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of the organisational structure and business overview of
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NatWest Group, including the products and services provided
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by each of its operating segments and the markets in which
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they operate, are contained in the Business review. Details
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Introduction
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Definition, sources of risk and key developments in 2023
181
Governance and risk appetite
182
Identification and measurement
182
Mitigation
182
Assessment and monitoring
183
Problem debt management
184
Forbearance
185
Credit grading models
186
Impairment, provisioning and write-offs
186
Governance and post model adjustments
187
Significant increase in credit risk
189
Asset lifetimes
189
Economic loss drivers
190
Measurement uncertainty and ECL sensitivity analysis
196
Measurement uncertainty and ECL adequacy
199
Movement in ECL provision
199
Credit risk \u2013 Banking activities
\u00a0
Financial instruments within the scope of the IFRS 9 ECL framework
200
Segment analysis \u2013 portfolio summary
201
Segmental loans and impairment metrics
204
Sector analysis \u2013 portfolio summary
207
Wholesale forbearance
213
Credit risk enhancement and mitigation
215
Personal portfolio
216
Commercial real estate
221
Flow statements
222
Stage 2 decomposition \u2013 arrears status and contributing factors
230
Stage 2 decomposition \u2013 by a significant increase in credit risk trigger
232
Stage 3 vintage analysis
234
Asset quality
235
Credit risk \u2013 Trading activities
\u00a0
Securities financing transactions and collateral
239
Derivatives
240
Debt securities
241
Cross border exposure
242
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Definition (audited)
Credit risk is the risk that customers, counterparties or issuers fail to meet a contractual
obligation to settle outstanding amounts.
Sources of risk
(audited)
The principal sources of credit risk for NatWest Group are lending, off-balance sheet
products, derivatives and securities financing, and debt securities. NatWest Group is also
exposed to settlement risk through foreign exchange, trade finance and payments
activities.
Key developments in 2023
\ue001
Personal lending grew as a result of strong demand across both mortgages and
unsecured lending, although mortgage demand reduced during the second half of the
year in line with trends in the UK mortgage market. Adjustments were made to
affordability assumptions and stress rates to ensure that lending continued to be
assessed appropriately, given the high interest rate and inflationary environment.
Support for customers was proactively promoted during the year and the number of
customers requesting support (primarily forbearance) increased gradually. Although
there was an increase in arrears during the year, this was partly driven by overall
growth in Retail Banking portfolios in recent years, as well as adjustments to lending
criteria following COVID-19. Indicators of difficulty to pay remain at or below levels
observed before COVID-19.
\ue001
Wholesale lending increased during the year, driven by financial institutions sectors.
Sector appetite continues to be reviewed regularly, with particular focus on sector
clusters and sub-sectors that are deemed to represent a heightened risk, including
due to cost of living, supply chain and inflationary pressures.
\ue001
Overall expected credit loss (ECL) increased during 2023 reflecting portfolio growth
alongside broadly stable portfolio performance. There were Stage 3 default flow
increases, particularly in the Personal portfolio, but these were broadly in line with
expectations due to growth and normalisation of risk parameters. This was mitigated
by a net ECL reduction from 2023 updates to economic scenarios and
weightings.
ECL post model adjustments increased during the year reflecting
continued economic uncertainty from inflation, higher interest rates and liquidity
concerns.
\ue001
NatWest Group continued to align its financial planning process with the climate
transition planning process. This included adding climate policy and technology-
related transition assumptions into NatWest Group\u2019s base case macroeconomic
scenario used for financial planning and assessment of ECL in this IFRS 9 reporting
period. This resulted in an increase in ECL of \u00a36 million.
\ue001
Several models were redeveloped in 2023, most notably IFRS 9 probability of default
(PD) and loss given default (LGD) models for business loans and stress testing models
for Personal mortgages, financial institutions and non-UK corporates economic
response models for Wholesale lending.
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Governance
(audited)
The credit risk function provides oversight and challenge of frontline credit risk
management activities. Governance activities include:
\ue001
Defining and proposing credit risk appetite measures for Board approval.
\ue001
Establishing credit risk policy, standards and toolkits which set out the mandatory
limits and parameters required to ensure that credit risk is managed within risk
appetite and which provide the minimum standards for the identification, assessment,
management, monitoring and reporting of credit risk.
\ue001
Oversight of the first line of defence to ensure that credit risk remains within the
appetite set by the Board and that it is being managed adequately and effectively.
\ue001
Assessing the adequacy of ECL provisions including approving key IFRS 9 inputs
(such as significant increase in credit risk (SICR) thresholds) and any necessary in-
model and post model adjustments through NatWest Group and business unit
provisions and model committees.
\ue001
Development and approval of credit grading models.
\ue001
Providing regular reporting on credit risk to the Board Risk Committee and Board.
Risk appetite
Credit risk appetite is approved by the Board and is set and monitored through risk
appetite frameworks tailored to NatWest Group\u2019s Personal and Wholesale segments. Risk
appetite statements and associated measures are reviewed at least annually by the
Board on the Board Risk Committee\u2019s recommendation to ensure they remain
appropriate and aligned to strategy.
Personal
The Personal credit risk appetite framework sets limits that control the quality and
concentration of both existing and new business for each relevant business segment.
These risk appetite measures consider the segments\u2019 ability to grow sustainably and the
level of losses expected under stress. Credit risk is further controlled through operational
limits specific to customer or product characteristics.
Wholesale
For Wholesale credit, the framework has been designed to reflect factors that influence
the ability to operate within risk appetite. Tools such as stress testing and economic
capital are used to measure credit risk volatility and develop links between the
framework and risk appetite limits.
Operational limits are used to manage concentrations of risk which may arise across four
lenses \u2013 single name, sector, country and product and asset classes. The framework is
supported by a suite of transactional acceptance standards that set out the risk
parameters within which businesses should operate.
Identification and measurement
Credit stewardship
(audited)
Risks are identified through relationship management and credit stewardship of
customers and portfolios. Credit stewardship takes place throughout the customer
relationship, beginning with the initial approval. It includes the application of credit
assessment standards, credit risk mitigation and collateral, ensuring that credit
documentation is complete and appropriate, carrying out regular portfolio or customer
reviews and problem debt identification and management.
Asset quality (audited)
All credit grades map to an asset quality (AQ) scale, used for financial reporting. This AQ
scale is based on Basel PDs. Performing loans are defined as AQ1-AQ9 (where the PD is
less than 100%) and defaulted non-performing loans as AQ10 or Stage 3 under IFRS 9
(where the PD is 100%). Loans are defined as defaulted when the payment status
becomes 90 days past due, or earlier if there is clear evidence that the borrower is
unlikely to repay, for example bankruptcy or insolvency.
Counterparty credit risk
Counterparty credit risk arises from the obligations of customers under derivative and
securities financing transactions. NatWest Group mitigates counterparty credit risk
through collateralisation and netting agreements, which allow amounts owed by NatWest
Group to a counterparty to be netted against amounts the counterparty owes NatWest
Group.
Mitigation
Mitigation techniques, as set out in the appropriate credit risk toolkits and transactional
acceptance standards, are used in the management of credit portfolios across NatWest
Group. These techniques mitigate credit concentrations in relation to an individual
customer, a borrower group or a collection of related borrowers. Where possible,
customer credit balances are netted against obligations. Mitigation tools can include
structuring a security interest in a physical or financial asset, the use of credit derivatives
including credit default swaps, credit-linked debt instruments and securitisation
structures, and the use of guarantees and similar instruments (for example, credit
insurance) from related and third parties.
Property is used to mitigate credit risk across a number of portfolios, in particular
residential mortgage lending and commercial real estate (CRE).
The valuation methodologies for collateral in the form of residential mortgage property
and CRE are detailed below.
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Residential mortgages
\u2013
NatWest Group takes collateral in the form of residential
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property to mitigate the credit risk arising from mortgages. NatWest Group values
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residential property individually during the loan underwriting process, either by obtaining
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an appraisal by a suitably qualified appraiser (for example, Royal Institution of Chartered
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Surveyors (RICS)) or using a statistically valid model.
In both cases, a sample of the
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valuation outputs are periodically reviewed by an independent RICS qualified appraiser.
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NatWest Group updates Retail Banking UK residential property values quarterly using
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country (Scotland, Wales and Northern Ireland) or English regional specific Office for
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National Statistics House Price indices.
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Within the Private Banking and RBSI segments, properties securing loans greater than
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\u00a32.5 million or \u20ac3 million are revalued every three years.
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The current indexed value of the property is a component of the ECL provisioning
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calculation.
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Commercial real estate valuations
\u2013
NatWest Group has an actively managed panel of
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chartered surveying firms that cover the spectrum of geography and property sectors in
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which NatWest Group takes collateral. Suitable RICS registered valuers for particular
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assets are contracted through a service agreement to ensure consistency of quality and
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advice. In the UK, an independent third-party market indexation is applied to update
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external valuations for commercial property once they are more than a year old. For
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loan obligations in excess of \u00a32.5 million and where the charged property has a book
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value in excess of \u00a30.5 million, a formal valuation review is commissioned at least every
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three years.
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Assessment and monitoring
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Practices for credit stewardship \u2013 including credit assessment, approval and monitoring
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as well as the identification and management of problem debts \u2013 differ between the
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Personal and Wholesale portfolios.
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Personal
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Personal customers are served through a lending approach that entails offering a large
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number of small-value loans. To ensure that these lending decisions are made
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consistently, NatWest Group analyses internal credit information as well as external data
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supplied by credit reference agencies (including historical debt servicing behaviour of
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customers with respect to both NatWest Group and other lenders). NatWest Group then
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sets its lending rules accordingly, developing different rules for different products.
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The process is then largely automated, with each customer receiving an individual credit
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score that reflects both internal and external behaviours and this score is compared with
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the lending rules set. For relatively high-value, complex personal loans, including some
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residential mortgage lending, specialist credit managers make the final lending decisions.
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These decisions are made within specified delegated authority limits that are issued
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dependent on the experience of the individual.
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Underwriting standards and portfolio performance are monitored on an ongoing basis to
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ensure they remain adequate in the current market environment and are not weakened
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materially to sustain growth.
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The actual performance of each portfolio is tracked relative to operational limits. The
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limits apply to a range of credit risk-related measures including projected credit default
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rates across products and the loan-to-value (LTV) ratio of the mortgage portfolios.
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Where operational limits identify areas of concern management action is taken to adjust
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credit or business strategy.
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Wholesale
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Wholesale customers, including corporates, banks and other financial institutions are
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managed on an individual basis. Customers are aggregated as a single risk when
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sufficiently interconnected to the extent that a failure of one could lead to the failure of
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another.
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A credit assessment is carried out before credit facilities are made available to
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customers. The assessment process is dependent on the complexity of the transaction.
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Credit approvals are subject to environmental, social and governance risk policies which
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restrict exposure to certain highly carbon intensive industries as well as those with
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potentially heightened reputational impacts. Customer specific climate risk commentary
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is now mandatory.
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For lower risk transactions below specific thresholds, credit decisions can be approved
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through a combination of fully automated or relationship manager self-sanctioning within
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the business. This process is facilitated through an auto-decision making system, which
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utilises scorecards, strategies and policy rules.
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For all other transactions, credit is only granted to customers following joint approval by
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an approver from the business and the credit risk function or by two credit officers. The
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joint business and credit approvers act within a delegated approval authority under the
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Wholesale Credit Authorities framework policy. The level of delegated authority held by
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approvers is dependent on their experience and expertise with only a small number of
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senior executives holding the highest approval authority.
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Transactional acceptance standards provide detailed transactional lending and risk
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acceptance metrics and structuring guidance. As such, these standards provide a
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mechanism to manage risk appetite at the customer/transaction level and are
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supplementary to the established credit risk appetite.
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Credit quality through PD credit grades or performance against a combination of risk
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triggers in business banking, and LGD are reviewed and if appropriate reapproved
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annually. The review process assesses borrower performance, including reconfirmation
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or adjustment of risk parameter estimates; the adequacy of security; compliance with
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terms and conditions; and refinancing risk.
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Problem debt management
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Personal
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Early problem identification
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Pre-emptive triggers are in place to help identify customers that may be at risk of being
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in financial difficulty. These triggers are both internal, using NatWest Group data, and
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external using information from credit reference agencies. Proactive contact is then
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made with the customer to establish if they require help with managing their finances. By
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adopting this approach, the aim is to prevent a customer\u2019s financial position
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deteriorating.
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Personal customers experiencing financial difficulty are managed by the Collections
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team. If the Collections team is unable to provide appropriate support after discussing
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suitable options with the customer, management of that customer moves to the
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Recoveries team.
If at any point in the collections and recoveries process, the customer is
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identified as being potentially vulnerable, the customer will be separated from the regular
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process and supported by a specialist team to ensure the customer receives appropriate
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support for their circumstances.
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In July 2023, Mortgage Charter support was introduced for residential mortgage
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customers. Mortgage Charter support includes temporary interest only or term
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extensions at the customer\u2019s request. A request for Mortgage Charter does not, of itself
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trigger transfer to a specialist team.
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Collections
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When a customer exceeds an agreed limit or misses a regular monthly payment the
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customer is contacted by NatWest Group and requested to remedy the position. If the
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situation is not resolved then, where appropriate, the Collections team will become more
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involved and the customer will be supported by skilled debt management staff who
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endeavour to provide customers with bespoke solutions. Solutions include short-term
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account restructuring, refinance loans and forbearance which can include interest
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suspension and \u2018breathing space\u2019. All treatments available to customers experiencing
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financial difficulties are reviewed to ensure they remain appropriate for customers
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impacted by current economic conditions.
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In the event that an affordable and sustainable agreement with a customer cannot be
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reached, the debt will transition to the Recoveries team.
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For provisioning purposes, under IFRS 9, exposure to customers managed by the
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Collections team is categorised as Stage 2 and subject to a lifetime loss assessment,
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unless it is 90 days past due or has triggered any other unlikeliness to pay indicators, in
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which case it is categorised as Stage 3.
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R
R
ecoveries
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The Recoveries team will issue a notice of intention to default to the customer and, if
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appropriate, a formal demand, while also registering the account with credit reference
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agencies where appropriate. Following this, the customer\u2019s debt may then be placed
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with a third-party debt collection agency, or alternatively a solicitor, in order to agree an
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affordable repayment plan with the customer. An option that may also be considered, is
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the sale of unsecured debt. Exposures subject to formal debt recovery are defaulted and,
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under IFRS 9, categorised as Stage 3.
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Wholesale
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Early problem identification
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Each segment and sector have defined early warning indicators to identify customers
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experiencing financial difficulty, and to increase monitoring if needed. Early warning
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indicators may be internal, such as a customer\u2019s bank account activity, or external, such
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as a publicly-listed customer\u2019s share price. If early warning indicators show a customer is
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experiencing potential or actual difficulty, or if relationship managers or credit officers
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identify other signs of financial difficulty, they may decide to classify the customer within
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the Risk of Credit Loss framework.
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There is an equivalent process for Business Banking customers, with problem debt cases
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reallocated to increased monitoring and support under a Portfolio Management
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Relationship team or the Financial Health and Support Team. Broader macro-economic
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trends including commodity prices, foreign exchange rates and consumer and
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government spend are also tracked, helping inform decisions on sector risk appetite.
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Customer level early warning indicators are regularly reviewed to ensure alignment with
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prevailing economic conditions, ensuring both the volume and focus of alerts is aligned to
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the point-in-time risk within each sector.
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The aligned Risk of Credit Loss and Viability framework
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This framework focuses on all Wholesale customers to provide early identification of
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credit deterioration, support intelligent risk-taking, ensure fair and consistent customer
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outcomes and provide key insights into Wholesale lending portfolios. Expert judgment is
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applied by experienced credit risk officers to classify cases into categories that reflect
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progressively deteriorating credit risk to NatWest Group. There are two classifications in
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the framework that apply to non-defaulted customers who are in financial stress \u2013
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Heightened Monitoring and Risk of Credit Loss. For the purposes of provisioning, all
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exposures categorised as Heightened Monitoring or Risk of Credit Loss are categorised
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as Stage 2 and subject to a lifetime loss assessment. The framework also applies to
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those customers that have met NatWest Group\u2019s default criteria (AQ10 exposures).
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Defaulted exposures are categorised as Stage 3 impaired for provisioning purposes.
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Heightened Monitoring customers are performing customers that have met certain
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characteristics, which have led to significant credit deterioration. Collectively,
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characteristics reflect circumstances that may affect the customer\u2019s ability to meet
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repayment obligations. Characteristics include trading issues, covenant breaches,
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material PD downgrades and past due facilities.
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Heightened Monitoring customers require pre-emptive actions (outside the customer\u2019s
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normal trading patterns) to return or maintain their facilities within NatWest Group\u2019s
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current risk appetite.
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Risk of Credit Loss customers are performing customers that have met the criteria for
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Heightened Monitoring and also pose a risk of credit loss to NatWest Group in the next
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12 months should mitigating action not be taken or not be successful.
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Once classified as either Heightened Monitoring or Risk of Credit Loss, a number of
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mandatory actions are taken in accordance with policies. Actions include a review of the
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customer\u2019s credit grade, facility and security documentation and the valuation of
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security. Depending on the severity of the financial difficulty and the size of the exposure,
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the customer relationship strategy is reassessed by credit officers, by specialist credit risk
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or relationship management units in the relevant business, or by Restructuring.
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Agreed customer management strategies are regularly monitored by both the business
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and credit teams. The largest Risk of Credit Loss exposures are regularly reviewed by a
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Risk of Credit Loss forum. The forum members are experienced credit, business and
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restructuring specialists. The purpose of the forum is to review and challenge the
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strategies undertaken for customers that pose the largest risk of credit loss to NatWest
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Group.
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Appropriate corrective action is taken when circumstances emerge that may affect the
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customer\u2019s ability to service its debt. Corrective actions may include granting a customer
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various types of concessions. Any decision to approve a concession will be a function of
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specific appetite, the credit quality of the customer, the market environment and the loan
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structure and security. All customers granted forbearance are classified Heightened
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Monitoring as a minimum.
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Other potential outcomes of the relationship review are to: return the customer to a
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satisfactory status, offer additional lending and continue monitoring, transfer the
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relationship to Restructuring if appropriate, or exit the relationship.
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The aligned Risk of Credit Loss and Viability framework does not apply to problem debt
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management for business banking customers. These customers are, where necessary,
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managed by specialist problem debt management teams, depending on the size of
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exposure or by the business banking recoveries team where a loan has been impaired.
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Restructuring
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Where customers are categorised as Risk of Credit Loss and the lending exposure is
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above \u00a31 million, relationships are supported by the Restructuring team. The objective of
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Restructuring is to protect NatWest Group\u2019s capital. Restructuring does this by working
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with corporate and commercial customers in financial difficulty to help them understand
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their options and how their restructuring or repayment strategies can be delivered.
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Helping viable customers return to financial health and restoring a normal banking
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relationship is always the preferred outcome; however, where this is not possible,
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NatWest Group will work with customers to achieve a solvent outcome.
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Throughout this period, the mainstream relationship manager will remain an integral part
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of the customer relationship. Insolvency is considered as a last resort and if deemed
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necessary, NatWest Group will work to recover its capital in a fair and efficient manner,
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while upholding the fair treatment of customers and NatWest Group\u2019s core values.
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Forbearance
(audited)
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Forbearance takes place when a concession is made on the contractual terms of a
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loan/debt in response to a customer\u2019s financial difficulties.
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The aim of forbearance is to support and restore the customer to financial health while
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minimising risk. To ensure that forbearance is appropriate for the needs of the customer,
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minimum standards are applied when assessing, recording, monitoring and reporting
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forbearance.
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A credit exposure may be forborne more than once, generally where a temporary
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concession has been granted and circumstances warrant another temporary or
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permanent revision of the loan\u2019s terms.
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Loans are reported as forborne until they meet the exit criteria as detailed in the
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appropriate regulatory guidance. These include being classified as performing for two
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years since the last forbearance event, making regular repayments and the loan/debt
\n
being less than 30 days past due.
\n
Types of forbearance
\n
Personal
\n
In the Personal portfolio, forbearance may involve payment concessions, loan
\n
rescheduling (including extensions in contractual maturity) and capitalisation of arrears.
\n
Forbearance support is provided for both mortgages and unsecured lending.
\n
Wholesale
\n
In the Wholesale portfolio, forbearance may involve covenant waivers, amendments to
\n
margins, payment concessions and loan rescheduling (including extensions in contractual
\n
maturity), capitalisation of arrears, and debt forgiveness or debt-for-equity swaps.
\n
Monitoring of forbearance
\n
Personal
\n
For Personal portfolios, forborne loans are separated and regularly monitored and
\n
reported while the forbearance strategy is implemented, until they exit forbearance.
\n
Wholesale
\n
In the Wholesale portfolio, customer PDs and facility LGDs are reassessed prior to
\n
finalising any forbearance arrangement. The ultimate outcome of a forbearance strategy
\n
is highly dependent on the co-operation of the borrower and a viable business or
\n
repayment outcome. Where forbearance is no longer appropriate, NatWest Group will
\n
consider other options such as the enforcement of security, insolvency proceedings or
\n
both, although these are options of last resort.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Provisioning for forbearance (audited)
\n
Personal
\n
The methodology used for provisioning in respect of Personal forborne loans will differ
\n
depending on whether the loans are performing or non-performing and which business is
\n
managing them due to local market conditions.
\n
Granting forbearance will only change the arrears status of the loan in specific
\n
circumstances, which can include capitalisation of principal and interest in arrears, where
\n
the loan may be returned to the performing book if the customer has demonstrated an
\n
ability to meet regular payments and is likely to continue to do so.
\n
The loan would continue to be reported as forborne until it meets the exit criteria set out
\n
by the appropriate regulatory guidance.
\n
For ECL provisioning, all forborne but performing exposures are categorised as Stage 2
\n
and are subject to a lifetime loss provisioning assessment. Where the forbearance
\n
treatment includes the cessation of interest on the customer balance (i.e. non-accrual),
\n
this will be treated as a Stage 3 default.
\n
For non-performing forborne loans, the Stage 3 loss assessment process is the same as
\n
for non-forborne loans.
\n
Wholesale
\n
Provisions for forborne loans are assessed in accordance with normal provisioning
\n
policies. The customer\u2019s financial position and prospects \u2013 as well as the likely effect of
\n
the forbearance, including any concessions granted, and revised PD or LGD gradings \u2013
\n
are considered in order to establish whether an impairment provision increase is
\n
required.
\n
Wholesale loans granted forbearance are individually credit assessed in most cases.
\n
Performing loans subject to forbearance treatment are categorised as Stage 2 and
\n
subject to a lifetime loss assessment.
\n
Forbearance may result in the value of the outstanding debt exceeding the present value
\n
of the estimated future cash flows. This difference will lead to a customer being classified
\n
as non-performing.
\n
In the case of non-performing forborne loans, an individual loan impairment provision
\n
assessment generally takes place prior to forbearance being granted. The amount of the
\n
loan impairment provision may change once the terms of the forbearance are known,
\n
resulting in an additional provision charge or a release of the provision in the period the
\n
forbearance is granted.
\n
The transfer of Wholesale loans from impaired to performing status follows assessment
\n
by relationship managers and credit. When no further losses are anticipated and the
\n
customer is expected to meet the loan\u2019s revised terms, any provision is written-off or
\n
released and the balance of the loan can be returned to performing status once the exit
\n
criteria, as set out by regulatory guidance, are met. Refer to pages 213 and 216 for
\n
further details on Wholesale and Personal forbearance.
\n
Credit grading models
\n
Credit grading models is the collective term used to describe all models, frameworks and
\n
methodologies used to calculate PD, exposure at default (EAD), LGD, maturity and the
\n
production of credit grades.
\n
Credit grading models are designed to provide:
\n
\ue001
An assessment of customer and transaction characteristics.
\n
\ue001
A meaningful differentiation of credit risk.
\n
\ue001
Accurate internal default rate, loss and exposure estimates that are used in the
\n
capital calculation or wider risk management purposes.
\n
Impairment, provisioning and write-offs (audited)
\n
In the overall assessment of credit risk, impairment provisioning and write-offs are used
\n
as key indicators of credit quality.
\n
NatWest Group\u2019s IFRS 9 provisioning models, which use existing IRB models as a starting
\n
point, incorporate term structures and forward-looking information. Regulatory
\n
conservatism within the IRB models has been removed as appropriate to comply with the
\n
IFRS 9 requirement for unbiased ECL estimates.
\n
Five key areas may materially influence the measurement of credit impairment under
\n
IFRS 9 \u2013 two of these relate to model build and three relate to model application:
\n
Model build:
\n
\ue001
The determination of economic indicators that have most influence on credit loss for
\n
each portfolio and the severity of impact (this leverages existing stress testing models
\n
which are reviewed annually).
\n
\ue001
The build of term structures to extend the determination of the risk of loss beyond 12
\n
months that will influence the impact of lifetime loss for exposures in Stage 2.
\n
Model application:
\n
\ue001
The assessment of the SICR and the formation of a framework capable of consistent
\n
application.
\n
\ue001
The determination of asset lifetimes that reflect behavioural characteristics while also
\n
representing management actions and processes (using historical data and
\n
experience).
\n
\ue001
The choice of forward-looking economic scenarios and their respective probability
\n
weights.
\n
For accounting policy information refer to Accounting policy 2.3
\n
IFRS 9 ECL model design principles (audited)
\n
Modelling of ECL for IFRS 9 follows the conventional approach to divide the estimation of
\n
credit losses into its component parts of PD, LGD and EAD.
\n
To meet IFRS 9 requirements, the PD, LGD and EAD parameters differ from their Pillar 1
\n
internal ratings based (IRB) counterparts in the following aspects:
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\ue001
Unbiased \u2013
material regulatory conservatism has been removed from IFRS 9
\n
parameters to produce unbiased estimates.
\n
\ue001
Point-in-time
\u2013 IFRS 9 parameters reflect actual economic conditions at the reporting
\n
date instead of long-run average or downturn conditions.
\n
\ue001
Economic forecasts
\u2013 IFRS 9 PD estimates and, where appropriate, EAD and LGD
\n
estimates reflect forward-looking economic conditions.
\n
\ue001
Lifetime measurement
\u2013 IFRS 9 PD, LGD and EAD are provided as multi-period term
\n
structures up to exposure lifetimes instead of over a fixed one-year horizon.
\n
IFRS 9 requires that at each reporting date, an entity shall assess whether the credit risk
\n
on an account has increased significantly since initial recognition. Part of this assessment
\n
requires a comparison to be made between the current lifetime PD (i.e. the PD over the
\n
remaining lifetime at the reporting date) and the equivalent lifetime PD as determined at
\n
the date of initial recognition.
\n
For assets originated before IFRS 9 was introduced, comparable lifetime origination PDs
\n
did not exist. These have been retrospectively created using the relevant model inputs
\n
applicable at initial recognition.
\n
PD estimates
\n
Personal models
\n
Personal PD models follow a discrete multi-horizon survival approach, predicting
\n
quarterly PDs up to lifetime at account level, with a key driver being scores from related
\n
IRB PD models. Forward-looking economic information is brought in by economic
\n
response models, which leverage the existing stress test model suite. The current suite of
\n
PD models was introduced in 2022 replacing the previous, first-generation models to
\n
remediate a range of model weaknesses.
\n
Wholesale models
\n
Wholesale PD models use a point-in-time/through-the-cycle framework to convert one-
\n
year regulatory PDs into point-in-time estimates that reflect economic conditions at the
\n
reporting date. The framework utilises credit cycle indices (CCIs) for a comprehensive set
\n
of region/industry segments. Further detail on CCIs is provided in the Economic loss
\n
drivers section.
\n
One year point-in-time PDs are extended to forward-looking lifetime PDs using a
\n
conditional transition matrix approach and a set of econometric forecasting models.
\n
LGD estimates
\n
The general approach for the IFRS 9 LGD models is to leverage corresponding IRB LGD
\n
models with bespoke adjustments to ensure estimates are unbiased and, where relevant,
\n
forward-looking.
\n
Personal
\n
Forward-looking information has only been incorporated for the secured portfolios,
\n
where changes in property prices can be readily accommodated. Analysis has shown
\n
minimal impact of economic conditions on LGDs for the other Personal portfolios.
\n
W
W
holesale
\n
Forward-looking economic information is incorporated into LGD estimates using the
\n
existing point-in-time/through-the-cycle framework. For low default portfolios, including
\n
sovereigns and banks, loss data is too scarce to substantiate estimates that vary with
\n
economic conditions. Consequently, for these portfolios, LGD estimates are assumed to
\n
be constant throughout the projection horizon.
\n
EAD estimates
\n
Personal
\n
The IFRS 9 Personal modelling approach for EAD is dependent on product type.
\n
\ue001
Revolving products use the existing IRB models as a basis, with appropriate
\n
adjustments incorporating a term structure based on time to default.
\n
\ue001
Amortising products use an amortising schedule, where a formula is used to calculate
\n
the expected balance based on remaining terms and interest rates.
\n
Analysis has indicated that there is minimal impact on EAD arising from changes in the
\n
economy for all Personal portfolios except mortgages. Therefore, forward-looking
\n
information is only incorporated in the mortgage EAD model (through forecast changes
\n
in interest rates).
\n
Wholesale
\n
For Wholesale, EAD values are projected using product specific credit conversion factors
\n
(CCFs), closely following the product segmentation and approach of the respective IRB
\n
model. However, the CCFs are estimated over multi-year time horizons and contain no
\n
regulatory conservatism or downturn assumptions.
\n
No explicit forward-looking information is incorporated, on the basis of analysis showing
\n
the temporal variation in CCFs is mainly attributable to changes in exposure
\n
management practices rather than economic conditions.
\n
Governance and post model adjustments
(audited)
\n
The IFRS 9 PD, EAD and LGD models are subject to NatWest Group\u2019s model risk policy
\n
that stipulates periodic model monitoring, periodic re-validation and defines approval
\n
procedures and authorities according to model materiality. Various post model
\n
adjustments were applied where management judged they were necessary to ensure an
\n
adequate level of overall ECL provision. All post model adjustments were subject to
\n
review, challenge and approval through model or provisioning committees.
\n
Post model adjustments will remain a key focus area of NatWest Group\u2019s ongoing ECL
\n
adequacy assessment process. A holistic framework has been established including
\n
reviewing a range of economic data, external benchmark information and portfolio
\n
performance trends with a particular focus on segments of the portfolio (both
\n
commercial and consumer) that are likely to be more susceptible to high inflation, high
\n
interest rates and supply chain disruption.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
ECL post model adjustments
\n
The table below shows ECL post model adjustments.
\n\n \n
Retail Banking
Commercial
Central items
Mortgages
Other
Private Banking
& Institutional
& other (1)
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Deferred model calibrations
-
-
1
23
-
24
Economic uncertainty
118
39
13
256
3
429
Other adjustments
1
-
-
8
23
32
Total
119
39
14
287
26
485
Of which:
- Stage 1
75
14
6
115
10
220
- Stage 2
31
25
8
167
9
240
- Stage 3
13
-
-
5
7
25
2022
Economic uncertainty
102
51
6
191
2
352
Other adjustments
8
20
-
16
15
59
Total
110
71
6
207
17
411
Of which:
- Stage 1
62
27
3
63
-
155
- Stage 2
32
44
3
139
16
234
- Stage 3
16
-
-
5
1
22
\n
.
\n
Post model adjustments increased since 31 December 2022, with notable shifts in all
\n
categories. This reflected:
\n
\ue001
The addition of deferred model calibration post model adjustments to account for
\n
elevated refinance risks on deteriorated exposures largely due to pressures from
\n
inflation and liquidity.
\n
\ue001
The increase in the economic uncertainty post model adjustments for Wholesale
\n
portfolios relating to inflation, supply chain and liquidity prompted by continued
\n
affordability risks, as a result of higher interest rates and sustained inflation. This was
\n
partially offset by a reduction in COVID-19 related post model adjustments.
\n
\ue001
Retail Banking
\u2013
The post model adjustments for economic uncertainty increased
\n
slightly to \u00a3157 million at 31 December 2023, from \u00a3153 million at 31 December
\n
2022. Continued consumer affordability risks, as a result of higher interest rates and
\n
sustained inflation, prompted an uplift in the cost of living post model adjustment (up
\n
from \u00a3127 million to \u00a3144 million). The cost of living post model adjustment captured
\n
the risk on segments in the Retail Banking portfolio that are more susceptible to the
\n
effects of cost of living rises. It focused on key affordability lenses, including
\n
customers with lower income in fuel poverty, over-indebted borrowers and
\n
customers vulnerable to a potential mortgage rate shock. This increase during the
\n
year was partly offset by some LGD post model adjustment reductions. Additionally,
\n
the judgemental post model adjustment relating to the modelling of cards EAD
\n
(\u00a320 million at 31 December 2022) was discontinued at H1 2023 and the latest
\n
update to the post model adjustment for legacy higher risk interest only residential
\n
mortgages resulted in a \u00a37 million reduction in the post model adjustment from 31
\n
December 2022, reflecting latest analysis of the portfolio segment.
\n
\ue001
Commercial & Institutional
\u2013 The post model adjustments for economic uncertainty
\n
increased to \u00a3256 million at 31 December 2023, from \u00a3191 million at 31 December
\n
2022. It included an overlay of \u00a350 million at 31 December 2023, from \u00a3108 million at
\n
31 December 2022, to cover the residual risks from COVID-19, including the risk that
\n
government support schemes could affect future recoveries and concerns
\n
surrounding associated debt, to customers that have utilised government support
\n
schemes. The inflation and supply chain post model adjustment was maintained with
\n
a mechanistic adjustment, via a sector-level downgrade, being applied to the sectors
\n
that were considered most at risk from these headwinds. A number of additional
\n
sectors were added to the sector-level downgrade reflecting the ongoing pressures
\n
from inflation being higher for longer plus broader concerns around reducing cash
\n
reserves across many sectors. The impact of the sector-level downgrades is a post
\n
model adjustment increase to \u00a3206 million at 31 December 2023 from \u00a383 million at
\n
31 December 2022, reflecting these significant headwinds which are not fully
\n
captured in the models. The \u00a323 million judgemental overlay for deferred model
\n
calibrations relates to refinance risk with the existing mechanistic modelling approach
\n
not fully capturing the risk on deteriorated exposures. Other adjustments included an
\n
overlay of \u00a37 million to mitigate the effect of operational timing delays in the
\n
identification and flagging of a SICR.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Significant increase in credit risk (SICR) (audited)
\n
Exposures that are considered significantly credit deteriorated since initial recognition are
\n
classified in Stage 2 and assessed for lifetime ECL measurement (exposures not
\n
considered deteriorated carry a 12 month ECL). NatWest Group has adopted a
\n
framework to identify deterioration based primarily on relative movements in lifetime PD
\n
supported by additional qualitative backstops. The principles applied are consistent
\n
across NatWest Group and align to credit risk management practices, where
\n
appropriate.
\n
The framework comprises the following elements:
\n
\ue001
IFRS 9 lifetime PD assessment (the primary driver)
\u2013
on modelled portfolios, the
\n
assessment is based on the relative deterioration in forward-looking lifetime PD and
\n
is assessed monthly. To assess whether credit deterioration has occurred, the
\n
residual lifetime PD at balance sheet date (which PD is established at date of initial
\n
recognition (DOIR)) is compared to the current PD. If the current lifetime PD exceeds
\n
the residual origination PD by more than a threshold amount, deterioration is
\n
assumed to have occurred and the exposure transferred into Stage 2 for a lifetime
\n
loss assessment. For Wholesale, a doubling of PD would indicate a SICR subject to a
\n
minimum PD uplift of 0.1%. For Personal portfolios, the criteria vary by risk band, with
\n
lower risk exposures needing to deteriorate more than higher risk exposures, as
\n
outlined in the following table:
\n
\ue001
Qualitative high-risk backstops
\u2013
the PD assessment is complemented with the use of
\n
qualitative high-risk backstops to further inform whether significant deterioration in
\n
lifetime risk of default has occurred. The qualitative high-risk backstop assessment
\n
includes the use of the mandatory 30+ days past due backstop, as prescribed by
\n
IFRS 9 guidance, and other features such as forbearance support, Wholesale
\n
exposures managed within the Risk of Credit Loss framework, and adverse credit
\n
bureau results for Personal customers.
\n
\ue001
Persistence (Personal and business banking customers only)
\u2013
the persistence rule
\n
ensures that accounts which have met the criteria for PD driven deterioration are still
\n
considered to be significantly deteriorated for three months thereafter. This additional
\n
rule enhances the timeliness of capture in Stage 2. The persistence rule is applied to
\n
PD driven deterioration only.
\n
The criteria are based on a significant amount of empirical analysis and seek to meet
\n
three key objectives:
\n
\ue001
Criteria effectiveness
\u2013
the criteria should be effective in identifying significant credit
\n
deterioration and prospective default population.
\n
\ue001
Stage 2
stability
\u2013 the criteria should not introduce unnecessary volatility in the Stage
\n
2 population.
\n
\ue001
Portfolio analysis
\u2013
the criteria should produce results which are intuitive when
\n
reported as part of the wider credit portfolio.
\n
Monitoring the effect on relative PD deterioration when originating new lending at times
\n
of weaker economic outlook (therefore, higher PDs at initial recognition) is important to
\n
ensure SICR criteria remains effective.
\n
Asset lifetimes
(audited)
\n
The choice of initial recognition and asset duration is another critical judgment in
\n
determining the quantum of lifetime losses that apply.
\n
\ue001
The date of initial recognition reflects the date that a transaction (or account) was
\n
first recognised on the balance sheet; the PD recorded at that time provides the
\n
baseline used for subsequent determination of SICR as detailed above.
\n
\ue001
For asset duration, the approach applied (in line with IFRS 9 requirements) is:
\n
\ue001
T
T
erm lending \u2013
the contractual maturity date, reduced for behavioural trends
\n
where appropriate (such as, expected prepayment and amortisation).
\n
\ue001
Revolving facilities
\u2013
for Personal portfolios (except credit cards), asset duration
\n
is based on behavioural life and this is normally greater than contractual life
\n
(which would typically be overnight). For Wholesale portfolios, asset duration is
\n
based on annual customer review schedules and will be set to the next review
\n
date.
\n
In the case of credit cards, the most significant judgment is to reflect the operational
\n
practice of card reissuance and the associated credit assessment as enabling a formal
\n
re-origination trigger. As a consequence, a capped lifetime approach of up to 36 months
\n
is used on credit card balances. If the approach was uncapped the ECL impact is
\n
estimated at approximately \u00a3110 million (2022 \u2013 \u00a380 million). However, credit card
\n
balances originated under the 0% balance transfer product and representing
\n
approximately 37% (2022 \u2013 19%) of performing card balances, have their ECL calculated
\n
on a behavioural lifetime approach as opposed to being capped at a maximum of three
\n
years.
\n
The capped approach reflects NatWest Group practice of a credit-based review of
\n
customers prior to credit card issuance and complies with IFRS 9. Benchmarking
\n
information indicates that peer UK banks use behavioural approaches in the main for
\n
credit card portfolios with average durations between three and ten years. Across
\n
Europe, durations are shorter and are, in some cases, as low as one year.
\n\n \n
PD bandings (based on
residual
PD deterioration threshold
Personal risk bands
lifetime PD calculated at DOIR)
criteria
Risk band A
<0.762%
PD@DOIR + 1%
Risk band B
<4.306%
PD@DOIR + 3%
Risk band C
>=4.306%
1.7 x PD@DOIR
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
(audited)
\n
Introduction
\n
The portfolio segmentation and selection of economic loss drivers for IFRS 9 follows the
\n
approach used in stress testing. To enable robust modelling the forecasting models for
\n
each portfolio segment (defined by product or asset class and where relevant, industry
\n
sector and region) are based on a selected, small number of economic variables,
\n
(typically three to four) that best explain the temporal variations in portfolio loss rates.
\n
The process to select economic loss drivers involves empirical analysis and expert
\n
judgement.
\n
The most significant economic loss drivers for the most material portfolios are shown in
\n
the table below:
\n\n \n
Portfolio
Economic loss drivers
UK Personal mortgages
UK unemployment rate, sterling swap rate, UK house
price index, UK real wage
UK Personal unsecured
UK unemployment rate, sterling swap rate, UK real
wage
UK corporates
UK stock price index, UK gross domestic product, Bank
of England base rate
UK commercial real estate
UK stock price index, UK commercial property price
index, UK GDP, Bank of England base rate
\n
Economic scenarios
\n
At 31 December 2023, the range of anticipated future economic conditions was defined
\n
by a set of four internally developed scenarios and their respective probabilities. In
\n
addition to the base case, they comprised upside, downside and extreme downside
\n
scenarios. The scenarios primarily reflected the current risks faced by the economy,
\n
particularly in relation to the path of inflation and interest rates.
\n
For 2023, the four scenarios were deemed appropriate in capturing the uncertainty in
\n
economic forecasts and the non-linearity in outcomes under different scenarios. These
\n
four scenarios were developed to provide sufficient coverage across potential rises in
\n
unemployment, inflation, asset price declines and the degree of permanent damage to
\n
the economy, around which there remains pronounced levels of uncertainty.
\n
Upside
\u2013
This scenario assumes robust growth as inflation falls sharply and rates are
\n
lowered more quickly than expected. Consumer spending is supported by savings built
\n
up since COVID-19 and further helped by fiscal support and strong business investment.
\n
The labour market remains resilient, with the unemployment rate falling. The housing
\n
market slows down compared to the previous year but remains robust.
\n
Compared to 31 December 2022, the upside scenario remains similarly configured,
\n
exploring a more benign set of economic outcomes, including a stronger performing
\n
stock market, real estate prices, and supported by a stronger global growth backdrop,
\n
relative to the base case view. Reflecting recent outturn data, inflation falls back quicker
\n
and the labour market is tighter than previously assumed.
\n
B
B
ase case
\u2013 High inflation and tight monetary policy leads to muted economic growth.
\n
However, continued disinflation allows an easing cycle to start in 2024. The
\n
unemployment rate rises modestly but there are no wide-spread job losses. Inflation
\n
moderates and falls to a target level of 2% by early 2025. The housing market
\n
experiences modest nominal price decline but the extent of the decline is lower than
\n
experienced during prior stresses. Housing market activities remain weak but gains pace
\n
gradually as interest rates fall and real income recovers.
\n
Since 31 December 2022, the economic outlook has improved as energy prices fell
\n
sharply and the labour market remained resilient. The near-term inflation outlook
\n
remains elevated and upside risks remain but they have reduced since last year. Rates
\n
increased to levels higher than expected previously and are expected to remain higher
\n
for longer. Economic growth is still expected to be muted in the near-term. The base
\n
case now assumes muted growth in 2023 as opposed to a mild recession assumed
\n
previously. The unemployment rate still rises but the peak is marginally lower and is
\n
underpinned by a resilient labour market The peak to trough house price correction
\n
remains broadly similar to the previous assumption but the timing of the fall is more
\n
spread out.
\n
D
D
ownside
\u2013
Inflation resurges as energy prices rise and core inflation remains persistently
\n
high. The economy experiences a recession as consumer confidence weakens due to a
\n
fall in real income. Interest rates are raised higher than the base case and remain
\n
elevated for longer. High rates are assumed to have a more significant impact on the
\n
labour market. Unemployment is higher than the base case scenario while house prices
\n
experience declines comparable to previous episodes of stress.
\n
Compared to 31 December 2022, the downside scenario explores risks associated with
\n
ongoing price pressures and significantly higher interest rates across the period. This
\n
contrasts with last year\u2019s scenario, which assumed lower rates than the base case view.
\n
Partly as a result, UK economic activity and labour market are slightly weaker. Nominal
\n
asset prices, while experiencing declines comparable with past downturns, perform
\n
slightly better than previously assumed.
\n
E
E
xtreme downside
\u2013
This scenario assumes a classical recession with loss of consumer
\n
confidence leading to a deep economic recession. This results in widespread job losses
\n
with the unemployment rate rising above the levels seen during the 2008 financial crisis.
\n
Rates are cut sharply in response, leading to some support to the recovery. House prices
\n
lose approximately a third of their value.
\n
Compared to 31 December 2022, the extreme downside again captures an extreme set
\n
of economic outcomes, with very sharp falls in asset prices and a marked deterioration in
\n
the labour market. The key difference is the assumed path for interest rates. Unlike at 31
\n
December 2022, when recessionary risks were explored in the context of a stubbornly
\n
high inflation environment, both inflation and interest rates are now assumed to follow a
\n
significantly lower trajectory \u2013 consistent with recession driven by material weakness in
\n
domestic demand.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
(audited)
\n
The main macroeconomic variables for each of the four scenarios used for expected credit loss (ECL) modelling are set out in the main macroeconomic variables table below.
\n
Main macroeconomic variables
\n\n \n
31 December 2023
31 December 2022
Extreme
Weighted
Extreme
Weighted
Upside
Base case
Downside
downside
average
Upside
Base case
Downside
downside
average
Five-year summary
%
%
%
%
%
%
%
%
%
%
GDP
1.8
1.0
0.5
(0.3)
0.9
2.2
1.3
0.8
0.4
1.2
Unemployment
3.5
4.6
5.2
6.8
4.8
3.9
4.5
4.9
6.7
4.8
House price index
3.9
0.3
(0.4)
(5.7)
0.3
5.1
0.8
(0.7)
(4.4)
0.6
Commercial real estate price
3.1
(0.2)
(2.0)
(6.8)
(0.6)
1.2
(1.9)
(2.8)
(9.1)
(2.5)
Consumer price index
1.7
2.6
5.2
1.8
2.8
3.6
4.2
4.4
8.2
4.8
Bank of England base rate
3.8
3.7
5.6
2.9
4.0
2.4
3.1
1.5
4.5
2.8
UK stock price index
4.8
3.3
1.2
(0.4)
2.8
3.0
1.4
(1.1)
(3.7)
0.5
World GDP
3.7
3.2
2.7
1.8
3.0
3.7
3.3
1.7
1.1
2.7
Probability weight
21.2
45.0
20.4
13.4
18.6
45.0
20.8
15.6
\n
(1)
The five-year summary runs from 2023-27 for 31 December 2023 and from 2022-26 for 31 December 2022.
\n
(2)
The table shows CAGR for annual GDP, average levels for the unemployment rate and Bank of England base rate and Q4 to Q4 CAGR for other parameters.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers (audited)
\n
Climate transition
\n
During 2023, NatWest Group continued to align its financial planning process with the
\n
climate transition planning process. This included adding climate policy and technology
\n
related transition assumptions into NatWest Group\u2019s base case macroeconomic scenario
\n
used for financial planning and assessment of ECL in this IFRS 9 reporting period. This
\n
resulted in an increase in ECL of less than \u00a31 million.
\n
As in the initial iteration of the Climate transition plan, included in NatWest Group\u2019s 2022
\n
Climate-related Disclosures Report, NatWest Group assesses the effects of climate
\n
transition policies within the base case macroeconomic scenario, using the UK Climate
\n
Change Committee (CCC) Balanced Net Zero (BNZ) scenario, aligned with the UK CCC
\n
sixth carbon budget, as a starting point. In addition, NatWest Group included estimated
\n
average policy delay into the climate economic assumptions for IFRS 9 purposes, based
\n
on the credibility ratings for sectoral policies provided by the UK CCC 2022 Progress
\n
Report to Parliament, to reflect estimated time delays based on credibility ratings as
\n
follows:
\n
\ue001
Credible policies
\u2013 estimated zero years of delayed adjustment to the BNZ pathway
\n
for the associated policy.
\n
\ue001
Policies with some or significant risk
\u2013 estimated three and five years of delay
\n
respectively for the associated policy.
\n
\ue001
Policies with insufficient plans
\u2013 estimated ten years of delay for the associated policy.
\n
The base case macroeconomic scenario now explicitly includes assumptions about the
\n
changes in transition policy expressed as an additional implicit carbon price. Implicit
\n
carbon price is an additional cost related to greenhouse gas emissions as a result of
\n
climate transition policy.
\n
NatWest Group assumes that between now and 2028, the transition policy will change
\n
slowly, and the implicit carbon price will increase modestly by \u00a310.5/tCO2e, which is
\n
consistent with the UK CCC BNZ scenario. The base case macroeconomic scenario also
\n
included assumptions about abatement technology development and specific sectors\u2019
\n
transition, for example, the switch from fossil fuels to renewable energy sources.
\n
NatWest Group will continue to enhance this analysis, including updates in the UK CCC
\n
2023 Progress Report to Parliament published in June 2023.
\n
While previous NatWest Group IFRS 9 base case scenarios included some climate
\n
transition considerations, they were based on all enacted policies and available
\n
technologies. The new approach described here applies to explicitly identifying the effect
\n
of additional climate transition policy.
\n
NatWest Group and its customers have a dependency on timely and appropriate
\n
government policies to provide the necessary impetus for technology development and
\n
customer behaviour changes, to enable the UK\u2019s successful transition to net zero. Policy
\n
delays and risks outlined in the UK CCC 2022 and 2023 Progress Reports, if not
\n
adequately addressed in a timely manner, put at risk the UK\u2019s net zero transition and in
\n
turn that of NatWest Group and its customers.
\n
For this first iteration of climate economic assumptions included within the base case
\n
macroeconomic scenario, NatWest Group focused on policy and technology related
\n
transition risks. It is assumed that in more extreme scenarios it is likely that climate policy
\n
changes would offset adverse/benign economic conditions. NatWest Group\u2019s tools,
\n
methodologies and assessment of climate risks will continue to evolve to further align
\n
financial planning and climate transition planning processes.
\n
Probability weightings of scenarios
\n
NatWest Group\u2019s quantitative approach to IFRS 9 multiple economic scenarios (MES)
\n
involves selecting a suitable set of discrete scenarios to characterise the distribution of
\n
risks in the economic outlook and assigning appropriate probability weights. This
\n
quantitative approach is used for 31 December 2023.
\n
The approach involves comparing UK GDP paths for NatWest Group\u2019s scenarios against
\n
a set of 1,000 model runs, following which, a percentile in the distribution is established
\n
that most closely corresponded to the scenario. Probability weight for base case is set
\n
first based on judgement, while probability weights for the alternate scenarios are
\n
assigned based on these percentiles scores.
\n
The assigned probability weights were judged to be aligned with the subjective
\n
assessment of balance of the risks in the economy. The weights were broadly
\n
comparable to those used at 31 December 2022 but with slightly less downside skew.
\n
This is reasonable as the inflation outturn since then has been encouraging, with
\n
continued disinflation and a reduced risk of stagflation. However, the risks still remain
\n
elevated and there is considerable uncertainty in the economic outlook, particularly with
\n
respect to persistence and the range of outcomes on inflation. Given that backdrop,
\n
NatWest Group judges it appropriate that downside-biased scenarios have higher
\n
combined probability weights than the upside-biased scenario. It presents good coverage
\n
to the range of outcomes assumed in the scenarios, including the potential for a robust
\n
recovery on the upside and exceptionally challenging outcomes on the downside. A
\n
21.2% weighting was applied to the upside scenario, a 45.0% weighting applied to the
\n
base case scenario, a 20.4% weighting applied to the downside scenario and a 13.4%
\n
weighting applied to the extreme downside scenario.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
\n
UK gross domestic product (\u00a3bn)
\n
2023Q1
2024Q1
2025Q1
2026Q1
2027Q1
2028Q1
\n
2000
\n
2100
\n
2200
\n
2300
\n
2400
\n
2500
\n
2600
\n
Upside
\n
Downside
\n
Base case
\n
Extreme downside
\n
Bank of England base rate (%)
\n
2023Q1
2024Q1
2025Q1
2026Q1
2027Q1
2028Q1
\n
0
\n
1
\n
2
\n
3
\n
4
\n
5
\n
6
\n
7
\n
Upside
\n
Downside
\n
Base case
\n
Extreme downside
\n
UK unemployment rate (%)
\n
2023Q1
2024Q1
2025Q1
2026Q1
2027Q1
2028Q1
\n
9
\n
8
\n
7
\n
6
\n
5
\n
4
\n
3
\n
2
\n
1
\n
0
\n
Upside
\n
Downside
\n
Base case
\n
Extreme downside
Economic loss drivers
(audited)
Annual figures
\n \n
GDP - annual growth
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
0.5
0.5
0.5
0.5
0.5
2024
3.6
0.4
(1.1)
(2.7)
0.3
2025
2.3
1.3
0.4
(1.6)
1.0
2026
1.2
1.6
1.2
1.2
1.4
2027
1.2
1.4
1.3
1.2
1.3
2028
1.2
1.4
1.3
1.2
1.3
Unemployment rate - annual average
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
4.2
4.2
4.2
4.2
4.2
2024
3.9
4.7
5.2
6.2
4.8
2025
3.2
4.7
5.8
8.4
5.1
2026
3.2
4.6
5.6
8.0
5.0
2027
3.3
4.6
5.5
7.4
4.8
2028
3.3
4.5
5.3
6.7
4.7
House price index - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
(2.9)
(2.9)
(2.9)
(2.9)
(2.9)
2024
7.2
(5.0)
(7.1)
(11.5)
(3.7)
2025
9.4
3.1
(3.1)
(14.2)
1.2
2026
2.8
3.4
5.5
(5.8)
2.7
2027
3.3
3.4
6.1
7.2
4.3
2028
3.5
3.4
4.4
6.6
3.9
Commercial real estate price - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
(7.2)
(7.2)
(7.2)
(7.2)
(7.2)
2024
12.7
-
(7.3)
(18.4)
(1.2)
2025
3.5
2.7
(2.0)
(20.0)
(0.5)
2026
4.6
2.0
3.8
6.7
3.4
2027
2.9
1.9
3.1
8.5
3.0
2028
1.3
0.8
2.6
8.6
2.0
\n \n
Consumer price index - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
4.6
4.6
4.6
4.6
4.6
2024
0.9
2.5
8.5
(1.2)
2.9
2025
0.7
2.0
5.3
1.7
2.4
2026
1.1
1.9
3.8
2.0
2.1
2027
1.2
1.9
3.7
2.0
2.2
2028
1.1
1.9
3.6
2.0
2.1
Bank of England base rate - annual average
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
4.68
4.68
4.68
4.68
4.68
2024
4.79
4.77
6.10
4.00
4.94
2025
3.46
3.46
6.08
2.06
3.81
2026
3.17
2.85
5.69
2.00
3.38
2027
2.75
2.75
5.31
2.00
3.17
2028
2.50
2.75
5.06
2.25
3.10
UK stock price index - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
3.7
3.7
3.7
3.7
3.7
2024
8.1
3.2
(17.4)
(41.5)
(5.9)
2025
5.1
3.2
8.7
24.9
6.5
2026
3.6
3.2
7.9
16.7
5.5
2027
3.6
3.2
5.6
11.0
4.6
2028
2.9
3.2
5.3
9.9
4.3
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
(audited)
\n
Worst points
\n\n \n
31 December 2023
31 December 2022
Extreme
Weighted
Extreme
Weighted
Downside
downside
average
Downside
downside
average
%
Quarter
%
Quarter
%
%
Quarter
%
Quarter
%
GDP
(1.2)
Q3 2024
(4.5)
Q4 2024
0.3
(3.2)
Q4 2023
(4.7)
Q4 2023
(0.8)
Unemployment rate - peak
5.8
Q1 2025
8.5
Q2 2025
5.2
6.0
Q1 2024
8.5
Q3 2024
5.4
House price index
(12.5)
Q4 2025
(31.7)
Q2 2026
(6.5)
(15.0)
Q1 2025
(26.2)
Q3 2025
(3.4)
Commercial real estate price
(16.6)
Q1 2025
(39.9)
Q3 2025
(10.2)
(21.8)
Q4 2023
(46.8)
Q3 2024
(16.4)
Consumer price index - highest four quarter change
10.3
Q1 2023
10.3
Q1 2023
10.3
15.7
Q1 2023
17.0
Q4 2023
11.7
Bank of England base rate
- extreme level
6.5
Q4 2024
5.3
Q4 2023
5.3
4.0
Q1 2023
6.0
Q1 2024
4.1
UK stock price index
(14.3)
Q4 2024
(39.3)
Q4 2024
(2.4)
(26.0)
Q4 2023
(48.7)
Q4 2023
(14.1)
\n
(1)
Unless specified otherwise, the figures show falls relative to the starting period. The calculations are performed over five years, with a starting point of Q4 2022 for 31 December 2023 scenarios and Q4 2021 for 31 December 2022 scenarios.
\n
Use of the scenarios in Personal lending
\n
Personal lending follows a discrete scenario approach. The PD, EAD, LGD and resultant
\n
ECL for each discrete scenario is calculated using product specific economic response
\n
models. Probability weighted averages across the suite of economic scenarios are then
\n
calculated for each of the model outputs, with the weighted PD being used for staging
\n
purposes.
\n
Business Banking utilises the Personal lending methodology rather than the Wholesale
\n
lending methodology.
\n
Use of the scenarios in Wholesale lending
\n
Wholesale lending follows a continuous scenario approach to calculate ECL. PD and LGD
\n
values arising from multiple economic forecasts (based on the concept of credit cycle
\n
indices) are simulated around the central projection. The central projection is a weighted
\n
average of economic scenarios with the scenarios translated into credit cycle indices
\n
using the Wholesale economic response models.
\n
UK economic uncertainty
\n
The high inflation environment alongside high interest rates are presenting significant
\n
headwinds for some businesses and consumers, in many cases compounding. These cost
\n
pressures remain a feature of the economic environment, though they are expected to
\n
moderate over 2024 and 2025 in the base case scenario. NatWest Group has considered
\n
where these are most likely to affect the customer base, with the cost of borrowing
\n
during 2023 for both businesses and consumers presenting an additional affordability
\n
challenge.
\n
The effects of these risks are not expected to be fully captured by forward-looking credit
\n
modelling, particularly given the high inflation environment, low unemployment base case
\n
outlook. Any incremental ECL effects for these risks will be captured via post model
\n
adjustments and are detailed further in the Governance and post model adjustments
\n
section.
\n
Model and monitoring enhancements
\n
During 2023, the monitoring framework for the retail model suite was enhanced to
\n
enable more granular performance tracking at key segment levels, such as balance
\n
transfers versus non-balance transfers for the credit cards models. A new Business
\n
Banking PD, EAD and LGD model suite was redeveloped in 2023, ensuring appropriate
\n
treatment of government-guaranteed loans.
\n
In addition, the retail economic response models, which are used to bring forward-
\n
looking information into the IFRS 9 PD models, were redeveloped to bring in more
\n
inflationary drivers. In Wholesale lending, new economic response models were
\n
introduced in 2022 and 2023 that follow an improved modelling approach and put higher
\n
weight on stock price indices compared to previous models.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL sensitivity analysis
(audited)
\n
The recognition and measurement of ECL is complex and involves the use of significant
\n
judgment and estimation, particularly in times of economic volatility and uncertainty. This
\n
includes the formulation and incorporation of multiple forward-looking economic
\n
conditions into ECL to meet the measurement objective of IFRS 9. The ECL provision is
\n
sensitive to the model inputs and economic assumptions underlying the estimate.
\n
The impact arising from the base case, upside, downside and extreme downside
\n
scenarios was simulated. These scenarios are used in the methodology for Personal
\n
multiple economic scenarios as described in the Economic loss drivers section. In the
\n
simulations, NatWest Group has assumed that the economic macro variables associated
\n
with these scenarios replace the existing base case economic assumptions, giving them a
\n
100% probability weighting and therefore serving as a single economic scenario.
