|
|
|
|
|
Exhibit
No. 1
|
Directorate
Change dated 01 July 2021
|
|
Exhibit
No. 2
|
Interim
Results - NatWest Markets dated 30 July 2021
|
|
|
|
|
|
|
|
●
|
Total
income was £296 million, compared with £809 million in H1
2020. Income excluding asset disposals/strategic risk reduction and
own credit adjustments was £335 million in H1 2021 compared
with £819 million in H1 2020, driven by weaker performance in
Fixed Income and a reduction in Currencies as volumes were impacted
by low volatility during the current period, in addition to
increased levels of customer activity in the comparative period as
the market reacted to the COVID-19 pandemic. Own credit adjustments
were down by £52 million compared with H1 2020 when credit
spreads widened across the market at the onset of the COVID-19
pandemic.
|
|
●
|
Operating
expenses of £480 million in H1 2021 were £334 million
lower than £814 million in H1 2020. Litigation and conduct
costs of £68 million credit reflects continued progress in
closing legacy matters during the period, and were £181
million lower than in H1 2020. Other operating expenses were down
£136 million to £453 million in H1 2021, primarily
reflecting continued progress on underlying cost
reductions.
|
|
●
|
The
impairment release for H1 2021 was £16 million, driven mainly
by credit improvements in the period and releases on individual
IFRS 9 Stage 2 and Stage 3 exposures, compared with a charge of
£45 million in H1 2020 when expected credit loss (ECL)
provisions increased in the early stages of the COVID-19
pandemic.
|
|
●
|
NWM
Group’s total assets and liabilities decreased by
£51.2 billion and £50.1
billion to £221.9 billion and £213.7 billion
respectively at 30 June 2021, compared with 31 December
2020. The decreases primarily reflect lower derivative fair values,
largely driven by increases in interest rates across major
currencies.
|
|
●
|
Valuation
reserves, comprised of credit valuation adjustments (CVA), funding
valuation adjustment (FVA), bid-offer and product and deal specific
reserves, decreased to £678 million at 30 June 2021 (31
December 2020 – £803 million). There was a reallocation
of FVA to CVA during the period following an update to the risk
management of certain exposures. The net decrease across CVA, FVA
and bid-offer reserves was driven by reduced exposures, due to
increases in interest rates and trade exit activity, in addition to
reduced risk.
|
|
●
|
On 9
June 2021 NWM Plc paid an interim ordinary dividend to its parent
company, NatWest Group plc, of £250 million, with the total
interim ordinary dividends paid in H1 2021 amounting to £750
million.
|
|
Liquidity and funding
|
|
|
●
|
NWM
Plc’s liquidity portfolio at 30 June 2021 was £17.7
billion with a LCR of 227% (31 December 2020 - £19.4 billion
with LCR 268%).
|
|
●
|
NWM Plc
issued £2.5 billion of term senior unsecured debt securities
in H1 2021, including benchmark transactions of $1.25 billion of
notes under the US MTN programme and €1.25 billion of notes
issued under the EMTN programme, and other private
placements.
|
|
Capital and leverage
|
|
|
●
|
Total NWM Plc RWAs were £24.6 billion at 30 June 2021,
compared with £25.6 billion at 31 December 2020. The decrease
reflected lower levels of credit, counterparty credit and
operational risk, offset by an increase in market
risk. Following
the announcement of GBP LIBOR cessation in March 2021, the market
risk RWAs became elevated by £2.5 billion as a result of
including modelled GBP LIBOR basis risk post 4 January 2022.
Regulatory approval has been obtained in July 2021 to update the
VaR model and this will remove this impact in Q3 2021. If this
model approval was back dated to Q2 2021 the reported RWAs would
have been £22.1 billion. Underlying levels of market risk were
low and progress continues to be made on asset disposals in line
with the strategy.
|
|
●
|
NWM
Plc’s CET1 ratio was 20.2% at 30 June 2021 compared with
21.7% at 31 December 2020. The decrease in the period reflected the
impact of dividends paid and other reserve movements, partially
offset by the reduction in RWAs.
|
|
●
|
Total
MREL for NWM Plc at 30 June 2021 was £10.8 billion, or 43.8%
of RWAs, down from £12.7 billion or 49.6% of RWAs at 31
December 2020. The reduction in the period was largely due to the
redemption of a $1.5 billion internal instrument issued to NatWest
Group plc and the reduction in CET1 capital.
|
|
|
30 June
|
31 March
|
31 December
|
|
|
2021
|
2021
|
2020
|
|
Balance sheet
|
|
|
|
|
Total assets
|
221.9
|
230.2
|
273.1
|
|
Funded assets
|
113.3
|
108.1
|
107.5
|
|
Derivative assets
|
108.6
|
122.1
|
165.6
|
|
|
|
|
|
|
Liquidity and funding
|
|
|
|
|
Liquidity coverage ratio (LCR) (%) (2)
|
227
|
233
|
268
|
|
Liquidity portfolio (£bn) (2)
|
17.7
|
16.5
|
19.4
|
|
Total wholesale funding (£bn) (3)
|
20.7
|
18.8
|
20.6
|
|
Total funding including repo (£bn)
|
71.6
|
67.9
|
75.9
|
|
|
|
|
|
|
Capital and leverage
|
|
|
|
|
Common Equity Tier (CET1) ratio (%)
|
20.2
|
21.1
|
21.7
|
|
CRR leverage ratio (%) (2)
|
4.7
|
4.9
|
5.2
|
|
Risk-weighted assets (RWAs) (£bn)
|
24.6
|
24.7
|
25.6
|
|
Total Capital ratio (%)
|
28.9
|
29.8
|
30.3
|
|
Total MREL (£bn) (4)
|
10.8
|
11.1
|
12.7
|
|
Total MREL ratio (%)
|
43.8
|
44.8
|
49.6
|
|
(1)
|
The targets, expectations and
trends discussed in this section represent management’s
current expectations and are subject to change, including as a
result of the factors described in the Risk Factors section on
pages 156 to 172 of the NatWest Markets Plc 2020 Annual Report and
Accounts, and the Summary Risk Factors set out on pages 48 and 49
of this announcement for H1 2021. These statements constitute
forward-looking statements. Refer to Forward-looking statements in
this announcement.
|
|
|
Half year ended 30 June 2021
|
|
Half year ended 30 June 2020
|
||||
|
|
|
Central
|
|
|
|
Central
|
|
|
|
NatWest
|
items &
|
|
|
NatWest
|
items &
|
|
|
|
Markets
|
other
|
Total
|
|
Markets
|
other
|
Total
|
|
Income statement
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
Net interest income
|
(4)
|
-
|
(4)
|
|
(39)
|
-
|
(39)
|
|
Non-interest income
|
294
|
6
|
300
|
|
848
|
-
|
848
|
|
Total income
|
290
|
6
|
296
|
|
809
|
-
|
809
|
|
Strategic costs
|
(89)
|
(6)
|
(95)
|
|
(105)
|
(7)
|
(112)
|
|
Litigation and conduct costs
|
2
|
66
|
68
|
|
(2)
|
(111)
|
(113)
|
|
Other operating expenses
|
(455)
|
2
|
(453)
|
|
(610)
|
21
|
(589)
|
|
Operating expenses
|
(542)
|
62
|
(480)
|
|
(717)
|
(97)
|
(814)
|
|
Operating (loss)/profit before impairments
|
(252)
|
68
|
(184)
|
|
92
|
(97)
|
(5)
|
|
Impairment releases/(losses)
|
16
|
-
|
16
|
|
(40)
|
(5)
|
(45)
|
|
Operating (loss)/profit before tax
|
(236)
|
68
|
(168)
|
|
52
|
(102)
|
(50)
|
|
Tax credit/(charge)
|
|
|
49
|
|
|
|
(79)
|
|
Loss for the period
|
|
|
(119)
|
|
|
|
(129)
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
Fixed Income (1,2,3,4)
|
43
|
-
|
43
|
|
403
|
-
|
403
|
|
Currencies (2,4)
|
205
|
-
|
205
|
|
336
|
-
|
336
|
|
Capital Markets (1,2,3,4)
|
166
|
-
|
166
|
|
219
|
-
|
219
|
|
Capital Management Unit & other (2,5)
|
13
|
6
|
19
|
|
(44)
|
-
|
(44)
|
|
Revenue share paid to other NatWest Group segments
|
(98)
|
-
|
(98)
|
|
(95)
|
-
|
(95)
|
|
Income excluding Asset disposals and OCA
|
329
|
6
|
335
|
|
819
|
-
|
819
|
|
Asset disposals/Strategic risk reduction (6)
|
(40)
|
-
|
(40)
|
|
(63)
|
-
|
(63)
|
|
Own credit adjustments (OCA)
|
1
|
-
|
1
|
|
53
|
-
|
53
|
|
Total income
|
290
|
6
|
296
|
|
809
|
-
|
809
|
|
(1)
|
Fixed Income comprises Rates and
Credit trading. Rates was presented as a separate business in NWM
Group results publications prior to the Q3 2020 Interim Management
Statement (H1 2020: £451 million). Credit trading and Capital
Markets were previously reported as Financing.
|
|
|
(2)
|
Income of £(40) million,
£(8) million and £(14) million reported within Fixed
Income, Currencies and Capital Markets respectively at H1 2020
relates to business that was subsequently transferred to Capital
Management Unit during 2020.
|
|
|
(3)
|
Income of £33 million reported
within Capital Markets at H1 2020 relates to business that
subsequently transferred to Fixed Income during
2020.
|
|
|
(4)
|
Income of £47 million and
£5 million reported within Fixed Income at H1 2020 relates to
business that was subsequently transferred to Currencies and
Capital Markets respectively during 2020.
|
|
|
(5)
|
Capital Management Unit was set up
in Q3 2020 to manage capital usage and optimisation across all
parts of NatWest Markets. The income shown here relates to legacy
assets. Other relates to income booked to the Central items &
other operating segment.
|
|
|
(6)
|
Asset disposals/Strategic risk reduction relates
to the costs of exiting positions, which includes changes in
carrying value to align to the expected exit valuation, and the
impact of risk reduction transactions entered into, in respect of
the strategic announcements of 14 February
2020.
|
|
|
●
|
Net interest income was a net expense of £4 million in
H1 2021 compared with £39 million net expense in H1
2020.
|
|
|
●
|
Non-interest income of £300 million in H1 2021
decreased by £548 million compared with £848 million in
H1 2020, reflecting a weaker performance in the Fixed Income
business and reduced Currencies income as volumes were impacted by
low volatility in the current period, in addition to increased
customer activity and elevated own credit adjustments at the onset
of the COVID-19 crisis in the comparative period. H1 2021 also
included a £20 million loss from a liability management
exercise which thereafter reduces the cost of funding. Asset
disposals/Strategic risk reduction of £(40) million was driven
by a number of transactions, compared with £(63) million in
the comparative period which was largely driven by a single
significant transaction undertaken to mitigate the RWA usage of NWM
Group.
|
|
|
●
|
Operating expenses were £480 million in H1 2021, a
decrease of £334 million from £814 million in H1 2020.
Litigation and conduct costs of £68 million credit reflects
continued progress in closing legacy matters during the period, and
were £181 million lower than £113 million in H1 2020.
Strategic costs were £95 million in H1 2021, compared with
£112 million in H1 2020, as work continued on the refocusing
of NWM Group. Other operating expenses decreased to £453
million in H1 2021 from £589 million in H1 2020, primarily
reflecting ongoing progress on underlying cost
reductions.
|
|
|
●
|
Impairment releases were £16 million in H1 2021,
largely driven by credit improvements in the period and releases on
individual IFRS 9 Stage 2 and Stage 3 exposures, compared with a
charge of £45 million in H1 2020 when ECL provisions increased
at the onset of the COVID-19 pandemic.
|
|
|
●
|
NatWest Markets operating loss before tax was £236
million compared with a profit of £52 million in H1 2020.
Income excluding asset disposals and own credit adjustments of
£329 million was £490 million lower than £819
million in H1 2020, reflecting a weaker performance in Fixed Income
and reduction in Currencies in the current period, in addition to
increased customer activity in the comparative period as the market
reacted to COVID-19. Asset disposals of £(40) million in the
period was driven by a number of transactions, compared with
£(63) million in H1 2020 that included £40 million from a
single significant transaction. Own credit adjustments were
£52 million lower than in H1 2020 when credit spreads widened
at the onset of the COVID-19 crisis. Operating expenses of
£542 million were lower compared with £717 million in H1
2020, largely driven by a decrease in other operating expenses
reflecting continued progress on underlying cost
reductions.
|
|
|
●
|
Central items & other operating profit before tax was
£68 million in H1 2021 compared with a £102 million loss
in H1 2020. Litigation and conduct costs of £66 million credit
in the current period reflects continued progress in closing legacy
matters, and were £177 million lower than in H1
2020.
|
|
|
|
Q2 2021
|
|
Q1 2021
|
|
Q2 2020
|
||||||
|
|
|
Central
|
|
|
|
Central
|
|
|
|
Central
|
|
|
|
NatWest
|
items &
|
|
|
NatWest
|
items &
|
|
|
NatWest
|
items &
|
|
|
|
Markets
|
other
|
Total
|
|
Markets
|
other
|
Total
|
|
Markets
|
other
|
Total
|
|
Income statement
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
Net interest income
|
3
|
-
|
3
|
|
(7)
|
-
|
(7)
|
|
4
|
-
|
4
|
|
Non-interest income
|
99
|
6
|
105
|
|
195
|
-
|
195
|
|
265
|
-
|
265
|
|
Total income
|
102
|
6
|
108
|
|
188
|
-
|
188
|
|
269
|
-
|
269
|
|
Strategic costs
|
(59)
|
(4)
|
(63)
|
|
(30)
|
(2)
|
(32)
|
|
(75)
|
(5)
|
(80)
|
|
Litigation and conduct costs
|
2
|
79
|
81
|
|
-
|
(13)
|
(13)
|
|
-
|
(9)
|
(9)
|
|
Other operating expenses
|
(226)
|
-
|
(226)
|
|
(229)
|
2
|
(227)
|
|
(285)
|
15
|
(270)
|
|
Operating expenses
|
(283)
|
75
|
(208)
|
|
(259)
|
(13)
|
(272)
|
|
(360)
|
1
|
(359)
|
|
Operating profit/(loss) before impairments
|
(181)
|
81
|
(100)
|
|
(71)
|
(13)
|
(84)
|
|
(91)
|
1
|
(90)
|
|
Impairment releases/(losses)
|
10
|
-
|
10
|
|
6
|
-
|
6
|
|
(45)
|
(5)
|
(50)
|
|
Operating (loss)/profit before tax
|
(171)
|
81
|
(90)
|
|
(65)
|
(13)
|
(78)
|
|
(136)
|
(4)
|
(140)
|
|
Tax credit
|
|
|
32
|
|
|
|
17
|
|
|
|
3
|
|
Loss for the period
|
|
|
(58)
|
|
|
|
(61)
|
|
|
|
(137)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income (1,2,3,4)
|
5
|
-
|
5
|
|
38
|
-
|
38
|
|
226
|
-
|
226
|
|
Currencies (2,4)
|
87
|
-
|
87
|
|
118
|
-
|
118
|
|
142
|
-
|
142
|
|
Capital Markets (1,2,3,4)
|
92
|
-
|
92
|
|
74
|
-
|
74
|
|
131
|
-
|
131
|
|
Capital Management Unit & other (2,5)
|
5
|
6
|
11
|
|
8
|
-
|
8
|
|
(17)
|
|
(17)
|
|
Revenue share paid to other NatWest Group segments
|
(50)
|
-
|
(50)
|
|
(48)
|
-
|
(48)
|
|
(48)
|
-
|
(48)
|
|
Income excluding Asset disposals and OCA
|
139
|
6
|
145
|
|
190
|
-
|
190
|
|
434
|
-
|
434
|
|
Asset disposals/Strategic risk reduction (6)
|
(36)
|
-
|
(36)
|
|
(4)
|
-
|
(4)
|
|
(63)
|
-
|
(63)
|
|
Own credit adjustments (OCA)
|
(1)
|
-
|
(1)
|
|
2
|
-
|
2
|
|
(102)
|
-
|
(102)
|
|
Total income
|
102
|
6
|
108
|
|
188
|
-
|
188
|
|
269
|
-
|
269
|
|
(1)
|
Fixed Income comprises Rates and
Credit trading. Rates was presented as a separate business in NWM
Group results publications prior to the Q3 2020 Interim Management
Statement (Q2 2020: £175 million). Credit trading and Capital
Markets were previously reported as Financing.
