6-K 1 a4884r-natwestedgar.htm NWG PLC Q3 2023 INTERIM MANAGEMENT STATEMENT a4884r-natwestedgar

 
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
For October 27, 2023
Commission File Number: 001-10306
 
NatWest Group plc
 
Gogarburn, PO Box 1000
Edinburgh EH12 1HQ
 
(Address of principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
   Form 20-F X            Form 40-F ___
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes ___            No X
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________
 
 
 
 
The following information was issued as Company announcements in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K: 
 
 
 
 
 
 
 
 

 
 
NatWest Group
Q3 2023
Interim Management Statement
 
 
 
 
 
 
 
 
                                                 
 
 
 
 
 
 
 
NatWest Group plc                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          natwestgroup.com
 
 
 
 
 
NatWest Group Q3 2023 Results                                                    
Page
Highlights
1
Business performance summary
3
  Chief Financial Officer review
4
  Retail Banking
6
  Private Banking
7
  Commercial & Institutional
8
  Central items & other
9
  Segment performance
10
Risk and capital management
 
  Credit risk
15
  Capital, liquidity and funding risk
22
Condensed consolidated financial statements
28
Notes to the financial statements
32
Additional information
35
Appendix - Non-IFRS financial measures
37
 
 
 
 
 
 
 
 
NatWest Group plc
Q3 2023 Interim Management Statement
Chief Executive, Paul Thwaite, commented:
"Today's Q3 2023 results show that NatWest is a strong bank which is performing well, generating sustainable profits and returns. This performance is built on the foundations of strong customer franchises and a robust balance sheet with high levels of liquidity and a well-diversified loan book. As a result, credit losses and impairments remain low and we are ready and able to stand by our customers and businesses through the current economic uncertainty.
 
Our leadership team has come together to ensure we all keep our eyes on the things that matter most - the 19 million people, families, and businesses we serve.  Across the bank, we are resolutely focused on meeting their needs today, whilst getting ahead of what they will need from us tomorrow. This is at the core of what we do. It is how we will build long-term value in our bank and deliver sustainable growth."
 
Strong Q3 2023 performance
●
Q3 2023 attributable profit of £866 million and a return on tangible equity (RoTE) of 14.7%. Attributable profit of £3,165 million for the year to date and a RoTE of 17.1%.
●
Total income excluding notable items(1), increased by £117 million, or 3.4%, compared with Q3 2022 principally reflecting the impact of volume growth and favourable yield curve movements. For the nine months ended 30 September 2023, total income excluding notable items, was £10,897 million, £1,602 million higher than prior year.
●
Bank net interest margin (NIM) of 2.94% was 19 basis points lower than Q2 2023 with the reduction largely due to changes in deposit mix as customers shifted balances from non-interest bearing current accounts to interest bearing savings accounts, particularly term, as well as the continued impact on mortgage margins as the higher margin Covid-era book rolls off and is replaced at lower margins. Bank NIM was 3.11% for the year to date.
●
Other operating expenses increased by £22 million, or 1.2%, compared with Q3 2022. For the nine months ended 30 September 2023, other operating expenses of £5.6 billion were £345 million, or 6.6%, higher than prior year. The cost:income ratio (excl. litigation and conduct) was 49.9% for the nine months ended 30 September 2023 compared with 55.6% for the same period in 2022.
●
The net impairment charge was £229 million in Q3 2023, or 24 basis points of gross customer loans, which reflects continued low and stable levels of stage 3 defaults across the portfolio and good book charges related to unsecured lending.
 
Robust balance sheet underpinning growth
●
Net loans to customers excluding central items increased by £1.8 billion to £354.5 billion during Q3 2023 including a £1.3 billion uplift in Commercial & Institutional as term loan facilities increased. Retail Banking gross new mortgage lending was £7.5 billion in the quarter compared with £7.6 billion in Q2 2023.
●
Up to 30 September 2023 we have provided £53.2 billion against our target to provide £100 billion climate and sustainable funding and financing between 1 July 2021 and the end of 2025.
●
Customer deposits excluding central items of £423.5 billion were £2.4 billion higher than Q2 2023. Term balances now account for 15% of our book, up from 11% at the end of the second quarter.
●
The loan:deposit ratio (LDR) (excl. repos and reverse repos) was 83%, in line with Q2 2023, with customer deposits exceeding net loans to customers by around £71 billion.
●
The liquidity coverage ratio (LCR) increased by 4 percentage points to 145% in the quarter, representing £49.6 billion headroom above 100% minimum requirement, primarily due to UBIDAC asset sales along with increased deposits offset by increased customer lending.
●
TNAV per share increased by 9 pence in Q3 2023 to 271 pence primarily reflecting the attributable profit for the period and movements in cash flow hedging reserves, offset by the impact of dividend payments.
 
Shareholder return supported by strong capital generation
●
Common Equity Tier 1 (CET1) ratio of 13.5% was in line with the position at 30 June 2023 principally reflecting the attributable profit offset by the ordinary dividend accrual and increase in RWAs.
●
RWAs increased by £4.1 billion during the quarter to £181.6 billion principally reflecting increased market risk and lending growth in Commercial & Institutional partially offset by a £1.9 billion reduction as we continue our exit from the Republic of Ireland.
 
 
 
(1)     Refer to the Non-IFRS financial measures appendix for details of notable items.
 
 
 
 
Outlook(1)
The economic outlook and consequent customer behaviours remain uncertain. The following statements are based on our latest economic forecasts and expected customer behaviours.
 
Outlook 2023
●
We continue to expect to achieve a return on tangible equity for the Group of 14-16%.
●
We expect total income excluding notable items to be around £14.3 billion and full year Bank NIM to be greater than 3% based on our latest expectations for the mix of our deposit book and the assumption that Bank of England base rates remain flat at 5.25% for the remainder of the year.
●
We continue to expect to deliver a Group cost:income ratio (excl. litigation and conduct) below 52% or around £7.6 billion of Group operating costs, excluding litigation and conduct costs.
●
We expect our impairment loss rate for 2023 to be below our through the cycle range of 20-30 basis points.
●
We expect CRD IV model updates to increase RWAs by around £3 billion in Q4 2023. The models remain subject to further development and final approval by the PRA.
 
Medium term
●
We continue to target a sustainable return on tangible equity for the group of 14-16% over the medium term.
●
We continue to expect to deliver a Group cost:income ratio (excl. litigation and conduct) of less than 50%, by 2025.
●
We currently expect RWAs to be around £200 billion at the end of 2025, including the impact of Basel 3.1, however this remains subject to final rules and approval.
●
We expect to continue to generate and return significant capital via ordinary dividends and buybacks to shareholders over the medium term and continue to expect that the CET1 ratio will be in the range of 13-14%.
 
The guidance remains subject to market conditions. We will monitor and react to market conditions and refine our internal forecasts as the economic position and customer behaviours evolve.
 
(1)       The guidance, targets, expectations, and trends discussed in this section represent NatWest Group plc management's current expectations and are subject to change, including as a result of the factors described in the NatWest Group plc Risk Factors section in the 2022 Annual Report and Accounts and Form 20-F and the Summary Risk Factors in the 2023 NatWest Group plc Interim Results announcement. These statements constitute forward-looking statements. Refer to Forward-looking statements in this announcement.
 
 
 
 
Business performance summary
 
 
Nine months ended
 
Quarter ended
 
30 September
30 September
 
30 September
30 June
30 September
 
2023
2022
 
2023
2023
2022
Summary consolidated income statement
£m
£m
 
£m
£m
£m
Net interest income
8,411
6,974
 
2,685
2,824
2,640
Non-interest income
2,804
2,474
 
803
1,027
589
Total income
11,215
9,448
 
3,488
3,851
3,229
Litigation and conduct costs
(242)
(294)
 
(134)
(52)
(125)
Other operating expenses
(5,600)
(5,255)
 
(1,793)
(1,875)
(1,771)
Operating expenses
(5,842)
(5,549)
 
(1,927)
(1,927)
(1,896)
Profit before impairment losses
5,373
3,899
 
1,561
1,924
1,333
Impairment losses
(452)
(193)
 
(229)
(153)
(247)
Operating profit before tax
4,921
3,706
 
1,332
1,771
1,086
Tax charge
(1,439)
(1,229)
 
(378)
(549)
(434)
Profit from continuing operations
3,482
2,477
 
954
1,222
652
Loss from discontinued operations, net of tax
(138)
(206)
 
(30)
(143)
(396)
Profit for the period
3,344
2,271
 
924
1,079
256
 
Performance key metrics and ratios
 
 
 
 
 
 
Notable items within total income (1)
£318m
£153m
 
(£26m)
£288m
(£168m)
Total income excluding notable items (1)
£10,897m
£9,295m
 
£3,514m
£3,563m
£3,397m
Bank net interest margin (1)
3.11%
2.72%
 
2.94%
3.13%
2.99%
Bank average interest earning assets (1)
£362bn
£343bn
 
£363bn
£362bn
£351bn
Cost:income ratio (excl. litigation and conduct) (1)
49.9%
55.6%
 
51.4%
48.7%
54.8%
Loan impairment rate (1)
16bps
7bps
 
24bps
16bps
26bps
Profit attributable to ordinary shareholders
£3,165m
£2,078m
 
£866m
£1,020m
£187m
Total earnings per share attributable to ordinary 
 
 
 
 
 
 
   shareholders - basic
34.1p
20.9p
 
9.8p
11.0p
1.9p
Return on tangible equity (RoTE) (1)
17.1%
10.0%
 
14.7%
16.4%
2.9%
Climate and sustainable funding and financing (2)
£20.6bn
£18.1bn
 
£4.6bn
£8.4bn
£6.2bn
 
 
As at
 
30 September
30 June
31 December
 
2023
2023
2022
 
£bn
£bn
£bn
Balance sheet
 
 
 
Total assets
717.1
702.6
720.1
Loans to customers - amortised cost
377.3
373.9
366.3
Loans to customers excluding central items (1)
354.5
352.7
346.7
Loans to customers and banks - amortised cost and FVOCI 
389.5
385.2
377.1
Total impairment provisions (3)
3.5
3.4
3.4
Expected credit loss (ECL) coverage ratio 
0.94%
0.92%
0.91%
Assets under management and administration (AUMA) (1)
38.2
37.9
33.4
Customer deposits
435.9
432.5
450.3
Customer deposits excluding central items (1,4)
423.5
421.1
432.9
Liquidity and funding
 
 
 
Liquidity coverage ratio (LCR)
145%
141%
145%
Liquidity portfolio
225
227
226
Net stable funding ratio (NSFR)
138%
138%
145%
Loan:deposit ratio (excl. repos and reverse repos) (1)
83%
83%
79%
Total wholesale funding
82
81
74
Short-term wholesale funding
29
28
21
Capital and leverage
 
 
 
Common Equity Tier 1 (CET1) ratio (5)
13.5%
13.5%
14.2%
Total capital ratio (5)
18.7%
18.8%
19.3%
Pro forma CET1 ratio (excl. foreseeable items) (6)
14.1%
14.2%
15.4%
Risk-weighted assets (RWAs)
181.6
177.5
176.1
UK leverage ratio
5.1%
5.0%
5.4%
Tangible net asset value (TNAV) per ordinary share (1,7)
271p
262p
264p
Number of ordinary shares in issue (millions) (7)
8,871
8,929
9,659
 
1. Refer to the Non-IFRS financial measures appendix for details of basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
2. NatWest Group uses its climate and sustainable funding and financing inclusion criteria to determine the assets, activities and companies that are eligible to be included within its climate and sustainable funding and financing targets. This includes both provision of committed (on and off-balance sheet) funding and financing, including
        provision of services for underwriting issuances and private placements. Up to 30 September 2023 we have provided £53.2 billion against our target to provide £100 billion climate and sustainable funding and financing between 1 July 2021 and end of 2025. As part of this, we aim to provide at least £10 billion in lending for residential
        properties with Energy Performance Certificate (EPC) ratings A and B between 1 January 2023 and the end of end of 2025. During Q3 2023 we provided £4.6 billion climate and sustainable funding and financing, which included £0.9 billion in lending for residential properties with EPC ratings A and B.
3. Includes £0.1 billion relating to off-balance sheet exposures (30 June 2023 - £0.1 billion; 31 December 2022 - £0.1 billion).
4. Central items includes Treasury repo activity and Ulster Bank Republic of Ireland.
5. Refer to the Capital, liquidity and funding risk section for details of the basis of preparation.
6. The pro forma CET1 ratio at 30 September 2023 excludes foreseeable items of £1,004 million: £643 million for ordinary dividends and £361 million foreseeable charges. (30 June 2023 excludes foreseeable items of £1,280 million: £780 million for ordinary dividends and £500 million foreseeable charges. 31 December 2022 excludes
        foreseeable items of £2,132 million: £967 million for ordinary dividends and £1,165 million foreseeable charges).
7. The number of ordinary shares in issue excludes own shares held.
 
 
 
Business performance summary
 
Chief Financial Officer review
We delivered a strong operating performance in Q3 2023 with a RoTE of 14.7% and 17.1% for the year to date. Total income excluding notable items, of £3.5 billion, was up by 3.4% on prior year and levels of default remain stable across our portfolio.
Our robust balance sheet has allowed us to continue to lend to our personal and business customers and customer deposits excluding central items have increased £2.4 billion in the quarter. We retain strong liquidity and capital positions with an LCR of 145%, representing £49.6 billion headroom above 100% minimum requirement, an LDR (excl. repos and reverse repos) of 83% and a strong CET1 ratio of 13.5%.
 
Financial performance
Total income increased by 8.0% to £3,488 million compared with Q3 2022. Total income excluding notable items, was 3.4% higher than Q3 2022 principally driven by increased lending, higher markets income and yield curve movements partially offset by the continued change in deposit mix from non-interest bearing to interest bearing and lower deposit balances. For the nine months ended 30 September 2023, total income, excluding notable items, was £10,897 million, £1,602 million higher than prior year. Total income excluding notable items, was £49 million lower than Q2 2023 reflecting asset margin pressure and changes in deposit mix partially offset by higher markets income in Commercial & Institutional.
 
Bank NIM of 2.94% was 19 basis points lower than Q2 2023 principally reflecting lending margin pressure of 12 basis points and 14 basis points due to continued changes in deposit mix as customers shift to lower margin fixed term accounts, and we expect some further pressure on Bank NIM as this shift continues, albeit at a slower rate. Bank NIM was 3.11% for the year to date.
 
In line with our expectations, other operating expenses were £345 million, or 6.6% higher for the year to date due to increased staff costs, and a one-off cost of living payment, inflationary pressures on utility and contract costs, and a property impairment. We remain committed to delivering on our full year cost guidance.
 
A net impairment charge of £229 million primarily reflects continued low and stable levels of stage 3 defaults across the portfolio and good book charges related to unsecured lending. Compared with Q2 2023, our ECL provision increased by £0.1 billion to £3.6 billion and our ECL coverage ratio has increased from 0.92% to 0.94%. We retain post model adjustments of £0.5 billion related to economic uncertainty, or 12% 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. The impairment charge for the year to date was £452 million, or 16 basis points of gross customer loans.
 
As a result, we are pleased to report an attributable profit for Q3 2023 of £866 million, with earnings per share of 9.8 pence and a RoTE of 14.7%.
 
Net loans to customers excluding central items increased by £1.8 billion over the quarter primarily driven by £1.3 billion growth in Commercial & Institutional due to an increase in term loan facilities and private financing within Corporate & Institutions, net of £0.7 billion of UK Government scheme repayments.  Retail Banking mortgage lending increased by £0.4 billion and unsecured lending increased by £0.6 billion with gross new mortgage lending of £7.5 billion in Q3 2023 compared with £7.6 billion in Q2 2023 and £11.0 billion in Q3 2022. Private Banking net loans to customers decreased by £0.3 billion driven by higher repayments and weaker demand for new lending.
 
Up to 30 September 2023 we have provided £53.2 billion against our target to provide £100 billion climate and sustainable funding and financing between 1 July 2021 and the end of 2025. As part of this we aim to provide at least £10 billion in lending for residential properties with Energy Performance Certificate (EPC) ratings A and B between 1 January 2023 and the end of 2025. During Q3 2023 we provided £4.6 billion climate and sustainable funding and financing, which included £0.9 billion in lending for residential properties with EPC ratings A and B.
 