\n
These scenarios were applied to all modelled portfolios in the analysis below, with the
\n
simulation impacting both PDs and LGDs. Post model adjustments included in the ECL
\n
estimates that were modelled were sensitised in line with the modelled ECL movements,
\n
but those that were judgmental in nature, primarily those for deferred model calibrations
\n
and economic uncertainty, were not (refer to the Governance and post model
\n
adjustments section) on the basis these would be re-evaluated by management through
\n
ECL governance for any new economic scenario outlook and not be subject to an
\n
automated calculation. As expected, the scenarios create differing impacts on ECL by
\n
portfolio and the impacts are deemed reasonable. In this simulation, it is assumed that
\n
existing modelled relationships between key economic variables and loss drivers hold, but
\n
in practice other factors would also have an impact, for example, potential customer
\n
behaviour changes and policy changes by lenders that might impact on the wider
\n
availability of credit.
\n
The focus of the simulations is on ECL provisioning requirements on performing
\n
exposures in Stage 1 and Stage 2. The simulations are run on a stand-alone basis and
\n
are independent of each other; the potential ECL impacts reflect the simulated impact at
\n
31 December 2023. Scenario impacts on SICR should be considered when evaluating the
\n
ECL movements of Stage 1 and Stage 2. In all scenarios the total exposure was the
\n
same but exposure by stage varied in each scenario.
\n
Stage 3 provisions are not subject to the same level of measurement uncertainty \u2013
\n
default is an observed event as at the balance sheet date. Stage 3 provisions therefore
\n
were not considered in this analysis.
\n
NatWest Group\u2019s core criterion to identify a SICR is founded on PD deterioration. Under
\n
the simulations, PDs change and result in exposures moving between Stage 1 and Stage
\n
2 contributing to the ECL impact.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL sensitivity analysis
(audited)
\n\n \n
Moderate
Moderate
Extreme
Base
upside
downside
downside
2023
Actual
scenario
scenario
scenario
scenario
Stage 1 modelled loans (\u00a3m)
Retail Banking - mortgages
173,982
174,642
175,311
171,320
165,143
Retail Banking - unsecured
8,802
8,838
8,992
8,652
8,334
Wholesale - property
26,933
27,088
27,200
26,645
22,326
Wholesale - non-property
123,228
124,107
124,742
122,243
104,657
332,945
334,675
336,245
328,860
300,460
Stage 1 modelled ECL (\u00a3m)
Retail Banking - mortgages
86
86
84
84
79
Retail Banking - unsecured
221
222
219
221
211
Wholesale - property
102
80
61
131
184
Wholesale - non-property
276
246
211
331
434
685
634
575
767
908
Stage 1 coverage
Retail Banking - mortgages
0.05%
0.05%
0.05%
0.05%
0.05%
Retail Banking - unsecured
2.51%
2.51%
2.44%
2.55%
2.53%
Wholesale - property
0.38%
0.30%
0.22%
0.49%
0.82%
Wholesale - non-property
0.22%
0.20%
0.17%
0.27%
0.41%
0.21%
0.19%
0.17%
0.23%
0.30%
Stage 2 modelled loans (\u00a3m)
Retail Banking - mortgages
17,825
17,165
16,496
20,487
26,664
Retail Banking - unsecured
3,772
3,736
3,582
3,922
4,240
Wholesale - property
3,306
3,151
3,039
3,594
7,913
Wholesale - non-property
13,512
12,633
11,998
14,497
32,083
38,415
36,685
35,115
42,500
70,900
Stage 2 modelled ECL (\u00a3m)
Retail Banking - mortgages
60
56
48
70
100
Retail Banking - unsecured
445
435
383
487
554
Wholesale - property
93
80
68
111
273
Wholesale - non-property
364
310
264
432
789
962
881
763
1,100
1,716
Stage 2 coverage
Retail Banking - mortgages
0.34%
0.33%
0.29%
0.34%
0.38%
Retail Banking - unsecured
11.80%
11.64%
10.69%
12.42%
13.07%
Wholesale - property
2.81%
2.54%
2.24%
3.09%
3.45%
Wholesale - non-property
2.69%
2.45%
2.20%
2.98%
2.46%
2.50%
2.40%
2.17%
2.59%
2.42%
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL sensitivity analysis
(audited)
\n\n \n
Moderate
Moderate
Extreme
Base
upside
downside
downside
2023
Actual
scenario
scenario
scenario
scenario
Stage 1 and Stage 2 modelled loans (\u00a3m)
Retail Banking - mortgages
191,807
191,807
191,807
191,807
191,807
Retail Banking - unsecured
12,574
12,574
12,574
12,574
12,574
Wholesale - property
30,239
30,239
30,239
30,239
30,239
Wholesale - non-property
136,740
136,740
136,740
136,740
136,740
371,360
371,360
371,360
371,360
371,360
Stage 1 and Stage 2 modelled ECL (\u00a3m)
Retail Banking - mortgages
146
142
132
154
179
Retail Banking - unsecured
666
657
602
708
765
Wholesale - property
195
160
129
242
457
Wholesale - non-property
640
556
475
763
1,223
1,647
1,515
1,338
1,867
2,624
Stage 1 and Stage 2 coverage
Retail Banking - mortgages
0.08%
0.07%
0.07%
0.08%
0.09%
Retail Banking - unsecured
5.30%
5.23%
4.79%
5.63%
6.08%
Wholesale - property
0.64%
0.53%
0.43%
0.80%
1.51%
Wholesale - non-property
0.47%
0.41%
0.35%
0.56%
0.89%
0.44%
0.41%
0.36%
0.50%
0.71%
Reconciliation to Stage 1 and Stage 2 ECL (\u00a3m)
ECL on modelled exposure
1,647
1,515
1,338
1,867
2,624
ECL on UBIDAC modelled exposures
8
8
8
8
8
ECL on non-modelled exposures
30
30
30
30
30
Total Stage 1 and Stage 2 ECL (\u00a3m)
1,685
1,553
1,376
1,905
2,662
Variance to actual total Stage 1 and Stage 2 ECL (\u00a3m)
(132)
(309)
220
977
Reconciliation to Stage 1 and Stage 2 flow exposure (\u00a3m)
Modelled loans
371,360
371,360
371,360
371,360
371,360
UBIDAC loans
318
318
318
318
318
Non-modelled loans
19,522
19,522
19,522
19,522
19,522
Other asset classes
153,439
153,439
153,439
153,439
153,439
\n
(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 31 December 2023 and therefore does not include variation in future undrawn exposure
\n
values.
\n
(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.
\n
(3)
Exposures related to Ulster Bank RoI continuing operations were not included in the simulations, the current Ulster Bank RoI ECL has been included across all scenarios to enable reconciliation to other disclosures.
\n
(4)
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 31 December 2023
The simulations change the composition of Stage 1 and Stage 2 exposure but total
\n
exposure is unchanged under each scenario as the loan population is static.
\n
(5)
Refer to the Economic loss drivers section for details of economic scenarios.
\n
(6)
Refer to the NatWest Group plc 2022 Annual Report and Accounts for 2022 comparatives.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL adequacy
(audited)
\n
\ue001
If the economics were as negative as observed in the extreme downside (i.e. 100%
\n
probability weighting), total Stage 1 and Stage 2 ECL was simulated to increase by
\n
around \u00a31 billion (approximately 58%). In this scenario, Stage 2 exposure increased
\n
significantly and was the key driver of the simulated ECL rise. The movement in
\n
Stage 2 balances in the other simulations was less significant.
\n
\ue001
In the Wholesale portfolio, there was a significant increase in ECL under both a
\n
moderate and extreme downside scenario. The Wholesale property ECL increase
\n
was mainly due to commercial real estate prices which showed negative growth until
\n
2025 and significant deterioration in the stock index. The non-property increase was
\n
mainly due to GDP contraction and significant deterioration in the stock index.
\n
\ue001
A net improvement in the economic scenarios since 2022 resulted in a reduction in
\n
modelled ECL.
\n
\ue001
Given that continued uncertainty remained due to high inflation, high interest rates
\n
during 2023 and supply chain disruption, NatWest Group utilised a framework of
\n
quantitative and qualitative measures to support the levels of ECL coverage. This
\n
included economic data, credit performance insights, supply chain contagion analysis
\n
and problem debt trends. This was particularly important for consideration of post
\n
model adjustments.
\n
\ue001
As the effects of these economic risks evolve into 2024, there is a risk of further
\n
credit deterioration. However, the income statement effect of this should have been
\n
mitigated by the forward-looking provisions retained on the balance sheet at 31
\n
December 2023.
\n
\ue001
There are a number of key factors that could drive further downside to impairments,
\n
through deteriorating economic and credit metrics and increased stage migration as
\n
credit risk increases for more customers. Such factors which could impact the IFRS 9
\n
models, include an adverse deterioration in unemployment and GDP in the economies
\n
in which NatWest Group operates.
\n
Movement in ECL provision
\n
(1)
\n
The table below shows the main ECL provision movements during the year.
\n\n \n
ECL provision
\u00a3m
At 1 January 2023
3,434
Transfers to disposal groups and reclassifications
(80)
Changes in economic forecasts
(125)
Changes in risk metrics and exposure: Stage 1 and Stage 2
95
Changes in risk metrics and exposure: Stage 3
557
Judgmental changes:
Changes in post model adjustments for Stage 1, Stage 2 and Stage 3
74
Write-offs and other
(310)
At 31 December 2023
3,645
At 1 January 2022
3,806
2022 movements
(372)
At 31 December 2022
3,434
\n
(1)
The above table is not within the scope of the independent auditors\u2019 report
.
\n
\ue001
During the year, overall ECL increased reflecting portfolio growth alongside broadly
\n
stable portfolio performance. There were Stage 3 default flow increases, particularly
\n
in the Personal portfolio, but these were broadly in line with expectations due to
\n
growth and normalisation of risk parameters. This was mitigated by a net ECL
\n
reduction from 2023 updates to economic scenarios and weightings.
\n
\ue001
Judgemental ECL post model adjustments, increased from 31 December 2022,
\n
reflecting continued economic uncertainty from inflation being higher for longer,
\n
higher interest rates and liquidity concerns, and represented 13% of total ECL (2022
\n
\u2013 12%).
\n
\ue001
For the Wholesale portfolio, default levels were lower than historic trends as the
\n
effects of higher inflation, supply chain disruption and higher interest rates, had to
\n
date, not led to a significant change in defaults.
\n
\ue001
Stage 3 balances increased due to default flows, as described above, alongside
\n
reduced write-off activity in 2023.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Credit risk \u2013 Banking activities
\n
Introduction
\n
This section details the credit risk profile of NatWest Group\u2019s banking activities. Refer to Accounting policy 2.3 and
\n
Note 15 to the consolidated financial statements for policies and critical judgments relating to impairment loss
\n
determination.
\n
Financial instruments within the scope of the IFRS 9 ECL framework (audited)
\n
Refer to Note 10 to the consolidated financial statements for balance sheet analysis of financial assets that are
\n
classified as amortised cost or fair value through other comprehensive income (FVOCI), the starting point for IFRS 9
\n
ECL framework assessment.
\n\n \n
31 December 2023
31 December 2022
Gross
ECL
Net
Gross
ECL
Net
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Balance sheet total gross amortised cost and FVOCI
553.8
554.3
In scope of IFRS 9 ECL framework
545.3
550.3
% in scope
98%
99%
Loans to customers - in scope - amortised cost
385.3
3.6
381.7
370.1
3.3
366.8
Loans to customers - in scope - FVOCI
0.1
-
0.1
0.1
-
0.1
Loans to banks - in scope - amortised cost
6.7
-
6.7
6.9
-
6.9
Total loans - in scope
392.1
3.6
388.5
377.1
3.3
373.8
Stage 1
348.6
0.7
347.9
325.2
0.6
324.6
Stage 2
37.9
0.9
37.0
46.8
0.9
45.9
Stage 3
5.6
2.0
3.6
5.1
1.8
3.3
Other financial assets - in scope - amortised cost
124.9
-
124.9
156.4
-
156.4
Other financial assets - in scope - FVOCI
28.3
-
28.3
16.8
-
16.8
Total other financial assets - in scope
153.2
-
153.2
173.2
-
173.2
Stage 1
152.0
-
152.0
172.4
-
172.4
Stage 2
1.2
-
1.2
0.8
-
0.8
Out of scope of IFRS 9 ECL framework
8.5
na
8.5
4.0
na
4.0
Loans to customers - out of scope - amortised cost
(0.4)
na
(0.4)
(0.4)
na
(0.4)
Loans to banks - out of scope - amortised cost
0.3
na
0.3
0.2
na
0.2
Other financial assets - out of scope - amortised cost
8.3
na
8.3
4.1
na
4.1
Other financial assets - out of scope - FVOCI
0.3
na
0.3
0.1
na
0.1
na = not applicable
\n
The assets outside the scope of IFRS 9 ECL framework
\n
were as follows:
\n
\ue001
Settlement balances, items in the course of collection,
\n
cash balances and other non-credit risk assets of \u00a38.6
\n
billion (2022 \u2013 \u00a34.3 billion). These were assessed as
\n
having no ECL unless there was evidence that they
\n
were defaulted.
\n
\ue001
Equity shares of \u00a30.3 billion (2022 \u2013 \u00a30.4 billion) as not
\n
within the IFRS 9 ECL framework by definition.
\n
\ue001
Fair value adjustments on loans hedged by interest rate
\n
swaps, where the underlying loan was within the IFRS 9
\n
ECL scope of \u00a3(0.3) billion (2022 \u2013 \u00a3(0.6) billion).
\n
Contingent liabilities and commitments
\n
In addition to contingent liabilities and commitments
\n
disclosed in Note 26 to the consolidated financial
\n
statements, reputationally-committed limits were also
\n
included in the scope of the IFRS 9 ECL framework. These
\n
were offset by \u00a30.1 billion (2022 \u2013 \u00a3(0.1) billion) out of scope
\n
balances primarily related to facilities that, if drawn, would
\n
not be classified as amortised cost or FVOCI, or undrawn
\n
limits relating to financial assets exclusions. Total
contingent
\n
liabilities (including financial guarantees) and commitments
\n
within IFRS 9 ECL scope of \u00a3132.0 billion (2022 \u2013 \u00a3137.2
\n
billion) comprised Stage 1 \u00a3120.6 billion (2022 \u2013 \u00a3119.2
\n
billion); Stage 2 \u00a310.7 billion (2022 \u2013 \u00a317.3 billion); and
\n
Stage 3 \u00a30.7 billion (2022 \u2013 \u00a30.7 billion).
\n
The ECL relating to off balance sheet exposures was \u00a30.1
\n
billion (2022 \u2013 \u00a30.1 billion). The total ECL in the remainder
\n
of the Credit risk section of \u00a33.6 billion (2022 \u2013 \u00a33.4 billion)
\n
included ECL for both on and off-balance sheet exposures
\n
for non-disposal groups.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segment analysis \u2013 portfolio summary (audited)
\n
The table below shows gross loans and ECL, by segment and stage, within the scope of the IFRS 9 ECL framework.
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans - amortised cost and FVOCI
(1)
Stage 1
182,297
17,565
119,047
29,677
348,586
Stage 2
21,208
906
15,771
6
37,891
Stage 3
3,133
258
2,162
10
5,563
Of which: individual
-
186
845
-
1,031
Of which: collective
3,133
72
1,317
10
4,532
Subtotal excluding disposal group loans
206,638
18,729
136,980
29,693
392,040
Disposal group loans
67
67
Total
29,760
392,107
ECL provisions
(2)
Stage 1
306
20
356
27
709
Stage 2
502
20
447
7
976
Stage 3
1,097
34
819
10
1,960
Of which: individual
-
34
298
-
332
Of which: collective
1,097
-
521
10
1,628
Subtotal excluding ECL provisions on disposal group loans
1,905
74
1,622
44
3,645
ECL provisions on disposal group loans
36
36
Total
80
3,681
ECL provisions coverage
(3)
Stage 1 (%)
0.17
0.11
0.30
0.09
0.20
Stage 2 (%)
2.37
2.21
2.83
nm
2.58
Stage 3 (%)
35.01
13.18
37.88
100.00
35.23
ECL provisions coverage excluding disposal group loans
0.92
0.40
1.18
0.15
0.93
ECL provisions coverage on disposal group loans
53.73
53.73
Total
0.27
0.94
Impairment (releases)/losses
ECL (release)/charge
(4)
465
14
94
5
578
Stage 1
(172)
(9)
(222)
6
(397)
Stage 2
440
15
182
8
645
Stage 3
197
8
134
(9)
330
Of which: individual
-
8
80
1
89
Of which: collective
197
-
54
(10)
241
Continuing operations
465
14
94
5
578
Discontinued operations
(6)
(6)
Total
(1)
572
Amounts written-off
188
2
122
7
319
Of which: individual
-
2
40
-
42
Of which: collective
188
-
82
7
277
\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segment analysis \u2013 portfolio summary (audited)
\n \n
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans - amortised cost and FVOCI
(1)
Stage 1
174,727
18,367
108,791
23,339
325,224
Stage 2
21,561
801
24,226
245
46,833
Stage 3
2,565
242
2,166
123
5,096
Of which: individual
-
168
905
48
1,121
Of which: collective
2,565
74
1,261
75
3,975
Subtotal excluding disposal group loans
198,853
19,410
135,183
23,707
377,153
Disposal group loans
1,502
1,502
Total
25,209
378,655
ECL provisions
(2)
Stage 1
251
21
342
18
632
Stage 2
450
14
534
45
1,043
Stage 3
917
26
747
69
1,759
Of which: individual
-
26
251
10
287
Of which: collective
917
-
496
59
1,472
Subtotal excluding ECL provisions on disposal group loans
1,618
61
1,623
132
3,434
ECL provisions on disposal group loans
53
53
Total
185
3,487
ECL provisions coverage
(3)
Stage 1 (%)
0.14
0.11
0.31
0.08
0.19
Stage 2 (%)
2.09
1.75
2.20
18.37
2.23
Stage 3 (%)
35.75
10.74
34.49
56.10
34.52
ECL provisions coverage excluding disposal group loans
0.81
0.31
1.20
0.56
0.91
ECL provisions coverage on disposal group loans
3.53
3.53
Total
0.73
0.92
Impairment (releases)/losses
ECL (release)/charge
(4)
229
(2)
122
(12)
337
Stage 1
(146)
2
(135)
(11)
(290)
Stage 2
268
(7)
108
24
393
Stage 3
107
3
149
(25)
234
Of which: individual
-
3
57
(6)
54
Of which: collective
107
-
92
(19)
180
Continuing operations
229
(2)
122
(12)
337
Discontinued operations
(71)
(71)
Total
(83)
266
Amounts written-off
216
15
224
27
482
Of which: individual
-
15
153
-
168
Of which: collective
216
-
71
27
314
\n
(1)
Includes loans to customers and banks.
\n
(2)
Includes \u00a39 million (2022 \u2013 \u00a33 million) related to assets classified as FVOCI and
\n
\u00a30.1 billion (2022 \u2013 \u00a30.1 billion) related to off-balance sheet exposures.
\n
(3)
ECL provisions coverage is calculated as ECL provisions divided by loans \u2013
\n
amortised cost and FVOCI. It is calculated on loans and total ECL provisions,
\n
including ECL for other (non-loan) assets and unutilised exposure. Some
\n
segments with a high proportion of debt securities or unutilised exposure may
\n
result in a not meaningful coverage ratio.
\n
(4)
Includes a \u00a316 million release (2022 \u2013 \u00a33 million charge) related to other
\n
financial assets, of which \u00a36 million charge (2022 \u2013 nil) related to assets
\n
classified as FVOCI, and includes a \u00a39 million release (2022 \u2013 \u00a35 million release)
\n
related to contingent liabilities.
\n
(5)
The table shows gross loans only and excludes amounts that were outside the
\n
scope of the ECL framework. Refer to the Financial instruments within the
\n
scope of the IFRS 9 ECL framework section for further details. Other financial
\n
assets within the scope of the IFRS 9 ECL framework were cash and balances
\n
at central banks totalling \u00a3103.1 billion (2022 \u2013 \u00a3143.3 billion) and debt
\n
securities of \u00a350.1 billion (2022 \u2013 \u00a329.9 billion).
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segment analysis \u2013 portfolio summary (audited)
\n
The table below shows Ulster Bank RoI disposal groups for Personal and Wholesale, by stage, for gross loans, off-balance sheet exposures and ECL. The tables in the rest of the Credit
\n
risk section are shown on a continuing basis and therefore exclude these exposures.
Off-balance sheet
Loans - amortised cost and FVOCI
Loan
Contingent
ECL provisions
Stage 1
Stage 2
Stage 3
Total
commitments
liabilities
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
2
4
2
8
-
-
-
1
1
2
Wholesale
6
15
38
59
1
2
3
7
24
34
Total
8
19
40
67
1
2
3
8
25
36
2022
Personal
-
-
-
-
-
-
-
-
-
-
Wholesale
1,269
193
40
1,502
413
19
17
19
17
53
Total
1,269
193
40
1,502
413
19
17
19
17
53
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segmental loans and impairment metrics (audited)
\n
The table below shows gross loans and ECL provisions, by days past due, by segment and stage, within the scope of the ECL framework.
Gross loans
ECL provisions
(2)
Stage 2
(1)
Stage 2
(1)
Not past
Not past
Stage 1
due
1-30 DPD
>30 DPD
Total
Stage 3
Total
Stage 1
due
1-30 DPD
>30 DPD
Total
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Retail Banking
182,297
20,128
738
342
21,208
3,133
206,638
306
453
15
34
502
1,097
1,905
Private Banking
17,565
772
77
57
906
258
18,729
20
18
1
1
20
34
74
Personal
14,296
158
73
24
255
209
14,760
3
2
-
-
2
20
25
Wholesale
3,269
614
4
33
651
49
3,969
17
16
1
1
18
14
49
Commercial & Institutional
119,047
14,689
657
425
15,771
2,162
136,980
356
415
21
11
447
819
1,622
Personal
2,268
15
21
7
43
52
2,363
2
-
-
-
-
16
18
Wholesale
116,779
14,674
636
418
15,728
2,110
134,617
354
415
21
11
447
803
1,604
Central items & other
29,677
5
-
1
6
10
29,693
27
6
-
1
7
10
44
Personal
4
2
-
1
3
6
13
5
1
-
1
2
9
16
Wholesale
29,673
3
-
-
3
4
29,680
22
5
-
-
5
1
28
Total loans
348,586
35,594
1,472
825
37,891
5,563
392,040
709
892
37
47
976
1,960
3,645
Of which:
Personal
198,865
20,303
832
374
21,509
3,400
223,774
316
456
15
35
506
1,142
1,964
Wholesale
149,721
15,291
640
451
16,382
2,163
168,266
393
436
22
12
470
818
1,681
2022
Retail Banking
174,727
20,653
605
303
21,561
2,565
198,853
251
406
14
30
450
917
1,618
Private Banking
18,367
730
39
32
801
242
19,410
21
14
-
-
14
26
61
Personal
15,182
122
35
16
173
207
15,562
5
1
-
-
1
17
23
Wholesale
3,185
608
4
16
628
35
3,848
16
13
-
-
13
9
38
Commercial & Institutional
108,791
22,520
956
750
24,226
2,166
135,183
342
491
26
17
534
747
1,623
Personal
2,475
17
17
7
41
46
2,562
3
1
-
-
1
12
16
Wholesale
106,316
22,503
939
743
24,185
2,120
132,621
339
490
26
17
533
735
1,607
Central items & other
23,339
234
4
7
245
123
23,707
18
42
1
2
45
69
132
Personal
54
70
3
6
79
13
146
1
11
1
2
14
11
26
Wholesale
23,285
164
1
1
166
110
23,561
17
31
-
-
31
58
106
Total loans
325,224
44,137
1,604
1,092
46,833
5,096
377,153
632
953
41
49
1,043
1,759
3,434
Of which:
Personal
192,438
20,862
660
332
21,854
2,831
217,123
260
419
15
32
466
957
1,683
Wholesale
132,786
23,275
944
760
24,979
2,265
160,030
372
534
26
17
577
802
1,751
\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segmental loans and impairment metrics (audited)
\n
The table below shows ECL and ECL provisions coverage, by days past due, by segment and stage, within the scope of the ECL framework.
ECL provisions coverage
ECL
Stage 2
(1,2)
Total (release)
Amounts
Stage 1
Not past due
1-30 DPD
>30 DPD
Total
Stage 3
Total
/charge
written-off
%
2023
%
%
%
%
%
%
\u00a3m
\u00a3m
Retail Banking
0.17
2.25
2.03
9.94
2.37
35.01
0.92
465
188
Private Banking
0.11
2.33
1.30
1.75
2.21
13.18
0.40
14
2
Personal
0.02
1.27
-
-
0.78
9.57
0.17
(3)
2
Wholesale
0.52
2.61
25.00
3.03
2.76
28.57
1.23
17
-
Commercial & Institutional
0.30
2.83
3.20
2.59
2.83
37.88
1.18
94
122
Personal
0.09
-
-
-
-
30.77
0.76
5
1
Wholesale
0.30
2.83
3.30
2.63
2.84
38.06
1.19
89
121
Central items & other
0.09
nm
-
nm
nm
nm
0.15
5
7
Personal
nm
nm
-
nm
nm
nm
nm
15
2
Wholesale
0.07
nm
-
-
nm
25.00
0.09
(10)
5
Total loans
0.20
2.51
2.51
5.70
2.58
35.23
0.93
578
319
Of which:
Personal
0.16
2.25
1.80
9.36
2.35
33.59
0.88
482
193
Wholesale
0.26
2.85
3.44
2.66
2.87
37.82
1.00
96
126
2022
Retail Banking
0.14
1.97
2.31
9.90
2.09
35.75
0.81
229
216
Private Banking
0.11
1.92
-
-
1.75
10.74
0.31
(2)
15
Personal
0.03
0.82
-
-
0.58
8.21
0.15
(3)
2
Wholesale
0.50
2.14
-
-
2.07
25.71
0.99
1
13
Commercial & Institutional
0.31
2.18
2.72
2.27
2.20
34.49
1.20
122
224
Personal
0.12
5.88
-
-
2.44
26.09
0.62
4
2
Wholesale
0.32
2.18
2.77
2.29
2.20
34.67
1.21
118
222
Central items & other
0.08
17.95
25.00
28.57
18.37
56.10
0.56
(12)
27
Personal
1.85
15.71
33.33
33.33
17.72
84.62
17.81
11
1
Wholesale
0.07
18.90
-
-
18.67
52.73
0.45
(23)
26
Total loans
0.19
2.16
2.56
4.49
2.23
34.52
0.91
337
482
Of which:
Personal
0.14
2.01
2.27
9.64
2.13
33.80
0.78
241
221
Wholesale
0.28
2.29
2.75
2.24
2.31
35.41
1.09
96
261
\n
(1)
30 DPD \u2013 30 days past due, the mandatory 30 days past due backstop as prescribed by the IFRS 9 guidance for a SICR.
\n
(2)
Some segments with a high proportion of debt securities or unutilised exposure may result in a not meaningful coverage ratio.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segmental loans and impairment metrics (audited)
\n
\ue001
Retail Banking
\u2013 Balance sheet growth continued during H2 2023, although at a
\n
reduced pace compared to H1 2023, reflecting the wider UK mortgage market
\n
trends. Unsecured balances growth in H2 2023, primarily in credit cards, was a
\n
continuation of the strong customer demand seen in the first half of the year.
\n
Lending criteria and affordability assumptions continue to be reviewed to ensure
\n
new business is assessed appropriately in the higher interest rate and inflationary
\n
environment. While portfolio performance continued to remain stable, total ECL
\n
coverage increased. The rise in coverage was reflective of increased Stage 3 ECL
\n
on unsecured portfolios, mainly due to reduced write-off activity, however, Stage 3
\n
inflows were higher this year, in line with growth and normalisation of risk
\n
parameters. The modest increase in good book coverage during the year reflected
\n
a slight increase in early arrears levels and a rise in the unsecured mix of the
\n
portfolio. Furthermore, post model adjustments to capture increased affordability
\n
pressures on customers due to high inflation and interest rates have increased
\n
during the year, ensuring ECL reflects the continued uncertainty despite modelled
\n
ECL reductions due to improved forward-looking economic updates since the end
\n
of 2022.
\n
\ue001
Commercial & Institutional
\u2013 Growth in exposure in Commercial & Institutional was
\n
driven by increased exposure to financial institutions, partially offset by reductions
\n
in other sectors including retail. There were also continued repayments of COVID-
\n
19 government lending schemes, and strategic reductions in certain sectors.
\n
Sector appetite continues to be reviewed regularly, with particular focus on sector
\n
clusters and sub-sectors that are vulnerable to inflationary and supply chain
\n
pressures or deemed to represent a heightened risk. Stage 2 ECL reduced due to
\n
positive portfolio performance and improvements in the latest economic scenarios.
\n
Coverage decreased due to portfolio growth with ECL broadly flat, but coverage
\n
on Stage 1 and Stage 2 was significantly above pre-COVID-19 levels, reflecting
\n
continued economic uncertainty.
\n
\ue001
Other
\u2013 Balance sheet growth in 2023 compared to 2022 was mainly due to an
\n
increase in central items held in the course of treasury related management
\n
activities.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
\n
The table below shows financial assets and off-balance sheet exposures gross of ECL and related ECL provisions, impairment and past due by sector, asset quality and geographical
\n
region.
Personal
Wholesale
Mortgages (1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans by geography
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- UK
208,275
5,893
9,592
223,760
30,703
65,033
39,906
2,016
137,658
361,418
- RoI
-
11
3
14
9
888
279
-
1,176
1,190
- Other Europe
-
-
-
-
375
5,096
7,865
399
13,735
13,735
- RoW
-
-
-
-
120
6,322
9,037
218
15,697
15,697
Loans by stage
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- Stage 1
188,140
3,742
6,983
198,865
27,316
63,690
56,105
2,610
149,721
348,586
- Stage 2
17,854
2,022
1,633
21,509
3,270
12,145
966
1
16,382
37,891
- Stage 3
2,281
140
979
3,400
621
1,504
16
22
2,163
5,563
- Of which: individual
122
-
20
142
240
625
2
22
889
1,031
- Of which: collective
2,159
140
959
3,258
381
879
14
-
1,274
4,532
Loans - past due analysis
(2)
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- Not past due
205,405
5,743
8,578
219,726
30,264
74,052
56,735
2,633
163,684
383,410
- Past due 1-30 days
1,178
41
71
1,290
491
2,222
332
-
3,045
4,335
- Past due 31-90 days
518
38
112
668
179
437
12
-
628
1,296
- Past due 91-180 days
445
32
103
580
42
71
2
-
115
695
- Past due >180 days
729
50
731
1,510
231
557
6
-
794
2,304
Loans - Stage 2
17,854
2,022
1,633
21,509
3,270
12,145
966
1
16,382
37,891
- Not past due
16,803
1,971
1,529
20,303
3,071
11,287
932
1
15,291
35,594
- Past due 1-30 days
765
27
40
832
100
516
24
-
640
1,472
- Past due 31-90 days
286
24
64
374
99
342
10
-
451
825
Weighted average life
(3)
- ECL measurement (years)
9
3
6
6
6
6
2
-
6
6
Weighted average 12 months PDs
(3)
- IFRS 9 (%)
0.50
3.45
5.29
0.75
1.45
1.59
0.19
0.37
1.07
0.89
- Basel (%)
0.67
3.37
3.15
0.84
0.94
1.25
0.17
0.37
0.81
0.83
ECL provisions by geography
420
376
1,168
1,964
398
1,201
66
16
1,681
3,645
- UK
420
365
1,163
1,948
384
999
38
13
1,434
3,382
- RoI
-
11
5
16
-
6
1
-
7
23
- Other Europe
-
-
-
-
7
146
12
-
165
165
- RoW
-
-
-
-
7
50
15
3
75
75
\n
For the notes to this table refer to page 211.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
Personal
Wholesale
Mortgages
(1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
ECL provisions by stage
420
376
1,168
1,964
398
1,201
66
16
1,681
3,645
- Stage 1
88
76
152
316
102
234
44
13
393
709
- Stage 2
61
207
238
506
98
356
15
1
470
976
- Stage 3
271
93
778
1,142
198
611
7
2
818
1,960
- Of which: individual
12
-
14
26
60
242
2
2
306
332
- Of which: collective
259
93
764
1,116
138
369
5
-
512
1,628
ECL provisions coverage (%)
0.20
6.37
12.17
0.88
1.28
1.55
0.12
0.61
1.00
0.93
- Stage 1 (%)
0.05
2.03
2.18
0.16
0.37
0.37
0.08
0.50
0.26
0.20
- Stage 2 (%)
0.34
10.24
14.57
2.35
3.00
2.93
1.55
100.00
2.87
2.58
- Stage 3 (%)
11.88
66.43
79.47
33.59
31.88
40.63
43.75
9.09
37.82
35.23
ECL (release)/charge
35
193
254
482
34
58
6
(2)
96
578
- UK
35
184
249
468
42
61
(4)
(2)
97
565
- RoI
-
9
5
14
(2)
(8)
1
-
(9)
5
- Other Europe
-
-
-
-
(6)
55
11
-
60
60
- RoW
-
-
-
-
-
(50)
(2)
-
(52)
(52)
Amounts written-off
32
70
91
193
39
86
1
-
126
319
Loans by residual maturity
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- <1 year
3,375
3,398
3,169
9,942
5,696
25,312
43,497
489
74,994
84,936
- 1-5 year
9,508
2,506
5,431
17,445
17,216
32,573
11,616
1,872
63,277
80,722
- > 5 < 15 year
46,453
-
993
47,446
5,701
14,167
1,939
199
22,006
69,452
- > 15 year
148,939
-
2
148,941
2,594
5,287
35
73
7,989
156,930
Other financial assets by asset quality
(4)
-
-
-
-
1
2,689
26,816
123,683
153,189
153,189
- AQ1-AQ4
-
-
-
-
1
2,689
26,084
123,683
152,457
152,457
- AQ5-AQ8
-
-
-
-
-
-
732
-
732
732
Off-balance sheet
9,843
17,284
8,462
35,589
14,205
59,716
22,221
227
96,369
131,958
- Loan commitments
9,843
17,284
8,417
35,544
13,861
57,081
20,765
227
91,934
127,478
- Financial guarantees
-
-
45
45
344
2,635
1,456
-
4,435
4,480
Off-balance sheet by asset quality
(4)
9,843
17,284
8,462
35,589
14,205
59,716
22,221
227
96,369
131,958
- AQ1-AQ4
9,099
448
7,271
16,818
10,916
36,380
20,644
165
68,105
84,923
- AQ5-AQ8
721
16,518
1,162
18,401
3,266
23,030
1,574
45
27,915
46,316
- AQ9
7
6
4
17
3
12
-
-
15
32
- AQ10
16
312
25
353
20
294
3
17
334
687
\n
For the notes to this table refer to page 211.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
Personal
Wholesale
Mortgages (1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2022 (5)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans by geography
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- UK
202,957
4,420
9,602
216,979
29,935
65,867
32,480
2,253
130,535
347,514
- RoI
-
40
104
144
34
1,102
74
-
1,210
1,354
- Other Europe
-
-
-
-
607
4,815
6,967
346
12,735
12,735
- RoW
-
-
-
-
460
6,276
8,617
197
15,550
15,550
Loans by stage
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- Stage 1
182,245
3,275
6,918
192,438
26,300
56,955
46,738
2,793
132,786
325,224
- Stage 2
18,787
1,076
1,991
21,854
4,035
19,590
1,353
1
24,979
46,833
- Stage 3
1,925
109
797
2,831
701
1,515
47
2
2,265
5,096
- Of which: individual
172
-
13
185
309
592
33
2
936
1,121
- Of which: collective
1,753
109
784
2,646
392
923
14
-
1,329
3,975
Loans - past due analysis
(2)
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- Not past due
200,634
4,335
8,825
213,794
29,986
74,251
47,824
2,796
154,857
368,651
- Past due 1-30 days
916
33
86
1,035
462
2,637
278
-
3,377
4,412
- Past due 31-90 days
510
29
104
643
297
563
5
-
865
1,508
- Past due 91-180 days
380
24
79
483
48
35
24
-
107
590
- Past due >180 days
517
39
612
1,168
243
574
7
-
824
1,992
Loans - Stage 2
18,787
1,076
1,991
21,854
4,035
19,590
1,353
1
24,979
46,833
- Not past due
17,951
1,039
1,872
20,862
3,595
18,335
1,344
1
23,275
44,137
- Past due 1-30 days
588
19
53
660
180
759
5
-
944
1,604
- Past due 31-90 days
248
18
66
332
260
496
4
-
760
1,092
Weighted average life
(3)
- ECL measurement (years)
8
2
6
5
4
6
3
-
5
5
Weighted average 12 months PDs
(3)
- IFRS 9 (%)
0.50
2.62
4.78
0.71
1.84
2.05
0.23
0.24
1.41
1.01
- Basel (%)
0.65
2.97
3.11
0.79
1.01
1.40
0.16
0.24
0.92
0.85
ECL provisions by geography
376
257
1,050
1,683
420
1,251
63
17
1,751
3,434
- UK
376
254
1,027
1,657
386
1,004
42
13
1,445
3,102
- RoI
-
3
23
26
13
66
1
-
80
106
- Other Europe
-
-
-
-
13
76
7
-
96
96
- RoW
-
-
-
-
8
105
13
4
130
130
\n
For the notes to this table refer to the following page.
\n
S
S
e
e
c
c
t
t
o
o
r
r
a
a
n
n
a
a
l
l
y
y
s
s
i
i
s
s
\u2013
\u2013
p
p
o
o
r
r
t
t
f
f
o
o
l
l
i
i
o
o
s
s
u
u
m
m
m
m
a
a
r
r
y
y
(
(
a
a
u
u
d
d
i
i
t
t
e
e
d
d
)
)
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n\n \n
Personal
Wholesale
Mortgages (1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2022 (5)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
ECL provisions by stage
376
257
1,050
1,683
420
1,251
63
17
1,751
3,434
- Stage 1
81
62
117
260
99
226
32
15
372
632
- Stage 2
62
122
282
466
98
465
14
-
577
1,043
- Stage 3
233
73
651
957
223
560
17
2
802
1,759
- Of which: individual
18
-
10
28
79
165
13
2
259
287
- Of which: collective
215
73
641
929
144
395
4
-
543
1,472
ECL provisions coverage (%)
0.19
5.76
10.82
0.78
1.35
1.60
0.13
0.61
1.09
0.91
- Stage 1 (%)
0.04
1.89
1.69
0.14
0.38
0.40
0.07
0.54
0.28
0.19
- Stage 2 (%)
0.33
11.34
14.16
2.13
2.43
2.37
1.03
-
2.31
2.23
- Stage 3 (%)
12.10
66.97
81.68
33.80
31.81
36.96
36.17
100.00
35.41
34.52
ECL (release)/charge
(74)
56
259
241
108
(27)
19
(4)
96
337
- UK
(74)
57
247
230
103
(51)
14
(4)
62
292
- RoI
-
(1)
12
11
1
(26)
(2)
-
(27)
(16)
- Other Europe
-
-
-
-
1
04
1
(1)
5
5
- RoW
-
-
-
-
3
46
6
1
56
56
Amounts written-off
31
67
123
221
34
187
40
-
261
482
Loans by residual maturity
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- <1 year
3,347
2,655
3,368
9,370
6,118
26,971
36,192
906
70,187
79,557
- 1-5 year
10,968
1,805
5,387
18,160
16,768
33,071
10,380
1,630
61,849
80,009
- > 5 < 15 year
46,500
-
950
47,450
5,259
13,392
1,379
184
20,214
67,664
- > 15 year
142,142
-
1
142,143
2,891
4,626
187
76
7,780
149,923
Other financial assets by asset quality
(4)
-
-
-
-
49
581
14,704
157,860
173,194
173,194
- AQ1-AQ4
-
-
-
-
-
567
14,156
157,860
172,583
172,583
- AQ5-AQ8
-
-
-
-
49
14
548
-
611
611
Off-balance sheet
18,782
15,848
8,547
43,177
14,308
59,718
19,555
268
93,849
137,026
- Loan commitments
18,782
15,848
8,496
43,126
13,895
56,500
18,223
268
88,886
132,012
- Financial guarantees
-
-
51
51
413
3,218
1,332
-
4,963
5,014
Off-balance sheet by asset quality
(4)
18,782
15,848
8,547
43,177
14,308
59,718
19,555
268
93,849
137,026
- AQ1-AQ4
17,676
436
7,353
25,465
11,573
37,265
17,899
205
66,942
92,407
- AQ5-AQ8
1,089
15,048
1,170
17,307
2,706
22,094
1,655
62
26,517
43,824
- AQ9
2
74
4
80
4
25
-
-
29
109
- AQ10
15
290
20
325
25
334
1
1
361
686
\n
(1)
Includes a portion of Private Banking lending secured against residential real estate, in line with ECL calculation methodology. Private Banking and RBS International mortgages are reported in UK, reflecting the country of lending origination and includes
\n
crown dependencies.
\n
(2)
30 DPD \u2013 30 days past due, the mandatory 30 days past due backstop as prescribed by the IFRS 9 guidance for a SICR.
\n
(3)
Not within the scope of the Independent auditors\u2019 report.
\n
(4)
AQ bandings are based on Basel PDs and mapping is as follows:
\n\n \n
Internal asset quality band
Probability of default range
Indicative S&P rating
Internal asset quality band
Probability of default range
Indicative S&P rating
AQ1
0% - 0.034%
AAA to AA
AQ6
1.076% - 2.153%
BB- to B+
AQ2
0.034% - 0.048%
AA to AA-
AQ7
2.153% - 6.089%
B+ to B
AQ3
0.048% - 0.095%
A+ to A
AQ8
6.089% - 17.222%
B- to CCC+
AQ4
0.095% - 0.381%
BBB+ to BBB-
AQ9
17.222% - 100%
CCC to C
AQ5
0.381% - 1.076%
BB+ to BB
AQ10
100%
D
\n
\u00a30.3 billion (2022 \u2013 \u00a30.3 billion) of AQ10 Personal balances primarily relate to loan commitments, the drawdown of which is effectively prohibited.
\n
(5)
Previously published sectors for the Wholesale portfolio have been re-presented to reflect updated internal sector reporting.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
\n
The table below shows ECL by stage, for the Personal portfolio and selected sectors of the Wholesale portfolio including those that contain an element of exposure classified as
\n
heightened climate-related risk.
\n\n \n
Loans - amortised cost and FVOCI
Off-balance sheet
ECL provisions
Stage 1
Stage 2
Stage 3
Total
Loan commitments
Contingent liabilities
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
198,865
21,509
3,400
223,774
35,544
45
316
506
1,142
1,964
Mortgages
188,140
17,854
2,281
208,275
9,843
-
88
61
271
420
Credit cards
3,742
2,022
140
5,904
17,284
-
76
207
93
376
Other personal
6,983
1,633
979
9,595
8,417
45
152
238
778
1,168
Wholesale
149,721
16,382
2,163
168,266
91,934
4,435
393
470
818
1,681
Property
27,316
3,270
621
31,207
13,861
344
102
98
198
398
Financial institutions
(1)
56,105
966
16
57,087
20,765
1,456
44
15
7
66
Sovereigns
2,610
1
22
2,633
227
-
13
1
2
16
Other wholesale
63,690
12,145
1,504
77,339
57,081
2,635
234
356
611
1,201
Of which:
Agriculture
3,851
1,011
90
4,952
950
21
19
35
34
88
Airlines and aerospace
1,525
454
3
1,982
1,788
178
4
7
2
13
Automotive
7,223
1,008
76
8,307
3,844
103
18
18
26
62
Building materials
1,204
282
72
1,558
1,475
72
6
9
8
23
Chemicals
354
62
4
420
785
13
1
9
1
11
Industrials
2,269
543
70
2,882
2,896
148
10
18
23
51
Land transport & logistics
4,231
578
61
4,870
3,025
184
11
14
18
43
Leisure
4,394
2,245
288
6,927
1,887
145
31
74
91
196
Mining & metals
241
32
4
277
545
7
-
-
4
4
Oil and gas
915
125
27
1,067
1,959
237
3
2
29
34
Power utilities
5,604
418
40
6,062
8,257
554
13
13
24
50
Retail
5,846
1,318
224
7,388
4,717
429
23
35
118
176
Shipping
207
35
3
245
71
31
-
1
2
3
Water & waste
3,536
173
13
3,722
1,904
84
4
5
4
13
Total
348,586
37,891
5,563
392,040
127,478
4,480
709
976
1,960
3,645
\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
\n\n \n
Loans - amortised cost and FVOCI
Off-balance sheet
ECL provisions
Stage 1
Stage 2
Stage 3
Total
Loan commitments
Contingent liabilities
Stage 1
Stage 2
Stage 3
Total
2022 (2)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
192,438
21,854
2,831
217,123
43,126
51
260
466
957
1,683
Mortgages
182,245
18,787
1,925
202,957
18,782
-
81
62
233
376
Credit cards
3,275
1,076
109
4,460
15,848
-
62
122
73
257
Other personal
6,918
1,991
797
9,706
8,496
51
117
282
651
1,050
Wholesale
132,786
24,979
2,265
160,030
88,886
4,963
372
577
802
1,751
Property
26,300
4,035
701
31,036
13,895
413
99
98
223
420
Financial institutions
(1)
46,738
1,353
47
48,138
18,223
1,332
32
14
17
63
Sovereigns
2,793
1
2
2,796
269
-
15
-
2
17
Other wholesale
56,955
19,590
1,515
78,060
56,499
3,218
226
465
560
1,251
Of which:
Agriculture
3,646
1,034
93
4,773
968
24
21
31
43
95
Airlines and aerospace
483
1,232
19
1,734
1,715
174
2
40
8
50
Automotive
5,776
1,498
30
7,304
4,009
99
18
18
11
47
Building materials
1,244
284
15
1,543
1,407
78
7
7
7
21
Chemicals
384
117
1
502
650
12
1
2
1
4
Industrials
2,148
1,037
82
3,267
3,135
195
10
16
24
50
Land transport & logistics
3,863
1,304
72
5,239
3,373
190
13
34
18
65
Leisure
3,416
3,787
260
7,463
1,907
102
27
147
115
289
Mining & metals
173
230
5
408
545
5
-
1
5
6
Oil and gas
953
159
60
1,172
2,157
248
3
3
31
37
Power utilities
4,228
406
6
4,640
6,960
1,182
9
11
1
21
Retail
6,497
1,746
150
8,393
4,682
416
21
29
68
118
Shipping
161
151
14
326
110
22
-
7
6
13
Water & waste
3,026
335
7
3,368
2,143
101
4
4
4
12
Total
325,224
46,833
5,096
377,153
132,012
5,014
632
1,043
1,759
3,434
\n
(1)
Financial institutions include transactions, such as securitisations, where the underlying assets may be in other sectors.
\n
(2)
Previously published sectors for the Wholesale portfolio have been re-presented to reflect updated internal sector reporting.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Wholesale forbearance (audited)
\n
The table below shows Wholesale forbearance, Heightened Monitoring and Risk of Credit Loss by sector. Personal forbearance is disclosed in the Personal portfolio section. The table
\n
shows current exposure but reflects risk transfers where there is a guarantee by another customer.
\n\n \n
Property
Financial institution
Sovereign
Other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Forbearance (flow)
916
56
22
2,568
3,562
Forbearance (stock)
1,071
70
22
3,752
4,915
Heightened Monitoring and Risk of Credit Loss
1,089
276
-
4,119
5,484
2022
Forbearance (flow)
723
105
-
2,598
3,426
Forbearance (stock)
900
107
-
4,742
5,749
Heightened Monitoring and Risk of Credit Loss
920
112
-
3,501
4,533
\n
Sector analysis \u2013 portfolio summary (audited)
\n
\ue001
Loans by geography and sector
\u2013 In line with NatWest Group\u2019s strategic focus,
\n
exposures continued to be mainly in the UK. Exposure to the Republic of Ireland
\n
reduced during 2023 as part of the phased withdrawal of Ulster Bank RoI.
\n
\ue001
Loans by stage
\u2013 There was an increase in Stage 1 exposure due to mortgage
\n
growth in Personal and lending to financial institutions in Wholesale. An overall
\n
improvement in forward-looking economics during 2023 drove a reduction in IFRS 9
\n
PDs, meaning a reduction in the proportion of most portfolio segments triggering PD
\n
deterioration rules, resulting in a net migration of exposures from Stage 2 into Stage
\n
1 during 2023.
\n
\ue001
Loans \u2013 Past due analysis
\u2013 In Personal, the value of arrears increased during 2023
\n
as expected with portfolio growth in recent years and adjustments to lending criteria
\n
following COVID-19.
\n
\ue001
Weighted average 12 months PDs
\u2013
IFRS 9 PDs remained broadly stable overall, with
\n
some increases in Personal portfolios, most notably in credit cards which had a PD
\n
modelling update. In Wholesale, some reductions were observed in PDs in corporate
\n
and property portfolios, linked to the economic scenario updates during the year.
\n
\ue001
ECL provisions by stage
\u2013
Portfolio growth was the key driver behind an increase in
\n
Stage 1 provisions. Stage 2 provisions reduced during 2023, reflecting broadly stable
\n
credit performance of the portfolios and the effect of improved 2023 forward-looking
\n
scenario updates. As outlined previously, Stage 3 provisions have yet to be materially
\n
affected by the customer affordability risks linked to the current economic
\n
uncertainty prevalent in the UK. However, there has been an increase in Stage 3
\n
ECL linked to a modest rise in default levels and reduced write-off activity.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Wholesale support schemes
\n
(1)
\n
The table below shows the sector split for the Bounce Back Loans Scheme (BBLS) as well as associated debt split by stage. Associated debt refers to non-BBLS lending to customers
\n
who also have BBLS lending.
\n\n \n
Gross carrying amount
BBL
Associated debt
ECL on associated debt
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
31 December 2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Wholesale
Property
661
150
27
838
687
202
82
971
7
13
33
Financial institutions
16
3
1
20
7
2
-
9
-
-
-
Other
2,210
495
231
2,936
2,080
849
163
3,092
24
53
93
Total
2,887
648
259
3,794
2,774
1,053
245
4,072
31
66
126
Gross carrying amount
BBL
Associated debt
ECL on associated debt
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
31 December 2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Wholesale
Property
966
186
48
1,200
874
205
60
1,139
10
14
26
Financial institutions
24
4
-
28
9
2
-
11
-
-
1
Other
3,233
641
342
4,216
2,338
884
117
3,339
26
57
70
Total
4,223
831
390
5,444
3,221
1,091
177
4,489
36
71
97
\n
(1)
Not within the scope of the independent auditors\u2019 report.
\n
Sector analysis \u2013 portfolio summary (audited)
\n
\ue001
ECL provisions coverage
\u2013
Overall provisions coverage remained broadly consistent
\n
with 31 December 2022. This was mainly a result of continued stable portfolio
\n
performance and MES economics-driven modelled ECL releases contrasted with
\n
increased economic uncertainty, captured through ECL post model adjustments.
\n
\ue001
ECL charge \u2013
The impairment charge for 2023 of \u00a3578 million primarily reflected the
\n
underlying Stage 3 charges and portfolio growth.
\n
\ue001
Loans by residual maturity
\u2013
The maturity profile of the portfolios remained
\n
consistent with prior periods. In mortgages, as expected, the vast majority of
\n
exposures were greater than five years. In unsecured lending, cards and other
\n
exposures were concentrated in less than five years. In Wholesale, more than 80% of
\n
exposures mature in less than five years.
\n
\ue001
Other financial assets by asset quality
\u2013 Consisting almost entirely of cash and
\n
balances at central banks and debt securities held in the course of treasury related
\n
management activities, these assets were mainly within the AQ1-AQ4 bands.
\n
\ue001
Off-balance sheet exposures by asset quality
\u2013
In Personal, undrawn exposures were
\n
reflective of available credit lines in credit cards and current accounts. Additionally,
\n
the mortgage portfolio had undrawn exposures, where a formal offer had been made
\n
to a customer but had not yet drawn down; the value decreased in line with the
\n
pipeline of offers. There was also a legacy portfolio of flexible mortgages where a
\n
customer had the right and ability to draw down further funds.
\n
The asset quality was aligned to the wider portfolio. In Wholesale, off-balance sheet
\n
exposures increased due to a rise in securitisations lending within financial
\n
institutions, with asset quality in line with existing off-balance sheet exposures.
\n
\ue001
Wholesale forbearance \u2013
Increased levels of forbearance were observed in Q4 2023.
\n
The retail, leisure, commercial real estate and power and utilities sectors represented
\n
the largest share of completed forbearance. Labour shortages/increased cost of
\n
labour, rising energy prices, supply chain issues and higher interest rates continue to
\n
weigh on these sectors. Payment holidays and covenant waivers were the most
\n
common forms of forbearance granted.
\n
\ue001
Heightened Monitoring and Risk of Credit Loss \u2013
Risk of Credit Loss framework
\n
exposures and inflows increased in 2023 compared to 2022. Heightened inflows were
\n
seen in the mobility and logistics, renewables and utilities, and technology, media and
\n
telecoms sector clusters, offset by decreases in consumer industries. Heightened
\n
inflows were seen in the automotive, media, power utilities and leveraged funds
\n
sectors, partially offset by leisure, airlines and aerospace and land transport and
\n
logistics. Retail SME customers do not form part of the Wholesale Risk of Credit Loss
\n
framework. Customers in financial difficulty within this group are managed by
\n
specialist problem debt management teams. The balances in arrears and recoveries
\n
remained flat in 2023, with inflows continuing to be driven by Bounce Back Loan
\n
Scheme (BBLS) exposures. Excluding BBLS balances, the debt value for this
\n
population that are in problem debt/recoveries also remained stable.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Credit risk enhancement and mitigation (audited)
\n
The table below shows exposures of modelled portfolios within the scope of the ECL framework and related credit risk enhancement and mitigation (CREM).
\n\n \n
Gross
Maximum credit risk
CREM by type
CREM coverage
Exposure post CREM
exposure
ECL
Total
Stage 3
Financial (1)
Property
Other (2)
Total
Stage 3
Total
Stage 3
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets
Cash and balances at central banks
103.1
-
103.1
-
-
-
-
-
-
103.1
-
Loans - amortised cost
(3)
392.0
3.5
388.5
3.5
37.4
248.2
21.8
307.4
3.1
81.1
0.4
Personal
(4)
223.7
1.9
221.8
2.2
0.9
207.5
-
208.4
2.0
13.4
0.2
Wholesale
(5)
168.3
1.6
166.7
1.3
36.5
40.7
21.8
99.0
1.1
67.7
0.2
Debt securities
50.1
-
50.1
-
-
-
-
-
-
50.1
-
Total financial assets
545.2
3.5
541.7
3.5
37.4
248.2
21.8
307.4
3.1
234.3
0.4
Contingent liabilities and commitments
Personal
(6,7)
35.6
-
35.6
0.3
1.0
4.0
-
5.0
-
30.6
0.3
Wholesale
96.4
0.1
96.3
0.4
2.6
7.1
4.1
13.8
0.1
82.5
0.3
Total off-balance sheet
132.0
0.1
131.9
0.7
3.6
11.1
4.1
18.8
0.1
113.1
0.6
Total exposure
677.2
3.6
673.6
4.2
41.0
259.3
25.9
326.2
3.2
347.4
1.0
2022
Financial assets
Cash and balances at central banks
143.2
-
143.2
-
-
-
-
-
-
143.2
-
Loans - amortised cost
(3)
377.2
3.3
373.9
3.4
31.8
243.1
21.7
296.6
3.0
77.3
0.4
Personal
(4)
217.2
1.7
215.5
1.9
0.9
202.1
-
203.0
1.7
12.5
0.2
Wholesale
(5)
160.0
1.6
158.4
1.5
30.9
41.0
21.7
93.6
1.3
64.8
0.2
Debt securities
29.9
-
29.9
-
-
-
-
-
-
29.9
-
Total financial assets
550.3
3.3
547.0
3.4
31.8
243.1
21.7
296.6
3.0
250.4
0.4
Contingent liabilities and commitments
Personal
(6,7)
43.2
-
43.2
0.3
0.7
4.4
-
5.1
-
38.1
0.3
Wholesale
93.9
0.1
93.8
0.4
3.1
7.4
4.0
14.5
0.1
79.3
0.3
Total off-balance sheet
137.0
0.1
136.9
0.7
3.8
11.8
4.0
19.6
0.1
117.3
0.6
Total exposure
687.3
3.4
683.9
4.1
35.6
254.9
25.7
316.2
3.1
367.7
1.0
\n
(1)
Includes cash and securities collateral.
\n
(2)
Includes guarantees, charges over trade debtors, other asset finance related physical collateral as well as the amount by which credit risk exposure is reduced through netting arrangements, mainly cash management pooling, which give NatWest Group a
\n
legal right to set off the financial asset against a financial liability due to the same counterparty.
\n
(3)
NatWest Group holds collateral in respect of individual loans \u2013 amortised cost to banks and customers. This collateral includes mortgages over property (both personal and commercial); charges over business assets such as plant and equipment;
\n
inventories and trade debtors; and guarantees of lending from parties other than the borrower. NatWest Group obtains collateral in the form of securities in reverse repurchase agreements. Collateral values are capped at the value of the loan.
\n
(4)
Stage 3 mortgage exposures have relatively limited uncovered exposure reflecting the security held. On unsecured credit cards and other personal borrowing, the residual uncovered amount reflects historical experience of continued cash recovery post
\n
default through ongoing engagement with customers.
\n
(5)
Stage 3 exposures post credit risk enhancement and mitigation in Wholesale mainly represent enterprise value and the impact of written down collateral values; an individual assessment to determine ECL will consider multiple scenarios and in some
\n
instances allocate a probability weighting to a collateral value in excess of the written down value.
\n
(6)
\u00a30.3 billion (2022
\u2013
\u00a30.3 billion) Personal Stage 3 balances primarily relate to loan commitments, the draw down of which is effectively prohibited.
\n
(7)
The Personal gross exposure value includes \u00a35.9 billion (2022
\u2013
\u00a314.0 billion) in respect of pipeline mortgages where a committed offer has been made to a customer but where the funds have not yet been drawn down. When drawn down, the exposure
\n
would be covered by a security over the borrower\u2019s property.
Personal portfolio (audited)
Disclosures in the Personal portfolio section include drawn exposure (gross of provisions).