|
|
|
(2)
|
Income of £2 million, £1
million and £5 million reported within Fixed Income,
Currencies and Capital Markets respectively at Q2 2020 relates to
business that was subsequently transferred to Capital Management
Unit during 2020.
|
|
|
(3)
|
Income of £21 million reported
within Capital Markets at Q2 2020 relates to business that
subsequently transferred to Fixed Income during
2020.
|
|
|
(4)
|
Income of £36 million and
£2 million reported within Fixed Income at Q2 2020 relates to
business that was subsequently transferred to Currencies and
Capital Markets respectively during 2020.
|
|
|
(5)
|
Capital Management Unit was set up
in Q3 2020 to manage capital usage and optimisation across all
parts of NatWest Markets. The income shown here relates to legacy
assets. Other relates to income booked to the Central items &
other operating segment.
|
|
|
(6)
|
Asset
disposals/Strategic risk reduction relates to the costs of exiting
positions, which includes changes in carrying value to align to the
expected exit valuation, and the impact of risk reduction
transactions entered into, in respect of the strategic
announcements of 14 February 2020.
|
|
|
●
|
Net interest income was £3 million in Q2 2021, compared
with net expense of £7 million in Q1 2021 and net income of
£4 million in Q2 2020.
|
|
|
●
|
Non-interest income of £105 million decreased by
£90 million compared with £195 million in Q1 2021 and by
£160 million compared with £265 million in Q2 2020,
reflecting a weaker performance in the Fixed Income business and
lower Currencies income as volumes were impacted by low volatility
in the current quarter, and the increased levels of customer
activity and elevated own credit adjustments in Q2 2020 in the
early stages of the COVID-19 pandemic. Asset disposals of
£(36) million reflected a number of transactions in the
quarter, compared with £(4) million in Q1 2021 and £(63)
million in Q2 2020, which included £(40) million from a single
significant transaction.
|
|
|
●
|
Operating expenses were £208 million in Q2 2021,
compared with £272 million in Q1 2021 and £359 million in
Q2 2020. Litigation and conduct costs of £81 million credit in
Q2 2021 reflects continued progress in closing legacy matters
during the period. Other operating expenses of £226 million in
Q2 2021 were comparable with £227 million in Q1 2021 but down
from £270 million in Q2 2020, reflecting ongoing progress on
underlying cost reductions.
|
|
|
●
|
Impairment releases were £10 million in Q2 2021,
largely driven by credit improvements on IFRS 9 Stage 1 and Stage 2
exposures, compared with a release of £6 million in Q1 2021
and a charge of £50 million in Q2 2020 when ECL provisions
increased at the onset of the COVID-19 pandemic.
|
|
|
●
|
NatWest Markets operating loss before tax was £171
million compared with £65 million in Q1 2021 and £136
million in Q2 2020. Income excluding asset disposals and own credit
adjustments was £139 million in Q2 2021 (Q1 2021 –
£190 million; Q2 2020 – £434 million), reflecting a
weaker performance in Fixed Income and a reduction in Currencies in
the current quarter, and the increased levels of customer activity
in Q2 2020 in the early stages of the COVID-19 pandemic. Asset
disposals of £(36) million in Q2 2021 included a number of
transactions, compared with £(4) million in Q1 2021 and
£(63) million in Q2 2020. Operating expenses of £283
million in Q2 2021 were higher compared with £259 million in
Q1 2021, largely due to higher strategic costs, but lower compared
with £360 million in Q2 2020 largely due to lower other
operating expenses, reflecting ongoing progress on underlying cost
reductions.
|
|
|
●
|
Central items & other operating profit before tax was
£81 million compared with losses of £13 million in Q1
2021 and £4 million in Q2 2020. Litigation and conduct costs
credit of £79 million in the current quarter reflects
continued progress in closing legacy matters.
|
|
|
Assets
|
|
Liabilities
|
|||||
|
|
30 June
|
31 December
|
|
30 June
|
31 December
|
|
|
|
|
2021
|
2020
|
|
2021
|
2020
|
|
|
|
|
£bn
|
£bn
|
|
£bn
|
£bn
|
|
|
|
Cash and balances at central banks
|
17.1
|
15.8
|
|
|
|
|
|
|
Trading assets
|
70.2
|
68.7
|
|
75.7
|
72.3
|
|
Trading liabilities
|
|
Securities
|
31.4
|
29.2
|
|
32.1
|
26.8
|
|
Short positions
|
|
Reverse repos (1)
|
24.7
|
19.4
|
|
23.7
|
19.0
|
|
Repos (2)
|
|
Derivative cash collateral given (3)
|
12.9
|
18.5
|
|
17.0
|
23.2
|
|
Derivative cash collateral received (4)
|
|
Other trading assets
|
1.2
|
1.6
|
|
2.9
|
3.3
|
|
Other trading liabilities
|
|
Loans - amortised cost
|
7.5
|
9.4
|
|
4.2
|
4.4
|
|
Deposits - amortised cost
|
|
Settlement balances
|
7.5
|
2.3
|
|
7.1
|
2.2
|
|
Settlement balances
|
|
Amounts due from holding company
|
|
|
|
|
|
|
Amounts due to holding company
|
|
and fellow
subsidiaries
|
1.4
|
1.6
|
|
6.4
|
8.1
|
|
and fellow
subsidiaries
|
|
Other financial assets
|
8.9
|
9.0
|
|
17.6
|
18.2
|
|
Other financial liabilities
|
|
Other assets
|
0.7
|
0.7
|
|
0.9
|
1.3
|
|
Other liabilities
|
|
Funded assets
|
113.3
|
107.5
|
|
111.9
|
106.5
|
|
Liabilities excluding derivatives
|
|
Derivative assets
|
108.6
|
165.6
|
|
101.8
|
157.3
|
|
Derivative liabilities
|
|
Total assets
|
221.9
|
273.1
|
|
213.7
|
263.8
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
of which:
|
|
|
|
|
|
20.7
|
20.6
|
|
wholesale
funding (5)
|
|
|
|
|
|
8.7
|
9.5
|
|
short-term wholesale
funding (5)
|
|
|
|
|
|
|
|
|
|
|
Net derivative assets (6)
|
3.9
|
4.7
|
|
3.1
|
3.6
|
|
Net derivative liabilities (6)
|
|
(1)
|
Comprises bank
reverse repos of £3.6 billion (31 December 2020 –
£2.2 billion) and customer reverse repos of £21.1 billion
(31 December 2020 – £17.2 billion).
|
|
(2)
|
Comprises bank
repos of £1.3 billion (31 December 2020 – £1.0
billion) and customer repos of £22.4 billion (31 December 2020
– £18.0 billion).
|
|
(3)
|
Comprises
derivative cash collateral given relating to banks of £5.8
billion (31 December 2020 – £7.5 billion) and customers
of £7.1 billion (31 December 2020 – £11.0
billion).
|
|
(4)
|
Comprises
derivative cash collateral received relating to banks of £7.9
billion (31 December 2020 – £11.8 billion) and customers
of £9.1 billion (31 December 2020 – £11.4
billion).
|
|
(5)
|
Excludes
derivative cash collateral received, repo, customer deposits and
intra-NatWest Group balances.
|
|
(6)
|
Refer to page
14 for further details.
|
|
●
|
Total assets and liabilities decreased by £51.2 billion and £50.1
billion to £221.9 billion and £213.7 billion respectively
at 30 June 2021, compared with £273.1 billion and £263.8
billion at 31 December 2020. The decreases primarily reflect lower
derivative fair values, largely driven by increases in interest
rates across major currencies. Funded assets, which exclude
derivatives, increased by £5.8 billion to £113.3
billion.
|
|
●
|
Cash and balances at central banks increased by £1.3 billion to £17.1
billion, compared with £15.8 billion at 31 December 2020,
driven by liquidity and capital management
actions.
|
|
●
|
Trading assets were up by
£1.5 billion to £70.2 billion at 30 June 2021, with
increases in securities and reverse repos driven by customer flows
and the management of balance sheet within limits, partially offset
by a decrease in derivative cash collateral posted.
Trading liabilities
increased by £3.4 billion to
£75.7 billion, with increases in short positions and repos
partially offset by a decrease in derivative cash collateral
received.
|
|
●
|
Derivative assets and derivative liabilities were down £57.0 billion to £108.6
billion and £55.5 billion to £101.8 billion respectively
at 30 June 2021, largely driven by increases in interest rates
across major currencies since year end 2020.
|
|
●
|
Settlement balance assets and liabilities were up £5.2 billion and £4.9 billion to
£7.5 billion and £7.1 billion respectively, due to
increased trading compared with the seasonally lower levels of
customer activity leading up to 31 December
2020.
|
|
●
|
Loans to customers – amortised cost were down £2.1 billion to £6.3 billion,
largely reflecting liquidity management
actions.
|
|
●
|
Other financial liabilities decreased by £0.6 billion to £17.6
billion (31 December 2020 – £18.2 billion), largely driven by maturities
in the period offset partially by new issuance. The balance at 30
June 2021 includes £12.1 billion of medium-term notes
issued.
|
|
●
|
Owners’ equity was down
£1.3 billion to £8.1 billion (31 December 2020
– £9.4 billion), driven by
interim dividend payments to NatWest Group plc totalling £0.8
billion, and other reserve movements in the
period.
|
|
Traded internal VaR
The
table below shows one-day 99% internal VaR for the trading
portfolios of NWM Group, split by exposure type.
|
|
||||||||||||||
|
|
Half year ended
|
|
|||||||||||||
|
|
30 June 2021
|
|
30 June 2020
|
|
31 December 2020
|
|
|||||||||
|
|
|
|
|
Period
|
|
|
|
|
Period
|
|
|
|
|
Period
|
|
|
Traded Internal VaR
|
Average
|
Maximum
|
Minimum
|
end
|
|
Average
|
Maximum
|
Minimum
|
end
|
|
Average
|
Maximum
|
Minimum
|
end
|
|
|
(1-day 99%)
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
£m
|
|
|
Interest rate
|
11.3
|
19.0
|
4.5
|
17.4
|
|
10.1
|
20.2
|
6.1
|
6.1
|
|
7.3
|
11.4
|
4.8
|
6.3
|
|
|
Credit spread
|
11.0
|
13.4
|
9.4
|
11.2
|
|
16.3
|
27.2
|
8.7
|
17.7
|
|
14.4
|
18.8
|
10.0
|
10.3
|
|
|
Currency
|
3.9
|
9.4
|
2.0
|
2.4
|
|
4.2
|
8.4
|
2.1
|
3.9
|
|
4.1
|
7.0
|
2.1
|
3.0
|
|
|
Equity
|
0.5
|
0.8
|
0.2
|
0.2
|
|
0.8
|
2.0
|
0.3
|
0.3
|
|
0.4
|
0.8
|
0.2
|
0.7
|
|
|
Commodity
|
0.2
|
0.5
|
-
|
-
|
|
0.1
|
0.3
|
-
|
0.1
|
|
0.2
|
0.6
|
-
|
0.2
|
|
|
Diversification (1)
|
(13.5)
|
|
|
(15.5)
|
|
(14.8)
|
|
|
(9.6)
|
|
(10.9)
|
|
|
(10.3)
|
|
|
Total
|
13.4
|
23.9
|
9.5
|
15.7
|
|
16.7
|
25.7
|
10.1
|
18.5
|
|
15.5
|
22.2
|
10.2
|
10.2
|
|
|
Note:
(1) NWM Group benefits
from diversification across various financial instrument types,
currencies and markets. The extent of the diversification benefit
depends on the correlation between the assets and risk factors in
the portfolio at a particular time. The diversification factor is
the sum of the VaR on individual risk types less the
total.
Key points
● The increase in
average interest rate VaR, compared to the prior period, reflected
a rise in tenor basis risk in sterling flow trading. This related
to the transition from LIBOR to alternative risk-free rates. The
regulator has approved an update
of the VaR model, which will remove this impact during Q3
2021.
● The decrease in
average credit spread VaR mostly reflected a tightening of credit
spreads over the period.
● Traded VaR remained
within appetite throughout the period.
|
|
||||||||||||||
|
|
30 June
|
31 December
|
|
|
2021
|
2020
|
|
Capital adequacy ratios
|
%
|
%
|
|
CET1
|
20.2
|
21.7
|
|
Tier 1
|
23.9
|
25.2
|
|
Total
|
28.9
|
30.3
|
|
|
|
|
|
Capital (1)
|
£m
|
£m
|
|
CET1
|
4,969
|
5,547
|
|
Tier 1
|
5,864
|
6,433
|
|
Total
|
7,100
|
7,753
|
|
|
|
|
|
Risk-weighted assets
|
|
|
|
Credit risk
|
5,941
|
6,902
|
|
Counterparty credit risk
|
7,424
|
8,130
|
|
Market risk
|
9,197
|
8,150
|
|
Operational risk
|
2,020
|
2,382
|
|
Total RWAs
|
24,582
|
25,564
|
|
|
|
|
|
Leverage (2)
|
|
|
|
CRR leverage exposure (£m)
|
124,600
|
123,927
|
|
Tier 1 capital (£m)
|
5,864
|
6,433
|
|
CRR leverage ratio (%)
|
4.7
|
5.2
|
|
Capital resources
The
minimum requirement for own funds is set out for NWM Plc legal
entity under the Capital Requirements Regulation. Transitional
arrangements on the phasing in of end-point capital resources are
set by the PRA.
|
|
||
|
|
30 June
|
31 December
|
|
|
|
2021
|
2020
|
|
|
Shareholders’ equity
|
£m
|
£m
|
|
|
Shareholders’ equity
|
7,980
|
9,152
|
|
|
Other equity instruments
|
(904)
|
(904)
|
|
|
|
7,076
|
8,248
|
|
|
|
|
|
|
|
Regulatory adjustments and deductions
|
|
|
|
|
Own credit
|
50
|
43
|
|
|
Defined benefit pension fund adjustment
|
(176)
|
(174)
|
|
|
Cash flow hedging reserve
|
(116)
|
(201)
|
|
|
Prudential valuation adjustments
|
(236)
|
(251)
|
|
|
Expected losses less impairments
|
(2)
|
(1)
|
|
|
Instruments of financial sector entities where the institution has
a significant investment
|
(1,631)
|
(1,624)
|
|
|
Adjustments under IFRS 9 transitional arrangements
|
4
|
7
|
|
|
Foreseeable ordinary dividends
|
-
|
(500)
|
|
|
|
(2,107)
|
(2,701)
|
|
|
|
|
|
|
|
CET1 capital
|
4,969
|
5,547
|
|
|
|
|
|
|
|
Additional Tier 1 (AT1) capital
|
|
|
|
|
Qualifying instruments and related share premium
|
904
|
904
|
|
|
Qualifying instruments and related share premium subject to phase
out
|
217
|
219
|
|
|
|
1,121
|
1,123
|
|
|
|
|
|
|
|
Tier 1 deductions
|
|
|
|
|
Instruments of financial sector entities where the institution has
a significant investment
|
(226)
|
(237)
|
|
|
|
|
|
|
|
Tier 1 capital
|
5,864
|
6,433
|
|
|
|
|
|
|
|
Qualifying Tier 2 capital
|
|
|
|
|
Qualifying instruments and related share premium
|
1,614
|
1,704
|
|
|
|
|
|
|
|
Tier 2 deductions
|
|
|
|
|
Instruments of financial sector entities where the institution has
a significant investment
|
(397)
|
(406)
|
|
|
Other regulatory adjustments
|
19
|
22
|
|
|
|
(378)
|
(384)
|
|
|
|
|
|
|
|
Tier 2 capital
|
1,236
|
1,320
|
|
|
Total regulatory capital
|
7,100
|
7,753
|
|
|
|
|
|
|
|
|
30 June
|
31 December
|
|
|
2021
|
2020
|
|
Leverage
|
£m
|
£m
|
|
Cash and balances at central banks
|
13,922
|
11,736
|
|
Trading assets
|
51,035
|
52,169
|
|
Derivatives
|
106,405
|
164,104
|
|
Net loans to customers
|
21,873
|
23,827
|
|
Other assets
|
7,150
|
4,246
|
|
Total assets
|
200,385
|
256,082
|
|
Derivatives
|
|
|
|
-
netting
|
(108,882)
|
(169,152)
|
|
- potential future
exposures
|
34,692
|
35,654
|
|
Securities financing transactions gross up
|
1,230
|
999
|
|
Undrawn commitments
|
4,540
|
5,037
|
|
Regulatory deductions and other adjustments
|
(5,763)
|
(2,977)
|
|
Exclusion of core UK-group exposures
|
(1,602)
|
(1,716)
|
|
Leverage exposure
|
124,600
|
123,927
|
|
|
Liquidity value (1)
|
|
|
|
30 June
|
31 December
|
|
|
2021
|
2020
|
|
NatWest Markets Plc
|
£m
|
£m
|
|
Cash and balances at central banks
|
14,071
|
11,773
|
|
AAA to AA- rated governments
|
3,176
|
7,207
|
|
A+ and lower rated governments
|
33
|
79
|
|
Government guaranteed issuers, public sector entities and
government sponsored entities
|
-
|
-
|
|
International organisations and multilateral development
banks
|
233
|
144
|
|
LCR level 1 bonds
|
3,442
|
7,430
|
|
LCR level 1 assets
|
17,513
|
19,203
|
|
LCR level 2 assets
|
-
|
-
|
|
Non-LCR eligible assets
|
-
|
-
|
|
Primary liquidity
|
17,513
|
19,203
|
|
Secondary liquidity (2)
|
223
|
224
|
|
Total liquidity value
|
17,736
|
19,427
|
|
|
GBP
|
USD
|
EUR
|
Other
|
Total
|
|
Total liquidity portfolio
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
30 June 2021
|
8,891
|
2,821
|
5,988
|
36
|
17,736
|
|
31 December 2020
|
8,838
|
3,793
|
6,716
|
80
|
19,427
|
|
Funding sources
The table below shows NWM Group’s carrying values of the
principal funding sources based on contractual
maturity.