Customer deposits excluding central items increased by £2.4 billion in the quarter to £423.5 billion, driven by term balance growth partially offset by reductions in instant access and current accounts. Growth of £1.4 billion in Retail Banking and £0.7 billion in Private Banking reflected increased term account balances offset by reductions in instant access savings and current accounts. Commercial & Institutional customer deposits increased by £0.3 billion primarily due to growth in Corporate & Institutions, specifically term balances, partially offset with a reduction in Commercial Mid-market non-interest bearing balances reflecting the market contraction. The mix of our deposit book has continued to change in the third quarter, with term balances now accounting for 15% of the book compared with 11% at the end of the second quarter. The shift to term balances was seen across the business but was strongest in Private Banking and parts of our Corporate & Institutional business within Commercial & Institutional.
 
TNAV per share increased by 9 pence in Q3 2023 to 271 pence primarily reflecting the attributable profit for the period and movements in cash flow hedging reserves, offset by the impact of dividend payments.
 
 
 
 
 
 
 
Business performance summary
Chief Financial Officer review continued
Capital
The CET1 ratio remains strong at 13.5%, or 13.4% excluding IFRS 9 transitional relief. This is in line with Q2 2023 principally reflecting the attributable profit, 50 basis points, offset with distributions deducted from capital of 20 basis points and the increase in RWAs, 30 basis points. NatWest Group's minimum requirement for own funds and eligible liabilities (MREL) ratio was 31.2%.
 
RWAs increased by £4.1 billion in Q3 2023 to £181.6 billion principally reflecting increased market risk and lending growth in Commercial & Institutional partially offset by a £1.9 billion reduction as we continue our exit from the Republic of Ireland.
 
Funding and liquidity
The LCR increased by 4 percentage points to 145% in the quarter, representing £49.6 billion headroom above 100% minimum requirement, primarily due to UBIDAC asset sales along with increased deposits offset by increased customer lending. Our primary liquidity as at 30 September 2023 was £148.9 billion and £116.2 billion or 78% of this was cash at central banks. Total wholesale funding increased by £1.0 billion in the quarter to £82.2 billion.
 
 
 
 
 
 
Business performance summary
Retail Banking
 
 
Quarter ended
 
30 September
30 June
30 September
 
2023
2023
2022
 
£m
£m
£m
Total income
1,442
1,516
1,475
Operating expenses
(780)
(671)
(693)
   of which: Other operating expenses
(721)
(650)
(630)
Impairment losses
(169)
(79)
(116)
Operating profit
493
766
666
 
 
 
 
Return on equity (1)
17.5%
28.2%
27.0%
Net interest margin (1)
2.56%
2.78%
2.85%
Cost:income ratio (excl. litigation and conduct) (1)
50.0%
42.9%
42.7%
Loan impairment rate (1)
33bps
15bps
24bps
 
 
As at
 
30 September
30 June
31 December
 
2023
2023
2022
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
205.2
204.4
197.6
Customer deposits
184.5
183.1
188.4
RWAs
58.9
57.3
54.7
 
1. Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
   
    During Q3 2023, Retail Banking continued to pursue sustainable growth whilst taking a measured approach to risk. Retail Banking delivered a return on equity of 17.5%, reflecting the impact of a more challenging operating environment and higher cost impacts.
   
    Retail Banking provided £0.9 billion of climate and sustainable funding and financing in Q3 2023.
 
Q3 2023 performance
 
-
Total income was £33 million, or 2.2%, lower than Q3 2022 reflecting lower deposit balances with mix shift from non-interest bearing to interest bearing balances, as customers continue to migrate to higher interest rate savings products, and continued mortgage margin dilution, as well as higher treasury costs, partly offset by continued strong loan growth and the impact of rate rises on deposit income.
-
Net interest margin was 22 basis points lower than Q2 2023 largely reflecting deposit mix shift from non-interest bearing to interest bearing balances and lower mortgage margins reflecting the roll-off of higher margin business. These impacts are partly offset by the impact of rate rises on deposit income.
-
Other operating expenses were £91 million, or 14.4%, higher than Q3 2022 reflecting property lease termination losses, continued investment in the business, higher pay awards to support our colleagues with cost of living challenges and increased data costs. This was partly offset by savings from a 3% headcount reduction.
-
An impairment charge of £169 million in Q3 2023 largely reflects stage 3 defaults, which remain broadly stable, good book charges driven by unsecured PD increases, linked to economic modelling inputs, and unsecured lending growth.
-
Net loans to customers increased by £0.8 billion in Q3 2023 reflecting mortgage growth of £0.4 billion, with gross new mortgage lending of £7.5 billion, representing flow share of around 13%. Cards balances increased by £0.5 billion and personal advances increased by £0.1 billion in Q3 2023 with continued strong customer demand.
-
Customer deposits increased by £1.4 billion in Q3 2023 reflecting strong growth in fixed term savings, partially offset by lower current account and instant access savings balances.
-
RWAs increased by £1.6 billion, or 2.8%, in Q3 2023 due to IRB model adjustments and continued asset growth in the period.
 
 
 
 
 
 
 
 
 
 
 
 
 
Business performance summary
Private Banking
 
 
Quarter ended
 
30 September
30 June
30 September
 
2023
2023
2022
 
£m
£m
£m
Total income
214
271
285
Operating expenses
(157)
(167)
(139)
   of which: Other operating expenses
(157)
(159)
(138)
Impairment releases/(losses)
2
(3)
(7)
Operating profit
59
101
139
 
 
 
 
Return on equity (1)
11.7%
20.8%
31.8%
Net interest margin (1)
3.02%
4.17%
4.37%
Cost:income ratio (excl. litigation and conduct) (1)
73.4%
58.7%
48.4%
Loan impairment rate (1)
(4)bps
6bps
15bps
AUM net flows (£bn) (1)
-
0.4
0.3
 
 
 
 
As at
 
30 September
30 June
31 December
 
2023
2023
2022
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
18.8
19.1
19.2
Customer deposits
37.2
36.5
41.2
RWAs
11.6
11.5
11.2
Assets under management (AUMs) (1)
29.8
30.0
28.3
Assets under administration (AUAs) (1)
8.4
7.9
5.1
Total assets under management and administration (AUMAs) (1)
38.2
37.9
33.4
 
(1)
Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
 
 
 
During Q3 2023, Private Banking delivered a return on equity of 11.7%, reflecting the impact of a more challenging operating environment with competitive pressure and a change in customer behaviour leading to an adverse deposit book mix.
 
Private Banking provided £0.1 billion of climate and sustainable funding and financing in Q3 2023.
 
Q3 2023 performance
-
Total income was £71 million, or 24.9%, lower than Q3 2022 reflecting lower deposit balances with mix shift from non-interest bearing to interest bearing balances, as customers continue to migrate to higher interest rate savings products, higher pass through of interest rate increases to customers, reduced lending volumes and mortgage margin pressure, partially offset by the deposit benefits from higher interest rates.
-
Net interest margin was 115 basis points lower than Q2 2023 largely reflecting a change in the deposit book mix and the impact of the Q2 2023 deposit repricing. Higher margin current accounts reduced by £1.3 billion in the quarter whilst lower margin savings accounts increased £2.0 billion.
-
Other operating expenses were £19 million, or 13.8%, higher than Q3 2022 reflecting continued investment in the business and planned increased headcount for consumer duty and Coutts 24, our customer help centre.
-
A net impairment release of £2 million in Q3 2023 largely reflects a small release in good book provision whilst stage 3 defaults remain at low levels.
-
Net loans to customers decreased by £0.3 billion, or 1.6%, in Q3 2023 driven by higher repayments and weaker demand for new lending.   
-
Customer deposits increased by £0.7 billion, or 1.9%, compared with Q2 2023 driven by the continued strong term and notice balance growth, partially offset by lower instant access savings and current accounts.
-
AUMAs increased by £0.3 billion to £38.2 billion, in Q3 2023 primarily reflecting AUA net inflows of £0.2 billion and muted
market movements. AUM net inflows for the year to date reflects 4% of opening AUM balances.
 
 
 
 
 
 
Business performance summary
Commercial & Institutional
 
 
Quarter ended
 
30 September
30 June
30 September
 
2023
2023
2022
 
£m
£m
£m
Net interest income
1,271 
1,243
1,131
Non-interest income
570 
552
526
Total income
1,841 
1,795
1,657
 
 
 
 
Operating expenses
(1,012)
(984)
(893)
   of which: Other operating expenses
(960)
(934)
(840)
Impairment losses
(59)
(64)
(119)
Operating profit
770 
747
645
 
 
 
 
Return on equity (1)
14.7%
14.3%
12.2%
Net interest margin (1)
3.88%
3.79%
3.46%
Cost:income ratio (excl. litigation and conduct) (1)
52.1%
52.0%
50.7%
Loan impairment rate (1)
18bps
20bps
36bps
  As at30 September30 June31 December202320232022£bn£bn£bnNet loans to customers (amortised cost)130.5129.2129.9Customer deposits201.8201.5203.3Funded assets (1)325.2320.6306.3RWAs107.9103.6103.2
(1)     Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
During Q3 2023, Commercial & Institutional delivered another strong performance with growth in revenues and operating profit supporting a return on equity of 14.7%.
 
Commercial & Institutional provided £3.6 billion of climate and sustainable funding and financing in Q3 2023.
 
Q3 2023 performance
-
Total income was £184 million, or 11.1%, higher than Q3 2022 largely reflecting higher deposit income supported by interest rate rises and higher markets income partly offset by higher funding costs.
-
Net interest margin was 9 basis points higher than Q2 2023 largely reflecting one-off items. The benefit of rate rises on deposit income is more than offset by deposit mix shifts from non-interest bearing to interest bearing balances.
-
Other operating expenses were £120 million, or 14.3%, higher than Q3 2022 reflecting higher pay awards to support our colleagues with cost of living challenges, continued investment in the business, including an increase in headcount, and property lease termination losses.
-
An impairment charge of £59 million in Q3 2023 reflects continued low stage 3 default charges.
-
Net loans to customers increased by £1.3 billion, or 1.0%, in Q3 2023 largely due to an increase in term loan facilities including an increase in revolving credit utilisations and private financing growth within Corporate & Institutions, partly offset by UK Government scheme repayments of £0.7 billion.
-
Customer deposits increased by £0.3 billion, or 0.1%, in Q3 2023 due to growth in Corporate & Institutions, specifically term balances, partly offset by a continued market contraction of non-interest bearing balances in Commercial Mid-market. The deposit mix continues to evolve with transition from non-interest bearing and instant access to term balances.
-
RWAs increased by £4.3 billion, or 4.2%, in Q3 2023 primarily due to increased market risk through the quarter following heightened market volatility and lending volume growth.
 
 
 
 
 
 
 
 
 
 
Business performance summary
Central items & other
 
 
Quarter ended
 
30 September
30 June
30 September
 
2023
2023
2022
 
£m
£m
£m
Continuing operations
 
 
 
Total income
(9)
269 
(188)
Operating expenses (1)
22 
(105)
(171)
   of which: Other operating expenses
45 
(132)
(163)
   of which: Ulster Bank RoI direct expenses
(43)
(63)
(75)
Impairment losses
(3)
(7)
(5)
Operating profit/(loss)
10 
157 
(364)
   of which: Ulster Bank RoI
(54)
(136)
(156)
 
 
 
 
 
As at
 
30 September
30 June
31 December
 
2023
2023
2022
 
£bn
£bn
£bn
Net loans to customers (amortised cost) (2)
22.8
21.2
19.6
Customer deposits
12.4
11.4
17.4
RWAs
3.2
5.1 
7.0 
 
(1)
Includes withdrawal-related direct program costs of £10 million for the quarter ended 30 September 2023 (30 June 2023 - £15 million, 30 September 2022 - £24 million).
(2)
Excluded £0.3 billion of loans to customers held at fair value through profit or loss (30 June 2023 - £0.4 billion, 31 December 2022 - £0.5 billion).
 
 
Q3 2023 performance
−  Total income was £179 million higher than Q3 2022 reflecting one-off items including lower losses on liquidity asset bond sales, business growth fund gains and lower losses on redemption of own debt partially offset by lower gains on interest and FX risk management derivatives not in accounting hedge relationships and losses associated with property lease terminations.
−  Net loans to customers increased by £1.6 billion in Q3 2023 mainly due to reverse repo activity in Treasury.
−  Customer deposits increased by £1.0 billion in Q3 2023 primarily reflecting repo activity in Treasury. Ulster Bank RoI customer deposit balances were £0.2 billion as at Q3 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment performance
 
 
Nine months ended 30 September 2023
 
 
 
 
Central
Total
 
Retail
Private
Commercial &
 & items
 NatWest
 
Banking
Banking
Institutional
 other
Group
 
£m
£m
£m
£m
£m
Continuing operations
 
 
 
 
 
Income statement
 
 
 
 
 
Net interest income
4,242 
572 
3,775 
(178)
8,411 
Non-interest income
320 
209 
1,814 
461 
2,804 
Total income
4,562 
781 
5,589 
283 
11,215 
Direct expenses 
(604)
(181)
(1,118)
(3,697)
(5,600)
Indirect expenses 
(1,460)
(287)
(1,735)
3,482 
-
Other operating expenses
(2,064)
(468)
(2,853)
(215)
(5,600)
Litigation and conduct costs
(83)
(11)
(146)
(2)
(242)
Operating expenses
(2,147)
(479)
(2,999)
(217)
(5,842)
Operating profit before impairment losses (1)
2,415 
302 
2,590 
66 
5,373 
Impairment losses (1)
(362)
(9)
(79)
(2)
(452)
Operating profit
2,053 
293 
2,511 
64 
4,921 
 
 
 
 
 
 
Income excluding notable items (1)
4,562 
781 
5,586 
(32)
10,897 
 
 
 
 
 
 
Additional information
 
 
 
 
 
Return on tangible equity (1)
na
na
na
na
17.1%
Return on equity (1)
25.1%
20.3%
16.1%
nm
na
Cost:income ratio (excl. litigation and conduct) (1)
45.2%
59.9%
51.0%
nm
49.9%
Total assets (£bn)
229.1
26.8
411.6
49.6
717.1
Funded assets (£bn) (1)
229.1
26.8
325.2
48.5
629.6
Net loans to customers - amortised cost (£bn)
205.2
18.8
130.5
22.8
377.3
Loan impairment rate (1)
23bps
6bps
8bps
nm
16bps
Impairment provisions (£bn)
(1.9)
(0.1)
(1.5)
-
(3.5)
Impairment provisions - stage 3 (£bn)
(1.1)
-
(0.8)
-
(1.9)
Customer deposits (£bn)
184.5
37.2
201.8
12.4
435.9
Risk-weighted assets (RWAs) (£bn)
58.9
11.6
107.9
3.2
181.6
RWA equivalent (RWAe) (£bn)
58.9
11.6
109.1
3.9
183.5
Employee numbers (FTEs - thousands)
13.4
2.4
12.6
33.3
61.7
Third party customer asset rate (1)
3.13%
4.43%
5.98%
nm
nm
Third party customer funding rate (1)
(1.24%)
(1.88%)
(1.23%)
nm
nm
Bank average interest earning assets (£bn) (1)
204.6
19.1
130.9
na
361.7
Bank net interest margin (1)
2.77%
4.00%
3.86%
na
3.11%
nm = not meaningful, na = not applicable.
 