\n \n
2023
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
Personal lending
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgages
192,915
13,222
2,200
-
208,337
Of which:
Owner occupied
174,167
11,629
1,464
-
187,260
Buy-to-let
18,748
1,593
736
-
21,077
Interest only
25,805
11,631
461
-
37,897
Mixed
(1)
10,068
25
10
-
10,103
ECL provisions
(2)
397
12
6
-
415
Other personal lending
(3)
13,758
1,395
222
13
15,388
ECL provisions
(2)
1,508
12
2
16
1,538
Total personal lending
206,673
14,617
2,422
13
223,725
Mortgage LTV ratios
- Owner occupied
55%
59%
56%
-
55%
- Stage 1
55%
59%
54%
-
55%
- Stage 2
54%
63%
54%
-
54%
- Stage 3
48%
61%
72%
-
49%
- Buy-to-let
52%
59%
52%
-
53%
- Stage 1
52%
60%
52%
-
53%
- Stage 2
50%
57%
49%
-
50%
- Stage 3
50%
53%
58%
-
51%
Gross new mortgage lending
29,664
1,400
180
-
31,244
Of which:
Owner occupied
27,718
1,267
136
-
29,121
- LTV > 90%
1,173
-
-
-
1,173
Weighted average LTV
(4)
70%
63%
69%
-
70%
Buy-to-let
1,946
133
44
-
2,123
Weighted average LTV
(4)
58%
65%
52%
-
58%
Interest only
2,680
1,224
23
-
3,927
Mixed
(1)
1,568
2
-
-
1,570
Mortgage forbearance
Forbearance flow
(5)
569
22
9
-
600
Forbearance stock
1,416
28
15
-
1,459
Current
950
10
6
-
966
1-3 months in arrears
116
2
2
-
120
>3 months in arrears
350
16
7
-
373
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n\n \n
2022
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
Personal lending
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgages
186,891
13,709
2,357
-
202,957
Of which:
Owner occupied
168,790
12,096
1,541
-
182,427
Buy-to-let
18,101
1,613
816
-
20,530
Interest only
21,469
11,877
519
-
33,865
Mixed
(1)
9,768
1
16
-
9,785
ECL provisions
(2)
355
9
6
-
370
Other personal lending
(3)
11,935
1,853
267
143
14,198
ECL provisions
(2)
1,257
15
3
26
1,301
Total personal lending
198,826
15,562
2,624
143
217,155
Mortgage LTV ratios
- Owner occupied
52%
59%
56%
-
53%
- Stage 1
52%
59%
56%
-
53%
- Stage 2
52%
61%
60%
-
52%
- Stage 3
45%
59%
74%
-
47%
- Buy-to-let
50%
59%
53%
-
51%
- Stage 1
51%
59%
53%
-
52%
- Stage 2
49%
53%
48%
-
49%
- Stage 3
47%
55%
57%
-
50%
Gross new mortgage lending
41,227
2,968
327
-
44,522
Of which:
Owner occupied
36,305
2,701
221
-
39,227
- LTV > 90%
1,265
-
-
-
1,265
Weighted average LTV
(4)
69%
65%
65%
-
69%
Buy-to-let
4,922
267
106
-
5,295
Weighted average LTV
(4)
64%
66%
60%
-
64%
Interest only
5,323
2,664
62
-
8,049
Mixed
(1)
2,309
-
2
-
2,311
Mortgage forbearance
Forbearance flow
(5)
182
7
4
-
193
Forbearance stock
1,015
16
8
-
1,039
Current
649
8
6
-
663
1-3 months in arrears
133
-
2
-
135
>3 months in arrears
233
8
-
-
241
\n
(1)
Includes accounts which have an interest only sub-account and a capital and
\n
interest sub-account to provide a more comprehensive view of interest only
\n
exposures.
\n
(2)
Retail Banking excludes a non-material amount of lending and provisions held
\n
on relatively small legacy portfolios.
\n
(3)
Comprises unsecured lending except for Private Banking, which includes both
\n
secured and unsecured lending. It excludes loans that are commercial in
\n
nature.
\n
(4)
New mortgage lending LTV reflects the LTV at the time of lending.
\n
(5)
Forbearance flows only include an account once per year, although some
\n
accounts may be subject to multiple forbearance deals. Forbearance deals post
\n
default are excluded from these flows.
\n
For the key points to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n
Mortgage LTV distribution by stage
\n
The table below shows gross mortgage lending and related ECL by LTV band for the Retail Banking portfolio. Mortgage lending not within the scope of governance and post model
\n
adjustments reflected portfolios carried at fair value.
\n\n \n
Mortgages
ECL provisions
ECL provisions coverage
Retail Banking
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
\u226450%
68,092
7,447
1,145
76,684
27
18
134
179
0.0
0.2
11.7
0.2
>50% and
\u226470%
65,777
7,011
767
73,555
35
26
85
146
0.1
0.4
11.1
0.2
>70% and
\u226480%
22,537
1,633
113
24,283
13
7
15
35
0.1
0.4
13.3
0.1
>80% and
\u226490%
13,583
1,143
47
14,773
9
6
7
22
0.1
0.5
14.9
0.1
>90% and
\u2264100%
3,008
370
14
3,392
2
3
3
8
0.1
0.8
21.4
0.2
>100%
22
6
11
39
-
-
5
5
-
-
45.5
12.8
Total with LTVs
173,019
17,610
2,097
192,726
86
60
249
395
0.1
0.3
11.9
0.2
Other
186
1
2
189
1
-
1
2
0.5
-
50.0
1.1
Total
173,205
17,611
2,099
192,915
87
60
250
397
0.1
0.3
11.9
0.2
2022
\u226450%
71,321
8,257
1,036
80,614
26
20
121
167
-
0.2
11.7
0.2
>50% and
\u226470%
68,178
7,792
616
76,586
32
30
71
133
-
0.4
11.5
0.2
>70% and
\u226480%
17,602
1,602
62
19,266
7
6
11
24
-
0.4
17.7
0.1
>80% and
\u226490%
7,918
944
17
8,879
6
5
5
16
0.1
0.5
29.4
0.2
>90% and
\u2264100%
1,409
18
6
1,433
3
-
2
5
0.2
-
33.3
0.3
>100%
35
7
10
52
2
-
4
6
5.7
-
40.0
11.5
Total with LTVs
166,463
18,620
1,747
186,830
76
61
214
351
-
0.3
12.3
0.2
Other
59
1
1
61
3
-
1
4
5.1
-
100.0
6.6
Total
166,522
18,621
1,748
186,891
79
61
215
355
-
0.3
12.3
0.2
\n
\ue001
Growth in the mortgage portfolio decreased in the second half of 2023, consistent with
trends in the wider UK mortgage market
.
\n
\ue001
Mortgage portfolio LTV increased, partly due to the higher relative proportion of new business from recent years\u2019 strong lending performance, as well as easing of house prices reflected in the
\n
Office for National Statistics house price indices.
\n
\ue001
The proportion of overall interest only mortgage balances increased in 2023 driven by the implementation of the Mortgage Charter. Interest only new lending reduced during the year
\n
consistent with the reduction in buy-to-let new lending.
\n
\ue001
Portfolios and new business were closely monitored against agreed operating limits. These included loan-to-value ratios, buy-to-let concentrations, new-build concentrations and credit quality.
\n
Lending criteria, affordability calculations and assumptions for new lending were adjusted during the year, considering inflationary pressure and interest rate rises, to maintain credit quality in
\n
line with appetite and to ensure customers are assessed fairly.
\n
\ue001
Support for customers was proactively promoted during the year. The flow and stock of forbearance increased during the year. The reported forbearance values included customers who
\n
used Mortgage Charter support if indicators of financial stress were already present before Mortgage Charter support was taken. The number of customers requesting support outside of
\n
Mortgage Charter (primarily forbearance) increased gradually during the year, but remained within expectations.
\n
\ue001
Other personal lending balances increased during the year mainly as a result of credit card new business. Lending criteria were carefully managed and the credit quality (based on new
\n
business PD) of the new business written improved, compared to 2022.
\n
\ue001
As noted previously, ECL increased. For further details on the movements in ECL provisions at product level, refer to the Flow statements section.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n
Retail Banking mortgage LTV distribution by region
\n\n \n
The table below shows gross mortgage lending by LTV band for Retail Banking, by geographical region.
Flood risk (1)
Weighted
Lending at high/
\u226450%
50%\u226480%
80%\u2264100%
>100%
Total
average LTV
Other
Total
Total
very high risk (2)
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
%
%
South East
14,645
18,510
3,107
1
36,263
54
2
36,265
19
5.0
Greater London
14,689
18,044
2,366
1
35,100
53
3
35,103
18
6.1
Scotland
5,051
5,938
1,445
1
12,435
54
2
12,437
6
4.2
North West
7,314
8,629
1,881
2
17,826
54
2
17,828
9
4.9
South West
7,308
8,296
1,379
1
16,984
53
1
16,985
9
3.7
West Midlands
5,391
7,072
1,404
1
13,868
55
1
13,869
7
2.5
East of England
8,576
11,810
2,208
-
22,594
55
2
22,596
12
4.5
Rest of the UK
13,711
19,540
4,374
32
37,657
56
175
37,832
20
4.5
Total
76,685
97,839
18,164
39
192,727
54
188
192,915
100
4.7
2022
South East
15,856
17,670
1,396
1
34,923
51
3
34,926
19
4.1
Greater London
15,200
17,550
1,336
1
34,087
51
3
34,090
18
2.3
Scotland
5,024
6,174
1,163
1
12,362
54
1
12,363
7
3.2
North West
7,670
8,672
1,236
2
17,580
52
2
17,582
9
2.2
South West
7,874
7,922
627
-
16,423
50
1
16,424
9
3.0
West Midlands
5,477
7,014
862
1
13,354
53
1
13,355
7
1.2
East of England
9,241
11,492
987
2
21,722
52
2
21,724
12
2.1
Rest of the UK
14,312
19,408
2,712
43
36,475
54
48
36,523
19
3.2
Total
80,654
95,902
10,319
51
186,926
52
61
186,987
100
2.8
\n
(1)
Not within the scope of the independent auditors\u2019 report.
\n
(2)
Flood risk is modelled by calculating an estimated loss for each flood source different types of flooding (Fluvial, pluvial, tidal), annualised for each source and combined for a total flood score. Flood defences are considered where available. Flood scores are
\n
allocated per property based on the potential annualised loss (\u00a3) to a property dependent on the type, frequency and depth of flooding modelled across different return periods. The scoring ranges from 0 to 100, with 0 being lowest and 100 being the
\n
highest risk. A score of 61 and above is considered to be high risk and properties with a score of 81 and above considered to be very high risk after flood mitigants are taken into account.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n
Retail Banking fixed rate mortgages by roll-off date
(1)
\n
The table below shows gross fixed rate mortgage lending for Retail Banking, by roll-off date.
\n\n \n
2023
2022
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Retail Banking mortgages - gross exposure
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fixed rate roll-off
< 1 year
30,867
3,670
295
34,832
37,391
4,644
276
42,311
>1 year < 2 years
39,013
3,513
290
42,816
32,266
4,063
240
36,569
> 2 years
87,402
7,461
590
95,453
84,116
7,103
438
91,657
Total
157,282
14,644
1,175
173,101
153,773
15,810
954
170,537
\n
Retail Banking mortgages by Energy Performance Certificate (EPC) rating
\n
(1)
\n
The table below represents the energy efficiency of Retail Banking residential mortgages.
\n\n \n
31 December 2023
31 December 2022
Owner occupied
Buy-to-let
Total
Owner occupied
Buy-to-let
Total
EPC rating
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
A
547
13
560
424
12
436
B
21,566
1,458
23,024
19,874
1,342
21,216
C
29,764
5,712
35,476
28,049
5,228
33,277
D
46,924
6,056
52,980
47,497
6,033
53,530
E
16,027
1,557
17,584
17,153
1,687
18,840
F
3,360
62
3,422
3,691
86
3,777
G
736
16
752
789
21
810
Unclassified
55,243
3,874
59,117
51,313
3,692
55,005
Total
174,167
18,748
192,915
168,790
18,101
186,891
\n
(1)
Not within the scope of the independent auditors\u2019 report.
\n
(2)
As at 31 December 2023, \u00a3140.8 billion, 67.6%, of the total residential mortgages portfolio had Energy Performance Certificate (EPC) data available (2022 \u2013 \u00a3138.8 billion, 68.3%). Of which, 44.1% were rated as EPC A to C (2022 \u2013 41.6%).
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Commercial real estate (CRE)
\n
CRE LTV distribution by stage (audited)
\n
The table below shows CRE current exposure and related ECL by LTV band.
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
\u226450%
7,173
664
61
7,898
38
15
9
62
0.5
2.3
14.8
0.8
>50% and
\u226470%
3,165
619
94
3,878
22
21
18
61
0.7
3.4
19.1
1.6
>70% and
\u2264100%
319
112
84
515
3
6
21
30
0.9
5.4
25.0
5.8
>100%
241
6
26
273
1
1
16
18
0.4
16.7
61.5
6.6
Total with LTVs
10,898
1,401
265
12,564
64
43
64
171
0.6
3.1
24.2
1.4
Total portfolio average LTV
47%
51%
72%
48%
Other
(1)
2,189
390
45
2,624
10
7
19
36
0.5
1.8
42.2
1.4
Investment
13,087
1,791
310
15,188
74
50
83
207
0.6
2.8
26.8
1.4
Development
(2)
1,717
147
49
1,913
12
5
25
42
0.7
3.4
51.0
2.2
Total
14,804
1,938
359
17,101
86
55
108
249
0.6
2.8
30.1
1.5
2022
\u226450%
7,010
658
57
7,725
36
12
16
64
0.5
1.8
28.1
0.8
>50% and
\u226470%
3,515
798
43
4,356
23
18
12
53
0.7
2.3
27.9
1.2
>70% and
\u2264100%
259
82
156
497
1
3
42
46
0.4
3.7
26.9
9.1
>100%
102
10
23
135
1
1
14
16
1.0
10.0
60.9
11.8
Total with LTVs
10,886
1,548
279
12,713
61
34
84
179
0.6
2.2
30.1
1.4
Total portfolio average LTV
45%
52%
75%
47%
Other
(1)
1,800
627
55
2,482
9
15
27
51
0.5
2.4
49.1
2.0
Investment
12,686
2,175
334
15,195
70
49
111
230
0.6
2.3
33.2
1.5
Development
(2)
1,553
332
57
1,942
13
8
28
49
0.8
2.4
49.1
2.5
Total
14,239
2,507
391
17,137
83
57
139
279
0.6
2.3
35.6
1.6
\n
(1)
Relates mainly to business banking and unsecured corporate lending.
\n
(2)
Relates to the development of commercial and residential properties. LTV is not a meaningful measure for this type of lending activity.
\n
\ue001
O
O
verall
\u2013 The majority of the CRE portfolio was located and managed in the UK.
\n
Business appetite and strategy was aligned across NatWest Group.
\n
\ue001
2023 trends
\u2013
In H2 2023, conditions were impacted by the uncertain interest rate
\n
outlook. Investment volumes were at historic lows for much of 2023, and values
\n
continued to drift downwards in some sectors. There were some early signs of
\n
improving sentiment following a sharp reduction in medium-term interest rates, but
\n
valuations remain somewhat uncertain, particularly in the office sector
.
\n
\ue001
C
C
redit quality
\u2013
The CRE portfolio has coped well to date with the fall in capital values
\n
and increase in rates, with no significant increase to loans coming into the Risk of
\n
Credit Loss Framework.
\n
\ue001
Risk appetite
\u2013
Lending appetite is subject to regular review.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n
The flow statements that follow show the main ECL and related income statement movements. They also show the changes in ECL as well as the changes in related financial assets
\n
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
\n
differences do not have a material ECL effect. Other points to note:
\n
\ue001
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
\n
included.
\n
\ue001
Stage transfers (for example, exposures moving from Stage 1 into Stage 2) are a key feature of the ECL movements, with the net re-measurement cost of transitioning to a worse
\n
stage being a primary driver of income statement charges. Similarly, there is an ECL benefit for accounts improving stage.
\n
\ue001
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
\n
write-off or accounting write-down.
\n
\ue001
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
\n
direct recovery costs. Other (P&L only items) affects the income statement but does not affect balance sheet ECL movements.
\n
\ue001
Amounts written-off represent the gross asset written-down against accounts with ECL, including the net asset write-down for any debt sale activity.
\n
\ue001
There were some flows from Stage 1 into Stage 3 including transfers due to unexpected default events with a post model adjustment in place for Commercial & Institutional to
\n
account for this risk.
\n
\ue001
The effect of any change in post model adjustments during the year is typically reported under changes in risk parameters, as are any effects arising from changes to the
\n
underlying models. Refer to the section on Governance and post model adjustments for further details.
\n
\ue001
All movements are captured monthly and aggregated. Interest suspended post default is included within Stage 3 ECL with the movement in the value of suspended interest during
\n
the year reported under currency translation and other adjustments.
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
NatWest Group total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
507,539
632
48,482
1,043
5,231
1,759
561,252
3,434
Currency translation and other adjustments
(2,462)
3
(232)
6
128
145
(2,566)
154
Transfers from Stage 1 to Stage 2
(49,502)
(318)
49,502
318
-
-
-
-
Transfers from Stage 2 to Stage 1
47,264
762
(47,264)
(762)
-
-
-
-
Transfers to Stage 3
(336)
(6)
(3,221)
(293)
3,557
299
-
-
Transfers from Stage 3
311
32
631
61
(942)
(93)
-
-
Net re-measurement of ECL on stage transfer
(544)
810
241
507
Changes in risk parameters
(52)
17
306
271
Other changes in net exposure
1,530
205
(7,516)
(188)
(1,946)
(193)
(7,932)
(176)
Other (P&L only items)
(6)
6
(24)
(24)
Income statement (releases)/charges
(397)
645
330
578
Transfers to disposal groups and fair value
1
(5)
(86)
(34)
(90)
(41)
(175)
(80)
Amounts written-off
-
-
(2)
(2)
(317)
(317)
(319)
(319)
Unwinding of discount
-
-
-
(146)
(146)
At 31 December 2023
504,345
709
40,294
976
5,621
1,960
550,260
3,645
Net carrying amount
503,636
39,318
3,661
546,615
At 1 January 2022
546,178
302
35,557
1,478
5,238
2,026
586,973
3,806
2022 movements
(38,639)
330
12,925
(435)
(7)
(267)
(25,721)
(372)
At 31 December 2022
507,539
632
48,482
1,043
5,231
1,759
561,252
3,434
Net carrying amount
506,907
47,439
3,472
557,818
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Retail Banking - mortgages
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
165,264
79
18,831
61
1,762
215
185,857
355
Currency translation and other adjustments
-
(1)
-
1
78
77
78
77
Transfers from Stage 1 to Stage 2
(18,779)
(19)
18,779
19
-
-
-
-
Transfers from Stage 2 to Stage 1
16,742
37
(16,742)
(37)
-
-
-
-
Transfers to Stage 3
(61)
-
(1,028)
(7)
1,089
7
-
-
Transfers from Stage 3
40
1
294
7
(334)
(8)
-
-
Net re-measurement of ECL on stage transfer
(21)
27
6
12
Changes in risk parameters
24
(5)
72
91
Other changes in net exposure
10,832
(13)
(2,307)
(6)
(497)
(43)
8,028
(62)
Other (P&L only items)
-
-
(9)
(9)
Income statement (releases)/charges
(10)
16
26
32
Amounts written-off
-
-
-
-
(30)
(30)
(30)
(30)
Unwinding of discount
-
-
(46)
(46)
At 31 December 2023
174,038
87
17,827
60
2,068
250
193,933
397
Net carrying amount
173,951
17,767
1,818
193,536
At 1 January 2022
159,966
24
10,748
155
1,267
250
171,981
429
2022 movements
5,298
55
8,083
(94)
495
(35)
13,876
(74)
At 31 December 2022
165,264
79
18,831
61
1,762
215
185,857
355
Net carrying amount
165,185
18,770
1,547
185,502
\n
\ue001
ECL levels for mortgages increased during 2023, reflecting continued strong growth.
\n
While portfolio performance remained stable, increased economic uncertainty is
\n
captured through ECL post model adjustments (reflected in changes in risk
\n
parameters).
\n
\ue001
There were net flows into Stage 2 from Stage 1 with an upward trend in early
\n
arrears coupled with the collective migration into Stage 2 of higher risk customers
\n
utilising new Mortgage Charter treatments (approximately \u00a30.9 billion exposure). PDs
\n
remained broadly stable due to the impact of improved economics since 2022 and
\n
balance paydown within Stage 2 resulted in a lower Stage 2 balance in 2023.
\n
\ue001
The increase in the cost of living post model adjustment during 2023 proportionately
\n
allocated more ECL to Stage 1 given the forward-looking nature of the affordability
\n
threat. Refer to the Governance and post model adjustments section for more
\n
information.
\n
\ue001
The Stage 3 inflows remained broadly stable, albeit with signs of an upward drift in
\n
default rates, reflecting slightly poorer arrears performance on mortgages recently
\n
rolled off onto higher product rates. Furthermore, the increase in Stage 3 ECL overall
\n
reflected recent house price index deterioration.
\n
\ue001
The relatively small ECL cost for net re-measurement on stage transfer included the
\n
effect of risk targeted ECL adjustments, when previously in the good book. Refer to
\n
the Governance and post model adjustments section for further details.
\n
\ue001
Write-off occurs once the repossessed property has been sold and there is a residual
\n
shortfall balance remaining outstanding. This would typically be within five years from
\n
default but can be longer.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Retail Banking - credit cards
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
3,062
61
1,098
120
113
71
4,273
252
Currency translation and other adjustments
-
-
-
-
4
4
4
4
Transfers from Stage 1 to Stage 2
(1,933)
(42)
1,933
42
-
-
-
-
Transfers from Stage 2 to Stage 1
753
52
(753)
(52)
-
-
-
-
Transfers to Stage 3
(21)
(1)
(122)
(45)
143
46
-
-
Transfers from Stage 3
2
1
7
3
(9)
(4)
-
-
Net re-measurement of ECL on stage transfer
(31)
162
41
172
Changes in risk parameters
18
25
8
51
Other changes in net exposure
1,612
12
(117)
(51)
(36)
(1)
1,459
(40)
Other (P&L only items)
-
-
1
1
Income statement (releases)/charges
(1)
136
49
184
Amounts written-off
-
-
-
-
(69)
(69)
(69)
(69)
Unwinding of discount
-
-
(7)
(7)
At 31 December 2023
3,475
70
2,046
204
146
89
5,667
363
Net carrying amount
3,405
1,842
57
5,304
At 1 January 2022
2,740
58
947
141
91
60
3,778
259
2022 movements
322
3
151
(21)
22
11
495
(7)
At 31 December 2022
3,062
61
1,098
120
113
71
4,273
252
Net carrying amount
3,001
978
42
4,021
\n
\ue001
The overall increase in ECL was mainly due to the increase in Stage 2 ECL.
\n
\ue001
While portfolio performance remained stable, a net flow into Stage 2 from Stage 1
\n
was observed as PDs increased with observed unemployment and PD modelling
\n
updates capturing more economic downside.
\n
\ue001
Credit card balances continued to grow since the 2022 year end, in line with industry
\n
trends in the UK, reflecting strong customer demand, while sustaining robust risk
\n
appetite.
\n
\ue001
Stage 3 inflows remained relatively stable during the year, although there was a
\n
modest upward trend in default levels, in line with growth and normalisation of risk
\n
parameters.
\n
\ue001
Charge-off (analogous to partial write-off) typically occurs after 12 missed payments.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Retail Banking - other personal unsecured
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
4,784
111
2,028
269
779
631
7,591
1,011
Currency translation and other adjustments
-
-
-
-
26
26
26
26
Transfers from Stage 1 to Stage 2
(2,775)
(118)
2,775
118
-
-
-
-
Transfers from Stage 2 to Stage 1
2,284
317
(2,284)
(317)
-
-
-
-
Transfers to Stage 3
(61)
(3)
(326)
(128)
387
131
-
-
Transfers from Stage 3
7
3
23
9
(30)
(12)
-
-
Net re-measurement of ECL on stage transfer
(224)
329
53
-
158
Changes in risk parameters
(41)
14
82
55
Other changes in net exposure
1,001
104
(558)
(55)
(111)
(33)
332
16
Other (P&L only items)
-
-
20
20
Income statement (releases)/charges
(161)
288
122
249
Amounts written-off
-
-
(1)
(1)
(88)
(88)
(89)
(89)
Unwinding of discount
-
-
(32)
(32)
At 31 December 2023
5,240
149
1,657
238
963
758
7,860
1,145
Net carrying amount
5,091
1,419
205
6,715
At 1 January 2022
4,548
52
1,967
294
629
540
7,144
886
2022 movements
236
59
61
(25)
150
91
447
125
At 31 December 2022
4,784
111
2,028
269
779
631
7,591
1,011
Net carrying amount
4,673
1,759
148
6,580
\n
\ue001
Total ECL increased, mainly in Stage 3. While default levels were broadly stable, they
\n
were higher than in 2022. This increase was in line with growth and normalisation of
\n
risk parameters. Furthermore, write-off levels were lower during 2023, which
\n
sustained a higher Stage 3 ECL position at 31 December 2023.
\n
\ue001
A slight rise in early arrears levels since 2022 and modest PD increases during the
\n
year resulted in a net migration from Stage 1 into Stage 2. However, good book ECL
\n
and coverage levels were largely consistent with 2022, with the improved economic
\n
outlook since 2022 mitigating further IFRS 9 PD increases and balance paydown
\n
within Stage 2.
\n
\ue001
Unsecured retail balances grew steadily until Q3 2023 but, in line with industry trends
\n
in the UK, stabilised in the last quarter of the year.
\n
\ue001
Write-off occurs once recovery activity with the customer has been concluded or
\n
there are no further recoveries expected, but no later than six years after default.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements
(audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
160,352
342
24,711
534
2,198
747
187,261
1,623
Currency translation and other adjustments
(1,702)
1
(226)
(1)
26
46
(1,902)
46
Inter-group transfers
-
-
-
-
-
-
-
-
Transfers from Stage 1 to Stage 2
(23,886)
(129)
23,886
129
-
-
-
-
Transfers from Stage 2 to Stage 1
25,353
334
(25,353)
(334)
-
-
-
-
Transfers to Stage 3
(109)
(2)
(1,523)
(90)
1,632
92
-
-
Transfers from Stage 3
180
27
266
34
(446)
(61)
-
-
Net re-measurement of ECL on stage transfer
(253)
276
129
152
Changes in risk parameters
(62)
(42)
136
32
Other changes in net exposure
16,114
98
(4,731)
(58)
(1,128)
(95)
10,255
(55)
Other (P&L only items)
(5)
6
(36)
(35)
Income statement (releases)/charges
(222)
182
134
94
Amounts written-off
-
-
(1)
(1)
(121)
(121)
(122)
(122)
Unwinding of discount
-
-
(54)
(54)
At 31 December 2022
176,302
356
17,029
447
2,161
819
195,492
1,622
Net carrying amount
175,946
16,582
1,342
193,870
At 1 January 2022
152,224
129
19,731
785
2,155
750
174,110
1,664
2022 movements
8,128
213
4,980
(251)
43
(3)
13,151
(41)
At 31 December 2022
160,352
342
24,711
534
2,198
747
187,261
1,623
Net carrying amount
160,010
24,177
1,451
185,638
\n
\ue001
Growth in exposures was mainly driven by financial institutions sectors.
\n
\ue001
ECL remained broadly stable during 2023 reflecting stable portfolio performance.
\n
\ue001
Reductions in modelled ECL from improving economic variables and risk metrics
\n
were partially offset by increases in post model adjustments to capture continued
\n
economic uncertainty.
\n
\ue001
Stage 3 ECL increased mainly due to charges on a few individual customers.
\n
\ue001
Overall impairment charges were low as the effects of inflation, high interest rates
\n
and supply chain disruption have, to date, not led to a significant increase in defaults.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional - corporate
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
53,595
218
19,235
431
1,434
504
74,264
1,153
Currency translation and other adjustments
(419)
2
(180)
-
25
41
(574)
43
Inter-group transfers
88
1
(66)
-
(30)
(2)
(8)
(1)
Transfers from Stage 1 to Stage 2
(17,161)
(96)
17,161
96
-
-
-
-
Transfers from Stage 2 to Stage 1
18,525
246
(18,525)
(246)
-
-
-
-
Transfers to Stage 3
(91)
(2)
(1,098)
(69)
1,189
71
-
-
Transfers from Stage 3
124
21
204
26
(328)
(47)
-
-
Net re-measurement of ECL on stage transfer
(189)
202
103
116
Changes in risk parameters
(36)
(44)
126
46
Other changes in net exposure
6,741
61
(4,455)
(51)
(758)
(75)
1,528
(65)
Other (P&L only items)
(5)
5
(37)
(37)
Income statement (releases)/charges
(169)
112
117
60
Amounts written-off
-
-
(1)
(1)
(78)
(78)
(79)
(79)
Unwinding of discount
-
-
(41)
(41)
At 31 December 2023
61,402
226
12,275
344
1,454
602
75,131
1,172
Net carrying amount
61,176
11,931
852
73,959
\n
\ue001
There was modest exposure growth, with increased new lending largely offset by
\n
repayments.
\n
\ue001
ECL remained broadly flat but reductions in Stage 2 ECL from repayments were
\n
offset by an increase in Stage 3 from a few individual customers.
\n
\ue001
Overall impairment charges were low as the effects of inflation, high interest rates
\n
and supply chain disruption have, to date, not led to a significant increase in defaults.
\n
The 2023 charge was largely driven by charges on a few individual customers.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional - property
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
24,878
92
3,986
89
628
214
29,492
395
Currency translation and other adjustments
(6)
(1)
(8)
-
1
(2)
(13)
(3)
Inter-group transfers
(38)
-
(8)
-
7
1
(39)
1
Transfers from Stage 1 to Stage 2
(5,010)
(30)
5,010
30
-
-
-
-
Transfers from Stage 2 to Stage 1
4,498
77
(4,498)
(77)
-
-
-
-
Transfers to Stage 3
(14)
(1)
(401)
(20)
415
21
-
-
Transfers from Stage 3
43
4
56
7
(99)
(11)
-
-
Net re-measurement of ECL on stage transfer
(54)
64
24
34
Changes in risk parameters
(24)
2
8
(14)
Other changes in net exposure
1,689
31
(982)
(6)
(313)
(16)
394
9
Other (P&L only items)
-
-
-
-
Income statement (releases)/charges
(47)
60
16
29
Amounts written-off
-
-
-
-
(33)
(33)
(33)
(33)
Unwinding of discount
-
-
(11)
(11)
At 31 December 2023
26,040
94
3,155
89
606
195
29,801
378
Net carrying amount
25,946
3,066
411
29,423
\n
\ue001
The property portfolio remained stable throughout 2023 with minor movements on
\n
exposure and ECL.
\n
\ue001
Overall, there was a small reduction on ECL as write-offs exceeded impairment
\n
charges.
\n
\ue001
Impairment charges were lower than historic trends, as the effects of inflation, high
\n
interest rates and supply chain disruption have, to date, not led to a significant
\n
increase in defaults.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional - other
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
81,879
32
1,490
14
136
29
83,505
75
Currency translation and other adjustments
(1,278)
(1)
(38)
-
-
5
(1,316)
4
Inter-group transfers
(49)
-
74
-
22
-
47
-
Transfers from Stage 1 to Stage 2
(1,716)
(3)
1,716
3
-
-
-
-
Transfers from Stage 2 to Stage 1
2,330
12
(2,330)
(12)
-
-
-
-
Transfers to Stage 3
(4)
-
(24)
(1)
28
1
-
-
Transfers from Stage 3
15
2
6
-
(21)
(2)
-
-
Net re-measurement of ECL on stage transfer
(11)
11
3
3
Changes in risk parameters
(2)
1
-
(1)
Other changes in net exposure
7,683
7
705
(2)
(56)
(4)
8,332
1
Other (P&L only items)
-
-
2
2
Income statement (releases)/charges
(6)
10
1
5
Amounts written-off
-
-
-
-
(8)
(8)
(8)
(8)
Unwinding of discount
-
-
(2)
(2)
At 31 December 2023
88,860
36
1,599
14
101
22
90,560
72
Net carrying amount
88,824
1,585
79
90,488
\n
\ue001
Growth in exposure was observed due to increased lending in the securitisation
\n
sector.
\n
\ue001
The growth was within high quality assets, so ECL was broadly flat with write-offs
\n
exceeding impairment charges.
\n
\ue001
Overall impairment charges were low as the effects of inflation, high interest rates
\n
and supply chain disruption have, to date, not led to a significant increase in defaults.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition arrears status and contributing factors
\n
The tables below show Stage 2 decomposition for the Personal and Wholesale portfolios.
\u00a0
UK mortgages
Credit cards
Other
Total
Loans
ECL
Loans
ECL
Loans
ECL
Loans
ECL
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
Currently >30 DPD
291
1
14
7
51
19
356
27
Currently <=30 DPD
17,563
60
2,008
200
1,582
219
21,153
479
- PD deterioration
12,807
48
1,455
160
831
126
15,093
334
- PD persistence
2,317
6
481
32
373
33
3,171
71
- Other driver (adverse credit, forbearance etc)
2,439
6
72
8
378
60
2,889
74
Total Stage 2
17,854
61
2,022
207
1,633
238
21,509
506
2022
Personal
Currently >30 DPD
205
1
10
5
52
18
267
24
Currently <=30 DPD
18,582
61
1,066
117
1,939
264
21,587
442
- PD deterioration
16,342
56
805
97
1,093
150
18,240
303
- PD persistence
867
2
200
13
185
16
1,252
31
- Other driver (adverse credit, forbearance etc)
1,373
3
61
7
661
98
2,095
108
Total Stage 2
18,787
62
1,076
122
1,991
282
21,854
466
\n
\ue001
The levels of PD driven deterioration decreased in 2023, mainly in the mortgage
\n
portfolio. The economic scenario updates during 2023 resulted in a reduction in
\n
lifetime PDs for the mortgage and personal loan portfolios. This drove a segment of
\n
lower risk cases out of PD SICR deterioration (and captured in PD persistence in the
\n
case of Q4 MES update).
\n
\ue001
The PD modelling update during H1 2023 on the credit card portfolio resulted in
\n
more downside risk captured through modelled ECL and this, alongside modest
\n
increase in early arrears levels, led to more PD SICR deterioration being captured
\n
during 2023.
\n
\ue001
Higher risk mortgage customers who utilised the new Mortgage Charter measures
\n
were collectively migrated into Stage 2, approximately \u00a30.9 billion of exposures, and
\n
captured in the other driver category.
\n
\ue001
Accounts that are less than 30 days past due continue to represent the vast majority
\n
of the Stage 2 population, whilst noting that the greater than 30 days past due
\n
population increased during 2023. As expected, ECL coverage was higher in
\n
accounts that were more than 30 days past due than those in Stage 2 for other
\n
reasons.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition arrears status and contributing factors
Property
Corporate
Financial institutions
Sovereign
Total
Loans
ECL
Loans
ECL
Loans
ECL
Loans
ECL
Loans
ECL
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Wholesale
Currently >30 DPD
99
4
342
9
10
-
-
-
451
13
Currently <=30 DPD
3,171
94
11,803
347
956
15
1
1
15,931
457
- PD deterioration
2,166
72
7,465
222
750
8
-
-
10,381
302
- PD persistence
220
4
838
16
13
-
-
-
1,071
20
- Other driver (forbearance, RoCL etc)
785
18
3,500
109
193
7
1
1
4,479
135
Total Stage 2
3,270
98
12,145
356
966
15
1
1
16,382
470
2022
Wholesale
Currently >30 DPD
255
3
487
11
3
-
-
-
745
14
Currently <=30 DPD
3,780
95
19,103
454
1,350
14
1
-
24,234
563
- PD deterioration
2,503
62
15,714
357
1,230
10
-
-
19,447
429
- PD persistence
81
3
269
9
5
-
-
-
355
12
- Other driver (forbearance, RoCL etc)
1,196
30
3,120
88
115
4
1
-
4,432
122
Total Stage 2
4,035
98
19,590
465
1,353
14
1
-
24,979
577
\n
\ue001
The improved economic outlook, including a more optimistic forecast for stock index
\n
and commercial real estate valuations, resulted in a reduction of IFRS 9 PDs.
\n
Consequently, compared to 2022, a large proportion of exposure no longer exhibited
\n
a SICR and migrated back into Stage 1 resulting in a reduction in Stage 2 exposure.
\n
\ue001
PD deterioration remained the primary trigger for identifying a SICR and Stage 2
\n
treatment.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition by a significant increase in credit risk trigger
UK mortgages
Credit cards
Other
Total
2023
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
Personal trigger
(1)
PD movement
12,969
72.5
1,469
72.7
866
52.9
15,304
71.1
PD persistence
2,317
13.0
481
23.8
374
22.9
3,172
14.7
Adverse credit bureau recorded with credit reference agency
1,047
5.9
49
2.4
99
6.1
1,195
5.6
Forbearance support provided
137
0.8
1
-
11
0.7
149
0.7
Customers in collections
178
1.0
2
0.1
8
0.5
188
0.9
Collective SICR and other reasons
(2)
1,087
6.1
20
1.0
266
16.3
1,373
6.4
Days past due >30
119
0.7
-
-
9
0.6
128
0.6
17,854
100.0
2,022
100.0
1,633
100.0
21,509
100.0
2022
Personal trigger
(1)
PD movement
16,477
87.7
814
75.7
1,129
56.7
18,420
84.3
PD persistence
866
4.6
200
18.6
186
9.3
1,252
5.7
Adverse credit bureau recorded with credit reference agency
929
4.9
52
4.8
96
4.8
1,077
4.9
Forbearance support provided
101
0.5
1
0.1
17
0.9
119
0.5
Customers in collections
153
0.8
2
0.2
4
0.2
159
0.7
Collective SICR and other reasons
(2)
195
1.0
7
0.7
546
27.4
748
3.4
Days past due >30
66
0.4
-
-
13
0.7
79
0.4
18,787
100.0
1,076
100.0
1,991
100.0
21,854
100.0
\n
For the notes to this table refer to the following page.
\n
\ue001
PD-related SICR triggers continued to represent the vast majority of Stage 2.
\n
\ue001
The levels of PD driven deterioration decreased in 2023, mainly in the mortgage
\n
portfolio. The economic scenario updates during 2023 resulted in a reduction in
\n
lifetime PDs for the mortgage and personal loan portfolios, which drove a segment of
\n
lower risk cases out of PD SICR deterioration.
\n
\ue001
The Q4 2023 economic modelling updates that reduced PDs on mortgages and loans
\n
are captured in PD persistence category (for at least three months).
\n
\ue001
The PD modelling update during H1 2023 on the credit card portfolio resulted in
\n
more downside risk captured through modelled ECL and this, alongside modest
\n
increase in early arrears levels, led to more PD SICR deterioration being captured
\n
during 2023.
\n
\ue001
Higher risk mortgage customers who utilised the new Mortgage Charter measures
\n
are collectively migrated into Stage 2, approximately \u00a30.9 billion of exposures. This is
\n
captured in the collective SICR and other reasons category.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition by a significant increase in credit risk trigger
Property
Corporate
Financial institutions
Sovereign
Total
2023
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
Wholesale trigger
(1)
PD movement
2,211
67.6
7,611
62.5
760
78.7
-
-
10,582
64.6
PD persistence
223
6.8
847
7.0
13
1.3
-
-
1,083
6.6
Risk of Credit Loss
563
17.2
2,630
21.7
120
12.4
-
-
3,313
20.2
Forbearance support provided
49
1.6
373
3.1
-
-
-
-
422
2.6
Customers in collections
7
0.2
23
0.2
-
-
-
-
30
0.2
Collective SICR and other reasons
(2)
70
2.1
457
3.8
72
7.5
1
100.0
600
3.7
Days past due >30
147
4.5
204
1.7
1
0.1
-
-
352
2.1
3,270
100.0
12,145
100.0
966
100.0
1
100.0
16,382
100.0
2022
Wholesale trigger
(1)
PD movement
2,569
63.7
15,962
81.5
1,231
91.0
-
-
19,762
79.2
PD persistence
82
2.0
269
1.4
5
0.4
-
-
356
1.4
Risk of Credit Loss
596
14.8
1,664
8.5
32
2.4
-
-
2,292
9.2
Forbearance support provided
41
1.0
476
2.4
19
1.4
-
-
536
2.1
Customers in collections
13
0.3
44
0.2
-
-
-
-
57
0.2
Collective SICR and other reasons
(2)
566
14.0
970
5.0
64
4.7
1
100.0
1,601
6.4
Days past due >30
168
4.2
205
1.0
2
0.1
-
-
375
1.5
4,035
100.0
19,590
100.0
1,353
100.0
1
100.0
24,979
100.0
\n
(1)
The table is prepared on a hierarchical basis from top to bottom, for example, accounts with PD deterioration may also trigger backstop(s) but are only reported under PD deterioration.
\n
(2)
Includes cases where a PD assessment cannot be made and accounts where the PD has deteriorated beyond a prescribed backstop threshold aligned to risk management practices.
\n
\ue001
PD deterioration continued to be the primary trigger of migration of exposures from
\n
Stage 1 into Stage 2. As the economic outlook improved, there was a reduction in
\n
cases triggering Stage 2.
\n
\ue001
Moving exposures on to the Risk of Credit Loss framework remained an important
\n
backstop indicator of a SICR. The exposures classified under the Stage 2 Risk of
\n
Credit Loss framework trigger increased over the year, as less exposures were
\n
captured under the PD deterioration Stage 2 trigger.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 3 vintage analysis
\n
The table below shows estimated vintage analysis of the material Stage 3 portfolios.
2023
2022
Retail Banking mortgages
(1)
Wholesale
Retail Banking mortgages
(1)
Wholesale
Stage 3 loans (\u00a3bn)
2.0
2.2
1.7
2.3
Vintage (time in default):
<1 year
45%
40%
43%
46%
1-3 years
32%
35%
26%
26%
3-5 years
9%
12%
12%
10%
>5 years
14%
13%
19%
18%
100%
100%
100%
100%
\n
(1)
Retail Banking excludes a non-material amount of lending held on relatively small legacy portfolios.
\n
(2)
Comparative data for Wholesale has been re-presented to correct the ageing profile.
\n
\ue001
The increase in the proportion of loans in Stage 3 for less than three years was mainly due to the adoption of the new regulatory definition of default from January 2022, including
\n
cases captured due to the regulatory default probation rules alone (which represented approximately 11% of Stage 3 Retail Banking mortgages and 9% of Stage 3 Wholesale
\n
balances).
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality
(audited)
\n
The table below shows asset quality bands of gross loans and ECL, by stage, for the Personal portfolio.
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
UK mortgages
AQ1-AQ4
110,694
7,572
-
118,266
51
20
-
71
0.1
0.3
-
0.1
AQ5-AQ8
77,290
9,578
-
86,868
37
37
-
74
0.1
0.4
-
0.1
AQ9
156
704
-
860
-
4
-
4
-
0.6
-
0.5
AQ10
-
-
2,281
2,281
-
-
271
271
-
-
11.9
11.9
188,140
17,854
2,281
208,275
88
61
271
420
0.1
0.3
11.9
0.2
Credit cards
AQ1-AQ4
124
-
-
124
1
-
-
1
0.8
-
-
0.8
AQ5-AQ8
3,612
1,965
-
5,577
75
193
-
268
2.1
9.8
-
4.8
AQ9
6
57
-
63
-
14
-
14
-
24.6
-
22.2
AQ10
-
-
140
140
-
-
93
93
-
-
66.4
66.4
3,742
2,022
140
5,904
76
207
93
376
2.0
10.2
66.4
6.4
Other personal
AQ1-AQ4
764
150
-
914
11
23
-
34
1.4
15.3
-
3.7
AQ5-AQ8
6,178
1,374
-
7,552
138
180
-
318
2.2
13.1
-
4.2
AQ9
41
109
-
150
3
35
-
38
7.3
32.1
-
25.3
AQ10
-
-
979
979
-
-
778
778
-
-
79.5
79.5
6,983
1,633
979
9,595
152
238
778
1,168
2.2
14.6
79.5
12.2
Total
AQ1-AQ4
111,582
7,722
-
119,304
63
43
-
106
0.1
0.6
-
0.1
AQ5-AQ8
87,080
12,917
-
99,997
250
410
-
660
0.3
3.2
-
0.7
AQ9
203
870
-
1,073
3
53
-
56
1.5
6.1
-
5.2
AQ10
-
-
3,400
3,400
-
-
1,142
1,142
-
-
33.6
33.6
198,865
21,509
3,400
223,774
316
506
1,142
1,964
0.2
2.4
33.6
0.9
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality (audited)
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
UK mortgages
AQ1-AQ4
116,559
9,208
-
125,767
45
24
-
69
0.0
0.3
-
0.1
AQ5-AQ8
65,510
8,962
-
74,472
36
34
-
70
0.1
0.4
-
0.1
AQ9
176
617
-
793
-
4
-
4
-
0.7
-
0.5
AQ10
-
-
1,925
1,925
-
-
233
233
-
-
12.1
12.1
182,245
18,787
1,925
202,957
81
62
233
376
00
0.3
12.1
0.2
Credit cards
AQ1-AQ4
98
-
-
98
-
-
-
-
-
-
-
-
AQ5-AQ8
3,172
1,036
-
4,208
61
112
-
173
1.9
10.8
-
4.1
AQ9
5
40
-
45
1
10
-
11
20.0
25.0
-
24.4
AQ10
-
-
109
109
-
-
73
73
-
-
67.0
67.0
3,275
1,076
109
4,460
62
122
73
257
1.9
11.3
67.0
5.8
Other personal
AQ1-AQ4
1,047
128
-
1,175
11
17
-
28
1.1
13.3
-
2.4
AQ5-AQ8
5,843
1,732
-
7,575
104
224
-
328
1.8
12.9
-
4.3
AQ9
28
131
-
159
2
41
-
43
7.1
31.3
-
27.0
AQ10
-
-
797
797
-
-
651
651
-
-
81.7
81.7
6,918
1,991
797
9,706
117
282
651
1,050
1.7
14.2
81.7
10.8
Total personal
AQ1-AQ4
117,704
9,336
-
127,040
56
41
-
97
0.1
0.4
-
0.1
AQ5-AQ8
74,525
11,730
-
86,255
201
370
-
571
0.3
3.2
-
0.7
AQ9
209
788
-
997
3
55
-
58
1.4
7.0
-
5.8
AQ10
-
-
2,831
2,831
-
-
957
957
-
-
33.8
33.8
192,438
21,854
2,831
217,123
260
466
957
1,683
0.1
2.1
33.8
0.8
\n
\ue001
In the Personal portfolio, the majority of exposures were in AQ4 and AQ5 within
\n
mortgages. The higher proportion of UK mortgage loans in bands AQ5-AQ8 was
\n
reflected in the overall average Basel PD for mortgages marginally increasing from
\n
0.65% to 0.67%.
\n
\ue001
In other personal, the relatively high level of exposures in AQ10 reflected that
\n
impaired assets can be held on the balance sheet, with commensurate ECL
\n
provision, for up to six years after default.
Furthermore, write-off levels were lower
\n
during 2023 than 2022.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality (audited)
\n
The table below shows asset quality bands of gross loans and ECL, by stage, for the Wholesale portfolio.
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
Property
AQ1-AQ4
14,961
405
-
15,366
16
5
-
21
0.1
1.2
-
0.1
AQ5-AQ8
12,346
2,799
-
15,145
86
88
-
174
0.7
3.1
-
1.2
AQ9
9
66
-
75
-
5
-
5
-
7.6
-
6.7
AQ10
-
-
621
621
-
-
198
198
-
-
31.9
31.9
27,316
3,270
621
31,207
102
98
198
398
0.4
3.0
31.9
1.3
Other
AQ1-AQ4
25,914
937
-
26,851
27
13
-
40
0.1
1.4
-
0.2
AQ5-AQ8
37,738
10,935
-
48,673
207
323
-
530
0.6
3.0
-
1.1
AQ9
38
273
-
311
-
20
-
20
-
7.3
-
6.4
AQ10
-
-
1,504
1,504
-
-
611
611
-
-
40.6
40.6
63,690
12,145
1,504
77,339
234
356
611
1,201
0.4
2.9
40.6
1.6
Financial institutions
AQ1-AQ4
52,702
665
-
53,367
28
6
-
34
0.1
0.9
-
0.1
AQ5-AQ8
3,402
284
-
3,686
16
9
-
25
0.5
3.2
-
0.7
AQ9
1
17
-
18
-
-
-
-
-
-
-
-
AQ10
-
-
16
16
-
-
7
7
-
-
43.8
43.8
56,105
966
16
57,087
44
15
7
66
0.1
1.6
43.8
0.1
Sovereign
AQ1-AQ4
2,487
1
-
2,488
13
1
-
14
0.5
100.0
-
0.6
AQ5-AQ8
123
-
-
123
-
-
-
-
-
-
-
-
AQ9
-
-
-
-
-
-
-
-
-
-
-
-
AQ10
-
-
22
22
-
-
2
2
-
-
9.1
9.1
2,610
1
22
2,633
13
1
2
16
0.5
100.0
9.1
0.6
Total
AQ1-AQ4
96,064
2,008
-
98,072
84
25
-
109
0.1
1.3
-
0.1
AQ5-AQ8
53,609
14,018
-
67,627
309
420
-
729
0.6
3.0
-
1.1
AQ9
48
356
-
404
-
25
-
25
-
7.0
-
6.2
AQ10
-
-
2,163
2,163
-
-
818
818
-
-
37.8
37.8
149,721
16,382
2,163
168,266
393
470
818
1,681
0.3
2.9
37.8
1.0
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality (audited)
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
Property
AQ1-AQ4
14,497
542
-
15,039
16
4
-
20
0.1
0.7
-
0.1
AQ5-AQ8
11,792
3,401
-
15,193
83
89
-
172
0.7
2.6
-
1.1
AQ9
11
92
-
103
-
5
-
5
-
5.4
-
4.9
AQ10
-
-
701
701
-
-
223
223
-
-
31.8
31.8
26,300
4,035
701
31,036
99
98
223
420
0.4
2.4
31.8
1.4
Other
AQ1-AQ4
20,409
5,316
-
25,725
24
38
-
62
0.1
0.7
-
0.2
AQ5-AQ8
36,511
13,942
-
50,453
202
404
-
606
0.6
2.9
-
1.2
AQ9
35
332
-
367
-
23
-
23
-
6.9
-
6.3
AQ10
-
-
1,515
1,515
-
-
560
560
-
-
37.0
37.0
56,955
19,590
1,515
78,060
226
465
560
1,251
0.4
2.4
37.0
1.6
Financial institutions
AQ1-AQ4
44,257
914
-
45,171
18
5
-
23
0.0
0.6
-
0.1
AQ5-AQ8
2,479
429
-
2,908
14
9
-
23
0.6
2.1
-
0.8
AQ9
2
10
-
12
-
-
-
-
-
-
-
-
AQ10
-
-
47
47
-
-
17
17
-
-
36.2
36.2
46,738
1,353
47
48,138
32
14
17
63
0.1
1.0
36.2
0.1
Sovereign
AQ1-AQ4
2,678
1
-
2,679
15
-
-
15
0.6
-
-
0.6
AQ5-AQ8
115
-
-
115
-
-
-
-
-
-
-
-
AQ9
-
-
-
-
-
-
-
-
-
-
-
-
AQ10
-
-
2
2
-
-
2
2
-
-
100.0
100.0
2,793
1
2
2,796
15
-
2
17
0.5
\u2014
100.0
0.6
Total
AQ1-AQ4
81,841
6,773
-
88,614
73
47
-
120
0.1
0.7
-
0.1
AQ5-AQ8
50,897
17,772
-
68,669
299
502
-
801
0.6
2.8
-
1.2
AQ9
48
434
-
482
-
28
-
28
-
6.5
-
5.8
AQ10
-
-
2,265
2,265
-
-
802
802
-
-
35.4
35.4
132,786
24,979
2,265
160,030
372
577
802
1,751
0.3
2.3
35.4
1.1
\n
\ue001
Asset quality remained stable.
\n
\ue001
Customer credit grades were reassessed as and when a request for financing was
\n
made, a scheduled customer credit review performed or a material credit event
\n
specific to that customer occurred. Credit grades are reassessed for all customers at
\n
least annually.
\n
\ue001
ECL provisions coverage showed the expected trend, with increased coverage in the
\n
weaker asset quality bands within Stage 2 compared to Stage 1 and within Stage 3
\n
compared to Stage 2.
\n\n\n\n\n\n\n\n\n\n\n\n
Credit risk \u2013 Trading activities
\n
This section details the credit risk profile of NatWest Group\u2019s trading activities.
\n
Securities financing transactions and collateral
(audited)
\n
The table below shows securities financing transactions in Commercial & Institutional and Central items & other. Balance sheet captions include balances held at all classifications under
\n
IFRS.
\n\n \n
Reverse Repos
Repos
Of which:
Outside netting
Of which:
Outside netting
Total
can be offset
arrangements
Total
can be offset
arrangements
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Gross
77,508
77,050
458
66,767
66,047
720
IFRS offset
(25,903)
(25,903)
-
(25,903)
(25,903)
-
Carrying value
51,605
51,147
458
40,864
40,144
720
Master netting arrangements
(669)
(669)
-
(669)
(669)
-
Securities collateral
(50,287)
(50,287)
-
(39,475)
(39,475)
-
Potential for offset not recognised under IFRS
(50,956)
(50,956)
-
(40,144)
(40,144)
-
Net
649
191
458
720
-
720
2022
Gross
61,775
61,241
534
55,226
50,743
4,483
IFRS offset
(20,211)
(20,211)
-
(20,211)
(20,211)
-
Carrying value
41,564
41,030
534
35,015
30,532
4,483
Master netting arrangements
(2,445)
(2,445)
-
(2,445)
(2,445)
-
Securities collateral
(38,387)
(38,387)
-
(28,087)
(28,087)
-
Potential for offset not recognised under IFRS
(40,832)
(40,832)
-
(30,532)
(30,532)
-
Net
732
198
534
4,483
-
4,483
\n\n\n\n\n\n\n\n\n\n\n\n\n
Derivatives
(audited)
\n
The table below shows 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. A
\n
significant proportion of the derivatives relate to trading activities in Commercial & Institutional. The table also includes hedging derivatives in Central items & other.
\n\n \n
2023
2022
Notional
GBP
USD
EUR
Other
Total
Assets
Liabilities
Notional
Assets
Liabilities
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3m
\u00a3m
\u00a3bn
\u00a3m
\u00a3m
Gross exposure
99,501
96,264
118,275
116,158
IFRS offset
(20,597)
(23,869)
(18,730)
(22,111)
Carrying value
3,244
3,025
6,012
1,122
13,403
78,904
72,395
13,925
99,545
94,047
Of which:
Interest rate
(1)
2,952
1,623
5,466
227
10,268
44,563
38,483
10,742
53,480
48,535
Exchange rate
291
1,397
537
895
3,120
34,161
33,586
3,168
45,829
45,237
Credit
1
5
9
-
15
180
326
15
236
275
Carrying value
13,403
78,904
72,395
13,925
99,545
94,047
Counterparty mark-to-market
netting
(60,355)
(60,355)
(77,365)
(77,365)
Cash collateral
(12,284)
(6,788)
(14,079)
(9,761)
Securities collateral
(3,408)
(1,664)
(4,571)
(1,185)
Net exposure
2,857
3,588
3,530
5,736
Banks
(2)
335
555
648
711
Other financial institutions
(3)
1,422
1,304
1,732
1,969
Corporate
(4)
1,063
1,690
1,068
2,969
Government
(5)
37
39
82
87
Net exposure
2,857
3,588
3,530
5,736
UK
1,283
1,912
1,271
2,878
Europe
800
1,209
1,196
2,015
US
607
381
753
626
RoW
167
86
310
217
Net exposure
2,857
3,588
3,530
5,736
Asset quality of uncollateralised derivative assets
AQ1-AQ4
2,382
3,014
AQ5-AQ8
471
500
AQ9-AQ10
4
16
Net exposure
2,857
3,530
\n
(1)
The notional amount of interest rate derivatives includes \u00a37,280 billion (2022 \u2013 \u00a38,065 billion) in respect of contracts cleared through central clearing counterparties.
\n
(2)
Transactions with certain counterparties with whom NatWest 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
\n
positions in certain jurisdictions where the collateral agreements are not deemed to be legally enforceable.
\n
(3)
Includes transactions with securitisation vehicles and funds where collateral posting is contingent on NatWest Group\u2019s external rating.
\n
(4)
Mainly large corporates with whom NatWest Group may have netting arrangements in place, but operational capability does not support collateral posting.
\n
(5)
Sovereigns and supranational entities with no collateral arrangements, collateral arrangements that are not considered enforceable, or one-way collateral agreements in their favour
.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Debt securities
(audited)
\n
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\u2019s, Moody\u2019s and Fitch.
\n
Refer to Note 13 on Trading assets and liabilities for details on short positions.
\n\n \n
Central and local government
UK
US
Other
Financial institutions
Corporate
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
AAA
-
-
1,333
1,132
-
2,465
AA to AA+
-
2,600
19
762
4
3,385
A to AA-
2,729
-
1,017
251
283
4,280
BBB- to A-
-
-
693
295
489
1,477
Non-investment grade
-
-
-
198
149
347
Unrated
-
-
-
-
-
-
Total
2,729
2,600
3,062
2,638
925
11,954
2022
AAA
-
-
469
766
3
1,238
AA to AA+
-
2,345
1,042
1,114
21
4,522
A to AA-
2,205
-
372
77
29
2,683
BBB- to A-
-
-
916
149
296
1,361
Non-investment grade
-
-
-
65
49
114
Unrated
-
-
-
1
3
4
Total
2,205
2,345
2,799
2,172
401
9,922
Cross border exposure
Cross border exposures comprise both banking and trading activities, including reverse repurchase agreements. Exposures comprise loans and advances, including finance leases and
instalment credit receivables, and other monetary assets, such as debt securities. The geographical breakdown is based on the country of domicile of the borrower or guarantor of
ultimate risk. Cross border exposures include non-local currency claims of overseas offices on local residents but exclude exposures to local residents in local currencies. The table
shows cross border exposures greater than 0.5% of NatWest Group\u2019s total assets.
\n \n
Government
Banks
Other
Total
Short positions
Net of short positions
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Western Europe
7,830
10,109
26,508
44,447
4,655
39,792
Of which: France
2,229
2,105
7,839
12,173
1,183
10,990
Germany
1,614
4,525
1,065
7,204
1,905
5,299
Luxembourg
1
317
7,045
7,363
-
7,363
Ireland
29
90
3,622
3,741
99
3,642
Jersey
-
-
4,394
4,394
-
4,394
United States
6,764
3,440
16,356
26,560
2,974
23,586
Canada
1,262
2,059
1,132
4,453
17
4,436
2022
Western Europe
5,608
7,385
19,018
32,011
4,438
27,573
Of which: France
1,875
1,911
3,958
7,744
1,414
6,330
Germany
794
3,717
839
5,350
1,053
4,297
Luxembourg
1
190
5,640
5,831
5
5,826
Ireland
28
70
2,823
2,921
66
2,855
Jersey
-
-
3,019
3,019
-
3,019
United States
8,080
3,852
12,931
24,863
1,429
23,434
Canada
35
1,885
402
2,322
12
2,310
Capital, liquidity and funding risk
NatWest Group continually ensures a comprehensive approach is taken to the
management of capital, liquidity and funding, underpinned by frameworks, risk appetite
and policies, to manage and mitigate its capital, liquidity and funding risks. The
framework ensures the tools and capability are in place to facilitate the management
and mitigation of risk ensuring NatWest Group operates within its regulatory
requirements and risk appetite.
Definitions
(audited)
Regulatory capital consists of reserves and instruments issued that are available, have a
degree of permanency and are capable of absorbing losses. A number of strict
conditions set by regulators must be satisfied to be eligible as capital.
Capital risk is the inability to conduct business in base or stress conditions on a risk or
leverage basis due to insufficient qualifying capital as well as the failure to assess,
monitor, plan and manage capital adequacy requirements.