|
|
|||||||
|
|
30 June 2021
|
|
31 December 2020
|
|
||||
|
|
Short-term
|
Long-term
|
|
|
Short-term
|
Long-term
|
|
|
|
|
less than
|
more than
|
|
|
less than
|
more than
|
|
|
|
|
1 year
|
1 year
|
Total
|
|
1 year
|
1 year
|
Total
|
|
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
|
|
Bank deposits
|
1,364
|
330
|
1,694
|
|
1,294
|
514
|
1,808
|
|
|
of which: repos (amortised cost)
|
526
|
-
|
526
|
|
200
|
-
|
200
|
|
|
Customer deposits
|
2,417
|
43
|
2,460
|
|
2,526
|
92
|
2,618
|
|
|
of which: repos (amortised cost)
|
128
|
-
|
128
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading liabilities (1)
|
|
|
|
|
|
|
|
|
|
Repos (2)
|
23,720
|
-
|
23,720
|
|
19,036
|
-
|
19,036
|
|
|
Derivative cash collateral received
|
17,017
|
-
|
17,017
|
|
23,226
|
-
|
23,226
|
|
|
Other bank and customer deposits
|
919
|
726
|
1,645
|
|
818
|
985
|
1,803
|
|
|
Debt securities in issue
|
378
|
827
|
1,205
|
|
527
|
881
|
1,408
|
|
|
|
42,034
|
1,553
|
43,587
|
|
43,607
|
1,866
|
45,473
|
|
|
Other financial liabilities
|
|
|
|
|
|
|
|
|
|
Customer deposits (designated fair value)
|
546
|
172
|
718
|
|
616
|
180
|
796
|
|
|
Debt securities in issue
|
|
|
|
|
|
|
|
|
|
commercial paper and certificates of
deposits
|
3,651
|
143
|
3,794
|
|
3,253
|
168
|
3,421
|
|
|
medium term notes (MTNs)
|
2,852
|
9,222
|
12,074
|
|
4,441
|
8,407
|
12,848
|
|
|
Subordinated liabilities
|
280
|
771
|
1,051
|
|
-
|
1,105
|
1,105
|
|
|
|
7,329
|
10,308
|
17,637
|
|
8,310
|
9,860
|
18,170
|
|
|
Amounts due to holding company and fellow
subsidiaries (3)
|
|
|
|
|
|
|
|
|
|
Internal MREL
|
952
|
2,920
|
3,872
|
|
-
|
5,181
|
5,181
|
|
|
Other bank and customer deposits
|
651
|
-
|
651
|
|
925
|
-
|
925
|
|
|
Subordinated liabilities
|
-
|
1,678
|
1,678
|
|
-
|
1,753
|
1,753
|
|
|
|
1,603
|
4,598
|
6,201
|
|
925
|
6,934
|
7,859
|
|
|
|
|
|
|
|
|
|
|
|
|
Total funding
|
54,747
|
16,832
|
71,579
|
|
56,662
|
19,266
|
75,928
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which: available in
resolution (4)
|
-
|
5,369
|
5,369
|
|
-
|
8,039
|
8,039
|
|
|
Notes:
(1) Funding sources excludes short
positions of £32,111 million (31 December 2020 - £26,779
million) reflected as trading liabilities on the balance
sheet.
(2) Comprises Central and other bank
repos of £1,319 million (31 December 2020 - £1,048
million), other financial institution repos of £20,487 million
(31 December 2020 - £15,973 million) and other corporate repos
of £1,914 million (31 December 2020 - £2,015
million).
(3) Amounts due to holding company and
fellow subsidiaries relating to non-financial instruments of
£155 million (31 December 2020 - £275 million) have been
excluded from the table.
(4) Eligible liabilities (as defined in the Banking
Act 2009 as amended from time to time) that meet the eligibility
criteria set out in the regulations, rules, policies, guidelines,
or statements of the Bank of England including the Statement of
Policy published in June 2018.
Key points
● During H1 2021, NWM
Group continued to access capital markets raising £2.5 billion
of funding in the form of benchmark transactions and private
placements. The benchmark transactions were $1.25 billion 3.25 year
fixed and floating rate notes issued under the US Rule 144A
programme and €1.25 billion five-year fixed rate notes issued
under the EMTN programme.
● Depending on market
conditions in H2 2021, NWM Group will continue its plans for
moderate term issuance to cover maturities and support business
initiatives with the rest of NatWest Group.
● NWM Group also
maintains a portfolio of bi-lateral borrowing in other formats,
such as secured notes and loans backed by banking book or other
collateral.
|
|
|||||||
|
Senior notes and subordinated liabilities - residual maturity
profile by instrument type
The table below shows NWM Group’s debt securities in issue,
subordinated liabilities and internal resolution instruments by
residual maturity.
|
|
||||||||||||||||
|
|
Trading
|
|
|
|
|
|
|
|
|||||||||
|
|
liabilities
|
|
Other financial liabilities
|
|
Amounts due to holding
|
|
|
||||||||||
|
|
Debt
|
|
Debt securities in issue
|
|
|
|
company and fellow
|
|
|
||||||||
|
|
securities
|
|
Commercial
|
|
|
|
|
subsidiaries
|
|
|
|||||||
|
|
in issue
|
|
paper
|
|
Subordinated
|
|
|
Internal
|
Subordinated
|
Total notes
|
|
||||||
|
|
MTNs
|
|
and CDs
|
MTNs
|
liabilities
|
Total
|
|
MREL
|
liabilities
|
in issue
|
|
||||||
|
30 June 2021
|
£m
|
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
||||||
|
Less than 1 year
|
378
|
|
3,651
|
2,852
|
280
|
6,783
|
|
952
|
-
|
8,113
|
|
||||||
|
1-3 years
|
277
|
|
133
|
4,882
|
241
|
5,256
|
|
2,920
|
832
|
9,285
|
|
||||||
|
3-5 years
|
155
|
|
10
|
3,800
|
-
|
3,810
|
|
-
|
-
|
3,965
|
|
||||||
|
More than 5 years
|
395
|
|
-
|
540
|
530
|
1,070
|
|
-
|
846
|
2,311
|
|
||||||
|
Total
|
1,205
|
|
3,794
|
12,074
|
1,051
|
16,919
|
|
3,872
|
1,678
|
23,674
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
31 December 2020
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Less than 1 year
|
527
|
|
3,253
|
4,441
|
-
|
7,694
|
|
-
|
-
|
8,221
|
|
||||||
|
1-3 years
|
169
|
|
165
|
4,444
|
549
|
5,158
|
|
5,181
|
-
|
10,508
|
|
||||||
|
3-5 years
|
240
|
|
3
|
3,356
|
-
|
3,359
|
|
-
|
889
|
4,488
|
|
||||||
|
More than 5 years
|
472
|
|
-
|
607
|
556
|
1,163
|
|
-
|
864
|
2,499
|
|
||||||
|
Total
|
1,408
|
|
3,421
|
12,848
|
1,105
|
17,374
|
|
5,181
|
1,753
|
25,716
|
|
||||||
|
The table below shows the currency breakdown of total notes in
issue.
|
|
||||||||||||||||
|
|
GBP
|
USD
|
|
EUR
|
Other
|
Total
|
|
||||||||||
|
30 June 2021
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
||||||||||
|
Commercial paper and CDs
|
226
|
1,342
|
|
2,226
|
-
|
3,794
|
|
||||||||||
|
MTNs
|
476
|
3,588
|
|
7,531
|
1,684
|
13,279
|
|
||||||||||
|
External subordinated liabilities
|
94
|
213
|
|
744
|
-
|
1,051
|
|
||||||||||
|
Internal MREL due to NatWest Group plc
|
-
|
2,048
|
|
1,824
|
-
|
3,872
|
|
||||||||||
|
Subordinated liabilities due to NatWest Group plc
|
-
|
846
|
|
832
|
-
|
1,678
|
|
||||||||||
|
Total
|
796
|
8,037
|
|
13,157
|
1,684
|
23,674
|
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||||||
|
31 December 2020
|
724
|
8,029
|
|
14,588
|
2,375
|
25,716
|
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||||||
|
Securities financing transactions and collateral
The
table below shows securities financing transactions in NWM Group.
Balance sheet captions include balances held at all classifications
under IFRS 9.
|
|
|||||||
|
|
Reverse repos
|
|
Repos
|
|
||||
|
|
|
|
Outside
|
|
|
|
Outside
|
|
|
|
|
Of which:
|
netting
|
|
|
Of which:
|
netting
|
|
|
|
Total
|
can be offset
|
arrangements
|
|
Total
|
can be offset
|
arrangements
|
|
|
30 June 2021
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
|
Gross
|
53,657
|
52,648
|
1,009
|
|
52,748
|
51,616
|
1,132
|
|
|
IFRS offset
|
(28,374)
|
(28,374)
|
-
|
|
(28,374)
|
(28,374)
|
-
|
|
|
Carrying value
|
25,283
|
24,274
|
1,009
|
|
24,374
|
23,242
|
1,132
|
|
|
|
|
|
|
|
|
|
|
|
|
Master netting arrangements
|
(2,838)
|
(2,838)
|
-
|
|
(2,838)
|
(2,838)
|
-
|
|
|
Securities collateral
|
(21,302)
|
(21,302)
|
-
|
|
(20,371)
|
(20,371)
|
-
|
|
|
Potential for offset not recognised under IFRS
|
(24,140)
|
(24,140)
|
-
|
|
(23,209)
|
(23,209)
|
-
|
|
|
Net
|
1,143
|
134
|
1,009
|
|
1,165
|
33
|
1,132
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2020
|
|
|
|
|
|
|
|
|
|
Gross
|
46,169
|
45,806
|
363
|
|
44,102
|
42,402
|
1,700
|
|
|
IFRS offset
|
(24,866)
|
(24,866)
|
-
|
|
(24,866)
|
(24,866)
|
-
|
|
|
Carrying value
|
21,303
|
20,940
|
363
|
|
19,236
|
17,536
|
1,700
|
|
|
|
|
|
|
|
|
|
|
|
|
Master netting arrangements
|
(929)
|
(929)
|
-
|
|
(929)
|
(929)
|
-
|
|
|
Securities collateral
|
(19,938)
|
(19,938)
|
-
|
|
(16,607)
|
(16,607)
|
-
|
|
|
Potential for offset not recognised under IFRS
|
(20,867)
|
(20,867)
|
-
|
|
(17,536)
|
(17,536)
|
-
|
|
|
Net
|
436
|
73
|
363
|
|
1,700
|
-
|
1,700
|
|
|
Key points
● Reverse repos and
repos increased on both gross and carrying value basis when
compared to 2020. These trends are consistent with seasonal lower
levels of activity.
● Reverse repo and
repo transactions are primarily backed by highly-rated sovereign,
supranational and agency collateral.
|
|
|||||||
|
Debt securities
The table below shows debt securities held at mandatory fair value
through profit or loss by issuer as well as ratings based on the
lowest of Standard & Poor’s, Moody’s and
Fitch.
|
|
||||||
|
|
Central and local government
|
Financial
|
|
|
|||
|
|
UK
|
US
|
Other
|
institutions
|
Corporate
|
Total
|
|
|
30 June 2021
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
AAA
|
-
|
-
|
2,469
|
1,013
|
-
|
3,482
|
|
|
AA to AA+
|
-
|
4,088
|
4,829
|
1,010
|
44
|
9,971
|
|
|
A to AA-
|
5,121
|
-
|
1,781
|
397
|
75
|
7,374
|
|
|
BBB- to A-
|
-
|
-
|
9,235
|
386
|
518
|
10,139
|
|
|
Non-investment grade
|
-
|
-
|
33
|
252
|
102
|
387
|
|
|
Unrated
|
-
|
-
|
-
|
10
|
4
|
14
|
|
|
Total
|
5,121
|
4,088
|
18,347
|
3,068
|
743
|
31,367
|
|
|
Short positions
|
(5,487)
|
(2,303)
|
(22,185)
|
(2,030)
|
(106)
|
(32,111)
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2020
|
|
|
|
|
|
|
|
|
AAA
|
-
|
-
|
3,114
|
1,113
|
-
|
4,227
|
|
|
AA to AA+
|
-
|
5,149
|
3,651
|
576
|
49
|
9,425
|
|
|
A to AA-
|
4,184
|
-
|
1,358
|
272
|
81
|
5,895
|
|
|
BBB- to A-
|
-
|
-
|
8,277
|
444
|
656
|
9,377
|
|
|
Non-investment grade
|
-
|
-
|
36
|
127
|
53
|
216
|
|
|
Unrated
|
-
|
-
|
-
|
150
|
1
|
151
|
|
|
Total
|
4,184
|
5,149
|
16,436
|
2,682
|
840
|
29,291
|
|
|
Short positions
|
(5,704)
|
(1,123)
|
(18,135)
|
(1,761)
|
(56)
|
(26,779)
|
|
|
|
|||||||
|
Derivatives
The
table below shows third-party derivatives by type of contract. The
master netting agreements and collateral shown do not result in a
net presentation on the balance sheet under IFRS.
