NWG plc Q1 2024 Interim Management Statement

NatWest Group plc
26 April 2024
 

 

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NatWest Group

Q1 2024

Interim Management Statement

 

 






 

 

 

 

 

 

NatWest Group plc

natwestgroup.com

 

 


NatWest Group Q1 2024 results

Page

Highlights

2

Business performance summary


  Chief Financial Officer's review

4

  Retail Banking

5

  Private Banking

6

  Commercial & Institutional

7

  Central items & other

8

  Segment performance

9

Risk and capital management


  Credit risk

13

  Capital, liquidity and funding risk

21

Condensed consolidated financial statements

26

Notes to the financial statements

30

Additional information

31

Appendix - Non-IFRS financial measures

34

 

 


Q1 2024 performance summary

Chief Executive, Paul Thwaite, commented:

"NatWest Group has delivered a strong set of results for the first quarter - with an operating profit of £1.3 billion - as we remain focused on the priorities we set out in February, which will help us shape the future of this bank. 

Our performance is grounded in the vital role we play in the economy and in the lives of our 19 million customers. Though macro-uncertainty continues, customer confidence and activity is improving, with both lending(1) and deposits up in the quarter and impairments remaining low, reflecting our well-diversified business.

We are ambitious for this bank, and by succeeding for our customers, we will succeed for our shareholders. Our first priority is delivering disciplined growth across our three businesses by serving our customers well. At the same time, we are becoming simpler, more productive and easier to deal with. As a result, we aim to generate returns that allow us to support our customers, invest in our business and deliver attractive distributions to shareholders.

We are also pleased with the recent momentum in the reduction of HM Treasury's stake in the bank. Returning NatWest Group to private ownership is a shared ambition and we believe it is in the best interests of both the bank and all our shareholders."

Strong Q1 2024 performance

-    Q1 2024 attributable profit of £918 million and a return on tangible equity (RoTE) of 14.2%.

-    Total income excluding notable items was £3,414 million. The reduction of £28 million, or 0.8%, compared with Q4 2023, was due to the impact of one day fewer, with mortgage margin pressure largely offset by higher markets income in Commercial & Institutional, and £406 million lower than Q1 2023 principally reflecting lower deposit balances and mix changes, and lending margin pressure.

-    Net interest margin (NIM) of 2.05% was 6 basis points higher than Q4 2023 principally reflecting notable items and changes within central items, while NIM across the three businesses was stable.

-    Other operating expenses were broadly stable compared with Q4 2023 (£13 million lower), and £96 million, or 5.0%, higher than Q1 2023 principally reflecting the Bank of England Levy and increased staff costs due to inflation and severance costs, partially offset by ongoing simplification of our business and lower costs in relation to our withdrawal from the Republic of Ireland

-    A net impairment charge of £93 million, or 10 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 £1.4 billion, or 0.4% in the quarter, to £357.0 billion primarily reflecting growth in Corporate & Institutions partially offset by increased mortgage redemptions in the quarter within Retail Banking.

-    Up to 31 March 2024 we have provided £68.5 billion of our target to provide £100 billion climate and sustainable funding and financing between 1 July 2021 and the end of 2025.

-    Customer deposits excluding central items increased by £0.9 billion, or 0.2%, in the quarter primarily reflecting growth of £2.0 billion in Retail Banking partially offset by a £1.2 billion reduction in Commercial & Institutional due to active management of our commercial deposits and reduced liquidity in the market. Term balances now account for 17% of our book, up from 16% at the end of 2023.

-    The loan:deposit ratio (LDR) (excl. repos and reverse repos) was 84% at Q1 2024, with customer deposits exceeding net loans to customers by around £66 billion.

-    The liquidity coverage ratio (LCR) of 151%, representing £53.8 billion headroom above 100% minimum requirement, increased by 7 percentage points compared with Q4 2023 primarily due to increased issuance and customer deposits coupled with the replacement of the Cash Ratio Deposit scheme with a Bank of England Levy.

-    TNAV per share increased by 10 pence in the quarter to 302 pence primarily reflecting the attributable profit for the period.

Shareholder return supported strong capital generation

-    Common Equity Tier (CET1) ratio of 13.5% was 10 basis points higher than Q4 2023 as the attributable profit for the quarter, c.50 basis points, was largely offset by a £3.3 billion increase in RWAs, c.25 basis points, and a £367 million ordinary dividend deduction, c.20 basis points.

-    RWAs increased by £3.3 billion in the quarter to £186.3 billion largely reflecting a £1.6 billion increase associated with the annual update to operational risk and lending growth within Commercial & Institutional. 

Outlook (2)

-      We retain the outlook guidance provided in the 2023 Annual Report and Accounts with the exception of full year 2024 Group operating costs (excluding litigation and conduct costs) which is now expected to be broadly stable compared with 2023 excluding around £0.1 billion increase in bank levies.

(1)     Loans to customers excluding central items.

(2)     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 2023 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


2024

2023

2023

Summary consolidated income statement

£m 

£m 

£m 

Net interest income

2,651

2,638

2,902

Non-interest income

824

899

974

Total income

3,475

3,537

3,876

Litigation and conduct costs

(24)

(113)

(56)

Other operating expenses

(2,028)

(2,041)

(1,932)

Operating expenses

(2,052)

(2,154)

(1,988)

Profit before impairments

1,423

1,383

1,888

Impairment losses

(93)

(126)

(70)

Operating profit before tax

1,330

1,257

1,818

Tax (charge)/credit

(339)

5

(512)

Profit from continuing operations

991

1,262

1,306

(Loss)/profit from discontinued operations, net of tax

(4)

26

35

Profit for the period

987

1,288

1,341

 




Performance key metrics and ratios




Notable items within total income (1)

£61m

£95m

£56m

Total income excluding notable items (1)

£3,414m

£3,442m

£3,820m

Net interest margin (2)

2.05%

1.99%

2.25%

Average interest earning assets (2)

£521bn

£525bn

£522bn

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

58.4%

57.7%

49.8%

Loan impairment rate (1)

10bps

13bps

7bps

Profit attributable to ordinary shareholders

£918m

£1,229m

£1,279m

Total earnings per share attributable to ordinary shareholders - basic

10.5p

13.9p

13.2p

Return on tangible equity (RoTE) (1)

14.2%

20.1%

19.8%

Climate and sustainable funding and financing (3)

£6.6bn

£8.7bn

£7.6bn


As at


31 March

31 December

31 March


2024

2023

2023

 

£bn

£bn

£bn 

Balance sheet

 



Total assets

697.5

692.7

695.6

Loans to customers - amortised cost

378.0

381.4

374.2

Loans to customers excluding central items (1,4)

357.0

355.6

352.4

Loans to customers and banks - amortised cost and FVOCI 

387.7

392.0

385.8

Total impairment provisions (5)

3.6

3.6

3.4

Expected credit loss (ECL) coverage ratio

0.94%

0.93%

0.89%

Assets under management and administration (AUMA) (1)

43.1

40.8

35.2

Customer deposits 

432.8

431.4

430.5

Customer deposits excluding central items (1,4)

420.0

419.1

421.8

Liquidity and funding

 



Liquidity coverage ratio (LCR)

151%

144%

139%

Liquidity portfolio (6)

229

223

216

Net stable funding ratio (NSFR)

136%

133%

141%

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

84%

84%

83%

Total wholesale funding

87

80

79

Short-term wholesale funding

31

28

25

Capital and leverage

 



Common Equity Tier 1 (CET1) ratio (7)

13.5%

13.4%

14.4%

Total capital ratio (7)

18.8%

18.4%

19.6%

Pro forma CET1 ratio (excl. foreseeable items) (8)

14.3%

14.2%

15.7%

Risk-weighted assets (RWAs)

186.3

183.0

178.1

UK leverage ratio

5.1%

5.0%

5.4%

Tangible net asset value (TNAV) per ordinary share (1,9)

302p

292p

278p

Number of ordinary shares in issue (millions) (9)

8,727

8,792

9,581

 

(1)

(2)

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

Refer to page 37 of the Non-IFRS financial measures appendix for details.

(3)

NatWest Group uses its climate and sustainable funding and financing inclusion (CSFFI) criteria to determine the assets, activities and companies that are eligible to be included within its climate and sustainable funding and financing target. This includes both provision of committed (on and off-balance sheet) funding and financing, including provision of services for underwriting issuances and private placements.

(4)

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

(5)

Includes £0.1 billion relating to off-balance sheet exposures (31 December 2023 - £0.1 billion; 31 March 2023 - £0.1 billion).

(6)

Comparative period for March 2023 has been re-presented on an LCR basis in line with the Liquidity portfolio definition as of 31 December 2023.

(7)

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

(8)

The pro forma CET1 ratio at 31 March 2024 excludes foreseeable items of £1,633 million: £1,380 million for ordinary dividends and £253 million foreseeable charges (31 December 2023 excludes foreseeable items of £1,538 million: £1,013 million for ordinary dividends and £525 million foreseeable charges; 31 March 2023 excludes foreseeable items of £2,351 million: £1,479 million for ordinary dividends and £872 million foreseeable charges).

(9)

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

Business performance summary

Chief Financial Officer's review

We delivered an operating profit of £1,330 million in the first quarter with a RoTE of 14.2%. Total income excluding notable items was broadly stable on Q4 2023, and we continue to see low levels of default across our portfolio, with a net impairment charge of 10 basis points of gross customer loans.