Liquidity consists of assets that can be readily converted to cash within a short
timeframe at a reliable value. Liquidity risk is the risk of being unable to meet actual or
potential financial obligations in a timely manner when they fall due in the short term.
Funding consists of on-balance sheet liabilities that are used to provide cash to finance
assets. Funding risk is the risk that current or prospective financial obligations cannot be
met as they fall due in the medium to long term, either at all or without increasing
funding costs unacceptably.
Liquidity and funding risks arise in a number of ways, including through the maturity
transformation role that banks perform. The risks are dependent on factors such as:
\ue001
Maturity profile;
\ue001
Composition of sources and uses of funding;
\ue001
The quality and size of the liquidity portfolio;
\ue001
Wholesale market conditions; and
\ue001
Depositor and investor behaviour.
Sources of risk
(audited)
Capital
The eligibility of instruments and financial resources as regulatory capital is laid down by
applicable regulation. Capital is categorised under two tiers (Tier 1 and Tier 2) according
to the ability to absorb losses, degree of permanency and the ranking of absorbing losses
on either a going or gone concern basis. There are three broad categories of capital
across these two tiers:
\ue001
CET1 capital
-
CET1 capital must be perpetual and capable of unrestricted and
immediate use to cover risks or losses as soon as these occur. This includes ordinary
shares issued and retained earnings.
\ue001
Additional Tier 1 (AT1) capital -
This is the second type of loss absorbing capital and
must be capable of absorbing losses on a going concern basis. These instruments are
either written down or converted into CET1 capital when the CET1 ratio falls below a
pre-specified level.
\ue001
Tier 2 capital -
Tier 2 capital is supplementary capital and provides loss absorption on
a gone concern basis. Tier 2 capital absorbs losses after Tier 1 capital. It typically
consists of subordinated debt securities with a minimum maturity of five years at the
point of issuance.
Minimum requirement for own funds and eligible liabilities (MREL)
In addition to capital, other specific loss-absorbing instruments, including senior notes
and Tier 2 capital instruments with certain qualifying criteria issued by NatWest Group,
may be used to cover certain gone concern capital requirements, which is referred to as
MREL. Gone concern refers to the situation in which resources must be available to
enable an orderly resolution, in the event that the Bank of England (BoE) deems that
NatWest Group has failed or is likely to fail.
Liquidity
NatWest Group maintains a prudent approach to the definition of liquidity portfolio to
ensure it is available when and where required, taking into account regulatory, legal and
other constraints. Following ringfencing legislation, liquidity is no longer considered
fungible across NatWest Group. Principal liquidity portfolios are maintained in the UK
Domestic Liquidity Sub-Group (UKDoLSub) (primarily in NatWest Bank Plc), NatWest
Markets Plc, RBS International Limited, NWM N.V and NatWest Bank Europe GmbH.
Some disclosures in this section where relevant are presented, on a consolidated basis,
for NatWest Group and the UK DoLSub.
Liquidity portfolio is divided into primary and secondary liquidity as follows:
\ue001
Primary liquidity is LCR eligible assets and includes cash and balances at central
banks, Treasury bills and high quality government securities.
\ue001
Secondary liquidity is assets
eligible as collateral for local central bank liquidity
facilities. These assets include own-issued securitisations or whole loans that are
retained on balance sheet and pre-positioned with a central bank so that they may
be converted into additional sources of liquidity at very short notice
.
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n
Funding
\n
NatWest Group maintains a diversified set of funding sources, including customer
\n
deposits, wholesale deposits and term debt issuance taking into account regulatory
\n
metrics (Net Stable Funding Ratio).
The principal levels at which funding risk is managed
\n
are at NatWest Group, NatWest Holdings Group, UK DoLSub, NatWest Markets Plc, RBS
\n
International Limited, NWM N.V. and NatWest Bank Europe GmbH. NatWest Group also
\n
retains access to central bank funding facilities.
\n
For further details on capital constituents and the regulatory framework covering capital,
\n
liquidity and funding requirements, refer to the 2023 NatWest Group Pillar 3 Report.
\n
Capital risk management
\n
Capital management ensures that there is sufficient capital and other loss-absorbing
\n
instruments to operate effectively including meeting minimum regulatory requirements,
\n
operating within Board-approved risk appetite, maintaining its credit rating and
\n
supporting its strategic goals.
\n
Capital management is critical in supporting the businesses and is enacted through an
\n
end-to-end framework across businesses and legal entities. Capital is managed within
\n
the organisation at the following levels; NatWest Group consolidated, NWH Group sub
\n
consolidated, NatWest Markets Plc, NatWest Markets N.V. and RBS International Limited.
\n
The banking subsidiaries within NWH Group are governed by the same principles,
\n
processes and management as NatWest Group. Note that although the aforementioned
\n
entities are regulated in line with Basel III principles, local implementation of the
\n
framework differs across geographies.
\n
Capital planning is integrated into NatWest Group\u2019s wider annual budgeting process and
\n
is assessed and updated at least monthly. Regular returns are submitted to the PRA
\n
which include a two-year rolling forecast view. Other elements of capital management,
\n
including risk appetite and stress testing, are set out on pages 175 to 177.
\n
Produce capital plans
\n
Capital plans are produced for NatWest Group, its key operating entities and its
\n
businesses over a five year planning horizon under expected and stress conditions.
\n
Stressed capital plans are produced to support internal stress testing in the ICAAP for
\n
regulatory purposes.
\n
Shorter term forecasts are developed frequently in response to actual performance,
\n
changes in internal and external business environment and to manage risks and
\n
opportunities.
\n
Assess capital adequacy
\n
Capital plans are developed to maintain capital of sufficient quantity and quality to
\n
support NatWest Group\u2019s business, its subsidiaries and strategic plans over the planning
\n
horizon within approved risk appetite, as determined via stress testing, and minimum
\n
regulatory requirements.
\n
Capital resources and capital requirements are assessed across a defined planning
\n
horizon.
\n
Impact assessment captures input from across NatWest Group including from
\n
businesses.
\n
Inform capital actions
\n
Capital planning informs potential capital actions including buy backs, redemptions,
\n
dividends and new issuance to external investors or via internal transactions.
\n
Decisions on capital actions will be influenced by strategic and regulatory requirements,
\n
risk appetite, costs and prevailing market conditions.
\n
As part of capital planning, NatWest Group will monitor its portfolio of external capital
\n
securities and assess the optimal blend and most cost effective means of financing.
\n
Capital planning is one of the tools that NatWest Group uses to monitor and manage
\n
capital risk on a going and gone concern basis, including the risk of excessive leverage.
\n
Liquidity risk management
\n
NatWest Group manages its liquidity risk taking into account regulatory, legal and other
\n
constraints to ensure sufficient liquidity is available where required to cover liquidity
\n
stresses. The principal levels at which liquidity risk is managed are:
\n
\ue001
NatWest Group
\n
\ue001
NatWest Holdings Group
\n
\ue001
UK DoLSub
\n
\ue001
NatWest Markets Plc
\n
\ue001
NatWest Markets Securities Inc.
\n
\ue001
RBS International Limited
\n
\ue001
NWM N.V.
\n
\ue001
NatWest Bank Europe GmbH
\n
The UK DoLSub is PRA regulated and comprises NatWest Group\u2019s three licensed
\n
deposit-taking UK banks: National Westminster Bank Plc (NWB Plc), The Royal Bank of
\n
Scotland plc (RBS plc) and Coutts & Company.
\n
NatWest Group categorises its liquidity portfolio, including its locally managed liquidity
\n
portfolios, into primary and secondary liquid assets. The size of the liquidity portfolios are
\n
determined by referencing NatWest Group\u2019s liquidity risk appetite. NatWest Group
\n
retains a prudent approach to setting the composition of the liquidity portfolios, which is
\n
subject to internal policies applicable to all entities and limits over quality of counterparty,
\n
maturity mix and currency mix.
\n
RBS International Limited and NWM N.V. hold locally managed portfolios that comply
\n
with local regulations that may differ from PRA rules.
\n
The liquidity value of the portfolio is determined by taking current market prices and
\n
applying a discount or haircut, to give a liquidity value that represents the amount of
\n
cash that can be generated by the asset.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Funding risk management
\n
NatWest Group manages funding risk through a comprehensive framework which
\n
measures and monitors the funding risk on the balance sheet including quantitative and
\n
qualitative analysis of the behavioural aspects of its assets and liabilities as well as the
\n
funding concentration.
\n
Prudential regulation changes that may impact capital requirements
\n
NatWest Group faces numerous changes in prudential regulation that may impact the
\n
minimum amount of capital it must hold and consequently may increase funding costs
\n
and reduce return on equity.
\n
Regulatory changes are actively monitored by NatWest Group, including engagement
\n
with industry associations and regulators and participation in quantitative impact studies.
\n
Monitoring the changing regulatory landscape forms a fundamental part of capital
\n
planning and management of its business. NatWest Group believes that its strategy to
\n
focus on simpler, lower risk activities within a more resilient recovery and resolution
\n
framework will enable it to manage the impact of these.
\n
UK and EU implementation of Basel framework
\n
The Basel framework is an internationally agreed set of measures developed by the
\n
Basel Committee on Banking Supervision (BCBS). The Basel III standards are minimum
\n
requirements which apply to internationally active banks, which ensure a global level
\n
playing field on financial regulation.
Individual jurisdictions must decide how to implement
\n
the standards.
\n
From 1 January 2021, NatWest Group has been regulated under the on-shored CRR and
\n
associated on-shored binding technical standards which were created by the European
\n
Union (Withdrawal) Act 2018 and amending statutory instruments. As the Withdrawal
\n
Act applied to the CRR in place as of 31 December 2020, changes to the CRR in the EU
\n
are not reflected in the UK CRR unless separately legislated and amended by statutory
\n
instruments. Going forward, the Financial Services Bill gives the PRA the power to write
\n
prudential rules directly into the PRA rulebook and it will co-ordinate with HM Treasury
\n
to implement any required changes to the UK CRR.
\n
On 1 January 2022, PRA implemented changes to the UK CRR to align to the Basel III
\n
standards which included the introduction of a new standardised approach for
\n
counterparty credit risk (SA-CCR), amendments to the LCR and NSFR rules as well as
\n
new regulation applicable to internal ratings (IRB) models. Changes were also introduced
\n
to the UK Leverage Ratio framework. Equivalent reforms were implemented in the EU in
\n
June 2021, known as CRR2.
\n
On 30 November 2022, the PRA published its consultation paper CP16/22 setting out its
\n
proposed rules and expectations with respect to
the remaining Basel III standards to be
\n
implemented in the UK, also referred to as \u201cBasel 3.1 standards\u201d. This will complete the
\n
implementation of post-global financial crisis prudential reforms, which were designed to
\n
i) increase the quantity of capital in the system, per unit of risk; ii) increase the quality
\n
capital held by firms; and iii) improve the accuracy of risk-management firms, reducing
\n
the variability of risk-weighted assets (RWAs).
\n
The Basel 3.1 changes mainly impact capital requirements for STD and IRB Credit Risk,
\n
Market Risk, Credit Valuation Adjustment (CVA), Counterparty Credit Risk (CCR) and
\n
Operational Risk. An aggregate \u201coutput floor\u201d is also being introduced to ensure that
\n
total RWAs for firms using advanced or internally modelled methods and subject to the
\n
floor cannot fall below 72.5% of RWAs under the standardised approach. The proposal
\n
does not include further changes to the Leverage Ratio, Large Exposures and Liquidity
\n
Risk frameworks.
\n
The consultation paper has been followed up with the publication of the PRA\u2019s policy
\n
statement PS17/23 Implementation of the Basel 3.1 standards near-final part 1.
This
\n
contains the near final rules on Market Risk, CVA, CCR and Operational Risk sections,
\n
along with some Pillar 2 guidance relating to these topics.
Part 2, containing rules on the
\n
remaining Basel 3.1 changes, is expected to be published in Q2 2024.
\n
The PRA rules are expected to be implemented from 1 July 2025.
\n
Equivalent changes relating to the Basel 3.1 standards will be implemented in EU by
\n
CRR3 and CRD6 for which the European Commission issued a proposal in October 2021,
\n
with the near final rules published December 2023. The EU implementation date is
\n
expected to be 1 January 2025.
Their impact will be limited to NatWest Group\u2019s EU
\n
subsidiaries.
\n
Other developments in 2023
\n
On 13 November 2023, the PRA published PS14/13 which formally phased out the CET1
\n
capital deduction for NPEs (Non- Performing Exposures). The requirement was originally
\n
introduced in EU CRR and adopted in the UK; however, the PRA considered that it would
\n
not be appropriate in a UK context to apply the NPE deduction requirement going
\n
forward. Capital disclosures as of 31 December 2023 reflect the benefit because of the
\n
reversal of this deduction.
\n
On 20 November 2023, the PRA announced its 2023 list of O-SIIs (Other Systemically
\n
Important Institutions) as well as the 2023 O-SII buffers for ring-fenced banks (RFBs). The
\n
PRA is required to identify O-SIIs on an annual basis. NatWest Group Plc is part of the
\n
PRA\u2019s O-SII list and the O-SII buffer for its ring-fenced sub-group (i.e. NatWest Holdings
\n
Group) was kept at 1.5%. The 2023 O-SII rates will apply from 1 January 2025. An O-SII
\n
buffer can apply to O-SIIs, or parts of an O-SII that are ring-fenced banks.
\n
NatWest Group, as a third-country group with two or more subsidiary banking
\n
institutions in the EU, was approved by the European Central Bank (ECB) to establish a
\n
dual IPU (Intermediate Parent Undertaking) structure on behalf of its European
\n
subsidiaries. As a result, NatWest Bank Europe GmbH, a wholly owned subsidiary of
\n
NatWest Holdings Group, will act as the ring-fenced IPU. RBS Holdings N.V., a wholly
\n
owned subsidiary of NatWest Markets Plc, will act as the non-ring fenced IPU. Both IPUs
\n
became subject to ECB supervision from 1 January 2024.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Summary of future changes to prudential regulation in UK that may impact NatWest Group
\n
The table below covers expected future changes to prudential regulation in the UK which may impact NatWest Group at a consolidated level. Certain entities within the group will be
\n
exposed to changes in prudential regulation from other legislative bodies and/or local supervisory authorities where NatWest Group\u2019s entities are authorised (e.g. EU and Jersey) on a
\n
solo basis and these changes may be different in substance, scope and timing than those highlighted below.
\n\n \n
Area of development
Key changes
Source of changes/implementation date
IFRS 9 transitional relief
\ue001
IFRS 9 CET1 add-back phased out in period to 31 December 2024
\ue001
Implementation: 1 January 2024
In respect to ECL
\ue001
The transitional factor will reduce further from 50% to 25% from January 2024
provisions
Capital \u2013 Output floor
\ue001
Level of application: Applies at highest level of application: Consolidated level for UK Groups; sub-consolidated level
\ue001
PRA Basel 3.1 CP16/22
for Ring Fenced sub-groups.
\ue001
Implementation: 1 July 2025
\ue001
Capital stack: Applies to full capital stack including capital buffers.
\ue001
Transitional
period
for
the
application;
starting
with
50%
at
1
July
2025
through
to
72.5%
at
1
January
2030.
Credit risk (STD, IRB,
\ue001
Significant revisions to standardised credit risk, including to unrated corporates, SMEs, specialised lending,
\ue001
PRA Basel 3.1 CP16/22
FIRB)
mortgages & equity exposures.
\ue001
Implementation: 1 July 2025
\ue001
Changes to IRB; restrictions on IRB modelling (switch to standardised on central governments and equities, switch
to FIRB on financial institutions and large corporates), inclusion of input floors and other modelling changes.
\ue001
Removal of SME & Infrastructure supporting factors (IRB & standardised).
\ue001
Amendments to credit risk mitigation, including the withdrawal of some internal modelling approaches, the removal
of double default and a new risk weight substitution approach on some exposures.
Market risk
\ue001
Implementation of FRTB - new standardised & modelled approaches (Expected Shortfall replaces VaR), revised
\ue001
PRA Basel 3.1 CP16/22
banking/trading book boundary.
\ue001
Near final rules published in PRA PS17/23
\ue001
Model approval applications are required to be provided during 2024 for standardised MR & CVA.
\ue001
Implementation: 1 July 2025
CVA & counterparty
\ue001
Removal of modelled approach.
\ue001
PRA Basel 3.1 CP16/22
credit risk
\ue001
New standardised approach, aligned to Basel framework, including the removal of CVA exemptions on sovereigns,
\ue001
Near final rules published in PRA PS17/23
non-financial counterparties and pension funds.
\ue001
Implementation: 1 July 2025
\ue001
Reduced SA-CCR alpha factor from 1.4 to 1 for non-financial counterparties and pension funds.
Operational risk
\ue001
New standardised approach
\ue001
PRA Basel 3.1 CP16/22
\ue001
Internal loss multiplier (ILM) set to 1.
\ue001
Near final rules published in PRA PS17/23
\ue001
Changes to the income requirements in scope of the business indicator.
\ue001
Implementation: 1 July 2025
Pillar 2
\ue001
PRA commitment to review Pillar 2A methodologies in 2024, to adjust requirements ahead of implementation of the
\ue001
PRA Basel 3.1 CP16/22
Pillar 1
\ue001
Implementation: 1 July 2025
Capitalisation of foreign
\ue001
PRA proposal to clarify that items held at historical foreign exchange rates, which only re-value in certain
\ue001
PRA consultation under CP17/23 closes on
exchange positions for
circumstances, are not included in Pillar 1 foreign exchange risk requirements as their sensitivity to foreign
31 January 2023
market risk
exchange rates is generally zero.
\ue001
Implementation: 1 July 2025
Identification and
\ue001
PRA proposal to implement Basel guidelines for step-in risk in the PRA Rulebook.
\ue001
PRA consultation under CP23/23 closes on
management of step-in
\ue001
PRA proposal to adopt EBA guidelines for limits on exposures to shadow banking entities and connected clients in
5 March 2024
risk, shadow banking
the Large Exposures (CRR) part of the PRA Rulebook.
\ue001
Implementation: 1 January 2026
entities and groups of
connected clients
\n\n\n\n\n\n\n\n\n\n\n\n\n
Key points
\n
CET1 ratio
\n
13.4%
\n
(2022 \u2013 14.2%)
\n
MREL
\n
\u00a355.8bn
\n
(2022 - \u00a355.5bn)
\n
RWAs
\n
\u00a3183.0bn
\n
(2022 - \u00a3176.1bn)
\n
The CET1 ratio decreased 80 basis points due to a \u00a36.9
\n
billion increase in RWAs and a \u00a30.6 billion decrease in
\n
CET1. The CET1 capital decrease was mainly driven by
\n
\ue001
distributions to shareholders of \u00a33.6 billion (210
\n
basis points); consisting of directed buyback of \u00a31.3
\n
billion; an ordinary interim dividend of \u00a30.5 billion; a
\n
foreseeable final ordinary dividend of \u00a31.0 billion;
\n
and a \u00a30.8 billion decrease for the on-market
\n
ordinary share buyback programme, of which \u00a30.5
\n
billion is reported as a foreseeable charge;
\n
\ue001
a \u00a30.2 billion decrease in the IFRS 9 transitional
\n
adjustment, primarily due to the annual update in
\n
the dynamic stage transition percentage and the
\n
end of transition on the static and historic stages;
\n
\ue001
an increase in the intangible assets deduction of
\n
\u00a30.5 billion;
\n
\ue001
and other movements on reserves and regulatory
\n
adjustments of \u00a30.7 billion.
\n
These reductions were partially offset by the \u00a34.4 billion
\n
attributable profit in the period.
\n
Minimum Requirements of own Funds and eligible
\n
Liabilities increased by \u00a30.3 billion to \u00a355.8 billion
\n
primarily due to a \u00a30.6 billion decrease in CET1, a \u00a30.1
\n
billion decrease in MREL eligible Tier 2 capital and a
\n
\u00a31.0 billion increase in senior unsecured debt. The \u00a30.1
\n
billion decrease in eligible Tier 2 capital is driven by
\n
redemptions and foreign exchange movements offset by
\n
the issuance of \u20ac0.7 billion subordinated debt in the
\n
period and other regulatory adjustments. The \u00a31.0
\n
billion increase in senior unsecured debt is driven by
\n
new issuances offset by redemptions and foreign
\n
exchange movements.
\n
Total RWAs increased by \u00a36.9 billion to \u00a3183.0 billion
\n
mainly reflecting:
\n
\ue001
an increase in credit risk RWAs of \u00a35.6 billion,
\n
driven by an increase in IRB Temporary Model
\n
Adjustment related to mortgages within Retail
\n
Banking as well as increased exposures within
\n
Commercial & Institutional and Retail Banking.
\n
This was partially offset by reduced exposures
\n
within Ulster Bank RoI as a result of the
\n
phased withdrawal from the Republic of
\n
Ireland.
\n
\ue001
an increase in counterparty credit risk RWAs
\n
of \u00a31.1 billion, primarily due to the call of a
\n
credit default swap trade in Q2 2023 and the
\n
subsequent removal of credit risk mitigation.
\n
\ue001
an increase in operational risk RWAs of \u00a31.1
\n
billion following the annual recalculation.
\n
\ue001
a reduction in market risk RWAs of \u00a30.9 billion,
\n
driven by reduced market volatility in H1 and
\n
hedging activity as part of ongoing risk
\n
management in Q4 2023.
\n
UK leverage ratio
\n
5.0%
\n
(2022 \u2013 5.4%)
\n
Liquidity portfolio
\n
\u00a3222.8bn
\n
(2022 - \u00a3232.6bn)
\n
LCR
\n
144%
\n
(2022 \u2013 145%)
\n
NSFR
\n
133%
\n
(2022 \u2013 145%)
\n
The leverage ratio decreased by 40
\n
basis points to 5.0%. The decrease was
\n
due to a \u00a30.6 billion reduction in Tier 1
\n
capital and a \u00a328.2 billion increase in
\n
leverage exposure. The key driver in the
\n
leverage exposure was an increase in
\n
other financial assets partially offset by
\n
a reduction in held for sale assets.
\n
The portfolio decreased by \u00a39.8 billion to
\n
\u00a3222.8 billion, with primary liquidity
\n
decreasing by \u00a320.6 billion to \u00a3148.1
\n
billion. The decrease in primary liquidity
\n
is driven by increased lending and
\n
reduced deposits, offset by UBIDAC
\n
asset sale and increased certificates of
\n
deposit and commercial paper issuance.
\n
The growth in secondary liquidity is due
\n
to an increase in the pre-positioned
\n
collateral at the Bank of England.
\n
The Liquidity Coverage Ratio (LCR)
\n
decreased to 144% during the year
\n
driven by growth in customer lending
\n
and reduced customer deposits offset
\n
by an increase in wholesale funding and
\n
UBIDAC asset sale.
\n
The net stable funding ratio (NSFR)
\n
decreased 12% during the year to 133%
\n
driven by reduced customer deposits
\n
and increased lending
.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Minimum requirements
\n
Maximum Distributable Amount (MDA) and Minimum Capital Requirements
\n
NatWest Group is subject to minimum capital requirements relative to RWAs. The table
\n
below summarises the minimum capital requirements (the sum of Pillar 1 and Pillar 2A),
\n
and the additional capital buffers which are held in excess of the regulatory minimum
\n
requirements and are usable in stress.
\n
Where the CET1 ratio falls below the sum of the minimum capital and the combined
\n
buffer requirement, there is a subsequent automatic restriction on the amount available
\n
to service discretionary payments (including AT1 coupons), known as the MDA. Note
\n
that different capital requirements apply to individual legal entities or sub-groups and the
\n
table shown does not reflect any incremental PRA buffer requirements, which are not
\n
disclosable.
\n
The current capital position provides significant headroom above both our minimum
\n
requirements and our MDA threshold requirements.
\n\n \n
Type
CET1
Total Tier 1
Total capital
Pillar 1 requirements
4.5%
6.0%
8.0%
Pillar 2A requirements
1.8%
2.4%
3.2%
Minimum Capital Requirements
6.3%
8.4%
11.2%
Capital conservation buffer
2.5%
2.5%
2.5%
Countercyclical capital buffer
(1)
1.7%
1.7%
1.7%
MDA threshold
(2)
10.5%
n/a
n/a
Overall capital requirement
10.5%
12.6%
15.4%
Capital ratios at 31 December 2023
13.4%
15.5%
18.4%
Headroom
(3) (4)
2.9%
2.9%
3.0%
\n
(1)
The Financial Policy Committee increased the UK CCyB rate from 1% to 2% effective from 5 July 2023. The Central Bank
\n
of Ireland increased CCyB on Irish exposures from 0% to 0.5% applicable 15 June 2023 and 1% from 24 November 2023.
\n
A further increase to 1.5% will be effective 7 June 2024.
\n
(2)
Pillar 2A requirements for NatWest Group are set as a variable amount with the exception of some fixed add-ons.
\n
(3)
The headroom does not reflect excess distributable capital and may vary over time.
\n
(4)
Headroom as at 31 December 2022 was CET1 4.7%, Total Tier 1 4.8% and Total Capital 5.0%.
\n
Leverage ratios
\n
The table below summarises the minimum ratios of capital to leverage exposure under
\n
the binding PRA UK leverage framework applicable for NatWest Group.
\n\n \n
Type
CET1
Total Tier 1
Minimum ratio
2.44%
3.25%
Countercyclical leverage ratio buffer
(1)
0.6%
0.6%
Total
3.04%
3.85%
\n
(1)
The countercyclical leverage ratio buffer is set at 35% of NatWest Group\u2019s CCyB. The UK CCyB increased from 1% to
\n
2% from 5 July 2023. Foreign exposure may be subject to different CCyB rates depending on the rates set in those
\n
jurisdictions.
\n
Liquidity and funding ratios
\n
The table below summarises the minimum requirements for key liquidity and funding
\n
metrics under the PRA framework.
\n\n \n
Type
Liquidity Coverage Ratio (LCR)
100%
Net Stable Funding Ratio (NSFR)
100%
\n\n\n\n\n\n\n\n\n\n\n\n\n
Measurement
\n
Capital, risk-weighted assets and leverage: Key metrics
\n
The table below sets out the key capital and leverage ratios. NatWest Group is subject to
\n
the requirements set out in the PRA Rulebook. The capital and leverage ratios are
\n
therefore being presented under these frameworks on a transitional basis.
\n \n \n
2023
2022
Capital adequacy ratios
(1)
%
%
CET1
13.4
14.2
Tier 1
15.5
16.4
Total
18.4
19.3
\n\n \n
RWAs
\u00a3m
\u00a3m
Credit risk
147,598
141,963
Counterparty credit risk
7,830
6,723
Market risk
7,363
8,300
Operational risk
20,198
19,115
Total RWAs
182,989
176,101
\n\n \n
Capital
\u00a3m
\u00a3m
CET1
24,440
24,992
Tier1
28,315
28,867
Total
33,632
33,920
\n\n \n
Leverage ratios
\u00a3m
\u00a3m
Tier 1 capital
28,315
28,867
UK leverage exposure
562,843
534,613
UK leverage ratio (%)
(2)
5.0%
5.4%
UK average Tier 1 capital
(3)
28,323
29,564
UK average leverage exposure
(3)
571,225
531,429
UK average leverage ratio (%)
(3)
5.0%
5.6%
\n
(1)
31 December 2023 includes the transitional arrangements for the capital impact of IFRS 9 expected credit loss (ECL)
\n
accounting and prior periods also include the transitional relief on grandfathered capital instruments. The impact of the
\n
IFRS 9 transitional adjustments at 31 December 2023 was \u00a30.2 billion for CET1 capital, \u00a354 million for total capital and
\n
\u00a317 million RWAs (31 December 2022 - \u00a30.4 billion CET1 capital, \u00a336 million total capital and \u00a371 million RWAs).
\n
Excluding these adjustments, the CET1 ratio would be 13.2% (31 December 2022 - 14.0%). The transitional relief on
\n
grandfathered instruments at 31 December 2023 was nil (31 December 2022 - \u00a30.1 billion). Excluding both the
\n
transitional relief on grandfathered capital instruments and the transitional arrangements for the capital impact of IFRS 9
\n
expected credit loss (ECL) accounting, the end-point Tier 1 capital ratio would be 15.4% (31 December 2022 \u2013 16.2%)
\n
and the end-point Total capital ratio would be 18.4% (31 December 2022 \u2013 19.3%).
\n
(2)
The UK leverage exposure and transitional Tier 1 capital are calculated in accordance with current PRA rules. Excluding
\n
the IFRS 9 transitional adjustment, the UK leverage ratio would be 5.0% (31 December 2022 \u2013 5.3%).
\n
(3)
Based on the daily average of on-balance sheet items and three month-end average of off-balance sheet items and Tier
\n
1 capital.
\n
Capital flow statement
\n
table below analyses the movement in CET1, AT1 and Tier 2 capital for the year
The
\n
ended 31 December 2023. It is being presented on a transitional basis based on current
\n
PRA rules.
\n\n \n
CET1
AT1
Tier 2
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 31 December 2022
24,992
3,875
5,053
33,920
Attributable profit for the period
4,394
4,394
Ordinary interim dividend paid
(491)
(491)
Directed buyback
(1,259)
(1,259)
Foreseeable ordinary dividends
(1,013)
(1,013)
Foreseeable charges
(870)
(870)
Foreign exchange reserve
(637)
(637)
FVOCI reserve
53
53
Own credit
48
48
Share capital and reserve movements in
respect of employee share schemes
93
93
Goodwill and intangibles deduction
(498)
(498)
Deferred tax assets
(67)
(67)
Prudential valuation adjustments
(4)
(4)
Net dated subordinated debt instruments
269
269
Foreign exchange movements
(115)
(115)
Adjustment under IFRS 9 transitional
arrangements
(159)
(159)
Other movements
(142)
110
(32)
At 31 December 2023
24,440
3,875
5,317
33,632
\n
\ue001
For CET1 movements refer to the key points on page 247.
\n
\ue001
Tier 2 movements of \u00a30.2 billion include an increase of \u00a30.6 billion for a \u20ac0.7 billion
\n
5.763% Fixed to Fixed Reset Tier 2 Notes 2034 issued in February 2023, partially
\n
offset by the \u00a30.1 billion redemption of the UBIDAC subordinated notes, \u00a30.1 billion
\n
partial redemption of 5.125% Subordinated Tier 2 Notes 2024, \u00a30.1 billion redemption
\n
of 6.000% Subordinated Tier 2 Notes 2023, amortisation, foreign exchange
\n
movements \u00a30.1 billion and maturities with minimum regulatory value.
\n
\ue001
Within Tier 2, there was also a \u00a30.1 billion increase in the Tier 2 surplus provisions.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Risk-weighted assets
\n
The table below analyses the movement in RWAs during the year, by key drivers.
\n\n \n
Credit
Counterparty
Market
Operational
risk
credit risk
risk
risk
Total
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
At 31 December 2022
142.0
6.7
8.3
19.1
176.1
Foreign exchange movement
(0.9)
-
-
-
(0.9)
Business movement
8.4
0.2
(0.9)
1.1
8.8
Risk parameter changes
(1.9)
-
-
-
(1.9)
Model updates
3.0
-
-
-
3.0
Other movement
-
0.9
-
-
0.9
Acquisitions and disposals
(3.0)
-
-
-
(3.0)
At 31 December 2023
147.6
7.8
7.4
20.2
183.0
\n
The table below analyses the movement in RWAs by segment during the year.
\n\n \n
Retail
Private
Commercial &
Central items
Total NatWest
Banking
Banking
Institutional
& other (1)
Group
Total RWAs
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
At 31 December 2022
54.7
11.2
103.2
7.0
176.1
Foreign exchange movement
-
-
(0.8)
(0.1)
(0.9)
Business movement
3.6
-
6.3
(1.1)
8.8
Risk parameter changes
-
-
(1.9)
-
(1.9)
Model updates
3.3
-
(0.3)
-
3.0
Other movement
-
-
0.9
-
0.9
Acquisitions and disposals
-
-
-
(3.0)
(3.0)
At 31 December 2023
61.6
11.2
107.4
2.8
183.0
Credit risk
53.9
9.8
81.9
2.0
147.6
Counterparty credit risk
0.3
-
7.5
-
7.8
Market risk
0.2
-
7.2
-
7.4
Operational risk
7.2
1.4
10.8
0.8
20.2
Total RWAs
61.6
11.2
107.4
2.8
183.0
\n
(1)
\u00a3
1.4 billion of Central items & other relates to Ulster RoI.
\n
Total RWAs increased by \u00a36.9 billion during the period mainly reflecting:
\n
\ue001
Business movements totalling \u00a38.8 billion, primarily driven by increased credit risk
\n
exposures within Commercial & Institutional and Retail Banking. There is an additional
\n
increase following the annual recalculation of operational risk RWAs. This was
\n
partially offset by a reduction in market risk RWAs reflecting reduced market volatility
\n
and tighter risk management in Q4 2023.
\n
\ue001
Model updates totalling \u00a33.0 billion, driven by IRB Temporary Model Adjustment
\n
related to mortgages within Retail Banking with a partial offset within Commercial &
\n
Institutional.
\n
\ue001
Other changes of \u00a30.9 billion, driven by the termination of portfolio credit default
\n
swap resulting in removal of the CRM benefit.
\n
\ue001
Disposals relating to the phased withdrawal from the Republic of Ireland, reducing
\n
RWAs by \u00a33.0 billion.
\n
\ue001
Risk parameters reflecting changes in regulatory treatment for certain structured
\n
transactions, reducing RWAs by \u00a31.9 billion.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Leverage exposure
\n
The leverage metrics for UK entities are calculated in accordance with the Leverage
\n
ratio (CRR) part of the PRA Rulebook.
\n\n \n
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Cash and balances at central banks
104,262
144,832
Trading assets
45,551
45,577
Derivatives
78,904
99,545
Financial assets
439,449
404,374
Other assets
23,605
18,864
Assets of disposal groups
902
6,861
Total assets
692,673
720,053
Derivatives
- netting and variation margin
(79,299)
(100,356)
- potential future exposures
17,212
18,327
Securities financing transactions gross up
1,868
4,147
Other off balance sheet items
50,961
46,144
Regulatory deductions and other adjustments
(16,043)
(7,114)
Claims on central banks
(100,735)
(141,144)
Exclusion of bounce back loans
(3,794)
(5,444)
UK leverage exposure
562,843
534,613
UK leverage ratio (%)
5.0
5.4
\n
Liquidity key metrics
\n
The table below sets out the key liquidity and related metrics monitored by NatWest
\n
Group.
\n\n \n
2023
2022
NatWest Group
UK DoLSub
NatWest Group
UK DoLSub
Liquidity Coverage Ratio
144%
138%
145%
131%
Stressed Outflow Coverage
(1)
153%
143%
150%
131%
Net Stable Funding Ratio
133%
126%
145%
137%
\n
(1)
NatWest Group\u2019s Stressed Outflow Coverage (SOC) is an internal measure calculated by reference to liquid assets as a
\n
percentage of net stressed contractual and behavioural outflows over three months under the worst of three severe
\n
stress scenarios of a market-wide stress, an idiosyncratic stress and a combination of both as per ILAAP. This
\n
assessment is performed in accordance with PRA guidance.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Minimum requirements of own funds and eligible liabilities (MREL)
\n
The following table illustrates the components of estimated Minimum requirements of own funds and eligible liabilities (MREL) in NatWest Group and operating subsidiaries and includes
\n
external issuances only. The roll-off profile relating to senior debt and subordinated debt instruments is set out on page 254.
\n\n \n
2023
2022
Par value (1)
Balance sheet value
Regulatory value
MREL value (3)
Par value
Balance sheet value
Regulatory value (2)
MREL value
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
CET1 capital
(4)
24.4
24.4
24.4
24.4
25.0
25.0
25.0
25.0
Tier 1 capital: end-point CRR compliant AT1
of which: NatWest Group plc (holdco)
3.9
3.9
3.9
3.9
3.9
3.9
3.9
3.9
of which: NatWest Group plc operating subsidiaries (opcos)
-
-
-
-
-
-
-
-
3.9
3.9
3.9
3.9
3.9
3.9
3.9
3.9
Tier 1 capital: end-point CRR non-compliant
(5)
of which: holdco
-
-
-
-
-
-
-
-
of which: opcos
0.1
0.1
-
-
0.1
0.1
-
-
0.1
0.1
-
-
0.1
0.1
-
-
Tier 2 capital: end-point CRR compliant
of which: holdco
5.6
5.3
5.2
5.2
6.0
5.5
4.9
5.4
of which: opcos
-
-
-
-
0.1
0.1
-
-
5.6
5.3
5.2
5.2
6.1
5.6
4.9
5.4
Tier 2 capital: end-point CRR non compliant
(5)
of which: holdco
-
-
-
-
-
-
-
-
of which: opcos
0.2
0.3
-
-
0.3
0.5
0.1
-
0.2
0.3
-
-
0.3
0.5
0.1
-
Senior unsecured debt securities
of which: holdco
22.2
21.7
-
22.2
23.4
22.3
-
21.2
of which: opcos
33.4
29.9
-
-
26.1
22.9
-
\u2014
55.6
51.6
-
22.2
49.5
45.2
-
21.2
Tier 2 capital
Other regulatory adjustments
-
-
0.1
0.1
-
-
-
-
Total
89.8
85.6
33.6
55.8
84.9
80.3
33.9
55.5
RWAs
183.0
176.1
UK leverage exposure
562.9
534.6
MREL as a ratio of RWAs
30.5%
31.5%
MREL as a ratio of UK leverage exposure
9.9%
10.4%
\n
(1)
Par value reflects the nominal value of securities issued.
\n
(2)
Regulatory amounts as at December 2022 reported for AT1, Tier 1, and Tier 2 instruments from operating companies incudes grandfathered instrument as per the transitional provisions allowed under CRR2 (until 28 June 2025). 3 Tier 2 instruments from
\n
UBIDAC were classified as grandfathered which were redeemed in November 2023.
\n
(3)
MREL value reflects NatWest Group\u2019s interpretation of the Bank of England\u2019s approach to setting a minimum requirement for own funds and eligible liabilities (MREL), published in December 2021 (Updating June 2018). Liabilities excluded from MREL
\n
include instruments with less than one year remaining to maturity, structured debt, operating company senior debt, and other instruments that do not meet the MREL criteria. The MREL calculation includes Tier 1 and Tier 2 securities before the application
\n
of any regulatory caps or adjustments.
\n
(4)
Shareholders\u2019 equity was \u00a337.2 billion (2022 - \u00a336.5 billion).
\n
(5)
CRR2 non-compliant instruments- as at Dec 2022, all Tier 1 and Tier 2 instruments were grandfathered under CRR2 compliance (until 28 June 2025) were reported under Tier 1 capital: end-point CRR non-compliant and Tier 2 capital: end-point CRR non-
\n
compliant category. As at December 2023, we have no grandfathered instrument outstanding.
\n\n\n\n\n\n\n\n\n\n\n\n\n
\n
The following table illustrates the components of the stock of outstanding issuance in NatWest Group and its operating subsidiaries including external and internal issuances.
NatWest
NWM
RBS
NatWest
Holdings
NatWest
Securities
International
Group plc
Limited
NWB Plc
RBS plc
UBIDAC
NWM Plc
Markets N.V.
Inc.(6)
Limited (7)
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Additional Tier 1
Externally issued
3.9
-
0.1
-
-
-
-
-
-
Additional Tier 1
Internally issued
-
3.7
2.5
0.5
-
0.9
0.2
-
0.3
3.9
3.7
2.6
0.5
-
0.9
0.2
-
0.3
Tier 2
Externally issued
5.3
-
-
-
-
-
0.3
-
-
Tier 2
Internally issued
-
4.7
3.6
0.4
-
1.0
0.1
0.3
-
5.3
4.7
3.6
0.4
-
1.0
0.4
0.3
-
Senior unsecured
Externally issued
21.7
-
-
-
-
-
-
-
-
Senior unsecured
Internally issued
-
11.4
6.5
1.4
0.5
3.1
-
-
0.3
21.7
11.4
6.5
1.4
0.5
3.1
-
-
0.3
Total outstanding issuance
30.9
19.8
12.7
2.3
0.5
5.0
0.6
0.3
0.6
\n
(1)
For AT1 & Tier 2, the balances are the IFRS balance sheet carrying amounts, which may differ from the amount which the instrument contributes to regulatory capital. Regulatory balances exclude, for example, issuance costs and fair value movements,
\n
while dated capital is required to be amortised on a straight-line basis over the final five years of maturity.
\n
(2)
Balance sheet amounts reported for AT1 and Tier 2 instruments are before grandfathering restrictions imposed by CRR.
\n
(3)
Internal issuance for NWB Plc, RBS plc and UBIDAC represents AT1, Tier 2 or Senior unsecured issuance to NatWest Holdings Limited and for NWM N.V. and NWM SI to NWM Plc.
\n
(4)
The balances are the IFRS balance sheet carrying amounts for Senior unsecured debt category and it does not include CP, CD and short term/medium notes issued from NatWest Group operating subsidiaries
\n
(5)
The above table does not include CET1 numbers.
\n
(6)
NWM Securities Inc - regulated under US broker dealer rules.
\n
(7)
RBS International limited - MREL resolution rules under consultation in Jersey.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Roll-off profile
\n
The following table illustrates the roll-off profile and weighted average spreads of NatWest Group\u2019s major wholesale funding programmes.
\n\n \n
As at and for year
Roll-off profile
Senior debt roll-off profile
(1)
ended 31 December 2023
H1 2024
H2 2024
2025
2026
2027 & 2028
2029 & later
NatWest Group plc
- amount (\u00a3m)
21,660
-
-
2,865
4,385
5,727
8,683
- weighted average rate spread (bps)
182
-
-
176
221
167
173
NWM Plc
- amount (\u00a3m)
20,338
4,014
2,362
5,611
3,785
3,841
725
- weighted average rate spread (bps)
42
69
31
49
41
(7)
122
NatWest Bank Plc
- amount (\u00a3m)
6,008
5,042
966
-
-
-
-
- weighted average rate spread (bps)
36
34
46
-
-
-
-
NWM N.V.
- amount (\u00a3m)
2,193
948
959
65
77
-
144
- weighted average rate spread (bps)
(69)
(115)
(62)
(49)
106
-
94
Covered bonds
-
amount (\u00a3m)
2,122
2,122
-
-
-
-
-
-
weighted average rate spread (bps)
158
158
-
-
-
-
-
Total notes issued - amount (\u00a3m)
52,321
12,126
4,287
8,541
8,247
9,568
9,552
Weighted average rate spread (bps)
99
55
14
91
137
99
168
Subordinated debt instruments roll-off profile
(2)
NatWest Group plc (\u00a3m)
5,318
417
574
957
919
1,909
542
NWM Plc (\u00a3m)
20
-
-
-
18
-
2
NWM N.V. (\u00a3m)
255
-
-
-
-
-
255
Total (\u00a3m)
5,593
417
574
957
937
1,909
799
\n
(1)
Based on final contractual instrument maturity.
\n
(2)
Based on first call date of instrument, however this does not indicate NatWest Group\u2019s strategy on capital and funding management. The table above does not include debt accounted Tier 1 instruments although those instruments form part of the total
\n
subordinated debt balance.
\n
(3)
The weighted average spread reflects the average net funding cost to NatWest Group and is calculated on an indicative basis and are quoted over term SONIA at the time of issuance.
\n
(4)
The roll-off table is based on sterling-equivalent balance sheet values.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Liquidity portfolio
\n
The table below shows the composition of the liquidity portfolio with primary liquidity aligned to high-quality liquid assets on a regulatory LCR basis. Secondary liquidity comprises of
\n
assets which are eligible as collateral for local central bank liquidity facilities and do not form part of the LCR eligible high-quality liquid assets.
\n\n \n
2023
2022
(7)
NatWest
NWH
UK DoL
NatWest
NWH
UK DoL
Group (1)
Group (2)
Sub
Group
Group
Sub
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
99,855
68,495
67,954
142,011
108,047
104,606
High quality government/MDB/PSE and GSE bonds
(4)
36,250
26,510
26,510
22,141
11,921
11,714
Extremely high quality covered bonds
4,164
4,164
4,164
2,093
2,092
1,812
LCR level 1 Eligible Assets
140,269
99,169
98,628
166,245
122,060
118,132
LCR level 2 Eligible Assets
(5)
7,796
7,320
7,320
2,401
2,072
2,032
Primary liquidity (HQLA)
(6)
148,065
106,489
105,948
168,646
124,132
120,164
Secondary liquidity
74,722
74,683
74,683
63,917
63,849
63,849
Total liquidity value
222,787
181,172
180,631
232,563
187,981
184,013
\n
(1)
NatWest Group includes the UK Domestic Liquidity Sub-Group (NWB Plc, RBS plc and Coutts & Co) NatWest Markets Plc and other significant operating subsidiaries that hold liquidity portfolios.
These include The Royal Bank of Scotland International
\n
Limited and NWM N.V. who hold managed portfolios that comply with local regulations that may differ from PRA rules.
\n
(2)
NWH Group comprises UK DoLSub and NatWest Bank Europe GmbH who hold managed portfolios that comply with local regulations that may differ from PRA rules.
\n
(3)
NatWest Markets Plc liquidity portfolio is reported in the NatWest Markets Plc Annual Report and Accounts.
\n
(4)
Multilateral development bank abbreviated to MDB, public sector entities abbreviated to PSE and government sponsored entities abbreviated to GSE.
\n
(5)
Includes Level 2A and Level 2B.
\n
(6)
High-quality liquid assets abbreviated to HQLA.
\n
(7)
Comparative periods have been re-presented on an LCR basis in line with the Liquidity portfolio definition as of 31 December 2023
Funding sources
(audited)
The table below shows the carrying values of the principal funding sources based on contractual maturity. Balance sheet captions include balances held at all classifications under
IFRS 9.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Short-term less
Long-term more
\u00a0
Short-term less
Long-term more
\u00a0
\u00a0
than 1 year
than 1 year
Total
than 1 year
than 1 year
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bank Deposits
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Repos
3,118
-
3,118
1,446
-
1,446
Other bank deposits
(1)
5,836
13,236
19,072
6,353
12,642
18,995
\u00a0
8,954
13,236
22,190
7,799
12,642
20,441
Customer Deposits
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Repos
10,844
-
10,844
9,575
254
9,829
Non-bank financial institutions
46,875
13
46,888
50,226
9
50,235
Personal
216,456
6,436
222,892
224,706
1,209
225,915
Corporate
150,718
35
150,753
164,314
25
164,339
\u00a0
424,893
6,484
431,377
448,821
1,497
450,318
Trading liabilities
(2)
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Repos
(3)
26,634
268
26,902
23,740
-
23,740
Derivatives collateral
15,075
-
15,075
17,680
-
17,680
Other bank and customer deposits
768
382
1,150
413
654
1,067
Debt securities in issue - Medium term notes
418
288
706
54
743
797
\u00a0
42,895
938
43,833
41,887
1,397
43,284
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Customer deposits
194
1,086
1,280
253
797
1,050
Debt securities in issue:
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Commercial paper and certificates of deposit
11,116
205
11,321
5,587
85
5,672
Medium term notes
6,878
32,625
39,503
6,934
31,750
38,684
Covered bonds
2,122
-
2,122
804
2,038
2,842
Securitisation
-
863
863
-
859
859
\u00a0
20,310
34,779
55,089
13,578
35,529
49,107
Subordinated liabilities
1,047
4,667
5,714
974
5,286
6,260
Total funding
498,099
60,104
558,203
513,059
56,351
569,410
Of which: available in resolution
(4)
-
-
26,561
-
-
24,899
\n
(1)
Includes \u00a312.0 billion (2022 \u2013 \u00a312.0 billion) relating to Term Funding Scheme with additional incentives for Small and Medium-sized Enterprises participation.
(2)
Excludes short positions of \u00a39.8 billion (2022 \u2013 \u00a39.5 billion).
(3)
Comprises central & other bank repos of \u00a34.0 billion (2022 \u2013 \u00a31.6 billion), other financial institution repos of \u00a320.4 billion (2022 \u2013 \u00a319.4 billion) and other corporate repos of \u00a32.5 billion (2022 \u2013 \u00a32.7 billion).
(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 by the
Bank of England in December 2021 (updating June 2018). The balance consists of \u00a321.7 billion (2022 \u2013 \u00a320.0 billion) under debt securities in issue (senior MREL) and \u00a34.9 billion (2022 \u2013 \u00a34.9 billion) under subordinated liabilities.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Contractual maturity
(audited)
\n
This table shows the residual maturity of financial instruments, based on contractual date of maturity of NatWest Group\u2019s banking activities, including hedging derivatives. Trading
\n
activities, comprising mandatory fair value through profit or loss (MFVTPL) assets and held-for-trading (HFT) liabilities have been excluded from the maturity analysis and are shown in
\n
total in the table below.
\n\n \n
Banking activities
Less than
6 months-
More than
Trading
1 months
1-3 months
3-6 months
1 year
Subtotal
1-3 years
3-5 years
5 years
Total
activities
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
104,262
-
-
-
104,262
-
-
-
104,262
-
104,262
Trading assets
-
-
-
-
-
-
-
-
-
45,551
45,551
Derivatives
(1)
(4)
(5)
(4)
(14)
42
84
1
113
78,791
78,904
Settlement balances
7,231
-
-
-
7,231
-
-
-
7,231
-
7,231
Loans to banks - amortised cost
5,120
90
1,429
11
6,650
14
250
-
6,914
-
6,914
Loans to customers -
amortised cost
(1)
34,507
20,130
13,602
23,299
91,538
60,679
43,477
189,266
384,960
-
384,960
Personal
4,643
2,337
3,201
6,133
16,314
23,138
21,203
162,890
223,545
-
223,545
Corporate
19,226
4,551
4,569
7,787
36,133
28,661
20,020
24,679
109,493
-
109,493
Non-bank financial institutions
10,638
13,242
5,832
9,379
39,091
8,880
2,254
1,697
51,922
-
51,922
Other financial assets
2,278
1,835
2,669
2,920
9,702
10,929
10,815
18,948
50,394
708
51,102
Total financial assets
153,397
22,051
17,695
26,226
219,369
71,664
54,626
208,215
553,874
125,050
678,924
2022
Total financial assets
187,577
18,259
16,461
25,223
247,520
68,679
50,450
187,808
554,457
145,766
700,223
\n
(1)
Loans to customers excludes \u00a33.5 billion (2022 - \u00a33.3 billion) of impairment provisions.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Contractual maturity
(audited)
\n\n \n
Banking activities
Less than
6 months - 1
More than
Trading
1 months
1-3 months
3-6 months
year
Subtotal
1-3 years
3-5 years
5 years
Total
activities
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bank deposits excluding repos
4,822
217
527
270
5,836
5,036
8,200
-
19,072
-
19,072
Bank repos
2,649
469
-
-
3,118
-
-
-
3,118
-
3,118
Customer repos
8,287
32
2,029
496
10,844
-
-
-
10,844
-
10,844
Customer deposits excluding repos
364,492
20,485
13,501
15,571
414,049
6,456
9
19
420,533
-
420,533
Personal
193,523
4,574
6,163
12,196
216,456
6,433
3
-
222,892
-
222,892
Corporate
129,939
11,376
6,656
2,747
150,718
13
3
19
150,753
-
150,753
Non-bank financial institutions
41,030
4,535
682
628
46,875
10
3
-
46,888
-
46,888
Settlement balances
6,645
-
-
-
6,645
-
-
-
6,645
-
6,645
Trading liabilities
-
-
-
-
-
-
-
-
-
53,636
53,636
Derivatives
14
14
23
63
114
125
20
10
269
72,126
72,395
Other financial liabilities
2,797
5,918
6,379
5,216
20,310
17,496
12,590
4,693
55,089
-
55,089
CPs and CDs
1,673
3,222
3,860
2,361
11,116
205
-
-
11,321
-
11,321
Medium term notes
50
2,674
1,416
2,738
6,878
16,188
11,953
4,484
39,503
-
39,503
Covered bonds
1,047
-
1,075
-
2,122
-
-
-
2,122
-
2,122
Securitisations
-
-
-
-
-
297
377
189
863
-
863
Customer deposits DFV
27
22
28
117
194
806
260
20
1,280
-
1,280
Subordinated liabilities
-
43
431
573
1,047
1,877
1,874
916
5,714
-
5,714
Notes in circulation
3,237
-
-
-
3,237
-
-
-
3,237
-
3,237
Lease liabilities
14
17
24
47
102
156
94
318
670
-
670
Total financial liabilities
392,957
27,195
22,914
22,236
465,302
31,146
22,787
5,956
525,191
125,762
650,953
2022
Total financial liabilities
436,251
19,253
12,620
8,483
476,607
26,194
20,782
9,023
532,606
146,723
679,329
\n\n\n\n\n\n\n\n\n\n\n\n\n
Senior notes and subordinated liabilities - residual maturity profile by instrument type
(audited)
\n
The table below shows NatWest Group\u2019s debt securities in issue and subordinated liabilities by residual maturity.
\n\n \n
Trading
liabilities
Other financial liabilities
Debt securities in issue
Debt securities
Commercial
Covered
Subordinated
Total notes
in issue MTNs
paper and CDs
MTNs
bonds
Securitisation
liabilities
Total
in issue
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Less than 1 year
418
11,116
6,878
2,122
-
1,047
21,163
21,581
1-3 years
48
205
16,188
-
297
1,877
18,567
18,615
3-5 years
-
-
11,953
-
376
1,874
14,203
14,203
More than 5 years
240
-
4,484
-
190
916
5,590
5,830
Total
706
11,321
39,503
2,122
863
5,714
59,523
60,229
\n\n \n
2022
Less than 1 year
54
5,587
6,934
804
-
974
14,299
14,353
1-3 years
475
73
15,161
2,038
296
2,195
19,763
20,238
3-5 years
35
12
9,989
-
375
1,458
11,834
11,869
More than 5 years
233
-
6,600
-
188
1,633
8,421
8,654
Total
797
5,672
38,684
2,842
859
6,260
54,317
55,114
\n
The table below shows the currency breakdown.
\n\n \n
GBP
USD
EUR
Other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Commercial paper and CDs
4,599
3,015
3,707
-
11,321
MTNs
4,421
17,214
15,496
3,078
40,209
Covered bonds
1,047
-
1,075
-
2,122
Securitisation
863
-
-
-
863
Subordinated liabilities
2,675
1,551
1,488
-
5,714
Total
13,605
21,780
21,766
3,078
60,229
2022
10,897
22,399
19,050
2,768
55,114
\n\n\n\n\n\n\n\n\n\n\n\n\n
Funding gap: maturity and segment analysis
\n
The contractual maturity of loans to customers and customer deposits are shown
\n
below. The table demonstrates the maturity transformation role being performed by
\n
NatWest Group of lending long-term whilst relying largely on short-term funding. This
\n
is possible as the behavioural profiles of many customer deposits, which tend to be
\n
repayable on demand, show longer maturity and greater stability than their
\n
contractual agreements.
\n
NatWest Group forms expectations on customer behaviours through both qualitative
\n
and quantitative techniques, incorporating observed customer behaviours over historic
\n
time periods, which includes the more recent periods of interest rate change.
\n
Customer behaviour assumptions are approved by the Natwest Group Balance Sheet
\n
Committee and have been used to prepare the funding gap analysis, which reduces
\n
maturity mismatch across the periods shown.
\n\n \n
Contractual maturity
Behavioural maturity
Loans to customers (1)
Customer deposits
Net surplus/(gap)
Net surplus/(gap)
Greater
Greater
Greater
Greater
Less than
1-5
than
Less than
1-5
than
Less than
1-5
than
Less than
1-5
than
1 year
years
5 years
Total
1 year
years
5 years
Total
1 year
years
5 years
Total
1 year
years
5 years
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Retail Banking
12
41
152
205
182
6
-
188
170
(35)
(152)
(17)
(5)
(6)
(6)
(17)
Private Banking
3
6
9
18
38
-
-
38
35
(6)
(9)
20
16
6
(2)
20
Commercial & Institutional
51
58
28
137
199
1
-
200
148
(57)
(28)
63
15
50
(2)
63
Central items & other
-
-
-
-
2
-
-
2
2
-
-
2
2
-
-
2
Total
66
105
189
360
421
7
-
428
355
(98)
(189)
68
28
50
(10)
68
2022
Total
73
103
180
356
450
2
-
452
377
(101)
(180)
96
12
74
10
96
\n
(1)
Loans to customers and customer deposits include trading assets and trading liabilities respectively and excludes reverse repos and repos.
\n
\ue001
The net customer funding surplus has decreased by \u00a328 billion during 2023 to \u00a368 billion driven by a \u00a324 billion decline in deposits and a \u00a34 billion increase in loans to customers.
\n
\ue001
During 2023 there was a change in the customer deposit mix with a shift from instant access and current account to term products, with additional prudence applied to customer
\n
account depositor behavioural assumptions.
\n
Encumbrance
(audited)
\n
NatWest Group evaluates the extent to which assets can be financed in a secured form
\n
(encumbrance), but certain asset types lend themselves more readily to encumbrance.
\n
The typical characteristics that support encumbrance are an ability to pledge those
\n
assets to another counterparty or entity through operation of law without necessarily
\n
requiring prior notification, homogeneity, predictable and measurable cash flows, and a
\n
consistent and uniform underwriting and collection process. Retail assets including
\n
residential mortgages, credit card receivables and personal loans display many of these
\n
features.
\n
NatWest Group categorises its assets into four broad groups, those that are:
\n
\ue001
Already encumbered and used to support funding currently in place through own-
\n
asset securitisations, covered bonds and securities repurchase agreements.
\n
\ue001
Pre-positioned with central banks as part of funding schemes and those encumbered
\n
under such schemes.
\n
\ue001
Ring-fenced to meet regulatory requirements, where NatWest Group has in place an
\n
operational continuity in resolution (OCIR) investment mandate wherein the PRA
\n
requires critical service providers to hold segregated liquidity buffers covering at least
\n
50% of their annual fixed overheads.
\n
\ue001
Unencumbered. In this category, NatWest Group has in place an enablement
\n
programme which seeks to identify assets capable of being encumbered and to
\n
identify the actions to facilitate such encumbrance whilst not affecting customer
\n
relationships or servicing. Programmes to manage the use of assets to actively
\n
support funding are established within UK DoLSub and NatWest Markets Plc.
Balance sheet encumbrance
The table shows the retained encumbered assets of NatWest Group.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Encumbered as a result of transactions with
\u00a0\u00a0
Unencumbered assets not pre-positioned with central banks
\u00a0
\u00a0
counterparties other than central banks
Pre-positioned
Collateral
\u00a0\u00a0\u00a0\u00a0\u00a0
\u00a0\u00a0
SFT,
\u00a0
& encumbered
ring-fenced to
\u00a0\u00a0\u00a0\u00a0\u00a0
\u00a0
Covered
derivatives and
Total
assets held at
meet regulatory
Readily
Other
Cannot
\u00a0\u00a0
\u00a0
debts
other (1,2)
\u00a0
central banks
requirement
available
available (3)
be used (4)
Total
Total (5)
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Cash and balances at central banks
-
5.1
5.1
-
-
99.2
-
-
99.2
104.3
Trading assets
-
18.9
18.9
-
-
2.5
0.5
23.7
26.7
45.6
Derivatives
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
78.9
78.9
78.9
Settlement balances
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
7.2
7.2
7.2
Loans to banks - amortised cost
-
0.1
0.1
-
-
5.3
0.7
0.8
6.8
6.9
Loans to customers - amortised cost
(6)
13.4
0.3
13.7
112.0
-
84.9
122.3
48.5
255.7
381.4
Other financial assets
(7)
-
15.3
15.3
-
1.9
31.9
0.3
1.7
33.9
51.1
Intangible assets
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
7.6
7.6
7.6
Other assets
-
-
-
-
-
-
2.5
6.3
8.8
8.8
Assets of disposal groups
(8)
-
-
-
-
-
-
-
0.9
0.9
0.9
Total assets
13.4
39.7
53.1
112.0
1.9
223.8
126.3
175.6
525.7
692.7
2022
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
Total assets
11.5
33.8
45.3
99.9
1.8
260.1
127.1
185.8
573.0
720.0
\n
(1)
Repos and other secured deposits, cash, coin and nostro balance held with the Bank of England as collateral against deposits and notes in circulation are included here rather than within those positioned at the central bank as they are part of normal
banking operations. Securities financing transactions (SFT) include collateral given to secure derivative liabilities.