|
|
|||||||||||
|
|
30 June 2021
|
|
31 December 2020
|
|||||||||
|
|
Notional
|
|
|
|
|
|
|
|||||
|
|
GBP
|
USD
|
Euro
|
Other
|
Total
|
Assets
|
Liabilities
|
|
Notional
|
Assets
|
Liabilities
|
|
|
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£m
|
£m
|
|
£bn
|
£m
|
£m
|
|
|
Gross exposure
|
|
|
|
|
|
107,677
|
100,572
|
|
|
164,252
|
155,787
|
|
|
IFRS offset
|
|
|
|
|
|
-
|
-
|
|
|
-
|
-
|
|
|
Carrying value
|
3,580
|
3,782
|
4,891
|
1,410
|
13,663
|
107,677
|
100,572
|
|
13,697
|
164,252
|
155,787
|
|
|
Of which:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate
swaps
|
|
|
|
|
|
59,264
|
50,297
|
|
|
91,352
|
80,440
|
|
|
Options
purchased
|
|
|
|
|
|
14,663
|
-
|
|
|
20,526
|
-
|
|
|
Options
written
|
|
|
|
|
|
-
|
14,803
|
|
|
-
|
20,190
|
|
|
Futures and
forwards
|
|
|
|
|
|
-
|
-
|
|
|
1
|
2
|
|
|
Total
|
3,220
|
2,264
|
4,269
|
424
|
10,177
|
73,927
|
65,100
|
|
10,371
|
111,879
|
100,632
|
|
|
Exchange rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spot, forwards and
futures
|
|
|
|
|
|
22,035
|
22,134
|
|
|
34,902
|
35,022
|
|
|
Currency
swaps
|
|
|
|
|
|
6,932
|
8,081
|
|
|
10,025
|
12,087
|
|
|
Options
purchased
|
|
|
|
|
|
4,562
|
-
|
|
|
7,277
|
-
|
|
|
Options
written
|
|
|
|
|
|
-
|
4,825
|
|
|
-
|
7,662
|
|
|
Total
|
358
|
1,514
|
611
|
986
|
3,469
|
33,529
|
35,040
|
|
3,310
|
52,204
|
54,771
|
|
|
Credit
|
2
|
4
|
11
|
-
|
17
|
221
|
431
|
|
15
|
161
|
376
|
|
|
Equity and commodity
|
-
|
-
|
-
|
-
|
-
|
-
|
1
|
|
1
|
8
|
8
|
|
|
Carrying value
|
|
|
|
|
13,663
|
107,677
|
100,572
|
|
13,697
|
164,252
|
155,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty mark-to-market netting
|
|
|
|
|
|
(85,710)
|
(85,710)
|
|
|
(134,913)
|
(134,913)
|
|
|
Cash collateral
|
|
|
|
|
|
(13,867)
|
(10,346)
|
|
|
(19,606)
|
(14,778)
|
|
|
Securities collateral
|
|
|
|
|
|
(4,170)
|
(1,384)
|
|
|
(5,053)
|
(2,487)
|
|
|
Net exposure
|
|
|
|
|
|
3,930
|
3,132
|
|
|
4,680
|
3,609
|
|
|
Of which outside netting agreements
|
|
|
|
|
|
964
|
919
|
|
|
853
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks (2)
|
|
|
|
|
|
135
|
682
|
|
|
206
|
532
|
|
|
Other financial institutions (3)
|
|
|
|
|
|
1,731
|
1,364
|
|
|
1,416
|
1,939
|
|
|
Corporate (4)
|
|
|
|
|
|
1,966
|
927
|
|
|
2,921
|
1,046
|
|
|
Government (5)
|
|
|
|
|
|
98
|
159
|
|
|
137
|
92
|
|
|
Net exposure
|
|
|
|
|
|
3,930
|
3,132
|
|
|
4,680
|
3,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
|
|
|
|
|
|
2,297
|
750
|
|
|
2,833
|
1,516
|
|
|
Europe
|
|
|
|
|
|
846
|
1,172
|
|
|
1,076
|
1,192
|
|
|
US
|
|
|
|
|
|
573
|
945
|
|
|
470
|
644
|
|
|
RoW
|
|
|
|
|
|
214
|
265
|
|
|
301
|
257
|
|
|
Net exposure
|
|
|
|
|
|
3,930
|
3,132
|
|
|
4,680
|
3,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset quality of uncollateralised derivative assets
|
|
|
|
|
|
|
|
|
||||
|
AQ1-AQ4
|
|
|
|
|
|
3,048
|
|
|
|
3,388
|
|
|
|
AQ5-AQ8
|
|
|
|
|
|
824
|
|
|
|
1,263
|
|
|
|
AQ9-AQ10
|
|
|
|
|
|
58
|
|
|
|
29
|
|
|
|
Net exposure
|
|
|
|
|
|
3,930
|
|
|
|
4,680
|
|
|
|
Notes:
(1) The notional amount of interest
rate derivatives includes £7,019 billion (31 December 2020
– £7,074 billion) in respect of contracts cleared
through central clearing counterparties.
(2) Transactions with certain
counterparties with whom NWM Group has netting arrangements but
collateral is not posted on a daily basis; certain transactions
with specific terms that may not fall within netting and collateral
arrangements; derivative positions in certain jurisdictions, for
example China, where the collateral agreements are not deemed to be
legally enforceable.
(3) Includes transactions with
securitisation vehicles and funds where collateral posting is
contingent on NWM Group’s external
rating.
(4) Mainly large corporates with whom
NWM Group may have netting arrangements in place, but operational
capability does not support collateral posting.
(5) Sovereigns and supranational entities with no
collateral arrangements, collateral arrangements that are not
considered enforceable, or one-way collateral agreements in their
favour.
|
||||||||||||
|
Asset quality
The table below shows the current and potential exposure by high
level asset class and asset quality. It represents total credit
risk for assets held in the banking book in addition to
counterparty credit risk for traded products.
|
|
||||||||||
|
|
Cash &
|
Sovereign
|
Loans
|
|
Collateralised
|
Uncollateralised
|
|
|
|
|
|
|
|
balances at
|
debt
|
& other
|
Other debt
|
rate risk
|
rate risk
|
Repo &
|
Off-balance
|
|
|
|
|
|
central banks
|
securities
|
lending
|
securities
|
management
|
management
|
reverse repo
|
sheet items
|
Leasing
|
Total
|
|
|
30 June 2021
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
AQ1-AQ4
|
17,304
|
5,587
|
5,217
|
2,755
|
2,063
|
1,451
|
277
|
666
|
50
|
35,370
|
|
|
AQ5-AQ8
|
-
|
-
|
618
|
226
|
338
|
570
|
-
|
49
|
-
|
1,801
|
|
|
AQ9
|
-
|
-
|
153
|
-
|
2
|
51
|
-
|
-
|
-
|
206
|
|
|
AQ10
|
-
|
-
|
17
|
1
|
-
|
3
|
-
|
-
|
-
|
21
|
|
|
Current exposure
|
17,304
|
5,587
|
6,005
|
2,982
|
2,403
|
2,075
|
277
|
715
|
50
|
37,398
|
|
|
Potential exposure
|
17,304
|
5,587
|
16,522
|
2,982
|
11,166
|
3,780
|
1,997
|
1,843
|
50
|
61,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4
|
15,771
|
5,968
|
6,687
|
1,432
|
2,399
|
2,109
|
351
|
815
|
55
|
35,587
|
|
|
AQ5-AQ8
|
-
|
-
|
1,183
|
58
|
479
|
985
|
-
|
59
|
-
|
2,764
|
|
|
AQ9
|
-
|
-
|
168
|
-
|
2
|
3
|
-
|
1
|
-
|
174
|
|
|
AQ10
|
-
|
-
|
30
|
1
|
1
|
8
|
-
|
1
|
4
|
45
|
|
|
Current exposure
|
15,771
|
5,968
|
8,068
|
1,491
|
2,881
|
3,105
|
351
|
876
|
59
|
38,570
|
|
|
Potential exposure
|
15,771
|
5,968
|
20,119
|
1,491
|
11,969
|
4,764
|
1,306
|
1,811
|
59
|
63,258
|
|
|
Key point
● Measured against
NWM Group’s asset quality scale, 95% (31 December 2020
– 92%) of total current exposure was rated in the AQ1-AQ4
bands. When considered against external credit ratings, 95%, or
£35.5 billion (31 December 2020 – 93%, £36.0
billion) of current exposure was equivalent to an investment grade
rating (BBB- or better).
|
|||||||||||
|
Economic loss drivers
Introduction
The portfolio segmentation and selection of economic loss drivers
for IFRS 9 follow closely the approach used in stress testing. To
enable robust modelling the forecasting models for each portfolio
segment (defined by product or asset class and where relevant,
industry sector and region) are based on a selected, small number
of economic factors, (typically three to four) that best explain
the temporal variations in portfolio loss rates. The process to
select economic loss drivers involves empirical analysis and expert
judgement.
The most material economic loss drivers for the UK portfolios
include UK GDP, world GDP, the unemployment rate, the house price
index, and the Bank of England base rate. Similar metrics are used
for other key country exposures in NWM Group.
Economic scenarios
There was improvement in the economic outlook for the UK since 31
December 2020, which was reflected in a more optimistic base case
scenario as at 30 June 2021. The main drivers of the improvement
were as follows:
●
Rapid roll-out of
the COVID-19 vaccination in the UK and in other developed
countries, leading to relaxation of restrictions.
●
The success of
various government support measures in containing the fallout from
lockdown.
●
Faster than
expected economic recovery, with GDP having made material gains
since the lifting of restrictions, and labour and housing markets
in particular showing continued signs of resiliency.
The range of anticipated future economic conditions was defined by
a set of four internally developed scenarios and their respective
probabilities. In addition to the base case, they comprised upside,
downside and extreme downside scenarios. The scenarios primarily
reflect a range of outcomes for the path of COVID-19 as well as
recovery, and the associated effects on labour and asset
markets.
The four scenarios were deemed appropriate in capturing the
uncertainty in economic forecasts and the non-linearity in outcomes
under different scenarios. The scenarios were developed to provide
sufficient coverage across potential changes in unemployment, asset
price and the degree of permanent damage to the economy, around
which there are pronounced levels of uncertainty at this
stage.
The tables below provide details of the key economic parameters
under the four scenarios.
The main macroeconomic variables for each of the four scenarios
used for expected credit loss (ECL) modelling are set out in the
table below. The compound annual growth rate (CAGR) for GDP is
shown. It also shows the five-year average for unemployment and the
Bank of England base rate. The house price index and commercial
real estate figures show the total change in each asset over five
years.
Main macroeconomic variables
|
|
|||||||||
|
Five-year summary
|
30 June 2021
|
|
31 December 2020
|
|||||||
|
|
|
|
|
Extreme
|
|
|
|
|
Extreme
|
|
|
|
Upside
|
Base case
|
Downside
|
downside
|
|
Upside
|
Base case
|
Downside
|
downside
|
|
|
UK
|
%
|
%
|
%
|
%
|
|
%
|
%
|
%
|
%
|
|
|
GDP - CAGR
|
3.9
|
3.5
|
2.9
|
2.5
|
|
3.6
|
3.1
|
2.8
|
1.3
|
|
|
Unemployment - average
|
4.1
|
4.6
|
5.8
|
8.1
|
|
4.4
|
5.7
|
7.1
|
9.7
|
|
|
House price index - total change
|
23.4
|
14.2
|
4.9
|
(0.8)
|
|
12.5
|
7.6
|
4.4
|
(19.0)
|
|
|
Bank of England base rate - average
|
0.9
|
0.4
|
-
|
(0.5)
|
|
0.2
|
-
|
(0.1)
|
(0.5)
|
|
|
Commercial real estate price - total change
|
13.6
|
4.7
|
0.1
|
(8.7)
|
|
4.3
|
0.7
|
(12.0)
|
(31.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
World GDP - CAGR
|
3.8
|
3.5
|
2.7
|
1.8
|
|
3.5
|
3.4
|
2.9
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probability weight
|
35.0
|
40.0
|
20.0
|
5.0
|
|
20.0
|
40.0
|
30.0
|
10.0
|
|
|
|
||||||||||
|
Annual figures
UK GDP – annual growth
|
|
||||||||||||||
|
|
|
|
|
Extreme
|
|||||||||||
|
|
Upside
|
Base case
|
Downside
|
downside
|
|||||||||||
|
|
%
|
%
|
%
|
%
|
|||||||||||
|
2021
|
10.1
|
7.3
|
2.7
|
0.1
|
|||||||||||
|
2022
|
5.4
|
5.8
|
4.3
|
-
|
|||||||||||
|
2023
|
1.6
|
1.6
|
4.4
|
7.7
|
|||||||||||
|
2024
|
1.6
|
1.6
|
2.2
|
3.7
|
|||||||||||
|
2025
|
1.6
|
1.6
|
1.5
|
1.7
|
|||||||||||
|
UK unemployment rate – annual average
|
|||||||||||||||
|
|
|
|
|
Extreme
|
|||||||||||
|
|
Upside
|
Base case
|
Downside
|
downside
|
|||||||||||
|
|
%
|
%
|
%
|
%
|
|||||||||||
|
2021
|
4.7
|
5.3
|
5.4
|
5.9
|
|||||||||||
|
2022
|
4.3
|
4.8
|
7.0
|
11.8
|
|||||||||||
|
2023
|
4.0
|
4.5
|
6.5
|
10.4
|
|||||||||||
|
2024
|
3.8
|
4.5
|
5.4
|
7.1
|
|||||||||||
|
2025
|
3.8
|
4.3
|
4.8
|
5.2
|
|||||||||||
|
UK house price index – four quarter growth
|
|
|
|
|
|||||||||||
|
|
|
|
|
Extreme
|
|||||||||||
|
|
Upside
|
Base case
|
Downside
|
downside
|
|||||||||||
|
|
%
|
%
|
%
|
%
|
|||||||||||
|
2021
|
8.0
|
2.0
|
(2.4)
|
(5.4)
|
|||||||||||
|
2022
|
1.7
|
0.5
|
(3.0)
|
(27.0)
|
|||||||||||
|
2023
|
2.8
|
1.9
|
1.3
|
12.2
|
|||||||||||
|
2024
|
4.8
|
4.8
|
4.8
|
19.5
|
|||||||||||
|
2025
|
4.0
|
4.0
|
4.0
|
6.2
|
|||||||||||
|
UK commercial real estate price – four quarter
growth
|
|
|
|
|
|||||||||||
|
|
|
|
|
Extreme
|
|||||||||||
|
|
Upside
|
Base case
|
Downside
|
downside
|
|||||||||||
|
|
%
|
%
|
%
|
%
|
|||||||||||
|
2021
|
7.0
|
(1.4)
|
(8.4)
|
(13.4)
|
|||||||||||
|
2022
|
2.1
|
2.0
|
(1.3)
|
(18.2)
|
|||||||||||
|
2023
|
1.7
|
1.7
|
5.8
|
15.7
|
|||||||||||
|
2024
|
1.3
|
1.3
|
2.3
|
5.4
|
|||||||||||
|
2025
|
1.2
|
1.2
|
2.3
|
5.1
|
|||||||||||
|
Worst points
|
|||||||||||||||
|
|
30 June 2021
|
|
31 December 2020
|
||||||||||||
|
|
|
|
|
Extreme
|
|
|
|
|
Extreme
|
||||||
|
|
Upside
|
Base case
|
Downside
|
downside
|
|
Upside
|
Base case
|
Downside
|
downside
|
||||||
|
UK
|
%
|
%
|
%
|
%
|
|
%
|
%
|
%
|
%
|
||||||
|
GDP
|
-
|
-
|
-
|
(10.2)
|
|
-
|
(1.8)
|
(5.1)
|
(10.4)
|
||||||
|
Unemployment rate (peak)
|
5.0
|
5.5
|
7.0
|
11.9
|
|
5.9
|
7.0
|
9.4
|
13.9
|
||||||
|
House price index
|
-
|
-
|
(6.1)
|
(33.1)
|
|
-
|
(3.6)
|
(11.2)
|
(32.0)
|
||||||
|
Commercial real estate price
|
-
|
(2.1)
|
(14.1)
|
(33.1)
|
|
(3.4)
|
(10.1)
|
(28.9)
|
(40.4)
|
||||||
|
Note:
(1) For the unemployment rate, the figures show the
peak levels between 2021 and 2026 for 30 June 2021, and between
2020 and 2025 for 31 December 2020. For the other parameters, the
figures show falls relative to the starting periods mentioned under
the five-year summary table above.
|
|
||||||||||||||
|
Economic loss drivers
Probability weightings of scenarios
NWM
Group’s approach to IFRS 9 multiple economic scenarios (MES)
involves selecting a suitable set of discrete scenarios to
characterise the distribution of risks in the economic outlook and
assigning appropriate probability weights. The scale of the
economic impact of COVID-19 and the range of recovery paths
necessitates a change of approach to assigning probability weights
from that used in recent updates. Prior to 2020, GDP paths for NWM
Group’s scenarios were compared against a set of 1,000 model
runs, following which a percentile in the distribution was
established that most closely corresponded to the
scenario.
Instead,
NWM Group has subjectively applied probability weights, reflecting
expert views within NWM Group. The probability weight assignment
was judged to present good coverage to the central scenarios and
the potential for a robust recovery on the upside and exceptionally
challenging outcomes on the downside. A 35% weighting was applied
to the upside scenario, a 40% weighting applied to the base case
scenario, a 20% weighting applied to the downside scenario and a 5%
weighting applied to the extreme downside scenario. NWM Group
assessed the downside risk posed by COVID-19 to be diminishing over
the course of 2021, with the vaccination roll-out and positive
economic data being observed since the gradual relaxing of lockdown
restrictions. NWM Group therefore judged it was appropriate to
apply a higher probability to upside-biased scenarios than at
December 2020.
Use of the scenarios in lending
The
lending ECL methodology is based on the concept of credit cycle
indices (CCIs). The CCIs represent all relevant economic loss
drivers for a region/industry segment aggregated into a single
index value that describes the loss rate conditions in the
respective segment relative to its long-run average. A CCI value of
zero corresponds to loss rates at long-run average levels, a
positive CCI value corresponds to loss rates below long-run average
levels and a negative CCI value corresponds to loss rates above
long-run average levels.
The
four economic scenarios are translated into forward-looking
projections of CCIs using a set of econometric models. Subsequently
the CCI projections for the individual scenarios are averaged into
a single central CCI projection according to the given scenario
probabilities. The central CCI projection is then overlaid with an
additional mean reversion assumption, i.e. that after one to two
years into the forecast horizon the CCIs gradually revert to their
long-run average of zero.