Net lending across the three businesses has increased in the quarter, as growth in Corporate & Institutions was partially offset by higher mortgage redemptions, and we have seen growth in customer deposits. Our robust balance sheet means that we remain in a strong liquidity position, with an LCR of 151%, representing £53.8 billion headroom above 100% minimum requirement, and an LDR (excl. repos and reverse repos) of 84%. Our CET1 ratio remains within our targeted range at 13.5%.

Financial performance

Total income decreased by 1.8% to £3,475 million compared with Q4 2023 and was 10.3% lower than Q1 2023. Total income excluding notable items was £3,414 million, a reduction of £28 million, or 0.8%, compared with Q4 2023, due to the impact of one day fewer, with mortgage margin pressure largely offset by higher markets income in Commercial & Institutional, and £406 million lower than Q1 2023 principally reflecting lower deposit balances and mix changes, and lending margin pressure.

NIM of 2.05% was 6 basis points higher than Q4 2023 principally reflecting notable items and changes within central items, while NIM across the three businesses was stable.

Total operating expenses were £102 million lower than Q4 2023 and £64 million higher than Q1 2023. Other operating expenses were broadly stable compared with Q4 2023 (£13 million lower), and £96 million, or 5.0%, higher than Q1 2023 principally reflecting the Bank of England Levy and increased staff costs due to inflation and severance costs, partially offset by simplification in our business and lower costs in relation to our withdrawal from the Republic of Ireland. We remain committed to deliver on our full year cost guidance, excluding the impact of increased bank levies.

A net impairment charge of £93 million principally reflected the continued strong performance of our lending book. Levels of default remain stable and at low levels across the portfolio despite inflationary pressures and the higher interest rate environment. Compared with Q4 2023, our ECL provision remained flat at £3.6 billion and our ECL coverage ratio has increased from 0.93% to 0.94%. We retain post model adjustments of £0.4 billion related to economic uncertainty, or 11.3% of total impairment provisions. Whilst we are comfortable with the strong credit performance of our book, we will continue to assess this position regularly and are closely monitoring the impacts of inflationary pressures on the UK economy and our customers.

As a result, we are pleased to report an attributable profit for Q1 2024 of £918 million, with earnings per share of 10.5 pence and a RoTE of 14.2%.

Net loans to customers excluding central items increased by £1.4 billion in the quarter to £357.0 billion primarily reflecting a £3.4 billion increase in Commercial & Institutional partially offset by £1.7 billion reduction in Retail Banking due to higher mortgage redemptions. Total gross new mortgage lending was £5.2 billion in the quarter, compared with £9.9 billion in Q1 2023 and £5.6 billion in Q4 2023, representing flow share of c.10.5%. Within Commercial & Institutional, growth was largely within Corporate & Institutions, partly offset by UK Government Scheme repayments of £0.6 billion.

Up to 31 March 2024 we have provided £68.5 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 2024 we provided £6.6 billion climate and sustainable funding and financing, which included £0.5 billion in lending for EPC A and B rated residential properties.

Customer deposits excluding central items increased by £0.9 billion in the quarter to £420.0 billion reflecting £2.0 billion growth in Retail Banking partially offset by a £1.2 billion reduction in Commercial & Institutional primarily as a result of active management of our commercial deposits and reduced liquidity in the market. Deposit mix was more stable in the quarter than the levels of migration observed in 2023; term balances now account for 17% of our book, up from 16% at Q4 2023.

TNAV per share increased by 10 pence in the quarter to 302 pence primarily reflecting the attributable profit for the period.

Capital and leverage

The CET1 ratio was 13.5%, or 13.4% excluding IFRS 9 transitional relief, and increased by 10 basis points in the quarter as the attributable profit, c.50 basis points, was largely offset by a £3.3 billion increase in RWAs, c.25 basis points, and a £367 million ordinary dividend deduction, c.20 basis points. NatWest Group's minimum requirement for own funds and eligible liabilities (MREL) was 30.7%.

RWAs increased by £3.3 billion in the quarter to £186.3 billion largely reflecting a £1.6 billion increase associated with the annual update to operational risk and lending growth within Commercial & Institutional. 

Funding and liquidity

The LCR increased by 7 percentage points to 151%, representing £53.8 billion headroom above 100% minimum requirements primarily due to increased issuance and customer deposits coupled with the replacement of the Cash Ratio Deposit scheme with a Bank of England Levy. Our primary liquidity at Q1 2024 was £158.4 billion and £112.8 billion, or 71%, of this was cash at central banks. Total wholesale funding increased by £7.0 billion in the quarter to £86.6 billion.

 

Business performance summary

Retail Banking


Quarter ended


31 March

31 December

31 March


2024

2023

2023


£m

£m

£m

Total income

1,325

1,369

1,604

Operating expenses

(773)

(681)

(696)

   of which: Other operating expenses

(767)

(647)

(693)

Impairment losses

(63)

(103)

(114)

Operating profit

489

585

794


 



Return on equity (1)

16.5%

20.2%

30.0%

Net interest margin (2)

2.22%

2.23%

2.75%

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

57.9%

47.3%

43.2%

Loan impairment rate (1)

12bps

20bps

22bps

 


As at


31 March

31 December

31 March


2024

2023

2023


£bn

£bn

£bn

Net loans to customers (amortised cost)

203.5

205.2

201.7

Customer deposits

190.0

188.0

184.0

RWAs

62.5

61.6

55.6

 

(1)

(2)

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

Refer to page 37 of the Non-IFRS financial measures appendix for details.

 

During Q1 2024, Retail Banking continued to take a measured approach to risk, whilst delivering an operating profit of £0.5 billion and a return on equity of 16.5%.

Retail Banking provided £0.5 billion of climate and sustainable funding and financing in Q1 2024 from lending on properties with an EPC rating of A or B.

-

Total income was £44 million, or 3.2%, lower than Q4 2023 due to continued mortgage margin dilution and the impact of one day fewer in the quarter. Total income was £279 million, or 17.4%, lower than Q1 2023 reflecting mortgage margin dilution, impact of the deposit balance mix shift from non-interest bearing to interest bearing balances and higher funding costs, partly offset by lending growth.

-

Net interest margin was 1 basis point lower than Q4 2023 largely reflecting mortgage margin dilution partly offset by increasing structural hedge benefit.

-

Other operating expenses were £120 million, or 18.5%, higher than Q4 2023 reflecting the Bank of England Levy, increased severance costs as well as branch and property exit costs. Other operating expenses were £74 million, or 10.7%, higher than Q1 2023 reflecting the Bank of England Levy, increased severance costs and branch and property exit costs partly offset by savings from a 7.1% reduction in headcount.

-

An impairment charge of £63 million in Q1 2024 with stage 3 inflows reflecting normalisation of risk parameters, partly offset by good book releases related to model updates.

-

Net loans to customers were £1.7 billion, or 0.8%, lower than Q4 2023 reflecting lower mortgage balances of £1.8 billion with higher redemptions only partly offset by gross new mortgage lending of £5.0 billion. Cards balances increased by £0.3 billion partly offset by £0.2 billion lower personal advances.

-

Customer deposits increased by £2.0 billion, or 1.1%, in Q1 2024 reflecting growth in savings and current account balances.

-

RWAs increased by £0.9 billion, or 1.5%, in Q1 2024 primarily due to the annual update for operational risk calculation.



 

Business performance summary

Private Banking


Quarter ended


31 March

31 December

31 March


2024

2023

2023


£m

£m

£m

Total income

208

209

296

Operating expenses

(181)

(206)

(155)

   of which: Other operating expenses

(180)

(208)

(152)

Impairment releases/(losses)

6

(5)

(8)

Operating profit/(loss)

33

(2)

133


 



Return on equity (1)

6.7%

(1.8%)

28.5%

Net interest margin (2)

2.06%

2.07%

3.31%

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

86.5%

99.5%

51.4%

Loan impairment rate (1)

(13)bps

11bps

17bps

AUM net flows (£bn) (1)

0.4

0.3

0.6

 

 


As at


31 March

31 December

31 March


2024

2023

2023


£bn

£bn

£bn

Net loans to customers (amortised cost)

18.2

18.5

19.2

Customer deposits

37.8

37.7

37.3

RWAs

11.3

11.2

11.4

Assets Under Management (AUMs) (1)

33.6

31.7

29.6

Assets Under Administration (AUAs) (1)

9.5

9.1

5.6

Total Assets Under Management and Administration (AUMA) (1)

43.1

40.8

35.2

 

(1)

(2)

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

Refer to page 37 of the Non-IFRS financial measures appendix for details.

 

During Q1 2024, Private Banking delivered a return on equity of 6.7% and an operating profit of £33 million, reflecting the impact of 2023 sharp changes in deposit volume and mix adversely impacting hedge returns. Q1 2024 has seen a strong performance in deposits given seasonal tax outflow impact and good AUMA growth setting a strong foundation for improved profitability.

Private Banking provided £0.07 billion of climate and sustainable funding and financing in Q1 2024 from lending on properties with an EPC rating of A or B.

-

Total income was broadly flat compared to Q4 2023 as deposit balances and mix continued to stabilise with the impact of one day fewer largely offset by higher investment fee income from increased AUMA. Total income was £88 million, or 29.7%, lower than Q1 2023 reflecting lower deposit balances and a change in product mix as customers migrated to savings products offering higher returns, combined with a reduction in lending volumes and mortgage margin dilution.  

-

Net interest margin was 1 basis point lower than Q4 2023 reflecting mortgage margin dilution.