(2)
Derivative cash collateral of \u00a39.9 billion (2022 - \u00a313 billion) has been included in the encumbered assets.
(3)
Other assets that are capable of being encumbered are those assets on the balance sheet that are available for funding and collateral purposes but are not readily realisable in their current form. These assets include loans that could be pre-positioned
with central banks but have not been subject to internal and external documentation review and diligence work.
(4)
Cannot be used includes:
a)
Derivatives, reverse repurchase agreements and trading related settlement balances.
b)
Non-financial assets such as intangibles, prepayments and deferred tax.
c)
Loans that are not encumbered and cannot be pre-positioned with central banks on criteria set by the central banks, including those relating to date of origination and level of documentation.
d)
Non-recourse invoice financing balances and certain shipping loans whose terms and structure prohibit their use as collateral.
(5)
In accordance with market practice, NatWest Group employs securities recognised on the balance sheet, and securities received under reverse repo transactions as collateral for repos.
(6)
The pre-positioned and encumbered assets held at central banks of \u00a3112.0 billion includes the encumbered residential mortgages of \u00a321.6 billion. \u00a370.9 billion of residential UK mortgages are included in \u00a384.9 billion readily available loans to customers.
(7)
Other financial assets under SFT, derivatives and other include \u00a30.5 billion of debt securities under the continuing control of NWB Plc. This follows the agreement between NWB Plc and the Group Pension Fund to establish a bankruptcy remote reservoir
trust to hold these assets. Refer to Note 5 for additional information.
(8)
The majority of UBIDAC assets are in contracted loan sale agreements as part of its phased withdrawal strategy and are unavailable for any alternative contingent liquidity arrangements. UBIDAC has in place a committed unsecured liquidity line from
NatWest Bank to support the withdrawal.
Market risk
NatWest Group is exposed to non-traded market risk through its banking activities and
to traded market risk through its trading activities. Non-traded and traded market risk
exposures are managed and discussed separately. The non-traded market risk section
begins below. The traded market risk section begins on page 269. Pension-related
activities also give rise to market risk. Refer to page 274 for more information on risk
related to pensions.
Non-traded market risk
Definition
(audited)
Non-traded market risk is the risk to the value of assets or liabilities outside the trading
book, or the risk to income, that arises from changes in market prices such as interest
rates, foreign exchange rates and equity prices, or from changes in managed rates.
Sources of risk
(audited)
The key sources of non-traded market risk are interest rate risk, credit spread risk,
foreign exchange risk, equity risk and accounting volatility risk. For detailed qualitative
and quantitative information on each of these risk types, refer to the separate sub-
sections following the VaR table below.
Key developments in 2023
\ue001
In the UK, the Bank of England base rate rose from 3.50% at 31 December 2022 to
5.25% at 31 December 2023 as inflation pressures persisted in the short term.
However, the five-year sterling overnight index interest rate swap rate rose from
4.10% at 31 December 2022 to a peak of 5.37% in the third quarter of 2023, but fell
back to 3.38% at 31 December 2023. The corresponding ten-year rate rose from
3.75% at 31 December 2022 to a peak of 4.68% in the third quarter of 2023, but fell
back to 3.29% at 31 December 2023.
\ue001
Overall, non-traded market risk VaR increased in 2023, on both an average and
period-end basis. This was driven by an increase in credit spread VaR, notably in the
second half of the year, reflecting increased holdings of bonds in the liquidity portfolio.
Interest rate VaR fell slightly in H2, driven by a reduction in the interest rate-sensitive
position, particularly in sterling. By the end of 2023, credit spread risk had replaced
interest rate risk as the main driver of non-traded market risk VaR.
\ue001
NatWest Group\u2019s structural hedge notional reduced to \u00a3207 billion at 31 December
2023 from \u00a3231 billion at 31 December 2022 mainly as a result of lower current
account and instant access savings deposits. This also reflected the impact of
changes in the deposit mix, whereby customers have moved balances into fixed-
term savings accounts. Higher swap rates were reflected in a higher yield on the
structural hedge, which rose from 0.98% in 2022 to 1.47% in 2023.
\ue001
The sensitivity of net interest earnings to a 25-basis-point upward shift in the yield
curve was a cumulative \u00a3760 million over three years at 31 December 2023,
compared to \u00a3893 million at 31 December 2022. The main contributors to the
reduced sensitivity were lower volumes of managed margin deposits and current
accounts, which included the migration to fixed-term savings accounts.
\ue001
Sterling strengthened against the US dollar, to 1.27 at 31 December 2023 compared
to 1.21 at 31 December 2022. It also strengthened against the euro, to 1.15 at 31
December 2023 compared to 1.13 at 31 December 2022. Net investments in foreign
operations decreased by \u00a31.8 billion in sterling equivalent terms over the year, mainly
reflecting the UBIDAC wind-down. However, after hedging, residual structural foreign
currency exposures were broadly stable, decreasing, in sterling equivalent terms, by
\u00a30.2 billion.
Governance
(audited)
Responsibility for identifying, measuring, monitoring and controlling market risk arising
from non-trading activities lies with the relevant business. Oversight is provided by the
independent Risk function.
Risk positions are reported regularly to the Executive Risk Committee, the Board Risk
Committee, and the Board as well as to the Asset & Liability Management Committee.
Non-traded market risk policy sets out the governance and risk management
framework.
Risk appetite
NatWest Group\u2019s qualitative appetite is set out in the non-traded market risk appetite
statement.
Its quantitative appetite is expressed in terms of value-at-risk (VaR), stressed value-at-
risk (SVaR), sensitivity and stress limits, and earnings-at-risk limits.
The limits are reviewed to reflect changes in risk appetite, business plans, portfolio
composition and the market and economic environments. To ensure approved limits are
not breached and that NatWest Group remains within its risk appetite, triggers have
been set and are actively managed.
The risk appetite statements and associated measures are reviewed at least annually by
the Board on the Board Risk Committee\u2019s recommendation to ensure they remain
appropriate and aligned to strategy. For further information on risk appetite and risk
controls, refer to pages 175 and 176.
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n
Risk measurement
\n
Non-traded internal VaR (1-day 99%)
\n
The following table shows one-day internal banking book value-at-risk (VaR) at a 99% confidence level, split by risk type. VaR values for each year are calculated based on one-day
\n
values for each of the 12 month-end reporting dates.
\n
NatWest Group\u2019s VaR metrics are explained on page 271. Each of the key risk types are discussed in greater detail in their individual sub-sections following this table.
\n\n \n
2023
2022
Average
Maximum
Minimum
Period end
Average
Maximum
Minimum
Period end
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest rate
38.0
63.2
24.6
24.6
30.4
60.7
7.6
37.7
Credit spread
33.1
54.2
20.9
54.2
36.3
86.6
19.9
20.3
Structural foreign exchange rate
11.2
13.6
8.4
12.1
8.9
11.3
6.1
11.3
Equity
14.2
19.0
10.4
10.4
18.1
22.2
13.7
14.7
Pipeline risk
(1)
3.3
7.1
1.4
7.1
1.5
4.5
0.3
2.4
Diversification
(2)
(34.4)
(29.9)
(36.9)
(34.9)
Total
65.4
83.4
52.1
78.5
58.3
91.2
45.5
51.5
\n
(1)
Pipeline risk is the risk of loss arising from personal customers owning an option to draw down a loan \u2013 typically a mortgage \u2013 at a committed rate, where interest rate changes may result in greater or fewer customers than anticipated taking up the
\n
committed offer.
\n
(2)
NatWest 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
\n
diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
\n
\ue001
Overall, non-traded market risk VaR increased in 2023, on both an average and period-end basis. This was driven by an increase in credit spread VaR, notably in the second half of
\n
the year, reflecting increased holdings of bonds in the liquidity portfolio.
\n
\ue001
Interest rate VaR fell slightly in H2, driven by a reduction in the interest-rate-sensitive position, particularly in sterling.
\n
\ue001
By the end of 2023, credit spread risk had replaced interest rate risk as the main driver of non-traded market risk VaR.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Interest rate risk
\n
Non-traded interest rate risk (NTIRR) arises from the provision to customers of a range
\n
of banking products with differing interest rate characteristics. When aggregated, these
\n
products form portfolios of assets and liabilities with varying degrees of sensitivity to
\n
changes in market interest rates. Mismatches can give rise to volatility in net interest
\n
income as interest rates vary.
\n
NTIRR comprises the following three primary risk types:
\n
\ue001
Gap risk: arises from the timing of rate changes in non-trading book instruments. The
\n
extent of gap risk depends on whether changes to the term structure of interest
\n
rates occur consistently across the yield curve (parallel risk) or differentially by period
\n
(non-parallel risk).
\n
\ue001
Basis risk: captures the impact of relative changes in interest rates for financial
\n
instruments that have similar tenors but are priced using different interest rate
\n
indices, or on the same interest rate indices but with different tenors.
\n
\ue001
Option risk: arises from option derivative positions or from optional elements
\n
embedded in assets, liabilities and/or off-balance sheet items, where NatWest Group
\n
or its customer can alter the level and timing of their cash flows. Option risk also
\n
includes pipeline risk.
\n
To manage exposures within its risk appetite, NatWest Group aggregates interest rate
\n
positions and hedges its residual exposure, primarily with interest rate swaps.
\n
Structural hedging aims to reduce gap risk and the sensitivity of earnings to interest rate
\n
shocks. It also provides some protection against prolonged periods of falling rates.
\n
Structural hedging is explained in greater detail below, followed by information on how
\n
NatWest Group measures NTIRR from both an economic value-based and an earnings-
\n
based perspective.
\n
Structural hedging
\n
NatWest Group has a significant pool of stable, non and low interest-bearing liabilities,
\n
principally comprising current accounts and savings, in addition to its equity and
\n
reserves. A proportion of these balances are hedged, either by investing directly in
\n
longer-term fixed-rate assets (such as fixed-rate mortgages) or by using interest rate
\n
swaps, which are generally booked as cash flow hedges of floating-rate assets, in order
\n
to provide a consistent and predictable revenue stream.
\n
After hedging the net interest rate exposure externally, NatWest Group allocates income
\n
to equity or products in structural hedges by reference to the relevant interest rate swap
\n
curve. Over time, this approach has provided a basis for stable income attribution for
\n
management purposes to products and interest rate returns. The programme aims to
\n
track a time series of medium-term swap rates, but the yield will be affected by changes
\n
in product volumes and NatWest Group\u2019s equity capital.
\n
The table below shows hedge income, total yield, incremental income and the period-end
\n
and average notional balances allocated to equity and products in respect of the
\n
structural hedges managed by NatWest Group. Hedge income represents the fixed leg of
\n
the hedge, while incremental income represents the difference between hedge income
\n
and short-term cash rates. Both years are presented on a revised basis of preparation
\n
vs. the 2022 Annual Report and Accounts. UBIDAC is no longer included. In addition, the
\n
\u2018Other\u2019 category is no longer used: hedges booked in Coutts & Co. have now been
\n
allocated between product hedges and equity hedges, while hedges booked in RBS
\n
International have been allocated to product hedges.
\n\n \n
2023
2022
Incremental
Hedge
Period end
Average
Total
Incremental
Hedge
Period end
Average
Total
income (1)
income
notional
notional
yield
income (1)
income
notional
notional
yield
\u00a3m
\u00a3m
\u00a3bn
\u00a3bn
%
\u00a3m
\u00a3m
\u00a3bn
\u00a3bn
%
Equity
(611)
418
22
22
1.87
63
372
23
22
1.72
Product
(6,321)
2,822
185
199
1.42
(1,074)
1,780
208
197
0.90
Total
(6,932)
3,240
207
221
1.47
(1,011)
2,152
231
219
0.98
\n
(1)
Incremental income represents the difference between hedge income and an unhedged return that is based on short-term cash rates. For example, the sterling overnight index average (SONIA) is used to estimate incremental income from sterling
\n
structural hedges.
\n
Equity structural hedges refer to income allocated primarily to equity and reserves. At 31 December 2023, the equity structural hedge notional was allocated between NWH Group and
\n
NWM Group in a ratio of approximately 78%/22% respectively.
\n
Product structural hedges refer to income allocated to customer products by NWH Group Treasury, mainly current account and savings balances in Commercial & Institutional, Retail
\n
Banking and Private Banking.
\n
At 31 December 2023, approximately 94% by notional of total structural hedges were sterling-denominated.
\n\n\n\n\n\n\n\n\n\n\n\n\n
\ue001
The structural hedge period-end notional fell, mainly due to lower volumes of current
\n
account and managed rate savings deposits. This also reflected the impact of
\n
changes in the deposit mix, whereby customers have moved balances into fixed-
\n
term savings accounts.
\n
\ue001
The five-year sterling swap rate fell to 3.38% at 31 December 2023 from 4.10% at 31
\n
December 2022. The ten-year sterling swap rate also fell, to 3.29% from 3.75%. The
\n
structural hedge yield rose to 1.47% in 2023 from 0.98% in 2022.
\n
\ue001
Hedge income rose by \u00a31,088 million to \u00a33,240 million from \u00a32,152 million. Despite
\n
the increase in hedge income, incremental income fell. This illustrates the relative
\n
stability of hedge income compared to an unhedged portfolio that would earn short-
\n
term cash rates. Compared to the 49-basis-point increase in the structural hedge
\n
total yield, SONIA increased 176 basis points to 5.19% at 31 December 2023 from
\n
3.43% at 31 December 2022.
\n
The following table presents the incremental income associated with product structural
\n
hedges at segment level.
\n\n \n
2023
2022
\u00a3m
\u00a3m
Retail Banking
(2,644)
(463)
Commercial & Institutional
(3,213)
(537)
Private Banking & Other
(464)
(74)
Total
(6,321)
(1,074)
\n
NTIRR can be measured using value-based or earnings-based approaches. Value-based
\n
approaches measure the change in value of the balance sheet assets and liabilities
\n
including all cash flows. Earnings-based approaches measure the potential impact on the
\n
income statement of changes in interest rates over a defined horizon, generally one to
\n
three years.
\n
NatWest Group uses VaR as its value-based approach and sensitivity of net interest
\n
earnings as its earnings-based approach.
\n
These two approaches provide complementary views of the impact of interest rate risk
\n
on the balance sheet at a point in time. The scenarios employed in the net interest
\n
earnings sensitivity approach may incorporate assumptions about how NatWest Group
\n
and its customers will respond to a change in the level of interest rates. In contrast, the
\n
VaR approach measures the sensitivity of the balance sheet at a point in time. Capturing
\n
all cash flows, VaR also highlights the impact of duration and repricing risks beyond the
\n
one-to-three-year period shown in earnings sensitivity calculations.
\n
Value-at-risk
\n
VaR is a statistical estimate of the potential change in the market value of a portfolio
\n
(and, thus, the impact on the income statement) over a specified time horizon at a given
\n
confidence level.
\n
NatWest Group\u2019s standard VaR metrics \u2013 which assume a time horizon of one trading
\n
day and a confidence level of 99% \u2013 are based on interest rate repricing gaps at the
\n
reporting date. Daily rate moves are modelled using observations from the last 500
\n
business days. These incorporate customer products plus associated funding and
\n
hedging transactions as well as non-financial assets and liabilities. Behavioural
\n
assumptions are applied as appropriate.
\n
The non-traded interest rate risk VaR metrics for NatWest Group\u2019s retail and commercial
\n
banking activities are included in the banking book VaR table presented earlier in this
\n
section. The VaR captures the risk resulting from mismatches in the repricing dates of
\n
assets and liabilities.
\n
It also includes any mismatch between the maturity profile of external hedges and
\n
NatWest Group\u2019s target maturity profile for the hedge.
\n
Sensitivity of net interest earnings
\n
Net interest earnings are sensitive to changes in the level of interest rates, mainly
\n
because maturing structural hedges are replaced at higher or lower rates and changes
\n
to coupons on managed rate customer products do not always match changes in
\n
market rates of interest or central bank policy rates.
\n
Earnings sensitivity is derived from a market-implied forward rate curve, which will
\n
incorporate expected changes in central bank policy rates such as the Bank of England
\n
base rate. A simple scenario is shown that projects forward earnings based on the 31
\n
December 2023 balance sheet, which is assumed to remain constant. An earnings
\n
projection is derived from the market-implied curve, which is then subject to interest rate
\n
shocks. The difference between the market-implied projection and the shock gives an
\n
indication of underlying sensitivity to interest rate movements.
\n
Reported sensitivities should not be considered a forecast of future performance in these
\n
rate scenarios. Actions that could reduce interest earnings sensitivity include changes in
\n
pricing strategies on customer loans and deposits as well as hedging. Management
\n
action may also be taken to stabilise total income also taking into account non-interest
\n
income.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Three-year 25-basis-point sensitivity table
\n
The table below shows the sensitivity of net interest earnings \u2013 for both structural hedges and managed rate accounts \u2013 on a one, two and three-year forward-looking basis to an
\n
upward or downward interest rate shift of 25 basis points.
\n
In all scenarios, yield curves are assumed to move in parallel. For more information and assumptions relating to this and the following table, refer to the previous page.
\n\n \n
+25 basis points upward shift
-25 basis points downward shift
Year 1
Year 2
Year 3
Year 1
Year 2
Year 3
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Structural hedges
44
138
227
(44)
(138)
(227)
Managed margin
120
117
114
(125)
(121)
(105)
Total
164
255
341
(169)
(259)
(332)
2022
Structural hedges
50
158
260
(50)
(158)
(260)
Managed margin
148
141
136
(170)
(140)
(129)
Total
198
299
396
(220)
(298)
(389)
\n
(1)
Earnings sensitivity considers only the main drivers, namely structural hedging and margin management.
\n
\ue001
The overall reduction in the sensitivity of net interest income earnings in all scenarios mainly reflects lower managed rate deposit and current account volumes. This includes
\n
changes in the deposit mix, whereby customers have moved balances into fixed-term savings from managed-rate savings accounts.
\n
One-year 25 and 100-basis-point sensitivity table
\n
The following table presents the one-year sensitivity to upward and downward 25-basis-point and 100-basis-point shifts in the yield curve, analysed by currency.
\n\n \n
2023
2022
Shifts in yield curve
Shifts in yield curve
+25 basis points
-25 basis points
+100 basis points
-100 basis points
+25 basis points
-25 basis points
+100 basis points
-100 basis points
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Euro
7
(11)
38
(45)
13
(12)
48
(50)
Sterling
138
(139)
504
(577)
172
(194)
698
(784)
US dollar
14
(14)
54
(56)
10
(11)
42
(53)
Other
5
(5)
21
(22)
3
(3)
13
(16)
Total
164
(169)
617
(700)
198
(220)
801
(903)
\n\n\n\n\n\n\n\n\n\n\n\n\n
Sensitivity of fair value through other comprehensive income (FVOCI) portfolios
\n
and cash flow hedging reserves to interest rate movements
\n
NatWest Group holds most of the bonds in its liquidity portfolio at fair value and the
\n
bonds are generally classified as FVOCI for accounting purposes. Valuation changes
\n
arising from unexpected movements in market rates are initially recognised in FVOCI
\n
reserves.
\n
Interest rate swaps are used to implement the structural hedging programme and also
\n
hedging of some personal and commercial lending portfolios, primarily fixed-rate
\n
mortgages. Generally, these swaps are booked in cash flow hedge accounting
\n
relationships. Changes in the valuation of swaps that are in effective cash flow hedge
\n
accounting relationships are recognised in cash flow hedge reserves.
\n
The table below shows the sensitivity of bonds initially classified as FVOCI and swaps
\n
subject to cash flow hedge accounting to a parallel shift in all rates. Valuation changes
\n
affecting interest rate swaps that hedge bonds in the liquidity portfolio are also included.
\n
Where FVOCI bonds and swaps are booked in fair value hedge accounting relationships,
\n
the valuation change affecting both instruments would be recognised in the income
\n
statement. Cash flow hedges are assumed to be fully effective.
\n
Note that the effectiveness of cash flow and fair value hedge relationships is monitored
\n
and regularly tested in accordance with IFRS requirements. Note also that valuation
\n
changes affecting the cash flow hedge reserve affect tangible net asset value, but would
\n
not be expected to affect CET1 capital.
\n\n \n
2023
2022
+25 basis points
-25 basis points
+100 basis points
-100 basis points
+25 basis points
-25 basis points
+100 basis points
-100 basis points
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
FVOCI reserves
(1)
1
(10)
(1)
(3)
2
(13)
5
Cash flow hedge reserves
(251)
254
(981)
1,041
(278)
281
(1,097)
1,138
Total
(252)
255
(991)
1,040
(281)
283
(1,110)
1,143
\n
\ue001
The sensitivity of FVOCI and cash flow hedge reserves was broadly stable in 2023 compared to 2022. The movement in cash flow hedge reserves in 2023 is shown in the
\n
statement of changes in equity on page 301.
\n
Credit spread risk
\n
Credit spread risk arises from the potential adverse economic impact of a change in the
\n
spread between bond yields and swap rates, where the bond portfolios are accounted at
\n
fair value through other comprehensive income.
\n
NatWest Group\u2019s bond portfolios primarily comprise high-quality securities maintained as
\n
a liquidity buffer to ensure it can continue to meet its obligations in the event that access
\n
to wholesale funding markets is restricted. Additionally, other high-quality bond portfolios
\n
are held for collateral purposes and to support payment systems.
\n
Credit spread risk is monitored daily through sensitivities and VaR measures (refer to the
\n
non-traded market risk VaR table earlier in this section). Exposures and limit utilisations
\n
are reported to senior management on a regular basis. Dealing mandates in place for
\n
the bond portfolios further mitigate the risk by imposing constraints by duration, asset
\n
class and credit rating.
\n
Foreign exchange risk
\n
Non-traded foreign exchange risk arises from three main sources:
\n
\ue001
Structural foreign exchange rate risk \u2013 mainly arises from the capital deployed in
\n
foreign subsidiaries and branches.
\n
\ue001
Transactional foreign exchange rate risk \u2013 arises from customer transactions and
\n
profits and losses that are in a currency other than the functional currency.
\n
\ue001
Forecast earnings or costs in foreign currencies \u2013 NatWest Group assesses its
\n
potential exposure to forecast foreign currency income and expenses. NatWest
\n
Group hedges forward some forecast expenses.
\n
The most material non-traded open currency positions are the structural foreign
\n
exchange exposures arising from investments in foreign subsidiaries and branches.
\n
These exposures are assessed and managed to predefined risk appetite levels under
\n
delegated authority agreed by the CFO with support from the Asset & Liability
\n
Management Committee. NatWest Group seeks to limit the potential volatility impact on
\n
its CET1 ratio from exchange rate movements by deliberately maintaining a structural
\n
open currency position. Gains or losses arising from the retranslation of net investments
\n
in overseas operations are recognised in other comprehensive income and reduce the
\n
sensitivity of capital ratios to foreign exchange rate movements primarily arising from the
\n
retranslation of non-sterling denominated RWAs. Sensitivity is minimised where, for a
\n
given currency, the ratio of the structural open position to RWAs equals the CET1 ratio.
\n
The sensitivity of this ratio to exchange rates is monitored monthly and reported to the
\n
Asset & Liability Management Committee at least quarterly. Foreign exchange exposures
\n
arising from customer transactions are hedged by businesses on a regular basis in line
\n
with NatWest Group policy.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Foreign exchange risk
\n
The table below shows structural foreign currency exposures.
\n\n \n
Net investments
Net investment
Structural foreign currency
Residual structural
in foreign operations
hedges
exposures pre-economic hedges
Economic hedges (1)
foreign currency exposures
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
US dollar
1,185
(228)
957
(957)
-
Euro
4,475
(2,585)
1,890
-
1,890
Other non-sterling
963
(429)
534
-
534
Total
6,623
(3,242)
3,381
(957)
2,424
\n\n \n
2022
US dollar
1,278
(303)
975
(975)
-
Euro
6,189
(4,164)
2,025
-
2,025
Other non-sterling
996
(431)
565
-
565
Total
8,463
(4,898)
3,565
(975)
2,590
\n
(1)
Economic hedges of US dollar net investments in foreign operations represent US dollar AT1 equity securities that do not qualify as net investment hedges for accounting purposes. They provide an offset to structural foreign exchange exposures to the
\n
extent that there are net assets in overseas operations available, but they are accounted for at historical cost under IFRS until redemption.
\n
\ue001
The reduction in both net investments in foreign operations and net investment hedges mainly reflected the wind-down of UBIDAC.
\n
\ue001
Changes in foreign currency exchange rates affect equity in proportion to structural foreign currency exposure pre economic hedges. For example, a 5% strengthening or
\n
weakening in foreign currencies against sterling would result in a gain or loss of \u00a30.2 billion in equity, respectively.
\n
Equity risk
(audited)
\n
Non-traded equity risk is the potential variation in income and reserves arising from
\n
changes in equity valuations. Equity positions are carried on the balance sheet at fair
\n
value based on market prices where available. Equity positions may take the form of
\n
shares that are publicly listed on a recognised exchange, such as NatWest Group\u2019s
\n
investment in Permanent TSB, privately owned investments such as the investment in
\n
Vodeno and shareholdings in industry participations including SWIFT. Further disclosure
\n
of NatWest Group\u2019s investments in equity shareholdings, fair value gains and losses and
\n
valuation techniques may be found in the notes to the consolidated financial statements.
\n
Investments, acquisitions or disposals of a strategic nature are referred to the
\n
Acquisitions & Disposals Committee. Once approved by the CFO with support from the
\n
Acquisitions & Disposals Committee for execution, such transactions are referred for
\n
approval to the Board, the Executive Committee, the Chief Executive, the Chief Financial
\n
Officer or as otherwise required. Decisions to acquire or hold equity positions in the non-
\n
trading book that are not of a strategic nature are taken by authorised persons with
\n
delegated authority.
\n
Non-traded equity value at risk is monitored monthly and capital allocation to the risk is
\n
included in NatWest Group\u2019s annual Internal Capital Adequacy Assessment Process
\n
(ICAAP).
\n
Accounting volatility risk
\n
Accounting volatility risk arises when an exposure is accounted for at amortised cost but
\n
economically hedged by a derivative that is accounted for at fair value. Although this is
\n
not an economic risk, the difference in accounting between the exposure and the hedge
\n
creates volatility in the income statement.
\n
Accounting volatility can be mitigated through hedge accounting. However, residual
\n
volatility will remain in cases where accounting rules mean that hedge accounting is not
\n
an option, or where there is some hedge ineffectiveness. Accounting volatility risk is
\n
reported to the Asset & Liability Management Committee monthly and capitalised as part
\n
of the ICAAP.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Traded market risk
\n
Definition (audited)
\n
Traded market risk is the risk of losses in trading book positions from fluctuations in
\n
market variables, such as interest rates, credit spreads, foreign exchange rates, equity
\n
prices, implied volatilities and asset correlations.
\n
Sources of risk
(audited)
\n
Traded market risk mainly arises from NatWest Group\u2019s trading activities. These
\n
activities provide a range of financing, risk management and investment services to
\n
clients
\u2212
including corporations and financial institutions
\u2212
around the world. From a
\n
market risk perspective, activities are focused on rates; currencies; and traded credit.
\n
NatWest Group undertakes transactions in financial instruments including debt securities,
\n
as well as securities financing and derivatives.
\n
All material traded market risk resides in NatWest Markets. The key categories are
\n
interest rate risk, credit spread risk and foreign currency price risk.
\n
Trading activities may also give rise to counterparty credit risk. For further detail refer to
\n
the Credit risk section.
\n
Key developments in 2023
\n
\ue001
The year was marked by periods of increased market volatility reflecting UK political
\n
developments, global inflationary concerns, the ongoing Russia-Ukraine conflict and
\n
the Israel\u2013Hamas conflict.
\n
\ue001
The significant volatility in Gilts, sterling swaps and inflation entered the rolling
\n
window for VaR calculation during 2023. However, traded VaR and SVaR remained
\n
within appetite and, on an average basis, at similar levels compared to 2022, aided
\n
by NatWest Group\u2019s continued disciplined approach to risk-taking.
\n
Governance
(audited)
\n
Market risk policy statements set out the governance and risk management framework.
\n
Responsibility for identifying, measuring, monitoring and controlling market risk arising
\n
from trading activities lies with the relevant trading business. The Market Risk function
\n
independently advises on, monitors and challenges the risk-taking activities undertaken
\n
by the trading business ensuring these are within the constraints of the market risk
\n
framework, policies, and risk appetite statements and measures.
\n
Risk appetite
\n
NatWest Group\u2019s qualitative appetite for traded market risk is set out in the traded
\n
market risk appetite statement. Quantitative appetite is expressed in terms of exposure
\n
limits. The limits at NatWest Group level comprise value-at-risk (VaR), stressed value-at-
\n
risk (SVaR) and stress-testing. More details on these are provided on the following pages.
\n
For each trading business, a document known as a dealing authority compiles details of
\n
all applicable limits and trading restrictions. The desk-level mandates comprise qualitative
\n
limits related to the product types within the scope of each desk, as well as quantitative
\n
metrics specific to the desk\u2019s market risk exposures. These additional limits and metrics
\n
aim to control various risk dimensions such as exposure size, aged inventory, currency
\n
and tenor.
\n
The limits are reviewed to reflect changes in risk appetite, business plans, portfolio
\n
composition and the market and economic environments and recalibrated to ensure that
\n
they remain aligned to NatWest Group RWA targets. Limit reviews focus on optimising
\n
the alignment between traded market risk exposure and capital usage.
\n
To ensure approved limits are not breached and that NatWest Group remains within its
\n
risk appetite, triggers have been set such that if exposures exceed a specified level,
\n
action plans are developed by the relevant business and the Market Risk function and
\n
implemented. The risk appetite statements and associated measures are reviewed at
\n
least annually by the Board on the Board Risk Committee\u2019s recommendation to ensure
\n
they remain appropriate and aligned to strategy. For more detail on risk appetite and
\n
risk controls, refer to pages 175 and 176.
\n
Monitoring and mitigation
\n
Traded market risk is identified and assessed by gathering, analysing, monitoring and
\n
reporting market risk information at desk, business, business segment and NatWest
\n
Group-wide levels. Industry expertise, continued system developments and techniques
\n
such as stress testing are also used to enhance the effectiveness of the identification and
\n
assessment of all material market risks.
\n
Traded market risk exposures are monitored against limits and analysed daily. A daily
\n
report summarising the position of exposures against limits at desk, business, business
\n
segment and NatWest Group levels is provided to senior management and market risk
\n
managers across the function. Limit reporting is supplemented with regulatory capital
\n
and stress testing information as well as ad-hoc reporting.
\n\n\n\n\n\n\n\n\n\n\n\n\n
A risk review of trading businesses is undertaken weekly with senior risk and front office
\n
staff. This includes a review of profit and loss drivers, notable position concentrations and
\n
other positions of concern.
\n
Business profit and loss performance is monitored automatically through loss triggers
\n
which, if breached, require a remedial action plan to be agreed between the Market Risk
\n
function and the business. The loss triggers are set using both a fall-from-peak approach
\n
and an absolute loss level. In addition, regular updates on traded market risk positions
\n
are provided to the Executive Risk Committee, the Board Risk Committee and the Board.
\n
Measurement
\n
NatWest Group uses VaR, SVaR and the incremental risk charge (IRC) to capitalise
\n
traded market risk. Risks that are not adequately captured by VaR or SVaR are captured
\n
by the Risks Not In VaR (RNIV) framework to ensure that NatWest Group is adequately
\n
capitalised for market risk. In addition, stress testing is used to identify any vulnerabilities
\n
and potential losses.
\n
The key inputs into these measurement methods are market data and risk factor
\n
sensitivities. Sensitivities refer to the changes in trade or portfolio value that result from
\n
small changes in market parameters that are subject to the market risk limit framework.
\n
Revaluation ladders are used in place of sensitivities to capture the impact of large
\n
moves in risk factors or the joint impact of two risk factors.
\n
These methods have been designed to capture correlation effects and allow NatWest
\n
Group to form an aggregated view of its traded market risk across risk types, markets
\n
and business lines while also taking into account the characteristics of each risk type.
\n
Value-at-risk
\n
For internal risk management purposes, VaR assumes a time horizon of one trading day
\n
and a confidence level of 99%.
\n
The internal VaR model \u2013 which captures all trading book positions including those
\n
products approved by the regulator \u2013 is based on a historical simulation, utilising market
\n
data from the previous 500 days. During 2023, an update was made to the VaR model
\n
to make it more sensitive to recent market conditions, following approval from the PRA.
\n
The model also captures the potential impact of interest rate risk; credit spread risk;
\n
foreign currency price risk; equity price risk; and commodity price risk.
\n
When simulating potential movements in such risk factors, a combination of absolute,
\n
relative and rescaled returns is used.
\n
The performance and adequacy of the VaR model are tested regularly through the
\n
following processes:
\n
\ue001
Back-testing: Internal and regulatory back-testing is conducted on a daily basis.
\n
Information on internal back-testing is provided in this section. Information on
\n
regulatory back-testing appears in the Pillar 3 Report.
\n
\ue001
Ongoing model validation: VaR model performance is assessed both regularly, and on
\n
an ad-hoc basis, if market conditions or portfolio profile change significantly.
\n
\ue001
Model Risk Management review: As part of the model lifecycle, all risk models
\n
(including the VaR model) are independently reviewed to ensure the model is still fit
\n
for purpose given current market conditions and portfolio profile. For further detail on
\n
the independent model validation carried out by Model Risk Management refer to
\n
page 281. More information relating to pricing and market risk models is presented in
\n
the Pillar 3 Report.
\n\n\n\n\n\n\n\n\n\n\n\n\n
One-day 99% traded internal VaR
\n
Traded VaR (1-day 99%) (audited)
\n
The table below shows one-day 99% internal VaR for NatWest Group\u2019s trading portfolios, split by exposure type.
\n\n \n
2023
2022
Average
Maximum
Minimum
Period end
Average
Maximum
Minimum
Period end
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest rate
9.8
19.3
4.3
7.4
7.3
12.6
4.1
9.0
Credit spread
6.2
7.1
4.9
6.8
7.8
12.0
6.0
6.4
Currency
2.3
7.0
0.9
1.8
3.1
8.0
1.2
1.5
Equity
-
0.1
-
0.1
-
0.3
-
-
Diversification
(1)
(7.0)
(7.2)
(7.5)
(6.8)
Total
11.3
20.0
6.6
8.9
10.7
15.1
7.2
10.1
\n
(1)
NatWest 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
\n
diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
\n
\ue001
On an average basis, traded VaR remained at similar levels in 2023 compared to 2022.
\n
\ue001
The increase in average interest rate VaR, compared to 2022, reflected an increase in curve risk in sterling and euro flow trading.
\n
\ue001
The decrease in average credit spread VaR mostly reflected a tightening of credit spreads on the net longer credit profile over the period
.
\n
0
\n
5
\n
10
\n
15
\n
20
\n
25
\n
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
\n
Total Trading VaR
Interest Rate VaR
Credit VaR
FX VaR
Equity VaR
\n
\u00a3m
\n\n\n\n\n\n\n\n\n\n\n\n\n
VaR back-testing
\n
The main approach employed to assess the VaR model\u2019s ongoing performance is back-
\n
testing, which counts the number of days when a loss exceeds the corresponding daily
\n
VaR estimate, measured at a 99% confidence level.
\n
Two types of profit and loss (P&L) are used in back-testing comparisons: Actual P&L and
\n
Hypothetical P&L. For more details on the back-testing approach, refer to the Pillar 3
\n
Report.
\n
The table below shows internal back-testing exceptions in the major NatWest Markets
\n
businesses for the 250-business-day period to 31 December 2023. Internal back-testing
\n
compares one-day 99% traded internal VaR with Actual and Hypothetical (Hypo) P&L.
\n\n \n
Back-testing exceptions
Actual
Hypo
Rates
-
-
Currencies
-
-
Credit
1
1
xVA
-
-
\n
\ue001
The back-testing exception was driven by losses in Financials in March 2023 due to
\n
increased credit market volatility following the collapse of Silicon Valley Bank.
\n
Stressed VaR (SVaR)
\n
As with VaR, the SVaR methodology produces estimates of the potential change in the
\n
market value of a portfolio, over a specified time horizon, at a given confidence level.
\n
SVaR is a VaR-based measure using historical data from a one-year period of stressed
\n
market conditions.
\n
A simulation of 99% VaR is run on the current portfolio for each 250-day period from
\n
2005 to the current VaR date, moving forward one day at a time. The SVaR is the worst
\n
VaR outcome of the simulated results.
\n
This is in contrast with VaR, which is based on a rolling 500-day historical data set. A
\n
time horizon of ten trading days is assumed with a confidence level of 99%.
\n
The internal traded SVaR model captures all trading book positions.
\n\n \n
2023
2022
Period
Period
Average
Maximum
Minimum
end
Average
Maximum
Minimum
end
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Total internal
traded SVaR
56
140
28
36
70
206
34
40
\n
\ue001
Traded SVaR was, on an average basis, lower in 2023 than in 2022, following the
\n
reduction in tenor basis risk in sterling flow trading resulting from the VaR model
\n
update in Q3 2022.
\n
Risks Not In VaR (RNIVs)
\n
The RNIV framework is used to identify and quantify market risks that are not fully
\n
captured by the internal VaR and SVaR models.
\n
RNIV calculations form an integral part of ongoing model and data improvement efforts
\n
to capture all market risks in scope for model approval in VaR and SVaR.
\n
For further qualitative and quantitative disclosures on RNIVs, refer to the Market risk
\n
section of the Pillar 3 Report.
\n
Stress testing
\n
For information on stress testing, refer to page 177.
\n
Incremental risk charge (IRC)
\n
The IRC model quantifies the impact of rating migration and default events on the
\n
market value of instruments with embedded credit risk (in particular, bonds and credit
\n
default swaps) held in the trading book. It further captures basis risk between different
\n
instruments, maturities and reference entities. For further qualitative and quantitative
\n
disclosures on the IRC, refer to the Market risk section of the Pillar 3 Report.
Market risk \u2013 linkage to balance sheet
The table below analyses NatWest Group\u2019s balance sheet by non-trading and trading business.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
\u00a0 \u00a0
Non-trading
Trading
\u00a0
Non-trading
Trading
\u00a0
\u00a0
Total
business (1)
business (2)
Total
business (1)
business (2)
\u00a0
\u00a0
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Primary market risk factor
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104.3
104.3
-
144.8
144.8
-
Interest rate
Trading assets
45.6
0.8
44.8
45.6
1.2
44.4
\u00a0
Reverse repos
23.7
-
23.7
21.5
-
21.5
Interest rate
Securities
12.0
-
12.0
9.9
-
9.9
Interest rate, credit spreads, equity
Other
9.9
0.8
9.1
14.2
1.2
13.0
Interest rate
Derivatives
78.9
1.0
77.9
99.5
1.3
98.2
Interest rate, credit spreads, equity
Settlement balances
7.2
0.9
6.3
2.6
0.2
2.4
Settlement
Loans to banks
6.9
6.8
0.1
7.1
7.0
0.1
Interest rate
Loans to customers
381.4
381.4
-
366.3
366.2
0.1
Interest rate
Other financial assets
51.1
51.1
-
30.9
30.9
-
Interest rate, credit spreads, equity
Intangible assets
7.6
7.6
-
7.1
7.1
-
Interest rate, credit spreads, equity
Other assets
8.8
8.8
-
9.3
9.3
-
\u00a0
Assets of disposal groups
0.9
0.9
-
6.9
6.9
-
\u00a0
Total assets
692.7
563.6
129.1
720.1
574.9
145.2
\u00a0
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
22.2
22.2
-
20.4
20.4
-
Interest rate
Customer deposits
431.4
431.4
-
450.3
450.3
-
Interest rate
Settlement balances
6.6
-
6.6
2.0
-
2.0
Settlement
Trading liabilities
53.6
-
53.6
52.8
-
52.8
\u00a0
Repos
26.9
-
26.9
23.7
-
23.7
Interest rate
Short positions
9.8
-
9.8
9.5
-
9.5
Interest rate, credit spreads
Other
16.9
-
16.9
19.6
-
19.6
Interest rate
Derivatives
72.4
1.2
71.2
94.0
1.5
92.5
Interest rate, credit spreads
Other financial liabilities
55.1
55.0
0.1
49.1
49.0
0.1
Interest rate
Subordinated liabilities
5.7
5.7
-
6.3
6.3
-
Interest rate
Notes in circulation
3.2
3.2
-
3.2
3.2
-
Interest rate
Other liabilities
5.3
5.3
-
5.5
5.5
-
\u00a0
Total liabilities
655.5
524.0
131.5
683.6
536.2
147.4
\u00a0
\n
(1)
Non-trading businesses are entities that primarily have exposures that are not classified as trading book. For these exposures, with the exception of pension-related activities, the main measurement methods are sensitivity analysis of net interest income,
internal non-traded market risk VaR and fair value calculations. For more information refer to the non-traded market risk section.
(2)
Trading businesses are entities that primarily have exposures that are classified as trading book under regulatory rules. For these exposures, the main methods used by NatWest Group to measure market risk are detailed in the traded market risk section.
(3)
Foreign exchange risk affects all non-sterling denominated exposures on the balance sheet across trading and non-trading businesses, and therefore has not been listed in the above tables.2.2. Fair value \u2013 financial instruments
We measure financial instruments at fair value when they are classified as mandatory
fair value through profit or loss; held-for-trading; designated fair value through profit or
loss and fair value through other comprehensive income and they are recognised in the
financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net
exposure to either market or credit risk. In these cases, the fair value is derived from the
net risk exposure of that portfolio with portfolio level adjustments applied to incorporate
bid-offer spreads, counterparty credit risk, and funding costs (refer to \u2018Valuation
Adjustments\u2019).
Where the market for a financial instrument is not active, fair value is established using a
valuation technique. These valuation techniques involve a degree of estimation, the
extent of which depends on the instrument\u2019s complexity and the availability of market-
based data. The complexity and uncertainty in the financial instrument\u2019s fair value is
categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.
2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured
at amortised cost or at fair value through other comprehensive income, issued financial
guarantee and loan commitment (other than those classified as held for trading) is
assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.
ECL are a probability-weighted estimate of credit losses. The probability is determined by
the risk of default which is applied to the cash flow estimates. In the absence of a change
in credit rating, allowances are recognised when there is a reduction in the net present
value of expected cash flows. Following a significant increase in credit risk, ECL are
adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make
payments as they fall due. Future cashflows are discounted, so long-dated cashflows are
less likely to affect current expectations on credit loss. Our assessment of sector specific
risks, and whether additional adjustments are required, include expectations of the ability
of those sectors to meet their financing needs in the market. Changes in credit risk
appetite and how we manage credit positions that stem from climate considerations,
such as oil and gas, will directly affect our positions.
Judgement is exercised as follows:
\ue001
Models
\u2013 in certain low default portfolios, Basel parameter estimates are also applied
for IFRS 9.
\ue001
Non-modelled portfolios
\u2013 use a standardised capital requirement under Basel II.
Under IFRS 9, they have bespoke treatments for the identification of significant
increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for
appropriateness. The ECL calculation is based on expected future cash flows, which
is typically applied at a portfolio level.
\ue001
Multiple economic scenarios (MES)
\u2013 the central, or base, scenario is most critical to
the ECL calculation, independent of the method used to generate a range of
alternative outcomes and their probabilities.
\ue001
Significant increase in credit risk
\u2013
IFRS 9 requires that at each reporting date, an
entity shall assess whether the credit risk on an account has increased significantly
since initial recognition. Part of this assessment requires a comparison to be made
between the current lifetime PD (i.e. the current probability of default over the
remaining lifetime) with the equivalent lifetime PD as determined at the date of initial
recognition.
.
On restructuring where a financial asset is not derecognised, the revised cash flows are
used in re-estimating the credit loss. Where restructuring causes derecognition of the
original financial asset, the fair value of the replacement asset is used as the closing cash
flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares
or property, the exchange is accounted for as the sale of the loan and the acquisition of
equity securities or investment property. Where our acquired interest is in equity shares,
relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance
sheet when we conclude that there is no longer any realistic prospect of recovery of
part, or all, of the loan. For financial assets that are individually assessed for impairment,
the timing of the write-off is determined on a case-by-case basis. Such financial assets
are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-
negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed
portfolios are:
\ue001
Retail mortgages: write-off usually occurs within five years, or earlier, when an
account is closed, but can be longer where the customer engages constructively;
\ue001
Credit cards: the irrecoverable amount is typically written off after twelve arrears
cycles or at four years post default any remaining amounts outstanding are written
off;
\ue001
Overdrafts and other unsecured loans: write-off occurs within six years;
\ue001
Commercial loans: write-offs are determined in the light of individual circumstances;
and Business loans are generally written off within five years.3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.
3.9. Netting
Financial assets and financial liabilities are offset, and the net amount presented on the
balance sheet when, and only when, we currently have a legally enforceable right to set
off the recognised amounts and we intend either to settle on a net basis or to realise the
asset and settle the liability simultaneously. We are party to a number of arrangements,
including master netting agreements, that give us the right to offset financial assets and
financial liabilities, but where we do not intend to settle the amounts net or
simultaneously, the assets and liabilities concerned are presented separately on the
balance sheet.
3.10. Capital instruments
We classify a financial instrument that we issue as a liability if it is a contractual obligation
to deliver cash or another financial asset, or to exchange financial assets or financial
liabilities on potentially unfavourable terms and as equity if we evidence a residual
interest in our assets after the deduction of liabilities. Incremental costs and related tax
that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known
as treasury shares or own shares held) is deducted from retained earnings. On the
cancellation of treasury shares their nominal value is removed from retained earnings
and a consequential amount recognised in capital redemption in compliance with the
Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are
credited to equity, net of any directly attributable incremental costs.
3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.10 Financial instruments - classification
Financial instruments are contracts that give rise to a financial asset of one entity and a corresponding financial liability or equity instrument of a counterparty entity,
such as cash, derivatives, loans, deposits and settlement balances. This note presents financial instruments classified in accordance with IFRS 9 \u2013 Financial
Instruments.
Judgement: classification of financial assets
Classification of financial assets between amortised cost and
fair value through other comprehensive income requires a
degree of judgement in respect of business models and
contractual cashflows.
\ue001
The business model criteria is assessed at a portfolio level
to determine whether assets are classified as held to
collect or held to collect and sell. Information that is
considered in determining the applicable business model
includes: the portfolio\u2019s policies and objectives; how the
performance and risks of the portfolio are managed,
evaluated and reported to management; and the
frequency, volume and timing of sales in prior periods,
sales expectation for future periods, and the reasons for
sales.
\ue001
The contractual cash flow characteristics of financial
assets are assessed with reference to whether the cash
flows represent solely payments of principal and interest
(SPPI). A level of judgement is made in assessing terms
that could change the contractual cash flows so that it
would not meet the condition for SPPI, including contingent
and leverage features,
non-recourse arrangements and
features that could modify the time value of money.
For accounting policy information refer to Accounting policies
3.8, 3.9 and 3.11.
The following tables analyse financial assets and liabilities in accordance with the categories of financial instruments
in IFRS 9.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0\u00a0\u00a0\u00a0
Amortised
Other
\u00a0
\u00a0
MFVTPL
DFV
FVOCI
cost
assets
Total
Assets
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
\u00a0\u00a0\u00a0
104,262
\u00a0
104,262
Trading assets
45,551
\u00a0\u00a0\u00a0\u00a0
45,551
Derivatives
(1)
78,904
\u00a0\u00a0\u00a0\u00a0
78,904
Settlement balances
\u00a0\u00a0\u00a0
7,231
\u00a0
7,231
Loans to bank - amortised cost
(2)
\u00a0\u00a0\u00a0
6,914
\u00a0
6,914
Loans to customers - amortised cost (
3
)
\u00a0\u00a0\u00a0
381,433
\u00a0
381,433
Other financial assets
703
5
28,699
21,695
\u00a0
51,102
Intangible assets
\u00a0\u00a0\u00a0\u00a0
7,614
7,614
Other assets
\u00a0\u00a0\u00a0\u00a0
8,760
8,760
Assets of disposal groups
(4)
\u00a0\u00a0\u00a0\u00a0
902
902
31 December 2023
125,158
5
28,699
521,535
17,276
692,673
Cash and balances at central banks
\u00a0\u00a0\u00a0
144,832
\u00a0
144,832
Trading assets
45,577
\u00a0\u00a0\u00a0\u00a0
45,577
Derivatives
(1)
99,545
\u00a0\u00a0\u00a0\u00a0
99,545
Settlement balances
\u00a0\u00a0\u00a0
2,572
\u00a0
2,572
Loans to bank - amortised cost
(2)
\u00a0\u00a0\u00a0
7,139
\u00a0
7,139
Loans to customers - amortised cost (
3
)
\u00a0\u00a0\u00a0
366,340
\u00a0
366,340
Other financial assets
787
-
16,973
13,135
\u00a0
30,895
Intangible assets
\u00a0\u00a0\u00a0\u00a0
7,116
7,116
Other assets
\u00a0\u00a0\u00a0\u00a0
9,176
9,176
Assets of disposal groups
(4)
\u00a0\u00a0\u00a0\u00a0
6,861
6,861
31 December 2022
145,909
-
16,973
534,018
23,153
720,053
\n
\n
\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0
Amortised
Other
\u00a0
\u00a0
Held-for-trading
DFV
cost
liabilities
Total
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bank deposits
(5)
\u00a0 \u00a0
22,190
\u00a0
22,190
Customer deposits
\u00a0 \u00a0
431,377
\u00a0
431,377
Settlement balances
\u00a0 \u00a0
6,645
\u00a0
6,645
Trading liabilities
53,636
\u00a0 \u00a0 \u00a0
53,636
Derivatives
(1)
72,395
\u00a0 \u00a0 \u00a0
72,395
Other financial liabilities
(6)
\u00a0
2,888
52,201
\u00a0
55,089
Subordinated liabilities
\u00a0
237
5,477
\u00a0
5,714
Notes in circulation
\u00a0 \u00a0
3,237
\u00a0
3,237
Other liabilities
(7)
\u00a0 \u00a0
748
4,454
5,202
31 December 2023
126,031
3,125
521,875
4,454
655,485
Bank deposits
(5)
\u00a0 \u00a0
20,441
\u00a0
20,441
Customer deposits
\u00a0 \u00a0
450,318
\u00a0
450,318
Settlement balances
\u00a0 \u00a0
2,012
\u00a0
2,012
Trading liabilities
52,808
\u00a0 \u00a0 \u00a0
52,808
Derivatives
(1)
94,047
\u00a0 \u00a0 \u00a0
94,047
Other financial liabilities
(6)
\u00a0
2,377
46,730
\u00a0
49,107
Subordinated liabilities
\u00a0
345
5,915
\u00a0
6,260
Notes in circulation
\u00a0 \u00a0
3,218
\u00a0
3,218
Other liabilities
(7)
\u00a0 \u00a0
1,205
4,141
5,346
31 December 2022
146,855
2,722
529,839
4,141
683,557
\n
(1)
Includes net hedging derivatives assets of \u00a3114 million (2022 - \u00a3143 million) and net
hedging derivatives liabilities of \u00a3270 million (2022 - \u00a3132 million).
(2)
Includes items in the course of collection from other banks of \u00a3255 million (2022 -
\u00a3229 million).
(3)
Includes finance lease receivables of \u00a38,731 million (2022 - \u00a38,402 million).
(4)
Includes assets of disposal groups held at FVTPL of \u00a3841 million (2022 - \u00a35,397
million). The portfolio is classified as level 3 in the fair value hierarchy.
(5)
Includes items in the course of transmission to other banks of \u00a392 million (2022 -
\u00a3242 million).
(6)
The carrying amount of customer deposits designated at fair value through profit
or loss is the same as the principal amount for both periods. No amounts have
been recognised in the profit or loss for changes in credit risk associated with these
liabilities as the changes are immaterial both during the period and cumulatively.
(7)
Includes lease liabilities of \u00a3670 million (2022 - \u00a31,118 million), held at amortised
cost.
Reclassification of mortgages from amortised cost to fair value through profit or loss
In June 2022 UBIDAC announced the cessation of new mortgage business to its customers. On 1 July 2022 UBIDAC mortgages in both its continuing and discontinued businesses were
reclassified from amortised cost to fair value through profit or loss, reflecting the change in business model. We fair value these assets using a discounted cash flow method. Key inputs
include assumptions about cash flows from legally binding sales agreements for those mortgage assets that form part of the assets of disposal groups. For details on material
developments in assets and liabilities of disposals groups during the year, refer to Note 8.
The effect of the reclassification as at 1 July 2022 is shown below.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Amortised cost
MFVTPL
Change in value
\u00a0
\u00a3m
\u00a3m
\u00a3m
Amounts reclassified on balance sheet
\u00a0 \u00a0 \u00a0
Loans to customers
(1)
587
606
19
Assets of disposal groups
(2)
10,676
10,383
(293)
\u00a0
11,263
10,989
(274)
\n
(1)
Change in value recognised in continuing operations.
(2)
Change in value recognised in discontinued operations.
We originate loans that include features that change the contractual cash flows based on the borrower meeting certain contractually specified environmental, social and governance
(ESG) targets. These are known as ESG-linked (or sustainability-linked) loans. As part of the terms of these loans, the contractual interest rate is reduced or increased if the borrower
meets (or fails to meet) specific targets linked to the activity of the borrower, for example reducing carbon emissions, increasing the level of diversity at Board level, or achieving a
sustainable supply chain. ESG features are first assessed to ascertain whether the adjustment to the contractual cash flows results in a de minimis exposure to risks or volatility in
those contractual cash flows. If this is the case the classification of the loan is not affected. If the effect of the ESG feature is assessed as being more than de minimis, we apply
judgement to ensure that the ESG features do not generate compensation for risks that are not in line with a basic lending arrangement. This includes, amongst other aspects, a
review of the consistency of the ESG targets with the asset or activity of the borrower, and consideration of the targets within our risk appetite. Some of these loans are an integral
part of our climate and sustainable funding and financing target disclosed on page 16.
The table below analyses financial assets forming a component of ESG-linked loans and other products with contractual terms that could change the timing or amount of cash flows.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0 \u00a0
Positive impact on
Negative impact on
Reduction in
\u00a0
\u00a0
Carrying value
product margin
product margin
cash flows
Carrying value
\u00a0
\u00a3bn
bps
bps
\u00a3m
\u00a3bn
Sustainability-linked loans
6.5
3.2
3.9
2.5
5.0
Other products
16.1
-
-
-
8.9
Lending subject to performance triggers
22.6
\u00a0 \u00a0
2.5
13.9
\n
Additional information on finance lease receivables
The following table shows the reconciliation of undiscounted finance lease receivables to net investment in finance leases which are presented under Loans to customers-amortised
cost on the balance sheet.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Amount receivable under finance leases
\u00a0 \u00a0
Within 1 year
3,340
3,235
1 to 2 years
2,358
2,254
2 to 3 years
1,625
1,388
3 to 4 years
900
833
4 to 5 years
388
411
After 5 years
1,079
1,130
Total lease payments
9,690
9,251
Unguaranteed residual values
169
171
Future drawdowns
(12)
(13)
Unearned income
(1,025)
(889)
Present value of lease payments
8,822
8,520
Impairments
(91)
(118)
Net investment in finance leases
8,731
8,402
\n
Financial instruments \u2013 financial assets and liabilities that can be offset
The tables below present information on financial assets and financial liabilities that are offset on the balance sheet under IFRS or subject to enforceable master netting agreements
together with financial collateral received or given.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Instruments which can be offset
Potential for offset not recognised by IFRS
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0 \u00a0
Effect of master
\u00a0 \u00a0
Net amount after
Instruments
\u00a0
\u00a0 \u00a0 \u00a0 \u00a0
netting and similar
Cash
Securities
netting agreements and
outside netting
Balance sheet
\u00a0
Gross
IFRS offset
Balance sheet
agreements
collateral
collateral
effect of related collateral
agreements
total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets
99,023
(20,597)
78,426
(60,355)
(12,284)
(3,408)
2,379
478
78,904
Derivative liabilities
95,734
(23,869)
71,865
(60,355)
(6,788)
(1,663)
3,059
530
72,395
Net position
(1)
3,289
3,272
6,561
-
(5,496)
(1,745)
(680)
(52)
6,509
Trading reverse repos
39,573
(16,257)
23,316
(664)
-
(22,461)
191
378
23,694
Trading repos
42,442
(16,257)
26,185
(664)
-
(25,520)
1
717
26,902
Net position
(2,869)
-
(2,869)
-
-
3,059
190
(339)
(3,208)
Non trading reverse repos
37,477
(9,646)
27,831
(5)
-
(27,826)
-
80
27,911
Non trading repos
23,605
(9,646)
13,959
(5)
-
(13,954)
-
3
13,962
Net position
13,872
-
13,872
-
-
(13,872)
-
77
13,949
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Derivative assets
117,606
(18,730)
98,876
(77,365)
(14,079)
(4,571)
2,861
669
99,545
Derivative liabilities
115,177
(22,111)
93,066
(77,365)
(9,761)
(1,185)
4,755
981
94,047
Net position
(1)
2,429
3,381
5,810
-
(4,318)
(3,386)
(1,894)
(312)
5,498
Trading reverse repos
35,612
(14,510)
21,102
(2,445)
-
(18,458)
199
435
21,537
Trading repos
33,767
(14,510)
19,257
(2,445)
-
(16,812)
-
4,483
23,740
Net position
1,845
-
1,845
-
-
(1,646)
199
(4,048)
(2,203)
Non trading reverse repos
25,630
(5,702)
19,928
-
-
(19,928)
-
98
20,026
Non trading repos
16,977
(5,702)
11,275
-
-
(11,275)
-
-
11,275
Net position
8,653
-
8,653
-
-
(8,653)
-
98
8,751
\n
(1)
Net IFRS offset balance of \u00a33,272 million (2022 - \u00a33,381 million) relates to variation margin netting reflected on other balance sheet lines.
11 Financial instruments - valuation
Financial instruments recognised at fair value are revalued using techniques that can include observable inputs (pricing information that is readily available in the
market, for example UK Government securities), and unobservable inputs (pricing information that is not readily available, for example unlisted securities). Gains and
losses are recognised in the income statement and statement of comprehensive income as appropriate.
This note presents information on the valuation of financial
instruments.
The table below provides an overview of the various sections contained within the note.
Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.