Finally,
ECL is calculated using a Monte Carlo approach by averaging PD and
LGD values arising from many CCI paths simulated around the central
CCI projection.
The
rationale for the approach is the long-standing observation that
loss rates tend to follow regular cycles. This allows NWM Group to
enrich the range and depth of future economic conditions embedded
in the final ECL beyond what would be obtained from using the
discrete macro-economic scenarios alone.
UK economic uncertainty
Treatment of COVID-19 relief mechanisms
Use of
COVID-19 relief mechanisms (for example, payment holidays and
Coronavirus Business Interruption Loan Scheme (CBILS)) does not
automatically merit identification of significant increase in
credit risk (SICR) and trigger a Stage 2 classification in
isolation.
NWM
Group continues to provide support, where appropriate, to existing
customers. Those who are deemed either (a) to require a prolonged
timescale to return to within NWM Group’s risk appetite, (b)
not to have been viable pre-COVID-19, or (c) not to be able to
sustain their debt once COVID-19 is over, will trigger a SICR and,
if concessions are sought, be categorised as forborne, in line with
regulatory guidance. Payment holiday extensions beyond an aggregate
of 12 months in an 18 month period to cover continuing COVID-19
business interruption are categorised as forbearance, including for
customers where no other SICR triggers are present.
|
|
|
Model monitoring and enhancement
The
abrupt and prolonged interruption of a wide range of economic
activities due to COVID-19 and the subsequent government
interventions to support businesses and individuals, has resulted
in patterns in the data of key economic loss drivers and loss
outcomes, that are markedly different from those that NWM
Group’s models have been built on. To account for these
structural changes, model adjustments have been applied and model
changes have been implemented.
All
in-model adjustments described have been applied by correcting the
PD and LGD estimates within the core ECL calculation process and
therefore consistently and systematically inform SICR
identification and ECL measurement.
UK economic uncertainty
Government support
Most
notably as a result of various government support measures,
model-projected default rates have been adjusted by introducing
lags between 6 to 12 months. These lags are based partly on
objective empirical data (i.e. the absence of increases in realised
default rates by the reporting date) and partly judgmental, based
on remaining government support measures and their expected
effectiveness.
Extreme GDP movements
Due to
the specific nature of COVID-19, GDP year-on-year movements in both
directions are extremely sharp, many multiples of their respective
extremes observed previously.
This
creates a risk of overstretched, invalid extrapolations in
statistical models. Therefore, all econometric models were updated
to make them robust against extreme GDP movements by capping
projected CCI values at levels corresponding to three times the
default rates observed at the peak of the global financial crisis
and using quarterly averages rather than spot values for CCI
projections.
Governance and post model adjustments
The
IFRS 9 PD, exposure at default and LGD models are subject to NWM
Group’s model risk policy that stipulates periodic model
monitoring, periodic re-validation and defines approval procedures
and authorities according to model materiality. Various post model
adjustments (PMAs) were applied where management judged they were
necessary to ensure an adequate level of overall ECL provision. All
PMAs were subject to formal approval through provisioning
governance, and were categorised as follows:
● Deferred model
calibrations – ECL adjustments where PD model monitoring
indicated that actual defaults were below estimated levels but
where it was judged that an implied ECL release was not
supportable, as these were being judged to have been distorted by
government support schemes. As a consequence, any potential ECL
release was deferred and retained on the balance
sheet.
● Economic
uncertainty – ECL adjustments primarily arising from
uncertainties associated with MES and credit outcomes as a result
of the effect of COVID-19 and the consequences of government
interventions. In both cases, management judged that additional ECL
was required until further credit performance data became available
on the behavioural and loss consequences of COVID-19.
● Other adjustments
– ECL adjustments where it was judged that the modelled ECL
required to be amended.
PMAs
will remain a key focus area of NWM Group’s ongoing ECL
adequacy assessment process. A holistic framework has been
established including reviewing a range of economic data, external
benchmark information and portfolio performance trends,
particularly with more observable outcomes from the unwinding of
COVID-19 support mechanisms during the remainder of
2021.
|
|
|
Measurement uncertainty and ECL sensitivity analysis
The
recognition and measurement of ECL is complex and involves the use
of significant judgement and estimation, particularly in times of
economic volatility and uncertainty. This includes the formulation
and incorporation of multiple forward-looking economic conditions
into ECL to meet the measurement objective of IFRS 9. The ECL
provision is sensitive to the model inputs and economic assumptions
underlying the estimate.
The
focus of the simulations is on ECL provisioning requirements on
performing exposures in Stage 1 and Stage 2. The simulations are
run on a stand-alone basis and are independent of each other; the
potential ECL impacts reflect the simulated impact as at 30 June
2021. Scenario impacts on a SICR should be considered when
evaluating the ECL movements of Stage 1 and Stage 2. In all
scenarios the total exposure was the same but exposure by stage
varied in each scenario.
Stage 3
provisions are not subject to the same level of measurement
uncertainty – default is an observed event as at the balance
sheet date. Stage 3 provisions therefore have not been considered
in this analysis.
The
impact arising from the upside, downside and extreme downside
scenarios has been simulated. In the simulations, NWM Group has
assumed that the economic macro variables associated with these
scenarios replace the existing base case economic assumptions,
giving them a combined total 100% probability weighting and
therefore serving as a single economic scenario.
These
scenarios have been applied to all modelled portfolios in the
analysis below, with the simulation impacting both PDs and LGDs.
Modelled PMAs present in the underlying ECL estimates are also
sensitised in line with the modelled ECL movements, but those that
were judgmental in nature, primarily those for economic
uncertainty, were not (refer to the Governance and post model
adjustments section). As expected, the scenarios create differing
impacts on ECL by portfolio and the impacts are deemed reasonable.
In this simulation, it is assumed that existing modelled
relationships between key economic variables and loss drivers hold,
but in practice other factors would also have an impact, for
example, potential customer behaviour changes and policy changes by
lenders that might impact on the wider availability of
credit.
NWM
Group’s core criterion to identify a SICR is founded on PD
deterioration, as discussed above. Under the simulations, PDs
change and result in exposures moving between Stage 1 and Stage 2
contributing to the ECL impact.
|
|
|||||
|
|
|
|
|
|
Extreme
|
|
|
30 June 2021
|
Actual
|
Base case
|
Upside
|
Downside
|
downside
|
|
|
Stage 1 modelled exposure (£m)
|
6,661
|
6,916
|
6,916
|
6,681
|
6,113
|
|
|
Stage 1 modelled ECL (£m)
|
10
|
10
|
10
|
10
|
12
|
|
|
Stage 1 coverage (%)
|
0.15%
|
0.14%
|
0.14%
|
0.15%
|
0.20%
|
|
|
Stage 2 modelled exposure (£m)
|
739
|
485
|
485
|
719
|
1,287
|
|
|
Stage 2 modelled ECL (£m)
|
36
|
35
|
35
|
36
|
42
|
|
|
Stage 2 coverage (%)
|
4.87%
|
7.22%
|
7.22%
|
5.01%
|
3.26%
|
|
|
Stage 1 and Stage 2 modelled exposure (£m)
|
7,400
|
7,401
|
7,401
|
7,400
|
7,400
|
|
|
Stage 1 and Stage 2 modelled ECL (£m)
|
46
|
45
|
45
|
46
|
54
|
|
|
Stage 1 and Stage 2 coverage (%)
|
0.62%
|
0.61%
|
0.61%
|
0.62%
|
0.73%
|
|
|
Variance - (lower)/higher to actual total Stage 1 and Stage 2
ECL
|
|
(1)
|
(1)
|
0
|
8
|
|
|
Notes:
(1) Variations in future undrawn
exposure values across the scenarios are modelled, however the
exposure position reported is that used to calculate modelled ECL
as at 30 June 2021 and therefore does not include variation in
future undrawn exposure values.
(2) Reflects ECL for all modelled
exposure in scope for IFRS 9. The analysis excludes non-modelled
portfolios and exposure relating to bonds and
cash.
(3) All simulations are run on a
stand-alone basis and are independent of each other, with the
potential ECL impact reflecting the simulated impact as at 30 June
2021. The simulations change the composition of Stage 1 and Stage 2
exposure but total exposure is unchanged under each scenario as the
loan population is static.
(4) Refer to the Economic loss drivers
section for details of economic scenarios.
(5) Refer to the NatWest Markets Plc 2020 Annual
Report and Accounts for 31 December 2020
comparatives.
|
||||||
|
Measurement uncertainty and ECL adequacy
The
improvement in the economic outlook and scenarios used in the IFRS
9 MES framework at H1 2021 resulted in a release of modelled ECL.
Given continued uncertainty remains due to COVID-19 despite the
improved economic outlook, NWM Group utilised a framework of
quantitative and qualitative measures to support the directional
change and levels of ECL coverage, including economic data, credit
performance insights and problem debt trends. This was particularly
important for consideration of post model adjustments.
As
government support mechanisms continue to conclude during 2021, NWM
Group anticipates further credit deterioration in the portfolios.
However, the income statement effect of this will be mitigated by
the forward-looking provisions retained on the balance sheet as at
30 June 2021.
There
are a number of key factors that could drive further downside to
impairments, through deteriorating economic and credit metrics and
increased stage migration as credit risk increases for more
customers. A key factor would be a more adverse deterioration in
GDP and unemployment in the economies in which NWM Group operates,
but also, among others:
● The ongoing
trajectory of lockdown restriction relaxation within the UK, and
any future repeated lockdown requirements.
● The progress of the
COVID-19 vaccination roll-out and its effectiveness against new
variants.
● The efficacy of the
various government support initiatives in terms of their ability to
defray customer defaults is yet to be proven, notably over an
extended period.
● Higher unemployment
if companies fail to retain jobs after the UK furlough scheme
concludes in Q3 2021.
● The level of
revenues lost by corporate clients and pace of recovery of those
revenues may affect NWM Group’s clients’ ability to
service their borrowing, especially in those sectors most exposed
to the effects of COVID-19.
|
|
|
Portfolio summary
The
table below shows gross loans and related credit impairment
measures, within the scope of the IFRS 9 ECL
framework.
|
|
||
|
|
30 June
|
31 December
|
|
|
|
2021
|
2020
|
|
|
|
£m
|
£m
|
|
|
Loans - amortised cost and fair value through other comprehensive
income (FVOCI)
|
|
|
|
|
Stage 1
|
7,034
|
7,799
|
|
|
Stage 2
|
721
|
1,566
|
|
|
Stage 3
|
108
|
171
|
|
|
Of which: individual
|
98
|
162
|
|
|
Of which: collective
|
10
|
9
|
|
|
Inter-Group (1)
|
726
|
755
|
|
|
|
8,589
|
10,291
|
|
|
ECL provisions
|
|
|
|
|
Stage 1
|
10
|
12
|
|
|
Stage 2
|
37
|
49
|
|
|
Stage 3
|
87
|
132
|
|
|
Of which: individual
|
78
|
124
|
|
|
Of which: collective
|
9
|
8
|
|
|
Inter-Group
|
1
|
1
|
|
|
|
135
|
194
|
|
|
ECL provisions coverage (2,3)
|
|
|
|
|
Stage 1 (%)
|
0.14
|
0.15
|
|
|
Stage 2 (%)
|
5.13
|
3.13
|
|
|
Stage 3 (%)
|
80.56
|
77.19
|
|
|
Inter-Group (%)
|
0.14
|
0.13
|
|
|
|
1.70
|
2.02
|
|
|
|
|
|
|
|
|
Half year ended
|
||
|
|
30 June
|
30 June
|
|
|
|
2021
|
2020
|
|
|
|
£m
|
£m
|
|
|
Impairment losses
|
|
|
|
|
ECL (release)/charge (4)
|
|
|
|
|
Stage 1
|
(8)
|
14
|
|
|
Stage 2
|
(5)
|
43
|
|
|
Stage 3
|
(3)
|
(13)
|
|
|
Of which: individual
|
1
|
(4)
|
|
|
Of which: collective
|
(4)
|
(9)
|
|
|
Third party
|
(16)
|
44
|
|
|
Inter-Group
|
-
|
2
|
|
|
|
(16)
|
46
|
|
|
ECL loss rate - annualised (basis points) (3)
|
(41)
|
69
|
|
|
Amounts written off
|
40
|
4
|
|
|
Notes:
(1) NWM Group’s
intercompany assets were classified in Stage 1. The ECL attached to
these loans was £0.9 million (31 December 2020 –
£1.2 million). The remaining tables in the credit risk section
exclude intercompany assets and associated ECL.
(2) ECL provisions
coverage is calculated as ECL provisions divided by loans –
amortised cost and FVOCI.
(3) ECL provisions
coverage and ECL loss rates are calculated on third party loans and
related ECL provisions and charge respectively. ECL loss rate is
calculated as annualised third party ECL charge divided by loans
– amortised cost and FVOCI. The half year ECL charge is
annualised by multiplying by two.
(4) Includes a £1
million charge (30 June 2020 – £1 million charge)
related to other financial assets, of which nil (30 June 2020
– nil) related to assets classified as FVOCI and a £1
million release (30 June 2020 – £1 million release)
related to contingent liabilities.
(5) The table shows
gross loans only and excludes amounts that are outside the scope of
the ECL framework. Refer to page 64 for Financial instruments
within the scope of the IFRS 9 ECL framework in the NatWest Markets
Plc 2020 Annual Report and Accounts for further details. Other
financial assets within the scope of the IFRS 9 ECL framework were
cash and balances at central banks totalling £17.1 billion (31
December 2020 – £15.8 billion) and debt securities of
£8.1 billion (31 December 2020 – £8.7
billion).
Key points
● ECLs
are calculated each month, with modelled impairment calculations
relying on month in arrears data and individually assessed
provisions based on the current month. A quarterly provision
adequacy assessment is also performed. Outputs are reviewed by NWM
Group senior management, who formally approve ECL levels and ECL
coverage as being at appropriate levels, to reflect the current
economic situation.
● While the
significant increase in defaults and losses predicted in 2020 to
occur throughout 2021 and early 2022 have not materialised and
there has been an immaterial level of Stage 3 defaults so far, ECL
coverage has been maintained at relatively stable
levels.
|
|||
|
Sector analysis – COVID-19 impact
The
table below shows exposures and ECL, by stage, for key sectors of
the Wholesale portfolio, that continue to be affected by
COVID-19.
|
|
||||||||||||
|
|
|
|
|
|
|
Off-balance sheet
|
|
|
|
|
|
||
|
|
Loans - amortised cost & FVOCI
|
|
Loan
|
Contingent
|
|
ECL provisions
|
|||||||
|
|
Stage 1
|
Stage 2
|
Stage 3
|
Total
|
|
commitments
|
liabilities
|
|
Stage 1
|
Stage 2
|
Stage 3
|
Total
|
|
|
30 June 2021
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
£m
|
|
|
Property
|
94
|
43
|
16
|
153
|
|
432
|
20
|
|
-
|
1
|
11
|
12
|
|
|
Financial
institutions
|
6,043
|
438
|
4
|
6,485
|
|
5,272
|
578
|
|
8
|
33
|
3
|
44
|
|
|
Sovereign
|
301
|
-
|
3
|
304
|
|
36
|
-
|
|
1
|
-
|
2
|
3
|
|
|
Corporate
|
596
|
240
|
85
|
921
|
|
5,373
|
116
|
|
1
|
3
|
71
|
75
|
|
|
Of
which:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airlines
and aerospace
|
21
|
-
|
8
|
29
|
|
216
|
43
|
|
-
|
-
|
8
|
8
|
|
|
Automotive
|
11
|
38
|
-
|
49
|
|
653
|
-
|
|
-
|
-
|
-
|
-
|
|
|
Health
|
22
|
-
|
2
|
24
|
|
-
|
-
|
|
-
|
-
|
1
|
1
|
|
|
Land
transport and logistics
|
43
|
41
|
-
|
84
|
|
227
|
1
|
|
-
|
1
|
-
|
1
|
|
|
Leisure
|
21
|
35
|
-
|
56
|
|
287
|
-
|
|
-
|
-
|
-
|
-
|
|
|
Oil
and gas
|
-
|
1
|
17
|
18
|
|
299
|
2
|
|
-
|
-
|
4
|
4
|
|
|
Retail
|
-
|
-
|
9
|
9
|
|
388
|
5
|
|
-
|
-
|
8
|
8
|
|
|
Total
|
7,034
|
721
|
108
|
7,863
|
|
11,113
|
714
|
|
10
|
37
|
87
|
134
|
|
|
31 December 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
127
|
45
|
18
|
190
|
|
446
|
32
|
|
1
|
-
|
10
|
11
|
|
|
Financial
institutions
|
6,933
|
1,272
|
3
|
8,208
|
|
5,591
|
613
|
|
9
|
43
|
3
|
55
|
|
|
Sovereign
|
110
|
67
|
3
|
180
|
|
37
|
-
|
|
1
|
-
|
2
|
3
|
|
|
Corporate
|
629
|
182
|
147
|
958
|
|
6,291
|
130
|
|
1
|
6
|
117
|
124
|
|
|
Of
which:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airlines
and aerospace
|
-
|
23
|
10
|
33
|
|
312
|
44
|
|
-
|
-
|
9
|
9
|
|
|
Automotive
|
11
|
38
|
-
|
49
|
|
863
|
-
|
|
-
|
1
|
-
|
1
|
|
|
Health
|
22
|
-
|
2
|
24
|
|
-
|
-
|
|
-
|
-
|
1
|
1
|
|
|
Land
transport and logistics
|
85
|
1
|
1
|
87
|
|
451
|
6
|
|
-
|
-
|
-
|
-
|
|
|
Leisure
|
-
|
50
|
-
|
50
|
|
472
|
-
|
|
-
|
1
|
-
|
1
|
|
|
Oil
and gas
|
11
|
3
|
50
|
64
|
|
374
|
3
|
|
-
|
-
|
35
|
35
|
|
|
Retail
|
-
|
-
|
10
|
10
|
|
342
|
5
|
|
-
|
-
|
10
|
10
|
|
|
Total
|
7,799
|
1,566
|
171
|
9,536
|
|
12,365
|
775
|
|
12
|
49
|
132
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flow statement
The
flow statement that follows shows the main ECL and related income
statement movements. It also shows the changes in ECL as well as
the changes in related financial assets used in determining ECL.