-

Other operating expenses were £28 million, or 13.5%, lower than Q4 2023 reflecting the annual Bank Levy charge in Q4 2023, and a one-off additional VAT charge catch up along with lower strategic severance costs. Other operating expenses were £28 million, or 18.4%, higher than Q1 2023 primarily reflecting the Bank of England Levy, an additional VAT charge and higher strategic spend to increase operational efficiency.

-

A net impairment release of £6 million, compared with an £8 million charge in Q1 2023, largely reflects good book releases and lower stage 3 charges.

-

Net loans to customers decreased by £0.3 billion, or 1.6%, in Q1 2024 driven by higher mortgage redemptions, only partly offset by mortgage gross new lending of £0.2 billion.

-

Customer deposits increased by £0.1 billion, or 0.3%, compared with Q4 2023 with increases due to overall personal market growth offsetting tax outflows.

-

AUMA increased by £2.3 billion in Q1 2024 to £43.1 billion, primarily driven by £1.9 billion positive market movements and £0.4 billion AUM net inflows. 

 

 

 



 

Business performance summary

Commercial & Institutional


Quarter ended


31 March

31 December

31 March


2024

2023

2023


£m

£m

£m

Net interest income

1,246

1,269

1,261

Non-interest income

613

563

692

Total income

1,859

1,832

1,953


 



Operating expenses

(1,051)

(1,092)

(1,003)

   of which: Other operating expenses

(1,020)

(1,014)

(959)

Impairment (losses)/releases

(39)

(15)

44

Operating profit

769

725

994


 



Return on equity (1)

14.6%

13.5%

19.5%

Net interest margin (2)

2.07%

2.05%

2.08%

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

54.9%

55.3%

49.1%

Loan impairment rate (1)

11bps

4bps

(13)bps

 


As at


31 March

31 December

31 March


2024

2023

2023


£bn

£bn

£bn

Net loans to customers (amortised cost)

135.3

131.9

131.5

Customer deposits

192.2

193.4

200.5

Funded assets (1)

321.7

306.9

320.4

RWAs

109.9

107.4

104.8

 

(1)

(2)

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

Refer to page 37 of the Non-IFRS financial measures appendix for details.

 

In Q1 2024, Commercial & Institutional continued to support customers with an increase in lending of 2.6% and delivered a strong performance in income and operating profit supporting a return on equity of 14.6%.

Commercial & Institutional provided £6.0 billion of climate and sustainable funding and financing in Q1 2024 to support customers investing in the transition to net zero.

-

Total income was £27 million, or 1.5%, higher than Q4 2023 primarily reflecting higher markets income, partially offset by the impact of one day fewer. Total income was £94 million, or 4.8%, lower than Q1 2023 primarily due to lower deposit returns reflecting lower volumes and continued deposit mix shift from non-interest bearing to interest bearing balances, partially offset by strong capital markets and lending growth in Corporate & Institutions.

-

Net interest margin was 2 basis points higher than Q4 2023 reflecting higher deposit hedge returns and liquidity benefits, partially offset by lower deposit volumes. 

-

Other operating expenses were £6 million, or 0.6%, higher than Q4 2023 reflecting increased staff costs partially offset by a reduction in bank levies. Other operating expenses were £61 million, or 6.4%, higher than Q1 2023 reflecting the impact of inflationary increases in staff costs, continued investment in the business and the introduction of the Bank of England Levy.

-

An impairment charge of £39 million in Q1 2024 remains at low levels with an increase in stage 3 inflows, partly offset by good book releases.

-

Net loans to customers increased by £3.4 billion, or 2.6%, in Q1 2024 largely reflecting a strong performance within Corporate & Institutions, partly offset by continued UK Government scheme repayments of £0.6 billion.

-

Customer deposits decreased by £1.2 billion, or 0.6%, in Q1 2024 largely reflecting reductions within Commercial Mid-market and Business Banking due to active management of our deposits and reduced liquidity in the market.

-

RWAs increased by £2.5 billion, or 2.3%, in Q1 2024 primarily due to lending book growth and the annual update for operational risk.

 



 

Business performance summary

Central items & other


Quarter ended


31 March

31 December

31 March


2024

2023

2023


£m

£m

£m

Continuing operations

 



Total income

83

127

23

Operating expenses (1)

(47)

(175)

(134)

   of which: Other operating expenses

(61)

(172)

(128)

   of which: Ulster Bank RoI direct expenses

(25)

(69)

(100)

Impairment releases/(losses)

3

(3)

8

Operating profit/(loss)

39

(51)

(103)

   of which: Ulster Bank RoI

(47)

(124)

(159)


 




As at


31 March

31 December

31 March


2024

2023

2023


£bn

£bn

£bn

Net loans to customers (amortised cost) (2)

21.0

25.8

21.8

Customer deposits

12.8

12.3

8.7

RWAs

2.6

2.8

6.3

 

(1)

Includes withdrawal-related direct program costs of £8 million for the quarter ended 31 March 2024 (31 December 2023 - £17 million; 31 March 2023 - £49 million).

(2)

Excludes £0.3 billion of loans to customers held at fair value through profit or loss (31 December 2023 - £0.3 billion; 31 March 2023 - £0.5 billion).

 

-

Total income was £44 million lower than Q4 2023 primarily reflecting foreign exchange recycling gains in Q4 2023, not repeated in Q1 2024, partly offset by higher gains on interest and foreign exchange risk management derivatives not in accounting hedge relationships in Q1 2024. Total income was £60 million higher than Q1 2023 primarily reflecting Business Growth Fund gains, gains on liquidity asset bond sales and a loss on surrender of leases in Q1 2023 partially offset by lower gains on interest and foreign exchange risk management derivatives not in accounting hedge relationships.

-

Other operating expenses were £111 million, or 64.5%, lower than Q4 2023 primarily reflecting lower costs in relation to the withdrawal from our operations in the Republic of Ireland, and were £67 million, or 52.3%, lower than Q1 2023.

-

Customer deposits increased by £0.5 billion, or 4.1% in Q1 2024 primarily reflecting repo activity in Treasury. Ulster Bank RoI customer deposit balances were £0.2 billion as at Q1 2024.

-

Net loans to customers decreased £4.8 billion to £21.0 billion in Q1 2024 mainly due to reverse repo activity in Treasury.



 


Segment performance


Quarter ended 31 March 2024


Retail

Private

Commercial &

Central items

Total NatWest


Banking

Banking

Institutional

& other

Group


£m

£m

£m

£m

£m

Continuing operations

 

 

 

 

 

Income statement

 

 

 

 

 

Net interest income

1,216

134

1,246

55

2,651

Non-interest income

109

74

613

28

824

Total income

1,325

208

1,859

83

3,475

Direct expenses

(189)

(61)

(384)

(1,394)

(2,028)

Indirect expenses

(578)

(119)

(636)

1,333

-

Other operating expenses

(767)

(180)

(1,020)

(61)

(2,028)

Litigation and conduct costs

(6)

(1)

(31)

14

(24)

Operating expenses

(773)

(181)

(1,051)

(47)

(2,052)

Operating profit before impairment losses/releases

552

27

808

36

1,423

Impairment (losses)/releases

(63)

6

(39)

3

(93)

Operating profit

489

33

769

39

1,330

 

 

 

 

 

 

Total income excluding notable items (1)

1,325

208

1,864

17

3,414

 

 

 

 

 

 

Additional information

 

 

 

 

 

Return on tangible equity (1)

na

na

na

na

14.2%

Return on equity (1)

16.5%

6.7%

14.6%

nm

na

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

57.9%

86.5%

54.9%

nm

58.4%

Total assets (£bn)

226.4

26.5

388.8

55.8

697.5

Funded assets (£bn) (1)

226.4

26.5

321.7

54.7

629.3

Net loans to customers - amortised cost (£bn)

203.5

18.2

135.3

21.0

378.0

Loan impairment rate (1)

12bps

(13)bps

11bps

nm

10bps

Impairment provisions (£bn)

(1.9)

(0.1)

(1.5)

(0.1)

(3.6)

Impairment provisions - stage 3 (£bn)

(1.2)

-

(0.8)

-

(2.0)

Customer deposits (£bn)

190.0

37.8

192.2

12.8

432.8

Risk-weighted assets (RWAs) (£bn)

62.5

11.3

109.9

2.6

186.3

RWA equivalent (RWAe) (£bn)

62.6

11.3

111.1

3.1

188.1

Employee numbers (FTEs - thousands)

13.1

2.2

12.7

33.3

61.3

Third party customer asset rate (1)

3.79%

4.97%

6.81%

nm

nm

Third party customer funding rate (1)

(2.05%)

(3.14%)

(1.93%)

nm

nm

Average interest earning assets (£bn) (2)

220.6

26.2

241.9

na

521.1

Net interest margin (2)

2.22%

2.06%

2.07%

na

2.05%

nm = not meaningful, na = not applicable

(1)

(2)

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

Refer to page 37 of the Non-IFRS financial measures appendix for details.





