Private Banking

 

 



Net interest income 


229

251

143

Annualised net interest income


929

996

580



 



Private Banking average IEA


28,091

29,140

29,192

Less liquid asset buffer average IEA


(8,878)

(9,956)

(10,325)

Adjusted Private Banking average IEA


19,213

19,184

18,867



 



Private Banking net interest margin


4.83%

5.19%

3.07%



 



Commercial & Institutional

 

 



Net interest income 


1,261

1,276

803

Annualised adjusted net interest income


5,114

5,062

3,257



 



Commercial & Institutional average IEA


198,872

201,329

197,548

Less liquid asset buffer average IEA


(67,601)

(71,039)

(76,563)

Adjusted Commercial & Institutional average IEA


131,271

130,290

120,985



 



Commercial & Institutional net interest margin


3.90%

3.89%

2.69%

 

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. 


As at


31 March

31 December

31 March


2023

2022

2022

Ordinary shareholders' interests (£m)

33,817

32,598

35,345

Less intangible assets (£m)

(7,171)

(7,116)

(6,774)

Tangible equity (£m)

26,646

25,482

28,571


 



Ordinary shares in issue (millions) (1)

9,581

9,659

10,622


 



TNAV per ordinary share (pence)

278p

264p

269p

 

(1)

The number of ordinary shares in issue excludes own shares held.

 



 

Non-IFRS financial measures continued

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 March

31 December

31 March


2023

2022

2022


£bn

£bn

£bn

Customer deposits

430.5

450.3

482.9

Less Central items & other

(8.7)

(17.4)

(35.0)

Customer deposits excluding central items

421.8

432.9

447.9

 

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 March

31 December

31 March


2023

2022

2022


£bn

£bn

£bn

Net loans to customers (amortised cost)

374.2

366.3

365.3

Less Central items & other

(21.8)

(19.6)

(35.1)

Net loans to customers excluding central items

352.4

346.7

330.2

 

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 March

31 December

31 March

 

2023

2022

2022 (1)

 

£m

£m

£m

Loans to customers - amortised cost 

374,214

366,340

365,340

Less reverse repos

(21,743)

(19,749)

(26,780)


352,471

346,591

338,560


 



Customer deposits 

430,537

450,318

482,887

Less repos

(5,989)

(9,828)

(16,166)


424,548

440,490

466,721


 



Loan:deposit ratio 

87%

81%

76%

Loan:deposit ratio (excl. repos and reverse repos)

83%

79%

73%

 

(1)

Re-presented.

 



 

Non-IFRS financial measures continued

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.


Quarter ended or as at


31 March

31 December

31 March


2023

2022

2022

Loan impairment charge/(release) (£m)

70

144

(36)

Annualised loan impairment charge/(release) (£m)

280

576

(144)


 



Gross customer loans (£bn)

377.6

369.7

368.9


 



Loan impairment rate 

7bps

16bps

(4)bps

12. Funded assets

Funded assets are 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 March

31 December

31 March


2023

2022

2022


£m

£m

£m

Total assets

695,624

720,053

785,398

Less derivative assets

(79,420)

(99,545)

(100,013)

Funded assets

616,204

620,508

685,385

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 third party assets held on an execution-only basis in custody by Private Banking, Retail Banking and Commercial & Institutional for their customers, for which the execution services are supported by Private Banking. Private Banking receives a fee for providing investment management and execution services to Retail Banking and Commercial & Institutional business segments.

This measure is tracked and reported as the amount of funds that we manage or administer, directly impacts the level of investment income that we receive.

14. Net new money

Net new money refers to client cash inflows and outflows relating to investment products (this can include transfers from savings accounts). Net new money 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.

Net new money 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.

 

 

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