Interim Results 2020 - (Part 1 of 2)

Companies

NATWEST GROUP (NWG)

UK 100

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	Half year ended		Quarter ended
	30 June	30 June	30 June	31 March	30 June
Performance key metrics and ratios	2020	2019	2020	2020	2019
Profit before impairment losses	£2,088m	£3,017m	£767m	£1,321m	£1,918m
Operating (loss)/profit before tax	(£770m)	£2,694m	(£1,289m)	£519m	£1,681m
(Loss)/profit attributable to ordinary shareholders	(£705m)	£2,038m	(£993m)	£288m	£1,331m
Bank net interest margin (NatWest Group NIM
excluding NWM) (1)	1.78%	2.04%	1.67%	1.89%	2.02%
Bank average interest earning assets (NatWest Group
excluding NWM) (1)	£440bn	£407bn	£458bn	£422bn	£410bn
Cost:income ratio (1)	63.8%	57.2%	70.9%	57.7%	52.6%
Loan impairment rate (1)	159bps	21bps	229bps	90bps	30bps
Earnings per share
- basic	(5.8p)	16.9p	(8.2p)	2.4p	11.0p
- basic fully diluted	(5.8p)	16.8p	(8.2p)	2.4p	11.0p
Return on tangible equity (1)	(4.4%)	12.1%	(12.4%)	3.6%	15.8%
Average tangible equity	£32bn	£34bn	£32bn	£32bn	£34bn
Average number of ordinary shares
outstanding during the period (millions)
- basic	12,079	12,058	12,085	12,074	12,069
- basic fully diluted (2)	12,101	12,096	12,107	12,100	12,104

			30 June	31 March	31 December
Balance sheet related key metrics and ratios			2020	2020	2019
Total assets			£806.9bn	£817.6bn	£723.0bn
Funded assets (1)			£623.5bn	£608.9bn	£573.0bn
Loans to customers - amortised cost			£352.3bn	£351.3bn	£326.9bn
Impairment provisions			£6.1bn	£4.2bn	£3.7bn
Customer deposits			£408.3bn	£384.8bn	£369.2bn

Liquidity coverage ratio (LCR)			166%	152%	152%
Liquidity portfolio			£243bn	£201bn	£199bn
Net stable funding ratio (NSFR) (3)			144%	138%	141%
Loan:deposit ratio (1)			86%	91%	89%
Total wholesale funding			£86bn	£86bn	£75bn
Short-term wholesale funding			£22bn	£32bn	£19bn

Common equity tier (CET1) ratio (4)			17.2%	16.6%	16.2%
Total capital ratio			22.5%	21.4%	21.2%
Pro forma CET1 ratio, pre dividend accrual (5)			17.2%	16.6%	17.0%
Risk-weighted assets (RWAs)			£181.5bn	£185.2bn	£179.2bn
CRR leverage ratio			5.1%	5.1%	5.1%
UK leverage ratio			6.0%	5.8%	5.8%

Tangible net asset value (TNAV) per ordinary share			264p	273p	268p
Tangible net asset value (TNAV) per ordinary share - fully diluted (1,2)			263p	272p	267p
Tangible equity			£32,006m	£32,990m	£32,371m
Number of ordinary shares in issue (millions)			12,125	12,094	12,094
Number of ordinary shares in issue (millions) - fully diluted (2,6)			12,147	12,116	12,138

	Half year ended		Quarter ended
	30 June	30 June	30 June	31 March	30 June
	2020	2019	2020	2020	2019
Net interest income	3,852	4,004	1,910	1,942	1,971

Own credit adjustments	53	(46)	(102)	155	(3)
Strategic disposals	-	1,035	-	-	1,035
Other non-interest income	1,933	2,124	868	1,065	1,077

Non-interest income	1,986	3,113	766	1,220	2,109

Total income	5,838	7,117	2,676	3,162	4,080

Litigation and conduct costs	89	(60)	85	4	(55)
Strategic costs	(464)	(629)	(333)	(131)	(434)
Other expenses	(3,375)	(3,411)	(1,661)	(1,714)	(1,673)

Operating expenses	(3,750)	(4,100)	(1,909)	(1,841)	(2,162)

Profit before impairment losses	2,088	3,017	767	1,321	1,918
Impairment losses	(2,858)	(323)	(2,056)	(802)	(237)

Operating (loss)/profit before tax	(770)	2,694	(1,289)	519	1,681
Tax credit/(charge)	208	(194)	396	(188)	22

(Loss)/profit for the period	(562)	2,500	(893)	331	1,703

Attributable to:
Ordinary shareholders	(705)	2,038	(993)	288	1,331
Preference shareholders	16	20	8	8	10
Paid-in equity shareholders	192	182	95	97	92
Non-controlling interests	(65)	260	(3)	(62)	270

Notable items within total income
Alawwal bank merger gain in NatWest Markets	-	444	-	-	444
FX recycling (loss)/gain in Central items & other	(103)	290	(39)	(64)	290
Legacy liability release in Central items & other	-	256	-	-	256
Liquidity Asset Bond sale gain	110	11	17	93	1
IFRS volatility in Central items & other	(11)	17	55	(66)	21
NatWest Markets asset disposals/strategic risk reduction (1)	(63)	(27)	(63)	-	(23)

H1 2020 compared with H1 2019
●	Income across the retail and commercial businesses decreased by 9.0% reflecting the contraction of the yield curve, mortgage margin dilution, lower business activity and lower consumer spending, resulting from government measures in response to Covid-19. Partially offsetting, we have seen strong gross new mortgage lending in UK Personal Banking with drawdowns against UK Government lending initiatives and increased utilisation of revolving credit facilities (RCFs) in Commercial Banking, whilst maintaining a disciplined approach to risk.
●	NatWest Markets income excluding asset disposals/strategic risk reduction, OCA and notable items increased by 44.4% reflecting increased customer activity as the market reacted to the spread of the Covid-19 virus, partially offset by the impact of credit market write-downs.
●	Litigation and conduct costs included a £250 million PPI release reflecting lower than predicted valid complaints volumes, partially offset by other charges.
●	Strategic costs of £464 million in H1 2020 included an £83 million charge related to technology spend, £155 million related to property charges and a £120 million direct charge in NatWest Markets primarily related to restructuring activity.
●	Other expenses, excluding OLD, decreased by £41 million, or 1.2%, and headcount reduced by c.3,900, or 5.9%. We have maintained a focus on driving underlying cost reductions and efficiencies across the business through the continued shift from physical to digital, process improvements and property savings.
●	The net impairment loss of £2,858 million, 159 basis points of gross customer loans, reflected the deterioration of the economic outlook. As a result the ECL coverage ratio across the Personal and Wholesale portfolios increased from 1.02% to 1.72%.

Q2 2020 compared with Q1 2020
●	Income across the retail and commercial businesses decreased by £176 million reflecting the contraction of the yield curve, reduced business activity and lower consumer spending, resulting from government measures in response to Covid-19. Partially offsetting, we have seen strong balance growth in Commercial Banking, largely relating to drawdowns against UK Government lending initiatives.
●	NatWest Markets income excluding asset disposals/strategic risk reduction and OCA increased by £50 million. Income from Financing increased as credit markets stabilised, supported by central bank actions, whilst Rates and Currencies decreased as the volatility seen towards the end of Q1 2020 eased.
●	Strategic costs of £333 million in Q2 2020 included a £44 million charge related to technology spend, £148 million related to property charges and an £86 million direct charge in NatWest Markets primarily related to restructuring activity.
●	Other expenses, excluding OLD, decreased by £54 million reflecting reduced investment spend and other cost saving initiatives. Headcount decreased by c.500.
●	The net impairment loss of £2,056 million, 229 basis points of gross customer loans, reflected the deterioration of the economic outlook. As a result the ECL coverage ratio across the Personal and Wholesale portfolios increased from 1.18% to 1.72%.

Q2 2020 compared with Q2 2019
●	Income across the retail and commercial businesses decreased by 11.4% whilst NatWest Markets income excluding asset disposals/strategic risk reduction, OCA and notable items increased by 62.2%.
●	Other expenses, excluding OLD, decreased by £15 million, or 0.9%.