(1)
Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
 
 
 
 
Segment performance
 
 
Nine months ended 30 September 2022
 
 
 
 
Central
Total 
 
Retail
Private
Commercial &
& items
NatWest
 
Banking
Banking
Institutional
other
Group
 
£m
£m
£m
£m
£m
Continuing operations
 
 
 
 
 
Income statement
 
 
 
 
 
Net interest income
3,719 
526 
2,895 
(166)
6,974 
Non-interest income
310 
220 
1,699 
245 
2,474 
Total income
4,029 
746 
4,594 
79 
9,448 
Direct expenses 
(505)
(169)
(1,109)
(3,472)
(5,255)
Indirect expenses 
(1,309)
(253)
(1,465)
3,027 
-
Other operating expenses
(1,814)
(422)
(2,574)
(445)
(5,255)
Litigation and conduct costs
(121)
(2)
(139)
(32)
(294)
Operating expenses
(1,935)
(424)
(2,713)
(477)
(5,549)
Operating profit/(loss) before impairment  losses/releases (1)
2,094 
322 
1,881 
(398)
3,899 
Impairment (losses)/releases (1)
(142)
4 
(60)
5 
(193)
Operating profit/(loss)
1,952 
326 
1,821 
(393)
3,706 
 
 
 
 
 
 
Income excluding notable items (1)
4,029 
746 
4,578 
(58)
9,295 
 
 
 
 
 
 
Additional information
 
 
 
 
 
Return on tangible equity (1)
na
na
na
na
10.0%
Return on equity (1)
26.5%
24.5%
11.7%
nm
na
Cost:income ratio (excl. litigation and conduct) (1)
45.0%
56.6%
56.0%
nm
55.6%
Total assets (£bn)
221.3
29.8
465.3
85.1
801.5
Funded assets (£bn) (1)
221.3
29.8
325.5
83.9
660.5
Net loans to customers - amortised cost (£bn)
192.8
19.1
131.9
28.0
371.8
Loan impairment rate (1)
10bps
(3)bps
6bps
nm
7bps
Impairment provisions (£bn)
(1.5)
(0.1)
(1.6)
(0.1)
(3.3)
Impairment provisions - stage 3 (£bn)
(0.9)
-
(0.7)
(0.1)
(1.7)
Customer deposits (£bn)
190.9
42.2
215.2
24.7
473.0
Risk-weighted assets (RWAs) (£bn)
53.0
11.1
104.8
9.6
178.5
RWA equivalent (RWAe) (£bn)
53.0
11.1
106.5
10.1
180.7
Employee numbers (FTEs - thousands)
13.8
2.2
12.2
31.8
60.0
Third party customer asset rate (1)
2.61%
2.80%
3.19%
nm
nm
Third party customer funding rate (1)
(0.11%)
(0.15%)
(0.10%)
nm
nm
Bank average interest earning assets (£bn) (1)
188.6
19.1
125.4
na
342.7
Bank net interest margin (1)
2.64%
3.69%
3.09%
na
2.72%
nm = not meaningful, na = not applicable.
 
(1)
Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
 
 
 
Segment performance
 
 
Quarter ended 30 September 2023
 
 
 
 
Central
Total
 
Retail
Private
Commercial &
 & items
 NatWest
 
Banking
Banking
Institutional
 other
Group
 
£m
£m
£m
£m
£m
Continuing operations
 
 
 
 
 
Income statement
 
 
 
 
 
Net interest income
1,334
144
1,271
(64)
2,685
Non-interest income
108
70
570
55
803
Total income
1,442
214
1,841
(9)
3,488
Direct expenses 
(206)
(63)
(377)
(1,147)
(1,793)
Indirect expenses 
(515)
(94)
(583)
1,192
-
Other operating expenses
(721)
(157)
(960)
45
(1,793)
Litigation and conduct costs
(59)
-
(52)
(23)
(134)
Operating expenses
(780)
(157)
(1,012)
22
(1,927)
Operating profit before impairment losses/releases (1)
662
57
829
13
1,561
Impairment (losses)/releases (1)
(169)
2
(59)
(3)
(229)
Operating profit
493
59
770
10
1,332
 
 
 
 
 
 
Income excluding notable items (1)
1,442
214
1,847
11
3,514
 
 
 
 
 
 
Additional information
 
 
 
 
 
Return on tangible equity (1)
na
na
na
na
14.7%
Return on equity (1)
17.5%
11.7%
14.7%
nm
na
Cost:income ratio (excl. litigation and conduct) (1)
50.0%
73.4%
52.1%
nm
51.4%
Total assets (£bn)
229.1
26.8
411.6
49.6
717.1
Funded assets (£bn) (1)
229.1
26.8
325.2
48.5
629.6
Net loans to customers - amortised cost (£bn)
205.2
18.8
130.5
22.8
377.3
Loan impairment rate (1)
33bps
(4)bps
18bps
nm
24bps
Impairment provisions (£bn)
(1.9)
(0.1)
(1.5)
-
(3.5)
Impairment provisions - stage 3 (£bn)
(1.1)
-
(0.8)
-
(1.9)
Customer deposits (£bn)
184.5
37.2
201.8
12.4
435.9
Risk-weighted assets (RWAs) (£bn)
58.9
11.6
107.9
3.2
181.6
RWA equivalent (RWAe) (£bn)
58.9
11.6
109.1
3.9
183.5
Employee numbers (FTEs - thousands)
13.4
2.4
12.6
33.3
61.7
Third party customer asset rate (1)
3.34%
4.80%
6.72%
nm
nm
Third party customer funding rate (1)
(1.69%)
(2.80%)
(1.65%)
nm
nm
Bank average interest earning assets (£bn) (1)
206.9
18.9
129.8
na
362.8
Bank net interest margin (1)
2.56%
3.02%
3.88%
na
2.94%
nm = not meaningful, na = not applicable
 
(1)
Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
 
 
 
 
Segment performance
 
 
Quarter ended 30 June 2023
 
 
 
 
Central
Total 
 
Retail
Private
Commercial &
& items
NatWest
 
Banking
Banking
Institutional
other
Group
 
£m
£m
£m
£m
£m
Continuing operations
 
 
 
 
 
Income statement
 
 
 
 
 
Net interest income
1,416
199
1,243
(34)
2,824
Non-interest income
100
72
552
303
1,027
Total income
1,516
271
1,795
269
3,851
Direct expenses 
(187)
(58)
(381)
(1,249)
(1,875)
Indirect expenses 
(463)
(101)
(553)
1,117
-
Other operating expenses
(650)
(159)
(934)
(132)
(1,875)
Litigation and conduct costs
(21)
(8)
(50)
27
(52)
Operating expenses
(671)
(167)
(984)
(105)
(1,927)
Operating profit before impairment losses (1)
845
104
811
164
1,924
Impairment losses (1)
(79)
(3)
(64)
(7)
(153)
Operating profit
766
101
747
157
1,771
 
 
 
 
 
 
Income excluding notable items (1)
1,516
271
1,792
(16)
3,563
 
 
 
 
 
 
Additional information
 
 
 
 
 
Return on tangible equity (1)
na
na
na
na
16.4%
Return on equity (1)
28.2%
20.8%
14.3%
nm
na
Cost:income ratio (excl. litigation and conduct) (1)
42.9%
58.7%
52.0%
nm
48.7%
Total assets (£bn)
229.1
27.3
401.5
44.7
702.6
Funded assets (£bn) (1)
229.1
27.3
320.6
43.7
620.7
Net loans to customers - amortised cost (£bn)
204.4
19.1
129.2
21.2
373.9
Loan impairment rate (1)
15bps
6bps
20bps
nm
16bps
Impairment provisions (£bn)
(1.7)
(0.1)
(1.5)
(0.1)
(3.4)
Impairment provisions - stage 3 (£bn)
(1.0)
-
(0.8)
(0.1)
(1.9)
Customer deposits (£bn)
183.1
36.5
201.5
11.4
432.5
Risk-weighted assets (RWAs) (£bn)
57.3
11.5
103.6
5.1
177.5
RWA equivalent (RWAe) (£bn)
57.3
11.5
104.9
5.8
179.5
Employee numbers (FTEs - thousands)
13.7
2.3
12.6
32.9
61.5
Third party customer asset rate (1)
3.11%
4.41%
5.84%
nm
nm
Third party customer funding rate (1)
(1.20%)
(1.71%)
(1.18%)
nm
nm
Bank average interest earning assets (£bn) (1)
204.6
19.2
131.4
na
362.3
Bank net interest margin (1)
2.78%
4.17%
3.79%
na
3.13%
nm = not meaningful, na = not applicable
 
(1)
Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
 
 
 
 
Segment performance
 
 
Quarter ended 30 September 2022
 
 
 
 
Central
Total 
 
Retail
Private
Commercial &
& items
NatWest
 
Banking
Banking
Institutional
other
Group
 
£m
£m
£m
£m
£m
Continuing operations
 
 
 
 
 
Income statement
 
 
 
 
 
Net interest income
1,379 
211 
1,131 
(81)
2,640 
Non-interest income
96 
74 
526 
(107)
589 
Total income
1,475 
285 
1,657 
(188)
3,229 
Direct expenses 
(180)
(59)
(367)
(1,165)
(1,771)
Indirect expenses 
(450)
(79)
(473)
1,002 
-
Other operating expenses
(630)
(138)
(840)
(163)
(1,771)
Litigation and conduct costs
(63)
(1)
(53)
(8)
(125)
Operating expenses
(693)
(139)
(893)
(171)
(1,896)
Operating profit/(loss) before impairment losses (1)
782 
146 
764 
(359)
1,333 
Impairment losses (1)
(116)
(7)
(119)
(5)
(247)
Operating profit/(loss)
666 
139 
645 
(364)
1,086 
 
 
 
 
 
 
Income excluding notable items (1)
1,475 
285 
1,648 
(11)
3,397 
 
 
 
 
 
 
Additional information
 
 
 
 
 
Return on tangible equity (1)
na
na
na
na
2.9%
Return on equity (1)
27.0%
31.8%
12.2%
nm
na
Cost:income ratio (excl. litigation and conduct) (1)
42.7%
48.4%
50.7%
nm
54.8%
Total assets (£bn)
221.3
29.8
465.3
85.1
801.5
Funded assets (£bn) (1)
221.3
29.8
325.5
83.9
660.5
Net loans to customers - amortised cost (£bn)
192.8
19.1
131.9
28.0
371.8
Loan impairment rate (1)
24bps
15bps
36bps
nm
26bps
Impairment provisions (£bn)
(1.5)
(0.1)
(1.6)
(0.1)
(3.3)
Impairment provisions - stage 3 (£bn)
(0.9)
-
(0.7)
(0.1)
(1.7)
Customer deposits (£bn)
190.9
42.2
215.2
24.7
473.0
Risk-weighted assets (RWAs) (£bn)
53.0
11.1
104.8
9.6
178.5
RWA equivalent (RWAe) (£bn)
53.0
11.1
106.5
10.1
180.7
Employee numbers (FTEs - thousands)
13.8
2.2
12.2
31.8
60.0
Third party customer asset rate (1)
2.64%
3.09%
3.53%
nm
nm
Third party customer funding rate (1)
(0.17%)
(0.29%)
(0.19%)
nm
nm
Bank average interest earning assets (£bn) (1)
192.1
19.2
129.8
na
350.7
Bank net interest margin (1)
2.85%
4.37%
3.46%
na
2.99%
nm = not meaningful, na = not applicable
 
 
(1)
Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
 
 
 
 
 
 
 
 
 
Risk and capital management
 
 
Page
Credit risk
 
   Segment analysis - portfolio summary
16
   Segment analysis - loans
18
   Movement in ECL provision
18
   ECL post model adjustments
19
   Sector analysis - portfolio summary
20
   Wholesale support schemes
21
Capital, liquidity and funding risk
22
 
 
 
 
 
 
 
 
 
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
30 September 2023
£m
£m
£m
£m
£m
Loans - amortised cost and FVOCI (1)
 
 
 
 
 
Stage 1
185,826
17,831
114,918
27,866
346,441
Stage 2
17,963
943
18,721
19
37,646
Stage 3
2,965
258
2,224
18
5,465
Of which: individual
-
209
1,041
-
1,250
Of which: collective
2,965
49
1,183
18
4,215
Subtotal excluding disposal group loans
206,754
19,032
135,863
27,903
389,552
Disposal group loans
 
 
 
136
136
Total
 
 
 
28,039
389,688
ECL provisions (2)
 
 
 
 
 
Stage 1
304
20
340
23
687
Stage 2
481
17
509
25
1,032
Stage 3
1,096
33
785
16
1,930
Of which: individual
-
33
287
-
320
Of which: collective
1,096
-
498
16
1,610
Subtotal excluding ECL provisions on disposal group loans
1,881
70
1,634
64
3,649
ECL provisions on disposal group loans
 
 
 
61
61
Total
 
 
 
125
3,710
ECL provisions coverage (3)
 
 
 
 
 
Stage 1 (%)
0.16
0.11
0.30
0.08
0.20
Stage 2 (%)
2.68
1.80
2.72
nm
2.74
Stage 3 (%)
36.96
12.79
35.30
88.89
35.32
ECL provisions coverage excluding disposal group loans
0.91
0.37
1.20
0.23
0.94
ECL provisions coverage on disposal group loans
 
 
 
44.85
44.85
Total
 
 
 
0.45
0.95
 
 
30 June 2023
 
 
 
 
 
Loans - amortised cost and FVOCI (1)
 
 
 
 
 
Stage 1
180,293
18,075
112,341
25,653
336,362
Stage 2
22,686
988
19,676
90
43,440
Stage 3
2,826
254
2,246
124
5,450
Of which: individual
-
203
1,017
27
1,247
Of which: collective
2,826
51
1,229
97
4,203
Subtotal excluding disposal group loans
205,805
19,317
134,263
25,867
385,252
Disposal group loans
 
 
 
573
573
Total
 
 
 
26,440
385,825
ECL provisions (2)
 
 
 
 
 
Stage 1
282
23
333
23
661
Stage 2 
439
17
507
28
991
Stage 3
1,038
31
765
71
1,905
Of which: individual
-
31
260
4
295
Of which: collective
1,038
-
505
67
1,610
Subtotal excluding ECL provisions on disposal group loans
1,759
71
1,605
122
3,557
ECL provisions on disposal group loans
 
 
 
31
31
Total
 
 
 
153
3,588
ECL provisions coverage (3)
 
 
 
 
 
Stage 1 (%)
0.16
0.13
0.30
0.09
0.20
Stage 2 (%)
1.94
1.72
2.58
31.11
2.28
Stage 3 (%)
36.73
12.20
34.06
57.26
34.95
ECL provisions coverage excluding disposal group loans
0.85
0.37
1.20
0.47
0.92
ECL provisions coverage on disposal group loans
 
 
 
5.41
5.41
Total
 
 
 
0.58
0.93
nm = not meaningful
 
For the notes to this table refer to the following page.
 
 
 
 
Risk and capital management
Credit risk continued
Segment analysis - portfolio summary continued
 
 
 
 
 
 
 
 
Retail
Private
Commercial
Central items
 
 
Banking
Banking
& Institutional
& other
Total
31 December 2022
£m
£m
£m
£m
£m
Loans - amortised cost and FVOCI (1)
 
 
 
 
 
Stage 1
174,727
18,367
108,791
23,339
325,224
Stage 2
21,561
801
24,226
245
46,833
Stage 3
2,565
242
2,166
123
5,096
Of which: individual
-
168
905
48
1,121
Of which: collective
2,565
74
1,261
75
3,975
Subtotal excluding disposal group loans
198,853
19,410
135,183
23,707
377,153
Disposal group loans
 
 
 
1,502
1,502
Total
 
 
 
25,209
378,655
ECL provisions (2)
 
 
 
 
 
Stage 1
251
21
342
18
632
Stage 2 
450
14
534
45
1,043
Stage 3
917
26
747
69
1,759
Of which: individual
-
26
251
10
287
Of which: collective
917
-
496
59
1,472
Subtotal excluding ECL provisions on disposal group loans
1,618
61
1,623
132
3,434
ECL provisions on disposal group loans
 
 
 
53
53
Total
 
 
 
185
3,487
ECL provisions coverage (3)
 
 
 
 
 
Stage 1 (%)
0.14
0.11
0.31
0.08
0.19
Stage 2 (%)
2.09
1.75
2.20
18.37
2.23
Stage 3 (%)
35.75
10.74
34.49
56.10
34.52
ECL provisions coverage excluding disposal group loans
0.81
0.31
1.20
0.56
0.91
ECL provisions coverage on disposal group loans
 
 
 
3.53
3.53
Total
 
 
 
0.73
0.92
 
(1)
Includes loans to customers and banks.
(2)
Includes £9 million (30 June 2023 - £4 million; 31 December 2022 - £3 million) related to assets classified as FVOCI; and £0.1 billion (30 June 2023 - £0.1 billion; 31 December 2022 - £0.1 billion) related to off-balance sheet exposures.
(3)
ECL provisions coverage is calculated as ECL provisions divided by loans - amortised cost and FVOCI. It is calculated on third party loans and total ECL provisions. Some segments with a high proportion of debt securities or unutilised exposure may result in a not meaningful coverage ratio.
(4)
The table shows gross loans only and excludes amounts that were outside the scope of the ECL framework. Other financial assets within the scope of the IFRS 9 ECL framework were cash and balances at central banks totalling £118.6 billion (30 June 2023 - £121.9 billion; 31 December 2022 - £143.3 billion) and debt securities of £45.3 billion (30 June 2023 - £34.7 billion; 31 December 2022 - £29.9 billion).
 