Valuation
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Page
Financial instruments
\u00a0
Critical accounting policy: Fair value
341
Valuation
\u00a0
Fair value hierarchy
(D)
342
Valuation techniques
(D)
342
Inputs to valuation models
(D)
342
Valuation control
(D)
343
Key areas of judgement
(D)
343
Assets and liabilities split by fair value hierarchy level
(T)
344
Valuation adjustments
\u00a0
Fair value adjustments made
(T)
345
Funding valuation adjustments (FVA)
(D)
345
Credit valuation adjustments (CVA)
(D)
345
Bid-offer
(D)
345
Product and deal specific
(D)
345
Own credit
(D)
345
Level 3 additional information
\u00a0
Level 3 ranges of unobservable inputs
(D)
346
Level 3 instruments, valuation techniques and inputs
(T)
346
Level 3 sensitivities
(D)
347
Alternative assumptions
(D)
347
Other considerations
(D)
347
High and low range of fair value of level 3 assets and liabilities
(T)
347
Movement in level 3 assets and liabilities over the reporting period
(D)
348
Movement in level 3 assets and liabilities
(T)
348
Fair value of financial instruments measured at amortised cost
\u00a0
Fair value of financial instruments measured at amortised cost on the balance sheet
\u00a0
balance sheet
349
(D) = Descriptive; (T) = Table
\u00a0
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Fair value hierarchy
\n
Financial instruments carried at fair value have been classified under the fair value
\n
hierarchy. The classification ranges from level 1 to level 3, with more expert judgement
\n
and price uncertainty for those classified at level 3.
\n
The determination of an instrument\u2019s level cannot be made at a global product level as a
\n
single product type can be in more than one level. For example, a single name corporate
\n
credit default swap could be in level 2 or level 3 depending on the level of market activity
\n
for the referenced entity.
\n
Level 1
\u2013 instruments valued using unadjusted quoted prices in active and liquid markets,
\n
for identical financial instruments. Examples include government bonds, listed equity
\n
shares and certain exchange-traded derivatives.
\n
L
L
evel 2
- instruments valued using valuation techniques that have observable inputs.
\n
Observable inputs are those that are readily available with limited adjustments required.
\n
Examples include most government agency securities, investment-grade corporate
\n
bonds, certain mortgage products - including collateralised loan obligations (CLOs), most
\n
bank loans, repos and reverse repos, state and municipal obligations, most notes issued,
\n
certain money market securities, loan commitments and most over the counter (OTC)
\n
derivatives.
\n
L
L
evel 3
- instruments valued using a valuation technique where at least one input which
\n
could have a significant effect on the instrument\u2019s valuation, is not based on observable
\n
market data. Examples include non-derivative instrument\u2019s which trade infrequently,
\n
certain syndicated and commercial mortgage loans, private equity, and derivatives with
\n
unobservable model inputs.
\n
Valuation techniques
\n
NatWest Group derives the fair value of its instruments differently depending on whether
\n
the instrument is a non-modelled or a modelled product.
\n
Non-modelled products
are valued directly from a price input, typically on a position-by-
\n
position basis. Examples include equities and most debt securities.
\n
Non-modelled products can fall into any fair value levelling hierarchy depending on the
\n
observable market activity, liquidity, and assessment of valuation uncertainty of the
\n
instruments. The assessment of fair value and the classification of the instrument to a fair
\n
value level is subject to the valuation controls discussed in the Valuation control section.
\n
Modelled products
valued using a pricing model range in complexity from comparatively
\n
vanilla products such as interest rate swaps and options (e.g., interest rate caps and
\n
floors) through to more complex derivatives (e.g., balance guarantee swaps).
\n
For modelled products the fair value is derived using the model and the appropriate
\n
model inputs or parameters, as opposed to a cash price equivalent. Model inputs are
\n
taken either directly or indirectly from available data, where some inputs are also
\n
modelled.
\n
Fair value classification of modelled instruments is either level 2 or level 3, depending on
\n
the product/model combination, the observability and quality of input parameters and
\n
other factors. All these must be assessed to classify a position. The modelled product is
\n
assigned to the lowest fair value hierarchy level of any significant input used in that
\n
valuation.
\n
Most derivative instruments, for example vanilla interest rate swaps, foreign exchange
\n
swaps and liquid single name credit derivatives, are classified as level 2. This is because
\n
they are vanilla products valued using standard market models and with observable
\n
inputs. Level 2 products range from vanilla to more complex products, where more
\n
complex products remain classified as level 2 due to the low materiality of any
\n
unobservable inputs.
\n
Inputs to valuation models
\n
When using valuation techniques, the fair value can be significantly affected by the
\n
choice of
valuation model
and underlying assumptions. Factors considered include the
\n
cashflow amounts and timing of those cash flows, and application of appropriate discount
\n
rates, incorporating both funding and credit risk. Values between and beyond available
\n
data points are obtained by interpolation and extrapolation. The principal inputs to these
\n
valuation techniques are as follows:
\n
Bond prices
- quoted prices are generally available for government bonds, certain
\n
corporate securities, and some mortgage-related products.
\n
Credit spreads/margins
- these reflect credit default swap levels or the return required
\n
over a benchmark rate or index to compensate for the referenced credit risk. Where
\n
available, these are derived from the price of credit default swaps or other credit-based
\n
instruments, such as debt securities. When direct prices are not available; credit
\n
spreads/margins are determined with reference to available prices of entities with similar
\n
characteristics.
\n
Interest rates
- these are principally based on interest rate swap prices referencing
\n
benchmark interest rates. Interest rates, include SONIA (Sterling Overnight Interbank
\n
Average Rate) and other overnight rates. Other quoted interest rates may also be used
\n
from both the bond, and futures markets.
\n
F
F
oreign currency exchange rates
- there are observable prices both for spot and
\n
forward contracts and futures in the world's major currencies.
\n
E
E
quity and equity index prices
- quoted prices are generally readily available for equity
\n
shares listed on the world's major stock exchanges and for major indices on such shares.
Price volatilities and correlations
- volatility is a measure of the tendency of a price to
change with time. Correlation measures the degree which two or more prices or
variables are observed to move together. Variables that move in the same direction
show positive correlation; those that move in opposite directions are negatively
correlated.
P
P
repayment rates
- are used to reflect how fast a pool of assets prepay. The fair value of
a financial instrument that can be prepaid by the issuer or borrower differs from that of
an instrument that cannot be prepaid. When valuing prepayable instruments, the value of
this prepayment option is considered.
R
R
ecovery rates/loss given default
- are used as an input to valuation models and
reserves for asset-backed securities and other credit products as an indicator of severity
of losses on default. Recovery rates are primarily sourced from market data providers,
the value of the underlying collateral or inferred from observable credit spreads.
Valuation control
NatWest Group's control environment for the determination of the fair value of financial
instruments includes formalised procedures for the review and validation of fair values.
The review of market prices and inputs is performed by an independent price verification
(IPV) team
IPV is a key element of the control environment. Valuations are first performed by the
business which entered into the transaction. These valuations are then reviewed by the
IPV team, independent of those trading the financial instruments, in light of available
pricing evidence.
Independent pricing data is collated from a range of sources. Each source is reviewed for
quality and the independent data applied in the IPV processes using a formalised input
quality hierarchy. Consensus services are one source of independent data and
encompass interest rate, currency, credit, and bond markets, providing comprehensive
coverage of vanilla products and a wide selection of exotic products.
Where measurement differences are identified through the IPV process these are
grouped by the quality hierarchy of the independent data. If the size of the difference
exceeds defined thresholds, an adjustment is made to bring the valuation to within the
independently calculated fair value range.
IPV takes place at least monthly, for all fair value financial instruments. The IPV control
includes formalised reporting and escalation of any valuation differences in breach of
established thresholds.
The quality and completeness of the information gathered in the IPV process gives an
indication as to the liquidity and valuation uncertainty of an instrument and forms part of
the information considered when determining fair value hierarchy classifications.
Initial fair value level classification of a financial instrument is carried out by the IPV team.
These initial classifications are subject to senior management review. Particular attention
is paid to instruments transferring from one level to another, new instrument classes or
products, instruments where the transaction price is significantly different from the fair
value and instruments where valuation uncertainty is high.
Valuation Committees are made up of valuation specialists and senior business
representatives from various functions and oversees pricing, reserving and valuations
issues. These committees meet monthly to review and ratify any methodology changes.
The Executive Valuation Committee meets quarterly to address key material and
subjective valuation issues, to review items escalated by Valuation Committees and to
discuss other relevant industry matters.
The Group model risk policy sets the policy for model documentation, testing and review.
Governance of the model risk policy is carried out by the Group model risk oversight
committee, which comprises model risk owners and independent model experts. All
models are required to be independently validated in accordance with the Model Risk
Policy.
Key areas of judgement
Over the years the business has simplified, with most products classified as level 1 or 2 of
the fair value hierarchy. However, the diverse range of products historically traded by
NatWest Group means some products remain classified as level 3. Level 3 indicates a
significant level of pricing uncertainty, where expert judgement is used. As such, extra
disclosures are required in respect of level 3 instruments.
In general, the degree of expert judgement used and hence valuation uncertainty
depends on the degree of liquidity of an instrument or input.
Where markets are liquid, little judgement is required. However, when the information
regarding the liquidity in a particular market is not clear, a judgement may need to be
made. For example, for an equity traded on an exchange, daily volumes of trading can
be seen, but for an OTC derivative, assessing the liquidity of the market with no central
exchange is more challenging.
A key related matter is where a market moves from liquid to illiquid or vice versa. Where
this movement is considered temporary, the fair value level is not changed. For example,
if there is little market trading in a product on a reporting date but at the previous
reporting date and during the intervening period the market has been liquid. In this case,
the instrument will continue to be classified at the same level in the hierarchy. This is to
provide consistency so that transfers between levels are driven by genuine changes in
market liquidity and do not reflect short term or seasonal effects. Material movements
between levels are reviewed quarterly by the business and IPV.
The breadth and depth of the IPV data allows for a rules-based quality assessment to be
made of market activity, liquidity, and pricing uncertainty, which assists with the process
of allocation to an appropriate level. Where suitable independent pricing information is
not readily available, the quality assessment will result in the instrument being assessed
as level 3.
The table below shows the assets and liabilities held by NatWest Group split by fair value hierarchy level. Level 1 are considered the most liquid instruments, and level 3 the most
illiquid, valued using expert judgement and so carry the most significant price uncertainty.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Loans
-
33,388
209
33,597
-
35,260
395
35,655
Securities
8,447
3,493
14
11,954
7,463
2,458
1
9,922
Derivatives
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
1
43,912
650
44,563
5
52,764
711
53,480
Foreign exchange
-
34,096
65
34,161
-
45,715
114
45,829
Other
-
72
108
180
-
54
182
236
Other financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Loans
-
108
657
765
-
172
727
899
Securities
17,848
10,536
258
28,642
10,380
6,278
203
16,861
Total financial assets held at fair value
26,296
125,605
1,961
153,862
17,848
142,701
2,333
162,882
As a % of total fair value assets
17%
82%
1%
\u00a0
11%
88%
1%
\u00a0
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Deposits
-
43,126
1
43,127
-
42,486
1
42,487
Debt securities in issue
-
706
-
706
-
797
-
797
Short positions
7,936
1,865
2
9,803
7,462
2,062
-
9,524
Derivatives
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
-
38,044
439
38,483
2
47,855
678
48,535
Foreign exchange
-
33,528
58
33,586
-
45,139
98
45,237
Other
-
138
188
326
-
76
199
275
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Debt securities in issue
-
1,605
3
1,608
-
1,327
-
1,327
Other deposits
-
1,280
-
1,280
-
1,050
-
1,050
Subordinated liabilities
-
237
-
237
-
345
-
345
Total financial liabilities held at fair value
7,936
120,529
691
129,156
7,464
141,137
976
149,577
As a % of total fair value liabilities
6%
93%
1%
\u00a0
5%
94%
1%
\u00a0
\n
(1)
Transfers between levels are deemed to have occurred at the beginning of the quarter in which the instrument was transferred.
(2)
For an analysis of debt securities held at mandatory fair value through profit or loss by issuer as well as ratings and derivatives, by type and contract, refer to Risk and capital management \u2013 Credit risk.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Valuation adjustments
\n
When valuing financial instruments in the trading book, adjustments are made to mid-
\n
market valuations to cover bid-offer spread, funding and credit risk. These adjustments
\n
are presented in the table below:
\n\n \n
2023
2022
Adjustment
\u00a3m
\u00a3m
Funding valuation adjustments
132
173
Credit valuation adjustments
236
300
Bid-offer
86
130
Product and deal specific
103
141
Total
557
744
\n
Funding valuation adjustments decreased during the year, primarily driven by changes in
\n
GBP interest rates and funding spreads tightening.
\n
The decrease in credit value adjustments was driven by credit spreads tightening and a
\n
reduction in exposures, primarily due to portfolio ageing, partially offset by new trade
\n
activity. Interest rates tightening, trade restructuring and trade specific valuation
\n
adjustments were the drivers of the decrease in product and deal specific. The decrease
\n
in bid-offer was driven by risk reduction.
\n
Funding valuation adjustments (FVA)
\n
FVA represents an estimate of the adjustment that a market participant would make to
\n
incorporate funding costs and benefits that arise in relation to derivative exposures. FVA
\n
is calculated as a portfolio level adjustment and can result in either a funding charge
\n
(positive) or funding benefit (negative).
\n
Funding levels are applied to estimated potential future exposures. For uncollateralised
\n
derivatives, the exposure reflects the future valuation of the derivative. For collateralised
\n
derivatives, the exposure reflects the difference between the future valuation of the
\n
derivative and the level of collateral posted.
\n
Credit valuation adjustments (CVA)
\n
CVA represents an estimate of the adjustment to fair value that is made to incorporate
\n
the counterparty credit risk inherent in derivative exposures. CVA is calculated on a
\n
portfolio basis reflecting an estimate of the amount a third party would charge to assume
\n
the credit risk.
\n
Collateral held under a credit support agreement is factored into the CVA calculation. In
\n
such cases where NatWest Group holds collateral against counterparty exposures, CVA
\n
is held to the extent that residual risk remains.
\n
FVA and CVA are actively managed by a credit and market risk hedging process, and
\n
therefore movements in CVA and FVA are partially offset by trading revenue on the
\n
hedges.
\n
Bid-offer
\n
Fair value positions are required to be marked to exit levels, represented by bid (long
\n
positions) or offer (short positions) levels. Non-derivative positions are typically marked
\n
directly to bid or offer prices. However derivative exposures are adjusted to exit levels by
\n
taking bid-offer reserves calculated on a portfolio basis. The reserving approach is based
\n
on current market bid-offer spreads and standard market bucketing of risk.
\n
Bid-offer spreads vary by maturity and risk type to reflect different spreads in the
\n
market. For positions where there is no observable quote, the bid-offer spreads are
\n
widened in comparison to proxies to reflect reduced liquidity or observability.
\n
Netting is applied on a portfolio basis to reflect the value at which NatWest Group
\n
believes it could exit the net risk of the portfolio, rather than the sum of exit costs for
\n
each of the portfolio\u2019s individual trades. This is applied where the asset and liability
\n
positions are managed as a portfolio for risk and reporting purposes.
\n
Product and deal specific
\n
On initial recognition of financial assets and liabilities valued using valuation techniques
\n
which have a significant dependence on information other than observable market data,
\n
any difference between the transaction price and that derived from the valuation
\n
technique is deferred. Such amounts are recognised in the income statement over the
\n
life of the transaction, when market data becomes observable, or when the transaction
\n
matures or is closed out as appropriate. On 31 December 2023, net gains of \u00a378 million
\n
(2022 - \u00a374 million) were carried forward. During the year, net gains of \u00a3119 million
\n
(2022 - \u00a397 million) were deferred and \u00a3115 million (2022 - \u00a394 million) were recognised
\n
in the income statement.
\n
Where system-generated valuations do not accurately reflect market prices, manual
\n
valuation adjustments are applied either at a position or portfolio level. Manual
\n
adjustments are subject to the scrutiny of independent control teams and are subject to
\n
monthly review by senior management.
\n
Own credit
\n
NatWest Group considers the effect of its own credit standing when valuing financial
\n
liabilities recorded at fair value. Own credit spread adjustments are made when valuing
\n
issued debt held at fair value, including issued structured notes. An own credit
\n
adjustment is applied to positions where it is believed that counterparties would consider
\n
NatWest Group\u2019s creditworthiness when pricing trades.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Level 3 additional information
\n
For illiquid assets and liabilities, classified as level 3, additional information is provided on the valuation techniques used and price sensitivity of the products to those inputs. This is to
\n
enable the reader to gauge the level of uncertainty that arises from positions with significant unobservable inputs or modelling parameters.
\n
Level 3 ranges of unobservable inputs
\n
The table below provides additional information on level 3 instruments and inputs. This shows the valuation technique used for the fair value calculation, the unobservable input and
\n
input range.
\n \n \n
2023
20
22
Financial instrument
Valuation technique
Unobservable inputs
Units
Low
High
Low
High
Trading assets and Other financial assets
Loans
Price-based
Price
%
-
123
-
113
Discount cash flow
Credit spreads
bps
49
119
56
114
Discount cash flow
Discount margin
bps
174
228
174
222
Debt securities
Price-based
Price
%
-
119
-
255
Equity Shares
Price-based
Price
GBP
-
32,142
-
34,027
Price-based
Price
%
-
30
-
30
Discount cash flow
Discount margin
%
7
9
6
8
Net asset valuation
Fund NAV
%
80
120
80
120
Derivative assets and liabilities
Credit derivatives
Credit derivative pricing
Credit spreads
bps
13
600
7
530
Option pricing
Correlation
%
(15)
95
(15)
95
Volatility
%
30
80
30
80
Upfront points
%
-
99
-
99
Recovery rate
%
-
60
-
60
Interest rate & FX
Option pricing
Correlation
%
(50)
99
(50)
100
derivatives
Volatility
%
30
111
30
127
Constant Prepayment Rate
%
2
22
2
21
Mean Reversion
%
-
20
-
92
Inflation volatility
%
2
2
1
2
Inflation rate
%
2
3
2
3
\n
(1)
Valuation for private equity investments may be estimated by looking at past prices of similar stocks and from valuation statements where valuations are usually derived from earnings measures such as EBITDA or net asset value (NAV). Similarly, for
\n
equity or bond fund investments, prices may be estimated from valuation or credit statements using NAV or similar measures.
\n
(2)
NatWest Group does not have any material liabilities measured at fair value that are issued with an inseparable third-party credit enhancement.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Level 3 sensitivities
\n
The level 3 sensitivities presented below are calculated at a trade or low-level portfolio
\n
basis rather than an overall portfolio basis. As individual sensitivities are aggregated with
\n
no reflection of the correlated nature between instruments, the overall portfolio
\n
sensitivity may not be accurately reflected. For example, some portfolios may be
\n
negatively correlated to others, where a downwards movement in one asset would
\n
produce an upwards movement in another. However, due to the additive presentation of
\n
the above figures this correlation impact cannot be displayed. As such, the actual
\n
potential downside sensitivity of the total portfolio may be less than the non-correlated
\n
sum of the additive figures as shown in the below table.
\n
Alternative assumptions
\n
Reasonably plausible alternative assumptions of unobservable inputs are determined
\n
based on a specified target level of certainty of 90%.
\n
Alternative assumptions are determined with reference to all available evidence including
\n
consideration of the following: quality of independent pricing information considering
\n
consistency between different sources, variation over time, perceived tradability or
\n
otherwise of available quotes; consensus service dispersion ranges; volume of trading
\n
activity and market bias (e.g. one-way inventory); day 1 profit or loss arising on new
\n
trades; number and nature of market participants; market conditions; modelling
\n
consistency in the market; size and nature of risk; length of holding of position; and
\n
market intelligence.
\n
Other considerations
\n
Whilst certain inputs used to calculate CVA, FVA and own credit adjustments are not
\n
based on observable market data, the uncertainty of these inputs is not considered to
\n
have a significant effect on the net valuation of the related derivative portfolios and
\n
issued debt.
\n
As such, the fair value levelling of the derivative portfolios and issued debt is not
\n
determined by CVA, FVA or own credit inputs. In addition, any fair value sensitivity
\n
driven by these inputs is not included in the level 3 sensitivities presented.
\n
The table below shows the high and low range of fair value of the level 3 assets and liabilities. This range incorporates the range of fair value inputs as described in the previous table.
\n\n \n
2023
2022
Level 3
Favourable
Unfavourable
Level 3
Favourable
Unfavourable
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Trading assets
Loans
209
-
-
395
10
(10)
Securities
14
-
-
1
-
-
Derivatives
Interest rate
650
20
(20)
711
30
(30)
Foreign exchange
65
-
-
114
10
(10)
Other
108
10
(10)
182
10
(10)
Other financial assets
Loans
657
-
(40)
727
-
(10)
Securities
258
20
(50)
203
20
(30)
Total financial assets held at fair value
1,961
50
(120)
2,333
80
(100)
Liabilities
Trading liabilities
Deposits
1
-
-
1
-
-
Short positions
2
-
-
-
-
-
Derivatives
Interest rate
439
10
(10)
678
30
(30)
Foreign exchange
58
-
-
98
-
-
Other
188
10
(10)
199
-
-
Other financial liabilities - debt securities in issue
3
-
-
-
-
-
Total financial liabilities held at fair value
691
20
(20)
976
30
(30)
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Movement in level 3 assets and liabilities
\n
The following table shows the movement in level 3 assets and liabilities in the year.
\n\n \n
Other
Other
Other
Other
Derivatives
trading
financial
Total
Derivatives
trading
financial
Total
assets
assets (2)
assets (3)
assets
liabilities
liabilities (2)
liabilities
liabilities
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
1,007
396
930
2,333
975
1
-
976
Amounts recorded in the income statement
(1)
(156)
(88)
1
(243)
(313)
-
-
(313)
Amount recorded in the statement of
comprehensive income
-
-
32
32
-
-
-
-
Level 3 transfers in
6
15
16
37
7
2
-
9
Level 3 transfers out
(5)
(32)
(190)
(227)
(9)
(2)
-
(11)
Purchases/originations
180
8
275
463
195
2
3
200
Settlements/other decreases
(70)
(8)
(86)
(164)
(51)
-
-
(51)
Sales
(137)
(65)
(52)
(254)
(116)
-
-
(116)
Foreign exchange and other adjustments
(2)
(3)
(11)
(16)
(3)
-
-
(3)
At 31 December
823
223
915
1,961
685
3
3
691
Amounts recorded in the income statement
in respect of balances held at period end
- unrealised
67
(39)
1
29
(121)
-
-
(121)
2022
At 1 January
918
740
394
2,052
606
3
-
609
Amounts recorded in the income statement
(1)
126
31
(14)
143
382
(1)
-
381
Amount recorded in the statement of
comprehensive income
-
-
(20)
(20)
-
-
-
-
Level 3 transfers in
193
1
532
726
78
3
-
81
Level 3 transfers out
(122)
(147)
(68)
(337)
(61)
(3)
-
(64)
Purchases/originations
355
274
185
814
382
-
-
382
Settlements/other decreases
(40)
(75)
-
(115)
(41)
-
-
(41)
Sales
(423)
(434)
(101)
(958)
(376)
(2)
-
(378)
Foreign exchange and other adjustments
-
6
22
28
5
1
-
6
At 31 December
1,007
396
930
2,333
975
1
-
976
Amounts recorded in the income statement
in respect of balances held at period end
- unrealised
126
31
(16)
141
382
(1)
-
381
\n
(1)
There were \u00a369 million net gains on trading assets and liabilities (2022 \u2013 \u00a3224 million net losses) recorded in income from trading activities. Net gains on other instruments of \u00a31 million (2022 \u2013 \u00a314 million net losses) were recorded in other operating
\n
income and interest income as appropriate.
\n
(2)
Other trading assets and other trading liabilities comprise assets and liabilities held at fair value in trading portfolios.
\n
(3)
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.
Fair value of financial instruments measured at amortised cost on the balance sheet
The following table shows the carrying value and fair value of financial instruments measured at amortised cost on the balance sheet.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Items where
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
fair value
\u00a0
Carrying
\u00a0
Fair value hierarchy level
approximates
\u00a0
value
Fair value
Level 1
Level 2
Level 3
carrying value
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104.3
104.3
-
-
-
104.3
Settlement balances
7.2
7.2
-
-
-
7.2
Loans to banks
6.9
7.0
-
2.2
0.6
4.2
Loans to customers
381.4
373.2
-
27.5
345.7
-
Other financial assets - securities
21.7
21.6
4.0
6.6
11.0
-
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
144.8
144.8
-
-
-
144.8
Settlement balances
2.6
2.6
-
-
-
2.6
Loans to banks
7.1
7.1
-
4.2
2.8
0.1
Loans to customers
366.3
354.5
-
20.3
334.2
-
Other financial assets - securities
13.1
12.8
3.6
3.2
6.0
-
2023
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
22.2
22.3
-
15.4
2.7
4.2
Customer deposits
431.4
431.0
-
30.7
48.8
351.5
Settlement balances
6.6
6.6
-
-
-
6.6
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
- debt securities in issue
52.2
52.2
-
41.7
10.5
-
Subordinated liabilities
5.5
5.4
-
5.4
-
-
Notes in circulation
3.2
3.2
-
-
-
3.2
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
20.4
20.0
-
13.1
2.2
4.7
Customer deposits
450.3
450.3
-
12.7
30.6
407.0
Settlement balances
2.0
2.0
-
-
-
2.0
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
- debt securities in issue
46.7
46.1
-
40.7
5.4
-
Subordinated liabilities
5.9
5.6
-
5.5
0.1
-
Notes in circulation
3.2
3.2
-
-
-
3.2
\n
The assumptions and methodologies underlying the
calculation of fair values of financial instruments at the
balance sheet date are as follows:
Short-term financial instruments
For certain short-term financial instruments, including but
not limited to, cash and balances at central banks,
settlement balances, loans with short-term maturities, notes
in circulation and customer demand deposits, carrying
value is deemed a reasonable approximation of fair value.
Loans to banks and customers
In estimating the fair value of net loans to customers and
banks measured at amortised cost, NatWest Group\u2019s loans
are segregated into appropriate portfolios reflecting the
characteristics of the constituent loans. Two principal
methods are used to estimate fair value:
(a)
(b)
Contractual cashflows that are discounted using a
market discount rate that incorporates the current
spread for the borrower or where this is not observable,
the spread for borrowers of a similar credit standing.
Expected cash flows (unadjusted for credit losses) are
discounted at the current offer rate for the same or
similar products. The current methodology caps all loan
values at par rather than modelling clients\u2019 option to
repay loans early. This approach is adopted for lending
portfolios in Retail Banking, Ulster Bank RoI, Commercial
& Institutional (SME loans) and Private Banking in order
to reflect the homogeneous nature of these portfolios.
Debt securities and subordinated liabilities
Most debt securities are valued using quoted prices in
active markets or from quoted prices of similar financial
instruments. The remaining population is valued using
discounted cashflows at current offer rates.
Bank and customer deposits
Fair values of deposits are estimated using discounted cash
flow valuation techniques. Where required, methodologies
can be revised as additional information and valuation
inputs become available.
12 Financial instruments \u2013 maturity analysis
This note shows the maturity profile of NatWest Group\u2019s financial assets and liabilities by contractual date of maturity and contractual cash flows.
Remaining maturity
The following table shows the residual maturity of financial instruments, based on contractual date of maturity.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Less than
More than
\u00a0
Less than
More than
\u00a0
\u00a0
12 months
12 months
Total
12 months
12 months
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104,262
-
104,262
144,832
-
144,832
Trading assets
36,723
8,828
45,551
35,944
9,633
45,577
Derivatives
29,839
49,065
78,904
38,107
61,438
99,545
Settlement balances
7,231
-
7,231
2,572
-
2,572
Loans to banks - amortised cost
6,650
264
6,914
6,872
267
7,139
Loans to customers - amortised cost
87,663
293,770
381,433
84,289
282,051
366,340
Other financial assets
10,192
40,910
51,102
6,128
24,767
30,895
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
8,954
13,236
22,190
7,799
12,642
20,441
Customer deposits
424,893
6,484
431,377
448,821
1,497
450,318
Settlement balances
6,645
-
6,645
2,012
-
2,012
Trading liabilities
45,349
8,287
53,636
42,760
10,048
52,808
Derivatives
30,721
41,674
72,395
39,331
54,716
94,047
Other financial liabilities
20,310
34,779
55,089
13,796
35,311
49,107
Subordinated liabilities
1,047
4,667
5,714
973
5,287
6,260
Notes in circulation
3,237
-
3,237
3,218
-
3,218
Lease liabilities
102
568
670
137
981
1,118
\n
Assets and liabilities by contractual cash flows up to 20 years
The tables on the following page show the contractual undiscounted cash flows receivable and payable, up to a period of 20 years, including future receipts and payments of interest of
financial assets and liabilities by contractual maturity. The balances in the following tables do not agree directly with the consolidated balance sheet, as the tables include all cash flows
relating to principal and future coupon payments, presented on an undiscounted basis. The tables have been prepared on the following basis:
Financial assets have been reflected in the time band of the latest date on which they could be repaid, unless earlier repayment can be demanded by NatWest Group. Financial
liabilities are included at the earliest date on which the counterparty can require repayment, regardless of whether or not such early repayment results in a penalty. If the repayment of
a financial instrument is triggered by, or is subject to, specific criteria such as market price hurdles being reached, the asset is included in the time band that contains the latest date on
which it can be repaid, regardless of early repayment. The liability is included in the time band that contains the earliest possible date on which the conditions could be fulfilled, without
considering the probability of the conditions being met.
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
For example, if a structured note is automatically prepaid when an equity index exceeds a certain level, the cash outflow will be included in the less than three months period, whatever
\n
the level of the index at the year end. The settlement date of debt securities in issue, issued by certain securitisation vehicles consolidated by NatWest Group, depends on when cash
\n
flows are received from the securitised assets. Where these assets are prepayable, the timing of the cash outflow relating to securities assumes that each asset will be prepaid at the
\n
earliest possible date. As the repayments of assets and liabilities are linked, the repayment of assets in securitisations is shown on the earliest date that the asset can be prepaid, as
\n
this is the basis used for liabilities.
\n
The principal amounts of financial assets and liabilities that are repayable after 20 years or where the counterparty has no right to repayment of the principal are excluded from the
\n
table, as are interest payments after 20 years.
\n
The maturity of guarantees and commitments is based on the earliest possible date they would be drawn in order to evaluate NatWest Group\u2019s liquidity position.
\n
MFVTPL assets of \u00a3125.1 billion (2022 - \u00a3145.8 billion) and HFT liabilities of \u00a3125.8 billion (2022 - \u00a3146.7 billion) have been excluded from the following tables.
\n\n \n
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
Cash and balances at central banks
104,262
-
-
-
-
-
Derivatives held for hedging
31
29
128
104
49
49
Settlement balances
7,231
-
-
-
-
-
Loans to banks - amortised cost
5,234
1,437
23
302
-
-
Loans to customers - amortised cost
52,175
46,894
81,445
61,465
96,577
114,806
Other financial assets
(1)
4,897
6,756
12,304
11,183
10,019
8,063
Finance lease
61
242
735
401
656
359
173,891
55,358
94,635
73,455
107,301
123,277
Liabilities by contractual maturity up to 20 years
Bank deposits
8,334
1,279
6,069
8,307
-
-
Customer deposits
393,363
31,900
6,464
11
14
19
Settlement balances
6,645
-
-
-
-
-
Derivatives held for hedging
71
175
366
192
92
8
Other financial liabilities
9,094
12,319
18,843
13,818
4,769
346
Subordinated liabilities
72
1,167
2,301
1,512
1,406
342
Other liabilities - Notes in circulation
3,237
-
-
-
-
-
Lease liabilities
30
79
172
111
175
132
420,846
46,919
34,215
23,951
6,456
847
Guarantees and commitments - notional amount
Guarantees
(2)
2,820
-
-
-
-
-
Commitments
(3)
112,807
-
-
-
-
-
115,627
-
-
-
-
-
\n
For the notes to this table refer to the following page.
\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
144,832
-
-
-
-
-
Derivatives held for hedging
130
345
28
41
(44)
43
Settlement balances
2,572
-
-
-
-
-
Loans to banks - amortised cost
5,254
1,621
17
288
-
-
Loans to customers - amortised cost
50,923
43,417
76,278
55,128
85,038
100,085
Other financial assets
(1)
2,771
4,507
8,391
7,835
5,706
2,524
Finance lease
96
267
857
482
549
296
\u00a0
206,578
50,157
85,571
63,774
91,249
102,948
Liabilities by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
6,690
1,445
5,662
8,503
89
-
Customer deposits
437,830
11,389
1,252
2
14
20
Settlement balances
2,012
-
-
-
-
-
Derivatives held for hedging
280
(371)
586
306
116
85
Other financial liabilities
6,720
6,640
18,833
13,906
7,361
294
Subordinated liabilities
96
1,073
2,690
1,897
1,541
328
Other liabilities - Notes in circulation
3,218
-
-
-
-
-
Lease liabilities
41
113
260
203
318
254
\u00a0
456,887
20,289
29,283
24,817
9,439
981
Guarantees and commitments - notional amount
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Guarantees
(2)
3,150
-
-
-
-
-
Commitments
(3)
118,779
-
-
-
-
-
\u00a0
121,929
-
-
-
-
-
\n
(1)
Other financial assets exclude equity shares.
(2)
NatWest Group is only called upon to satisfy a guarantee when the guaranteed party fails to meet its obligations. NatWest Group expects most guarantees it provides to expire unused.
(3)
NatWest Group has given commitments to provide funds to customers under undrawn formal facilities, credit lines and other commitments to lend subject to certain conditions being met by the counterparty. NatWest Group does not expect all facilities to
be drawn, and some may lapse before drawdown.
13 Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities held at fair value and classified as held-for-trading. Financial instruments are classified as held-for-trading
if they are held for the purpose of selling or repurchasing them in the short term, to make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
For accounting policy information refer to Accounting policy 3.8.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Assets
\u00a3m
\u00a3m
Loans
\u00a0 \u00a0
Reverse repos
23,694
21,537
Collateral given
9,141
13,005
Other loans
762
1,113
Total loans
33,597
35,655
Securities
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
2,729
2,205
- US
2,600
2,345
- Other
3,062
2,799
Financial institutions and corporate
3,563
2,573
Total securities
11,954
9,922
Total
45,551
45,577
Liabilities
\u00a0 \u00a0
Deposits
\u00a0 \u00a0
Repos
26,902
23,740
Collateral received
15,075
17,680
Other deposits
1,150
1,067
Total deposits
43,127
42,487
Debt securities in issue
706
797
Short positions
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
1,893
2,313
- US
2,071
1,293
- Other
4,049
3,936
Financial institutions and Corporate
1,790
1,982
Total short positions
9,803
9,524
Total
53,636
52,808
\n
\n
\n
14 Derivatives
Derivative is a term covering a wide range of financial instruments that derive their
fair value from an underlying rate or price, for example interest rates or exchange
rates (the underlying). NatWest Group uses derivatives as a part of its trading activities, to manage its own risks such as interest rate, foreign exchange, or credit risk
and in certain customer transactions. This note
shows contracted volumes of derivatives, how they are used for hedging purposes and more specifically the effects of
the application of hedge accounting.
For accounting policy information refer to Accounting policies 3.8 and 3.11.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Notional
Asset
Liability
\u00a0
Traded on
\u00a0 \u00a0
Traded on
\u00a0 \u00a0
Traded on
\u00a0 \u00a0
\u00a0
recognised
Traded over
\u00a0
recognised
Traded over
\u00a0
recognised
Traded over
\u00a0
\u00a0
exchanges
the counter
Total
exchanges
the counter
Total
exchanges
the counter
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest rate
819
9,449
10,268
48
44,515
44,563
34
38,449
38,483
- Swaps
-
6,533
6,533
-
33,807
33,807
-
27,424
27,424
- Options
510
1,674
2,184
48
10,708
10,756
34
11,025
11,059
- Forwards and futures
309
1,242
1,551
-
-
-
-
-
-
Exchange rate
1
3,119
3,120
-
34,161
34,161
-
33,586
33,586
- Swaps
-
449
449
-
8,173
8,173
-
7,370
7,370
- Options
1
674
675
-
4,181
4,181
-
4,197
4,197
- Spot, forwards and futures
-
1,996
1,996
-
21,807
21,807
-
22,019
22,019
Credit
-
15
15
-
180
180
-
326
326
Equity and commodity
-
-
-
-
-
-
-
-
-
Total
820
12,583
13,403
48
78,856
78,904
34
72,361
72,395
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
707
10,035
10,742
113
53,367
53,480
33
48,502
48,535
- Swaps
-
7,201
7,201
-
39,039
39,039
-
32,992
32,992
- Options
296
1,418
1,714
113
14,328
14,441
33
15,510
15,543
- Forwards and futures
411
1,416
1,827
-
-
-
-
-
-
Exchange rate
2
3,166
3,168
-
45,829
45,829
-
45,237
45,237
- Swaps
-
438
438
-
11,840
11,840
-
10,430
10,430
- Options
2
835
837
-
6,375
6,375
-
6,647
6,647
- Spot, forwards and futures
-
1,893
1,893
-
27,614
27,614
-
28,160
28,160
Credit
-
15
15
-
236
236
-
275
275
Equity and commodity
-
-
-
-
-
-
-
-
-
Total
709
13,216
13,925
113
99,432
99,545
33
94,014
94,047
\n
Included in the table above is the notional amount of \u00a37,280 billion (2022 - \u00a38,065 billion) of interest rate derivatives that are traded over the counter and settled through central
clearing counterparties. NatWest Group has no other type of derivatives that are settled through central counterparties.
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
NatWest Group applies hedge accounting to reduce the accounting mismatch caused in
\n
the income statement by using derivatives to hedge the following risks: interest rate,
\n
foreign exchange and the foreign exchange risk associated with net investment in
\n
foreign operations.
\n
NatWest Group\u2019s interest rate hedging relates to the management of NatWest Group\u2019s
\n
non-trading structural interest rate risk, caused by the mismatch between fixed interest
\n
rates and floating interest rates on its financial instruments. NatWest Group manages
\n
this risk within approved limits. Residual risk positions are hedged with derivatives,
\n
principally interest rate swaps.
\n
Cash flow hedges of interest rate risk relate to exposures to the variability in future
\n
interest payments and receipts due to the movement of interest rates on forecast
\n
transactions and on financial assets and financial liabilities. This variability in cash flows is
\n
hedged by interest rate swaps, which convert variable cash flows into fixed. For these
\n
cash flow hedge relationships, the hedged items are actual and forecast variable interest
\n
rate cash flows arising from financial assets and financial liabilities with interest rates
\n
linked to the relevant interest rates, most notably SOFR, EURIBOR, the European Central
\n
Bank deposit rate, SONIA and the Bank of England Official Bank Rate. The variability in
\n
cash flows due to movements in the relevant interest rate is hedged; this risk component
\n
is identified using the risk management systems of NatWest Group and encompasses the
\n
majority of cash flow variability risk.
\n
Suitable larger fixed rate financial instruments are subject to fair value hedging in line
\n
with documented risk management strategies.
\n
Fair value hedges of interest rate risk involve interest rate swaps transforming the fixed
\n
interest rate risk in financial assets and financial liabilities to floating. The hedged risk is
\n
the risk of changes in the hedged item\u2019s fair value attributable to changes in the interest
\n
rate risk component of the hedged item. The significant interest rates identified as risk
\n
components are SOFR, EURIBOR, ESTR and SONIA. These risk components are
\n
identified using the risk management systems of NatWest Group and encompass the
\n
majority of the hedged item\u2019s fair value risk.
\n
Hedge accounting using derivatives
\n
NatWest Group hedges the exchange rate risk of its net investment in foreign currency
\n
denominated operations with currency borrowings and forward foreign exchange
\n
contracts.
\n
NatWest Group reviews the value of the investments\u2019 net assets, executing hedges
\n
where appropriate to reduce the sensitivity of capital ratios to foreign exchange rate
\n
movement. Hedge accounting relationships will be designated where required.
\n
Exchange rate risk also arises in NatWest Group where payments are denominated in
\n
currencies other than the functional currency. Residual risk positions are hedged with
\n
foreign exchange derivatives, fixing the exchange rate the payments will be settled in.
\n
The derivatives are documented as cash flow hedges.
\n
For all cash flow hedging, fair value hedge relationships and net investment hedging,
\n
NatWest Group determines that there is an economic relationship between the hedged
\n
item and hedging instrument via assessing the initial and ongoing effectiveness by
\n
comparing movements in the fair value of the expected highly probable forecast interest
\n
cash flows/ fair value of the hedged item attributable to the hedged risk with movements
\n
in the fair value of the expected changes in cash flows from the hedging instrument. The
\n
method used for comparing movements is either regression testing, or the dollar offset
\n
method. The method for testing effectiveness and the period over which the test is
\n
performed depends on the applicable risk management strategy and is applied
\n
consistently to each risk management strategy. Hedge effectiveness is assessed on a
\n
cumulative basis and the determination of effectiveness is in line with the requirements of
\n
IAS 39.
\n
NatWest Group uses either the actual ratio between the hedged item and hedging
\n
instrument(s) or one that minimises hedge ineffectiveness to establish the hedge ratio for
\n
hedge accounting. Hedge ineffectiveness is measured in line with the requirements of IAS
\n
39 and recognised in the income statement as it arises.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Derivatives in hedge accounting relationships
\n
Included in the table below are derivatives held for hedging purposes as follows.
2023
2022
Changes in fair value used for
Changes in fair value used for
Notional
Assets
Liabilities
hedge ineffectiveness (1)
Notional
Assets
Liabilities
hedge ineffectiveness (1)
\u00a3bn
\u00a3m
\u00a3m
\u00a3m
\u00a3bn
\u00a3m
\u00a3m
\u00a3m
Fair value hedging
Interest rate contracts
(2)
67.6
1,139
2,607
406
58.7
1,554
3,009
482
Cash flow hedging
Interest rate contracts
140.0
1,924
4,970
1,211
167.6
2,681
6,207
(3,342)
Exchange rate contracts
16.9
112
254
(12)
6.3
142
112
(3)
Net investment hedging
Exchange rate contracts
0.3
2
7
(3)
0.5
1
9
4
224.8
3,177
7,838
1,602
233.1
4,378
9,337
(2,859)
IFRS netting and clearing house settlements
(3,063)
(7,568)
(4,235)
(9,205)
114
270
143
132
\n
(1)
The change in fair value used for hedge ineffectiveness includes instruments that were derecognised in the year.
\n
(2)
The hedged risk includes inflation risk.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Hedge ineffectiveness
\n
Hedge ineffectiveness recognised in other operating income comprises.
2023
2022
2021
\u00a3m
\u00a3m
\u00a3m
Fair value hedging
Loss on hedged items attributable to the hedged risk
(364)
(442)
(846)
Gain on the hedging instruments
406
482
897
Fair value hedging ineffectiveness
42
40
51
Cash flow hedging
Interest rate risk
10
(60)
(26)
Cash flow hedging ineffectiveness
10
(60)
(26)
Total
52
(20)
25
\n
The main sources of ineffectiveness for interest rate risk hedge accounting relationships are:
\n
\ue001
The effect of the counterparty credit risk on the fair value of the interest rate swap which is not reflected in the fair value of the hedged item attributable to the change in interest
\n
rate (fair value hedge).
\n
\ue001
Differences in the repricing basis between the hedging instrument and hedged cash flows (cash flow hedge); and
\n
\ue001
Upfront present values on the hedging derivatives where hedge accounting relationships have been designated after the trade date (cash flow hedge and fair value hedge).
Maturity of notional hedging contracts
The following table shows the period in which the notional of hedging contract ends.
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
Over 10 years
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Fair value hedging
Interest rate risk
(1)
Hedging assets
0.1
1.7
7.1
9.0
5.9
4.7
28.5
Hedging liabilities
2.7
3.3
13.4
11.3
7.7
0.7
39.1
2022
Fair value hedging
Interest rate risk
(1)
Hedging assets
0.5
1.9
4.7
4.9
4.2
3.6
19.8
Hedging liabilities
1.0
2.9
14.6
10.3
9.6
0.5
38.9
2023
Cash flow hedging
Interest rate risk
Hedging assets
3.9
14.5
33.9
22.8
10.1
-
85.2
Hedging liabilities
0.8
3.9
39.1
10.1
0.3
0.6
54.8
Exchange rate risk
Hedging assets
0.3
0.7
1.6
-
-
-
2.6
Hedging liabilities
8.4
0.8
2.4
2.5
0.2
-
14.3
2022
Cash flow hedging
Interest rate risk
Hedging assets
6.6
9.4
46.5
21.9
10.1
-
94.5
Hedging liabilities
17.3
26.8
15.7
5.1
7.5
0.7
73.1
Exchange rate risk
Hedging assets
0.1
-
-
-
-
-
0.1
Hedging liabilities
-
1.1
2.8
2.1
0.2
-
6.2
\n
(1)
The hedged risk includes inflation risk.
\n\n\n\n\n\n\n\n\n\n\n\n\n \n
Average fixed interest rates
The following table shows average fixed rate for cash flow hedges, interest rate risk.
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
Over 10 years
Total
2023
%
%
%
%
%
%
%
Average fixed interest rate
Hedging assets
1.16
2.46
1.19
3.30
1.77
3.12
2.04
Hedging liabilities
0.93
2.54
4.36
2.28
2.36
4.50
3.79
2022
Average fixed interest rate
Hedging assets
1.36
1.98
1.71
2.04
1.02
3.12
1.72
Hedging liabilities
1.27
0.95
2.75
1.03
2.68
4.55
1.63
\n
Average foreign exchange rates
\n
For cash flow hedging of exchange rate risk, the average foreign exchange rates applicable across the relationships were as below for the main currencies hedged.
\n\n \n
2023
2022
INR/GBP
105.03
100.54
USD/GBP
1.28
1.29
CHF/GBP
1.08
1.15
JPY/GBP
170.54
132.89
JPY/USD
129.75
128.29
NOK/USD
9.21
9.21
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Analysis of hedged items and related hedging instruments
\n
The table below analyses assets and liabilities subject to hedging derivatives.
\n\n \n
Changes in fair value
Carrying value of
Impact on hedged items
used as a basis to
hedged assets and liabilities
included in carrying value
determine ineffectiveness (1)
2023
\u00a3m
\u00a3m
\u00a3m
Fair value hedging - interest rate
(2)
Loans to banks and customers - amortised cost
5,663
(316)
167
Other financial assets - securities
22,896
174
636
Total
(3)
28,559
(142)
803
Bank and customer deposits
745
(3)
(6)
Other financial liabilities - debt securities in issue
36,305
(1,151)
(1,023)
Subordinated liabilities
5,346
(320)
(138)
Total
42,396
(1,474)
(1,167)
2022
Fair value hedging - interest rate
(2)
Loans to banks and customers - amortised cost
5,764
(526)
(1,236)
Other financial assets - securities
12,897
(922)
(2,525)
Total
(3)
18,661
(1,448)
(3,761)
Bank and customer deposits
565
(3)
3
Other financial liabilities - debt securities in issue
35,856
(2,222)
2,790
Subordinated liabilities
5,504
(547)
526
Total
41,925
(2,772)
3,319
\n
For the notes to this table refer to the following page.
Changes in fair value
Carrying value of
used as a basis to
hedged assets and liabilities
determine ineffectiveness (1)
2023
\u00a3m
\u00a3m
Cash flow hedging - interest rate
Loans to banks and customers - amortised cost
(4)
84,583
(2,796)
Other financial assets - securities
623
(22)
Total
85,206
(2,818)
Bank and customer deposits
54,675
1,610
Other financial liabilities - debt securities in issue
156
7
Total
54,831
1,617
Cash flow hedging - exchange rate
Loans to banks and customers - amortised cost
(4)
583
-
Other financial assets - securities
1,839
-
Total
2,422
-
Other financial liabilities - debt securities in issue
11,460
9
Subordinated liabilities
-
-
Other
201
3
Total
11,661
12
2022
Cash flow hedging - interest rate
Loans to banks and customers - amortised cost
(4)
93,212
5,263
Other financial assets - securities
1,176
73
Total
94,388
5,336
Bank and customer deposits
72,610
(2,008)
Other financial liabilities - debt securities in issue
571
(46)
Total
73,181
(2,054)
Cash flow hedging - exchange rate
Loans to banks and customer - amortised cost
(4)
-
-
Other financial assets - securities
-
-
Total
-
-
Other financial liabilities - debt securities in issue
4,141
(2)
Subordinated liabilities
-
-
Other
204
5
Total
4,345
3
\n
(1)
The change in fair value used for hedge ineffectiveness includes instruments that were derecognised in the year.
\n
(2)
The hedged risk includes inflation risk.
\n
(3)
Carrying values include \u00a357 million (2022 - \u00a361 million) adjustment for discontinued fair value hedges.
\n
(4)
Includes cash and balances at central banks.
Analysis of cash flow and foreign exchange hedge reserve
The following table shows an analysis of the pre-tax cash flow hedge reserve and foreign exchange hedge reserve.
\u00a0
2023
2022
\u00a0\u00a0
Foreign
\u00a0
Foreign
\u00a0
Cash flow
exchange
Cash flow
exchange
\u00a0
hedge reserve
hedge reserve
hedge reserve
hedge reserve
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing
\u00a0\u00a0\u00a0\u00a0
Interest rate risk
(2,330)
-
(3,576)
-
Foreign exchange risk
1
(18)
16
(85)
De-designated
\u00a0\u00a0\u00a0\u00a0
Interest rate risk
(304)
-
(297)
-
Foreign exchange risk
4
(771)
20
(880)
Total
(2,629)
(789)
(3,837)
(965)
\u00a0
2023
2022
\u00a0\u00a0
Foreign
\u00a0
Foreign
\u00a0
Cash flow
exchange
Cash flow
exchange
\u00a0
hedge reserve
hedge reserve
hedge reserve
hedge reserve
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Amount recognised in equity
\u00a0\u00a0\u00a0\u00a0
Interest rate risk
137
-
(2,997)
(64)
Foreign exchange risk
50
107
24
(202)
Total
187
107
(2,973)
(266)
Amount transferred from equity to earnings
\u00a0\u00a0\u00a0\u00a0
Interest rate risk to net interest income
1,112
-
(252)
-
Interest rate risk to non interest income
(1)
(10)
-
(21)
-
Interest rate risk to operating expenses
-
-
(14)
-
Foreign exchange risk to net interest income
(74)
-
(29)
-
Foreign exchange risk to non interest income
(9)
69
15
7
Foreign exchange risk to operating expenses
2
-
(3)
-
Total
1,021
69
(304)
7
\n
(1)
There was \u00a310 million (2022 - \u00a321 million) reclassified with the cash flow reserve to earnings due to forecasted cash flows that are no longer expected to occur.
15 Loan impairment provisions
There is a risk that customers and counterparties fail to meet their contractual obligation to settle outstanding amounts, known as expected credit losses (ECL). The
calculation of ECL considers historic, current and forward-looking information to determine the amount we do not expect to recover. ECL is recognised on current and
potential exposures, and contingent liabilities.
For accounting policy information refer to Accounting policy 2.3. Further disclosures on credit risk and information on ECL methodology are shown from page 186.
Loan exposure and impairment metrics
The table below summarises loans and credit impairment measures within the scope of IFRS 9 Expected credit losses
framework.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Loans - amortised cost and FVOCI
\u00a0 \u00a0
Stage 1
348,586
325,224
Stage 2
37,891
46,833
Stage 3
5,563
5,096
Of which: individual
1,031
1,121
Of which: collective
4,532
3,975
\u00a0
392,040
377,153
ECL provisions
(1)
\u00a0 \u00a0
- Stage 1
709
632
- Stage 2
976
1,043
- Stage 3
1,960
1,759
Of which: individual
332
287
Of which: collective
1,628
1,472
\u00a0
3,645
3,434
ECL provision coverage
(2)
\u00a0 \u00a0
- Stage 1 (%)
0.20
0.19
- Stage 2 (%)
2.58
2.23
- Stage 3 (%)
35.23
34.52
\u00a0
0.93
0.91
Continuing operations
\u00a0 \u00a0
Impairment (releases)/losses
\u00a0 \u00a0
ECL (release)/charge
(3,4)
578
337
Stage 1
(397)
(290)
Stage 2
645
393
Stage 3
330
234
Of which: individual
89
54
Of which: collective
241
180
Amounts written off
319
482
Of which: individual
42
168
Of which: collective
277
314
\n
(1)
Includes loans to customers and banks.
(2)
Includes \u00a39 million (2022 - \u00a33 million) related to assets classified as FVOCI and
\u00a30.1 billion (2022 - \u00a30.1 billion) related to off-balance sheet exposures.
(3)
ECL provisions coverage is calculated as ECL provisions divided by loans \u2013
amortised cost and FVOCI. It is calculated on loans and total ECL provisions,
including ECL for other (non-loan) assets and unutilised exposure. Some
segments with a high proportion of debt securities or unutilised exposure may
result in a not meaningful coverage ratio.
(4)
Includes a \u00a316 million release (2022 - \u00a33 million charge) related to other
financial assets, of which \u00a36 million charge (2022 - nil) related to assets
classified as FVOCI; and \u00a39 million release (2022 - \u00a35 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 Financial instruments within the scope of
the IFRS 9 ECL framework for further details. Other financial assets within the
scope of the IFRS 9 ECL framework were cash and balances at central banks
totalling \u00a3103.1 billion (2022 \u2013 \u00a3143.3 billion) and debt securities of \u00a350.1 billion
(2022 \u2013 \u00a329.9 billion).
Credit risk enhancement and mitigation
For information on Credit risk enhancement and mitigation held as security, refer to Risk and capital management \u2013 Credit risk enhancement and mitigation section.
Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2023, customer loan impairment provisions amounted to \u00a33,645 million (2022 - \u00a33,434
million). A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan was advanced. Such evidence includes, changes in
the credit rating of a borrower, the failure to make payments in accordance with the loan agreement, significant reduction in the value of any security, breach of limits or covenants,
and observable data about relevant macroeconomic measures.
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management\u2019s assessment of any potential deterioration in the creditworthiness of the
borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of
impairment losses. For further information and sensitivity analysis, refer to Risk and capital management \u2013 Measurement uncertainty and ECL sensitivity analysis section.
IFRS 9 ECL model design principles
Refer to Credit risk \u2013 IFRS 9 ECL model design principles section for further details.
Approach for multiple economic scenarios (MES)
The base scenario plays a greater part in the calculation of ECL than the approach to MES. Refer to Credit risk \u2013 Economic loss drivers - Probability weightings of scenarios section for
further details.
16 Other financial assets
Other financial assets consist of debt securities, equity shares and loans that are not held for trading. Balances consist of local and central government securities, a
component part of NatWest Group\u2019s liquidity portfolio.
For accounting policy information refer to Accounting policy 3.8.
\u00a0
Debt securities
\u00a0 \u00a0 \u00a0
\u00a0
Central and local government
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
\u00a0
UK
US
Other
Other debt
Total
Equity shares
Loans
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mandatory fair value through profit or loss
-
-
-
1
1
2
700
703
Designated at fair value
-
-
3
2
5
-
-
5
Fair value through other comprehensive income
(1)
6,441
5,517
5,738
10,627
28,323
311
65
28,699
Amortised cost
2,889
647
35
18,124
21,695
-
-
21,695
Total
9,330
6,164
5,776
28,754
50,024
313
765
51,102
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Mandatory fair value through profit or loss
-
-
-
2
2
3
782
787
Designated at fair value
-
-
-
-
-
-
-
-
Fair value through other comprehensive income
(1)
802
7,175
1,757
6,765
16,499
357
117
16,973
Amortised cost
2,562
937
54
9,582
13,135
-
-
13,135
Total
3,364
8,112
1,811
16,349
29,636
360
899
30,895
\n
(1)
Upon initial recognition, NatWest Group occasionally irrevocably
designates some of its equity investments as equity instruments at FVOCI when they meet the definition of equity under IAS 32 Financial instruments: presentation, are not held for trading or
they are held for strategic purposes. Such classification is determined on an instrument-by-instrument basis. Gains and losses on these equity instruments are not recycled to the income statement and dividends are recognised in profit or loss except when
they represent a recovery of part of the cost of the instrument, in which case such gains are recorded in OCI. Equity instruments at FVOCI are not subject to an impairment assessment.
There were no significant acquisitions of equity shares in the year. In 2022, NatWest Group acquired \u00a3146 million of equity shares in Permanent TSB p.l.c as part consideration on the
sale of certain assets and \u00a326 million of equity shares in Vodeno Limited.
NatWest Group disposed of equity shares in Permanent TSB p.l.c of \u00a347 million and UBS Equity Funds of \u00a335 million in the year. In 2022, NatWest Group disposed of equity shares in
Visa Inc. of \u00a399 million and UBS Equity Funds of \u00a369 million. There were no significant dividends on equity shares held at FVOCI in either year.19 Other financial liabilities
Other financial liabilities consist of customer deposits designated at fair value and debt securities in issue.
For accounting policy information refer to Accounting policies 3.8 and 3.10.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Customer deposits - designated as at fair value through profit or loss
1,280
1,050
Debt securities in issue
\u00a0 \u00a0
- MRELs
21,660
22,265
- Other medium term notes
17,843
16,419
- Commercial paper and certificates of deposit
11,321
5,672
- Covered bonds
2,122
2,842
- Securitisation
863
859
Total
55,089
49,107
\n20 Subordinated liabilities
Subordinated liabilities are debt securities that, in the event of winding up or bankruptcy, rank below other liabilities for interest payments and repayment.
For accounting policy information refer to Accounting policies 3.8 and 3.10.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Dated loan capital
5,573
5,968
Undated loan capital
22
173
Preference shares
119
119
\u00a0
5,714
6,260
\n
Certain preference shares issued by the company are classified as liabilities; these securities remain subject to the capital maintenance rules of the Companies Act 2006.
\u00a0\u00a0
First call
Maturity
Capital
2023
2022
Dated loan capital
\u00a0
date
date
treatment
\u00a3m
\u00a3m
NatWest Group plc
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
$2,250 million
5.125% notes
-
May-24
Tier 2
418
706
$2,000 million
6.000% notes
-
Dec-23
Tier 2
-
536
\u00a31,000 million
3.622% notes
May-25
Aug-30
Tier 2
985
964
\u00a31,000 million
2.105% notes
Aug-26
Nov-31
Tier 2
1,000
1,001
$1,000 million
6.100% notes
-
Jun-23
Tier 2
-
126
$850 million
3.032% notes
Aug-30
Nov-35
Tier 2
541
555
\u20ac750 million
1.043% notes
Jun-27
Sep-32
Tier 2
652
665
$750 million
3.754% notes
Nov-24
Nov-29
Tier 2
592
626
\u20ac700 million
5.763% notes
Nov-28
Feb-34
Tier 2
636
\u00a0
\u00a3650 million
7.416% notes
Mar-28
Jun-33
Tier 2
657
641
\u00a0\u00a0\u00a0\u00a0\u00a0
5,481
5,820
Other subsidiaries
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
\u20ac170 million
Floating rate notes
-
Feb-41
Not applicable
237
223
$150 million
7.125% notes
-
Oct-93
Not applicable
17
18
\u20ac145.6 million
Floating rate notes
-
Apr-23
Tier 2
-
122
$136 million
7.750% notes
-
May-23
Not applicable
-
83
\u00a0\u00a0\u00a0\u00a0\u00a0
5,735
6,266
Fair value hedging
\u00a0\u00a0\u00a0\u00a0
(162)
(298)
\u00a0\u00a0\u00a0\u00a0\u00a0
5,573
5,968
\u00a0\u00a0
First call
Maturity
Capital
2023
2022
Undated loan capital
\u00a0
date
date
treatment
\u00a3m
\u00a3m
Other subsidiaries
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
\u00a335 million
11.500%
notes
Dec-22
-
Not applicable
-
72
\u00a331 million
7.380% notes
-
-
Not applicable
1
2
\u20ac31 million
11.375% notes
-
-
Tier 2
-
48
\u00a316 million
5.630% notes
Sep-26
-
Not applicable
18
18
\u00a311 million
11.750% notes
-
-
Tier 2
-
25
\u00a34.9 million
2.500% fixed notes
-
-
Not applicable
3
6
\u00a31.1 million
SONIA + 2.827% notes
-
-
Tier 2
-
2
\u00a0\u00a0\u00a0\u00a0\u00a0
22
173
Preference shares
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
Other subsidiaries
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
\u00a3140 million
Non-cumulative preference shares of \u00a31
-
-
Not applicable
119
119
\u00a0\u00a0\u00a0\u00a0\u00a0
119
119
Total
\u00a0\u00a0\u00a0\u00a0
5,714
6,260
\n
(1)
Notes redeemed before call date as tax and regulatory benefits discontinued.24 Asset transfers
This note provides an overview of assets that have been transferred but where
the NatWest Group retains substantially all the risks and rewards of the
transferred assets and therefore continues to recognize them on
its
balance
sheet.