 

Segment performance


Quarter ended 31 December 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

1,254

138

1,269

(23)

2,638

Non-interest income

115

71

563

150

899

Total income

1,369

209

1,832

127

3,537

Direct expenses

(211)

(74)

(392)

(1,364)

(2,041)

Indirect expenses

(436)

(134)

(622)

1,192

-

Other operating expenses

(647)

(208)

(1,014)

(172)

(2,041)

Litigation and conduct costs

(34)

2

(78)

(3)

(113)

Operating expenses

(681)

(206)

(1,092)

(175)

(2,154)

Operating profit/(loss) before impairment losses

688

3

740

(48)

1,383

Impairment losses

(103)

(5)

(15)

(3)

(126)

Operating profit/(loss)

585

(2)

725

(51)

1,257

 






Total income excluding notable items (1)

1,369

209

1,834

30

3,442

 






Additional information






Return on tangible equity (1)

na

na

na

na

20.1%

Return on equity (1)

20.2%

(1.8%)

13.5%

nm

na

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

47.3%

99.5%

55.3%

nm

57.7%

Total assets (£bn)

228.7

26.9

385.0

52.1

692.7

Funded assets (£bn) (1)

228.7

26.9

306.9

51.3

613.8

Net loans to customers - amortised cost (£bn)

205.2

18.5

131.9

25.8

381.4

Loan impairment rate (1)

20bps

11bps

4bps

nm

13bps

Impairment provisions (£bn)

(1.9)

(0.1)

(1.5)

(0.1)

(3.6)

Impairment provisions - stage 3 (£bn)

(1.1)

-

(0.9)

-

(2.0)

Customer deposits (£bn)

188.0

37.7

193.4

12.3

431.4

Risk-weighted assets (RWAs) (£bn)

61.6

11.2

107.4

2.8

183.0

RWA equivalent (RWAe) (£bn)

61.6

11.2

108.6

3.6

185.0

Employee numbers (FTEs - thousands)

13.3

2.3

12.5

33.1

61.2

Third party customer asset rate (1)

3.50%

4.88%

6.65%

nm

nm

Third party customer funding rate (1)

(1.94%)

(3.02%)

(1.87%)

nm

nm

Average interest earning assets (£bn) (2)

223.2

26.5

245.2

na

524.7

Net interest margin (2)

2.23%

2.07%

2.05%

na

1.99%

nm = not meaningful, na = not applicable

(1)

(2)

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

Refer to page 37 of the Non-IFRS financial measures appendix for details.



 



 

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

(211)

(60)

(360)

(1,301)

(1,932)

Indirect expenses

(482)

(92)

(599)

1,173

-

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)

14.1

2.3

12.5

32.9

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

Average interest earning assets (£bn) (2)

220.3

28.1

246.0

na

522.4

Net interest margin (2)

2.75%

3.31%

2.08%

na

2.25%

nm = not meaningful, na = not applicable

(1)

(2)

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

Refer to page 37 of the Non-IFRS financial measures appendix for details.



 



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

Capital, liquidity and funding risk

21



 

Risk and capital management

Credit risk

Segment analysis - portfolio summary 

The table below shows gross loans and expected credit loss (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 2024

£m

£m

£m

£m

£m

Loans - amortised cost and FVOCI (1,2)






Stage 1

178,692

17,288

123,704

24,679

344,363

Stage 2

23,145

769

13,661

2

37,577

Stage 3

3,291

284

2,188

-

5,763

Of which: individual

-

222

946

-

1,168

Of which: collective

3,291

62

1,242

-

4,595

Subtotal excluding disposal group loans

205,128

18,341

139,553

24,681

387,703

Disposal group loans

 

 

 

-

-

Total

 

 

 

24,681

387,703

ECL provisions (3)

 

 

 

 

 

Stage 1

294

19

336

20

669

Stage 2

473

13

425

2

913

Stage 3

1,162

37

845

-

2,044

Of which: individual

-

37

302

-

339

Of which: collective

1,162

-

543

-

1,705

Subtotal excluding ECL provisions on disposal group loans

1,929

69

1,606

22

3,626

ECL provisions on disposal group loans

 

 

 

-

-

Total

 

 

 

22

3,626

ECL provisions coverage (4)

 

 

 

 

 

Stage 1 (%)

0.16

0.11

0.27

0.08

0.19

Stage 2 (%)

2.04

1.69

3.11

100.00

2.43

Stage 3 (%)

35.31

13.03

38.62

-

35.47

ECL provisions coverage excluding disposal group loans

0.94

0.38

1.15

0.09

0.94

ECL provisions coverage on disposal group loans

 

 

 

-

-

Total

 

 

 

0.09

0.94

 







31 December 2023






Loans - amortised cost and FVOCI (1,2)






Stage 1

182,297

17,565

119,047

29,677

348,586

Stage 2

21,208

906

15,771

6

37,891

Stage 3

3,133

258

2,162

10

5,563

Of which: individual

-

186

845

-

1,031

Of which: collective

3,133

72

1,317

10

4,532

Subtotal excluding disposal group loans

206,638

18,729

136,980

29,693

392,040

Disposal group loans




67

67

Total




29,760

392,107

ECL provisions (3)






Stage 1

306

20

356

27

709

Stage 2 

502

20

447

7

976

Stage 3

1,097

34

819

10

1,960

Of which: individual

-

34

298

-

332

Of which: collective

1,097

-

521

10

1,628

Subtotal excluding ECL provisions on disposal group loans

1,905

74

1,622

44

3,645

ECL provisions on disposal group loans




36

36

Total




80

3,681

ECL provisions coverage (4)






Stage 1 (%)

0.17

0.11

0.30

0.09

0.20

Stage 2 (%)

2.37

2.21

2.83

nm

2.58

Stage 3 (%)

35.01

13.18

37.88

100.00

35.23

ECL provisions coverage excluding disposal group loans

0.92

0.40

1.18

0.15

0.93

ECL provisions coverage on disposal group loans




53.73

53.73

Total




0.27

0.94

nm = not meaningful

 

(1)

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 £115.8 billion (31 December 2023 - £103.1 billion) and debt securities of £49.0 billion (31 December 2023 - £50.1 billion).

(2)

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

(3)

Includes £7 million (31 December 2023 - £9 million) related to assets classified as FVOCI and £0.1 billion (31 December 2023 - £0.1 billion) related to off-balance sheet exposures.

(4)

ECL provisions coverage is calculated as ECL provisions divided by loans - amortised cost and FVOCI. It is calculated on loans and total ECL provisions, including ECL for other (non-loan) assets and unutilised exposure. Some segments with a high proportion of debt securities or unutilised exposure may result in a not meaningful (nm) coverage ratio.

Risk and capital management

Credit risk continued

Segment analysis - loans

-   Retail Banking - Loans to customers were lower than Q4 2023, mainly due to a reduction in mortgage balances where higher redemptions were only partly offset by new mortgage lending. Unsecured lending grew overall, with growth in credit cards offset by a decrease in personal advances. New lending and portfolio credit quality was maintained with limited increases in arrears in line with expectations. Total ECL coverage increased slightly during the quarter, reflective of Stage 3 ECL growth on unsecured portfolios, mainly due to ongoing subdued write-off and debt sale activity. There was a modest reduction in good book coverage, reflective of continued stable portfolio performance alongside unsecured probability of default modelling updates.

 

-   Commercial & Institutional - While overall Wholesale exposure reduced in the quarter, there was Commercial & Institutional growth within multiple sectors. Sector appetite continues to be reviewed regularly, with particular focus on sector clusters and sub-sectors that are vulnerable to challenges in the external environment or deemed to represent a heightened risk. There was a marginal reduction in total ECL coverage during the quarter, due to a decrease in performing ECL, resulting from positive portfolio performance and the unwind of some PMAs. Stage 3 ECL increased due to a small increase in defaults, although still lower than historic trends, and was partially offset by write-off activity. There was a modest decrease in good book coverage, reflective of continued stable portfolio performance alongside PMA reductions.

 

Movement in ECL provision

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


ECL provision


£m

At 1 January 2024

3,645

Transfers to disposal groups and reclassifications

(16)

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

(84)

Changes in risk metrics and exposure: Stage 3

219

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

(23)

Write-offs and other

(115)

At 31 March 2024

3,626

 

-    ECL decreased marginally in Q1 2024, with increases in Stage 3 linked to ongoing subdued write-offs and debt sales in the Personal portfolios. This was offset by good book ECL reductions relating to stable portfolio performance, reductions in post model adjustments and personal unsecured probability of default modelling updates.

-    For the Wholesale portfolios, there was an increase in Commercial & Institutional Stage 3 charges in the quarter, mainly due to a small number of individual charges, but charges were still lower than historic trends.



 

Risk and capital management

Credit risk continued

ECL post model adjustments

The table below shows ECL post model adjustments.


Retail Banking

Private

Commercial &

Central items


 


Mortgages

Other

Banking

Institutional

& other

 

Total

31 March 2024

£m

£m

£m

£m

£m

 

£m

Deferred model calibrations

-

-

1

20

-

 

21

Economic uncertainty

120

45

10

233

3

 

411

Other adjustments

-

-

-

7

-

 

7

Total

120

45

11

260

3

 

439


 

 

 

 

 

 

 

Of which:

 

 

 

 

 

 

 

- Stage 1

72

16

5

108

3

 

204

- Stage 2

36

29

6

150

-

 

221

- Stage 3 

12

-

-

2

-

 

14


 

 

 

 

 

 

 

31 December 2023

 

Deferred model calibrations

-

-

1

23

-


24

Economic uncertainty

118

39

13

256

3


429

Other adjustments

1

-

-

8

23


32

Total

119

39

14

287

26


485









Of which:

 

 

 

 

 

 

 

- Stage 1

75

14

6

115

10

 

220

- Stage 2

31

25

8

167

9

 

240

- Stage 3 

13

-

-

5

7

 

25

 

-    Retail Banking - The post model adjustments for economic uncertainty increased slightly to £165 million at 31 March 2024, from £157 million at 31 December 2023. Sustained inflationary pressure alongside high interest rates continues to put pressure on consumer affordability risks. This economic context, coupled with modelled ECL reductions, prompted a modest uplift in the cost of living post model adjustment (up from £144 million to £153 million) to maintain adequate provision levels on this higher risk segment of the portfolio. The cost of living post model adjustment captures the risk on segments in the Retail Banking portfolio that are more susceptible to the effects of cost of living rises. It focuses on key affordability lenses, including customers with lower income in fuel poverty, over-indebted borrowers and customers vulnerable to a potential mortgage rate shock.