Due to differences in scope, exposures may differ from those
reported in other tables, principally in relation to exposures in
Stage 1 and Stage 2. These differences do not have a material ECL
impact. Other points to note:
● Financial assets
include treasury liquidity portfolios, comprising balances at
central banks and debt securities, as well as loans. Both modelled
and non-modelled portfolios are included.
● Stage transfers
(for example, exposures moving from Stage 1 to Stage 2) are a key
feature of the ECL movements, with the net re-measurement cost of
transitioning to a worse stage being a primary driver of income
statement charges. Similarly, there is an ECL benefit for accounts
improving stage.
● Changes in risk
parameters shows the reassessment of the ECL within a given stage,
including any ECL overlays and residual income statement gains or
losses at the point of write-off or accounting
write-down.
● Other (P&L only
items) includes any subsequent changes in the value of written-down
assets (for example, fortuitous recoveries) along with other direct
write-off items such as direct recovery costs. Other (P&L only
items) affects the income statement but does not affect balance
sheet ECL movements.
● Amounts written-off
represent the gross asset written-down against accounts with ECL,
including the net asset write-down for any debt sale
activity.
|
|
|||||||||||
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
|||||
|
|
Financial
|
|
|
Financial
|
|
|
Financial
|
|
|
Financial
|
|
|
|
|
assets
|
ECL
|
|
assets
|
ECL
|
|
assets
|
ECL
|
|
assets
|
ECL
|
|
|
NWM Group
|
£m
|
£m
|
|
£m
|
£m
|
|
£m
|
£m
|
|
£m
|
£m
|
|
|
At 1 January 2021
|
33,327
|
12
|
|
1,671
|
49
|
|
167
|
132
|
|
35,165
|
193
|
|
|
Currency translation and other adjustments
|
(700)
|
—
|
|
(36)
|
—
|
|
(3)
|
(3)
|
|
(739)
|
(3)
|
|
|
Inter-Group transfers
|
(3)
|
—
|
|
—
|
—
|
|
—
|
—
|
|
(3)
|
—
|
|
|
Transfers from Stage 1 to Stage 2
|
(484)
|
(1)
|
|
484
|
1
|
|
—
|
—
|
|
—
|
—
|
|
|
Transfers from Stage 2 to Stage 1
|
1,150
|
7
|
|
(1,150)
|
(7)
|
|
—
|
—
|
|
—
|
—
|
|
|
Transfers from Stage 3
|
—
|
—
|
|
—
|
—
|
|
—
|
—
|
|
—
|
—
|
|
|
Net re-measurement of ECL on stage transfer
|
|
(5)
|
|
|
3
|
|
|
—
|
|
|
(2)
|
|
|
Changes in risk parameters (model inputs)
|
|
(3)
|
|
|
(8)
|
|
|
(1)
|
|
|
(12)
|
|
|
Other changes in net exposure
|
(1,978)
|
—
|
|
(226)
|
(1)
|
|
(22)
|
(1)
|
|
(2,226)
|
(2)
|
|
|
Other (P&L only items)
|
|
—
|
|
|
1
|
|
|
(1)
|
|
|
—
|
|
|
Income statement releases
|
|
(8)
|
|
|
(5)
|
|
|
(3)
|
|
|
(16)
|
|
|
Amounts written-off
|
—
|
—
|
|
—
|
—
|
|
(40)
|
(40)
|
|
(40)
|
(40)
|
|
|
Unwinding of discount
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
At 30 June 2021
|
31,312
|
10
|
|
743
|
37
|
|
102
|
87
|
|
32,157
|
134
|
|
|
Net carrying amount
|
31,302
|
|
|
706
|
|
|
15
|
|
|
32,023
|
|
|
|
At 1 January 2020
|
32,877
|
10
|
|
188
|
4
|
|
184
|
132
|
|
33,249
|
146
|
|
|
2020 movements
|
5,370
|
8
|
|
2,609
|
49
|
|
(2)
|
4
|
|
7,977
|
61
|
|
|
At 30 June 2020
|
38,247
|
18
|
|
2,797
|
53
|
|
182
|
136
|
|
41,226
|
207
|
|
|
Net carrying amount
|
38,229
|
|
|
2,744
|
|
|
46
|
|
|
41,019
|
|
|
|
Key points
● The decrease in
Stage 1 and Stage 2 ECL was primarily due to the improvement in
economic forecasts.
● The
updated economics resulted in the migration of assets from Stage 2
to Stage 1 with a consequential reduction in Stage 2 lifetime
ECL.
● Amounts written-off
in the period largely related to a small number of legacy defaulted
exposures.
|
||||||||||||
|
|
Half year ended
|
|
|
|
30 June
|
30 June
|
|
|
2021
|
2020
|
|
|
£m
|
£m
|
|
Interest receivable
|
179
|
276
|
|
Interest payable
|
(183)
|
(315)
|
|
Net interest income
|
(4)
|
(39)
|
|
Fees and commissions receivable
|
146
|
277
|
|
Fees and commissions payable
|
(62)
|
(202)
|
|
Income from trading activities
|
226
|
776
|
|
Other operating income
|
(10)
|
(3)
|
|
Non-interest income
|
300
|
848
|
|
Total income
|
296
|
809
|
|
Staff costs
|
(252)
|
(377)
|
|
Premises and equipment
|
(37)
|
(75)
|
|
Other administrative expenses
|
(181)
|
(348)
|
|
Depreciation and amortisation
|
(10)
|
(14)
|
|
Operating expenses
|
(480)
|
(814)
|
|
Loss before impairment releases/(losses)
|
(184)
|
(5)
|
|
Impairment releases/(losses)
|
16
|
(45)
|
|
Operating loss before tax
|
(168)
|
(50)
|
|
Tax credit/(charge)
|
49
|
(79)
|
|
Loss for the period
|
(119)
|
(129)
|
|
Attributable to:
|
|
|
|
Ordinary shareholders
|
(189)
|
(96)
|
|
Paid-in equity holders
|
31
|
34
|
|
Non-controlling interests
|
39
|
(67)
|
|
|
(119)
|
(129)
|
|
|
Half year ended
|
|
|
|
30 June
|
30 June
|
|
|
2021
|
2020
|
|
|
£m
|
£m
|
|
Loss for the period
|
(119)
|
(129)
|
|
Items that do not qualify for reclassification
|
|
|
|
Remeasurement of retirement benefit schemes
|
(1)
|
(3)
|
|
(Loss)/profit on fair value of credit in financial
liabilities
|
|
|
|
designated at FVTPL
due to own credit risk
|
(25)
|
83
|
|
FVOCI financial assets
|
(1)
|
(176)
|
|
Tax
|
4
|
3
|
|
|
(23)
|
(93)
|
|
Items that do qualify for reclassification
|
|
|
|
FVOCI financial assets
|
(8)
|
(18)
|
|
Cash flow hedges
|
(103)
|
154
|
|
Currency translation
|
(112)
|
258
|
|
Tax
|
7
|
(42)
|
|
|
(216)
|
352
|
|
Other comprehensive (loss)/income after tax
|
(239)
|
259
|
|
Total comprehensive (loss)/income for the period
|
(358)
|
130
|
|
|
|
|
|
Attributable to:
|
|
|
|
Ordinary shareholders
|
(432)
|
149
|
|
Paid-in equity holders
|
31
|
34
|
|
Non-controlling interests
|
43
|
(53)
|
|
|
(358)
|
130
|
|
|
30 June
|
31 December
|
|
|
2021
|
2020
|
|
|
£m
|
£m
|
|
|
|
|
|
Assets
|
|
|
|
Cash and balances at central banks
|
17,073
|
15,771
|
|
Trading assets
|
70,159
|
68,689
|
|
Derivatives
|
108,644
|
165,619
|
|
Settlement balances
|
7,537
|
2,296
|
|
Loans to banks - amortised cost
|
1,188
|
1,003
|
|
Loans to customers - amortised cost
|
6,271
|
8,444
|
|
Amounts due from holding company and fellow
subsidiaries
|
1,418
|
1,587
|
|
Other financial assets
|
8,853
|
9,041
|
|
Other assets
|
715
|
688
|
|
Total assets
|
221,858
|
273,138
|
|
|
|
|
|
Liabilities
|
|
|
|
Bank deposits
|
1,694
|
1,808
|
|
Customer deposits
|
2,460
|
2,618
|
|
Amounts due to holding company and fellow subsidiaries
|
6,356
|
8,134
|
|
Settlement balances
|
7,100
|
2,248
|
|
Trading liabilities
|
75,698
|
72,252
|
|
Derivatives
|
101,769
|
157,332
|
|
Other financial liabilities
|
17,637
|
18,170
|
|
Other liabilities
|
1,003
|
1,234
|
|
Total liabilities
|
213,717
|
263,796
|
|
|
|
|
|
Equity
|
|
|
|
Owners’ equity
|
8,144
|
9,388
|
|
Non-controlling interests
|
(3)
|
(46)
|
|
Total equity
|
8,141
|
9,342
|
|
Total liabilities and equity
|
221,858
|
273,138
|
|
|
Half year ended
|
|
|
|
30 June
|
30 June
|
|
|
2021
|
2020
|
|
|
£m
|
£m
|
|
Called up share capital - at beginning and end of
period
|
400
|
400
|
|
Share premium account - at beginning and end of period
|
1,759
|
1,759
|
|
Paid-in equity - at beginning and end of period
|
904
|
904
|
|
FVOCI reserve - at beginning of period
|
34
|
(134)
|
|
Unrealised losses
|
(10)
|
(196)
|
|
Realised losses
|
2
|
1
|
|
Tax
|
1
|
3
|
|
At end of period
|
27
|
(326)
|
|
Cash flow hedging reserve - at beginning of period
|
201
|
137
|
|
Amount recognised in equity
|
(118)
|
110
|
|
Amount transferred from equity to earnings
|
15
|
44
|
|
Tax
|
12
|
(45)
|
|
At end of period
|
110
|
246
|
|
Foreign exchange reserve - at beginning of period
|
121
|
77
|
|
Retranslation of net assets
|
(131)
|
284
|
|
Foreign currency gains/(losses) on hedges of net
assets
|
15
|
(35)
|
|
Recycled to profit or loss on disposal of businesses
|
-
|
(5)
|
|
Tax
|
(6)
|
-
|
|
At end of period
|
(1)
|
321
|
|
Retained earnings - at beginning of period
|
5,969
|
6,764
|
|
Loss attributable to ordinary shareholders and other equity
owners
|
(158)
|
(62)
|
|
Ordinary dividends paid
|
(750)
|
-
|
|
Paid-in equity dividends paid
|
(31)
|
(34)
|
|
Remeasurement of retirement benefit schemes
|
|
|
|
-
gross
|
(1)
|
(3)
|
|
-
tax
|
2
|
11
|
|
Realised (losses)/gains in period on FVOCI equity
shares
|
(1)
|
1
|
|
Changes in fair value of credit in financial liabilities designated
as fair value through profit or loss
|
|
|
|
-
gross
|
(25)
|
83
|
|
-
tax
|
2
|
(8)
|
|
Share-based payments
|
(62)
|
(85)
|
|
Capital contribution
|
-
|
22
|
|
Distribution
|
-
|
(40)
|
|
At end of period
|
4,945
|
6,649
|
|
Owners' equity at end of period
|
8,144
|
9,953
|
|
Non-controlling interests - at beginning of period
|
(46)
|
3
|
|
Currency translation adjustments and other movements
|
4
|
14
|
|
Profit/(loss) attributable to non-controlling
interests
|
39
|
(67)
|
|
At end of period
|
(3)
|
(50)
|
|
Total equity at end of period
|
8,141
|
9,903
|
|
|
|
|
|
Attributable to:
|
|
|
|
Ordinary shareholders
|
7,240
|
9,049
|
|
Paid-in equity holders
|
904
|
904
|
|
Non-controlling interests
|
(3)
|
(50)
|
|
|
8,141
|
9,903
|
|
|
Half year ended
|
|
|
|
30 June
|
30 June
|
|
|
2021
|
2020
|
|
|
£m
|
£m
|
|
Operating activities
|
|
|
|
Operating loss before tax
|
(168)
|
(50)
|
|
Adjustments for non-cash items
|
516
|
(236)
|
|
Net cash flows from trading activities
|
348
|
(286)
|
|
Changes in operating assets and liabilities
|
3,252
|
1,414
|
|
Net cash flows from operating activities before tax
|
3,600
|
1,128
|
|
Income taxes paid
|
(26)
|
1
|
|
Net cash flows from operating activities
|
3,574
|
1,129
|
|
Net cash flows from investing activities
|
313
|
44
|
|
Net cash flows from financing activities
|
(2,047)
|
(201)
|
|
Effects of exchange rate changes on cash and cash
equivalents
|
(758)
|
1,331
|
|
Net increase in cash and cash equivalents
|
1,082
|
2,303
|
|
Cash and cash equivalents at beginning of period
|
26,380
|
27,043
|
|
Cash and cash equivalents at end of period
|
27,462
|
29,346
|
|
|
Half year ended
|
|
|
|
30 June
|
30 June
|
|
|
2021
|
2020
|
|
|
£m
|
£m
|
|
Wages, salaries and other staff costs
|
180
|
257
|
|
Temporary and contract costs
|
7
|
12
|
|
Social security costs
|
18
|
31
|
|
Bonus awards
|
36
|
58
|
|
Pension costs
|
11
|
19
|
|
- defined
benefit schemes
|
4
|
7
|
|
- defined
contribution schemes
|
7
|
12
|
|
Staff costs
|
252
|
377
|
|
Premises and equipment
|
37
|
75
|
|
Depreciation and amortisation
|
10
|
14
|
|
Other administrative expenses (1,2)
|
181
|
348
|
|
Administrative expenses
|
228
|
437
|
|
Operating expenses
|
480
|
814
|
|
●
|
NatWest
Markets; and
|
|
|
|
|
●
|
Central
items & other, which comprises corporate functions and other
activity not managed in the NatWest Markets segment during the
period. H1 2021 and H1 2020 are substantially comprised of
litigation and conduct costs.
