34 Consolidating financial information

NatWest Markets Plc ('NWM Plc') is a wholly owned subsidiary of NatWest Group plc and was able to offer and sell certain securities in the US from time to time pursuant to a registration statement on Form F-3 filed with the SEC with a full and unconditional guarantee from NatWest Group plc.

Adoption of Rule 13-01 of Regulation S-X

NatWest Group has early adopted the amendments to Rule 3-10 and new Rule 13-01 for simplifying financial and non-financial disclosures of the guarantor and issuer, as issued by the SEC on 2 March 2020.

NatWest Markets Plc utilises an exception provided in Rule 3-10 of Regulation S-X, and therefore does not file its financial statements with the SEC. In accordance with the requirements to qualify for the exception, presented below is condensed consolidating financial information for:

NatWest Group plc on a stand-alone basis as guarantor; and

NatWest Markets Plc on a stand-alone basis as issuer.

NatWest Group fully and unconditionally guarantees payment in full to the holders of securities or debt securities issued by NWM plc. The guarantees will be on a senior basis.

Regulation S-X requires a company to account for its investments in subsidiary undertakings using the equity method, which would increase the results for the period of NatWest Group plc and decrease NWM Plc in the information below by £9.201 million and £48 million respectively for the year ended 31 December 2020 (increase £811 million and increase £148 million, respectively, for the year ended 31 December 2019).

The net assets of NatWest Group plc would be decreased and NWM Plc increased in the information below by £579 million and £236 million respectively at 31 December 2020 (decreased by £10,240 million and increased by £276 million respectively at 31 December 2019).

Income statement


	NatWest
	Group plc	NWM Plc
For the year ended 31 December 2020	£m	£m
Net interest income	(478)	(31)
Non-interest income	(9,142)	953
Total income	(9,620)	922
Operating expenses	(69)	(1,110)
Impairment losses	(9)	(17)
Operating (loss) before tax	(9,698)	(205)
Tax credit/(charge)	125	(7)
Loss for the year	(9,573)	(212)
Attributable to:
Ordinary shareholders	(9,954)	(280)
Preference shareholders	26	—
Paid-in equity holders	355	68
Non-controlling interests	—	—
	(9,573)	(212)


	NatWest
	Group plc	NWM Plc
For the year ended 31 December 2019	£m	£m
Net interest income	(628)	(127)
Non-interest income	3,467	815
Total income	2,839	688
Operating expenses	(42)	(1,101)
Impairment releases	2	50
Operating profit/(loss) before tax	2,799	(363)
Tax (charge)/credit	(71)	94
Profit/(loss) for the year	2,728	(269)
Attributable to:
Ordinary shareholders	2,322	(329)
Preference shareholders	39	—
Paid-in equity holders	367	60
Non-controlling interests	—	—
	2,728	(269)



	NatWest
	Group plc	NWM Plc
For the year ended 31 December 2018	£m	£m
Net interest income	(368)	(239)
Non-interest income	2,794	1,002
Total income	2,426	763
Operating expenses	(85)	(1,262)
Impairment releases	1	89
Operating profit/(loss) before tax	2,342	(410)
Tax credit	149	51
Profit/(loss) from continuing operations	2,491	(359)
Profit/(loss) from discontinued operations, net of tax	—	54
Profit/(loss) for the year	2,491	(305)
Attributable to:
Ordinary shareholders	1,954	(305)
Preference shareholders	182	—
Paid-in equity holders	355	—
Non-controlling interests	—	—
	2,491	(305)

Balance sheet


	NatWest
	Group plc	NWM Plc
At 31 December 2020	£m	£m
Assets
Cash and balances at central banks	—	11,736
Trading assets	—	52,169
Derivatives	1,580	164,104
Settlement balances	—	1,084
Loans to banks - amortised cost	—	701
Loans to customers - amortised cost	—	7,477
Amount due from holding company and fellow subsidiaries	26,910	7,606
Other financial assets	579	8,043
Investment in group undertakings	46,229	2,600
Other assets	117	562
Total assets	75,415	256,082

Liabilities
Bank deposits	—	1,762
Customer deposits	—	1,469
Amount due to holding company and fellow subsidiaries	723	16,189
Settlement balances	—	604
Trading liabilities	—	56,916
Derivatives	1,102	153,754
Other financial liabilities	21,056	15,370
Subordinated liabilities	7,944	—
Other liabilities	151	866
Total liabilities	30,976	246,930
Owners' equity	44,439	9,152
Non-controlling interests	—	—
Total equity	44,439	9,152
Total liabilities and equity	75,415	256,082

Balance sheet


	NatWest
	Group plc	NWM Plc
At 31 December 2019	£m	£m
Assets
Cash and balances at central banks	—	9,953
Trading assets	—	57,768
Derivatives	979	147,458
Settlement balances	—	3,353
Loans to banks - amortised cost	—	238
Loans to customers - amortised cost	—	6,910
Amount due from holding company and fellow subsidiaries	25,018	7,145
Other financial assets	277	11,636
Investment in group undertakings	55,808	2,905
Other assets	1	687
Total assets	82,083	248,053
Liabilities
Bank deposits	—	2,038
Customer deposits	—	2,247
Amount due to holding company and fellow subsidiaries	439	16,858
Settlement balances	—	2,648
Trading liabilities	—	53,576
Derivatives	711	142,390
Other financial liabilities	19,331	17,470
Subordinated liabilities	7,647	—
Other liabilities	168	1,195
Total liabilities	28,296	238,422
Owners’ equity	53,787	9,631
Non-controlling interests	—	—
Total equity	53,787	9,631
Total liabilities and equity	82,083	248,053

Trust preferred securities

NatWest Group has issued trust preferred securities through trusts 100% owned by NatWest Group (through partnership interests held by RBSG Capital Corporation and NatWest Group), which meet the definition of a finance subsidiary in Regulation S-X, Rule 3-10. The securities represent undivided beneficial interests in the assets of the trusts, which consist of partnership preferred securities representing non-cumulative perpetual preferred limited partnership interests issued by Delaware limited partnerships. NatWest Group plc has provided subordinated guarantees for the benefit of the holders of the trust preferred securities and the partnership preferred securities. Under the terms of the guarantees, NatWest Group has fully and unconditionally guaranteed on a subordinated basis, payments on such trust preferred securities and partnership preferred securities, to the extent they are due to be paid and have not been paid by, or on behalf of, the trusts and the partnerships, as the case may be. Following implementation of IFRS 10 the trusts are no longer consolidated by NatWest Group. For those securities that were classified as subordinated liabilities, NatWest Group’s outstanding instruments with the trusts are classified as subordinated liabilities.