-    Commercial & Institutional - The post model adjustments for economic uncertainty decreased to £233 million at 31 March 2024, from £256 million at 31 December 2023. It still includes an overlay of £39 million (£50 million at 31 December 2023) to cover the residual risks from COVID-19, including the risks surrounding associated debt to customers that have utilised government support schemes. The inflation, supply chain and liquidity post model adjustment was maintained for lending prior to 1 January 2024, with a sector-level downgrade being applied to the sectors that were considered most at risk from the ongoing pressures from inflation being higher for longer, supply chain challenges and broader concerns around reducing cash reserves across many sectors. The £16 million reduction was a result of a mechanistic refresh reflecting portfolio changes. The impact of the sector-level downgrades was a post model adjustment decrease to £193 million at 31 March 2024 from £206 million at 31 December 2023.

-    The £20 million judgemental overlay for deferred model calibrations relates to refinance risk with the existing modelling approach not fully capturing the risk on deteriorated exposures.

-   Central items & other - The £23 million post model adjustment in other adjustments was removed in the quarter, reflecting the withdrawal from the Republic of Ireland.

 



 

Risk and capital management

Credit risk continued

Sector analysis - portfolio summary

The table below shows financial assets and off-balance sheet exposures gross of ECL and related ECL provisions, impairment and past due by sector, asset quality and geographical region.


Personal

 

Wholesale


Total


 

Credit

 

 

 

 

 

 

 

 


 


Mortgages (1)

cards

Other

Total

 

Property

Other

FI

Sovereign

Total


 

31 March 2024

£m

£m

£m

£m

 

£m

£m

£m

£m

£m


£m

Loans by geography

206,146

6,033

9,720

221,899

 

31,993

77,521

55,058

1,232

165,804

 

387,703

  - UK

206,146

6,033

9,720

221,899

 

31,448

64,611

37,221

549

133,829

 

355,728

  - RoI

-

-

-

-

 

10

953

217

-

1,180

 

1,180

  - Other Europe

-

-

-

-

 

415

5,017

8,462

365

14,259

 

14,259

  - RoW

-

-

-

-

 

120

6,940

9,158

318

16,536

 

16,536

 Loans by asset quality (2)

206,146

6,033

9,720

221,899

 

31,993

77,521

55,058

1,232

165,804

 

387,703

  - AQ1-AQ4

114,923

113

862

115,898

 

15,993

27,032

51,413

948

95,386

 

211,284

  - AQ5-AQ8

87,895

5,704

7,646

101,245

 

15,295

48,621

3,557

129

67,602

 

168,847

  - AQ9 

947

69

183

1,199

 

74

331

72

133

610

 

1,809

  - AQ10

2,381

147

1,029

3,557

 

631

1,537

16

22

2,206

 

5,763

Loans by stage 

206,146

6,033

9,720

221,899

 

31,993

77,521

55,058

1,232

165,804

 

387,703

  - Stage 1

183,705

3,916

7,284

194,905

 

28,608

65,458

54,312

1,080

149,458

 

344,363

  - Stage 2

20,060

1,970

1,407

23,437

 

2,753

10,527

730

130

14,140

 

37,577

  - Stage 3

2,381

147

1,029

3,557

 

632

1,536

16

22

2,206

 

5,763

  - Of which: individual

137

-

21

158

 

283

700

5

22

1,010

 

1,168

  - Of which: collective

2,244

147

1,008

3,399

 

349

836

11

-

1,196

 

4,595

Loans - past due analysis (3)

206,146

6,033

9,720

221,899

 

31,993

77,521

55,058

1,232

165,804

 

387,703

  - Not past due

203,223

5,863

8,647

217,733

 

31,222

74,304

53,938

1,210

160,674

 

378,407

  - Past due 1-30 days

1,185

41

82

1,308

 

337

2,289

1,111

-

3,737

 

5,045

  - Past due 31-90 days

599

42

113

754

 

151

226

2

22

401

 

1,155

  - Past due 90-180 days

388

34

107

529

 

61

125

2

-

188

 

717

  - Past due >180 days

751

53

771

1,575

 

222

577

5

-

804

 

2,379

Loans - Stage 2

20,060

1,970

1,407

23,437

 

2,753

10,527

730

130

14,140

 

37,577

  - Not past due

18,994

1,916

1,292

22,202

 

2,534

9,858

724

130

13,246

 

35,448

  - Past due 1-30 days

787

26

44

857

 

100

518

4

-

622

 

1,479

  - Past due 31-90 days

279

28

71

378

 

119

151

2

-

272

 

650

Weighted average life

 

 

 

 

 

 

 

 

 

 

 

 

   - ECL measurement (years)

9

4

6

6

 

6

6

2

1

6

 

6

Weighted average 12 months PDs

 

 

 

 

 

 

 

 

 

 

 

 

  - IFRS 9 (%)

0.51

3.38

5.10

0.76

 

1.32

1.54

0.19

1.25

1.04

 

0.88

  - Basel (%)

0.70

3.47

3.35

0.88

 

0.91

1.26

0.19

5.60

0.86

 

0.87

ECL provisions by geography

445

357

1,171

1,973

 

399

1,172

65

17

1,653

 

3,626

  - UK

445

357

1,171

1,973

 

388

1,018

37

13

1,456

 

3,429

  - RoI

-

-

-

-

 

-

2

1

-

3

 

3

  - Other Europe

-

-

-

-

 

4

104

9

-

117

 

117

  - RoW

-

-

-

-

 

7

48

18

4

77

 

77

ECL provisions by stage 

445

357

1,171

1,973

 

399

1,172

65

17

1,653

 

3,626

  - Stage 1

87

71

142

300

 

95

220

40

14

369

 

669

  - Stage 2

70

188

216

474

 

78

341

19

1

439

 

913

  - Stage 3

288

98

813

1,199

 

226

6

2

845

 

2,044

  - Of which: individual

21

-

15

36

 

81

-

2

303

 

339

  - Of which: collective

267

98

798

1,163

 

145

391

6

-

542

 

1,705

ECL provisions coverage (%)

0.22

5.92

12.05

0.89

 

1.25

0.12

1.38

1.00

 

0.94

  - Stage 1 (%)

0.05

1.81

1.95

0.15

 

0.33

0.07

1.30

0.25

 

0.19

  - Stage 2 (%)

0.35

9.54

15.35

2.02

 

2.83

2.60

0.77

3.10

 

2.43

  - Stage 3 (%)

12.10

66.67

79.01

33.71

 

35.76

39.78

37.50

9.09

38.30

 

35.47














 

For the notes to this table refer to page 19.



 

Risk and capital management

Credit risk continued

Sector analysis - portfolio summary continued

 


Personal

 

Wholesale


Total


 

Credit

 

 

 

 

 

 

 

 


 


Mortgages (1)

cards

Other

Total

 

Property

Other

FI

Sovereign

Total


 

31 March 2024

£m

£m

£m

£m

 

£m

£m

£m

£m

£m


£m

Loans by residual maturity

206,146

6,033

9,720

221,899

 

31,993

77,521

55,058

1,232

165,804

 

387,703

  - <1 year 

3,291

3,353

3,257

9,901

 

5,765

25,205

40,698

333

72,001

 

81,902

  - 1-5 year

9,541

2,680

5,459

17,680

 

18,063

32,297

12,105

551

63,016

 

80,696

  - >5< 15 year

45,751

-

996

46,747

 

5,605

14,744

2,221

311

22,881

 

69,628

  - >15 year

147,563

-

8

147,571

 

2,560

5,275

34

37

7,906

 

155,477

Other financial assets by

 

 

 

 

 

 

 

 

 

 

 

 

  asset quality (2)

-

-

-

-

 

1

2,912

27,208

134,631

164,752

 

164,752

  - AQ1-AQ4

-

-

-

-

 

1

2,910

26,463

134,631

164,005

 

164,005

  - AQ5-AQ8

-

-

-

-

 

-

2

745

-

747

 

747

Off-balance sheet

10,293

18,043

8,355

36,691

 

14,215

60,200

21,039

259

95,713

 

132,404

  - Loan commitments

10,293

18,043

8,311

36,647

 

13,858

57,410

19,234

259

90,761

 

127,408

  - Financial guarantees

-

-

44

44

 

357

2,790

1,805

-

4,952

 

4,996

Off-balance sheet by

 

 

 

 

 

 

 

 

 

 

 

 

  asset quality (2)

10,293

18,043

8,355

36,691

 

14,215

60,200

21,039

259

95,713

 

132,404

  - AQ1-AQ4

9,597

449

7,119

17,165

 

10,909

36,856

19,413

166

67,344

 

84,509

  - AQ5-AQ8

679

17,278

1,201

19,158

 

3,284

23,037

1,588

30

27,939

 

47,097

  - AQ9 

1

6

7

14

 

3

19

37

63

122

 

136

  - AQ10

16

310

28

354

 

19

288

1

-

308

 

662

 

For the notes to this table refer to page 19.