 
 
 
 
 
 
Risk and capital management
Credit risk continued
Segment analysis - loans
●
Retail Banking - Balance sheet growth continued during Q3 2023, but at a reduced pace compared to Q2 2023, reflecting UK mortgage market trends. Unsecured balances growth, primarily in credit cards, was a continuation of the strong customer demand seen in the first half of the year. Lending criteria and affordability assumptions continue to be reviewed to ensure new business is assessed appropriately in the higher interest rate and inflationary environment. While portfolio performance continued to remain stable, total ECL coverage increased. The rise in coverage was reflective of increased Stage 3 ECL on unsecured portfolios, mainly due to reduced write-off activity. The modest increase in good book coverage reflected slightly increased probability of defaults in unsecured portfolios, linked to economic modelling inputs, and unsecured lending growth. Post model adjustments to capture increased affordability pressures on customers due to high inflation and rising interest rates remained broadly stable. Stage 2 balances decreased during Q3 2023, driven by mortgages, as a lagged effect of the multiple economic scenarios update at 30 June 2023. This scenario update reduced levels of probability of default significant increase in credit risk deterioration, with the three-month probability of default persistence rules expiring, which resulted in some migration back into Stage 1. Increased probability of defaults in unsecured portfolios, as described above, resulted in increased Stage 2 balances, primarily in credit cards.
●
Commercial & Institutional - There was balance sheet growth during Q3 2023. Growth since Q4 2022 was primarily in financial institutions and other wholesale. Sector appetite continues to be reviewed regularly, with particular focus on sector clusters and sub-sectors that are deemed to represent a heightened risk, including due to cost of living, supply chain and inflationary pressures. Coverage remained stable with small increases in ECL alongside balance growth. Stage 1 and Stage 2 ECL increased marginally during the quarter with increases from changes in risk parameters largely offset by the continued unwind of Covid post model adjustments. Stage 3 individual ECL increased due to some flows into Stage 3 as well as ECL increases on a small number of previously defaulted exposures.
●
Central items & other - Disposal group loans continue to reduce as portfolios are sold, with Q3 2023 sales comprised primarily of non-defaulted loans. ECL for the remaining loans was updated to reflect the expected outcome from future portfolio sales.  This has resulted in higher coverage rates on these remaining loans.
 
Movement in ECL provision
The table below shows the main ECL provision movements during the year.
 
 
ECL provision
 
£m
At 1 January 2023
3,434
Transfers to disposal groups and reclassifications
(69)
Changes in economic forecasts
(98)
Changes in risk metrics and exposure: Stage 1 and Stage 2
45
Changes in risk metrics and exposure: Stage 3
424
Judgemental changes: changes in post model adjustments for Stage 1, Stage 2 and Stage 3
118
Write-offs and other
(205)
At 30 September 2023
3,649
 
●
ECL increased during 2023, reflecting a relatively stable level of good book ECL coverage alongside increases in Stage 3 ECL.
●
Stage 3 default flows in the Retail portfolios remained stable, although there were modest increases in line with growth and post-Covid lending strategy. For the Wholesale portfolios, default levels were lower than historic trends as the effects of high inflation, rising interest rates and supply chain disruption has, to date, not led to a significant increase in defaults.
●
Stage 3 balances increased, primarily driven by retail portfolios, linked to reduced write-off activity this year.
●
There were no changes to economic forecasts in the quarter and minimal changes from post model adjustments which have been largely retained reflecting a continued uncertain economic outlook.
●
A £69 million ECL reduction was due to the transfer to disposal groups and reclassifications related to the phased withdrawal of Ulster Bank RoI from the Republic of Ireland.
 
 
 
 
 
 
 
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
30 September 2023
£m
£m
 
£m
£m
 
£m
£m
Deferred model calibrations
-
-
 
1
21
 
-
22
Economic uncertainty
115
46
 
11
279
 
2
453
Other adjustments
7
-
 
-
14
 
33
54
Total
122
46
 
12
314
 
35
529
 
 
 
 
 
 
 
 
 
Of which:
 
 
 
 
 
 
 
 
- Stage 1
79
19
 
6
117
 
11
232
- Stage 2
29
27
 
6
193
 
21
276
- Stage 3 
14
-
 
-
4
 
3
21
 
 
 
 
 
 
 
 
 
30 June 2023
 
 
 
Deferred model calibrations
-
-
 
1
22
 
-
23
Economic uncertainty
116
43
 
12
289
 
2
462
Other adjustments
7
-
 
-
12
 
36
55
Total
123
43
 
13
323
 
38
540
 
 
 
 
 
 
 
 
 
Of which:
 
 
 
 
 
 
 
 
- Stage 1
74
19
 
6
113
 
20
232
- Stage 2
34
24
 
7
206
 
17
288
- Stage 3 
15
-
 
-
4
 
1
20
 
 
 
 
 
 
 
 
 
31 December 2022
 
 
 
Economic uncertainty
102
51
 
6
191
 
2
352
Other adjustments
8
20
 
-
16
 
15
59
Total
110
71
 
6
207
 
17
411
 
 
 
 
 
 
 
 
 
Of which:
 
 
 
 
 
 
 
 
- Stage 1
62
27
 
3
63
 
-
155
- Stage 2
32
44
 
3
139
 
16
234
- Stage 3 
16
-
 
-
5
 
1
22
 
 
●
Retail Banking - The post model adjustments for economic uncertainty increased slightly to £161 million at 30 September 2023, from £159 million at 30 June 2023. Continued consumer affordability risks, as a result of higher interest rates and sustained inflation, prompted an uplift in the cost of living post model adjustment (up from £134 million to £138 million). 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 slightly to £279 million at 30 September 2023, from £289 million at 30 June 2023. It included an overlay of £62 million, down from £79 million, to cover the residual risks from Covid, to address concerns about the associated debt of customers who have used government support schemes. A mechanistic post model adjustment via a sector level downgrade remained in place to account for the pressures from inflation and supply chains, plus broader concerns around liquidity and reducing cash reserves across many sectors. The post model adjustment increased to £217 million at 30 September 2023 from £210 million at 30 June 2023, reflecting the significant headwinds for a number of sectors which are not fully captured in the models.
 
 
 
 
 
 
 
Risk and capital management
Credit risk continued
Sector analysis - portfolio summary
The table below shows ECL by stage, for the Personal portfolios and selected sectors of the Wholesale portfolios.
 
 
 
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
30 September 2023
£m
£m
£m
£m
£m
 
£m
 
£m
£m
£m
£m
Personal
202,724
18,233
3,218
224,175
36,965
 
46
 
317
493
1,139
1,949
  Mortgages (1)
192,083
14,629
2,170
208,882
11,007
 
-
 
96
56
264
416
  Credit cards
3,569
1,825
132
5,526
17,267
 
-
 
70
175
95
340
  Other personal
7,072
1,779
916
9,767
8,691
 
46
 
151
262
780
1,193
Wholesale
143,717
19,413
2,247
165,377
92,220
 
4,540
 
370
539
791
1,700
  Property
27,083
3,510
661
31,254
14,372
 
359
 
99
114
197
410
  Financial institutions
52,414
437
34
52,885
19,697
 
1,553
 
32
15
10
57
  Sovereign
2,669
1
22
2,692
231
 
-
 
12
-
1
13
  Other wholesale
61,551
15,465
1,530
78,546
57,920
 
2,628
 
227
410
583
1,220
    Of which:
 
 
 
 
 
 
 
 
 
 
 
 
        Agriculture
3,719
1,119
104
4,942
998
 
20
 
18
37
35
90
        Airlines and aerospace 
1,382
596
3
1,981
1,636
 
181
 
4
9
2
15
        Automotive
6,844
868
63
7,775
4,097
 
84
 
20
16
19
55
        Building materials
1,309
305
15
1,629
1,471
 
73
 
7
10
8
25
        Chemicals
339
69
1
409
822
 
11
 
1
5
1
7
        Industrials
2,303
674
73
3,050
3,059
 
156
 
10
20
19
49
        Land transport and logistics
4,314
766
65
5,145
3,193
 
162
 
12
19
18
49
        Leisure
4,146
2,678
289
7,113
1,979
 
161
 
30
85
88
203
        Mining and metals
359
36
5
400
488
 
7
 
1
1
4
6
        Oil and gas
760
147
28
935
1,977
 
236
 
3
3
27
33
        Power utilities
5,023
446
45
5,514
8,608
 
623
 
12
13
9
34
        Retail
5,594
1,899
224
7,717
4,566
 
389
 
21
44
116
181
        Shipping
199
72
3
274
66
 
31
 
-
2
2
4
        Water and waste
3,389
386
14
3,789
1,812
 
97
 
4
4
4
12
Total
346,441
37,646
5,465
389,552
129,185
 
4,586
 
687
1,032
1,930
3,649
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31 December 2022 (2)
 
 
 
 
 
 
 
 
 
 
 
 
Personal
192,438
21,854
2,831
217,123
43,126
 
51
 
260
466
957
1,683
  Mortgages (1)
182,245
18,787
1,925
202,957
18,782
 
-
 
81
62
233
376
  Credit cards
3,275
1,076
109
4,460
15,848
 
-
 
62
122
73
257
  Other personal
6,918
1,991
797
9,706
8,496
 
51
 
117
282
651
1,050
Wholesale
132,786
24,979
2,265
160,030
88,886
 
4,963
 
372
577
802
1,751
  Property
26,300
4,035
701
31,036
13,895
 
413
 
99
98
223
420
  Financial institutions
46,738
1,353
47
48,138
18,223
 
1,332
 
32
14
17
63
  Sovereign
2,793
1
2
2,796
269
 
-
 
15
-
2
17
  Other wholesale
56,955
19,590
1,515
78,060
56,499
 
3,218
 
226
465
560
1,251
    Of which:
 
 
 
 
 
 
 
 
 
 
 
 
        Agriculture
3,646
1,034
93
4,773
968
 
24
 
21
31
43
95
        Airlines and aerospace 
483
1,232
19
1,734
1,715
 
174
 
2
40
8
50
        Automotive
5,776
1,498
30
7,304
4,009
 
99
 
18
18
11
47
        Building materials
1,244
284
15
1,543
1,407
 
78
 
7
7
7
21
        Chemicals
384
117
1
502
650
 
12
 
1
2
1
4
        Industrials
2,148
1,037
82
3,267
3,135
 
195
 
10
16
24
50
        Land transport and logistics
3,863
1,304
72
5,239
3,373
 
190
 
13
34
18
65
        Leisure
3,416
3,787
260
7,463
1,907
 
102
 
27
147
115
289
        Mining and metals
173
230
5
408
545
 
5
 
-
1
5
6
        Oil and gas
953
159
60
1,172
2,157
 
248
 
3
3
31
37
        Power utilities
4,228
406
6
4,640
6,960
 
1,182
 
9
11
1
21
        Retail
6,497
1,746
150
8,393
4,682
 
416
 
21
29
68
118
        Shipping
161
151
14
326
110
 
22
 
-
7
6
13
        Water and waste
3,026
335
7
3,368
2,143
 
101
 
4
4
4
12
Total
325,224
46,833
5,096
377,153
132,012
 
5,014
 
632
1,043
1,759
3,434
 
(1)
As at 30 September 2023, £144.2 billion, 70%, of the total residential mortgages portfolio had Energy Performance Certificate (EPC) data available (31 December 2022 - £138.8 billion, 68%), of which, 43% were rated as EPC A to C (31 December 2022 - 42%).
(2)
Previously published sector splits for the Wholesale portfolio have been re-presented to reflect updated internal sector reporting splits.
 
 
 
 
 
Risk and capital management
Credit risk continued
Wholesale support schemes
The table below shows the sector split for the Bounce Back Loan Scheme (BBLS) as well as associated debt split by stage. Associated debt refers to the non-BBLS lending to customers who also have BBLS lending.
 
 
Gross carrying amount
 
 
 
 
 
BBL
 
Associated debt
 
ECL on associated debt
 
Stage 1 
Stage 2
Stage 3
Total
 
Stage 1 
Stage 2
Stage 3
Total
 
Stage 1
Stage 2 
Stage 3
30 September 2023
£m
£m
£m
£m
 
£m
£m
£m
£m
 
£m
£m
£m
Wholesale 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property 
699
191
32
922
 
702
222
78
1,002
 
9
18
29
Financial institutions
18
4
-
22
 
8
2
-
10
 
-
-
-
Other
2,346
628
280
3,254
 
2,062
954
161
3,177
 
26
64
89
Total
3,063
823
312
4,198
 
2,772
1,178
239
4,189
 
35
82
118
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31 December 2022 (1)
 
 
 
 
 
 
 
 
 
 
 
Wholesale 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property 
966
186
48
1,200
 
874
205
60
1,139
 
10
14
26
Financial institutions
24
4
-
28
 
9
2
-
11
 
-
-
1
Other
3,233
641
342
4,216
 
2,338
884
117
3,339
 
26
57
70
Total
4,223
831
390
5,444
 
3,221
1,091
177
4,489
 
36
71
97
 
 
 
(1)
Previously published sector splits for the Wholesale portfolio have been re-presented to reflect updated internal sector reporting splits.
 
 
 
 
 
 
 
 
 
 
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 2022
 
CET1 ratio
The CET1 ratio decreased by 70 basis points to 13.5%. The reduction in CET1 ratio was due to a £0.4 billion decrease in CET1 capital and a £5.5 billion increase in RWAs.
The CET1 decrease was mainly driven by:
- the directed buyback of £1.3 billion;
- a foreseeable dividend accrual of £0.6 billion;
- a £0.5 billion decrease for the on-market ordinary share buyback programme, of which £0.4 billion is reported as a foreseeable charge;
- a £0.1 billion decrease in the IFRS 9 transitional adjustment, primarily due to the annual update in the dynamic stage transition percentage and the end of transition on the static and historic stages;
- an increase in the intangible assets deduction of £0.4 billion; and
- other movements on reserves and regulatory adjustments of £0.2 billion.
These reductions were partially offset by the £2.7 billion attributable profit in the period (net of ordinary interim dividend paid).
 
Total RWAs
Total RWAs increased by £5.5 billion to £181.6 billion, mainly reflecting:
- an increase in credit risk RWAs of £2.0 billion, primarily due to £0.9 billion of IRB model adjustments within Retail Banking, in addition to increased exposures within Commercial & Institutional and Retail Banking. This was partially offset by reduced exposures within Ulster Bank RoI as a result of the phased withdrawal from the Republic of Ireland.
- an increase in counterparty credit risk RWAs of £1.3 billion, primarily due to the call of a credit default swap trade in Q2 2023 and the subsequent removal of credit risk mitigation, this is in addition to increased trades during Q3 2023.
- an increase in operational risk RWAs of £1.1 billion following the annual recalculation.
- an increase in market risk RWAs of £1.1 billion, driven by market volatility during Q3 2023.
 
UK leverage ratio
The leverage ratio decreased by 30 basis points to 5.1%. The decrease was due to a £0.4 billion reduction in Tier 1 capital and a £28.9 billion increase in leverage exposure. The key driver in leverage exposure was an increase in other financial assets.
 
Liquidity portfolio
The liquidity portfolio decreased by £0.5 billion to £225.0 billion. Primary liquidity decreased by £12.7 billion to £148.9 billion, driven by a reduction in customer deposits, increased lending and capital distributions, partially offset by the UBIDAC asset sales and wholesale funding. Secondary liquidity increased by £12.2 billion due to an increase in pre-positioned collateral at the Bank of England.
 