	Half year ended		Quarter ended
	30 June	30 June	30 June	31 March	30 June
	2020	2019	2020	2020	2019
	£m	£m	£m	£m	£m
Total income	2,185	2,447	1,035	1,150	1,202
Operating expenses	(1,075)	(1,229)	(546)	(529)	(594)
Impairment losses	(657)	(181)	(360)	(297)	(69)
Operating profit	453	1,037	129	324	539
Return on equity	10.7%	25.6%	5.7%	15.5%	26.5%
Net interest margin	2.23%	2.57%	2.18%	2.28%	2.51%
Cost:income ratio	49.2%	50.2%	52.8%	46.0%	49.4%

			As at
			30 June	31 March	31 December
			2020	2020	2019
			£bn	£bn	£bn
Net loans to customers (amortised cost)			164.5	163.7	158.9
Customer deposits			161.0	152.8	150.3
RWAs			36.7	38.2	37.8
Loan impairment rate			87bps	72bps	20bps

H1 2020 compared with H1 2019
●	Total income decreased by £262 million, or 10.7%, due to lower deposit hedge income, mortgage margin dilution and lower fee income on overdrafts, partially offset by strong balance growth.
●	Excluding strategic, litigation and conduct costs, operating expenses increased by £17 million, or 1.5%, due to one-off releases in Q2 2019 partially offset by a reduction in staff costs associated with a 9.3% reduction in headcount.
●	Litigation and conduct costs include a £250 million PPI release reflecting lower than predicted valid complaints volumes.
●	Impairment losses of £657 million increased by £476 million primarily reflecting stage two charges linked to a forecast rise in unemployment and decline in HPI under a deteriorating economic outlook.
●	Net loans to customers increased by £12.6 billion, or 8.3%, as a result of strong gross new mortgage lending and lower redemptions. Gross new mortgage lending was £16.5 billion with market flow share of approximately 14%, supporting a stock share of approximately 10.5%. Personal advances and cards reduced by £0.2 billion and £0.3 billion respectively, reflecting lower spend and higher repayments as a result of Covid-19.
●	Customer deposits increased by £13.5 billion, or 9.2%, with stronger than normal growth as government backed initiatives for Covid-19, combined with lockdown restrictions, resulted in lower customer spend and increased savings.
●	RWAs remained broadly stable as mortgage lending growth was largely offset by lower unsecured balances, with no pro-cyclicality evident to date.
Q2 2020 compared with Q1 2020
●	Total income decreased by £115 million due to lower overdraft fees, Covid-19 support measures, significantly reduced card spend, which resulted in lower fees and lower unsecured balances, and the non-repeat of the annual insurance profit share. Net interest margin decreased by 10 basis points reflecting lower personal advances and cards balances and continued structural pressure in the mortgage business, as blended front book margins of around 124 basis points remain lower than the back book margin of approximately 138 basis points, partially offset by lower customer deposit rates payable. In the latter part of June 2020 blended front book application margins were around 130 basis points as spreads in the market continued to widen.
●	Impairment losses of £360 million increased by £63 million, primarily reflecting stage two charges linked to a forecast rise in unemployment and decline in HPI under a deteriorating economic outlook.
●	Net loans to customers increased by £0.8 billion due to mortgage growth of £1.9 billion, with lower consumer demand and increased repayments impacting unsecured. Personal advances and cards reduced by £0.4 billion respectively, as customers spent less and made repayments.
●	Customer deposits increased by £8.2 billion as customer spend reduced and savings increased as a result of Covid-19.
Q2 2020 compared with Q2 2019
●	Total income decreased by £167 million, or 13.9%, primarily reflecting lower overdraft fees, lower deposit hedge income and mortgage margin dilution.

H1 2020 compared with H1 2019
●	Total income decreased by €39 million, or 12.0%, reflecting lower business activity resulting from the impact of Covid-19 on our customers and our business, the non-repeat of €11 million income relating to the restructure of interest rate swaps on free funds, and interest rate and foreign exchange movements.
●	Excluding strategic, litigation and conduct costs, operating expenses decreased by €6 million, or 2.2%, reflecting a 9.7% headcount reduction, including the scale down of our services and other functional teams, and lower project costs, which in H1 2019 included costs related to the improvement of the Ulster Bank RoI risk management framework.
●	Impairment losses of €278 million increased by €302 million due to the impact across all portfolios from the deterioration in the economic outlook caused by Covid-19.
●	Net loans to customers decreased by €0.7 billion, or 3.3%, which included the net de-recognition of €0.2 billion of non-performing loans (NPL) from a sale agreed in Q4 2019, and an increase in loan provisions against the remaining loans. Gross new lending of €1.1 billion was 29.0% lower, with Q2 2020 impacted by lower demand primarily related to Covid-19 factors.
●	Customer deposits increased by €0.7 billion, or 3.3%, supporting a reduction in the loan:deposit ratio to 93% from 100%.
●	RWAs decreased by €1.7 billion, or 10.8%, largely due to model recalibrations and the de-recognition of NPLs in H1 2020.
Q2 2020 compared with Q1 2020
●	Total income decreased by €15 million mainly due to lower personal and commercial fees. Net interest margin decreased by 8 basis points reflecting the impact of negative rates on increased liquid assets.
●	Excluding strategic, litigation and conduct costs, operating expenses were €3 million lower due to reduced marketing and administration costs and foreign exchange movements.
●	Impairment losses increased by €214 million due to the deterioration in the economic outlook.
●	Net loans to customers decreased by €0.7 billion due to an increase in provisions together with loan repayments outweighing gross new lending, which was adversely impacted by lower demand largely as a result of Covid-19. Gross new lending was €0.4 billion, €0.3 billion lower than Q1 2020.
●	RWAs decreased by €0.3 billion due to model recalibrations and the impact of the NPL sale.
Q2 2020 compared with Q2 2019
●	Total income decreased by €23 million reflecting the impact of Covid-19, particularly on fee income due to lower transaction levels and implementation of waivers on both personal and commercial products.

H1 2020 compared with H1 2019
●	Total income decreased by £162 million, or 7.5%, reflecting £108 million lower non interest income due to reduced business activity and £54 million lower net interest income as a result of the contraction of the yield curve, partially offset by balance sheet growth.
●	Excluding strategic, litigation and conduct costs, operating expenses increased by £41 million, or 3.7%, reflecting a number of one-off releases in Q2 2019, higher innovation spend and a £5 million increase in OLD, partially offset by a 1.9% reduction in headcount following operating model efficiencies in H2 2019 and lower non staff costs.
●	Impairment losses of £1,790 million primarily from stage one and two charges reflecting the deterioration in the economic outlook, with total stage three charges of £236 million, including a small number of single name charges.
●	Net loans to customers increased by £10.6 billion, or 10.5%, with a £10.8 billion increase in H1 2020 reflecting drawdowns against UK Government lending schemes and £4.1 billion increased RCF utilisation.
●	Customer deposits increased by £26.2 billion, or 19.6%, principally due to a £24.6 billion increase in H1 2020 as customers sought to retain liquidity in light of Covid-19 uncertainty.
●	RWAs increased by £0.5 billion, or 0.6%, due to increased lending volumes and risk parameter changes, partially offset by a £4.5 billion reduction related to model improvements and active capital management, with limited procyclicality evident to date
Q2 2020 compared with Q1 2020
●	Total income decreased by £13 million as lower deposit funding benefits and reduced business activity offset balance sheet growth. Net interest margin decreased by 13 basis points mainly reflecting lower deposit funding benefits and higher liquidity portfolio costs.
●	Excluding strategic, litigation and conduct costs, operating expenses remained broadly stable as higher back office operations costs and a £1 million increase in OLD were partially offset by lower non-staff costs.
●	Impairment losses of £1,355 million primarily from stage one and two charges reflecting the deterioration in the economic outlook, with total stage three charges of £169 million, including a small number of single name charges.
●	Net loans to customers increased by £2.8 billion reflecting drawdowns against UK Government lending schemes, including £5.8 billion related to BBLS, £2.3 billion related to CBILS and £0.2 billion related to CLBILS, partially offset by £2.3 billion net RCF repayments, lower specialised business lending and increased loan provisions. RCF utilisation decreased to c.32% of committed facilities following increased drawdowns in March and April 2020, but remained above pre-Covid-19 levels.
●	Customer deposits increased by £15.7 billion as customers sought to retain liquidity in light of Covid-19 uncertainty, including the retention of UK Government lending scheme drawdowns.
●	RWAs increased by £1.4 billion due to increased lending volumes, risk parameter changes and business transfers of £0.4 billion from NatWest Markets.
Q2 2020 compared with Q2 2019
●	Total income decreased by £88 million, or 8.1%, reflecting reduced business activity and the contraction of the yield curve, partially offset by balance sheet growth and an £8 million fair value and disposal gain in Q2 2020, compared with a £15 million loss in Q2 2019.
●	Excluding strategic, litigation and conduct costs, operating expenses increased by £47 million, or 9.0%, reflecting a number of one-off releases in Q2 2019, higher innovation spend and £3 million higher OLD, partially offset by a 1.9% reduction in headcount following operating model efficiencies in H2 2019 and lower non-staff costs.