 



 

Risk and capital management

Credit risk continued

Sector analysis - portfolio summary continued

 


Personal


Wholesale


Total



Credit












Mortgages (1)

cards

Other

Total


Property

Other

FI

Sovereign

Total



31 December 2023

£m

£m

£m

£m


£m

£m

£m

£m

£m


£m

Loans by geography

208,275

5,904

9,595

223,774


31,207

77,339

57,087

2,633

168,266


392,040

  - UK

208,275

5,893

9,592

223,760

 

30,703

65,033

39,906

2,016

137,658


361,418

  - RoI

-

11

3

14

 

9

888

279

-

1,176


1,190

  - Other Europe

-

-

-

-

 

375

5,096

7,865

399

13,735


13,735

  - RoW

-

-

-

-

 

120

6,322

9,037

218

15,697


15,697

 Loans by asset quality (2)

208,275

5,904

9,595

223,774


31,207

77,339

57,087

2,633

168,266


392,040

  - AQ1-AQ4

118,266

124

914

119,304

 

15,366

26,851

53,367

2,488

98,072

 

217,376

  - AQ5-AQ8

86,868

5,577

7,552

99,997

 

15,145

48,673

3,686

123

67,627

 

167,624

  - AQ9 

860

63

150

1,073

 

75

311

18

-

404

 

1,477

  - AQ10

2,281

140

979

3,400

 

621

1,504

16

22

2,163

 

5,563

Loans by stage

208,275

5,904

9,595

223,774


31,207

77,339

57,087

2,633

168,266


392,040

  - Stage 1

188,140

3,742

6,983

198,865

 

27,316

63,690

56,105

2,610

149,721


348,586

  - Stage 2

17,854

2,022

1,633

21,509

 

3,270

12,145

966

1

16,382


37,891

  - Stage 3

2,281

140

979

3,400

 

621

1,504

16

22

2,163


5,563

  - Of which: individual

122

-

20

142

 

240

625

2

22

889


1,031

  - Of which: collective

2,159

140

959

3,258

 

381

879

14

-

1,274


4,532

Loans - past due analysis (3)

208,275

5,904

9,595

223,774


31,207

77,339

57,087

2,633

168,266


392,040

  - Not past due

205,405

5,743

8,578

219,726

 

30,264

74,052

56,735

2,633

163,684


383,410

  - Past due 1-30 days

1,178

41

71

1,290

 

491

2,222

332

-

3,045


4,335

  - Past due 31-90 days

518

38

112

668

 

179

437

12

-

628


1,296

  - Past due 90-180 days

445

32

103

580

 

42

71

2

-

115


695

  - Past due >180 days

729

50

731

1,510

 

231

557

6

-

794


2,304

Loans - Stage 2

17,854

2,022

1,633

21,509


3,270

12,145

966

1

16,382


37,891

  - Not past due

16,803

1,971

1,529

20,303

 

3,071

11,287

932

1

15,291


35,594

  - Past due 1-30 days

765

27

40

832

 

100

516

24

-

640


1,472

  - Past due 31-90 days

286

24

64

374

 

99

342

10

-

451


825

Weighted average life













   - ECL measurement (years)

9

3

6

6

 

6

6

2

-

6


6

Weighted average 12 months PDs












  - IFRS 9 (%)

0.50

3.45

5.29

0.75

 

1.45

1.59

0.19

0.37

1.07


0.89

  - Basel (%)

0.67

3.37

3.15

0.84

 

0.94

1.25

0.17

0.37

0.81


0.83

ECL provisions by geography

420

376

1,168

1,964


398

1,201

66

16

1,681


3,645

  - UK

420

365

1,163

1,948

 

384

999

38

13

1,434


3,382

  - RoI

-

11

5

16

 

-

6

1

-

7


23

  - Other Europe

-

-

-

-

 

7

146

12

-

165


165

  - RoW

-

-

-

-

 

7

50

15

3

75


75

ECL provisions by stage 

420

376

1,168

1,964


398

1,201

66

16

1,681


3,645

  - Stage 1

88

76

152

316

 

102

234

44

13

393


709

  - Stage 2

61

207

238

506

 

98

356

15

1

470


976

  - Stage 3

271

93

778

1,142

 

198

611

7

2

818


1,960

  - Of which: individual

12

-

14

26

 

60

242

2

2

306


332

  - Of which: collective

259

93

764

1,116

 

138

369

5

-

512


1,628

ECL provisions coverage (%)

0.20

6.37

12.17

0.88


1.28

1.55

0.12

0.61

1.00


0.93

  - Stage 1 (%)

0.05

2.03

2.18

0.16

 

0.37

0.37

0.08

0.50

0.26


0.20

  - Stage 2 (%)

0.34

10.24

14.57

2.35

 

3.00

2.93

1.55

100.00

2.87


2.58

  - Stage 3 (%)

11.88

66.43

79.47

33.59

 

31.88

40.63

43.75

9.09

37.82


35.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the notes to this table refer to the following page.

 



 

Risk and capital management

Credit risk continued

Sector analysis - portfolio summary continued

 


 


Personal


Wholesale


Total



Credit












Mortgages (1)

cards

Other

Total


Property

Other

FI

Sovereign

Total



31 December 2023

£m

£m

£m

£m


£m

£m

£m

£m

£m


£m

Loans by residual maturity

208,275

5,904

9,595

223,774


31,207

77,339

57,087

2,633

168,266


392,040

  - <1 year 

3,375

3,398

3,169

9,942

 

5,696

25,312

43,497

489

74,994


84,936

  - 1-5 year

9,508

2,506

5,431

17,445

 

17,216

32,573

11,616

1,872

63,277


80,722

  - >5< 15 year

46,453

-

993

47,446

 

5,701

14,167

1,939

199

22,006


69,452

  - >15 year

148,939

-

2

148,941

 

2,594

5,287

35

73

7,989


156,930

Other financial assets by

 

 

 

 

 

 

 

 

 

 

 

 

  asset quality (2)

-

-

-

-


1

2,689

26,816

123,683

153,189


153,189

  - AQ1-AQ4

-

-

-

-

 

1

2,689

26,084

123,683

152,457

 

152,457

  - AQ5-AQ8

-

-

-

-

 

-

-

732

-

732

 

732

Off-balance sheet

9,843

17,284

8,462

35,589


14,205

59,716

22,221

227

96,369


131,958

  - Loan commitments

9,843

17,284

8,417

35,544

 

13,861

57,081

20,765

227

91,934


127,478

  - Financial guarantees

-

-

45

45

 

344

2,635

1,456

-

4,435


4,480

Off-balance sheet by













  asset quality (2)

9,843

17,284

8,462

35,589


14,205

59,716

22,221

227

96,369


131,958

  - AQ1-AQ4

9,099

448

7,271

16,818

 

10,916

36,380

20,644

165

68,105


84,923

  - AQ5-AQ8

721

16,518

1,162

18,401

 

3,266

23,030

1,574

45

27,915


46,316

  - AQ9 

7

6

4

17

 

3

12

-

-

15


32

  - AQ10

16

312

25

353

 

20

294

3

17

334


687

 

(1)     Includes a portion of Private Banking lending secured against residential real estate, in line with ECL calculation methodology. Private Banking and RBS International mortgages are reported in UK, reflecting the country of lending origination and includes crown dependencies.

(2)     AQ bandings are based on Basel PDs and mapping is as follows:

Internal asset quality band

Probability of default range

Indicative S&P rating

AQ1

0% - 0.034%

AAA to AA

AQ2

0.034% - 0.048%

AA to AA-

AQ3

0.048% - 0.095%

A+ to A

AQ4

0.095% - 0.381%

BBB+ to BBB-

AQ5

0.381% - 1.076%

BB+ to BB

AQ6

1.076% - 2.153%

BB- to B+

AQ7

2.153% - 6.089%

B+ to B

AQ8

6.089% - 17.222%

B- to CCC+

AQ9

17.222% - 100%

CCC to C

AQ10

100%

D

£0.3 billion (31 December 2023 - £0.3 billion) of AQ10 Personal balances primarily relate to loan commitments, the drawdown of which is effectively prohibited.

(3)     30 DPD - 30 days past due, the mandatory 30 days past due backstop as prescribed by the IFRS 9 guidance for a SICR.



 

Risk and capital management

Credit risk continued

Sector analysis - portfolio summary continued

The table below shows ECL by stage, for the Personal portfolio and selected sectors of the Wholesale portfolio including those that contain an element of exposure classified as heightened climate-related risk.