 
 
 
 
 
 
Risk and capital management
Capital, liquidity and funding risk continued
Maximum Distributable Amount (MDA) and Minimum Capital Requirements
NatWest Group is subject to minimum capital requirements relative to RWAs. The table below summarises the minimum capital requirements (the sum of Pillar 1 and Pillar 2A), and the additional capital buffers which are held in excess of the regulatory minimum requirements and are usable in stress.  
 
Where the CET1 ratio falls below the sum of the minimum capital and the combined buffer requirement, there is a subsequent automatic restriction on the amount available to service discretionary payments (including AT1 coupons), known as the MDA. Note that different requirements apply to individual legal entities or sub-groups and that the table shown does not reflect any incremental PRA buffer requirements, which are not disclosable.
 
The current capital position provides significant headroom above both our minimum requirements and our MDA threshold requirements.
 
Type
CET1
Total Tier 1
Total capital
Pillar 1 requirements
4.5%
6.0%
8.0%
Pillar 2A requirements
1.7%
2.3%
3.0%
Minimum Capital Requirements
6.2%
8.3%
11.0%
Capital conservation buffer
2.5%
2.5%
2.5%
Countercyclical capital buffer (1) 
1.7%
1.7%
1.7%
MDA threshold (2)
10.4%
n/a
n/a
Overall capital requirement
10.4%
12.5%
15.2%
Capital ratios at 30 September 2023
13.5%
15.7%
18.7%
Headroom (3) 
3.1%
3.2%
3.5%
 
(1)
The UK CCyB rate is being maintained at 2%. The rate may vary in either direction in the future depending on how risks develop.  The CCyB on Irish exposures will increase from 0.5% to 1.0% from 24 November 2023.  A further increase to 1.5% will be effective June 2024.
(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.
 
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. The UK CCyB increased from 1% to 2% from 5 July 2023. Foreign exposure may be subject to different CCyB rates depending on the rates set in those jurisdictions.
 
 
 
 
 
Risk and capital management
Capital, liquidity and funding risk continued
Capital and leverage ratios
The table below sets out the key capital and leverage ratios and measures. These are calculated on current PRA rules and presented on a transitional basis for the remaining IFRS 9 transitional relief in respect to ECL. The remaining Tier 2 instruments subject to CRR2 grandfathering provisions were derecognised during Q3 2023 following regulatory approvals.
 
 
 
 
 
 
30 September
30 June
31 December
 
2023
2023
2022
Capital adequacy ratios (1)
%
%
%
CET1
13.5
13.5
14.2
Tier 1
15.7
15.7
16.4
Total
18.7
18.8
19.3
 
 
 
 
Capital
£m
£m
£m
Tangible equity
24,015
23,415
25,482
 
 
 
 
Prudential valuation adjustment
(272)
(271)
(275)
Deferred tax assets
(688)
(742)
(912)
Own credit adjustments
(24)
(49)
(58)
Pension fund assets
(246)
(243)
(227)
Cash flow hedging reserve
2,967
3,344
2,771
Foreseeable ordinary dividends
(643)
(780)
(967)
Adjustment for trust assets (2)
(365)
(365)
(365)
Foreseeable charges - on-market ordinary share buyback programme
(361)
(500)
(800)
Adjustments under IFRS 9 transitional arrangements
223
223
361
Insufficient coverage for non-performing exposures
(21)
(19)
(18)
Total regulatory adjustments
570
598
(490)
 
 
 
 
CET1 capital
24,585
24,013
24,992
 
 
 
 
Additional AT1 capital
3,875
3,875
3,875
Tier 1 capital
28,460
27,888
28,867
 
 
 
 
End-point Tier 2 capital 
5,485
5,364
4,978
Grandfathered instrument transitional arrangements
-
73
75
Tier 2 capital
5,485
5,437
5,053
Total regulatory capital
33,945
33,325
33,920
 
 
 
 
Risk-weighted assets
 
 
 
Credit risk
143,974
142,704
141,963
Counterparty credit risk
8,001
7,680
6,723
Market risk
9,380
6,962
8,300
Operational risk
20,198
20,198
19,115
Total RWAs
181,553
177,544
176,101
 
 
 
 
 
 
(1)
30 September 2023 includes the transitional arrangements for the capital impact of IFRS 9 expected credit loss (ECL) accounting and prior periods also include the transitional relief on grandfathered capital instruments. The impact of the IFRS 9 transitional adjustments at 30 September 2023 was £0.2 billion for CET1 capital, £48 million for total capital and £28 million RWAs (30 June 2023 - £0.2 billion CET1 capital, £35 million total capital and £37 million RWAs; 31 December 2022 - £0.4 billion CET1 capital, £36 million total capital and £71 million RWAs). Excluding these adjustments, the CET1 ratio would be 13.4% (30 June 2023 - 13.4%; 31 December 2022 - 14.0%). The transitional relief on grandfathered instruments at 30 September 2023 was nil (30 June 2023 - £0.1 billion; 31 December 2022 - £0.1 billion). Excluding both the transitional relief on grandfathered capital instruments and the transitional arrangements for the capital impact of IFRS 9 expected credit loss (ECL) accounting, the end-point Tier 1 capital ratio would be 15.6% (30 June 2023 - 15.6%; 31 December 2022 - 16.2%) and the end-point Total capital ratio would be 18.7% (30 June 2023 - 18.8%; 31 December 2022 - 19.2%)
 
(2)
Prudent deduction in respect of agreement with the pension fund to establish new legal structure to remove dividend linked contribution.
 
 
 
 
 
 
 
 
 
Risk and capital management
Capital, liquidity and funding risk continued
Capital and leverage ratios continued
 
 
30 September
30 June
31 December
 
2023
2023
2022
Leverage
£m
£m
£m
Cash and balances at central banks
119,590
123,022
144,832
Trading assets
49,621
48,893
45,577
Derivatives
87,504
81,873
99,545
Financial assets
432,451
416,739
404,374
Other assets
26,891
27,499
18,864
Assets of disposal groups
1,084
4,575
6,861
Total assets
717,141
702,601
720,053
Derivatives
 
 
 
   - netting and variation margin
(86,657)
(82,798)
(100,356)
   - potential future exposures
17,226
16,654
18,327
Securities financing transactions gross up
2,245
2,013
4,147
Other off-balance sheet items
50,528
48,668
46,144
Regulatory deductions and other adjustments
(16,647)
(15,663)
(7,114)
Claims on central banks
(116,157)
(114,253)
(141,144)
Exclusion of bounce back loans
(4,198)
(4,627)
(5,444)
UK leverage exposure
563,481
552,595
534,613
UK leverage ratio (%) (1)
5.1
5.0
5.4
 
 
(1)
Excluding the IFRS 9 transitional adjustment, the UK leverage ratio would be 5.0% (30 June 2023 - 5.0%; 31 December 2022 - 5.3%).
 
 
Capital flow statement
The table below analyses the movement in CET1, AT1 and Tier 2 capital for the nine months ended 30 September 2023. It is being presented on a transitional basis based on current PRA rules.
 
 
CET1
AT1
Tier 2
Total
 
£m
£m
£m
£m
At 31 December 2022
24,992
3,875
5,053
33,920
Attributable profit for the period
3,165
-
-
3,165
Ordinary interim dividend paid
(491)
-
-
(491)
Directed buyback 
(1,259)
-
-
(1,259)
Foreseeable ordinary dividends
(643)
-
-
(643)
On-market share buyback
(500)
-
-
(500)
Foreign exchange reserve
(419)
-
-
(419)
FVOCI reserve
82
-
-
82
Own credit
34
-
-
34
Share capital and reserve movements in respect of employee
 
 
 
 
   share schemes
70
-
-
70
Goodwill and intangibles deduction
(399)
-
-
(399)
Deferred tax assets
224
-
-
224
Prudential valuation adjustments
3
-
-
3
Net dated subordinated debt instruments
-
-
303
303
Foreign exchange movements
-
-
(50)
(50)
Adjustment under IFRS 9 transitional arrangements
(138)
-
-
(138)
Other movements
(136)
-
179
43
At 30 September 2023
24,585
3,875
5,485
33,945
 
●
The CET1 decrease is mainly driven by the directed buyback of £1.3 billion, a foreseeable ordinary dividend accrual of £0.6 billion, a £0.5 billion decrease for the on-market ordinary share buyback programme, a £0.1 billion decrease in the IFRS 9 transitional adjustment, an increase in the intangible assets deduction of £0.4 billion and other movements in reserves and regulatory adjustments of £0.2 billion, partially offset by an attributable profit in the period (net of ordinary interim dividend paid) of £2.7 billion.
 
●
The Tier 2 movement of £0.3 billion includes €700 million 5.763% Fixed to Fixed Reset Tier 2 Notes 2034 issued in February 2023 offset by the £0.1 billion derecognition of the UBIDAC subordinated notes as eligible Tier 2 capital instruments, partial redemption of 5.125% Subordinated Tier 2 Notes 2024, maturities with minimum regulatory value and an increase in regulatory amortisation £0.1 billion. Within Tier 2, there was also a £0.2 billion increase in the Tier 2 surplus provisions.
 
 
 
 
 
 
 
Risk and capital management
Capital, liquidity and funding risk continued
Risk-weighted assets
The table below analyses the movement in RWAs during the period, by key drivers.
 
 
 
Counterparty
 
Operational
 
 
Credit risk
credit risk
Market risk
 risk
Total
 
£bn
£bn
£bn
£bn
£bn
At 31 December 2022
142.0
6.7
8.3
19.1
176.1
Foreign exchange movement
(0.4)
(0.1)
-
-
(0.5)
Business movement
6.5
0.5
1.2
1.1
9.3
Risk parameter changes
(2.1)
-
-
-
(2.1)
Methodology changes 
-
-
-
-
-
Model updates
0.8
-
(0.1)
-
0.7
Other charges
-
0.9
-
-
0.9
Acquisitions and disposals
(2.8)
-
-
-
(2.8)
At 30 September 2023
144.0
8.0
9.4
20.2
181.6
 
The table below analyses segmental RWAs.
 
 
Retail
Private
Commercial 
Central items
Total NatWest
 
Banking
Banking
& Institutional
& other (1)
Group
Total RWAs
£bn
£bn
£bn
£bn
£bn
At 31 December 2022
54.7
11.2
103.2
7.0
176.1
Foreign exchange movement
-
-
(0.4)
(0.1)
(0.5)
Business movement
3.5
0.4
6.3
(0.9)
9.3
Risk parameter changes 
(0.2)
-
(1.9)
-
(2.1)
Methodology changes 
-
-
-
-
-
Model updates
0.9
-
(0.2)
-
0.7
Other charges
-
-
0.9
-
0.9
Acquisitions and disposals
-
-
-
(2.8)
(2.8)
At 30 September 2023
58.9
11.6
107.9
3.2
181.6
 
 
 
 
 
 
Credit risk
51.2
10.2
80.2
2.4
144.0
Counterparty credit risk
0.3
-
7.7
-
8.0
Market risk
0.2
-
9.2
-
9.4
Operational risk
7.2
1.4
10.8
0.8
20.2
Total RWAs
58.9
11.6
107.9
3.2
181.6
 
(1)     £1.6 billion of Central items & other relates to Ulster Bank RoI.
 
 
Total RWAs increased by £5.5 billion to £181.6 billion during the period mainly reflecting:
 
●
Business movements totalling £9.3 billion, driven by increased credit risk exposures within Retail Banking and Commercial & Institutional, increased market risk RWAs of £1.1 billion reflecting heightened market volatility in Q3 and increased RWAs following the annual recalculation of operational risk.
●
An increase in other changes of £0.9 billion, driven by the termination of portfolio credit default swap resulting in a decrease to the CRM benefit.
●
Model update increase of £0.7 billion, mainly driven by IRB model adjustments within Retail Banking.
●
A decrease in risk parameters of £2.1 billion, primarily reflecting changes in regulatory treatment for certain structured transactions.
●
Disposals relating to the phased withdrawal from the Republic of Ireland, reducing RWAs by £2.8 billion.
 
 
 
 
 
 
 
 
 
Risk and capital management
Capital, liquidity and funding risk continued
Liquidity portfolio
The table below shows the liquidity portfolio by product, with primary liquidity aligned to internal stressed outflow coverage and regulatory LCR categorisation. Secondary liquidity comprises assets eligible for discount at central banks, which do not form part of the liquid asset portfolio for LCR or internal stressed outflow purposes. In addition, a reconciliation has been provided between the liquidity portfolio for internal stressed outflow coverage and high-quality liquid assets on a regulatory LCR basis.
 
 
Liquidity value
 
30 September 2023
 
30 June 2023
 
31 December 2022
 
NatWest
 
NatWest
 
NatWest
 
Group (1)
 
Group
 
Group 
 
£m
 
£m
 
£m
Cash and balances at central banks 
116,231
 
119,612
 
140,820
   AAA to AA- rated governments
25,214
 
23,813
 
18,589
   A+ and lower rated governments
4,223
 
1,172
 
317
   Government guaranteed issuers, public sector entities and
 
 
 
 
 
      government sponsored entities
455
 
229
 
134
   International organisations 
 
 
 
 
 
      and multilateral development banks
2,821
 
2,674
 
1,734
LCR level 1 bonds
32,713
 
27,888
 
20,774
LCR level 1 assets
148,944
 
147,500
 
161,594
LCR level 2 assets
-
 
-
 
-
Non-LCR eligible assets
-
 
-
 
-
Primary liquidity 
148,944
 
147,500
 
161,594
Secondary liquidity (2)
76,097
 
79,424
 
63,917
Total liquidity value
225,041
 
226,924
 
225,511
 
 
 
 
 
 
 
30 September 2023
 
30 June 2023
 
 
 
NatWest
 
NatWest
 
 
Stressed outflow coverage (SOC) to liquidity coverage ratio (LCR)
Group (1)
 
Group
 
 
   reconciliation
£m
 
£m
 
 
SOC primary liquidity (from table above)
148,944
 
147,500
 
 
   Level 1 assets excluded (3)
6,175
 
4,180
 
 
   Level 2 assets excluded (4)
4,173
 
3,133
 
 
   Methodology difference (5)
628
 
960
 
 
Total LCR high quality liquid assets
159,920
 
155,773
 
 
 
(1)
NatWest Group includes the UK Domestic Liquidity Sub-Group (NWB Plc, RBS plc and Coutts & Co), NatWest Markets Plc and other significant operating subsidiaries that hold liquidity portfolios. These include The Royal Bank of Scotland International Limited, NWM N.V. and Ulster Bank Ireland DAC who hold managed portfolios that comply with local regulations that may differ from PRA rules.
(2)
Comprises assets eligible for discounting at the Bank of England and other central banks.
(3)
LCR level 1 assets include extremely high-quality covered bonds, government guaranteed bonds, and other LCR level 1 assets, which are not included as primary liquidity, but
included as inflows in stressed outflow coverage.
(4)
LCR level 2 assets include high-quality covered bonds, asset-backed securities and other level 2 assets which are not included as primary liquidity but included as inflows in stressed outflow coverage.
(5)
Methodology differences include cash in tills which is classified as LCR level 1 but not included in stressed outflow coverage, JPY bonds which are classified as level 1 for stressed
outflow coverage but level 2 for LCR and weighting differences between stressed outflow coverage and LCR.
 