Private Banking remains committed to supporting clients through a range of initiatives during this period of significant uncertainty, including the provision of mortgage and loan repayment breaks and via participation in the UK Government's CBILS financial support scheme, with £146 million approved as at H1 2020. H1 2020 compared with H1 2019
●	Total income decreased by £14 million, or 3.4%, primarily reflecting £11 million lower net interest income due to lower deposit income and asset margin compression, partially offset by balance sheet growth.
●	Excluding strategic, litigation and conduct costs, operating expenses increased by £24 million, or 11.1%, reflecting higher investment spend and a number of one-off items.
●	Impairment losses of £56 million, mainly reflected stage one and two charges linked to the deterioration of the economic outlook.
●	Net loans to customers increased by £1.3 billion, or 8.8%, reflecting mortgage lending and other loans growth. RWAs increased by £0.7 billion, or 7.2%, primarily reflecting increased lending volumes.
●	Customer deposits increased by £1.5 billion, or 5.3%, principally due to a £1.2 billion increase in H1 2020 reflecting an increase in instant access savings and current accounts.
●	Total AUMAs overseen by Private Banking increased by £0.9 billion, or 3.1%, reflecting net new business inflows of £1.2 billion partially offset by adverse market movements of £0.3 billion.
Q2 2020 compared with Q1 2020
●	Total income decreased by £10 million, primarily reflecting asset margin compression and a reduction in fee income, partially offset by balance sheet growth. Net interest margin decreased by 11 basis points mainly due to asset margin compression, lower deposit income and higher liquidity portfolio costs.
●	Excluding strategic, litigation and conduct costs, operating expenses increased by £5 million reflecting higher investment spend and a number of one-off items.
●	Impairment losses of £27 million, mainly reflected stage one and two charges linked to the deterioration of the economic outlook, partially offset by a single name release.
●	Customer deposits increased by £0.8 billion reflecting an increase in instant access savings and current accounts.
●	Total AUMAs overseen by Private Banking increased by £3.1 billion, reflecting positive investment performance of £2.9 billion and net new business inflows of £0.2 billion.
Q2 2020 compared with Q2 2019
●	Total income decreased by £11 million, or 5.4%, primarily reflecting lower deposit income, asset margin compression and a reduction in fee income, partially offset by balance sheet growth.
●	Excluding strategic, litigation and conduct costs, operating expenses increased by £18 million, or 17.1%, primarily reflecting higher investment spend and a number of one-off items.

H1 2020 compared with H1 2019
●	Total income decreased by £51 million, or 16.5%, primarily due to the impact of interest rate reductions on deposit income as well as £2 million lower payments income with the waiving of personal and commercial banking fees in Q2 2020 to support customers during Covid-19.
●	Excluding strategic, litigation and conduct costs, operating expenses increased by £12 million, or 11.0%, mainly due to £6 million higher investment spend to enhance the digital proposition, £2 million Covid-19 incident costs and £3 million higher technology costs.
●	Impairment losses of £46 million included £25 million stage one and stage two charges reflecting the deterioration in the economic outlook and a £19 million charge related to a single client.
●	Net loans to customers decreased by £0.9 billion, or 6.6%, as Institutional Banking customers repaid facilities to position themselves in the uncertain environment.
●	Customer deposits increased by £1.4 billion, or 5.0%, as Institutional Banking customers sought to build liquidity in response to Covid-19 uncertainty.
Q2 2020 compared with Q1 2020
●	Total income decreased £29 million primarily due to £23 million lower deposit income resulting from the full quarter impact of the central bank rate reductions and £4 million lower lending income. Net interest margin decreased by 30 basis points due to lower deposit funding benefits as a result of interest rate changes by central banks.
●	Impairment losses of £31 million included £17 million stage one and two charges reflecting the deterioration in the economic outlook and a £13 million charge related to a single client.
●	Net loans to customers decreased by £0.9 billion as Institutional Banking customers responded to the uncertain economic outlook by repaying facilities.
●	Customer deposits decreased £2.8 billion due to lower call balances in the Institutional Banking sector as significant Q1 2020 inflows were used to fund loan repayments. Deposits in Local Banking increased by £0.4 billion, most notably in Local Corporate and Everyday Banking.
Q2 2020 compared with Q2 2019
●	Total income decreased by £44 million, or 27.7%, due to lower deposit funding benefits, and lower fee income reflecting the economic response to Covid-19 with central bank rate reductions and fee waivers.
●	Excluding strategic, litigation and conduct costs, operating expenses increased by £7 million, or 13.0%, reflecting higher investment spend and Covid-19 incident costs.

Progress on strategic change
●	NatWest Markets continues to progress its strategy to refocus towards NatWest Group's corporate and institutional customers and reduce RWAs. During H1 2020, further refinements have been made to simplify the customer product suite, including exiting the Custom Index Trading business and the reduction of the third party market making offering in flow asset backed securities (ABS), residential mortgage backed securities (RMBS) and collateralised loan obligations (CLO). Additionally, NatWest Markets selected BNP Paribas as a strategic partner for the provision of execution and clearing of listed derivatives, following the decision to no longer offer these services for certain exchange traded derivatives, as announced in Q1 2020.
●	NatWest Markets continues to identify efficiency improvements. During Q2 2020 changes were made to the regional operating models in the US and APAC and actions were taken to drive closer alignment with NatWest Group, such as leveraging NatWest Group Technology infrastructure.
●	NatWest Markets has also actively identified and progressed RWA reduction, with a number of asset exits completed during Q2 2020. NatWest Markets continues to target an RWA reduction to £32 billion at the end of 2020.
H1 2020 compared with H1 2019
●	Total income decreased by £126 million, or 13.4%, reflecting a £444 million gain from the merger of Alawwal bank with Saudi British Bank (SABB) in H1 2019, partially offset by heightened customer activity and OCA movements. An OCA credit of £53 million compared with a £47 million charge in H1 2019 reflected the significant widening of credit spreads.
●	Income excluding asset disposals/strategic risk reduction, OCA and notable items increased by £254 million, or 44.4%, reflecting increased customer activity as the market reacted to the spread of the Covid-19 virus, resulting in higher levels of primary issuance from governments and increased secondary market activity in both the Rates and Currencies businesses, partially offset by the impact of credit market write-downs.
●	Excluding strategic, litigation and conduct costs, operating expenses decreased by £31 million, or 5.2%, primarily reflecting lower back office operational costs and initial reductions following the strategic announcement in February 2020.
●	RWAs decreased by £6.3 billion, or 15.2%, reflecting lower levels of counterparty and market risk which, despite recent turbulence, have trended downwards as the business seeks to reduce its RWAs.
Q2 2020 compared with Q1 2020
●	Income excluding asset disposals/strategic risk reduction and OCA increased by £50 million. Income from Financing increased as credit markets stabilised, supported by central bank actions, whilst Rates and Currencies decreased as the volatility seen towards the end of Q1 2020 eased. Asset disposal/strategic risk reduction losses of £63 million included a £40 million loss related to a single significant transaction.
●	Excluding strategic, litigation and conduct costs, operating expenses decreased by £27 million reflecting initial reductions following the strategic announcement in February 2020.
●	RWAs decreased by £3.8 billion as the business works towards its full year RWA target. Counterparty credit risk decreased by £1.5 billion reflecting the exit of specific positions and market risk decreased by £1.5 billion, as markets normalised. A reduction in credit risk of £0.8 billion included £0.4 billion of business transfers to Commercial Banking.
Q2 2020 compared with Q2 2019
●	Income excluding asset disposals/strategic risk reduction, OCA and notable items increased by £168 million, or 62.2%, reflecting heightened levels of customer activity in Q2 2020, as markets reacted to the Covid-19 pandemic.