|
|
|
Half year ended 30 June 2021
|
|
Half year ended 30 June 2020
|
||||
|
|
|
Central
|
|
|
|
Central
|
|
|
|
NatWest
|
items
|
|
|
NatWest
|
items
|
|
|
|
Markets
|
& other
|
Total
|
|
Markets
|
& other
|
Total
|
|
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
Interest receivable
|
179
|
-
|
179
|
|
276
|
-
|
276
|
|
Interest payable
|
(183)
|
-
|
(183)
|
|
(315)
|
-
|
(315)
|
|
Net fees and commissions
|
84
|
-
|
84
|
|
75
|
-
|
75
|
|
Other non-interest income
|
210
|
6
|
216
|
|
773
|
-
|
773
|
|
Total income
|
290
|
6
|
296
|
|
809
|
-
|
809
|
|
Operating expenses
|
(542)
|
62
|
(480)
|
|
(717)
|
(97)
|
(814)
|
|
Impairment releases/(losses)
|
16
|
-
|
16
|
|
(40)
|
(5)
|
(45)
|
|
Operating (loss)/profit
|
(236)
|
68
|
(168)
|
|
52
|
(102)
|
(50)
|
|
|
Half year ended 30 June 2021
|
|
Half year ended 30 June 2020
|
||||
|
|
|
Central
|
|
|
|
Central
|
|
|
|
NatWest
|
items
|
|
|
NatWest
|
items
|
|
|
|
Markets
|
& other
|
Total
|
|
Markets
|
& other
|
Total
|
|
Total revenue (1)
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
Total revenue
|
535
|
6
|
541
|
|
1,326
|
-
|
1,326
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Total revenue comprises interest receivable, fees and commissions
receivable, income from trading activities and other operating
income.
|
|
|
Half year ended
|
|
|
|
30 June
|
30 June
|
|
|
2021
|
2020
|
|
Analysis of net fees and commissions
|
£m
|
£m
|
|
Fees and commissions receivable
|
|
|
|
- Lending and
financing
|
34
|
46
|
|
-
Brokerage
|
25
|
61
|
|
- Underwriting
fees
|
77
|
124
|
|
-
Other
|
10
|
46
|
|
Total
|
146
|
277
|
|
|
|
|
|
Fees and commissions payable
|
(62)
|
(202)
|
|
|
|
|
|
Net fees and commissions
|
84
|
75
|
|
|
|
|
|
|
As at 30 June 2021
|
|
As at 31 December 2020
|
||||
|
|
|
Central
|
|
|
|
Central
|
|
|
|
NatWest
|
items
|
|
|
NatWest
|
items
|
|
|
|
Markets
|
& other
|
Total
|
|
Markets
|
& other
|
Total
|
|
Total assets and liabilities
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
Assets
|
221,857
|
1
|
221,858
|
|
273,124
|
14
|
273,138
|
|
Liabilities
|
213,717
|
-
|
213,717
|
|
263,773
|
23
|
263,796
|
|
|
Half year ended
|
|
|
|
30 June
|
30 June
|
|
|
2021
|
2020
|
|
|
£m
|
£m
|
|
Loss before tax
|
(168)
|
(50)
|
|
Expected tax credit
|
32
|
10
|
|
Losses and temporary differences in period where no deferred tax
asset recognised
|
(5)
|
(8)
|
|
Foreign profits taxed at other rates
|
(1)
|
(11)
|
|
Items not allowed for tax:
|
|
|
|
- losses on
disposals and write-downs
|
-
|
(1)
|
|
- UK bank
levy
|
(2)
|
(2)
|
|
- regulatory and
legal actions
|
8
|
(19)
|
|
- other
disallowable items
|
(3)
|
(7)
|
|
Taxable foreign exchange movements
|
-
|
(1)
|
|
Losses brought forward and utilised
|
6
|
20
|
|
Decrease in the carrying value of deferred tax assets in respect of
UK losses
|
(5)
|
(16)
|
|
Banking surcharge
|
19
|
(2)
|
|
Tax on paid-in equity
|
7
|
8
|
|
UK tax rate change impact
|
(17)
|
(23)
|
|
Adjustments in respect of prior periods
|
10
|
(27)
|
|
|
|
|
|
Actual tax credit/(charge)
|
49
|
(79)
|
|
|
30 June
|
31 December
|
|
|
2021
|
2020
|
|
Assets
|
£m
|
£m
|
|
Loans
|
|
|
|
- Reverse
repos
|
24,718
|
19,404
|
|
- Collateral
given
|
12,919
|
18,459
|
|
- Other
loans
|
1,154
|
1,611
|
|
Total loans
|
38,791
|
39,474
|
|
Securities
|
|
|
|
Central and local government
|
|
|
|
-
UK
|
5,121
|
4,184
|
|
-
US
|
4,088
|
5,149
|
|
-
other
|
18,347
|
16,436
|
|
Financial institutions and corporate
|
3,812
|
3,446
|
|
Total securities
|
31,368
|
29,215
|
|
Total
|
70,159
|
68,689
|
|
|
|
|
|
Liabilities
|
|
|
|
Deposits
|
|
|
|
-
Repos
|
23,720
|
19,036
|
|
- Collateral
received
|
17,017
|
23,226
|
|
- Other
deposits
|
1,645
|
1,803
|
|
Total deposits
|
42,382
|
44,065
|
|
Debt securities in issue
|
1,205
|
1,408
|
|
Short positions
|
32,111
|
26,779
|
|
Total
|
75,698
|
72,252
|
|
|
|
|
Amortised
|
Other
|
|
|
|
MFVTPL
|
FVOCI
|
cost
|
assets
|
Total
|
|
Assets
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Cash and balances at central banks
|
|
|
17,073
|
|
17,073
|
|
Trading assets
|
70,159
|
|
|
|
70,159
|
|
Derivatives (1)
|
108,644
|
|
|
|
108,644
|
|
Settlement balances
|
|
|
7,537
|
|
7,537
|
|
Loans to banks - amortised cost (2)
|
|
|
1,188
|
|
1,188
|
|
Loans to customers - amortised cost (3)
|
|
|
6,271
|
|
6,271
|
|
Amounts due from holding company and fellow
subsidiaries
|
608
|
|
756
|
54
|
1,418
|
|
Other financial assets
|
83
|
6,381
|
2,389
|
|
8,853
|
|
Other assets
|
|
|
|
715
|
715
|
|
30 June 2021
|
179,494
|
6,381
|
35,214
|
769
|
221,858
|
|
|
|
|
|
|
|
|
Cash and balances at central banks
|
|
|
15,771
|
|
15,771
|
|
Trading assets
|
68,689
|
|
|
|
68,689
|
|
Derivatives (1)
|
165,619
|
|
|
|
165,619
|
|
Settlement balances
|
|
|
2,296
|
|
2,296
|
|
Loans to banks - amortised cost (2)
|
|
|
1,003
|
|
1,003
|
|
Loans to customers - amortised cost (3)
|
|
|
8,444
|
|
8,444
|
|
Amounts due from holding company and fellow
subsidiaries
|
766
|
|
754
|
67
|
1,587
|
|
Other financial assets
|
166
|
6,300
|
2,575
|
|
9,041
|
|
Other assets
|
|
|
|
688
|
688
|
|
31 December 2020
|
235,240
|
6,300
|
30,843
|
755
|
273,138
|
|
|
Held-for-
|
|
Amortised
|
Other
|
|
|
|
trading
|
DFV
|
cost
|
liabilities
|
Total
|
|
Liabilities
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Bank deposits (4)
|
|
|
1,694
|
|
1,694
|
|
Customer deposits
|
|
|
2,460
|
|
2,460
|
|
Amounts due to holding company and fellow subsidiaries
|
428
|
|
5,786
|
142
|
6,356
|
|
Settlement balances
|
|
|
7,100
|
|
7,100
|
|
Trading liabilities
|
75,698
|
|
|
|
75,698
|
|
Derivatives (1)
|
101,769
|
|
|
|
101,769
|
|
Other financial liabilities
|
|
2,705
|
14,932
|
|
17,637
|
|
Other liabilities (5)
|
|
|
66
|
937
|
1,003
|
|
30 June 2021
|
177,895
|
2,705
|
32,038
|
1,079
|
213,717
|
|
|
|
|
|
|
|
|
Bank deposits (4)
|
|
|
1,808
|
|
1,808
|
|
Customer deposits
|
|
|
2,618
|
|
2,618
|
|
Amounts due to holding company and fellow subsidiaries
|
636
|
|
7,240
|
258
|
8,134
|
|
Settlement balances
|
|
|
2,248
|
|
2,248
|
|
Trading liabilities
|
72,252
|
|
|
|
72,252
|
|
Derivatives (1)
|
157,332
|
|
|
|
157,332
|
|
Other financial liabilities
|
|
3,196
|
14,974
|
|
18,170
|
|
Other liabilities (5)
|
|
|
81
|
1,153
|
1,234
|
|
31 December 2020
|
230,220
|
3,196
|
28,969
|
1,411
|
263,796
|
|
(1)
|
Includes net hedging derivative
assets of £158 million (31 December 2020 - £267 million)
and net hedging derivative liabilities of £126 million (31
December 2020 - £107 million).
|
|
(2)
|
Includes items in the course of
collection from other banks of £175 million (31 December 2020
- £119 million).
|
|
(3)
|
Includes finance lease receivables
of £63 million (31 December 2020 - £66
million).
|
|
(4)
|
Includes items in the course of
transmission to other banks of £91 million (31 December 2020 -
£10 million).
|
|
(5)
|
Includes lease liabilities of
£60 million (31 December 2020 - £71 million) held at
amortised cost.
|
|
|
30 June
|
31 December
|
|
|
2021
|
2020
|
|
|
£m
|
£m
|
|
Reverse repos
|
|
|
|
Trading assets
|
24,718
|
19,404
|
|
Loans to bank - amortised cost
|
221
|
6
|
|
Loans to customers - amortised cost
|
344
|
1,893
|
|
|
|
|
|
Repos
|
|
|
|
Bank deposits
|
526
|
200
|
|
Customer deposits
|
128
|
-
|
|
Trading liabilities
|
23,720
|
19,036
|
|
|
30 June 2021
|
|
31 December 2020
|
||||
|
|
Holding
|
Fellow
|
|
|
Holding
|
Fellow
|
|
|
|
company
|
subsidiaries
|
Total
|
|
company
|
subsidiaries
|
Total
|
|
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Trading assets
|
369
|
239
|
608
|
|
542
|
224
|
766
|
|
Settlement balances
|
-
|
31
|
31
|
|
-
|
-
|
-
|
|
Loans to banks - amortised cost
|
-
|
597
|
597
|
|
-
|
624
|
624
|
|
Loans to customers - amortised cost
|
110
|
18
|
128
|
|
112
|
18
|
130
|
|
Other assets
|
-
|
54
|
54
|
|
-
|
67
|
67
|
|
Amounts due from holding company and
|
|
|
|
|
|
|
|
|
fellow
subsidiaries
|
479
|
939
|
1,418
|
|
654
|
933
|
1,587
|
|
|
|
|
|
|
|
|
|
|
Derivatives (1)
|
436
|
531
|
967
|
|
594
|
774
|
1,368
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Bank deposits
|
-
|
113
|
113
|
|
-
|
145
|
145
|
|
Customer deposits
|
-
|
110
|
110
|
|
|
144
|
144
|
|
MREL instruments issued to NatWest Group plc
|
3,872
|
-
|
3,872
|
|
5,181
|
-
|
5,181
|
|
Trading liabilities
|
-
|
428
|
428
|
|
-
|
636
|
636
|
|
Other financial liabilities - Subordinated liabilities
|
1,678
|
-
|
1,678
|
|
1,753
|
-
|
1,753
|
|
Other liabilities
|
-
|
155
|
155
|
|
-
|
275
|
275
|
|
Amounts due to holding company and
|
|
|
|
|
|
|
|
|
fellow
subsidiaries
|
5,550
|
806
|
6,356
|
|
6,934
|
1,200
|
8,134
|
|
|
|
|
|
|
|
|
|
|
Derivatives (1)
|
806
|
391
|
1,197
|
|
1,120
|
425
|
1,545
|
|
|
30 June 2021
|
|
31 December 2020
|
||||||
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
Assets
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets
|
|
|
|
|
|
|
|
|
|
|
Loans
|
-
|
38,628
|
163
|
38,791
|
|
-
|
39,249
|
225
|
39,474
|
|
Securities
|
22,048
|
9,205
|
115
|
31,368
|
|
21,535
|
7,599
|
81
|
29,215
|
|
Derivatives
|
-
|
107,536
|
1,108
|
108,644
|
|
-
|
164,296
|
1,323
|
165,619
|
|
Amount due from holding company and fellow
subsidiaries
|
-
|
608
|
-
|
608
|
|
-
|
766
|
-
|
766
|
|
Other financial assets
|
|
|
|
|
|
|
|
|
|
|
Loans
|
-
|
18
|
497
|
515
|
|
-
|
21
|
71
|
92
|
|
Securities
|
4,931
|
985
|
33
|
5,949
|
|
5,107
|
1,247
|
20
|
6,374
|
|
Total financial assets held at fair value
|
26,979
|
156,980
|
1,916
|
185,875
|
|
26,642
|
213,178
|
1,720
|
241,540
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount due to holding company and fellow subsidiaries
|
-
|
428
|
-
|
428
|
|
-
|
636
|
-
|
636
|
|
Trading liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
-
|
42,379
|
3
|
42,382
|
|
-
|
44,058
|
7
|
44,065
|
|
Debt
securities in issue
|
-
|
1,205
|
-
|
1,205
|
|
-
|
1,408
|
-
|
1,408
|
|
Short
positions
|
23,659
|
8,451
|
1
|
32,111
|
|
19,045
|
7,734
|
-
|
26,779
|
|
Derivatives
|
-
|
101,078
|
691
|
101,769
|
|
-
|
156,384
|
948
|
157,332
|
|
Other financial liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
-
|
718
|
-
|
718
|
|
-
|
796
|
-
|
796
|
|
Debt
securities in issue
|
-
|
1,243
|
-
|
1,243
|
|
-
|
1,607
|
-
|
1,607
|
|
Subordinated liabilities
|
-
|
744
|
-
|
744
|
|
-
|
793
|
-
|
793
|
|
Total financial liabilities held at fair value
|
23,659
|
156,246
|
695
|
180,600
|
|
19,045
|
213,416
|
955
|
233,416
|
|
(1)
|
Level 1 - Instruments valued using
unadjusted quoted prices in active and liquid markets, for
identical financial instruments. Examples include government bonds,
listed equity shares and certain exchange-traded
derivatives.
Level 2 - Instruments valued using
valuation techniques that have observable inputs. Examples include
most government agency securities, investment-grade corporate
bonds, certain mortgage products, including CLOs, most bank loans,
repos and reverse repos, less liquid listed equities, state and
municipal obligations, most notes issued, and certain money market
securities and loan commitments and most OTC
derivatives.