 
 
 
 
 
 
 
 
Condensed consolidated income statement
for the period ended 30 September 2023 (unaudited)
 
 
 
 
Nine months ended
 
Quarter ended
 
30 September
30 September
 
30 September
30 June
30 September
 
2023
2022
 
2023
2023
2022
 
£m 
£m 
 
£m 
£m 
£m 
Interest receivable
15,071
8,591
 
5,589
4,981
3,341
Interest payable
(6,660)
(1,617)
 
(2,904)
(2,157)
(701)
Net interest income
8,411
6,974
 
2,685
2,824
2,640
Fees and commissions receivable
2,213
2,145
 
754
719
721
Fees and commissions payable
(484)
(468)
 
(169)
(158)
(168)
Trading income
609
969
 
191
85
260
Other operating income
466
(172)
 
27
381
(224)
Non-interest income
2,804
2,474
 
803
1,027
589
Total income
11,215
9,448
 
3,488
3,851
3,229
Staff costs
(2,924)
(2,687)
 
(919)
(965)
(879)
Premises and equipment
(845)
(820)
 
(275)
(284)
(286)
Other administrative expenses
(1,390)
(1,429)
 
(519)
(421)
(531)
Depreciation and amortisation
(683)
(613)
 
(214)
(257)
(200)
Operating expenses
(5,842)
(5,549)
 
(1,927)
(1,927)
(1,896)
Profit before impairment losses
5,373
3,899
 
1,561
1,924
1,333
Impairment losses
(452)
(193)
 
(229)
(153)
(247)
Operating profit before tax
4,921
3,706
 
1,332
1,771
1,086
Tax charge
(1,439)
(1,229)
 
(378)
(549)
(434)
Profit from continuing operations
3,482
2,477
 
954
1,222
652
Loss from discontinued operations, net of tax (1)
(138)
(206)
 
(30)
(143)
(396)
Profit for the period
3,344
2,271
 
924
1,079
256
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Ordinary shareholders
3,165
2,078
 
866
1,020
187
Paid-in equity holders
182
188
 
61
60
67
Non-controlling interests
(3)
5
 
(3)
(1)
2
 
3,344
2,271
 
924
1,079
256
 
 
 
 
 
 
 
Earnings per ordinary share - continuing operations
35.6p
23.0p
 
10.1p
12.5p
6.0p
Earnings per ordinary share - discontinued operations
(1.5p)
(2.1p)
 
(0.3p)
(1.5p)
(4.1p)
Total earnings per share attributable to ordinary
 
 
 
 
 
 
   shareholders - basic 
34.1p
20.9p
 
9.8p
11.0p
1.9p
Earnings per ordinary share - fully diluted continuing
 
 
 
 
 
 
   operations
35.4p
22.9p
 
10.1p
12.4p
6.0p
Earnings per ordinary share - fully diluted discontinued
 
 
 
 
 
 
   operations
(1.5p)
(2.1p)
 
(0.3p)
(1.5p)
(4.1p)
Total earnings per share attributable to ordinary
 
 
 
 
 
 
   shareholders - fully diluted
33.9p
20.8p
 
9.8p
10.9p
1.9p
 
(1)
The results of discontinued operations, comprising the post-tax loss, is shown as a single amount on the face of the income statement. An analysis of this amount is presented in Note 2 to the condensed consolidated financial statements.
 
 
 
 
 
 
Condensed consolidated statement of comprehensive income
for the period ended 30 September 2023 (unaudited)
 
 
 
 
Nine months ended
 
Quarter ended
 
30 September
30 September
 
30 September
30 June
30 September
 
2023
2022
 
2023
2023
2022
 
£m
£m
 
£m
£m
£m
Profit for the period
3,344
2,271
 
924
1,079
256
Items that do not qualify for reclassification
 
 
 
 
 
 
Remeasurement of retirement benefit schemes
(105)
(682)
 
(41)
(25)
(165)
Changes in fair value of credit in financial liabilities 
 
 
 
 
 
 
   designated at fair value through profit or loss 
 
 
 
 
 
 
      (FVTPL)
(27)
102
 
(23)
2
11
Fair value through other comprehensive income 
 
 
 
 
 
 
   (FVOCI) financial assets
36
42
 
6
(13)
39
Tax
20
136
 
13
9
13
 
(76)
(402)
 
(45)
(27)
(102)
Items that do qualify for reclassification 
 
 
 
 
 
 
FVOCI financial assets
65
(451)
 
12
13
7
Cash flow hedges
(208)
(3,978)
 
526
(1,032)
(2,421)
Currency translation
(401)
358
 
68
(410)
173
Tax
(16)
1,259
 
(143)
225
693
 
(560)
(2,812)
 
463
(1,204)
(1,548)
Other comprehensive (loss)/income after tax
(636)
(3,214)
 
418
(1,231)
(1,650)
Total comprehensive income/(loss) for the period
2,708
(943)
 
1,342
(152)
(1,394)
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Ordinary shareholders
2,529
(1,136)
 
1,284
(211)
(1,463)
Paid-in equity holders
182
188
 
61
60
67
Non-controlling interests
(3)
5
 
(3)
(1)
2
 
2,708
(943)
 
1,342
(152)
(1,394)
 
 
 
 
 
 
Condensed consolidated balance sheet as at 30 September 2023 (unaudited)
 
 
 
 
 
30 September
31 December
 
 
 
2023
2022
 
 
£m 
£m 
 
Assets
 
 
 
 
Cash and balances at central banks
 
         119,590 
144,832 
 
Trading assets
 
           49,621 
45,577 
 
Derivatives
 
           87,504 
99,545 
 
Settlement balances
 
           10,644 
2,572 
 
Loans to banks - amortised cost
 
             8,454 
7,139 
 
Loans to customers - amortised cost
 
         377,268 
366,340 
 
Other financial assets
 
           46,729 
30,895 
 
Intangible assets
 
             7,515 
7,116 
 
Other assets
 
             8,732 
9,176 
 
Assets of disposal groups
 
             1,084 
6,861 
 
Total assets
 
         717,141 
720,053 
 
 
 
 
 
 
Liabilities
 
 
 
 
Bank deposits
 
           24,354 
20,441 
 
Customer deposits
 
         435,867 
450,318 
 
Settlement balances
 
           11,585 
2,012 
 
Trading liabilities
 
           58,495 
52,808 
 
Derivatives
 
           81,135 
94,047 
 
Other financial liabilities
 
           56,302 
49,107 
 
Subordinated liabilities
 
             6,210 
6,260 
 
Notes in circulation
 
             3,144 
3,218 
 
Other liabilities
 
             4,592 
5,346 
 
Total liabilities
 
         681,684 
683,557 
 
 
 
 
 
 
Equity
 
 
 
 
Ordinary shareholders' interests
 
           31,530 
32,598 
 
Other owners' interests
 
             3,890 
3,890 
 
Owners' equity
 
           35,420 
36,488 
 
Non-controlling interests
 
                  37 
8 
 
Total equity
 
           35,457 
36,496 
 
 
 
 
 
 
Total liabilities and equity
 
717,141 
720,053 
 
 
 
 
 
 
Condensed consolidated statement of changes in equity
for the period ended 30 September 2023 (unaudited)
 
 
 
 
Share 
 
 
 
 
 
 
 
capital and
 
 
 
Total
Non
 
 
statutory
Paid-in
Retained
Other
owners'
controlling
Total 
 
reserves (1)
equity
earnings
reserves*
equity
 interests
equity
 
£m
£m
£m
£m
£m
£m
£m
At 1 January 2023
13,093
3,890
10,019
9,486
36,488
8
36,496
Profit/(loss) attributable to ordinary 
 
 
 
 
 
 
 
   shareholders and other equity owners
 
 
 
 
 
 
 
      - continuing operations
 
 
3,485
 
3,485
(3)
3,482
      - discontinued operations
 
 
(138)
 
(138)
 
(138)
Other comprehensive income
 
 
 
 
 
 
 
  - Realised gains/(losses) in period 
 
 
 
 
 
 
 
        on FVOCI equity shares 
 
 
2
(2)
-
 
-
  - Remeasurement of retirement 
 
 
 
 
 
 
 
        benefit schemes
 
 
(105)
 
(105)
 
(105)
  - Changes in fair value of credit in financial 
 
 
 
 
 
 
 
        liabilities designated at FVTPL due 
 
 
 
 
 
 
 
           to own credit risk
 
 
(27)
 
(27)
 
(27)
  - Unrealised gains: FVOCI
 
 
 
68
68
 
68
  - Amounts recognised in equity: cash flow 
 
 
 
 
 
 
 
        hedges
 
 
 
(821)
(821)
 
(821)
  - Foreign exchange reserve movement (4)
 
 
 
(401)
(401)
 
(401)
  - Amount transferred from equity to earnings
 
 
 
646
646
 
646
  - Tax
 
 
27
(23)
4
 
4
Ordinary dividends paid
 
 
(1,456)
 
(1,456)
 
(1,456)
Paid-in equity dividends paid
 
 
(182)
 
(182)
 
(182)
Shares repurchased during the period  (2,3)
-
 
(1,852)
 
(1,852)
 
(1,852)
Shares issued under employee share schemes during the period
-
 
21
 
21
 
21
Share-based payments 
 
 
(31)
 
(31)
 
(31)
Movement in own shares held 
(279)
 
 
 
(279)
 
(279)
Acquisition of subsidiary
 
 
 
 
 
32
32
At 30 September 2023
12,814
3,890
9,763
8,953
35,420
37
35,457
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30 September
 
 
 
 
 
 
 
2023
Attributable to:
 
 
 
 
£m
Ordinary shareholders
 
 
 
 
 
 
31,530
Paid-in equity holders
 
 
 
 
 
 
3,890
Non-controlling interests
 
 
 
 
 
 
37
 
 
 
 
 
 
 
35,457
*Other reserves consist of:
 
 
 
 
 
 
Merger reserve
 
 
 
 
 
 
10,881
FVOCI reserve
 
 
 
 
 
 
(20)
Cash flow hedging reserve
 
 
 
 
 
 
(2,967)
Foreign exchange reserve
 
 
 
 
 
 
1,059
 
 
 
 
 
 
 
8,953
 
(1)     Share capital and statutory reserves includes share capital, share premium, capital redemption reserve and own shares held.
(2)     In May 2023, there was an agreement to buy 469.2 million ordinary shares in NatWest Group plc from UK Government Investments Ltd (UKGI) at 268.4p per share for the total consideration of £1,265.6 million. NatWest Group cancelled 336.2 million of the purchased ordinary shares, amounting to £906.9 million excluding fees and held the remaining 133.0 million shares as own shares held, amounting to £358.8 million excluding fees. The nominal value of the share cancellation has been transferred to the capital redemption reserve.
(3)     NatWest Group plc repurchased and cancelled 364.3 million shares for total consideration of £951.0 million excluding fees in 2023 so far, as part of the On Market Share Buyback Programmes. Out of total number of shares bought back, 2.93 million shares were settled and cancelled in October 2023 amounting to £6.9 million. The nominal value of the share cancellations amounting to £389.2 million has been transferred to the capital redemption reserve.
(4)     Includes £305 million FX recycled to profit or loss upon completion of a capital repayment by UBIDAC.
 
 
 
 
 
 
 
 
 
Notes
 
1.
Presentation of condensed consolidated financial statements
 
 The condensed consolidated financial statements should be read in conjunction with NatWest Group plc's 2022 Annual Report and Accounts. The accounting policies are the same as those applied in the consolidated financial statements.
 
The directors have prepared the condensed consolidated financial statements on a going concern basis after assessing the principal risks, forecasts, projections and other relevant evidence over the twelve months from the date they are approved.
 
Amendments to IFRS effective from 1 January 2023 had no material effect on the condensed consolidated financial statements.
 
2.
Discontinued operations and assets and liabilities of disposal groups
 
Four legally binding agreements for the sale of UBIDAC business have been announced as part of the phased withdrawal from the Republic of Ireland. Material developments in Q3 2023 are set out below.
 
Agreement with Allied Irish Banks, p.l.c. (AIB) for the transfer of performing commercial loans
In Q3 2023, UBIDAC completed the sale of commercial loans to AIB, with a cumulative €3.1 billion of gross performing loans being fully migrated. The transfer of the final cohort of colleagues to AIB who were wholly or mainly assigned to supporting this part of the business under Transfer of Undertakings, Protection of Employment (TUPE) arrangements has also completed. Losses on disposal of €30 million have been recognised in respect of the migrations completed during Q3 2023.
 
Agreement with Permanent TSB p.l.c. (PTSB) for the sale of performing non-tracker mortgages, the performing loans in the micro-SME business, the UBIDAC Asset Finance business, including its Lombard digital platform, and 25 Ulster Bank branch locations in the Republic of Ireland.
In Q3 2023, the Lombard Asset Finance business which included balances of c.€500 million migrated to PTSB and the transfer of remaining colleagues who were eligible to move to PTSB under TUPE regulations also completed. This was the final phase of the transaction with PTSB, which also included c.€6.3 billion of gross performing non-tracker mortgage and micro-SME balances as well as 25 Ulster Bank branches.
 
Agreement with AIB for the sale of performing tracker and linked mortgages
In Q3 2023, UBIDAC completed the migration of €4.0 billion of performing tracker and linked mortgages to AIB. The remaining migrations are expected to occur by H1 2024.
 
Agreement with Elmscott Property Finance DAC / AB CarVal (CarVal) for the sale of a portfolio of performing and non-performing exposures
In Q3 2023, UBIDAC agreed the sale of a portfolio of performing and non-performing exposures to CarVal, which consists mostly of non-performing mortgages, unsecured personal loans and commercial facilities with a gross value of c. €690 million at 31 December 2022. Pepper Finance Corporation (Ireland) DAC will become the legal owner and servicer of the facilities. The majority of these migrations are expected to occur in Q4 2023.
 
The business activities relating to these sales that meet the requirements of IFRS 5 are presented as a discontinued operation and as a disposal group. Ulster Bank RoI continuing operations are reported within Central items & other.
 
(a)   Loss from discontinued operations, net of tax
 
 
Nine months ended
 
Quarter ended 
 
30 September
30 September
 
30 September
30 June
30 September
 
2023
2022
 
2023
2023
2022
 
£m
£m
 
£m
£m
£m
Interest receivable
22
160
 
(4)
11
4
Net interest income
22
160
 
(4)
11
4
Non-interest income
(42)
(409)
 
(28)
(31)
(405)
Total income
(20)
(249)
 
(32)
(20)
(401)
Operating expenses
(124)
(35)
 
(2)
(118)
(11)
Loss before impairment releases/losses
(144)
(284)
 
(34)
(138)
(412)
Impairment releases/(losses)
6
78
 
4
(5)
16
Operating loss before tax
(138)
(206)
 
(30)
(143)
(396)
Tax charge
-
-
 
-
-
-
Loss from discontinued operations, net of tax
(138)
(206)
 
(30)
(143)
(396)
 
 
 
 
Notes
2. Discontinued operations and assets and liabilities of disposal groups continued
(b)   Assets and liabilities of disposal groups
 
 
As at 
 
30 September
31 December
 
2023
2022
 
£m
£m
Assets of disposal groups
 
 
Loans to customers - amortised cost
75
1,458
Other financial assets - loans to customers at fair value through profit or loss
1,001
5,397
Other assets
8
6
 
1,084
6,861
 
 
 
Liabilities of disposal groups
 
 
Other liabilities
5
15
 
5
15
 
 
 
Net assets of disposal groups
1,079
6,846
 
 
3.
Litigation and other matters
 
NatWest Group plc's Interim Results 2023, issued on 28 July 2023, included disclosures about NatWest Group's litigation and regulatory matters in Note 14. Set out below are the material developments in those matters, and an update on an internal investigation by independent counsel, since publication of the Interim Results 2023.
 
Litigation
London Interbank Offered Rate (LIBOR) and other rates litigation
In August 2020, a complaint was filed in the United States District Court for the Northern District of California by several United States retail borrowers against the USD ICE LIBOR panel banks and their affiliates (including NatWest Group plc, NWM Plc, NWMSI and NWB Plc), alleging (i) that the very process of setting USD ICE LIBOR amounts to illegal price-fixing; and (ii) that banks in the United States have illegally agreed to use LIBOR as a component of price in variable retail loans. In September 2022, the district court dismissed the complaint. The plaintiffs filed an amended complaint, but in October 2023, the district court dismissed that complaint as well, and indicated that further amendment would not be permitted. The district court's decision is subject to appeal by the plaintiffs.    
 
FX litigation
In September 2023, second summonses were served by Stichting FX Claims on NWM N.V., NatWest Group plc and NWM Plc, for claims on behalf of a new group of parties. The summonses seek declarations from the Dutch court concerning liability for anti-competitive FX market conduct described in decisions of the European Commission (EC) of 16 May 2019 and 2 December 2021, along with unspecified damages.
 