		Half year ended 30 June 2020
								Central	Total
		UK Personal	Ulster	Commercial	Private	RBS	NatWest	items &	NatWest
		Banking	Bank RoI	Banking	Banking	International	Markets	other (1)	Group
		£m	£m	£m	£m	£m	£m	£m	£m
Income statement
Net interest income		1,982	194	1,370	251	201	(34)	(112)	3,852
Other non-interest income		203	55	633	141	58	797	46	1,933
Own credit adjustments		-	-	-	-	-	53	-	53
Total income		2,185	249	2,003	392	259	816	(66)	5,838
Direct expenses	- staff costs	(280)	(100)	(360)	(93)	(65)	(326)	(572)	(1,796)
	- other costs	(104)	(42)	(149)	(47)	(27)	(94)	(1,116)	(1,579)
Indirect expenses		(785)	(92)	(630)	(101)	(29)	(149)	1,786	-
Strategic costs	- direct	(1)	(4)	(5)	-	(3)	(120)	(331)	(464)
	- indirect	(103)	(8)	(70)	(10)	(5)	(16)	212	-
Litigation and conduct costs		198	1	(7)	(1)	3	(2)	(103)	89
Operating expenses		(1,075)	(245)	(1,221)	(252)	(126)	(707)	(124)	(3,750)
Operating profit/(loss) before impairment losses		1,110	4	782	140	133	109	(190)	2,088
Impairment losses		(657)	(243)	(1,790)	(56)	(46)	(40)	(26)	(2,858)
Operating profit/(loss)		453	(239)	(1,008)	84	87	69	(216)	(770)
Additional information
Return on equity (2)		10.7%	(24.2%)	(17.9%)	8.2%	11.8%	0.8%	nm	(4.4%)
Cost:income ratio (2)		49.2%	98.4%	59.5%	64.3%	48.6%	86.6%	nm	63.8%
Total assets (£bn)		187.1	27.6	186.0	23.9	31.5	303.8	47.0	806.9
Funded assets (£bn)		187.1	27.6	186.0	23.9	31.5	122.9	44.5	623.5
Net loans to customers - amortised cost (£bn)		164.5	18.7	112.0	16.0	12.7	11.4	17.0	352.3
Loan impairment rate (2)		79bps	248bps	311bps	70bps	72bps	nm	nm	159bps
Impairment provisions (£bn)		(1.9)	(0.9)	(3.0)	(0.1)	-	(0.2)	-	(6.1)
Impairment provisions - Stage 3 (£bn)		(0.9)	(0.6)	(1.2)	-	-	(0.1)	-	(2.8)
Customer deposits (£bn)		161.0	20.0	159.6	29.8	29.5	5.5	2.9	408.3
Risk-weighted assets (RWAs) (£bn)		36.7	12.8	78.3	10.4	6.8	35.1	1.4	181.5
RWA equivalent (RWAe) (£bn)		36.7	12.8	78.4	10.4	6.9	37.2	1.5	183.9
Employee numbers (FTEs - thousands)		17.5	2.8	10.2	2.0	1.8	5.0	23.4	62.7
Average interest earning assets (£bn)		178.6	25.7	156.5	23.0	31.2	38.0	nm	477.9
Net interest margin		2.23%	1.52%	1.76%	2.20%	1.30%	(0.18%)	nm	1.62%
Third party customer asset rate (3)		2.96%	2.27%	2.86%	2.65%	2.65%	nm	nm	nm
Third party customer funding rate (3)		(0.28%)	(0.12%)	(0.37%)	(0.25%)	(0.06%)	nm	nm	nm

		Half year ended 30 June 2019
								Central	Total
		UK Personal	Ulster	Commercial	Private	RBS	NatWest	items &	NatWest
		Banking	Bank RoI	Banking	Banking	International	Markets	other (1)	Group
		£m	£m	£m	£m	£m	£m	£m	£m
Income statement
Net interest income		2,084	200	1,424	261	242	(122)	(85)	4,004
Other non-interest income		363	82	741	123	68	667	80	2,124
Own credit adjustments		-	1	-	-	-	(47)	-	(46)
Strategic disposals		-	-	-	-	-	444	591	1,035
Total income		2,447	283	2,165	384	310	942	586	7,117
Direct expenses	- staff costs	(300)	(104)	(356)	(82)	(59)	(349)	(591)	(1,841)
	- other costs	(136)	(48)	(155)	(35)	(23)	(86)	(1,087)	(1,570)
Indirect expenses		(716)	(90)	(587)	(96)	(27)	(165)	1,681	-
Strategic costs	- direct	4	(9)	(32)	-	(5)	(49)	(538)	(629)
	- indirect	(75)	(10)	(86)	(17)	(5)	(30)	223	-
Litigation and conduct costs		(6)	(20)	(46)	(2)	-	1	13	(60)
Operating expenses		(1,229)	(281)	(1,262)	(232)	(119)	(678)	(299)	(4,100)
Operating profit before impairment (losses)/releases		1,218	2	903	152	191	264	287	3,017
Impairment (losses)/releases		(181)	21	(202)	3	3	36	(3)	(323)
Operating profit		1,037	23	701	155	194	300	284	2,694
Additional information
Return on equity (2)		25.6%	2.1%	8.8%	16.6%	29.7%	1.0%	nm	12.1%
Cost:income ratio (2)		50.2%	99.3%	56.9%	60.4%	38.4%	72.0%	nm	57.2%
Total assets (£bn)		173.9	26.4	165.6	21.9	30.4	278.9	32.8	729.9
Funded assets (£bn)		173.9	26.4	165.6	21.9	30.4	133.4	32.7	584.3
Net loans to customers - amortised cost (£bn)		151.9	19.0	101.4	14.7	13.6	9.3	0.7	310.6
Loan impairment rate (2)		24bps	(21)bps	39bps	(4)bps	(4)bps	nm	nm	21bps
Impairment provisions (£bn)		(1.3)	(0.9)	(1.3)	-	-	(0.2)	-	(3.7)
Impairment provisions - Stage 3 (£bn)		(0.8)	(0.8)	(1.0)	-	-	(0.2)	-	(2.8)
Customer deposits (£bn)		147.5	19.0	133.4	28.0	28.1	2.8	2.8	361.6
Risk-weighted assets (RWAs) (£bn)		37.0	14.2	77.8	9.7	6.9	41.4	1.5	188.5
RWA equivalent (RWAe) (£bn)		38.1	14.5	79.3	9.7	7.0	46.1	1.8	196.5
Employee numbers (FTEs - thousands)		19.3	3.1	10.4	1.9	1.8	5.0	25.1	66.6
Average interest earning assets (£bn)		163.8	24.7	145.3	21.2	28.8	33.3	nm	440.3
Net interest margin		2.57%	1.63%	1.98%	2.48%	1.69%	(0.73%)	nm	1.83%
Third party customer asset rate (3)		3.28%	2.30%	3.20%	2.95%	1.75%	nm	nm	nm
Third party customer funding rate (3)		(0.37%)	(0.17%)	(0.43%)	(0.44%)	(0.14%)	nm	nm	nm