Transfers that do not qualify for derecognition
NatWest Group enters into securities repurchase, lending and total return transactions in
accordance with normal market practice which includes the provision of additional
collateral if necessary. Under standard terms in the UK and US markets, the recipient
has an unrestricted right to sell or repledge collateral, subject to returning equivalent
securities on settlement of the transaction.
Securities sold under repurchase transactions and transactions with the substance of
securities repurchase agreements are not derecognised if NatWest Group retains
substantially all the risks and rewards of ownership. The fair value (and carrying value) of
securities transferred under such transactions included on the balance sheet, are set out
below. All of these securities could be sold or repledged by the holder.
\u00a0
2023
2022
The following assets have failed derecognition
(1)
\u00a3m
\u00a3m
Trading assets
7,907
6,668
Loans to bank - amortised cost
10
16
Loans to customers - amortised cost
281
398
Other financial assets
8,764
2,901
Total
16,962
9,983
(1)
Associated liabilities were \u00a316,522 million (2022 \u2013 \u00a39,501 million).
Assets pledged as collateral
NatWest Group pledges collateral with its counterparties in respect of derivative liabilities,
bank and stock borrowings and other transactions.
\u00a0
2023
2022
Assets pledged against liabilities
\u00a3m
\u00a3m
Trading assets
10,976
15,062
Loans to banks - amortised cost
63
66
Loans to customers - amortised cost
21,611
17,493
Other financial assets
(1)
6,506
3,351
Total
39,156
35,972
(1)
Includes assets pledged for pension derivatives and \u00a3482 million of debt securities under the continuing control of NWB
Plc. This follows the agreement between NWB Plc and the Group Pension Fund to establish a bankruptcy remote
reservoir trust to hold these assets. Refer to Note 5 for additional information.
As part of the covered debt programme \u00a311,067 million of loans to customers and other
debt instruments (2022 \u2013 \u00a38,156 million) have been transferred to bankruptcy remote
limited liability partnerships within the NatWest Group to provide collateral for issues of
debt securities and other borrowing by the NatWest Group of \u00a33,619 million (2022 \u2013
\u00a34,132 million). Refer to Note 23.Amounts included in the NatWest Group financial statements, in aggregate, by category
of related party are as follows:
\u00a0
Associates and Joint
Equity
\u00a0
\u00a0
Ventures
Shares (1)
Total
31 December 2023
\u00a3m
\u00a3m
\u00a3m
Investments
668
145
813
Loans to customers - amortised cost
-
13
13
Customer deposits
2
10
12
Settlement balances
-
-
-
Other comprehensive income
-
(8)
(8)
Other operating income
(11)
-
(11)
31 December 2022
\u00a0\u00a0\u00a0
Investments
688
149
837
Loans to customers - amortised cost
-
-
-
Customer deposits
1
4
5
Settlement balances
-
34
34
Other comprehensive income
-
11
11
Other operating income
(30)
-
(30)
\n
(1)
Represents investments in entities where ownership is more than 10%", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f31134": { "value": "Credit risk \n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
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Page
Introduction
\u00a0
Definition, sources of risk and key developments in 2023
181
Governance and risk appetite
182
Identification and measurement
182
Mitigation
182
Assessment and monitoring
183
Problem debt management
184
Forbearance
185
Credit grading models
186
Impairment, provisioning and write-offs
186
Governance and post model adjustments
187
Significant increase in credit risk
189
Asset lifetimes
189
Economic loss drivers
190
Measurement uncertainty and ECL sensitivity analysis
196
Measurement uncertainty and ECL adequacy
199
Movement in ECL provision
199
Credit risk \u2013 Banking activities
\u00a0
Financial instruments within the scope of the IFRS 9 ECL framework
200
Segment analysis \u2013 portfolio summary
201
Segmental loans and impairment metrics
204
Sector analysis \u2013 portfolio summary
207
Wholesale forbearance
213
Credit risk enhancement and mitigation
215
Personal portfolio
216
Commercial real estate
221
Flow statements
222
Stage 2 decomposition \u2013 arrears status and contributing factors
230
Stage 2 decomposition \u2013 by a significant increase in credit risk trigger
232
Stage 3 vintage analysis
234
Asset quality
235
Credit risk \u2013 Trading activities
\u00a0
Securities financing transactions and collateral
239
Derivatives
240
Debt securities
241
Cross border exposure
242
\n
Definition (audited)
Credit risk is the risk that customers, counterparties or issuers fail to meet a contractual
obligation to settle outstanding amounts.
Sources of risk
(audited)
The principal sources of credit risk for NatWest Group are lending, off-balance sheet
products, derivatives and securities financing, and debt securities. NatWest Group is also
exposed to settlement risk through foreign exchange, trade finance and payments
activities.
Key developments in 2023
\ue001
Personal lending grew as a result of strong demand across both mortgages and
unsecured lending, although mortgage demand reduced during the second half of the
year in line with trends in the UK mortgage market. Adjustments were made to
affordability assumptions and stress rates to ensure that lending continued to be
assessed appropriately, given the high interest rate and inflationary environment.
Support for customers was proactively promoted during the year and the number of
customers requesting support (primarily forbearance) increased gradually. Although
there was an increase in arrears during the year, this was partly driven by overall
growth in Retail Banking portfolios in recent years, as well as adjustments to lending
criteria following COVID-19. Indicators of difficulty to pay remain at or below levels
observed before COVID-19.
\ue001
Wholesale lending increased during the year, driven by financial institutions sectors.
Sector appetite continues to be reviewed regularly, with particular focus on sector
clusters and sub-sectors that are deemed to represent a heightened risk, including
due to cost of living, supply chain and inflationary pressures.
\ue001
Overall expected credit loss (ECL) increased during 2023 reflecting portfolio growth
alongside broadly stable portfolio performance. There were Stage 3 default flow
increases, particularly in the Personal portfolio, but these were broadly in line with
expectations due to growth and normalisation of risk parameters. This was mitigated
by a net ECL reduction from 2023 updates to economic scenarios and
weightings.
ECL post model adjustments increased during the year reflecting
continued economic uncertainty from inflation, higher interest rates and liquidity
concerns.
\ue001
NatWest Group continued to align its financial planning process with the climate
transition planning process. This included adding climate policy and technology-
related transition assumptions into NatWest Group\u2019s base case macroeconomic
scenario used for financial planning and assessment of ECL in this IFRS 9 reporting
period. This resulted in an increase in ECL of \u00a36 million.
\ue001
Several models were redeveloped in 2023, most notably IFRS 9 probability of default
(PD) and loss given default (LGD) models for business loans and stress testing models
for Personal mortgages, financial institutions and non-UK corporates economic
response models for Wholesale lending.
\n
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Governance
(audited)
The credit risk function provides oversight and challenge of frontline credit risk
management activities. Governance activities include:
\ue001
Defining and proposing credit risk appetite measures for Board approval.
\ue001
Establishing credit risk policy, standards and toolkits which set out the mandatory
limits and parameters required to ensure that credit risk is managed within risk
appetite and which provide the minimum standards for the identification, assessment,
management, monitoring and reporting of credit risk.
\ue001
Oversight of the first line of defence to ensure that credit risk remains within the
appetite set by the Board and that it is being managed adequately and effectively.
\ue001
Assessing the adequacy of ECL provisions including approving key IFRS 9 inputs
(such as significant increase in credit risk (SICR) thresholds) and any necessary in-
model and post model adjustments through NatWest Group and business unit
provisions and model committees.
\ue001
Development and approval of credit grading models.
\ue001
Providing regular reporting on credit risk to the Board Risk Committee and Board.
Risk appetite
Credit risk appetite is approved by the Board and is set and monitored through risk
appetite frameworks tailored to NatWest Group\u2019s Personal and Wholesale segments. Risk
appetite statements and associated measures are reviewed at least annually by the
Board on the Board Risk Committee\u2019s recommendation to ensure they remain
appropriate and aligned to strategy.
Personal
The Personal credit risk appetite framework sets limits that control the quality and
concentration of both existing and new business for each relevant business segment.
These risk appetite measures consider the segments\u2019 ability to grow sustainably and the
level of losses expected under stress. Credit risk is further controlled through operational
limits specific to customer or product characteristics.
Wholesale
For Wholesale credit, the framework has been designed to reflect factors that influence
the ability to operate within risk appetite. Tools such as stress testing and economic
capital are used to measure credit risk volatility and develop links between the
framework and risk appetite limits.
Operational limits are used to manage concentrations of risk which may arise across four
lenses \u2013 single name, sector, country and product and asset classes. The framework is
supported by a suite of transactional acceptance standards that set out the risk
parameters within which businesses should operate.
Identification and measurement
Credit stewardship
(audited)
Risks are identified through relationship management and credit stewardship of
customers and portfolios. Credit stewardship takes place throughout the customer
relationship, beginning with the initial approval. It includes the application of credit
assessment standards, credit risk mitigation and collateral, ensuring that credit
documentation is complete and appropriate, carrying out regular portfolio or customer
reviews and problem debt identification and management.
Asset quality (audited)
All credit grades map to an asset quality (AQ) scale, used for financial reporting. This AQ
scale is based on Basel PDs. Performing loans are defined as AQ1-AQ9 (where the PD is
less than 100%) and defaulted non-performing loans as AQ10 or Stage 3 under IFRS 9
(where the PD is 100%). Loans are defined as defaulted when the payment status
becomes 90 days past due, or earlier if there is clear evidence that the borrower is
unlikely to repay, for example bankruptcy or insolvency.
Counterparty credit risk
Counterparty credit risk arises from the obligations of customers under derivative and
securities financing transactions. NatWest Group mitigates counterparty credit risk
through collateralisation and netting agreements, which allow amounts owed by NatWest
Group to a counterparty to be netted against amounts the counterparty owes NatWest
Group.
Mitigation
Mitigation techniques, as set out in the appropriate credit risk toolkits and transactional
acceptance standards, are used in the management of credit portfolios across NatWest
Group. These techniques mitigate credit concentrations in relation to an individual
customer, a borrower group or a collection of related borrowers. Where possible,
customer credit balances are netted against obligations. Mitigation tools can include
structuring a security interest in a physical or financial asset, the use of credit derivatives
including credit default swaps, credit-linked debt instruments and securitisation
structures, and the use of guarantees and similar instruments (for example, credit
insurance) from related and third parties.
Property is used to mitigate credit risk across a number of portfolios, in particular
residential mortgage lending and commercial real estate (CRE).
The valuation methodologies for collateral in the form of residential mortgage property
and CRE are detailed below.
\n
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\n
Residential mortgages
\u2013
NatWest Group takes collateral in the form of residential
\n
property to mitigate the credit risk arising from mortgages. NatWest Group values
\n
residential property individually during the loan underwriting process, either by obtaining
\n
an appraisal by a suitably qualified appraiser (for example, Royal Institution of Chartered
\n
Surveyors (RICS)) or using a statistically valid model.
In both cases, a sample of the
\n
valuation outputs are periodically reviewed by an independent RICS qualified appraiser.
\n
NatWest Group updates Retail Banking UK residential property values quarterly using
\n
country (Scotland, Wales and Northern Ireland) or English regional specific Office for
\n
National Statistics House Price indices.
\n
Within the Private Banking and RBSI segments, properties securing loans greater than
\n
\u00a32.5 million or \u20ac3 million are revalued every three years.
\n
The current indexed value of the property is a component of the ECL provisioning
\n
calculation.
\n
Commercial real estate valuations
\u2013
NatWest Group has an actively managed panel of
\n
chartered surveying firms that cover the spectrum of geography and property sectors in
\n
which NatWest Group takes collateral. Suitable RICS registered valuers for particular
\n
assets are contracted through a service agreement to ensure consistency of quality and
\n
advice. In the UK, an independent third-party market indexation is applied to update
\n
external valuations for commercial property once they are more than a year old. For
\n
loan obligations in excess of \u00a32.5 million and where the charged property has a book
\n
value in excess of \u00a30.5 million, a formal valuation review is commissioned at least every
\n
three years.
\n
Assessment and monitoring
\n
Practices for credit stewardship \u2013 including credit assessment, approval and monitoring
\n
as well as the identification and management of problem debts \u2013 differ between the
\n
Personal and Wholesale portfolios.
\n
Personal
\n
Personal customers are served through a lending approach that entails offering a large
\n
number of small-value loans. To ensure that these lending decisions are made
\n
consistently, NatWest Group analyses internal credit information as well as external data
\n
supplied by credit reference agencies (including historical debt servicing behaviour of
\n
customers with respect to both NatWest Group and other lenders). NatWest Group then
\n
sets its lending rules accordingly, developing different rules for different products.
\n
The process is then largely automated, with each customer receiving an individual credit
\n
score that reflects both internal and external behaviours and this score is compared with
\n
the lending rules set. For relatively high-value, complex personal loans, including some
\n
residential mortgage lending, specialist credit managers make the final lending decisions.
\n
These decisions are made within specified delegated authority limits that are issued
\n
dependent on the experience of the individual.
\n
Underwriting standards and portfolio performance are monitored on an ongoing basis to
\n
ensure they remain adequate in the current market environment and are not weakened
\n
materially to sustain growth.
\n
The actual performance of each portfolio is tracked relative to operational limits. The
\n
limits apply to a range of credit risk-related measures including projected credit default
\n
rates across products and the loan-to-value (LTV) ratio of the mortgage portfolios.
\n
Where operational limits identify areas of concern management action is taken to adjust
\n
credit or business strategy.
\n
Wholesale
\n
Wholesale customers, including corporates, banks and other financial institutions are
\n
managed on an individual basis. Customers are aggregated as a single risk when
\n
sufficiently interconnected to the extent that a failure of one could lead to the failure of
\n
another.
\n
A credit assessment is carried out before credit facilities are made available to
\n
customers. The assessment process is dependent on the complexity of the transaction.
\n
Credit approvals are subject to environmental, social and governance risk policies which
\n
restrict exposure to certain highly carbon intensive industries as well as those with
\n
potentially heightened reputational impacts. Customer specific climate risk commentary
\n
is now mandatory.
\n
For lower risk transactions below specific thresholds, credit decisions can be approved
\n
through a combination of fully automated or relationship manager self-sanctioning within
\n
the business. This process is facilitated through an auto-decision making system, which
\n
utilises scorecards, strategies and policy rules.
\n
For all other transactions, credit is only granted to customers following joint approval by
\n
an approver from the business and the credit risk function or by two credit officers. The
\n
joint business and credit approvers act within a delegated approval authority under the
\n
Wholesale Credit Authorities framework policy. The level of delegated authority held by
\n
approvers is dependent on their experience and expertise with only a small number of
\n
senior executives holding the highest approval authority.
\n
Transactional acceptance standards provide detailed transactional lending and risk
\n
acceptance metrics and structuring guidance. As such, these standards provide a
\n
mechanism to manage risk appetite at the customer/transaction level and are
\n
supplementary to the established credit risk appetite.
\n
Credit quality through PD credit grades or performance against a combination of risk
\n
triggers in business banking, and LGD are reviewed and if appropriate reapproved
\n
annually. The review process assesses borrower performance, including reconfirmation
\n
or adjustment of risk parameter estimates; the adequacy of security; compliance with
\n
terms and conditions; and refinancing risk.
\n
\n
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\n
\n
\n
\n
\n
\n
\n
\n
Problem debt management
\n
Personal
\n
Early problem identification
\n
Pre-emptive triggers are in place to help identify customers that may be at risk of being
\n
in financial difficulty. These triggers are both internal, using NatWest Group data, and
\n
external using information from credit reference agencies. Proactive contact is then
\n
made with the customer to establish if they require help with managing their finances. By
\n
adopting this approach, the aim is to prevent a customer\u2019s financial position
\n
deteriorating.
\n
Personal customers experiencing financial difficulty are managed by the Collections
\n
team. If the Collections team is unable to provide appropriate support after discussing
\n
suitable options with the customer, management of that customer moves to the
\n
Recoveries team.
If at any point in the collections and recoveries process, the customer is
\n
identified as being potentially vulnerable, the customer will be separated from the regular
\n
process and supported by a specialist team to ensure the customer receives appropriate
\n
support for their circumstances.
\n
In July 2023, Mortgage Charter support was introduced for residential mortgage
\n
customers. Mortgage Charter support includes temporary interest only or term
\n
extensions at the customer\u2019s request. A request for Mortgage Charter does not, of itself
\n
trigger transfer to a specialist team.
\n
Collections
\n
When a customer exceeds an agreed limit or misses a regular monthly payment the
\n
customer is contacted by NatWest Group and requested to remedy the position. If the
\n
situation is not resolved then, where appropriate, the Collections team will become more
\n
involved and the customer will be supported by skilled debt management staff who
\n
endeavour to provide customers with bespoke solutions. Solutions include short-term
\n
account restructuring, refinance loans and forbearance which can include interest
\n
suspension and \u2018breathing space\u2019. All treatments available to customers experiencing
\n
financial difficulties are reviewed to ensure they remain appropriate for customers
\n
impacted by current economic conditions.
\n
In the event that an affordable and sustainable agreement with a customer cannot be
\n
reached, the debt will transition to the Recoveries team.
\n
For provisioning purposes, under IFRS 9, exposure to customers managed by the
\n
Collections team is categorised as Stage 2 and subject to a lifetime loss assessment,
\n
unless it is 90 days past due or has triggered any other unlikeliness to pay indicators, in
\n
which case it is categorised as Stage 3.
\n
R
R
ecoveries
\n
The Recoveries team will issue a notice of intention to default to the customer and, if
\n
appropriate, a formal demand, while also registering the account with credit reference
\n
agencies where appropriate. Following this, the customer\u2019s debt may then be placed
\n
with a third-party debt collection agency, or alternatively a solicitor, in order to agree an
\n
affordable repayment plan with the customer. An option that may also be considered, is
\n
the sale of unsecured debt. Exposures subject to formal debt recovery are defaulted and,
\n
under IFRS 9, categorised as Stage 3.
\n
Wholesale
\n
Early problem identification
\n
Each segment and sector have defined early warning indicators to identify customers
\n
experiencing financial difficulty, and to increase monitoring if needed. Early warning
\n
indicators may be internal, such as a customer\u2019s bank account activity, or external, such
\n
as a publicly-listed customer\u2019s share price. If early warning indicators show a customer is
\n
experiencing potential or actual difficulty, or if relationship managers or credit officers
\n
identify other signs of financial difficulty, they may decide to classify the customer within
\n
the Risk of Credit Loss framework.
\n
There is an equivalent process for Business Banking customers, with problem debt cases
\n
reallocated to increased monitoring and support under a Portfolio Management
\n
Relationship team or the Financial Health and Support Team. Broader macro-economic
\n
trends including commodity prices, foreign exchange rates and consumer and
\n
government spend are also tracked, helping inform decisions on sector risk appetite.
\n
Customer level early warning indicators are regularly reviewed to ensure alignment with
\n
prevailing economic conditions, ensuring both the volume and focus of alerts is aligned to
\n
the point-in-time risk within each sector.
\n
The aligned Risk of Credit Loss and Viability framework
\n
This framework focuses on all Wholesale customers to provide early identification of
\n
credit deterioration, support intelligent risk-taking, ensure fair and consistent customer
\n
outcomes and provide key insights into Wholesale lending portfolios. Expert judgment is
\n
applied by experienced credit risk officers to classify cases into categories that reflect
\n
progressively deteriorating credit risk to NatWest Group. There are two classifications in
\n
the framework that apply to non-defaulted customers who are in financial stress \u2013
\n
Heightened Monitoring and Risk of Credit Loss. For the purposes of provisioning, all
\n
exposures categorised as Heightened Monitoring or Risk of Credit Loss are categorised
\n
as Stage 2 and subject to a lifetime loss assessment. The framework also applies to
\n
those customers that have met NatWest Group\u2019s default criteria (AQ10 exposures).
\n
Defaulted exposures are categorised as Stage 3 impaired for provisioning purposes.
\n
Heightened Monitoring customers are performing customers that have met certain
\n
characteristics, which have led to significant credit deterioration. Collectively,
\n
characteristics reflect circumstances that may affect the customer\u2019s ability to meet
\n
repayment obligations. Characteristics include trading issues, covenant breaches,
\n
material PD downgrades and past due facilities.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Heightened Monitoring customers require pre-emptive actions (outside the customer\u2019s
\n
normal trading patterns) to return or maintain their facilities within NatWest Group\u2019s
\n
current risk appetite.
\n
Risk of Credit Loss customers are performing customers that have met the criteria for
\n
Heightened Monitoring and also pose a risk of credit loss to NatWest Group in the next
\n
12 months should mitigating action not be taken or not be successful.
\n
Once classified as either Heightened Monitoring or Risk of Credit Loss, a number of
\n
mandatory actions are taken in accordance with policies. Actions include a review of the
\n
customer\u2019s credit grade, facility and security documentation and the valuation of
\n
security. Depending on the severity of the financial difficulty and the size of the exposure,
\n
the customer relationship strategy is reassessed by credit officers, by specialist credit risk
\n
or relationship management units in the relevant business, or by Restructuring.
\n
Agreed customer management strategies are regularly monitored by both the business
\n
and credit teams. The largest Risk of Credit Loss exposures are regularly reviewed by a
\n
Risk of Credit Loss forum. The forum members are experienced credit, business and
\n
restructuring specialists. The purpose of the forum is to review and challenge the
\n
strategies undertaken for customers that pose the largest risk of credit loss to NatWest
\n
Group.
\n
Appropriate corrective action is taken when circumstances emerge that may affect the
\n
customer\u2019s ability to service its debt. Corrective actions may include granting a customer
\n
various types of concessions. Any decision to approve a concession will be a function of
\n
specific appetite, the credit quality of the customer, the market environment and the loan
\n
structure and security. All customers granted forbearance are classified Heightened
\n
Monitoring as a minimum.
\n
Other potential outcomes of the relationship review are to: return the customer to a
\n
satisfactory status, offer additional lending and continue monitoring, transfer the
\n
relationship to Restructuring if appropriate, or exit the relationship.
\n
The aligned Risk of Credit Loss and Viability framework does not apply to problem debt
\n
management for business banking customers. These customers are, where necessary,
\n
managed by specialist problem debt management teams, depending on the size of
\n
exposure or by the business banking recoveries team where a loan has been impaired.
\n
Restructuring
\n
Where customers are categorised as Risk of Credit Loss and the lending exposure is
\n
above \u00a31 million, relationships are supported by the Restructuring team. The objective of
\n
Restructuring is to protect NatWest Group\u2019s capital. Restructuring does this by working
\n
with corporate and commercial customers in financial difficulty to help them understand
\n
their options and how their restructuring or repayment strategies can be delivered.
\n
Helping viable customers return to financial health and restoring a normal banking
\n
relationship is always the preferred outcome; however, where this is not possible,
\n
NatWest Group will work with customers to achieve a solvent outcome.
\n
Throughout this period, the mainstream relationship manager will remain an integral part
\n
of the customer relationship. Insolvency is considered as a last resort and if deemed
\n
necessary, NatWest Group will work to recover its capital in a fair and efficient manner,
\n
while upholding the fair treatment of customers and NatWest Group\u2019s core values.
\n
Forbearance
(audited)
\n
Forbearance takes place when a concession is made on the contractual terms of a
\n
loan/debt in response to a customer\u2019s financial difficulties.
\n
The aim of forbearance is to support and restore the customer to financial health while
\n
minimising risk. To ensure that forbearance is appropriate for the needs of the customer,
\n
minimum standards are applied when assessing, recording, monitoring and reporting
\n
forbearance.
\n
A credit exposure may be forborne more than once, generally where a temporary
\n
concession has been granted and circumstances warrant another temporary or
\n
permanent revision of the loan\u2019s terms.
\n
Loans are reported as forborne until they meet the exit criteria as detailed in the
\n
appropriate regulatory guidance. These include being classified as performing for two
\n
years since the last forbearance event, making regular repayments and the loan/debt
\n
being less than 30 days past due.
\n
Types of forbearance
\n
Personal
\n
In the Personal portfolio, forbearance may involve payment concessions, loan
\n
rescheduling (including extensions in contractual maturity) and capitalisation of arrears.
\n
Forbearance support is provided for both mortgages and unsecured lending.
\n
Wholesale
\n
In the Wholesale portfolio, forbearance may involve covenant waivers, amendments to
\n
margins, payment concessions and loan rescheduling (including extensions in contractual
\n
maturity), capitalisation of arrears, and debt forgiveness or debt-for-equity swaps.
\n
Monitoring of forbearance
\n
Personal
\n
For Personal portfolios, forborne loans are separated and regularly monitored and
\n
reported while the forbearance strategy is implemented, until they exit forbearance.
\n
Wholesale
\n
In the Wholesale portfolio, customer PDs and facility LGDs are reassessed prior to
\n
finalising any forbearance arrangement. The ultimate outcome of a forbearance strategy
\n
is highly dependent on the co-operation of the borrower and a viable business or
\n
repayment outcome. Where forbearance is no longer appropriate, NatWest Group will
\n
consider other options such as the enforcement of security, insolvency proceedings or
\n
both, although these are options of last resort.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Provisioning for forbearance (audited)
\n
Personal
\n
The methodology used for provisioning in respect of Personal forborne loans will differ
\n
depending on whether the loans are performing or non-performing and which business is
\n
managing them due to local market conditions.
\n
Granting forbearance will only change the arrears status of the loan in specific
\n
circumstances, which can include capitalisation of principal and interest in arrears, where
\n
the loan may be returned to the performing book if the customer has demonstrated an
\n
ability to meet regular payments and is likely to continue to do so.
\n
The loan would continue to be reported as forborne until it meets the exit criteria set out
\n
by the appropriate regulatory guidance.
\n
For ECL provisioning, all forborne but performing exposures are categorised as Stage 2
\n
and are subject to a lifetime loss provisioning assessment. Where the forbearance
\n
treatment includes the cessation of interest on the customer balance (i.e. non-accrual),
\n
this will be treated as a Stage 3 default.
\n
For non-performing forborne loans, the Stage 3 loss assessment process is the same as
\n
for non-forborne loans.
\n
Wholesale
\n
Provisions for forborne loans are assessed in accordance with normal provisioning
\n
policies. The customer\u2019s financial position and prospects \u2013 as well as the likely effect of
\n
the forbearance, including any concessions granted, and revised PD or LGD gradings \u2013
\n
are considered in order to establish whether an impairment provision increase is
\n
required.
\n
Wholesale loans granted forbearance are individually credit assessed in most cases.
\n
Performing loans subject to forbearance treatment are categorised as Stage 2 and
\n
subject to a lifetime loss assessment.
\n
Forbearance may result in the value of the outstanding debt exceeding the present value
\n
of the estimated future cash flows. This difference will lead to a customer being classified
\n
as non-performing.
\n
In the case of non-performing forborne loans, an individual loan impairment provision
\n
assessment generally takes place prior to forbearance being granted. The amount of the
\n
loan impairment provision may change once the terms of the forbearance are known,
\n
resulting in an additional provision charge or a release of the provision in the period the
\n
forbearance is granted.
\n
The transfer of Wholesale loans from impaired to performing status follows assessment
\n
by relationship managers and credit. When no further losses are anticipated and the
\n
customer is expected to meet the loan\u2019s revised terms, any provision is written-off or
\n
released and the balance of the loan can be returned to performing status once the exit
\n
criteria, as set out by regulatory guidance, are met. Refer to pages 213 and 216 for
\n
further details on Wholesale and Personal forbearance.
\n
Credit grading models
\n
Credit grading models is the collective term used to describe all models, frameworks and
\n
methodologies used to calculate PD, exposure at default (EAD), LGD, maturity and the
\n
production of credit grades.
\n
Credit grading models are designed to provide:
\n
\ue001
An assessment of customer and transaction characteristics.
\n
\ue001
A meaningful differentiation of credit risk.
\n
\ue001
Accurate internal default rate, loss and exposure estimates that are used in the
\n
capital calculation or wider risk management purposes.
\n
Impairment, provisioning and write-offs (audited)
\n
In the overall assessment of credit risk, impairment provisioning and write-offs are used
\n
as key indicators of credit quality.
\n
NatWest Group\u2019s IFRS 9 provisioning models, which use existing IRB models as a starting
\n
point, incorporate term structures and forward-looking information. Regulatory
\n
conservatism within the IRB models has been removed as appropriate to comply with the
\n
IFRS 9 requirement for unbiased ECL estimates.
\n
Five key areas may materially influence the measurement of credit impairment under
\n
IFRS 9 \u2013 two of these relate to model build and three relate to model application:
\n
Model build:
\n
\ue001
The determination of economic indicators that have most influence on credit loss for
\n
each portfolio and the severity of impact (this leverages existing stress testing models
\n
which are reviewed annually).
\n
\ue001
The build of term structures to extend the determination of the risk of loss beyond 12
\n
months that will influence the impact of lifetime loss for exposures in Stage 2.
\n
Model application:
\n
\ue001
The assessment of the SICR and the formation of a framework capable of consistent
\n
application.
\n
\ue001
The determination of asset lifetimes that reflect behavioural characteristics while also
\n
representing management actions and processes (using historical data and
\n
experience).
\n
\ue001
The choice of forward-looking economic scenarios and their respective probability
\n
weights.
\n
For accounting policy information refer to Accounting policy 2.3
\n
IFRS 9 ECL model design principles (audited)
\n
Modelling of ECL for IFRS 9 follows the conventional approach to divide the estimation of
\n
credit losses into its component parts of PD, LGD and EAD.
\n
To meet IFRS 9 requirements, the PD, LGD and EAD parameters differ from their Pillar 1
\n
internal ratings based (IRB) counterparts in the following aspects:
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\ue001
Unbiased \u2013
material regulatory conservatism has been removed from IFRS 9
\n
parameters to produce unbiased estimates.
\n
\ue001
Point-in-time
\u2013 IFRS 9 parameters reflect actual economic conditions at the reporting
\n
date instead of long-run average or downturn conditions.
\n
\ue001
Economic forecasts
\u2013 IFRS 9 PD estimates and, where appropriate, EAD and LGD
\n
estimates reflect forward-looking economic conditions.
\n
\ue001
Lifetime measurement
\u2013 IFRS 9 PD, LGD and EAD are provided as multi-period term
\n
structures up to exposure lifetimes instead of over a fixed one-year horizon.
\n
IFRS 9 requires that at each reporting date, an entity shall assess whether the credit risk
\n
on an account has increased significantly since initial recognition. Part of this assessment
\n
requires a comparison to be made between the current lifetime PD (i.e. the PD over the
\n
remaining lifetime at the reporting date) and the equivalent lifetime PD as determined at
\n
the date of initial recognition.
\n
For assets originated before IFRS 9 was introduced, comparable lifetime origination PDs
\n
did not exist. These have been retrospectively created using the relevant model inputs
\n
applicable at initial recognition.
\n
PD estimates
\n
Personal models
\n
Personal PD models follow a discrete multi-horizon survival approach, predicting
\n
quarterly PDs up to lifetime at account level, with a key driver being scores from related
\n
IRB PD models. Forward-looking economic information is brought in by economic
\n
response models, which leverage the existing stress test model suite. The current suite of
\n
PD models was introduced in 2022 replacing the previous, first-generation models to
\n
remediate a range of model weaknesses.
\n
Wholesale models
\n
Wholesale PD models use a point-in-time/through-the-cycle framework to convert one-
\n
year regulatory PDs into point-in-time estimates that reflect economic conditions at the
\n
reporting date. The framework utilises credit cycle indices (CCIs) for a comprehensive set
\n
of region/industry segments. Further detail on CCIs is provided in the Economic loss
\n
drivers section.
\n
One year point-in-time PDs are extended to forward-looking lifetime PDs using a
\n
conditional transition matrix approach and a set of econometric forecasting models.
\n
LGD estimates
\n
The general approach for the IFRS 9 LGD models is to leverage corresponding IRB LGD
\n
models with bespoke adjustments to ensure estimates are unbiased and, where relevant,
\n
forward-looking.
\n
Personal
\n
Forward-looking information has only been incorporated for the secured portfolios,
\n
where changes in property prices can be readily accommodated. Analysis has shown
\n
minimal impact of economic conditions on LGDs for the other Personal portfolios.
\n
W
W
holesale
\n
Forward-looking economic information is incorporated into LGD estimates using the
\n
existing point-in-time/through-the-cycle framework. For low default portfolios, including
\n
sovereigns and banks, loss data is too scarce to substantiate estimates that vary with
\n
economic conditions. Consequently, for these portfolios, LGD estimates are assumed to
\n
be constant throughout the projection horizon.
\n
EAD estimates
\n
Personal
\n
The IFRS 9 Personal modelling approach for EAD is dependent on product type.
\n
\ue001
Revolving products use the existing IRB models as a basis, with appropriate
\n
adjustments incorporating a term structure based on time to default.
\n
\ue001
Amortising products use an amortising schedule, where a formula is used to calculate
\n
the expected balance based on remaining terms and interest rates.
\n
Analysis has indicated that there is minimal impact on EAD arising from changes in the
\n
economy for all Personal portfolios except mortgages. Therefore, forward-looking
\n
information is only incorporated in the mortgage EAD model (through forecast changes
\n
in interest rates).
\n
Wholesale
\n
For Wholesale, EAD values are projected using product specific credit conversion factors
\n
(CCFs), closely following the product segmentation and approach of the respective IRB
\n
model. However, the CCFs are estimated over multi-year time horizons and contain no
\n
regulatory conservatism or downturn assumptions.
\n
No explicit forward-looking information is incorporated, on the basis of analysis showing
\n
the temporal variation in CCFs is mainly attributable to changes in exposure
\n
management practices rather than economic conditions.
\n
Governance and post model adjustments
(audited)
\n
The IFRS 9 PD, EAD and LGD models are subject to NatWest Group\u2019s model risk policy
\n
that stipulates periodic model monitoring, periodic re-validation and defines approval
\n
procedures and authorities according to model materiality. Various post model
\n
adjustments were applied where management judged they were necessary to ensure an
\n
adequate level of overall ECL provision. All post model adjustments were subject to
\n
review, challenge and approval through model or provisioning committees.
\n
Post model adjustments will remain a key focus area of NatWest Group\u2019s ongoing ECL
\n
adequacy assessment process. A holistic framework has been established including
\n
reviewing a range of economic data, external benchmark information and portfolio
\n
performance trends with a particular focus on segments of the portfolio (both
\n
commercial and consumer) that are likely to be more susceptible to high inflation, high
\n
interest rates and supply chain disruption.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
ECL post model adjustments
\n
The table below shows ECL post model adjustments.
\n\n \n
Retail Banking
Commercial
Central items
Mortgages
Other
Private Banking
& Institutional
& other (1)
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Deferred model calibrations
-
-
1
23
-
24
Economic uncertainty
118
39
13
256
3
429
Other adjustments
1
-
-
8
23
32
Total
119
39
14
287
26
485
Of which:
- Stage 1
75
14
6
115
10
220
- Stage 2
31
25
8
167
9
240
- Stage 3
13
-
-
5
7
25
2022
Economic uncertainty
102
51
6
191
2
352
Other adjustments
8
20
-
16
15
59
Total
110
71
6
207
17
411
Of which:
- Stage 1
62
27
3
63
-
155
- Stage 2
32
44
3
139
16
234
- Stage 3
16
-
-
5
1
22
\n
.
\n
Post model adjustments increased since 31 December 2022, with notable shifts in all
\n
categories. This reflected:
\n
\ue001
The addition of deferred model calibration post model adjustments to account for
\n
elevated refinance risks on deteriorated exposures largely due to pressures from
\n
inflation and liquidity.
\n
\ue001
The increase in the economic uncertainty post model adjustments for Wholesale
\n
portfolios relating to inflation, supply chain and liquidity prompted by continued
\n
affordability risks, as a result of higher interest rates and sustained inflation. This was
\n
partially offset by a reduction in COVID-19 related post model adjustments.
\n
\ue001
Retail Banking
\u2013
The post model adjustments for economic uncertainty increased
\n
slightly to \u00a3157 million at 31 December 2023, from \u00a3153 million at 31 December
\n
2022. Continued consumer affordability risks, as a result of higher interest rates and
\n
sustained inflation, prompted an uplift in the cost of living post model adjustment (up
\n
from \u00a3127 million to \u00a3144 million). The cost of living post model adjustment captured
\n
the risk on segments in the Retail Banking portfolio that are more susceptible to the
\n
effects of cost of living rises. It focused on key affordability lenses, including
\n
customers with lower income in fuel poverty, over-indebted borrowers and
\n
customers vulnerable to a potential mortgage rate shock. This increase during the
\n
year was partly offset by some LGD post model adjustment reductions. Additionally,
\n
the judgemental post model adjustment relating to the modelling of cards EAD
\n
(\u00a320 million at 31 December 2022) was discontinued at H1 2023 and the latest
\n
update to the post model adjustment for legacy higher risk interest only residential
\n
mortgages resulted in a \u00a37 million reduction in the post model adjustment from 31
\n
December 2022, reflecting latest analysis of the portfolio segment.
\n
\ue001
Commercial & Institutional
\u2013 The post model adjustments for economic uncertainty
\n
increased to \u00a3256 million at 31 December 2023, from \u00a3191 million at 31 December
\n
2022. It included an overlay of \u00a350 million at 31 December 2023, from \u00a3108 million at
\n
31 December 2022, to cover the residual risks from COVID-19, including the risk that
\n
government support schemes could affect future recoveries and concerns
\n
surrounding associated debt, to customers that have utilised government support
\n
schemes. The inflation and supply chain post model adjustment was maintained with
\n
a mechanistic adjustment, via a sector-level downgrade, being applied to the sectors
\n
that were considered most at risk from these headwinds. A number of additional
\n
sectors were added to the sector-level downgrade reflecting the ongoing pressures
\n
from inflation being higher for longer plus broader concerns around reducing cash
\n
reserves across many sectors. The impact of the sector-level downgrades is a post
\n
model adjustment increase to \u00a3206 million at 31 December 2023 from \u00a383 million at
\n
31 December 2022, reflecting these significant headwinds which are not fully
\n
captured in the models. The \u00a323 million judgemental overlay for deferred model
\n
calibrations relates to refinance risk with the existing mechanistic modelling approach
\n
not fully capturing the risk on deteriorated exposures. Other adjustments included an
\n
overlay of \u00a37 million to mitigate the effect of operational timing delays in the
\n
identification and flagging of a SICR.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Significant increase in credit risk (SICR) (audited)
\n
Exposures that are considered significantly credit deteriorated since initial recognition are
\n
classified in Stage 2 and assessed for lifetime ECL measurement (exposures not
\n
considered deteriorated carry a 12 month ECL). NatWest Group has adopted a
\n
framework to identify deterioration based primarily on relative movements in lifetime PD
\n
supported by additional qualitative backstops. The principles applied are consistent
\n
across NatWest Group and align to credit risk management practices, where
\n
appropriate.
\n
The framework comprises the following elements:
\n
\ue001
IFRS 9 lifetime PD assessment (the primary driver)
\u2013
on modelled portfolios, the
\n
assessment is based on the relative deterioration in forward-looking lifetime PD and
\n
is assessed monthly. To assess whether credit deterioration has occurred, the
\n
residual lifetime PD at balance sheet date (which PD is established at date of initial
\n
recognition (DOIR)) is compared to the current PD. If the current lifetime PD exceeds
\n
the residual origination PD by more than a threshold amount, deterioration is
\n
assumed to have occurred and the exposure transferred into Stage 2 for a lifetime
\n
loss assessment. For Wholesale, a doubling of PD would indicate a SICR subject to a
\n
minimum PD uplift of 0.1%. For Personal portfolios, the criteria vary by risk band, with
\n
lower risk exposures needing to deteriorate more than higher risk exposures, as
\n
outlined in the following table:
\n
\ue001
Qualitative high-risk backstops
\u2013
the PD assessment is complemented with the use of
\n
qualitative high-risk backstops to further inform whether significant deterioration in
\n
lifetime risk of default has occurred. The qualitative high-risk backstop assessment
\n
includes the use of the mandatory 30+ days past due backstop, as prescribed by
\n
IFRS 9 guidance, and other features such as forbearance support, Wholesale
\n
exposures managed within the Risk of Credit Loss framework, and adverse credit
\n
bureau results for Personal customers.
\n
\ue001
Persistence (Personal and business banking customers only)
\u2013
the persistence rule
\n
ensures that accounts which have met the criteria for PD driven deterioration are still
\n
considered to be significantly deteriorated for three months thereafter. This additional
\n
rule enhances the timeliness of capture in Stage 2. The persistence rule is applied to
\n
PD driven deterioration only.
\n
The criteria are based on a significant amount of empirical analysis and seek to meet
\n
three key objectives:
\n
\ue001
Criteria effectiveness
\u2013
the criteria should be effective in identifying significant credit
\n
deterioration and prospective default population.
\n
\ue001
Stage 2
stability
\u2013 the criteria should not introduce unnecessary volatility in the Stage
\n
2 population.
\n
\ue001
Portfolio analysis
\u2013
the criteria should produce results which are intuitive when
\n
reported as part of the wider credit portfolio.
\n
Monitoring the effect on relative PD deterioration when originating new lending at times
\n
of weaker economic outlook (therefore, higher PDs at initial recognition) is important to
\n
ensure SICR criteria remains effective.
\n
Asset lifetimes
(audited)
\n
The choice of initial recognition and asset duration is another critical judgment in
\n
determining the quantum of lifetime losses that apply.
\n
\ue001
The date of initial recognition reflects the date that a transaction (or account) was
\n
first recognised on the balance sheet; the PD recorded at that time provides the
\n
baseline used for subsequent determination of SICR as detailed above.
\n
\ue001
For asset duration, the approach applied (in line with IFRS 9 requirements) is:
\n
\ue001
T
T
erm lending \u2013
the contractual maturity date, reduced for behavioural trends
\n
where appropriate (such as, expected prepayment and amortisation).
\n
\ue001
Revolving facilities
\u2013
for Personal portfolios (except credit cards), asset duration
\n
is based on behavioural life and this is normally greater than contractual life
\n
(which would typically be overnight). For Wholesale portfolios, asset duration is
\n
based on annual customer review schedules and will be set to the next review
\n
date.
\n
In the case of credit cards, the most significant judgment is to reflect the operational
\n
practice of card reissuance and the associated credit assessment as enabling a formal
\n
re-origination trigger. As a consequence, a capped lifetime approach of up to 36 months
\n
is used on credit card balances. If the approach was uncapped the ECL impact is
\n
estimated at approximately \u00a3110 million (2022 \u2013 \u00a380 million). However, credit card
\n
balances originated under the 0% balance transfer product and representing
\n
approximately 37% (2022 \u2013 19%) of performing card balances, have their ECL calculated
\n
on a behavioural lifetime approach as opposed to being capped at a maximum of three
\n
years.
\n
The capped approach reflects NatWest Group practice of a credit-based review of
\n
customers prior to credit card issuance and complies with IFRS 9. Benchmarking
\n
information indicates that peer UK banks use behavioural approaches in the main for
\n
credit card portfolios with average durations between three and ten years. Across
\n
Europe, durations are shorter and are, in some cases, as low as one year.
\n\n \n
PD bandings (based on
residual
PD deterioration threshold
Personal risk bands
lifetime PD calculated at DOIR)
criteria
Risk band A
<0.762%
PD@DOIR + 1%
Risk band B
<4.306%
PD@DOIR + 3%
Risk band C
>=4.306%
1.7 x PD@DOIR
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
(audited)
\n
Introduction
\n
The portfolio segmentation and selection of economic loss drivers for IFRS 9 follows the
\n
approach used in stress testing. To enable robust modelling the forecasting models for
\n
each portfolio segment (defined by product or asset class and where relevant, industry
\n
sector and region) are based on a selected, small number of economic variables,
\n
(typically three to four) that best explain the temporal variations in portfolio loss rates.
\n
The process to select economic loss drivers involves empirical analysis and expert
\n
judgement.
\n
The most significant economic loss drivers for the most material portfolios are shown in
\n
the table below:
\n\n \n
Portfolio
Economic loss drivers
UK Personal mortgages
UK unemployment rate, sterling swap rate, UK house
price index, UK real wage
UK Personal unsecured
UK unemployment rate, sterling swap rate, UK real
wage
UK corporates
UK stock price index, UK gross domestic product, Bank
of England base rate
UK commercial real estate
UK stock price index, UK commercial property price
index, UK GDP, Bank of England base rate
\n
Economic scenarios
\n
At 31 December 2023, the range of anticipated future economic conditions was defined
\n
by a set of four internally developed scenarios and their respective probabilities. In
\n
addition to the base case, they comprised upside, downside and extreme downside
\n
scenarios. The scenarios primarily reflected the current risks faced by the economy,
\n
particularly in relation to the path of inflation and interest rates.
\n
For 2023, the four scenarios were deemed appropriate in capturing the uncertainty in
\n
economic forecasts and the non-linearity in outcomes under different scenarios. These
\n
four scenarios were developed to provide sufficient coverage across potential rises in
\n
unemployment, inflation, asset price declines and the degree of permanent damage to
\n
the economy, around which there remains pronounced levels of uncertainty.
\n
Upside
\u2013
This scenario assumes robust growth as inflation falls sharply and rates are
\n
lowered more quickly than expected. Consumer spending is supported by savings built
\n
up since COVID-19 and further helped by fiscal support and strong business investment.
\n
The labour market remains resilient, with the unemployment rate falling. The housing
\n
market slows down compared to the previous year but remains robust.
\n
Compared to 31 December 2022, the upside scenario remains similarly configured,
\n
exploring a more benign set of economic outcomes, including a stronger performing
\n
stock market, real estate prices, and supported by a stronger global growth backdrop,
\n
relative to the base case view. Reflecting recent outturn data, inflation falls back quicker
\n
and the labour market is tighter than previously assumed.
\n
B
B
ase case
\u2013 High inflation and tight monetary policy leads to muted economic growth.
\n
However, continued disinflation allows an easing cycle to start in 2024. The
\n
unemployment rate rises modestly but there are no wide-spread job losses. Inflation
\n
moderates and falls to a target level of 2% by early 2025. The housing market
\n
experiences modest nominal price decline but the extent of the decline is lower than
\n
experienced during prior stresses. Housing market activities remain weak but gains pace
\n
gradually as interest rates fall and real income recovers.
\n
Since 31 December 2022, the economic outlook has improved as energy prices fell
\n
sharply and the labour market remained resilient. The near-term inflation outlook
\n
remains elevated and upside risks remain but they have reduced since last year. Rates
\n
increased to levels higher than expected previously and are expected to remain higher
\n
for longer. Economic growth is still expected to be muted in the near-term. The base
\n
case now assumes muted growth in 2023 as opposed to a mild recession assumed
\n
previously. The unemployment rate still rises but the peak is marginally lower and is
\n
underpinned by a resilient labour market The peak to trough house price correction
\n
remains broadly similar to the previous assumption but the timing of the fall is more
\n
spread out.
\n
D
D
ownside
\u2013
Inflation resurges as energy prices rise and core inflation remains persistently
\n
high. The economy experiences a recession as consumer confidence weakens due to a
\n
fall in real income. Interest rates are raised higher than the base case and remain
\n
elevated for longer. High rates are assumed to have a more significant impact on the
\n
labour market. Unemployment is higher than the base case scenario while house prices
\n
experience declines comparable to previous episodes of stress.
\n
Compared to 31 December 2022, the downside scenario explores risks associated with
\n
ongoing price pressures and significantly higher interest rates across the period. This
\n
contrasts with last year\u2019s scenario, which assumed lower rates than the base case view.
\n
Partly as a result, UK economic activity and labour market are slightly weaker. Nominal
\n
asset prices, while experiencing declines comparable with past downturns, perform
\n
slightly better than previously assumed.
\n
E
E
xtreme downside
\u2013
This scenario assumes a classical recession with loss of consumer
\n
confidence leading to a deep economic recession. This results in widespread job losses
\n
with the unemployment rate rising above the levels seen during the 2008 financial crisis.
\n
Rates are cut sharply in response, leading to some support to the recovery. House prices
\n
lose approximately a third of their value.
\n
Compared to 31 December 2022, the extreme downside again captures an extreme set
\n
of economic outcomes, with very sharp falls in asset prices and a marked deterioration in
\n
the labour market. The key difference is the assumed path for interest rates. Unlike at 31
\n
December 2022, when recessionary risks were explored in the context of a stubbornly
\n
high inflation environment, both inflation and interest rates are now assumed to follow a
\n
significantly lower trajectory \u2013 consistent with recession driven by material weakness in
\n
domestic demand.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
(audited)
\n
The main macroeconomic variables for each of the four scenarios used for expected credit loss (ECL) modelling are set out in the main macroeconomic variables table below.
\n
Main macroeconomic variables
\n\n \n
31 December 2023
31 December 2022
Extreme
Weighted
Extreme
Weighted
Upside
Base case
Downside
downside
average
Upside
Base case
Downside
downside
average
Five-year summary
%
%
%
%
%
%
%
%
%
%
GDP
1.8
1.0
0.5
(0.3)
0.9
2.2
1.3
0.8
0.4
1.2
Unemployment
3.5
4.6
5.2
6.8
4.8
3.9
4.5
4.9
6.7
4.8
House price index
3.9
0.3
(0.4)
(5.7)
0.3
5.1
0.8
(0.7)
(4.4)
0.6
Commercial real estate price
3.1
(0.2)
(2.0)
(6.8)
(0.6)
1.2
(1.9)
(2.8)
(9.1)
(2.5)
Consumer price index
1.7
2.6
5.2
1.8
2.8
3.6
4.2
4.4
8.2
4.8
Bank of England base rate
3.8
3.7
5.6
2.9
4.0
2.4
3.1
1.5
4.5
2.8
UK stock price index
4.8
3.3
1.2
(0.4)
2.8
3.0
1.4
(1.1)
(3.7)
0.5
World GDP
3.7
3.2
2.7
1.8
3.0
3.7
3.3
1.7
1.1
2.7
Probability weight
21.2
45.0
20.4
13.4
18.6
45.0
20.8
15.6
\n
(1)
The five-year summary runs from 2023-27 for 31 December 2023 and from 2022-26 for 31 December 2022.
\n
(2)
The table shows CAGR for annual GDP, average levels for the unemployment rate and Bank of England base rate and Q4 to Q4 CAGR for other parameters.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers (audited)
\n
Climate transition
\n
During 2023, NatWest Group continued to align its financial planning process with the
\n
climate transition planning process. This included adding climate policy and technology
\n
related transition assumptions into NatWest Group\u2019s base case macroeconomic scenario
\n
used for financial planning and assessment of ECL in this IFRS 9 reporting period. This
\n
resulted in an increase in ECL of less than \u00a31 million.
\n
As in the initial iteration of the Climate transition plan, included in NatWest Group\u2019s 2022
\n
Climate-related Disclosures Report, NatWest Group assesses the effects of climate
\n
transition policies within the base case macroeconomic scenario, using the UK Climate
\n
Change Committee (CCC) Balanced Net Zero (BNZ) scenario, aligned with the UK CCC
\n
sixth carbon budget, as a starting point. In addition, NatWest Group included estimated
\n
average policy delay into the climate economic assumptions for IFRS 9 purposes, based
\n
on the credibility ratings for sectoral policies provided by the UK CCC 2022 Progress
\n
Report to Parliament, to reflect estimated time delays based on credibility ratings as
\n
follows:
\n
\ue001
Credible policies
\u2013 estimated zero years of delayed adjustment to the BNZ pathway
\n
for the associated policy.
\n
\ue001
Policies with some or significant risk
\u2013 estimated three and five years of delay
\n
respectively for the associated policy.
\n
\ue001
Policies with insufficient plans
\u2013 estimated ten years of delay for the associated policy.
\n
The base case macroeconomic scenario now explicitly includes assumptions about the
\n
changes in transition policy expressed as an additional implicit carbon price. Implicit
\n
carbon price is an additional cost related to greenhouse gas emissions as a result of
\n
climate transition policy.
\n
NatWest Group assumes that between now and 2028, the transition policy will change
\n
slowly, and the implicit carbon price will increase modestly by \u00a310.5/tCO2e, which is
\n
consistent with the UK CCC BNZ scenario. The base case macroeconomic scenario also
\n
included assumptions about abatement technology development and specific sectors\u2019
\n
transition, for example, the switch from fossil fuels to renewable energy sources.
\n
NatWest Group will continue to enhance this analysis, including updates in the UK CCC
\n
2023 Progress Report to Parliament published in June 2023.
\n
While previous NatWest Group IFRS 9 base case scenarios included some climate
\n
transition considerations, they were based on all enacted policies and available
\n
technologies. The new approach described here applies to explicitly identifying the effect
\n
of additional climate transition policy.
\n
NatWest Group and its customers have a dependency on timely and appropriate
\n
government policies to provide the necessary impetus for technology development and
\n
customer behaviour changes, to enable the UK\u2019s successful transition to net zero. Policy
\n
delays and risks outlined in the UK CCC 2022 and 2023 Progress Reports, if not
\n
adequately addressed in a timely manner, put at risk the UK\u2019s net zero transition and in
\n
turn that of NatWest Group and its customers.
\n
For this first iteration of climate economic assumptions included within the base case
\n
macroeconomic scenario, NatWest Group focused on policy and technology related
\n
transition risks. It is assumed that in more extreme scenarios it is likely that climate policy
\n
changes would offset adverse/benign economic conditions. NatWest Group\u2019s tools,
\n
methodologies and assessment of climate risks will continue to evolve to further align
\n
financial planning and climate transition planning processes.
\n
Probability weightings of scenarios
\n
NatWest Group\u2019s quantitative approach to IFRS 9 multiple economic scenarios (MES)
\n
involves selecting a suitable set of discrete scenarios to characterise the distribution of
\n
risks in the economic outlook and assigning appropriate probability weights. This
\n
quantitative approach is used for 31 December 2023.
\n
The approach involves comparing UK GDP paths for NatWest Group\u2019s scenarios against
\n
a set of 1,000 model runs, following which, a percentile in the distribution is established
\n
that most closely corresponded to the scenario. Probability weight for base case is set
\n
first based on judgement, while probability weights for the alternate scenarios are
\n
assigned based on these percentiles scores.
\n
The assigned probability weights were judged to be aligned with the subjective
\n
assessment of balance of the risks in the economy. The weights were broadly
\n
comparable to those used at 31 December 2022 but with slightly less downside skew.
\n
This is reasonable as the inflation outturn since then has been encouraging, with
\n
continued disinflation and a reduced risk of stagflation. However, the risks still remain
\n
elevated and there is considerable uncertainty in the economic outlook, particularly with
\n
respect to persistence and the range of outcomes on inflation. Given that backdrop,
\n
NatWest Group judges it appropriate that downside-biased scenarios have higher
\n
combined probability weights than the upside-biased scenario. It presents good coverage
\n
to the range of outcomes assumed in the scenarios, including the potential for a robust
\n
recovery on the upside and exceptionally challenging outcomes on the downside. A
\n
21.2% weighting was applied to the upside scenario, a 45.0% weighting applied to the
\n
base case scenario, a 20.4% weighting applied to the downside scenario and a 13.4%
\n
weighting applied to the extreme downside scenario.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
\n
UK gross domestic product (\u00a3bn)
\n
2023Q1
2024Q1
2025Q1
2026Q1
2027Q1
2028Q1
\n
2000
\n
2100
\n
2200
\n
2300
\n
2400
\n
2500
\n
2600
\n
Upside
\n
Downside
\n
Base case
\n
Extreme downside
\n
Bank of England base rate (%)
\n
2023Q1
2024Q1
2025Q1
2026Q1
2027Q1
2028Q1
\n
0
\n
1
\n
2
\n
3
\n
4
\n
5
\n
6
\n
7
\n
Upside
\n
Downside
\n
Base case
\n
Extreme downside
\n
UK unemployment rate (%)
\n
2023Q1
2024Q1
2025Q1
2026Q1
2027Q1
2028Q1
\n
9
\n
8
\n
7
\n
6
\n
5
\n
4
\n
3
\n
2
\n
1
\n
0
\n
Upside
\n
Downside
\n
Base case
\n
Extreme downside
Economic loss drivers
(audited)
Annual figures
\n \n
GDP - annual growth
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
0.5
0.5
0.5
0.5
0.5
2024
3.6
0.4
(1.1)
(2.7)
0.3
2025
2.3
1.3
0.4
(1.6)
1.0
2026
1.2
1.6
1.2
1.2
1.4
2027
1.2
1.4
1.3
1.2
1.3
2028
1.2
1.4
1.3
1.2
1.3
Unemployment rate - annual average
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
4.2
4.2
4.2
4.2
4.2
2024
3.9
4.7
5.2
6.2
4.8
2025
3.2
4.7
5.8
8.4
5.1
2026
3.2
4.6
5.6
8.0
5.0
2027
3.3
4.6
5.5
7.4
4.8
2028
3.3
4.5
5.3
6.7
4.7
House price index - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
(2.9)
(2.9)
(2.9)
(2.9)
(2.9)
2024
7.2
(5.0)
(7.1)
(11.5)
(3.7)
2025
9.4
3.1
(3.1)
(14.2)
1.2
2026
2.8
3.4
5.5
(5.8)
2.7
2027
3.3
3.4
6.1
7.2
4.3
2028
3.5
3.4
4.4
6.6
3.9
Commercial real estate price - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
(7.2)
(7.2)
(7.2)
(7.2)
(7.2)
2024
12.7
-
(7.3)
(18.4)
(1.2)
2025
3.5
2.7
(2.0)
(20.0)
(0.5)
2026
4.6
2.0
3.8
6.7
3.4
2027
2.9
1.9
3.1
8.5
3.0
2028
1.3
0.8
2.6
8.6
2.0
\n \n
Consumer price index - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
4.6
4.6
4.6
4.6
4.6
2024
0.9
2.5
8.5
(1.2)
2.9
2025
0.7
2.0
5.3
1.7
2.4
2026
1.1
1.9
3.8
2.0
2.1
2027
1.2
1.9
3.7
2.0
2.2
2028
1.1
1.9
3.6
2.0
2.1
Bank of England base rate - annual average
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
4.68
4.68
4.68
4.68
4.68
2024
4.79
4.77
6.10
4.00
4.94
2025
3.46
3.46
6.08
2.06
3.81
2026
3.17
2.85
5.69
2.00
3.38
2027
2.75
2.75
5.31
2.00
3.17
2028
2.50
2.75
5.06
2.25
3.10
UK stock price index - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
3.7
3.7
3.7
3.7
3.7
2024
8.1
3.2
(17.4)
(41.5)
(5.9)
2025
5.1
3.2
8.7
24.9
6.5
2026
3.6
3.2
7.9
16.7
5.5
2027
3.6
3.2
5.6
11.0
4.6
2028
2.9
3.2
5.3
9.9
4.3
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
(audited)
\n
Worst points
\n\n \n
31 December 2023
31 December 2022
Extreme
Weighted
Extreme
Weighted
Downside
downside
average
Downside
downside
average
%
Quarter
%
Quarter
%
%
Quarter
%
Quarter
%
GDP
(1.2)
Q3 2024
(4.5)
Q4 2024
0.3
(3.2)
Q4 2023
(4.7)
Q4 2023
(0.8)
Unemployment rate - peak
5.8
Q1 2025
8.5
Q2 2025
5.2
6.0
Q1 2024
8.5
Q3 2024
5.4
House price index
(12.5)
Q4 2025
(31.7)
Q2 2026
(6.5)
(15.0)
Q1 2025
(26.2)
Q3 2025
(3.4)
Commercial real estate price
(16.6)
Q1 2025
(39.9)
Q3 2025
(10.2)
(21.8)
Q4 2023
(46.8)
Q3 2024
(16.4)
Consumer price index - highest four quarter change
10.3
Q1 2023
10.3
Q1 2023
10.3
15.7
Q1 2023
17.0
Q4 2023
11.7
Bank of England base rate
- extreme level
6.5
Q4 2024
5.3
Q4 2023
5.3
4.0
Q1 2023
6.0
Q1 2024
4.1
UK stock price index
(14.3)
Q4 2024
(39.3)
Q4 2024
(2.4)
(26.0)
Q4 2023
(48.7)
Q4 2023
(14.1)
\n
(1)
Unless specified otherwise, the figures show falls relative to the starting period. The calculations are performed over five years, with a starting point of Q4 2022 for 31 December 2023 scenarios and Q4 2021 for 31 December 2022 scenarios.