 

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 2024

£m

£m

£m

£m

£m

 

£m

 

£m

£m

£m

£m

Personal

194,905

23,437

3,557

221,899

36,647

 

44

 

300

474

1,199

1,973

  Mortgages (1)

183,705

20,060

2,381

206,146

10,293

 

-

 

87

70

288

445

  Credit cards

3,916

1,970

147

6,033

18,043

 

-

 

71

188

98

357

  Other personal

7,284

1,407

1,029

9,720

8,311

 

44

 

142

216

813

1,171

Wholesale

149,458

14,140

2,206

165,804

90,761

 

4,952

 

369

439

845

1,653

   Property

28,608

2,753

632

31,993

13,858

 

357

 

95

78

226

399

   Financial institutions (2)

54,312

730

16

55,058

19,234

 

1,805

 

40

19

6

65

   Sovereign

1,080

130

22

1,232

259

 

-

 

14

1

2

17

   Corporate

65,458

10,527

1,536

77,521

57,410

 

2,790

 

220

341

611

1,172

   Of which:

 

 

 

 

 

 

 

 

 

 

 

 

      Agriculture

3,934

918

107

4,959

957

 

21

 

17

35

36

88

      Airlines and aerospace

2,073

359

3

2,435

2,056

 

162

 

3

6

2

11

      Automotive

7,314

690

52

8,056

4,187

 

154

 

18

19

19

56

      Building materials

1,417

244

19

1,680

1,391

 

67

 

6

8

7

21

      Chemicals

293

124

4

421

765

 

13

 

1

9

4

14

      Industrials

2,342

473

70

2,885

2,843

 

141

 

9

16

30

55

      Land transport and logistics

4,515

452

76

5,043

2,980

 

195

 

11

14

21

46

      Leisure

5,053

1,880

291

7,224

1,873

 

122

 

31

70

99

200

      Mining and metals

263

37

5

305

531

 

7

 

-

-

5

5

      Oil and gas

697

52

55

804

1,909

 

240

 

3

2

46

51

      Power utilities

5,457

323

79

5,859

8,054

 

593

 

14

8

29

51

      Retail

5,969

1,152

211

7,332

4,314

 

475

 

20

32

80

132

      Shipping

198

34

1

233

60

 

29

 

-

2

1

3

      Water and waste

3,562

160

48

3,770

1,879

 

135

 

4

4

7

15

Total

344,363

37,577

5,763

387,703

127,408

 

4,996

 

669

913

2,044

3,626

 














31 December 2023













Personal

198,865

21,509

3,400

223,774

35,544


45


316

506

1,142

1,964

  Mortgages (1)

188,140

17,854

2,281

208,275

9,843


-


88

61

271

420

   Credit cards

3,742

2,022

140

5,904

17,284


-


76

207

93

376

   Other personal

6,983

1,633

979

9,595

8,417


45


152

238

778

1,168

Wholesale

149,721

16,382

2,163

168,266

91,934


4,435


393

470

818

1,681

   Property

27,316

3,270

621

31,207

13,861


344


102

98

198

398

   Financial institutions (2)

56,105

966

16

57,087

20,765


1,456


44

15

7

66

   Sovereign

2,610

1

22

2,633

227


-


13

1

2

16

   Corporate

63,690

12,145

1,504

77,339

57,081


2,635


234

356

611

1,201

   Of which:













      Agriculture

3,851

1,011

90

4,952

950

 

21

 

19

35

34

88

      Airlines and aerospace

1,525

454

3

1,982

1,788

 

178

 

4

7

2

13

      Automotive

7,223

1,008

76

8,307

3,844

 

103

 

18

18

26

62

      Building materials

1,204

282

72

1,558

1,475

 

72

 

6

9

8

23

      Chemicals

354

62

4

420

785

 

13

 

1

9

1

11

      Industrials

2,269

543

70

2,882

2,896

 

148

 

10

18

23

51

      Land transport and logistics

4,231

578

61

4,870

3,025

 

184

 

11

14

18

43

      Leisure

4,394

2,245

288

6,927

1,887

 

145

 

31

74

91

196

      Mining and metals

241

32

4

277

545

 

7

 

-

-

4

4

      Oil and gas

915

125

27

1,067

1,959

 

237

 

3

2

29

34

      Power utilities

5,604

418

40

6,062

8,257

 

554

 

13

13

24

50

      Retail

5,846

1,318

224

7,388

4,717

 

429

 

23

35

118

176

      Shipping

207

35

3

245

71

 

31

 

-

1

2

3

      Water and waste

3,536

173

13

3,722

1,904

 

84

 

4

5

4

13

Total

348,586

37,891

5,563

392,040

127,478


4,480


709

976

1,960

3,645



(1)

As at 31 March 2024, £138.1 billion, 67.0%, of the total residential mortgages portfolio had Energy Performance Certificate (EPC) data available (31 December 2023 - £140.8 billion, 67.6%). Of which, 44.6% were rated as EPC A to C (31 December 2023 - 44.1%).

(2)

Includes transactions, such as securitisations, where the underlying assets may be in other sectors.


















 


Risk and capital management

Capital, liquidity and funding risk

Introduction  

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 2023

 

CET1 ratio

13.5%

(as at 31 December 2023 - 13.4%)

 

Total RWAs

£186.3bn

(as at 31 December 2023 - £183.0bn)

The CET1 ratio increased by 10 basis points to 13.5%. The increase in the CET1 ratio was due to a £0.6 billion increase in CET1 capital, partially offset by a £3.3 billion increase in RWAs.

The CET1 capital increase was mainly driven by an attributable profit for ordinary shareholders of £0.9 billion partially offset by a foreseeable ordinary dividend accrual of £0.4 billion.

 

 

 


Total RWAs increased by £3.3 billion to £186.3 billion mainly reflecting:

-      an increase in credit risk RWAs of £1.7 billion, primarily due to drawdowns and new facilities within Commercial & Institutional in addition to an increase in unsecured lending within Retail Banking. There was also an increase in IRB Temporary Model Adjustment related to mortgages within Retail Banking.

-      an increase in operational risk RWAs of £1.6 billion following the annual recalculation and higher income compared to 2020.

 



UK leverage ratio

5.1%

(as at 31 December 2023 - 5.0%)


LCR

151%

(as at 31 December 2023 - 144%)

The leverage ratio increased by 10 basis points to 5.1% mainly due to a £0.6 billion increase in Tier 1 capital while the leverage exposure remained static during the period.

 


The Liquidity Coverage Ratio (LCR) increased to 151%, during the quarter driven by increased issuance and customer deposits coupled with replacement of the Cash Ratio Deposit scheme with a Bank of England Levy.

 

 

 



 

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

1.8%

2.4%

3.2%

Minimum Capital Requirements

6.3%

8.4%

11.2%

Capital conservation buffer

2.5%

2.5%

2.5%

Countercyclical capital buffer (1)

1.7%

1.7%

1.7%

MDA threshold (2)

10.5%

n/a

n/a

Overall capital requirement

10.5%

12.6%

15.4%

Capital ratios at 31 March 2024

13.5%

15.5%

18.8%

Headroom (3,4)

3.0%

2.9%

3.4%

 

(1)     The UK countercyclical capital buffer (CCyB) rate is currently being maintained at 2%.  The rate may vary in either direction in the future, depending on how risks develop. Foreign exposures may be subject to different CCyB rates depending on the rates set in those jurisdictions.

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

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

(4)     Headroom as at 31 December 2023 was CET1 2.9%, Total Tier 1 2.9% and Total Capital 3.0%.



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)

0.6%

0.6%

Total

3.04%

3.85%

 



 

(1)     The countercyclical leverage ratio buffer is set at 35% of NatWest Group's CCyB.

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


2024

2023

Capital adequacy ratios (1)

%

%

CET1

13.5

13.4

Tier 1

15.5

15.5

Total

18.8

18.4




Capital

£m

£m

Tangible equity

26,360

25,653


 


Prudential valuation adjustment

(249)

(279)

Deferred tax assets

(919)

(979)

Own credit adjustments

16

(10)

Pension fund assets

(160)

(143)

Cash flow hedging reserve

1,944

1,899

Foreseeable ordinary dividends

(1,380)

(1,013)

Adjustment for trust assets (2)

(365)

(365)

Foreseeable charges

(253)

(525)

Adjustments under IFRS 9 transitional arrangements

74

202

Total regulatory adjustments

(1,292)

(1,213)


 


CET1 capital

25,068

24,440


 


Additional AT1 capital

3,875

3,875

Tier 1 capital

28,943

28,315


 


End-point Tier 2 capital 

6,037

5,317

Tier 2 capital

6,037

5,317


 


Total regulatory capital

34,980

33,632


 


Risk-weighted assets

 


Credit risk

149,313

147,598

Counterparty credit risk

7,709

7,830

Market risk

7,452

7,363

Operational risk

21,821

20,198

Total RWAs

186,295

182,989

 

(1)     Based on current PRA rules, includes 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 2024 was £0.1 billion for CET1 capital, £24 million for total capital and £3 million RWAs (31 December 2023 - £0.2 billion CET1 capital, £54 million total capital and £17 million RWAs). Excluding this adjustment, the CET1 ratio would be 13.4% (31 December 2023 - 13.2%). Tier 1 capital ratio would be 15.5% (31 December 2023 - 15.4%) and the Total capital ratio would be 18.8% (31 December 2023 - 18.4%).

(2)     Prudent deduction in respect of agreement with the pension fund.

 



 

Risk and capital management

Capital, liquidity and funding risk continued

Capital and leverage ratios continued

 

31 March

31 December

 

2024

2023

Leverage

£m

£m

Cash and balances at central banks

           116,916 

104,262

Trading assets

             50,277 

45,551

Derivatives

             68,133 

78,904

Financial assets

           434,344 

439,449

Other assets

             26,974 

23,605

Assets of disposal groups

                  808 

902

Total assets

697,452 

692,673

Derivatives

 


   - netting and variation margin

(67,625)

(79,299)

   - potential future exposures

17,064

17,212

Securities financing transactions gross up

1,645

1,868

Other off balance sheet items

51,260

50,961

Regulatory deductions and other adjustments

(20,028)

(16,043)

Claims on central banks

(113,504)

(100,735)

Exclusion of bounce back loans

(3,433)

(3,794)

UK leverage exposure

562,831

562,843

UK leverage ratio (%) (1)

5.1

5.0

 

 

(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 5.1% (31 December 2023 - 5.0%).

 

Capital flow statement

The table below analyses the movement in CET1, AT1 and Tier 2 capital for the three months ended 31 March 2024. It is presented on a transitional basis based on current PRA rules.