		Quarter ended 30 June 2020
								Central	Total
		UK Personal	Ulster	Commercial	Private	RBS	NatWest	items &	NatWest
		Banking	Bank RoI	Banking	Banking	International	Markets	other (1)	Group
		£m	£m	£m	£m	£m	£m	£m	£m
Income statement
Net interest income		975	97	696	124	90	6	(78)	1,910
Other non-interest income		60	23	299	67	25	369	25	868
Own credit adjustments		-	-	-	-	-	(102)	-	(102)
Total income		1,035	120	995	191	115	273	(53)	2,676
Direct expenses	- staff costs	(139)	(52)	(176)	(46)	(33)	(159)	(272)	(877)
	- other costs	(45)	(18)	(71)	(23)	(13)	(37)	(577)	(784)
Indirect expenses		(393)	(46)	(324)	(54)	(15)	(75)	907	-
Strategic costs	- direct	(1)	(3)	-	-	(2)	(86)	(241)	(333)
	- indirect	(69)	(4)	(34)	(5)	(2)	(8)	122	-
Litigation and conduct costs		101	1	(6)	(1)	-	-	(10)	85
Operating expenses		(546)	(122)	(611)	(129)	(65)	(365)	(71)	(1,909)
Operating profit/(loss) before impairment losses		489	(2)	384	62	50	(92)	(124)	767
Impairment losses		(360)	(216)	(1,355)	(27)	(31)	(45)	(22)	(2,056)
Operating profit/(loss)		129	(218)	(971)	35	19	(137)	(146)	(1,289)
Additional information
Return on equity (2)		5.7%	(44.5%)	(32.5%)	6.6%	4.3%	(7.1%)	nm	(12.4%)
Cost:income ratio (2)		52.8%	101.7%	59.9%	67.5%	56.5%	133.7%	nm	70.9%
Total assets (£bn)		187.1	27.6	186.0	23.9	31.5	303.8	47.0	806.9
Funded assets (£bn)		187.1	27.6	186.0	23.9	31.5	122.9	44.5	623.5
Net loans to customers - amortised cost (£bn)		164.5	18.7	112.0	16.0	12.7	11.4	17.0	352.3
Loan impairment rate (2)		87bps	441bps	472bps	67bps	97bps	nm	nm	229bps
Impairment provisions (£bn)		(1.9)	(0.9)	(3.0)	(0.1)	-	(0.2)	-	(6.1)
Impairment provisions - Stage 3 (£bn)		(0.9)	(0.6)	(1.2)	-	-	(0.1)	-	(2.8)
Customer deposits (£bn)		161.0	20.0	159.6	29.8	29.5	5.5	2.9	408.3
Risk-weighted assets (RWAs) (£bn)		36.7	12.8	78.3	10.4	6.8	35.1	1.4	181.5
RWA equivalent (RWAe) (£bn)		36.7	12.8	78.4	10.4	6.9	37.2	1.5	183.9
Employee numbers (FTEs - thousands)		17.5	2.8	10.2	2.0	1.8	5.0	23.4	62.7
Average interest earning assets (£bn)		179.8	26.4	164.6	23.3	31.5	39.9	nm	497.4
Net interest margin		2.18%	1.48%	1.70%	2.14%	1.15%	0.06%	nm	1.54%
Third party customer asset rate (3)		2.86%	2.27%	2.70%	2.52%	2.58%	nm	nm	nm
Third party customer funding rate (3)		(0.20%)	(0.12%)	(0.33%)	(0.13%)	(0.01%)	nm	nm	nm

		Quarter ended 31 March 2020
								Central	Total
		UK Personal	Ulster	Commercial	Private	RBS	NatWest	items &	NatWest
		Banking	Bank RoI	Banking	Banking	International	Markets	other (1)	Group
		£m	£m	£m	£m	£m	£m	£m	£m
Income statement
Net interest income		1,007	97	674	127	111	(40)	(34)	1,942
Other non-interest income		143	32	334	74	33	428	21	1,065
Own credit adjustments		-	-	-	-	-	155	-	155
Total income		1,150	129	1,008	201	144	543	(13)	3,162
Direct expenses	- staff costs	(141)	(48)	(184)	(47)	(32)	(167)	(300)	(919)
	- other costs	(59)	(24)	(78)	(24)	(14)	(57)	(539)	(795)
Indirect expenses		(392)	(46)	(306)	(47)	(14)	(74)	879	-
Strategic costs	- direct	-	(1)	(5)	-	(1)	(34)	(90)	(131)
	- indirect	(34)	(4)	(36)	(5)	(3)	(8)	90	-
Litigation and conduct costs		97	-	(1)	-	3	(2)	(93)	4
Operating expenses		(529)	(123)	(610)	(123)	(61)	(342)	(53)	(1,841)
Operating profit/(loss) before impairment (losses)/releases		621	6	398	78	83	201	(66)	1,321
Impairment (losses)/releases		(297)	(27)	(435)	(29)	(15)	5	(4)	(802)
Operating profit/(loss)		324	(21)	(37)	49	68	206	(70)	519
Additional information
Return on equity (2)		15.5%	(4.2%)	(2.5%)	9.8%	19.4%	8.7%	nm	3.6%
Cost:income ratio (2)		46.0%	95.3%	59.1%	61.2%	42.4%	63.0%	nm	57.7%
Total assets (£bn)		186.3	26.3	178.3	23.4	33.2	335.7	34.4	817.6
Funded assets (£bn)		186.3	26.3	178.3	23.4	33.2	129.6	31.8	608.9
Net loans to customers - amortised cost (£bn)		163.7	18.7	109.2	15.8	13.6	12.2	18.1	351.3
Loan impairment rate (2)		72bps	56bps	157bps	73bps	44bps	nm	nm	90bps
Impairment provisions (£bn)		(1.6)	(0.7)	(1.7)	(0.1)	-	(0.1)	-	(4.2)
Impairment provisions - Stage 3 (£bn)		(0.9)	(0.6)	(1.0)	-	-	(0.1)	-	(2.6)
Customer deposits (£bn)		152.8	19.3	143.9	29.0	32.3	5.7	1.8	384.8
Risk-weighted assets (RWAs) (£bn)		38.2	12.7	76.9	10.3	6.8	38.9	1.4	185.2
RWA equivalent (RWAe) (£bn)		38.2	12.7	77.0	10.3	7.1	42.2	1.7	189.2
Employee numbers (FTEs - thousands)		17.8	2.9	10.0	2.0	1.8	5.1	23.6	63.2
Average interest earning assets (£bn)		177.4	24.9	148.4	22.7	30.9	36.1	nm	458.5
Net interest margin		2.28%	1.56%	1.83%	2.25%	1.45%	(0.45%)	nm	1.70%
Third party customer asset rate (3)		3.06%	2.28%	3.03%	2.77%	2.79%	nm	nm	nm
Third party customer funding rate (3)		(0.37%)	(0.13%)	(0.42%)	(0.38%)	(0.11%)	nm	nm	nm

		Quarter ended 30 June 2019
								Central	Total
		UK Personal	Ulster	Commercial	Private	RBS	NatWest	items &	NatWest
		Banking	Bank RoI	Banking	Banking	International	Markets	other (1)	Group
		£m	£m	£m	£m	£m	£m	£m	£m
Income statement
Net interest income		1,032	102	716	129	125	(91)	(42)	1,971
Other non-interest income		170	35	367	62	34	338	71	1,077
Own credit adjustments		-	1	-	-	-	(5)	1	(3)
Strategic disposals		-	-	-	-	-	444	591	1,035
Total income		1,202	138	1,083	191	159	686	621	4,080
Direct expenses	- staff costs	(148)	(53)	(175)	(41)	(31)	(176)	(281)	(905)
	- other costs	(77)	(22)	(80)	(17)	(10)	(38)	(524)	(768)
Indirect expenses		(317)	(42)	(269)	(45)	(13)	(76)	762	-
Strategic costs	- direct	4	(4)	(12)	-	(3)	(31)	(388)	(434)
	- indirect	(49)	(5)	(50)	(10)	(3)	(17)	134	-
Litigation and conduct costs		(7)	(19)	(36)	(2)	-	(6)	15	(55)
Operating expenses		(594)	(145)	(622)	(115)	(60)	(344)	(282)	(2,162)
Operating profit/(loss) before impairment (losses)/releases		608	(7)	461	76	99	342	339	1,918
Impairment (losses)/releases		(69)	10	(197)	(1)	2	20	(2)	(237)
Operating profit		539	3	264	75	101	362	337	1681
Additional information
Return on equity (2)		26.5%	0.6%	6.2%	15.9%	30.8%	4.4%	nm	15.8%
Cost:income ratio (2)		49.4%	105.1%	56.1%	60.2%	37.7%	50.1%	nm	52.6%
Total assets (£bn)		173.9	26.4	165.6	21.9	30.4	278.9	32.8	729.9
Funded assets (£bn)		173.9	26.4	165.6	21.9	30.4	133.4	32.7	584.3
Net loans to customers - amortised cost (£bn)		151.9	19.0	101.4	14.7	13.6	9.3	0.7	310.6
Loan impairment rate (2)		18bps	(20)bps	77bps	3bps	(6)bps	nm	nm	30bps
Impairment provisions (£bn)		(1.3)	(0.9)	(1.3)	-	-	(0.2)	-	(3.7)
Impairment provisions - Stage 3 (£bn)		(0.8)	(0.8)	(1.0)	-	-	(0.2)	-	(2.8)
Customer deposits (£bn)		147.5	19.0	133.4	28.0	28.1	2.8	2.8	361.6
Risk-weighted assets (RWAs) (£bn)		37.0	14.2	77.8	9.7	6.9	41.4	1.5	188.5
RWA equivalent (RWAe) (£bn)		38.1	14.5	79.3	9.7	7.0	46.1	1.8	196.5
Employee numbers (FTEs - thousands)		19.3	3.1	10.4	1.9	1.8	5.0	25.1	66.6
Average interest earning assets (£bn)		164.8	25.3	146.1	21.2	29.8	34.4	nm	444.8
Net interest margin		2.51%	1.62%	1.97%	2.44%	1.68%	(1.05%)	nm	1.78%
Third party customer asset rate (3)		3.25%	2.29%	3.18%	2.89%	1.79%	nm	nm	nm
Third party customer funding rate (3)		(0.38%)	(0.15%)	(0.42%)	(0.45%)	(0.13%)	nm	nm	nm