Government securities antitrust litigation
Class action antitrust claims commenced in March 2019 are pending in the United States District Court for the Southern District of New York (SDNY) against NWM Plc, NWMSI and other banks in respect of Euro-denominated bonds issued by various European central banks (European government bonds or EGBs). The complaint alleges a conspiracy among dealers of EGBs to widen the bid-ask spreads they quoted to customers, thereby increasing the prices customers paid for the EGBs or decreasing the prices at which customers sold EGBs. The class consists of those who purchased or sold EGBs in the US between 2007 and 2012. Previously, in March 2022, the SDNY dismissed the claims against NWM Plc and NWMSI on the ground that the complaint's conspiracy allegations were insufficient. However, in September 2023, the SDNY ruled that new allegations which plaintiffs have included in an amended complaint are sufficient to bring those NatWest entities back into the case as defendants.
 
1MDB litigation
A Malaysian court claim was served in Switzerland in November 2022 by 1MDB, a Sovereign Wealth Fund, in which Coutts & Co Ltd was named, along with six others, as a defendant in respect of losses allegedly incurred by 1MDB. It is claimed that Coutts & Co Ltd is liable as a constructive trustee for having dishonestly assisted the directors of 1MDB in the breach of their fiduciary duties by failing (amongst other alleged claims) to undertake due diligence in relation to a customer of Coutts & Co Ltd, through which funds totalling c.US$1 billion were received and paid out between 2009 and 2011. The claimant seeks the return of that amount plus interest. Coutts & Co Ltd filed an application in January 2023 challenging the validity of service and the Malaysian court's jurisdiction to hear the claim.
 
In April 2023, the claimant filed a notice of discontinuance of its claim against certain defendants including Coutts & Co Ltd. The claimant subsequently indicated that it intended to issue further replacement proceedings. Coutts & Co Ltd challenged the claimant's ability to take that step and a hearing took place in the Malaysian High Court in June 2023. In August 2023, the court disallowed the discontinuation of the claim by the claimant and directed that the application by Coutts & Co Ltd challenging the validity of the proceedings should proceed to a hearing. In September 2023, the claimant filed a notice to appeal that decision.
 
Coutts & Co Ltd (a subsidiary of RBS Netherlands Holdings B.V., which in turn is a subsidiary of NatWest Markets Plc) is a company registered in Switzerland and is in wind-down following the announced sale of its business assets in 2015.
 
 
 
 
 
Notes
3. Litigation and other matters continued
Other
Reviews into customer account closures
In July 2023, NatWest Group plc commissioned an independent review by the law firm Travers Smith LLP into issues that had arisen in connection with a recent account closure and treatment of the customer that attracted significant public attention and certain related interactions with the media. NatWest Group plc has received reports in connection with those reviews (and has today published a summary of the key findings and recommendations) and expects to receive a further report in due course.
 
In addition, NatWest Group plc is conducting internal reviews with respect to certain governance processes, policies, systems and controls of NatWest Group entities, including with respect to customer account closures.
 
The subject matter giving rise to these independent reviews and related developments, or the outcomes of any of the independent or internal reviews, could increase the risk of greater regulatory or third-party scrutiny and result in future legal or regulatory actions, which could have financial, reputational or collateral consequences for NatWest Group's business.
 
4.
Post balance sheet events
On 28 July 2023, the Group announced that it had appointed Travers Smith LLP to undertake a thorough and independent review into account closure arrangements at Coutts and the circumstances surrounding an article including if there was a leak of confidential information. Phase 1 of this review is now complete.
 
Other than as disclosed in this document, there have been no significant events between 30 September 2023 and the date of approval of this announcement which would require a change to, or additional disclosure, in the announcement.
 
 
 
Additional information
Presentation of information
'Parent company' refers to NatWest Group plc and 'NatWest Group' and 'we' refers to NatWest Group plc and its subsidiary and associated undertakings. The term 'NWH Group' refers to NatWest Holdings Limited ('NWH') and its subsidiary and associated undertakings. The term 'NWM Group' refers to NatWest Markets Plc ('NWM Plc') and its subsidiary and associated undertakings. The term 'NWM N.V.' refers to NatWest Markets N.V. The term 'NWMSI' refers to NatWest Markets Securities, Inc. The term 'RBS plc' refers to The Royal Bank of Scotland plc. The term 'NWB Plc' refers to National Westminster Bank Plc. The term 'UBIDAC' refers to Ulster Bank Ireland DAC.
 
NatWest Group publishes its financial statements in pounds sterling ('£' or 'sterling'). The abbreviations '£m' and '£bn' represent millions and thousands of millions of pounds sterling, respectively, and references to 'pence' or 'p' represent pence where the amounts are denominated in pounds sterling ('GBP'). Reference to 'dollars' or '$' are to United States of America ('US') dollars. The abbreviations '$m' and '$bn' represent millions and thousands of millions of dollars, respectively. The abbreviation '€' represents the 'euro', and the abbreviations '€m' and '€bn' represent millions and thousands of millions of euros, respectively.
 
Statutory accounts
Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2022 have been filed with the Registrar of Companies. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.
 
MAR - Inside Information
This announcement contains information that qualified or may have qualified as inside information for NatWest Group plc, for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR) as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018. This announcement is made by Alexander Holcroft, Head of Investor Relations for NatWest Group plc.
 
Contacts
 
Analyst enquiries:
Alexander Holcroft, Investor Relations
Media enquiries:
NatWest Group Press Office
 
 
 
Management presentation
Date:
Friday 27 October 2023
Time:
9am UK time
Zoom ID:
919 9900 1956
 
 
 
 
 
Available on natwestgroup.com/results
 
●
Q3 2023 Interim Management Statement and background slides.
 
●
A financial supplement containing income statement, balance sheet and segment performance for the nine quarters ended 30 September 2023.
 
●
NatWest Group Pillar 3 at 30 September 2023.
 
 
 
 
 
Forward-looking statements
 
This document may include forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, such as statements that include, without limitation, the words 'expect', 'estimate', 'project', 'anticipate', 'commit', 'believe', 'should', 'intend', 'will', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or variations on these expressions. These statements concern or may affect future matters, such as NatWest Group's future economic results, business plans and strategies.  In particular, this document may include forward-looking statements relating to NatWest Group plc in respect of, but not limited to: its economic and political risks, its regulatory capital position and related requirements, its financial position, profitability and financial performance (including financial, capital, cost savings and operational targets), the implementation of its purpose-led strategy, its environmental, social and governance and climate related targets, its access to adequate sources of liquidity and funding, increasing competition from new incumbents and disruptive technologies, its exposure to third party risks, its ongoing compliance with the UK ring-fencing regime and ensuring operational continuity in resolution, its impairment losses and credit exposures under certain specified scenarios, substantial regulation and oversight, ongoing legal, regulatory and governmental actions and investigations, the transition of LIBOR and IBOR rates to replacement risk free rates and NatWest Group's exposure to operational risk, conduct risk, cyber, data and IT risk, financial crime risk, key person risk and credit rating risk. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. Factors that could cause or contribute to differences in current expectations include, but are not limited to, future growth initiatives (including acquisitions, joint ventures and strategic partnerships), the outcome of legal, regulatory and governmental actions and investigations, the level and extent of future impairments and write-downs, legislative, political, fiscal and regulatory developments, accounting standards, competitive conditions, technological developments, interest and exchange rate fluctuations, general economic and political conditions and the impact of climate-related risks and the transitioning to a net zero economy. These and other factors, risks and uncertainties that may impact any forward-looking statement or NatWest Group plc's actual results are discussed in NatWest Group plc's 2022 Annual Report on Form 20-F, NatWest Group plc's Interim Results for H1 2023 on Form 6-K, Natwest Group plc's Interim Management Statement for Q1 and Q3 2023 on Form 6-K, and its other public filings. The forward-looking statements contained in this document speak only as of the date of this document and NatWest Group plc does not assume or undertake any obligation or responsibility to update any of the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise, except to the extent legally required.
 
 
 
 
 
 
 
 
 
 
 
 
Appendix
RBS\Finance\
 
Non-IFRS financial measures
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-IFRS financial measures
NatWest Group prepares its financial statements in accordance with UK-adopted International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). This document contains a number of non-IFRS measures, also known as alternative performance measures, defined under the European Securities and Markets Authority guidance or non-GAAP financial measures in accordance with SEC regulations. These measures are adjusted for notable and other defined items which management believes are not representative of the underlying performance of the business and which distort period-on-period comparison.
 
The non-IFRS measures provide users of the financial statements with a consistent basis for comparing business performance between financial periods and information on elements of performance that are one-off in nature. The non-IFRS measures also include a calculation of metrics that are used throughout the banking industry.
 
These non-IFRS measures are not a substitute for IFRS measures and a reconciliation to the closest IFRS measure is presented where appropriate.
 
 
1.
Total income excluding notable items
Total income excluding notable items is calculated as total income less notable items.
 
The exclusion of notable items aims to remove the impact of one-offs and other items which may distort period-on-period comparisons.
 
 
Nine months ended
 
Quarter ended 
 
30 September
30 September
 
30 September
30 June
30 September
 
2023
2022
 
2023
2023
2022
 
£m
£m
 
£m
£m
£m
Continuing operations
 
 
 
 
 
 
Total income
11,215
9,448
 
3,488
3,851
3,229
Less notable items:
 
 
 
 
 
 
Commercial & Institutional
 
 
 
 
 
 
   Fair value, disposal losses and asset
 
 
 
 
 
 
      disposals/strategic risk reduction
-
(45)
 
-
-
-
   Own credit adjustments (OCA)
3
61
 
(6)
3
9
Central items & other
 
 
 
 
 
 
   Loss on redemption of own debt
-
(161)
 
-
-
(137)
   Liquidity Asset Bond sale (losses)/gains
(33)
(88)
 
(9)
(11)
(124)
   Share of associate (losses)/profits for Business
 
 
 
 
 
 
      Growth Fund
(5)
(29)
 
10
(3)
(16)
  Property lease termination losses
(69)
-
 
(69)
-
-
   Interest and FX management derivatives not in
 
 
 
 
 
 
      hedge accounting relationships
100
415
 
48
(23)
100
   FX recycling gains
322
-
 
-
322
-
 
318
153
 
(26)
288
(168)
Total income excluding notable items
10,897
9,295
 
3,514
3,563
3,397
 
 
 
 
 
Non-IFRS financial measures continued
 
2.
Operating expenses - management view
The management analysis of operating expenses shows litigation and conduct costs on a separate line. These amounts are included within staff costs and other administrative expenses in the statutory analysis. Other operating expenses excludes litigation and conduct costs, which are more volatile and may distort comparisons with prior periods.
 
 
Nine months ended
 
30 September 2023
 
Litigation and
Other operating
Statutory operating
 
conduct costs
expenses
expenses
 
£m
£m
£m
Continuing operations
 
 
 
Staff costs
46
2,878
2,924
Premises and equipment
-
845
845
Depreciation and amortisation
-
683
683
Other administrative expenses
196
1,194
1,390
Total 
242
5,600
5,842
 
 
 
 
 
Nine months ended
 
30 September 2022
 
Litigation and
Other operating
Statutory operating
 
conduct costs
expenses
expenses
 
£m
£m
£m
Continuing operations
 
 
 
Staff costs
29
2,658
2,687
Premises and equipment
-
820
820
Depreciation and amortisation
-
613
613
Other administrative expenses
265
1,164
1,429
Total 
294
5,255
5,549
 
 
 
 
 
Quarter ended
 
30 September 2023
 
Litigation and
Other operating
Statutory operating
 
conduct costs
expenses
expenses
 
£m
£m
£m
Continuing operations
 
 
 
Staff costs
15
904
919
Premises and equipment
-
275
275
Depreciation and amortisation
-
214
214
Other administrative expenses
119
400
519
Total 
134
1,793
1,927
 
 
 
 
 
Quarter ended
 
30 June 2023
 
Litigation and
Other operating
Statutory operating
 
conduct costs
expenses
expenses
 
£m
£m
£m
Continuing operations
 
 
 
Staff costs
17
948
965
Premises and equipment
-
284
284
Depreciation and amortisation
-
257
257
Other administrative expenses
35
386
421
Total 
52
1,875
1,927
 
 
 
 
 
Quarter ended
 
30 September 2022
 
Litigation and
Other operating
Statutory operating
 
conduct costs
expenses
expenses
 
£m
£m
£m
Continuing operations
 
 
 
Staff costs
11
868
879
Premises and equipment
-
286
286
Depreciation and amortisation
-
200
200
Other administrative expenses
114
417
531
Total 
125
1,771
1,896
 
 
 
Non-IFRS financial measures continued
 
3.
Cost:income ratio (excl. litigation and conduct)
NatWest Group uses the cost:income ratio (excl. litigation and conduct) in its Outlook guidance. This is calculated as other operating expenses (operating expenses less litigation and conduct costs) divided by total income. Litigation and conduct costs are excluded as they are one-off in nature, difficult to forecast for Outlook purposes and distort period-on-period comparisons.
 
The calculation of the cost:income ratio (excl. litigation and conduct) is shown below, along with a comparison to cost:income ratio using total operating expenses.
 
 
 
 
 
 
 
 
Retail
Private
Commercial & 
Central items 
Total 
 
Banking
Banking
Institutional
and other
NatWest Group
Nine months ended 30 September 2023
£m
£m
£m
£m
£m
Continuing operations
 
 
 
 
 
Operating expenses
2,147
479
2,999
217
5,842
Less litigation and conduct costs
(83)
(11)
(146)
(2)
(242)
Other operating expenses
2,064
468
2,853
215
5,600
 
 
 
 
 
 
Total income
4,562
781
5,589
283
11,215
Cost:income ratio
47.1%
61.3%
53.7%
nm
52.1%
Cost:income ratio (excl. litigation and conduct)
45.2%
59.9%
51.0%
nm
49.9%
 
 
 
 
 
 
Nine months ended 30 September 2022
 
 
 
 
 
Continuing operations
 
 
 
 
 
Operating expenses
1,935
424
2,713
477
5,549
Less litigation and conduct costs
(121)
(2)
(139)
(32)
(294)
Other operating expenses
1,814
422
2,574
445
5,255
 
 
 
 
 
 
Total income
4,029
746
4,594
79
9,448
Cost:income ratio 
48.0%
56.8%
59.1%
nm
58.7%
Cost:income ratio (excl. litigation and conduct)
45.0%
56.6%
56.0%
nm
55.6%
 
 
 
 
 
 
Quarter ended 30 September 2023
 
 
 
 
 
Continuing operations
 
 
 
 
 
Operating expenses
780
157
1,012
(22)
1,927
Less litigation and conduct costs
(59)
-
(52)
(23)
(134)
Other operating expenses
721
157
960
(45)
1,793
 
 
 
 
 
 
Total income
1,442
214
1,841
(9)
3,488
Cost:income ratio
54.1%
73.4%
55.0%
nm
55.2%
Cost:income ratio (excl. litigation and conduct)
50.0%
73.4%
52.1%
nm
51.4%
 
 
 
 
 
 
Quarter ended 30 June 2023
 
 
 
 
 
Continuing operations
 
 
 
 
 
Operating expenses
671
167
984
105
1,927
Less litigation and conduct costs
(21)
(8)
(50)
27
(52)
Other operating expenses
650
159
934
132
1,875
 
 
 
 
 
 
Total income
1,516
271
1,795
269
3,851
Cost:income ratio 
44.3%
61.6%
54.8%
nm
50.0%
Cost:income ratio (excl. litigation and conduct)
42.9%
58.7%
52.0%
nm
48.7%
 
 
 
 
 
 
Quarter ended 30 September 2022
 
 
 
 
 
Continuing operations
 
 
 
 
 
Operating expenses
693
139
893
171
1,896
Less litigation and conduct costs
(63)
(1)
(53)
(8)
(125)
Other operating expenses
630
138
840
163
1,771
 
 
 
 
 
 
Total income
1,475
285
1,657
188
3,229
Cost:income ratio 
47.0%
48.8%
53.9%
nm
58.7%
Cost:income ratio (excl. litigation and conduct)
42.7%
48.4%
50.7%
nm
54.8%
 
 
 
 
 
Non-IFRS financial measures continued
 
4.
NatWest Group return on tangible equity
Return on tangible equity comprises annualised profit or loss for the period attributable to ordinary shareholders divided by average tangible equity. Average tangible equity is average total equity excluding average non-controlling interests, average other owners' equity and average intangible assets.
 