CET1

AT1

Tier 2

Total


£m

£m

£m

£m

At 31 December 2023

24,440

3,875

5,317

33,632

Attributable profit for the period

918

-

-

918

Foreseeable ordinary dividends

(367)

-

-

(367)

Foreign exchange reserve

(32)

-

-

(32)

FVOCI reserve

26

-

-

26

Own credit

26

-

-

26

Share capital and reserve movements in respect of employee share schemes

68

-

-

68

Goodwill and intangibles deduction

16

-

-

16

Deferred tax assets

60

-

-

60

Prudential valuation adjustments

30

-

-

30

Net dated subordinated debt instruments

-

-

764

764

Foreign exchange movements

-

-

(4)

(4)

Adjustment under IFRS 9 transitional arrangements

(128)

-

-

(128)

Other movements

11

-

(40)

(29)

At 31 March 2024

25,068

3,875

6,037

34,980

 

-    For CET1 movements refer to the key points on page 21.

-    Tier 2 instrument movements include £0.8 billion in relation to $1.0 billion 6.475% Fixed to Fixed Reset Tier 2 Notes 2034 issued in March 2024, partially offset by amortisation and foreign exchange movements.

-    Within Tier 2, there was also a decrease 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 2023

147.6

7.8

7.4

20.2

183.0

Foreign exchange movement

(0.1)

-

-

-

(0.1)

Business movement

1.6

(0.1)

0.2

1.6

3.3

Risk parameter changes

(0.1)

-

-

-

(0.1)

Model updates

0.3

-

(0.1)

-

0.2

At 31 March 2024

149.3

7.7

7.5

21.8

186.3

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 2023

61.6

11.2

107.4

2.8

183.0

Foreign exchange movement

-

-

(0.1)

-

(0.1)

Business movement

0.7

0.1

2.7

(0.2)

3.3

Risk parameter changes 

-

-

(0.1)

-

(0.1)

Model updates

0.2

-

-

-

0.2

At 31 March 2024

62.5

11.3

109.9

2.6

186.3







Credit risk

54.0

9.7

83.5

2.1

149.3

Counterparty credit risk

0.3

0.1

7.3

-

7.7

Market risk

0.1

-

7.4

-

7.5

Operational risk

8.1

1.5

11.7

0.5

21.8

Total RWAs

62.5

11.3

109.9

2.6

186.3

 

(1)

£1.0 billion of Central items & other relates to Ulster Bank RoI.

Total RWAs increased by £3.3 billion to £186.3 billion during the period mainly reflecting:

-    An increase in business movements totalling £3.3 billion, primarily driven by increased drawdowns and new facilities within Commercial & Institutional in addition to increased RWAs following the annual recalculation of operational risk due to higher income when compared to 2020.

-    A decrease in risk parameter changes of £0.1 billion, reflecting customers moving into default within Commercial & Institutional which is partially offset by PD deterioration within Commercial & Institutional.

-    An increase in model updates of £0.2 billion reflecting an increase in IRB Temporary Model Adjustment related to mortgages within Retail Banking.

Liquidity portfolio

The table below shows the composition of the liquidity portfolio with primary liquidity aligned to high-quality liquid assets on a regulatory LCR basis. Secondary liquidity comprises of assets which are eligible as collateral for local central bank liquidity facilities and do not form part of the LCR eligible high-quality liquid assets.


Liquidity value


31 March 2024


31 December 2023


NatWest


NatWest


Group (1)


Group


£m


£m

Cash and balances at central banks 

112,774


99,855

High quality government/MDB/PSE and GSE bonds (2)

32,581


36,250

Extremely high quality covered bonds

4,113


4,164

LCR level 1 Eligible Assets

149,468


140,269

LCR level 2 Eligible Assets (3)

8,949


7,796

Primary liquidity (HQLA) (4)

158,417


148,065

Secondary liquidity

70,786


74,722

Total liquidity value

229,203


222,787

 

(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 and NatWest Markets N.V. who hold managed portfolios that comply with local regulations that may differ from PRA rules.

(2)

Multilateral development bank abbreviated to MDB, public sector entities abbreviated to PSE and government sponsored entities abbreviated to GSE.

(3)

Includes Level 2A and Level 2B.

(4)

High-quality liquid assets abbreviated to HQLA.




 

Condensed consolidated income statement

for the period ended 31 March 2024 (unaudited)

 

 

Quarter ended

 

31 March

31 December

31 March

 

2024

2023

2023

 

£m 

£m 

£m 

Interest receivable

6,055

5,955

4,501

Interest payable

(3,404)

(3,317)

(1,599)

Net interest income

2,651

2,638

2,902

Fees and commissions receivable

770

770

740

Fees and commissions payable

(177)

(169)

(157)

Trading income

129

185

333

Other operating income

102

113

58

Non-interest income

824

899

974

Total income

3,475

3,537

3,876

Staff costs

(1,062)

(977)

(1,040)

Premises and equipment

(293)

(308)

(286)

Other administrative expenses

(424)

(618)

(450)

Depreciation and amortisation

(273)

(251)

(212)

Operating expenses

(2,052)

(2,154)

(1,988)

Profit before impairment losses

1,423

1,383

1,888

Impairment losses

(93)

(126)

(70)

Operating profit before tax

1,330

1,257

1,818

Tax (charge)/credit

(339)

5

(512)

Profit from continuing operations

991

1,262

1,306

(Loss)/profit from discontinued operations, net of tax 

(4)

26

35

Profit for the period

987

1,288

1,341


 



Attributable to:

 



Ordinary shareholders

918

1,229

1,279

Paid-in equity holders

60

60

61

Non-controlling interests

9

(1)

1


987

1,288

1,341


 



Earnings per ordinary share - continuing operations

10.5p

13.6p

12.8p

Earnings per ordinary share - discontinued operations

-

0.3p

0.4p

Total earnings per share attributable to ordinary shareholders - basic 

10.5p

13.9p

13.2p

Earnings per ordinary share - fully diluted continuing operations

10.4p

13.6p

12.8p

Earnings per ordinary share - fully diluted discontinued operations

-

0.3p

0.4p

Total earnings per share attributable to ordinary shareholders - fully diluted

10.4p

13.9p

13.2p

 

 

 

Condensed consolidated statement of comprehensive income

for the period ended 31 March 2024 (unaudited)


 

Quarter ended



31 March

31 December

31 March



2024

2023

2023



£m

£m

£m


987

1,288

1,341

Items that do not qualify for reclassification


 



Remeasurement of retirement benefit schemes 


(36)

(175)

(39)

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


 



   profit or loss (FVTPL) due to changes in credit risk


(23)

(12)

(6)

Fair value through other comprehensive income (FVOCI) financial assets


(13)

(19)

43

Tax 


31

59

(2)


(41)

(147)

(4)

Items that do qualify for reclassification 


 



FVOCI financial assets


45

(16)

40

Cash flow hedges


(66)

1,416

298

Currency translation


(25)

(218)

(59)

Tax


3

(345)

(98)


(43)

837

181

Other comprehensive (loss)/income after tax


(84)

690

177


903

1,978

1,518

 


 



Attributable to:


 



Ordinary shareholders


834

1,919

1,456

Paid-in equity holders


60

60

61

Non-controlling interests


9

(1)

1


903

1,978

1,518

 





 

 



 

Condensed consolidated balance sheet as at 31 March 2024 (unaudited)

 

31 March

31 December

 

2024

2023

 

£m

£m 

Assets

 


Cash and balances at central banks

116,916

104,262

Trading assets

50,277

45,551

Derivatives

68,133

78,904

Settlement balances

10,724

7,231

Loans to banks - amortised cost

6,051

6,914

Loans to customers - amortised cost

378,010

381,433

Other financial assets

50,283

51,102

Intangible assets

7,598

7,614

Other assets

8,652

8,760

Assets of disposal groups

808

902

Total assets

697,452

692,673

 

 


Liabilities

 


Bank deposits

21,614

22,190

Customer deposits

432,793

431,377

Settlement balances

10,758

6,645

Trading liabilities

56,696

53,636

Derivatives

61,689

72,395

Other financial liabilities

61,340

55,089

Subordinated liabilities

6,487

5,714

Notes in circulation

3,289

3,237

Other liabilities

4,898

5,202

Total liabilities

659,564

655,485


 


Equity

 


Ordinary shareholders' interests

33,958

33,267

Other owners' interests

3,890

3,890

Owners' equity

37,848

37,157

Non-controlling interests

40

31

Total equity

37,888

37,188

Total liabilities and equity

697,452

692,673

 

 

 

 

Condensed consolidated statement of changes in equity

for the period ended 31 March 2024 (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 2024

12,848

3,890

10,645

9,774

37,157

31

37,188

Profit attributable to ordinary shareholders

 

 

 

 

 

 

 

    and other equity owners  

 

 

 

 

 

 

 

      - continuing operations

 

 

982

 

982

9

991

      - discontinued operations

 

 

(4)

 

(4)

-

(4)

Other comprehensive income

 

 

 

 

 

 

 

  - Realised gains in period 

 

 

 

 

 

 

 

        on FVOCI equity shares 

 

 

1

(1)

-

 

-

  - Remeasurement of retirement 

 

 

 

 

 

 

 

        benefit schemes 

 

 

(36)

 

(36)

 

(36)

  - Changes in fair value of financial liabilities

 

 

 

 

 

 

 

        designated at FVTPL due to changes in credit risk

 

 

(23)

 

(23)

 

(23)

  - Unrealised gains: FVOCI

 

 

 

30

30

 

30

  - Amounts recognised in equity: cash flow hedges

 

 

 

(499)

(499)

 

(499)

  - Foreign exchange reserve movement

 

 

 

(25)