	Page
Capital, liquidity and funding risk	19
Credit risk
Economic loss drivers	28
Credit risk - Banking activities
Segmental exposure	37
Sector analysis	42
Personal portfolio	49
CRE	52
Flow statements	54
Asset quality	66
Credit risk - Trading activities	70
Market risk
Non-traded	73
Traded	76
Other risks	77

Type	CET1	Total Tier 1		Total capital
Pillar 1 requirements	4.5%	6.0%		8.0%
Pillar 2A requirements	1.9%	2.6%		3.4%
Minimum Capital Requirements	6.4%	8.6%		11.4%
Capital conservation buffer	2.5%	2.5%		2.5%
Countercyclical capital buffer (1)	0.0%	0.0%		0.0%
G-SIB buffer (2)	-		-	-
MDA Threshold	8.9%		na		na
Subtotal (3)	8.9%	11.1%		13.9%
Capital ratios at 30 June 2020	17.2%	19.4%		22.5%
Headroom (4)	8.3%	8.3%		8.6%

	CRR basis (1)
	30 June	31 December
Capital adequacy ratios	2020	2019
CET1 (%)	17.2	16.2
Tier 1 (%)	19.4	18.5
Total (%)	22.5	21.2

Capital	£m	£m
Tangible equity	32,006	32,371

Expected loss less impairment provisions	-	(167)
Prudential valuation adjustment	(370)	(431)
Deferred tax assets	(844)	(757)
Own credit adjustments	(244)	(118)
Pension fund assets	(588)	(474)
Cash flow hedging reserve	(341)	(35)
Foreseeable ordinary and special dividends	-	(968)
Foreseeable charges	-	(365)
Adjustments under IFRS 9 transitional arrangements	1,578	-
Other deductions	-	(2)
Total deductions	(809)	(3,317)

CET1 capital	31,197	29,054
AT1 capital	3,990	4,051
Tier 1 capital	35,187	33,105
Tier 2 capital	5,596	4,900

Total regulatory capital	40,783	38,005

Risk-weighted assets
Credit risk	135,700	131,000
Counterparty credit risk	12,400	12,600
Market risk	11,500	13,000
Operational risk	21,900	22,600
Total RWAs	181,500	179,200

Leverage
Cash and balances at central banks	100,300	77,900
Trading assets	72,400	76,700
Derivatives	183,400	150,000

	CET1	AT1	Tier 2	Total
	£m	£m	£m	£m
At 1 January 2020	29,054	4,051	4,900	38,005
Attributable loss for the period	(705)	-	-	(705)
Own credit	(126)	-	-	(126)
Share capital and reserve movements in respect of employee share schemes	(46)	-	-	(46)
Foreign exchange reserve	466	-	-	466
FVOCI reserves	(218)	-	-	(218)
Goodwill and intangibles deduction	20	-	-	20
Deferred tax assets	(87)	-	-	(87)
Prudential valuation adjustments	61	-	-	61
Expected loss less impairment	167	-	-	167
New issues of capital instruments	-	1,216	1,000	2,216
Redemption of capital instruments	-	(1,277)	-	(1,277)
Net dated subordinated debt/grandfathered instruments	-	-	(756)	(756)
Foreign exchange movements	(355)	-	452	97
Foreseeable ordinary and special dividends	968	-	-	968
Foreseeable charges	365	-	-	365
Adjustment under IFRS 9 transitional arrangements	1,578	-	-	1,578
Other movements	55	-	-	55
At 30 June 2020	31,197	3,990	5,596	40,783

●	The CET1 ratio increased by 100 basis points to 17.2% primarily due to the release of £1.3 billion following the cancellation of the proposed 2019 dividend payments and associated pension contribution in Q1 2020, as announced by the Board in response to Covid-19. The attributable loss in the period was £705 million however the IFRS 9 transitional arrangements on expected credit losses provided relief of £1,578 million.
●	RWAs increased by £2.3 billion in H1 2020. Credit Risk RWAs increased by £4.7 billion largely due to increased utilisation of existing facilities, new lending under the Government lending initiatives and revision of risk parameters in Commercial Banking. There were offsetting credit risk reductions in UK Personal Banking and NatWest Markets segments. Market Risk RWAs decreased by £1.5 billion, primarily reflecting movements in risks-not-in-VaR (RNIV) and Incremental Risk Charge (IRC) as well as a reduction in non-modelled market risk during the period.
●	The CRR leverage ratio remained as 5.1% due to an increase in Tier 1 capital being offset by increases in balance sheet exposures.
●	The total loss absorbing capital ratio of 36.8% is above the Bank of England (BOE) requirement of 21.9% at 1 January 2020, including CRDIV combined buffer requirements.
●	In the first half of 2020, NatWest Group plc issued $1.6 billion (£1.3 billion) new MREL eligible senior debt, $1.5 billion (£1.2 billion) of AT1 and £1.0 billion Tier 2 securities. NatWest Group plc made a redemption announcement on $2 billion (£1.3 billion) AT1 in June 2020 which have been excluded from capital and will be redeemed in August 2020. CET1 reduced by £345 million due to the FX impact on the redemption announcement. In subsidiaries, a £1.25 billion covered bond from National Westminster Bank Plc matured and NatWest Markets Plc issued two benchmark transactions, in the form of a €1.0 billion five - year fixed rate EMTN and a $1.0 billion three - year fixed rate US Rule 144A programme issuance.
●	NatWest Group participation in the BOE Term Funding Scheme (TFS) reduced by £5 billion and the Group drew down £5 billion under the BOE Term Funding Scheme with additional incentives for Small and Medium-sized Enterprises (TFSME) during H1 2020.
●	UBI DAC borrowed €3.1 billion from the European Central Bank (ECB) Targeted longer-term refinancing operation (TLTRO 3) and repaid €2.0 billion of TLTRO 2.
●	H1 2020 published LCR ratio of 166% is 14% higher than FY 2019 driven by increased deposits in NatWest Holdings Limited and Treasury issuance including AT1, Tier 2 and MREL, partially offset by NatWest Holdings Limited lending growth driven by mortgages and government schemes lending.
●	The net stable funding ratio was at 144% compared to 141% for FY 2019. The increase is mainly due to deposits growth.

●	IFRS 9 Transition - NatWest Group has elected to take advantage of the transitional regulatory capital rules in respect of expected credit losses following the adoption of IFRS 9; it had previously had a negligible impact up to Q4 2019. The CRR Covid-19 amendment now requires a full CET1 addback for the movement in stage 1 and stage 2 ECL from 1 January 2020 for the next two years. The IFRS 9 transitional arrangement impact on NatWest Group CET1 regulatory capital at 30 June 2020 is £1.6 billion.
●	UK Leverage exposure - The Prudential Regulation Authority (PRA) announced the ability for firms to apply for a modification by consent to permit the netting of regular-way purchase and sales settlement balances. The PRA also offered a further modification that gave an exclusion from the UK Leverage Exposure for Bounce Back Loans (BBL) and other 100% guaranteed government Covid-19 lending schemes. The NatWest Group has received permission to apply these and it has reduced the UK leverage exposure by approximately £6.9 billion and £5.2 billion respectively.
●	CRR Leverage exposure - The CRR Covid-19 amendment accelerated a change in CRR2 to allow the netting of regular-way purchase and sales settlement balances. The NatWest Group has applied this and it has reduced the CRR leverage exposure by approximately £6.9 billion.
●	Infrastructure and SME RWA supporting factors - The CRR Covid-19 amendment allowed an acceleration of the planned changes to the SME supporting factor and the introduction of an Infrastructure supporting factor, with these now being applicable with immediate effect. NatWest Group intends to implement these beneficial changes which will reduce RWAs but has not yet concluded the required operational change project to implement.
●	Prudential Valuation Adjustment (PVA) - The European Commission amended the prudent valuation Regulatory Technical Standard such that, due to the exceptional levels of market volatility, the aggregation factor was increased from 50% to 66% until 31 December 2020. This has reduced NatWest Group's PVA deduction by approximately £100 million.
●	Market Risk Value-at-risk (VaR) model capital multiplier - The PRA and De Nederlandsche Bank (DNB) have announced temporary approaches in relation to the exceptional levels of market volatility which has resulted in an increase in VaR model back testing exceptions in NatWest Markets Plc and NatWest Markets N.V.. Under the PRA temporary approach, capital multiplier increases due to new back testing exceptions which have resulted in an increase in capital requirements can be offset through a commensurate reduction in RNIV capital requirements. Under the DNB approach, back testing exceptions have been allowed to be excluded from the capital multiplier. The PRA approach resulted in approximately £2,300 million benefit and the DNB approach a benefit of approximately €100 million.
●	Capital buffers - Many countries have recently announced reductions in their countercyclical capital buffer rates in response to Covid-19. Most notably for NatWest Group, the Financial Policy Committee reduced the UK rate from 1% to 0% effective from 11 March 2020. The CBI also announced a reduction of the Republic of Ireland rate from 1% to 0% effective from 1 April 2020.