This measure shows the return NatWest Group generates on tangible equity deployed. It is used to determine relative performance of banks and used widely across the sector, although different banks may calculate the rate differently. A reconciliation is shown below including a comparison to the nearest GAAP measure, return on equity. This comprises profit attributable to ordinary shareholders divided by average total equity.
 
 
Nine months ended
 
Quarter ended or as at
 
30 September
30 September
 
30 September
30 June
30 September
 
2023
2022
 
2023
2023
2022
NatWest Group return on tangible equity 
£m
£m
 
£m
£m
£m
Profit attributable to ordinary shareholders 
3,165
2,078
 
866
1,020
187
Annualised profit attributable to ordinary shareholders 
4,220
2,771
 
3,464
4,080
748
 
 
 
 
 
 
 
Average total equity 
36,150
38,821
 
35,081
36,216
36,956
Adjustment for other owners' equity and intangibles 
(11,427)
(11,099)
 
(11,583)
(11,378)
(11,200)
Adjusted total tangible equity 
24,723
27,722
 
23,498
24,838
25,756
 
 
 
 
 
 
 
Return on equity
11.7%
7.1%
 
9.9%
11.3%
2.0%
Return on tangible equity
17.1%
10.0%
 
14.7%
16.4%
2.9%
 
 
 
 
 
Non-IFRS financial measures continued
5.
Segmental return on equity
Segmental return on equity comprises segmental operating profit or loss, adjusted for preference share dividends and tax, divided by average notional tangible equity. Average RWAe is defined as average segmental RWAs incorporating the effect of capital deductions. This is multiplied by an allocated equity factor for each segment to calculate the average notional tangible equity.
 
This measure shows the return generated by operating segments on equity deployed.
 
 
 
 
Retail
Private
Commercial &
Nine months ended 30 September 2023
 
 
Banking
Banking
Institutional
Operating profit (£m)
 
 
2,053
293
2,511
Paid-in equity cost allocation (£m)
 
 
(43)
(17)
(125)
Adjustment for tax (£m)
 
 
(563)
(77)
(597)
Adjusted attributable profit (£m)
 
 
1,447
199
1,790
Annualised adjusted attributable profit (£m)
 
 
1,930
265
2,386
Average RWAe (£bn)
 
 
56.9 
11.4 
105.6 
Equity factor (%)
 
 
13.5%
11.5%
14.0%
Average notional equity (£bn)
 
 
7.7 
1.3 
14.8 
Return on equity (%)
 
 
25.1%
20.3%
16.1%
 
 
 
 
 
 
Nine months ended 30 September 2022
 
 
 
 
 
Operating profit (£m)
 
 
1,952
326
1,821
Preference share and paid-in equity cost allocation (£m)
 
(60)
(9)
(141)
Adjustment for tax (£m)
 
 
(530)
(89)
(420)
Adjusted attributable profit (£m)
 
 
1,362
228
1,260
Annualised adjusted attributable profit (£m)
 
 
1,816 
304 
1,680 
Average RWAe (£bn)
 
 
52.7
11.3
102.9
Equity factor (%)
 
 
13.0%
11.0%
14.0%
Average notional equity (£bn)
 
 
6.8
1.2
14.4
Return on equity (%)
 
 
26.5%
24.5%
11.7%
 
 
 
 
 
 
Quarter ended 30 September 2023
 
 
 
 
 
Operating profit (£m)
 
 
493
59
770
Paid-in equity cost allocation (£m)
 
 
(13)
(6)
(39)
Adjustment for tax (£m)
 
 
(134)
(15)
(183)
Adjusted attributable profit (£m)
 
 
346
38
548
Annualised adjusted attributable profit (£m)
 
 
1,382
153
2,193
Average RWAe (£bn)
 
 
58.5 
11.4 
106.7 
Equity factor (%)
 
 
13.5%
11.5%
14.0%
Average notional equity (£bn)
 
 
7.9 
1.3 
14.9 
Return on equity (%)
 
 
17.5%
11.7%
14.7%
 
 
 
 
 
 
Quarter ended 30 June 2023
 
 
 
 
 
Operating profit (£m)
 
 
766
101
747
Paid-in equity cost allocation (£m)
 
 
(15)
(6)
(42)
Adjustment for tax (£m)
 
 
(210)
(27)
(176)
Adjusted attributable profit (£m)
 
 
541
68
529
Annualised adjusted attributable profit (£m)
 
 
2,163
274
2,115
Average RWAe (£bn)
 
 
56.8 
11.4 
106.0 
Equity factor (%)
 
 
13.5%
11.5%
14.0%
Average notional equity (£bn)
 
 
7.7 
1.3 
14.8 
Return on equity (%)
 
 
28.2%
20.8%
14.3%
 
 
 
 
 
 
Quarter ended 30 September 2022
 
 
 
 
 
Operating profit (£m)
 
 
666
139
645
Preference share and paid-in equity cost allocation (£m)
 
(20)
(3)
(48)
Adjustment for tax (£m)
 
 
(181)
(38)
(149)
Adjusted attributable profit (£m)
 
 
465
98
448
Annualised adjusted attributable profit (£m)
 
 
1,860
392
1,792
Average RWAe (£bn)
 
 
53.0 
11.2 
105.0 
Equity factor (%)
 
 
13.0%
11.0%
14.0%
Average notional equity (£bn)
 
 
6.9 
1.2 
14.7 
Return on equity (%)
 
 
27.0%
31.8%
12.2%
 
 
 
 
 
Non-IFRS financial measures continued
6.
Bank net interest margin
Bank net interest margin is defined as annualised net interest income, as a percentage of bank average interest-earning assets. Bank average interest earning assets are the average interest earning assets of the banking business of NatWest Group excluding liquid asset buffer.
 
Liquid asset buffer consists of assets held by NatWest Group, such as cash and balances at central banks and debt securities in issue, that can be used to ensure repayment of financial obligations as they fall due. The exclusion of liquid asset buffer has been introduced as a way to present net interest margin on a basis more comparable with UK peers and exclude the impact of regulatory driven factors. A reconciliation is shown below including a comparison to the nearest GAAP measure, net interest margin. This is net interest income as a percentage of average interest earning assets.
 
 
Nine months ended
 
Quarter ended
 
30 September
30 September
 
30 September
30 June
30 September
 
2023
2022
 
2023
2023
2022
 
£m
£m
 
£m
£m
£m
Continuing operations
 
 
 
 
 
 
NatWest Group net interest income 
8,411 
6,974
 
2,685 
2,824
2,640
Annualised NatWest Group net interest income
11,245 
9,324
 
10,652 
11,327
10,474
 
 
 
 
 
 
 
Average interest earning assets (IEA)
519,199 
546,918
 
520,815 
514,459
548,008
Less liquid asset buffer average IEA 
(157,505)
(204,224)
 
(157,972)
(152,133)
(197,304)
Bank average IEA 
361,694 
342,694 
 
362,843 
362,326
350,704
 
 
 
 
 
 
 
Net interest margin
2.17%
1.70%
 
2.05%
2.20%
1.91%
Bank net interest margin 
3.11%
2.72%
 
2.94%
3.13%
2.99%
 
 
Nine months ended
 
Quarter ended
 
30 September
30 September
 
30 September
30 June
30 September
 
2023
2022
 
2023
2023
2022
Retail Banking
£m
£m
 
£m
£m
£m
Net interest income 
4,242
3,719
 
1,334
1,416
1,379
Annualised net interest income
5,672
4,972
 
5,293
5,680
5,471
 
 
 
 
 
 
 
Retail Banking average IEA
221,838
207,915
 
223,686
221,468
212,179
Less liquid asset buffer average IEA
(17,269)
(19,311)
 
(16,745)
(16,820)
(20,050)
Adjusted Retail Banking average IEA
204,569
188,604
 
206,941
204,648
192,129
 
 
 
 
 
 
 
Retail Banking net interest margin
2.77%
2.64%
 
2.56%
2.78%
2.85%
 
 
 
 
 
 
 
Private Banking
 
 
 
 
 
 
Net interest income 
572
526
 
144
199
211
Annualised net interest income
765
703
 
571
798
837
 
 
 
 
 
 
 
Private Banking average IEA
27,270
29,366
 
26,595
27,140
29,309
Less liquid asset buffer average IEA
(8,174)
(10,310)
 
(7,680)
(7,976)
(10,155)
Adjusted Private Banking average IEA
19,096
19,056
 
18,915
19,164
19,154
 
 
 
 
 
 
 
Private Banking net interest margin
4.00%
3.69%
 
3.02%
4.17%
4.37%
 
 
 
 
 
 
 
Commercial & Institutional
 
 
 
 
 
 
Net interest income 
3,775
2,895
 
1,271
1,243
1,131
Annualised adjusted net interest income
5,047
3,871
 
5,043
4,986
4,487
 
 
 
 
 
 
 
Commercial & Institutional average IEA
196,457
202,061
 
193,793
196,735
205,021
Less liquid asset buffer average IEA
(65,598)
(76,639)
 
(63,944)
(65,288)
(75,216)
Adjusted Commercial & Institutional average IEA
130,859
125,422
 
129,849
131,447
129,805
 
 
 
 
 
 
 
Commercial & Institutional net interest margin
3.86%
3.09%
 
3.88%
3.79%
3.46%
 
 
 
 
 
Non-IFRS financial measures continued
7.
Tangible net asset value (TNAV) per ordinary share
TNAV per ordinary share is calculated as tangible equity divided by the number of ordinary shares in issue.
 
This is a measure used by external analysts in valuing the bank and allows for comparison with other per ordinary share metrics including the share price.
 
 
As at
 
30 September
30 June
31 December
 
2023
2023
2022
Ordinary shareholders' interests (£m)
31,530
30,868
32,598
Less intangible assets (£m)
(7,515)
(7,453)
(7,116)
Tangible equity (£m)
24,015
23,415
25,482
 
 
 
 
Ordinary shares in issue (millions) (1)
8,871
8,929
9,659
 
 
 
 
TNAV per ordinary share (pence)
271p
262p
264p
 
(1)     The number of ordinary shares in issue excludes own shares held.
 
 
8.
Customer deposits excluding central items
Customer deposits excluding central items is calculated as total NatWest Group customer deposits excluding Central items & other customer deposits.
 
Central items & other includes Treasury repo activity and Ulster Bank RoI. The exclusion of Central items & other removes the volatility relating to Treasury repo activity and the expected reduction of deposits as part of our withdrawal from the Republic of Ireland. These items may distort period-on-period comparisons and their removal gives the user of the financial statements a better understanding of the movements in customer deposits.
 
 
As at
 
30 September
30 June
31 December
 
2023
2023
2022
 
£bn
£bn
£bn
Total customer deposits
435.9
432.5
450.3
Less Central items & other
(12.4)
(11.4)
(17.4)
Customer deposits excluding central items
423.5
421.1
432.9
 
9.
Net loans to customers excluding central items
Net loans to customers excluding central items is calculated as total NatWest Group net loans to customers excluding Central items & other net loans to customers.
 
Central items & other includes Treasury reverse repo activity and Ulster Bank RoI. The exclusion of Central items & other removes the volatility relating to Treasury reverse repo activity and the reduction of loans to customers over 2022 as part of our withdrawal from the Republic of Ireland. This allows for better period-on-period comparisons and gives the user of the financial statements a better understanding of the movements in net loans to customers.
 
 
As at
 
30 September
30 June
31 December
 
2023
2023
2022
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
377.3
373.9
366.3
Less Central items & other
(22.8)
(21.2)
(19.6)
Net loans to customers excluding central items
354.5
352.7
346.7
 
 
 
 
Non-IFRS financial measures continued
10.
Loan:deposit ratio (excl. repos and reverse repos)
Loan:deposit ratio (excl. repos and reverse repos) is calculated as net customer loans held at amortised cost excluding reverse repos divided by total customer deposits excluding repos. This is a common metric used to assess liquidity.
 
The removal of repos and reverse repos reduces volatility and presents the ratio on a basis that is comparable to UK peers. A reconciliation is shown below including a comparison to the nearest GAAP measure, loan:deposit ratio. This is calculated as net loans to customers held at amortised cost divided by customer deposits.
 
 
As at
 
30 September
30 June
31 December
 
2023
2023
2022
 
£m
£m
£m
Loans to customers - amortised cost 
377,268
373,885
366,340
Less reverse repos
(23,095)
(21,420)
(19,749)
Loans to customers - amortised cost (excl. reverse repos)
354,173
352,465
346,591
 
 
 
 
Customer deposits 
435,867
432,532
450,318
Less repos
(10,692)
(9,322)
(9,828)
Customer deposits (excl. repos)
425,175
423,210
440,490
 
 
 
 
Loan:deposit ratio (%)
87%
86%
81%
Loan:deposit ratio (excl. repos and reverse repos) (%)
83%
83%
79%
 
11.
Loan impairment rate
Loan impairment rate is the annualised loan impairment charge divided by gross customer loans. This measure is used to assess the credit quality of the loan book.
 
 
Nine months ended
 
Quarter ended 
 
30 September
30 September
 
30 September
30 June
30 September
 
2023
2022
 
2023
2023
2022
Loan impairment charge (£m)
452
193
 
229
153
247
Annualised loan impairment charge (£m)
603
257
 
916
612
988
 
 
 
 
 
 
 
Gross customer loans (£bn)
380.8
375.1
 
380.8
377.3
375.1
 
 
 
 
 
 
 
Loan impairment rate
16bps
7bps
 
24bps
16bps
26bps
 
12.
Funded assets
Funded assets are calculated as total assets less derivative assets. This measure allows review of balance sheet trends exclusive of the volatility associated with derivative fair values.
 
 
As at
 
30 September
30 June
31 December
 
2023
2023
2022
 
£m
£m
£m
Total assets
717,141
702,601
720,053
Less derivative assets
(87,504)
(81,873)
(99,545)
Funded assets
629,637
620,728
620,508
 
13.
Assets under management and administration (AUMA)
AUMA comprises both assets under management (AUM) and assets under administration (AUA) serviced through the Private Banking segment.
 
AUM comprise assets where the investment management is undertaken by Private Banking on behalf of Private Banking, Retail Banking and Commercial & Institutional customers.
 
AUA comprise i) third party assets held on an execution-only basis in custody by Private Banking, Retail Banking and Commercial & Institutional for their customers, for which the execution services are supported by Private Banking, and for which Private Banking receives a fee for providing investment management and execution services to Retail Banking and Commercial & Institutional business segments ii) AUA of Cushon, acquired on 1 June 2023, which are supported by Private Banking and held and managed by third parties.
 
This measure is tracked and reported as the amount of funds that we manage or administer, and directly impacts the level of investment income that we receive.
 
 
 
 
 
Non-IFRS financial measures continued
14.
AUM net flows
AUM net flows refers to client cash inflows and outflows relating to investment products (this can include transfers from savings accounts). AUM net flows excludes the impact of European Economic Area (EEA) resident client outflows following the UK's exit from the EU and Russian client outflows since Q1 2022.
 
AUM net flows is reported and tracked to monitor the business performance of new business inflows and management of existing client withdrawals across Private Banking, Retail Banking and Commercial & Institutional.
 
 
15.
Wholesale funding
Wholesale funding comprises deposits by banks (excluding repos), debt securities in issue and subordinated liabilities.
 
Funding risk is the risk of not maintaining a diversified, stable and cost-effective funding base. The disclosure of wholesale funding highlights the extent of our diversification and how we mitigate funding risk.
 
 
16.
Third party rates
Third party customer asset rate is calculated as annualised interest receivable on third-party loans to customers as a percentage of third-party loans to customers. This excludes assets of disposal groups, intragroup items, loans to banks and liquid asset portfolios. Third party customer funding rate reflects interest payable or receivable on third-party customer deposits, including interest bearing and non-interest bearing customer deposits. Intragroup items, bank deposits, debt securities in issue and subordinated liabilities are excluded for customer funding rate calculation.
 
These metrics help investors better understand our net interest margin and interest rate sensitivity.
 
 
 
Legal Entity Identifier: 2138005O9XJIJN4JPN90
 
 
 
 
 
 
Date: 27 October 2023
 
 
 
NATWEST GROUP plc (Registrant)
 
 
 
By: /s/ Jan Cargill
 
 
 
Name: Jan Cargill
 
Title: Chief Governance Officer and Company Secretary