Level 3 - Instruments valued using
a valuation technique where at least one input which could have a
significant effect on the instrument’s valuation is not based
on observable market data. Examples include cash instruments which
trade infrequently, certain syndicated and commercial mortgage
loans, certain emerging markets and derivatives with unobservable
model inputs.
|
|
(2)
|
Transfers between levels are deemed
to have occurred at the beginning of the quarter in which the
instruments were transferred. There were no significant transfers
between level 1 and level 2.
|
|
(3)
|
For an analysis of debt securities
held at mandatorily fair value through profit or loss by issuer as
well as ratings and derivatives, by type and contract, refer to
Risk and capital management – Credit
risk.
|
|
(4)
|
The determination of an
instrument’s level cannot be made at a global product level
as a single product type can be in more than one level. For
example, a
single name corporate credit
default swap could be in level 2 or level 3 depending on whether
the reference counterparty’s obligations are liquid or
illiquid.
|
|
|
Half year ended 30 June 2021
|
|
Half year ended 30 June 2020
|
||||||
|
|
|
Other
|
|
|
|
|
Other
|
|
|
|
|
Trading
|
financial
|
Total
|
Total
|
|
Trading
|
financial
|
Total
|
Total
|
|
|
assets (1)
|
assets (2)
|
assets
|
liabilities
|
|
assets (1)
|
assets (2)
|
assets
|
liabilities
|
|
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
£m
|
|
At 1 January
|
1,629
|
91
|
1,720
|
955
|
|
2,415
|
88
|
2,503
|
1,389
|
|
Amount recorded in the income statement (3)
|
(191)
|
3
|
(188)
|
(124)
|
|
358
|
2
|
360
|
104
|
|
Amount recorded in the statement of
|
|
|
|
|
|
|
|
|
|
|
comprehensive
income
|
-
|
6
|
6
|
-
|
|
-
|
(1)
|
(1)
|
-
|
|
Level 3 transfers in
|
42
|
428
|
470
|
15
|
|
133
|
161
|
294
|
6
|
|
Level 3 transfers out
|
(68)
|
-
|
(68)
|
(116)
|
|
(101)
|
(3)
|
(104)
|
(337)
|
|
Purchases
|
169
|
8
|
177
|
114
|
|
366
|
5
|
371
|
100
|
|
Settlements
|
(36)
|
(4)
|
(40)
|
(15)
|
|
(113)
|
-
|
(113)
|
(14)
|
|
Sales
|
(158)
|
(1)
|
(159)
|
(132)
|
|
(933)
|
-
|
(933)
|
(167)
|
|
Foreign exchange and other adjustments
|
(1)
|
(1)
|
(2)
|
(2)
|
|
5
|
6
|
11
|
3
|
|
At 30 June
|
1,386
|
530
|
1,916
|
695
|
|
2,130
|
258
|
2,388
|
1,084
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recorded in the income statement in
|
|
|
|
|
|
|
|
|
|
|
respect of
balances held at period end
|
|
|
|
|
|
|
|
|
|
|
-
unrealised
|
(191)
|
3
|
(188)
|
(124)
|
|
358
|
2
|
360
|
104
|
|
(1)
|
Trading assets comprise assets held
at fair value in trading portfolios.
|
|
(2)
|
Other financial assets comprise
fair value through other comprehensive income, designated as at
fair value through profit or loss and other fair value through
profit or loss. Movement in the period primarily reflects increase
in loan positions classified as HTC&S under IFRS 9 and fair
valued through other comprehensive income.
|
|
(3)
|
Net losses on trading assets and
liabilities of £67 million (30 June 2020 - £254 million)
were recorded in income from trading activities. Net gains on other
instruments of £3 million (30 June 2020 - £2 million)
were recorded in other operating income and interest income as
appropriate.
|
|
|
30 June 2021
|
|
31 December 2020
|
||||
|
|
Level 3
|
Favourable
|
Unfavourable
|
|
Level 3
|
Favourable
|
Unfavourable
|
|
Assets
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
Trading assets
|
|
|
|
|
|
|
|
|
Loans
|
163
|
10
|
-
|
|
225
|
10
|
-
|
|
Securities
|
115
|
10
|
-
|
|
81
|
-
|
-
|
|
Derivatives
|
1,108
|
80
|
(100)
|
|
1,323
|
120
|
(100)
|
|
Other financial assets
|
|
|
|
|
|
|
|
|
Loans
|
497
|
20
|
(40)
|
|
71
|
10
|
(10)
|
|
Securities
|
33
|
-
|
-
|
|
20
|
-
|
-
|
|
Total financial assets held at fair value
|
1,916
|
120
|
(140)
|
|
1,720
|
140
|
(110)
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading liabilities
|
|
|
|
|
|
|
|
|
Deposits
|
3
|
-
|
-
|
|
7
|
-
|
-
|
|
Short
Positions
|
1
|
-
|
-
|
|
-
|
-
|
-
|
|
Derivatives
|
691
|
40
|
(40)
|
|
948
|
50
|
(40)
|
|
Total financial liabilities held at fair value
|
695
|
40
|
(40)
|
|
955
|
50
|
(40)
|
|
|
|
30 June
|
31 December
|
|
|
|
2021
|
2020
|
|
|
|
£m
|
£m
|
|
|
Funding – FVA
|
47
|
121
|
|
|
Credit – CVA
|
384
|
388
|
|
|
Bid – Offer
|
84
|
122
|
|
|
Product and deal specific
|
163
|
172
|
|
|
|
678
|
803
|
|
● Valuation reserves
comprising of credit valuation adjustments (CVA), funding valuation
adjustment (FVA), bid-offer and product and deal specific reserves,
decreased to £678 million at 30 June 2021 (31 December 2020
– £803 million).
|
|
● There was a
reallocation of FVA to CVA during the period following an update to
the risk management of certain exposures.
|
|
● The net decrease
across CVA, FVA and bid-offer reserves was driven by reduced
exposures, due to increases in interest rates and trade exit
activity, and reduced risk.
|
|
|
Items where
|
|
|
|
|
|
|
fair value
|
|
|
|
|
|
|
approximates
|
Carrying
|
|
Fair value hierarchy level
|
|
|
|
carrying value
|
value
|
Fair value
|
Level 2
|
Level 3
|
|
30 June 2021
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
|
Financial assets
|
|
|
|
|
|
|
Cash and balances at central banks
|
17.1
|
|
|
|
|
|
Settlement balances
|
7.5
|
|
|
|
|
|
Loans to banks
|
0.2
|
1.0
|
1.0
|
0.4
|
0.6
|
|
Loans to customers
|
|
6.3
|
6.2
|
0.5
|
5.7
|
|
Amounts due from holding company and fellow
subsidiaries
|
|
0.8
|
0.8
|
-
|
0.8
|
|
Other financial assets - Securities
|
|
2.4
|
2.4
|
-
|
2.4
|
|
Financial liabilities
|
|
|
|
|
|
|
Bank deposits
|
0.1
|
1.6
|
1.6
|
-
|
1.6
|
|
Customer deposits
|
|
2.5
|
2.4
|
-
|
2.4
|
|
Amounts due to holding company and fellow subsidiaries
|
|
5.8
|
5.9
|
5.7
|
0.2
|
|
Settlement balances
|
7.1
|
|
|
|
|
|
Other financial liabilities
|
|
|
|
|
|
|
Debt securities in
issue
|
|
14.6
|
14.9
|
8.6
|
6.3
|
|
Subordinated
liabilities
|
|
0.3
|
0.4
|
0.4
|
-
|
|
|
|
|
|
|
|
|
31 December 2020
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
Cash and balances at central banks
|
15.8
|
|
|
|
|
|
Settlement balances
|
2.3
|
|
|
|
|
|
Loans to banks
|
0.1
|
0.9
|
0.9
|
0.3
|
0.6
|
|
Loans to customers
|
|
8.4
|
8.4
|
1.9
|
6.5
|
|
Amounts due from holding company and fellow
subsidiaries
|
|
0.8
|
0.8
|
-
|
0.8
|
|
Other financial assets - Securities
|
|
2.6
|
2.6
|
-
|
2.6
|
|
Financial liabilities
|
|
|
|
|
|
|
Bank deposits
|
|
1.8
|
1.8
|
-
|
1.8
|
|
Customer deposits
|
0.1
|
2.5
|
2.6
|
-
|
2.6
|
|
Amounts due to holding company and fellow subsidiaries
|
0.1
|
7.1
|
7.2
|
7.1
|
0.1
|
|
Settlement balances
|
2.2
|
|
|
|
|
|
Other financial liabilities
|
|
|
|
|
|
|
Debt securities in
issue
|
|
14.7
|
15.0
|
9.4
|
5.6
|
|
Subordinated
liabilities
|
|
0.3
|
0.4
|
0.4
|
-
|
|
|
Litigation
|
|
|
|
|
and other
|
|
|
|
|
regulatory
|
Other (1)
|
Total
|
|
|
£m
|
£m
|
£m
|
|
At 1 January
|
334
|
114
|
448
|
|
Currency translation and other movements (2)
|
(4)
|
(13)
|
(17)
|
|
Charge to income statement
|
9
|
17
|
26
|
|
Release to income statement
|
(67)
|
(5)
|
(72)
|
|
Provisions utilised
|
(30)
|
(31)
|
(61)
|
|
At 30 June
|
242
|
82
|
324
|
|
|
30 June
|
31 December
|
|
|
2021
|
2020
|
|
|
£m
|
£m
|
|
Loans - amortised cost and fair value through other comprehensive
income (FVOCI)
|
|
|
|
Stage 1
|
7,034
|
7,799
|
|
Stage 2
|
721
|
1,566
|
|
Stage 3
|
108
|
171
|
|
Of which: individual
|
98
|
162
|
|
Of which: collective
|
10
|
9
|
|
Inter-Group (1)
|
726
|
755
|
|
|
8,589
|
10,291
|
|
ECL provisions
|
|
|
|
Stage 1
|
10
|
12
|
|
Stage 2
|
37
|
49
|
|
Stage 3
|
87
|
132
|
|
Of which: individual
|
78
|
124
|
|
Of which: collective
|
9
|
8
|
|
Inter-Group
|
1
|
1
|
|
|
135
|
194
|
|
ECL provisions coverage (2,3)
|
|
|
|
Stage 1 (%)
|
0.14
|
0.15
|
|
Stage 2 (%)
|
5.13
|
3.13
|
|
Stage 3 (%)
|
80.56
|
77.19
|
|
Inter-Group (%)
|
0.14
|
0.13
|
|
|
1.70
|
2.02
|
|
|
|
|
|
|
Half year ended
|
|
|
|
30 June
|
30 June
|
|
|
2021
|
2020
|
|
|
£m
|
£m
|
|
Impairment losses
|
|
|
|
ECL (release)/charge (4)
|
|
|
|
Stage 1
|
(8)
|
14
|
|
Stage 2
|
(5)
|
43
|
|
Stage 3
|
(3)
|
(13)
|
|
Of which: individual
|
1
|
(4)
|
|
Of which: collective
|
(4)
|
(9)
|
|
Third party
|
(16)
|
44
|
|
Inter-Group
|
-
|
2
|
|
|
(16)
|
46
|
|
ECL loss rate - annualised (basis points) (3)
|
(41)
|
69
|
|
Amounts written off
|
40
|
4
|
|
(1)
|
NWM Group’s intercompany
assets were classified in Stage 1. The ECL attached to these loans
was £0.9 million (31 December 2020 – £1.2 million).
The remaining tables in the credit risk section exclude
intercompany assets and associated ECL.
|
|
(2)
|
ECL provisions coverage is
calculated as ECL provisions divided by loans – amortised
cost and FVOCI.
|
|
(3)
|
ECL provisions coverage and ECL
loss rates are calculated on third party loans and related ECL
provisions and charge respectively. ECL loss rate is calculated as
annualised third party ECL charge divided by loans –
amortised cost and FVOCI. The half year ECL charge is annualised by
multiplying by two.
|
|
(4)
|
Includes a £1 million charge
(30 June 2020 – £1 million charge) related to other
financial assets, of which nil (30 June 2020 – nil) related
to assets classified as FVOCI and a £1 million release (30
June 2020 – £1 million release) related to contingent
liabilities.
|
|
(5)
|
The table shows gross loans only
and excludes amounts that are outside the scope of the ECL
framework. Refer to page 64 for Financial instruments within the
scope of the IFRS 9 ECL framework in the NatWest Markets Plc 2020
Annual Report and Accounts for further details. Other financial
assets within the scope of the IFRS 9 ECL framework were cash and
balances at central banks totalling £17.1 billion (31 December
2020 – £15.8 billion) and debt securities of £8.1
billion (31 December 2020 – £8.7
billion).
|
|
|
30 June
|
31 December
|
|
|
2021
|
2020
|
|
|
£m
|
£m
|
|
Guarantees
|
611
|
638
|
|
Other contingent liabilities
|
113
|
137
|
|
Standby facilities, credit lines and other commitments
|
10,986
|
12,292
|
|
Contingent liabilities and commitments
|
11,710
|
13,067
|
|
●
|
The provision of a funded guarantee of up to £2.6 billion by
NWM Plc to NWM N.V. that limits NWM N.V.’s exposure to large
individual customer credits to 10% of NWM N.V.’s
capital. Funding is provided by NWM Plc deposits placed with
NWM N.V. of not less than the guaranteed amount. At 30 June
2021 the deposits amounted to £0.7 billion and the guarantee
fees in the period were £3.3 million.
|
|
●
|
The provision of a funded and an unfunded guarantee by NWM Plc in
respect of NWM N.V.’s legacy portfolio. At 30 June 2021 the
exposure at default covered by the guarantees was approximately
£0.2 billion (of which £0.1 billion was cash
collateralised). Fees of £5.8 million in relation to the
guarantees were recognised in the period.
|
|
|
|
|
●
|
the condensed financial statements have been prepared in accordance
with UK adopted IAS 34 'Interim Financial Reporting';
|
|
●
|
the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year);
and
|
|
●
|
the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
|
|
Frank
Dangeard
Chairman
|
Robert
Begbie
Chief
Executive Officer
|
David
King
Chief
Financial Officer
|
|
Chairman
|
Executive directors
|
Non-executive directors
|
|
Frank
Dangeard
|
Robert
Begbie
David
King
|
Anne
Simpson
Brendan
Nelson (resigned 30 June 2021)
Sarah
Wilkinson
Tamsin
Rowe
Vivek
Ahuja
|
|
|
Half year ended
|
|
Quarter ended
|
|||
|
|
30 June
|
30 June
|
|
30 June
|
31 March
|
30 June
|
|
|
2021
|
2020
|
|
2021
|
2021
|
2020
|
|
Operating expenses
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
Staff costs
|
252
|
377
|
|
118
|
134
|
187
|
|
Premises and equipment
|
37
|
75
|
|
18
|
19
|
45
|
|
Other administrative expenses
|
181
|
348
|
|
67
|
114
|
120
|
|
Depreciation and amortisation
|
10
|
14
|
|
5
|
5
|
7
|
|
Total operating expenses
|
480
|
814
|
|
208
|
272
|
359
|
|
|
|
|
|
|
|
|
|
|
Half year ended
|
||||||||
|
|
30 June 2021
|
|
30 June 2020
|
||||||
|
|
|
Litigation
|
|
|
|
|
Litigation
|
|
|
|
|
|
and
|
|
Statutory
|
|
|
and
|
|
Statutory
|
|
|
Strategic
|
conduct
|
Other
|
operating
|
|
Strategic
|
conduct
|
Other
|
operating
|
|
|
costs
|
costs
|
expenses
|
expenses
|
|
costs
|
costs
|
expenses
|
expenses
|
|
Operating expenses
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
£m
|
|
Staff costs
|
65
|
-
|
187
|
252
|
|
59
|
-
|
318
|
377
|
|
Premises and equipment
|
3
|
-
|
34
|
37
|
|
22
|
-
|
53
|
75
|
|
Other administrative expenses
|
27
|
(68)
|
222
|
181
|
|
31
|
113
|
204
|
348
|
|
Depreciation and amortisation
|
-
|
-
|
10
|
10
|
|
-
|
-
|
14
|
14
|
|
Total
|
95
|
(68)
|
453
|
480
|
|
112
|
113
|
589
|
814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
||||||||
|
|
30 June 2021
|
|
31 March 2021
|
||||||
|
|
|
Litigation
|
|
|
|
|
Litigation
|
|
|
|
|
|
and
|
|
Statutory
|
|
|
and
|
|
Statutory
|
|
|
Strategic
|
conduct
|
Other
|
operating
|
|
Strategic
|
conduct
|
Other
|
operating
|
|
|
costs
|
costs
|
expenses
|
expenses
|
|
costs
|
costs
|
expenses
|
expenses
|
|
Operating expenses
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
£m
|
|
Staff costs
|
40
|
-
|
78
|
118
|
|
25
|
-
|
109
|
134
|
|
Premises and equipment
|
2
|
-
|
16
|
18
|
|
1
|
-
|
18
|
19
|
|
Other administrative expenses
|
21
|
(81)
|
127
|
67
|
|
6
|
13
|
95
|
114
|
|
Depreciation and amortisation
|
-
|
-
|
5
|
5
|
|
-
|
-
|
5
|
5
|
|
Total
|
63
|
(81)
|
226
|
208
|
|
32
|
13
|
227
|
272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
|
|
|||
|
|
30 June 2020
|
|
|
||||||
|
|
|
Litigation
|
|
|
|
|
|
|
|
|
|
|
and
|
|
Statutory
|
|
|
|
|
|
|
|
Strategic
|
conduct
|
Other
|
operating
|
|
|
|
|
|
|
|
costs
|
costs
|
expenses
|
expenses
|
|
|
|
|
|
|
Operating expenses
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
Staff costs
|
38
|
-
|
149
|
187
|
|
|
|
|
|
|
Premises and equipment
|
22
|
-
|
23
|
45
|
|
|
|
|
|
|
Other administrative expenses
|
20
|
9
|
91
|
120
|
|
|
|
|
|
|
Depreciation and amortisation
|
-
|
-
|
7
|
7
|
|
|
|
|
|
|
Total
|
80
|
9
|
270
|
359
|
|
|
|
|
|
|
●
|
Statutory
results on pages 25 to 46 comprising the condensed consolidated
income statement, condensed consolidated statement of comprehensive
income, condensed consolidated balance sheet, condensed
consolidated statement of changes in equity, condensed consolidated
cash flow statement and the related Notes 1 to 15.
|
|
●
|
Risk
and capital management section on pages 7 to 24 as indicated within
the scope of the independent review. Refer to the Independent
review report to NatWest Markets Plc on page 47 for further
information.
|
|
Contact
|
|
|
|
Paul
Pybus
|
Investor
Relations
|
+44 (0)
7769 161183
|
|
|
NatWest
Markets Plc
(Registrant)
|
|
|
|
|
|
By:
/s/
|
|
|
|
|
|
Name:
Mark Stevens
|
|
|
Title:
Assistant Secretary
|