		Counterparty		Operational
	Credit risk	credit risk	Market risk	risk	Total
	£bn	£bn	£bn	£bn	£bn
At 1 January 2020	131.0	12.6	13.0	22.6	179.2
Foreign exchange movement	2.1	0.4	-	-	2.5
Business movement	2.8	(0.6)	1.0	(0.7)	2.5
Risk parameter changes (1)	(0.6)	-	-	-	(0.6)
Methodology changes (2)	0.3	-	(0.1)	-	0.2
Model updates	0.1	-	-	-	0.1
Other movements (3)	-	-	(2.4)	-	(2.4)
At 30 June 2020	135.7	12.4	11.5	21.9	181.5

	30 June 2020				31 December 2019
		Balance				Balance
	Par	sheet	Regulatory	LAC	Par	sheet	Regulatory	LAC
	value (1)	value	value(2)	value (3)	value (1)	value	value (2)	value (3)
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
CET1 capital (4)	31.2	31.2	31.2	31.2	29.1	29.1	29.1	29.1

Tier 1 capital: end-point CRR compliant AT1
of which: NatWest Group (holdco)	4.0	4.0	4.0	4.0	4.0	4.0	4.0	4.0
of which: NatWest Group operating
subsidiaries (opcos)	-	-	-	-	-	-	-	-
	4.0	4.0	4.0	4.0	4.0	4.0	4.0	4.0
Tier 1 capital: end-point CRR non compliant
of which: holdco	1.5	1.7	1.5	0.5	1.4	1.6	1.4	0.5
of which: opcos	0.1	0.1	0.1	0.1	0.1	0.1	0.1	0.1
	1.6	1.8	1.6	0.6	1.5	1.7	1.5	0.6
Tier 2 capital: end-point CRR compliant
of which: holdco	9.3	9.7	5.5	6.2	6.2	6.4	4,8	4.7
of which: opcos	0.5	0.5	0.1	0.4	0.5	0.5	0.1	0.4
	9.8	10.2	5.6	6.6	6.7	6.9	4.9	5.1
Tier 2 capital: end-point CRR non compliant
of which: holdco	0.1	0.1	0.1	0.1	0.1	0.1	0.1	0.1
of which: opcos	1.6	1.9	1.2	1.7	1.6	1.8	1.2	1.6
	1.7	2.0	1.3	1.8	1.7	1.9	1.3	1.7
Senior unsecured debt securities issued by:
NatWest Group holdco	21.0	22.5	-	22.5	18.6	19.2	-	19.2
NatWest Group opcos	22.5	23.0	-	-	21.1	20.7	-	-
	43.5	45.5	-	22.5	39.7	39.9	-	19.2
Total	91.8	94.7	43.7	66.7	82.7	83.5	40.8	59.7

RWAs				181.5				179.2
UK leverage exposure				585.1				570.3

LAC as a ratio of RWAs				36.8%				33.3%
LAC as a ratio of UK leverage exposure				11.4%				10.5%

(1)	Par value reflects the nominal value of securities issued.
(2)	Regulatory capital instruments issued from operating companies are included in the transitional LAC calculation, to the extent they meet the current MREL criteria.
(3)	LAC value reflects NatWest Group's interpretation of the Bank of England's approach to setting a minimum requirement for own funds and eligible liabilities (MREL), published in June 2018. MREL policy and requirements remain subject to further potential development, as such NatWest Group estimated position remains subject to potential change. Liabilities excluded from LAC include instruments with less than one year remaining to maturity, structured debt, operating company senior debt, and other instruments that do not meet the MREL criteria. The LAC calculation includes eligible Tier 1 and Tier 2 securities before the application of any regulatory caps or adjustments.
(4)	Corresponding shareholders' equity was £43.1 billion (2019 - £43.5 billion).
(5)	Regulatory amounts reported for AT1, Tier 1 and Tier 2 instruments are before grandfathering restrictions imposed by CRR.
(6)	NatWest Group is no longer recognised as a G-SII from 1 January 2020 and is therefore not subject to the CRR MREL requirement as of this date which references CRR2 leverage exposure. To aid comparison the leverage exposure, and resulting ratio, is disclosed according to the BoE leverage framework for all time periods.

	BBL			CBIL			CLBIL
		Drawdown	% of BBIL to		Drawdown	% of CBIL to		Drawdown	% of CLBIL to
30 June 2020	Volume	amount (£m)	Sector loans	Volume	amount (£m)	Sector loans	Volume	amount (£m)	Sector loans
Wholesale lending by sector
Airlines and aerospace	175	5	0.21%	17	4	0.17%	-	-	-
Automotive	9,267	309	4.07%	495	111	1.46%	26	22	0.29%
Education	1,347	36	2.11%	83	21	1.23%	4	30	1.76%
Health	6,976	222	3.78%	543	69	1.17%	2	5	0.09%
Land transport and logistics	6,222	181	3.94%	306	66	1.44%	2	3	0.07%
Leisure	22,776	715	7.13%	1,697	305	3.04%	16	11	0.11%
Oil and gas	197	6	0.29%	13	5	0.24%	-	-	-
Retail	23,824	808	10.19%	1,395	328	4.14%	13	48	0.61%
Shipping	113	4	0.34%	15	3	0.25%	2	-	-
Textiles	844	25	13.37%	94	18	9.63%	2	-	-
Property	12,284	402	0.99%	327	64	0.16%	4	10	0.02%
Other (including Business
Banking)	116,382	3,082	3.40%	8,742	1,406	1.55%	72	52	0.06%
Total	200,408	5,795	3.32%	13,727	2,400	1.38%	143	181	0.10%

UK Personal Banking	Mortgages					ECL				Proportion of mortgage portfolio
				Not within
				IFRS 9 ECL
	Stage 1	Stage 2	Stage 3	scope	Total	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
30 June 2020	£m	£m	£m	£m	£m	£m	£m	£m	£m	%	%	%	%
≤50%	4,441	661	31	4	5,137	-	4	5	9	9.2	14.7	5.8	9.6
>50% and ≤70%	6,722	1,226	30	1	7,979	1	8	4	13	13.7	19.4	6.2	14.3
>70% and ≤80%	3,159	1,447	11	-	4,617	1	9	2	12	15.8	21.3	6.2	17.1
>80 and ≤90%	1,727	1,356	6	-	3,089	-	13	1	14	16.8	23.8	7.8	19.3
>90% and ≤100%	378	121	1	-	500	-	2	-	2	18.5	25.1	2.3	19.7
>100% and ≤110%	1	4	-	-	5	-	1	-	1	3.4	9.8	-	7.3
>110% and ≤130%	2	3	-	-	5	-	-	-	-	5.6	6.3	-	5.8
>130 and ≤150%	-	2	-	-	2	-	-	-	-	-	9.0	-	5.5
>150%	-	-	-	-	-	-	-	-	-	-	-	-	-
Total	16,430	4,820	79	5	21,334	2	37	12	51	12.7	20.1	6.0	13.8

Ulster Bank RoI	Mortgages					ECL				Proportion of mortgage portfolio
				Not within
				IFRS 9 ECL
	Stage 1	Stage 2	Stage 3	scope	Total	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
30 June 2020	£m	£m	£m	£m	£m	£m	£m	£m	£m	%	%	%	%
≤50%	148	115	49	-	312	-	5	13	18	3.5	21.4	11.9	6.1
>50% and ≤70%	139	119	44	-	302	-	5	11	16	4.1	21.9	14.8	7.2
>70% and ≤80%	47	62	23	-	132	-	3	7	10	3.4	19.0	15.1	7.1
>80 and ≤90%	40	53	21	-	114	-	3	7	10	3.8	15.7	14.1	7.4
>90% and ≤100%	2	42	16	-	60	-	2	6	8	0.8	17.3	12.4	9.3
>100% and ≤110%	1	17	13	-	31	-	1	5	6	0.9	12.5	13.2	9.5
>110% and ≤130%	-	13	9	-	22	-	1	4	5	-	15.8	9.0	9.8
>130 and ≤150%	-	1	3	-	4	-	-	2	2	-	21.2	10.8	11.3
>150%	-	1	-	-	1	-	-	-	-	-	8.2	4.1	4.8
Total	377	423	178	-	978	-	20	55	75	3.6	19.1	13.0	7.0

	30 June 2020				31 December 2019
	UK	RoI	Other	Total	UK	RoI	Other	Total
By geography and sub sector (1)	£m	£m	£m	£m	£m	£m	£m	£m
Investment
Residential (2)	4,791	412	5	5,208	4,507	462	27	4,996
Office (3)	3,737	210	58	4,005	2,916	183	83	3,182
Retail (4)	5,419	64	78	5,561	5,277	63	62	5,402
Industrial (5)	2,881	18	100	2,999	2,457	18	115	2,590
Mixed/other (6)	3,199	202	170	3,571	3,672	187	56	3,915
	20,027	906	411	21,344	18,829	913	343	20,085
Development
Residential (2)	3,052	233	8	3,293	2,464	165	5	2,634
Office (3)	137	22	-	159	78	17	-	95
Retail (4)	147	-	1	148	134	2	1	137
Industrial (5)	129	2	-	131	85	2	-	87
Mixed/other (6)	24	2	-	26	16	2	-	18
	3,489	259	9	3,757	2,777	188	6	2,971
Total	23,516	1,165	420	25,101	21,606	1,101	349	23,056

(1)	Geographical splits are based on country of collateral risk.
(2)	Properties including houses, flats and student accommodation.
(3)	Properties including offices in central business districts, regional headquarters and business parks.
(4)	Properties including high street retail, shopping centres, restaurants, bars and gyms.
(5)	Properties including distribution centres, manufacturing and warehouses.
(6)	Properties that do not fall within the other categories above. Mixed generally relates to a mixture of retail/office with residential.

Interim Results 2020 - (Part 1 of 2)

Business performance summary

Risk-weighted assets

Companies

UK 100

Latest directors dealings

	UK mortgages		RoI mortgages		Credit cards		Other		Total
	Loans	ECL	Loans	ECL	Loans	ECL	Loans	ECL	Loans	ECL
30 June 2020	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Personal
Currently in arrears (>30 DPD)	532	21	34	3	30	10	102	35	698	69
Currently up-to-date	23,553	173	2,173	95	1,291	233	3,063	440	30,080	941
- PD deterioration	19,089	166	1,332	69	859	187	2,553	383	23,833	805
- Up-to-date, PD persistence	1,017	1	66	2	293	15	256	17	1,632	35
- Other driver (adverse credit, forbearance etc)	3,447	6	775	24	139	31	254	40	4,615	101
Total Stage 2	24,085	194	2,207	98	1,321	243	3,165	475	30,778	1,010

31 December 2019
Personal
Currently in arrears (>30 DPD)	528	14	21	3	16	6	92	19	657	42
Currently up-to-date	9,860	73	1,056	28	1,243	126	2,218	234	14,377	461
- PD deterioration	4,184	60	208	15	727	92	1,482	188	6,601	355
- Up-to-date, PD persistence	1,812	5	252	4	422	20	540	29	3,026	58
- Other driver (adverse credit, forbearance etc)	3,864	8	596	9	94	14	196	17	4,750	48
Total Stage 2	10,388	87	1,077	31	1,259	132	2,310	253	15,034	503

	Property		Corporate		FI		Other		Total
	Loans	ECL	Loans	ECL	Loans	ECL	Loans	ECL	Loans	ECL
30 June 2020	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Wholesale
Currently in arrears (>30 DPD)	346	7	492	27	75	3	-	-	913	37
Currently up-to-date	12,054	385	49,550	1,527	3,714	66	1	-	65,319	1,978
- PD deterioration	10,715	304	47,137	1,418	3,217	38	1	-	61,070	1,760
- Up-to-date, PD persistence	25	-	81	1	1	-	-	-	107	1
- Other driver (forbearance, RoCL etc)	1,314	81	2,332	108	496	28	-	-	4,142	217
Total Stage 2	12,400	392	50,042	1,554	3,789	69	1	-	66,232	2,015

31 December 2019
Wholesale
Currently in arrears (>30 DPD)	57	2	219	6	7	-	-	-	283	8
Currently up-to-date	2,523	45	9,485	192	539	4	4	-	12,551	241
- PD deterioration	1,386	28	6,083	144	368	3	3	-	7,840	175
- Up-to-date, PD persistence	45	1	183	5	2	-	-	-	230	6
- Other driver (forbearance, RoCL etc)	1,092	16	3,219	43	169	1	1	-	4,481	60
Total Stage 2	2,580	47	9,704	198	546	4	4	-	12,834	249

●	The deteriorated economic outlook, as detailed in the Covid-19 - estimating ECL in uncertain times section, including significant falls in GDP and commercial real estate valuations, resulted in increased IFRS 9 PDs. Consequently, compared to the 2019 year-end, a larger proportion of the exposures exhibited a SICR causing Stage 2 exposures to increase significantly.
●	PD deterioration is the main trigger for identifying a SICR and Stage 2 treatment, although there has also been an increase in arrears.
●	There was an increase in flows on to the Risk of Credit Loss framework, however, these have been recorded under PD deterioration if this Stage 2 trigger has also been met.

●	The primary driver of credit deterioration was PD, which including persistence, accounted for the majority of movements into Stage 2. High risk back-stops, for example, forbearance and adverse credit bureau, provide additional valuable discrimination.
●	However, with a larger proportion of exposures now triggering PD deterioration following the deteriorated economic outlook, the proportion of accounts triggering high risk backstops alone decreased.

(1)	The table is prepared on a hierarchical basis from top to bottom, for example, accounts with PD deterioration may also trigger backstop(s) but are only reported under PD deterioration.
(2)	£322 million of Ulster Bank Rol mortgage exposure which did not meet existing SICR criteria have been classified within Stage 2 following a strategic review and are included in other reasons. It includes customers that have accessed payday lending, interest only mortgages past end of term, a small number of mortgage customers on a highly flexible mortgage significantly behind their repayment plan and customers breaching risk appetite thresholds for new business acquisition.
(3)	Includes customers where a PD assessment cannot be undertaken due to missing PDs.
(4)	£703 million of Ulster Bank Rol Wholesale exposure which did not meet existing SICR criteria have been classified within Stage 2 following strategic and sectoral reviews and are included in other reasons.

●	PD deterioration continued to be the primary trigger of migration of exposures from Stage 1 to Stage 2. As the economic outlook deteriorated, it now accounts for a higher proportion of the balances migrated to Stage 2.
●	Moving exposures on to the Risk of Credit Loss framework remains an important backstop indicator of a SICR.
●	The exposures classified under the Stage 2 Risk of Credit Loss framework trigger decreased over the period as more exposures were captured under the PD deterioration Stage 2 trigger.
●	NatWest Group continues to appraise its IFRS 9 SICR rules in the context of effectiveness, volatility and industry consistency. The recent PD driven increase in Stage 2 exposures in the Wholesale portfolios highlighted the gradual diminished impact on ECL of the threshold for better quality portfolios under stress, suggesting possible conservatism in the SICR rules for these portfolios. As an illustration, an increase of the de minimus PD threshold to 0.75% in the SICR rules could decrease the Wholesale portfolios Stage 2 exposure by 24% with a two basis point reduction on good book ECL coverage.