\n
Use of the scenarios in Personal lending
\n
Personal lending follows a discrete scenario approach. The PD, EAD, LGD and resultant
\n
ECL for each discrete scenario is calculated using product specific economic response
\n
models. Probability weighted averages across the suite of economic scenarios are then
\n
calculated for each of the model outputs, with the weighted PD being used for staging
\n
purposes.
\n
Business Banking utilises the Personal lending methodology rather than the Wholesale
\n
lending methodology.
\n
Use of the scenarios in Wholesale lending
\n
Wholesale lending follows a continuous scenario approach to calculate ECL. PD and LGD
\n
values arising from multiple economic forecasts (based on the concept of credit cycle
\n
indices) are simulated around the central projection. The central projection is a weighted
\n
average of economic scenarios with the scenarios translated into credit cycle indices
\n
using the Wholesale economic response models.
\n
UK economic uncertainty
\n
The high inflation environment alongside high interest rates are presenting significant
\n
headwinds for some businesses and consumers, in many cases compounding. These cost
\n
pressures remain a feature of the economic environment, though they are expected to
\n
moderate over 2024 and 2025 in the base case scenario. NatWest Group has considered
\n
where these are most likely to affect the customer base, with the cost of borrowing
\n
during 2023 for both businesses and consumers presenting an additional affordability
\n
challenge.
\n
The effects of these risks are not expected to be fully captured by forward-looking credit
\n
modelling, particularly given the high inflation environment, low unemployment base case
\n
outlook. Any incremental ECL effects for these risks will be captured via post model
\n
adjustments and are detailed further in the Governance and post model adjustments
\n
section.
\n
Model and monitoring enhancements
\n
During 2023, the monitoring framework for the retail model suite was enhanced to
\n
enable more granular performance tracking at key segment levels, such as balance
\n
transfers versus non-balance transfers for the credit cards models. A new Business
\n
Banking PD, EAD and LGD model suite was redeveloped in 2023, ensuring appropriate
\n
treatment of government-guaranteed loans.
\n
In addition, the retail economic response models, which are used to bring forward-
\n
looking information into the IFRS 9 PD models, were redeveloped to bring in more
\n
inflationary drivers. In Wholesale lending, new economic response models were
\n
introduced in 2022 and 2023 that follow an improved modelling approach and put higher
\n
weight on stock price indices compared to previous models.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL sensitivity analysis
(audited)
\n
The recognition and measurement of ECL is complex and involves the use of significant
\n
judgment and estimation, particularly in times of economic volatility and uncertainty. This
\n
includes the formulation and incorporation of multiple forward-looking economic
\n
conditions into ECL to meet the measurement objective of IFRS 9. The ECL provision is
\n
sensitive to the model inputs and economic assumptions underlying the estimate.
\n
The impact arising from the base case, upside, downside and extreme downside
\n
scenarios was simulated. These scenarios are used in the methodology for Personal
\n
multiple economic scenarios as described in the Economic loss drivers section. In the
\n
simulations, NatWest Group has assumed that the economic macro variables associated
\n
with these scenarios replace the existing base case economic assumptions, giving them a
\n
100% probability weighting and therefore serving as a single economic scenario.
\n
These scenarios were applied to all modelled portfolios in the analysis below, with the
\n
simulation impacting both PDs and LGDs. Post model adjustments included in the ECL
\n
estimates that were modelled were sensitised in line with the modelled ECL movements,
\n
but those that were judgmental in nature, primarily those for deferred model calibrations
\n
and economic uncertainty, were not (refer to the Governance and post model
\n
adjustments section) on the basis these would be re-evaluated by management through
\n
ECL governance for any new economic scenario outlook and not be subject to an
\n
automated calculation. As expected, the scenarios create differing impacts on ECL by
\n
portfolio and the impacts are deemed reasonable. In this simulation, it is assumed that
\n
existing modelled relationships between key economic variables and loss drivers hold, but
\n
in practice other factors would also have an impact, for example, potential customer
\n
behaviour changes and policy changes by lenders that might impact on the wider
\n
availability of credit.
\n
The focus of the simulations is on ECL provisioning requirements on performing
\n
exposures in Stage 1 and Stage 2. The simulations are run on a stand-alone basis and
\n
are independent of each other; the potential ECL impacts reflect the simulated impact at
\n
31 December 2023. Scenario impacts on SICR should be considered when evaluating the
\n
ECL movements of Stage 1 and Stage 2. In all scenarios the total exposure was the
\n
same but exposure by stage varied in each scenario.
\n
Stage 3 provisions are not subject to the same level of measurement uncertainty \u2013
\n
default is an observed event as at the balance sheet date. Stage 3 provisions therefore
\n
were not considered in this analysis.
\n
NatWest Group\u2019s core criterion to identify a SICR is founded on PD deterioration. Under
\n
the simulations, PDs change and result in exposures moving between Stage 1 and Stage
\n
2 contributing to the ECL impact.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL sensitivity analysis
(audited)
\n\n \n
Moderate
Moderate
Extreme
Base
upside
downside
downside
2023
Actual
scenario
scenario
scenario
scenario
Stage 1 modelled loans (\u00a3m)
Retail Banking - mortgages
173,982
174,642
175,311
171,320
165,143
Retail Banking - unsecured
8,802
8,838
8,992
8,652
8,334
Wholesale - property
26,933
27,088
27,200
26,645
22,326
Wholesale - non-property
123,228
124,107
124,742
122,243
104,657
332,945
334,675
336,245
328,860
300,460
Stage 1 modelled ECL (\u00a3m)
Retail Banking - mortgages
86
86
84
84
79
Retail Banking - unsecured
221
222
219
221
211
Wholesale - property
102
80
61
131
184
Wholesale - non-property
276
246
211
331
434
685
634
575
767
908
Stage 1 coverage
Retail Banking - mortgages
0.05%
0.05%
0.05%
0.05%
0.05%
Retail Banking - unsecured
2.51%
2.51%
2.44%
2.55%
2.53%
Wholesale - property
0.38%
0.30%
0.22%
0.49%
0.82%
Wholesale - non-property
0.22%
0.20%
0.17%
0.27%
0.41%
0.21%
0.19%
0.17%
0.23%
0.30%
Stage 2 modelled loans (\u00a3m)
Retail Banking - mortgages
17,825
17,165
16,496
20,487
26,664
Retail Banking - unsecured
3,772
3,736
3,582
3,922
4,240
Wholesale - property
3,306
3,151
3,039
3,594
7,913
Wholesale - non-property
13,512
12,633
11,998
14,497
32,083
38,415
36,685
35,115
42,500
70,900
Stage 2 modelled ECL (\u00a3m)
Retail Banking - mortgages
60
56
48
70
100
Retail Banking - unsecured
445
435
383
487
554
Wholesale - property
93
80
68
111
273
Wholesale - non-property
364
310
264
432
789
962
881
763
1,100
1,716
Stage 2 coverage
Retail Banking - mortgages
0.34%
0.33%
0.29%
0.34%
0.38%
Retail Banking - unsecured
11.80%
11.64%
10.69%
12.42%
13.07%
Wholesale - property
2.81%
2.54%
2.24%
3.09%
3.45%
Wholesale - non-property
2.69%
2.45%
2.20%
2.98%
2.46%
2.50%
2.40%
2.17%
2.59%
2.42%
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL sensitivity analysis
(audited)
\n\n \n
Moderate
Moderate
Extreme
Base
upside
downside
downside
2023
Actual
scenario
scenario
scenario
scenario
Stage 1 and Stage 2 modelled loans (\u00a3m)
Retail Banking - mortgages
191,807
191,807
191,807
191,807
191,807
Retail Banking - unsecured
12,574
12,574
12,574
12,574
12,574
Wholesale - property
30,239
30,239
30,239
30,239
30,239
Wholesale - non-property
136,740
136,740
136,740
136,740
136,740
371,360
371,360
371,360
371,360
371,360
Stage 1 and Stage 2 modelled ECL (\u00a3m)
Retail Banking - mortgages
146
142
132
154
179
Retail Banking - unsecured
666
657
602
708
765
Wholesale - property
195
160
129
242
457
Wholesale - non-property
640
556
475
763
1,223
1,647
1,515
1,338
1,867
2,624
Stage 1 and Stage 2 coverage
Retail Banking - mortgages
0.08%
0.07%
0.07%
0.08%
0.09%
Retail Banking - unsecured
5.30%
5.23%
4.79%
5.63%
6.08%
Wholesale - property
0.64%
0.53%
0.43%
0.80%
1.51%
Wholesale - non-property
0.47%
0.41%
0.35%
0.56%
0.89%
0.44%
0.41%
0.36%
0.50%
0.71%
Reconciliation to Stage 1 and Stage 2 ECL (\u00a3m)
ECL on modelled exposure
1,647
1,515
1,338
1,867
2,624
ECL on UBIDAC modelled exposures
8
8
8
8
8
ECL on non-modelled exposures
30
30
30
30
30
Total Stage 1 and Stage 2 ECL (\u00a3m)
1,685
1,553
1,376
1,905
2,662
Variance to actual total Stage 1 and Stage 2 ECL (\u00a3m)
(132)
(309)
220
977
Reconciliation to Stage 1 and Stage 2 flow exposure (\u00a3m)
Modelled loans
371,360
371,360
371,360
371,360
371,360
UBIDAC loans
318
318
318
318
318
Non-modelled loans
19,522
19,522
19,522
19,522
19,522
Other asset classes
153,439
153,439
153,439
153,439
153,439
\n
(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 31 December 2023 and therefore does not include variation in future undrawn exposure
\n
values.
\n
(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.
\n
(3)
Exposures related to Ulster Bank RoI continuing operations were not included in the simulations, the current Ulster Bank RoI ECL has been included across all scenarios to enable reconciliation to other disclosures.
\n
(4)
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 31 December 2023
The simulations change the composition of Stage 1 and Stage 2 exposure but total
\n
exposure is unchanged under each scenario as the loan population is static.
\n
(5)
Refer to the Economic loss drivers section for details of economic scenarios.
\n
(6)
Refer to the NatWest Group plc 2022 Annual Report and Accounts for 2022 comparatives.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL adequacy
(audited)
\n
\ue001
If the economics were as negative as observed in the extreme downside (i.e. 100%
\n
probability weighting), total Stage 1 and Stage 2 ECL was simulated to increase by
\n
around \u00a31 billion (approximately 58%). In this scenario, Stage 2 exposure increased
\n
significantly and was the key driver of the simulated ECL rise. The movement in
\n
Stage 2 balances in the other simulations was less significant.
\n
\ue001
In the Wholesale portfolio, there was a significant increase in ECL under both a
\n
moderate and extreme downside scenario. The Wholesale property ECL increase
\n
was mainly due to commercial real estate prices which showed negative growth until
\n
2025 and significant deterioration in the stock index. The non-property increase was
\n
mainly due to GDP contraction and significant deterioration in the stock index.
\n
\ue001
A net improvement in the economic scenarios since 2022 resulted in a reduction in
\n
modelled ECL.
\n
\ue001
Given that continued uncertainty remained due to high inflation, high interest rates
\n
during 2023 and supply chain disruption, NatWest Group utilised a framework of
\n
quantitative and qualitative measures to support the levels of ECL coverage. This
\n
included economic data, credit performance insights, supply chain contagion analysis
\n
and problem debt trends. This was particularly important for consideration of post
\n
model adjustments.
\n
\ue001
As the effects of these economic risks evolve into 2024, there is a risk of further
\n
credit deterioration. However, the income statement effect of this should have been
\n
mitigated by the forward-looking provisions retained on the balance sheet at 31
\n
December 2023.
\n
\ue001
There are a number of key factors that could drive further downside to impairments,
\n
through deteriorating economic and credit metrics and increased stage migration as
\n
credit risk increases for more customers. Such factors which could impact the IFRS 9
\n
models, include an adverse deterioration in unemployment and GDP in the economies
\n
in which NatWest Group operates.
\n
Movement in ECL provision
\n
(1)
\n
The table below shows the main ECL provision movements during the year.
\n\n \n
ECL provision
\u00a3m
At 1 January 2023
3,434
Transfers to disposal groups and reclassifications
(80)
Changes in economic forecasts
(125)
Changes in risk metrics and exposure: Stage 1 and Stage 2
95
Changes in risk metrics and exposure: Stage 3
557
Judgmental changes:
Changes in post model adjustments for Stage 1, Stage 2 and Stage 3
74
Write-offs and other
(310)
At 31 December 2023
3,645
At 1 January 2022
3,806
2022 movements
(372)
At 31 December 2022
3,434
\n
(1)
The above table is not within the scope of the independent auditors\u2019 report
.
\n
\ue001
During the year, overall ECL increased reflecting portfolio growth alongside broadly
\n
stable portfolio performance. There were Stage 3 default flow increases, particularly
\n
in the Personal portfolio, but these were broadly in line with expectations due to
\n
growth and normalisation of risk parameters. This was mitigated by a net ECL
\n
reduction from 2023 updates to economic scenarios and weightings.
\n
\ue001
Judgemental ECL post model adjustments, increased from 31 December 2022,
\n
reflecting continued economic uncertainty from inflation being higher for longer,
\n
higher interest rates and liquidity concerns, and represented 13% of total ECL (2022
\n
\u2013 12%).
\n
\ue001
For the Wholesale portfolio, default levels were lower than historic trends as the
\n
effects of higher inflation, supply chain disruption and higher interest rates, had to
\n
date, not led to a significant change in defaults.
\n
\ue001
Stage 3 balances increased due to default flows, as described above, alongside
\n
reduced write-off activity in 2023.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Credit risk \u2013 Banking activities
\n
Introduction
\n
This section details the credit risk profile of NatWest Group\u2019s banking activities. Refer to Accounting policy 2.3 and
\n
Note 15 to the consolidated financial statements for policies and critical judgments relating to impairment loss
\n
determination.
\n
Financial instruments within the scope of the IFRS 9 ECL framework (audited)
\n
Refer to Note 10 to the consolidated financial statements for balance sheet analysis of financial assets that are
\n
classified as amortised cost or fair value through other comprehensive income (FVOCI), the starting point for IFRS 9
\n
ECL framework assessment.
\n\n \n
31 December 2023
31 December 2022
Gross
ECL
Net
Gross
ECL
Net
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Balance sheet total gross amortised cost and FVOCI
553.8
554.3
In scope of IFRS 9 ECL framework
545.3
550.3
% in scope
98%
99%
Loans to customers - in scope - amortised cost
385.3
3.6
381.7
370.1
3.3
366.8
Loans to customers - in scope - FVOCI
0.1
-
0.1
0.1
-
0.1
Loans to banks - in scope - amortised cost
6.7
-
6.7
6.9
-
6.9
Total loans - in scope
392.1
3.6
388.5
377.1
3.3
373.8
Stage 1
348.6
0.7
347.9
325.2
0.6
324.6
Stage 2
37.9
0.9
37.0
46.8
0.9
45.9
Stage 3
5.6
2.0
3.6
5.1
1.8
3.3
Other financial assets - in scope - amortised cost
124.9
-
124.9
156.4
-
156.4
Other financial assets - in scope - FVOCI
28.3
-
28.3
16.8
-
16.8
Total other financial assets - in scope
153.2
-
153.2
173.2
-
173.2
Stage 1
152.0
-
152.0
172.4
-
172.4
Stage 2
1.2
-
1.2
0.8
-
0.8
Out of scope of IFRS 9 ECL framework
8.5
na
8.5
4.0
na
4.0
Loans to customers - out of scope - amortised cost
(0.4)
na
(0.4)
(0.4)
na
(0.4)
Loans to banks - out of scope - amortised cost
0.3
na
0.3
0.2
na
0.2
Other financial assets - out of scope - amortised cost
8.3
na
8.3
4.1
na
4.1
Other financial assets - out of scope - FVOCI
0.3
na
0.3
0.1
na
0.1
na = not applicable
\n
The assets outside the scope of IFRS 9 ECL framework
\n
were as follows:
\n
\ue001
Settlement balances, items in the course of collection,
\n
cash balances and other non-credit risk assets of \u00a38.6
\n
billion (2022 \u2013 \u00a34.3 billion). These were assessed as
\n
having no ECL unless there was evidence that they
\n
were defaulted.
\n
\ue001
Equity shares of \u00a30.3 billion (2022 \u2013 \u00a30.4 billion) as not
\n
within the IFRS 9 ECL framework by definition.
\n
\ue001
Fair value adjustments on loans hedged by interest rate
\n
swaps, where the underlying loan was within the IFRS 9
\n
ECL scope of \u00a3(0.3) billion (2022 \u2013 \u00a3(0.6) billion).
\n
Contingent liabilities and commitments
\n
In addition to contingent liabilities and commitments
\n
disclosed in Note 26 to the consolidated financial
\n
statements, reputationally-committed limits were also
\n
included in the scope of the IFRS 9 ECL framework. These
\n
were offset by \u00a30.1 billion (2022 \u2013 \u00a3(0.1) billion) out of scope
\n
balances primarily related to facilities that, if drawn, would
\n
not be classified as amortised cost or FVOCI, or undrawn
\n
limits relating to financial assets exclusions. Total
contingent
\n
liabilities (including financial guarantees) and commitments
\n
within IFRS 9 ECL scope of \u00a3132.0 billion (2022 \u2013 \u00a3137.2
\n
billion) comprised Stage 1 \u00a3120.6 billion (2022 \u2013 \u00a3119.2
\n
billion); Stage 2 \u00a310.7 billion (2022 \u2013 \u00a317.3 billion); and
\n
Stage 3 \u00a30.7 billion (2022 \u2013 \u00a30.7 billion).
\n
The ECL relating to off balance sheet exposures was \u00a30.1
\n
billion (2022 \u2013 \u00a30.1 billion). The total ECL in the remainder
\n
of the Credit risk section of \u00a33.6 billion (2022 \u2013 \u00a33.4 billion)
\n
included ECL for both on and off-balance sheet exposures
\n
for non-disposal groups.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segment analysis \u2013 portfolio summary (audited)
\n
The table below shows gross loans and ECL, by segment and stage, within the scope of the IFRS 9 ECL framework.
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans - amortised cost and FVOCI
(1)
Stage 1
182,297
17,565
119,047
29,677
348,586
Stage 2
21,208
906
15,771
6
37,891
Stage 3
3,133
258
2,162
10
5,563
Of which: individual
-
186
845
-
1,031
Of which: collective
3,133
72
1,317
10
4,532
Subtotal excluding disposal group loans
206,638
18,729
136,980
29,693
392,040
Disposal group loans
67
67
Total
29,760
392,107
ECL provisions
(2)
Stage 1
306
20
356
27
709
Stage 2
502
20
447
7
976
Stage 3
1,097
34
819
10
1,960
Of which: individual
-
34
298
-
332
Of which: collective
1,097
-
521
10
1,628
Subtotal excluding ECL provisions on disposal group loans
1,905
74
1,622
44
3,645
ECL provisions on disposal group loans
36
36
Total
80
3,681
ECL provisions coverage
(3)
Stage 1 (%)
0.17
0.11
0.30
0.09
0.20
Stage 2 (%)
2.37
2.21
2.83
nm
2.58
Stage 3 (%)
35.01
13.18
37.88
100.00
35.23
ECL provisions coverage excluding disposal group loans
0.92
0.40
1.18
0.15
0.93
ECL provisions coverage on disposal group loans
53.73
53.73
Total
0.27
0.94
Impairment (releases)/losses
ECL (release)/charge
(4)
465
14
94
5
578
Stage 1
(172)
(9)
(222)
6
(397)
Stage 2
440
15
182
8
645
Stage 3
197
8
134
(9)
330
Of which: individual
-
8
80
1
89
Of which: collective
197
-
54
(10)
241
Continuing operations
465
14
94
5
578
Discontinued operations
(6)
(6)
Total
(1)
572
Amounts written-off
188
2
122
7
319
Of which: individual
-
2
40
-
42
Of which: collective
188
-
82
7
277
\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segment analysis \u2013 portfolio summary (audited)
\n \n
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans - amortised cost and FVOCI
(1)
Stage 1
174,727
18,367
108,791
23,339
325,224
Stage 2
21,561
801
24,226
245
46,833
Stage 3
2,565
242
2,166
123
5,096
Of which: individual
-
168
905
48
1,121
Of which: collective
2,565
74
1,261
75
3,975
Subtotal excluding disposal group loans
198,853
19,410
135,183
23,707
377,153
Disposal group loans
1,502
1,502
Total
25,209
378,655
ECL provisions
(2)
Stage 1
251
21
342
18
632
Stage 2
450
14
534
45
1,043
Stage 3
917
26
747
69
1,759
Of which: individual
-
26
251
10
287
Of which: collective
917
-
496
59
1,472
Subtotal excluding ECL provisions on disposal group loans
1,618
61
1,623
132
3,434
ECL provisions on disposal group loans
53
53
Total
185
3,487
ECL provisions coverage
(3)
Stage 1 (%)
0.14
0.11
0.31
0.08
0.19
Stage 2 (%)
2.09
1.75
2.20
18.37
2.23
Stage 3 (%)
35.75
10.74
34.49
56.10
34.52
ECL provisions coverage excluding disposal group loans
0.81
0.31
1.20
0.56
0.91
ECL provisions coverage on disposal group loans
3.53
3.53
Total
0.73
0.92
Impairment (releases)/losses
ECL (release)/charge
(4)
229
(2)
122
(12)
337
Stage 1
(146)
2
(135)
(11)
(290)
Stage 2
268
(7)
108
24
393
Stage 3
107
3
149
(25)
234
Of which: individual
-
3
57
(6)
54
Of which: collective
107
-
92
(19)
180
Continuing operations
229
(2)
122
(12)
337
Discontinued operations
(71)
(71)
Total
(83)
266
Amounts written-off
216
15
224
27
482
Of which: individual
-
15
153
-
168
Of which: collective
216
-
71
27
314
\n
(1)
Includes loans to customers and banks.
\n
(2)
Includes \u00a39 million (2022 \u2013 \u00a33 million) related to assets classified as FVOCI and
\n
\u00a30.1 billion (2022 \u2013 \u00a30.1 billion) related to off-balance sheet exposures.
\n
(3)
ECL provisions coverage is calculated as ECL provisions divided by loans \u2013
\n
amortised cost and FVOCI. It is calculated on loans and total ECL provisions,
\n
including ECL for other (non-loan) assets and unutilised exposure. Some
\n
segments with a high proportion of debt securities or unutilised exposure may
\n
result in a not meaningful coverage ratio.
\n
(4)
Includes a \u00a316 million release (2022 \u2013 \u00a33 million charge) related to other
\n
financial assets, of which \u00a36 million charge (2022 \u2013 nil) related to assets
\n
classified as FVOCI, and includes a \u00a39 million release (2022 \u2013 \u00a35 million release)
\n
related to contingent liabilities.
\n
(5)
The table shows gross loans only and excludes amounts that were outside the
\n
scope of the ECL framework. Refer to the Financial instruments within the
\n
scope of the IFRS 9 ECL framework section for further details. Other financial
\n
assets within the scope of the IFRS 9 ECL framework were cash and balances
\n
at central banks totalling \u00a3103.1 billion (2022 \u2013 \u00a3143.3 billion) and debt
\n
securities of \u00a350.1 billion (2022 \u2013 \u00a329.9 billion).
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segment analysis \u2013 portfolio summary (audited)
\n
The table below shows Ulster Bank RoI disposal groups for Personal and Wholesale, by stage, for gross loans, off-balance sheet exposures and ECL. The tables in the rest of the Credit
\n
risk section are shown on a continuing basis and therefore exclude these exposures.
Off-balance sheet
Loans - amortised cost and FVOCI
Loan
Contingent
ECL provisions
Stage 1
Stage 2
Stage 3
Total
commitments
liabilities
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
2
4
2
8
-
-
-
1
1
2
Wholesale
6
15
38
59
1
2
3
7
24
34
Total
8
19
40
67
1
2
3
8
25
36
2022
Personal
-
-
-
-
-
-
-
-
-
-
Wholesale
1,269
193
40
1,502
413
19
17
19
17
53
Total
1,269
193
40
1,502
413
19
17
19
17
53
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segmental loans and impairment metrics (audited)
\n
The table below shows gross loans and ECL provisions, by days past due, by segment and stage, within the scope of the ECL framework.
Gross loans
ECL provisions
(2)
Stage 2
(1)
Stage 2
(1)
Not past
Not past
Stage 1
due
1-30 DPD
>30 DPD
Total
Stage 3
Total
Stage 1
due
1-30 DPD
>30 DPD
Total
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Retail Banking
182,297
20,128
738
342
21,208
3,133
206,638
306
453
15
34
502
1,097
1,905
Private Banking
17,565
772
77
57
906
258
18,729
20
18
1
1
20
34
74
Personal
14,296
158
73
24
255
209
14,760
3
2
-
-
2
20
25
Wholesale
3,269
614
4
33
651
49
3,969
17
16
1
1
18
14
49
Commercial & Institutional
119,047
14,689
657
425
15,771
2,162
136,980
356
415
21
11
447
819
1,622
Personal
2,268
15
21
7
43
52
2,363
2
-
-
-
-
16
18
Wholesale
116,779
14,674
636
418
15,728
2,110
134,617
354
415
21
11
447
803
1,604
Central items & other
29,677
5
-
1
6
10
29,693
27
6
-
1
7
10
44
Personal
4
2
-
1
3
6
13
5
1
-
1
2
9
16
Wholesale
29,673
3
-
-
3
4
29,680
22
5
-
-
5
1
28
Total loans
348,586
35,594
1,472
825
37,891
5,563
392,040
709
892
37
47
976
1,960
3,645
Of which:
Personal
198,865
20,303
832
374
21,509
3,400
223,774
316
456
15
35
506
1,142
1,964
Wholesale
149,721
15,291
640
451
16,382
2,163
168,266
393
436
22
12
470
818
1,681
2022
Retail Banking
174,727
20,653
605
303
21,561
2,565
198,853
251
406
14
30
450
917
1,618
Private Banking
18,367
730
39
32
801
242
19,410
21
14
-
-
14
26
61
Personal
15,182
122
35
16
173
207
15,562
5
1
-
-
1
17
23
Wholesale
3,185
608
4
16
628
35
3,848
16
13
-
-
13
9
38
Commercial & Institutional
108,791
22,520
956
750
24,226
2,166
135,183
342
491
26
17
534
747
1,623
Personal
2,475
17
17
7
41
46
2,562
3
1
-
-
1
12
16
Wholesale
106,316
22,503
939
743
24,185
2,120
132,621
339
490
26
17
533
735
1,607
Central items & other
23,339
234
4
7
245
123
23,707
18
42
1
2
45
69
132
Personal
54
70
3
6
79
13
146
1
11
1
2
14
11
26
Wholesale
23,285
164
1
1
166
110
23,561
17
31
-
-
31
58
106
Total loans
325,224
44,137
1,604
1,092
46,833
5,096
377,153
632
953
41
49
1,043
1,759
3,434
Of which:
Personal
192,438
20,862
660
332
21,854
2,831
217,123
260
419
15
32
466
957
1,683
Wholesale
132,786
23,275
944
760
24,979
2,265
160,030
372
534
26
17
577
802
1,751
\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segmental loans and impairment metrics (audited)
\n
The table below shows ECL and ECL provisions coverage, by days past due, by segment and stage, within the scope of the ECL framework.
ECL provisions coverage
ECL
Stage 2
(1,2)
Total (release)
Amounts
Stage 1
Not past due
1-30 DPD
>30 DPD
Total
Stage 3
Total
/charge
written-off
%
2023
%
%
%
%
%
%
\u00a3m
\u00a3m
Retail Banking
0.17
2.25
2.03
9.94
2.37
35.01
0.92
465
188
Private Banking
0.11
2.33
1.30
1.75
2.21
13.18
0.40
14
2
Personal
0.02
1.27
-
-
0.78
9.57
0.17
(3)
2
Wholesale
0.52
2.61
25.00
3.03
2.76
28.57
1.23
17
-
Commercial & Institutional
0.30
2.83
3.20
2.59
2.83
37.88
1.18
94
122
Personal
0.09
-
-
-
-
30.77
0.76
5
1
Wholesale
0.30
2.83
3.30
2.63
2.84
38.06
1.19
89
121
Central items & other
0.09
nm
-
nm
nm
nm
0.15
5
7
Personal
nm
nm
-
nm
nm
nm
nm
15
2
Wholesale
0.07
nm
-
-
nm
25.00
0.09
(10)
5
Total loans
0.20
2.51
2.51
5.70
2.58
35.23
0.93
578
319
Of which:
Personal
0.16
2.25
1.80
9.36
2.35
33.59
0.88
482
193
Wholesale
0.26
2.85
3.44
2.66
2.87
37.82
1.00
96
126
2022
Retail Banking
0.14
1.97
2.31
9.90
2.09
35.75
0.81
229
216
Private Banking
0.11
1.92
-
-
1.75
10.74
0.31
(2)
15
Personal
0.03
0.82
-
-
0.58
8.21
0.15
(3)
2
Wholesale
0.50
2.14
-
-
2.07
25.71
0.99
1
13
Commercial & Institutional
0.31
2.18
2.72
2.27
2.20
34.49
1.20
122
224
Personal
0.12
5.88
-
-
2.44
26.09
0.62
4
2
Wholesale
0.32
2.18
2.77
2.29
2.20
34.67
1.21
118
222
Central items & other
0.08
17.95
25.00
28.57
18.37
56.10
0.56
(12)
27
Personal
1.85
15.71
33.33
33.33
17.72
84.62
17.81
11
1
Wholesale
0.07
18.90
-
-
18.67
52.73
0.45
(23)
26
Total loans
0.19
2.16
2.56
4.49
2.23
34.52
0.91
337
482
Of which:
Personal
0.14
2.01
2.27
9.64
2.13
33.80
0.78
241
221
Wholesale
0.28
2.29
2.75
2.24
2.31
35.41
1.09
96
261
\n
(1)
30 DPD \u2013 30 days past due, the mandatory 30 days past due backstop as prescribed by the IFRS 9 guidance for a SICR.
\n
(2)
Some segments with a high proportion of debt securities or unutilised exposure may result in a not meaningful coverage ratio.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segmental loans and impairment metrics (audited)
\n
\ue001
Retail Banking
\u2013 Balance sheet growth continued during H2 2023, although at a
\n
reduced pace compared to H1 2023, reflecting the wider UK mortgage market
\n
trends. Unsecured balances growth in H2 2023, primarily in credit cards, was a
\n
continuation of the strong customer demand seen in the first half of the year.
\n
Lending criteria and affordability assumptions continue to be reviewed to ensure
\n
new business is assessed appropriately in the higher interest rate and inflationary
\n
environment. While portfolio performance continued to remain stable, total ECL
\n
coverage increased. The rise in coverage was reflective of increased Stage 3 ECL
\n
on unsecured portfolios, mainly due to reduced write-off activity, however, Stage 3
\n
inflows were higher this year, in line with growth and normalisation of risk
\n
parameters. The modest increase in good book coverage during the year reflected
\n
a slight increase in early arrears levels and a rise in the unsecured mix of the
\n
portfolio. Furthermore, post model adjustments to capture increased affordability
\n
pressures on customers due to high inflation and interest rates have increased
\n
during the year, ensuring ECL reflects the continued uncertainty despite modelled
\n
ECL reductions due to improved forward-looking economic updates since the end
\n
of 2022.
\n
\ue001
Commercial & Institutional
\u2013 Growth in exposure in Commercial & Institutional was
\n
driven by increased exposure to financial institutions, partially offset by reductions
\n
in other sectors including retail. There were also continued repayments of COVID-
\n
19 government lending schemes, and strategic reductions in certain sectors.
\n
Sector appetite continues to be reviewed regularly, with particular focus on sector
\n
clusters and sub-sectors that are vulnerable to inflationary and supply chain
\n
pressures or deemed to represent a heightened risk. Stage 2 ECL reduced due to
\n
positive portfolio performance and improvements in the latest economic scenarios.
\n
Coverage decreased due to portfolio growth with ECL broadly flat, but coverage
\n
on Stage 1 and Stage 2 was significantly above pre-COVID-19 levels, reflecting
\n
continued economic uncertainty.
\n
\ue001
Other
\u2013 Balance sheet growth in 2023 compared to 2022 was mainly due to an
\n
increase in central items held in the course of treasury related management
\n
activities.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
\n
The table below shows financial assets and off-balance sheet exposures gross of ECL and related ECL provisions, impairment and past due by sector, asset quality and geographical
\n
region.
Personal
Wholesale
Mortgages (1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans by geography
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- UK
208,275
5,893
9,592
223,760
30,703
65,033
39,906
2,016
137,658
361,418
- RoI
-
11
3
14
9
888
279
-
1,176
1,190
- Other Europe
-
-
-
-
375
5,096
7,865
399
13,735
13,735
- RoW
-
-
-
-
120
6,322
9,037
218
15,697
15,697
Loans by stage
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- Stage 1
188,140
3,742
6,983
198,865
27,316
63,690
56,105
2,610
149,721
348,586
- Stage 2
17,854
2,022
1,633
21,509
3,270
12,145
966
1
16,382
37,891
- Stage 3
2,281
140
979
3,400
621
1,504
16
22
2,163
5,563
- Of which: individual
122
-
20
142
240
625
2
22
889
1,031
- Of which: collective
2,159
140
959
3,258
381
879
14
-
1,274
4,532
Loans - past due analysis
(2)
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- Not past due
205,405
5,743
8,578
219,726
30,264
74,052
56,735
2,633
163,684
383,410
- Past due 1-30 days
1,178
41
71
1,290
491
2,222
332
-
3,045
4,335
- Past due 31-90 days
518
38
112
668
179
437
12
-
628
1,296
- Past due 91-180 days
445
32
103
580
42
71
2
-
115
695
- Past due >180 days
729
50
731
1,510
231
557
6
-
794
2,304
Loans - Stage 2
17,854
2,022
1,633
21,509
3,270
12,145
966
1
16,382
37,891
- Not past due
16,803
1,971
1,529
20,303
3,071
11,287
932
1
15,291
35,594
- Past due 1-30 days
765
27
40
832
100
516
24
-
640
1,472
- Past due 31-90 days
286
24
64
374
99
342
10
-
451
825
Weighted average life
(3)
- ECL measurement (years)
9
3
6
6
6
6
2
-
6
6
Weighted average 12 months PDs
(3)
- IFRS 9 (%)
0.50
3.45
5.29
0.75
1.45
1.59
0.19
0.37
1.07
0.89
- Basel (%)
0.67
3.37
3.15
0.84
0.94
1.25
0.17
0.37
0.81
0.83
ECL provisions by geography
420
376
1,168
1,964
398
1,201
66
16
1,681
3,645
- UK
420
365
1,163
1,948
384
999
38
13
1,434
3,382
- RoI
-
11
5
16
-
6
1
-
7
23
- Other Europe
-
-
-
-
7
146
12
-
165
165
- RoW
-
-
-
-
7
50
15
3
75
75
\n
For the notes to this table refer to page 211.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
Personal
Wholesale
Mortgages
(1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
ECL provisions by stage
420
376
1,168
1,964
398
1,201
66
16
1,681
3,645
- Stage 1
88
76
152
316
102
234
44
13
393
709
- Stage 2
61
207
238
506
98
356
15
1
470
976
- Stage 3
271
93
778
1,142
198
611
7
2
818
1,960
- Of which: individual
12
-
14
26
60
242
2
2
306
332
- Of which: collective
259
93
764
1,116
138
369
5
-
512
1,628
ECL provisions coverage (%)
0.20
6.37
12.17
0.88
1.28
1.55
0.12
0.61
1.00
0.93
- Stage 1 (%)
0.05
2.03
2.18
0.16
0.37
0.37
0.08
0.50
0.26
0.20
- Stage 2 (%)
0.34
10.24
14.57
2.35
3.00
2.93
1.55
100.00
2.87
2.58
- Stage 3 (%)
11.88
66.43
79.47
33.59
31.88
40.63
43.75
9.09
37.82
35.23
ECL (release)/charge
35
193
254
482
34
58
6
(2)
96
578
- UK
35
184
249
468
42
61
(4)
(2)
97
565
- RoI
-
9
5
14
(2)
(8)
1
-
(9)
5
- Other Europe
-
-
-
-
(6)
55
11
-
60
60
- RoW
-
-
-
-
-
(50)
(2)
-
(52)
(52)
Amounts written-off
32
70
91
193
39
86
1
-
126
319
Loans by residual maturity
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- <1 year
3,375
3,398
3,169
9,942
5,696
25,312
43,497
489
74,994
84,936
- 1-5 year
9,508
2,506
5,431
17,445
17,216
32,573
11,616
1,872
63,277
80,722
- > 5 < 15 year
46,453
-
993
47,446
5,701
14,167
1,939
199
22,006
69,452
- > 15 year
148,939
-
2
148,941
2,594
5,287
35
73
7,989
156,930
Other financial assets by asset quality
(4)
-
-
-
-
1
2,689
26,816
123,683
153,189
153,189
- AQ1-AQ4
-
-
-
-
1
2,689
26,084
123,683
152,457
152,457
- AQ5-AQ8
-
-
-
-
-
-
732
-
732
732
Off-balance sheet
9,843
17,284
8,462
35,589
14,205
59,716
22,221
227
96,369
131,958
- Loan commitments
9,843
17,284
8,417
35,544
13,861
57,081
20,765
227
91,934
127,478
- Financial guarantees
-
-
45
45
344
2,635
1,456
-
4,435
4,480
Off-balance sheet by asset quality
(4)
9,843
17,284
8,462
35,589
14,205
59,716
22,221
227
96,369
131,958
- AQ1-AQ4
9,099
448
7,271
16,818
10,916
36,380
20,644
165
68,105
84,923
- AQ5-AQ8
721
16,518
1,162
18,401
3,266
23,030
1,574
45
27,915
46,316
- AQ9
7
6
4
17
3
12
-
-
15
32
- AQ10
16
312
25
353
20
294
3
17
334
687
\n
For the notes to this table refer to page 211.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
Personal
Wholesale
Mortgages (1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2022 (5)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans by geography
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- UK
202,957
4,420
9,602
216,979
29,935
65,867
32,480
2,253
130,535
347,514
- RoI
-
40
104
144
34
1,102
74
-
1,210
1,354
- Other Europe
-
-
-
-
607
4,815
6,967
346
12,735
12,735
- RoW
-
-
-
-
460
6,276
8,617
197
15,550
15,550
Loans by stage
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- Stage 1
182,245
3,275
6,918
192,438
26,300
56,955
46,738
2,793
132,786
325,224
- Stage 2
18,787
1,076
1,991
21,854
4,035
19,590
1,353
1
24,979
46,833
- Stage 3
1,925
109
797
2,831
701
1,515
47
2
2,265
5,096
- Of which: individual
172
-
13
185
309
592
33
2
936
1,121
- Of which: collective
1,753
109
784
2,646
392
923
14
-
1,329
3,975
Loans - past due analysis
(2)
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- Not past due
200,634
4,335
8,825
213,794
29,986
74,251
47,824
2,796
154,857
368,651
- Past due 1-30 days
916
33
86
1,035
462
2,637
278
-
3,377
4,412
- Past due 31-90 days
510
29
104
643
297
563
5
-
865
1,508
- Past due 91-180 days
380
24
79
483
48
35
24
-
107
590
- Past due >180 days
517
39
612
1,168
243
574
7
-
824
1,992
Loans - Stage 2
18,787
1,076
1,991
21,854
4,035
19,590
1,353
1
24,979
46,833
- Not past due
17,951
1,039
1,872
20,862
3,595
18,335
1,344
1
23,275
44,137
- Past due 1-30 days
588
19
53
660
180
759
5
-
944
1,604
- Past due 31-90 days
248
18
66
332
260
496
4
-
760
1,092
Weighted average life
(3)
- ECL measurement (years)
8
2
6
5
4
6
3
-
5
5
Weighted average 12 months PDs
(3)
- IFRS 9 (%)
0.50
2.62
4.78
0.71
1.84
2.05
0.23
0.24
1.41
1.01
- Basel (%)
0.65
2.97
3.11
0.79
1.01
1.40
0.16
0.24
0.92
0.85
ECL provisions by geography
376
257
1,050
1,683
420
1,251
63
17
1,751
3,434
- UK
376
254
1,027
1,657
386
1,004
42
13
1,445
3,102
- RoI
-
3
23
26
13
66
1
-
80
106
- Other Europe
-
-
-
-
13
76
7
-
96
96
- RoW
-
-
-
-
8
105
13
4
130
130
\n
For the notes to this table refer to the following page.
\n
S
S
e
e
c
c
t
t
o
o
r
r
a
a
n
n
a
a
l
l
y
y
s
s
i
i
s
s
\u2013
\u2013
p
p
o
o
r
r
t
t
f
f
o
o
l
l
i
i
o
o
s
s
u
u
m
m
m
m
a
a
r
r
y
y
(
(
a
a
u
u
d
d
i
i
t
t
e
e
d
d
)
)
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n\n \n
Personal
Wholesale
Mortgages (1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2022 (5)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
ECL provisions by stage
376
257
1,050
1,683
420
1,251
63
17
1,751
3,434
- Stage 1
81
62
117
260
99
226
32
15
372
632
- Stage 2
62
122
282
466
98
465
14
-
577
1,043
- Stage 3
233
73
651
957
223
560
17
2
802
1,759
- Of which: individual
18
-
10
28
79
165
13
2
259
287
- Of which: collective
215
73
641
929
144
395
4
-
543
1,472
ECL provisions coverage (%)
0.19
5.76
10.82
0.78
1.35
1.60
0.13
0.61
1.09
0.91
- Stage 1 (%)
0.04
1.89
1.69
0.14
0.38
0.40
0.07
0.54
0.28
0.19
- Stage 2 (%)
0.33
11.34
14.16
2.13
2.43
2.37
1.03
-
2.31
2.23
- Stage 3 (%)
12.10
66.97
81.68
33.80
31.81
36.96
36.17
100.00
35.41
34.52
ECL (release)/charge
(74)
56
259
241
108
(27)
19
(4)
96
337
- UK
(74)
57
247
230
103
(51)
14
(4)
62
292
- RoI
-
(1)
12
11
1
(26)
(2)
-
(27)
(16)
- Other Europe
-
-
-
-
1
04
1
(1)
5
5
- RoW
-
-
-
-
3
46
6
1
56
56
Amounts written-off
31
67
123
221
34
187
40
-
261
482
Loans by residual maturity
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- <1 year
3,347
2,655
3,368
9,370
6,118
26,971
36,192
906
70,187
79,557
- 1-5 year
10,968
1,805
5,387
18,160
16,768
33,071
10,380
1,630
61,849
80,009
- > 5 < 15 year
46,500
-
950
47,450
5,259
13,392
1,379
184
20,214
67,664
- > 15 year
142,142
-
1
142,143
2,891
4,626
187
76
7,780
149,923
Other financial assets by asset quality
(4)
-
-
-
-
49
581
14,704
157,860
173,194
173,194
- AQ1-AQ4
-
-
-
-
-
567
14,156
157,860
172,583
172,583
- AQ5-AQ8
-
-
-
-
49
14
548
-
611
611
Off-balance sheet
18,782
15,848
8,547
43,177
14,308
59,718
19,555
268
93,849
137,026
- Loan commitments
18,782
15,848
8,496
43,126
13,895
56,500
18,223
268
88,886
132,012
- Financial guarantees
-
-
51
51
413
3,218
1,332
-
4,963
5,014
Off-balance sheet by asset quality
(4)
18,782
15,848
8,547
43,177
14,308
59,718
19,555
268
93,849
137,026
- AQ1-AQ4
17,676
436
7,353
25,465
11,573
37,265
17,899
205
66,942
92,407
- AQ5-AQ8
1,089
15,048
1,170
17,307
2,706
22,094
1,655
62
26,517
43,824
- AQ9
2
74
4
80
4
25
-
-
29
109
- AQ10
15
290
20
325
25
334
1
1
361
686
\n
(1)
Includes a portion of Private Banking lending secured against residential real estate, in line with ECL calculation methodology. Private Banking and RBS International mortgages are reported in UK, reflecting the country of lending origination and includes
\n
crown dependencies.
\n
(2)
30 DPD \u2013 30 days past due, the mandatory 30 days past due backstop as prescribed by the IFRS 9 guidance for a SICR.
\n
(3)
Not within the scope of the Independent auditors\u2019 report.
\n
(4)
AQ bandings are based on Basel PDs and mapping is as follows:
\n\n \n
Internal asset quality band
Probability of default range
Indicative S&P rating
Internal asset quality band
Probability of default range
Indicative S&P rating
AQ1
0% - 0.034%
AAA to AA
AQ6
1.076% - 2.153%
BB- to B+
AQ2
0.034% - 0.048%
AA to AA-
AQ7
2.153% - 6.089%
B+ to B
AQ3
0.048% - 0.095%
A+ to A
AQ8
6.089% - 17.222%
B- to CCC+
AQ4
0.095% - 0.381%
BBB+ to BBB-
AQ9
17.222% - 100%
CCC to C
AQ5
0.381% - 1.076%
BB+ to BB
AQ10
100%
D
\n
\u00a30.3 billion (2022 \u2013 \u00a30.3 billion) of AQ10 Personal balances primarily relate to loan commitments, the drawdown of which is effectively prohibited.
\n
(5)
Previously published sectors for the Wholesale portfolio have been re-presented to reflect updated internal sector reporting.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
\n
The table below shows ECL by stage, for the Personal portfolio and selected sectors of the Wholesale portfolio including those that contain an element of exposure classified as
\n
heightened climate-related risk.
\n\n \n
Loans - amortised cost and FVOCI
Off-balance sheet
ECL provisions
Stage 1
Stage 2
Stage 3
Total
Loan commitments
Contingent liabilities
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
198,865
21,509
3,400
223,774
35,544
45
316
506
1,142
1,964
Mortgages
188,140
17,854
2,281
208,275
9,843
-
88
61
271
420
Credit cards
3,742
2,022
140
5,904
17,284
-
76
207
93
376
Other personal
6,983
1,633
979
9,595
8,417
45
152
238
778
1,168
Wholesale
149,721
16,382
2,163
168,266
91,934
4,435
393
470
818
1,681
Property
27,316
3,270
621
31,207
13,861
344
102
98
198
398
Financial institutions
(1)
56,105
966
16
57,087
20,765
1,456
44
15
7
66
Sovereigns
2,610
1
22
2,633
227
-
13
1
2
16
Other wholesale
63,690
12,145
1,504
77,339
57,081
2,635
234
356
611
1,201
Of which:
Agriculture
3,851
1,011
90
4,952
950
21
19
35
34
88
Airlines and aerospace
1,525
454
3
1,982
1,788
178
4
7
2
13
Automotive
7,223
1,008
76
8,307
3,844
103
18
18
26
62
Building materials
1,204
282
72
1,558
1,475
72
6
9
8
23
Chemicals
354
62
4
420
785
13
1
9
1
11
Industrials
2,269
543
70
2,882
2,896
148
10
18
23
51
Land transport & logistics
4,231
578
61
4,870
3,025
184
11
14
18
43
Leisure
4,394
2,245
288
6,927
1,887
145
31
74
91
196
Mining & metals
241
32
4
277
545
7
-
-
4
4
Oil and gas
915
125
27
1,067
1,959
237
3
2
29
34
Power utilities
5,604
418
40
6,062
8,257
554
13
13
24
50
Retail
5,846
1,318
224
7,388
4,717
429
23
35
118
176
Shipping
207
35
3
245
71
31
-
1
2
3
Water & waste
3,536
173
13
3,722
1,904
84
4
5
4
13
Total
348,586
37,891
5,563
392,040
127,478
4,480
709
976
1,960
3,645
\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
\n\n \n
Loans - amortised cost and FVOCI
Off-balance sheet
ECL provisions
Stage 1
Stage 2
Stage 3
Total
Loan commitments
Contingent liabilities
Stage 1
Stage 2
Stage 3
Total
2022 (2)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
192,438
21,854
2,831
217,123
43,126
51
260
466
957
1,683
Mortgages
182,245
18,787
1,925
202,957
18,782
-
81
62
233
376
Credit cards
3,275
1,076
109
4,460
15,848
-
62
122
73
257
Other personal
6,918
1,991
797
9,706
8,496
51
117
282
651
1,050
Wholesale
132,786
24,979
2,265
160,030
88,886
4,963
372
577
802
1,751
Property
26,300
4,035
701
31,036
13,895
413
99
98
223
420
Financial institutions
(1)
46,738
1,353
47
48,138
18,223
1,332
32
14
17
63
Sovereigns
2,793
1
2
2,796
269
-
15
-
2
17
Other wholesale
56,955
19,590
1,515
78,060
56,499
3,218
226
465
560
1,251
Of which:
Agriculture
3,646
1,034
93
4,773
968
24
21
31
43
95
Airlines and aerospace
483
1,232
19
1,734
1,715
174
2
40
8
50
Automotive
5,776
1,498
30
7,304
4,009
99
18
18
11
47
Building materials
1,244
284
15
1,543
1,407
78
7
7
7
21
Chemicals
384
117
1
502
650
12
1
2
1
4
Industrials
2,148
1,037
82
3,267
3,135
195
10
16
24
50
Land transport & logistics
3,863
1,304
72
5,239
3,373
190
13
34
18
65
Leisure
3,416
3,787
260
7,463
1,907
102
27
147
115
289
Mining & metals
173
230
5
408
545
5
-
1
5
6
Oil and gas
953
159
60
1,172
2,157
248
3
3
31
37
Power utilities
4,228
406
6
4,640
6,960
1,182
9
11
1
21
Retail
6,497
1,746
150
8,393
4,682
416
21
29
68
118
Shipping
161
151
14
326
110
22
-
7
6
13
Water & waste
3,026
335
7
3,368
2,143
101
4
4
4
12
Total
325,224
46,833
5,096
377,153
132,012
5,014
632
1,043
1,759
3,434
\n
(1)
Financial institutions include transactions, such as securitisations, where the underlying assets may be in other sectors.
\n
(2)
Previously published sectors for the Wholesale portfolio have been re-presented to reflect updated internal sector reporting.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Wholesale forbearance (audited)
\n
The table below shows Wholesale forbearance, Heightened Monitoring and Risk of Credit Loss by sector. Personal forbearance is disclosed in the Personal portfolio section. The table
\n
shows current exposure but reflects risk transfers where there is a guarantee by another customer.
\n\n \n
Property
Financial institution
Sovereign
Other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Forbearance (flow)
916
56
22
2,568
3,562
Forbearance (stock)
1,071
70
22
3,752
4,915
Heightened Monitoring and Risk of Credit Loss
1,089
276
-
4,119
5,484
2022
Forbearance (flow)
723
105
-
2,598
3,426
Forbearance (stock)
900
107
-
4,742
5,749
Heightened Monitoring and Risk of Credit Loss
920
112
-
3,501
4,533
\n
Sector analysis \u2013 portfolio summary (audited)
\n
\ue001
Loans by geography and sector
\u2013 In line with NatWest Group\u2019s strategic focus,
\n
exposures continued to be mainly in the UK. Exposure to the Republic of Ireland
\n
reduced during 2023 as part of the phased withdrawal of Ulster Bank RoI.
\n
\ue001
Loans by stage
\u2013 There was an increase in Stage 1 exposure due to mortgage
\n
growth in Personal and lending to financial institutions in Wholesale. An overall
\n
improvement in forward-looking economics during 2023 drove a reduction in IFRS 9
\n
PDs, meaning a reduction in the proportion of most portfolio segments triggering PD
\n
deterioration rules, resulting in a net migration of exposures from Stage 2 into Stage
\n
1 during 2023.
\n
\ue001
Loans \u2013 Past due analysis
\u2013 In Personal, the value of arrears increased during 2023
\n
as expected with portfolio growth in recent years and adjustments to lending criteria
\n
following COVID-19.
\n
\ue001
Weighted average 12 months PDs
\u2013
IFRS 9 PDs remained broadly stable overall, with
\n
some increases in Personal portfolios, most notably in credit cards which had a PD
\n
modelling update. In Wholesale, some reductions were observed in PDs in corporate
\n
and property portfolios, linked to the economic scenario updates during the year.
\n
\ue001
ECL provisions by stage
\u2013
Portfolio growth was the key driver behind an increase in
\n
Stage 1 provisions. Stage 2 provisions reduced during 2023, reflecting broadly stable
\n
credit performance of the portfolios and the effect of improved 2023 forward-looking
\n
scenario updates. As outlined previously, Stage 3 provisions have yet to be materially
\n
affected by the customer affordability risks linked to the current economic
\n
uncertainty prevalent in the UK. However, there has been an increase in Stage 3
\n
ECL linked to a modest rise in default levels and reduced write-off activity.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Wholesale support schemes
\n
(1)
\n
The table below shows the sector split for the Bounce Back Loans Scheme (BBLS) as well as associated debt split by stage. Associated debt refers to non-BBLS lending to customers
\n
who also have BBLS lending.
\n\n \n
Gross carrying amount
BBL
Associated debt
ECL on associated debt
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
31 December 2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Wholesale
Property
661
150
27
838
687
202
82
971
7
13
33
Financial institutions
16
3
1
20
7
2
-
9
-
-
-
Other
2,210
495
231
2,936
2,080
849
163
3,092
24
53
93
Total
2,887
648
259
3,794
2,774
1,053
245
4,072
31
66
126
Gross carrying amount
BBL
Associated debt
ECL on associated debt
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
31 December 2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Wholesale
Property
966
186
48
1,200
874
205
60
1,139
10
14
26
Financial institutions
24
4
-
28
9
2
-
11
-
-
1
Other
3,233
641
342
4,216
2,338
884
117
3,339
26
57
70
Total
4,223
831
390
5,444
3,221
1,091
177
4,489
36
71
97
\n
(1)
Not within the scope of the independent auditors\u2019 report.
\n
Sector analysis \u2013 portfolio summary (audited)
\n
\ue001
ECL provisions coverage
\u2013
Overall provisions coverage remained broadly consistent
\n
with 31 December 2022. This was mainly a result of continued stable portfolio
\n
performance and MES economics-driven modelled ECL releases contrasted with
\n
increased economic uncertainty, captured through ECL post model adjustments.
\n
\ue001
ECL charge \u2013
The impairment charge for 2023 of \u00a3578 million primarily reflected the
\n
underlying Stage 3 charges and portfolio growth.
\n
\ue001
Loans by residual maturity
\u2013
The maturity profile of the portfolios remained
\n
consistent with prior periods. In mortgages, as expected, the vast majority of
\n
exposures were greater than five years. In unsecured lending, cards and other
\n
exposures were concentrated in less than five years. In Wholesale, more than 80% of
\n
exposures mature in less than five years.
\n
\ue001
Other financial assets by asset quality
\u2013 Consisting almost entirely of cash and
\n
balances at central banks and debt securities held in the course of treasury related
\n
management activities, these assets were mainly within the AQ1-AQ4 bands.
\n
\ue001
Off-balance sheet exposures by asset quality
\u2013
In Personal, undrawn exposures were
\n
reflective of available credit lines in credit cards and current accounts. Additionally,
\n
the mortgage portfolio had undrawn exposures, where a formal offer had been made
\n
to a customer but had not yet drawn down; the value decreased in line with the
\n
pipeline of offers. There was also a legacy portfolio of flexible mortgages where a
\n
customer had the right and ability to draw down further funds.
\n
The asset quality was aligned to the wider portfolio. In Wholesale, off-balance sheet
\n
exposures increased due to a rise in securitisations lending within financial
\n
institutions, with asset quality in line with existing off-balance sheet exposures.
\n
\ue001
Wholesale forbearance \u2013
Increased levels of forbearance were observed in Q4 2023.
\n
The retail, leisure, commercial real estate and power and utilities sectors represented
\n
the largest share of completed forbearance. Labour shortages/increased cost of
\n
labour, rising energy prices, supply chain issues and higher interest rates continue to
\n
weigh on these sectors. Payment holidays and covenant waivers were the most
\n
common forms of forbearance granted.
\n
\ue001
Heightened Monitoring and Risk of Credit Loss \u2013
Risk of Credit Loss framework
\n
exposures and inflows increased in 2023 compared to 2022. Heightened inflows were
\n
seen in the mobility and logistics, renewables and utilities, and technology, media and
\n
telecoms sector clusters, offset by decreases in consumer industries. Heightened
\n
inflows were seen in the automotive, media, power utilities and leveraged funds
\n
sectors, partially offset by leisure, airlines and aerospace and land transport and
\n
logistics. Retail SME customers do not form part of the Wholesale Risk of Credit Loss
\n
framework. Customers in financial difficulty within this group are managed by
\n
specialist problem debt management teams. The balances in arrears and recoveries
\n
remained flat in 2023, with inflows continuing to be driven by Bounce Back Loan
\n
Scheme (BBLS) exposures. Excluding BBLS balances, the debt value for this
\n
population that are in problem debt/recoveries also remained stable.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Credit risk enhancement and mitigation (audited)
\n
The table below shows exposures of modelled portfolios within the scope of the ECL framework and related credit risk enhancement and mitigation (CREM).
\n\n \n
Gross
Maximum credit risk
CREM by type
CREM coverage
Exposure post CREM
exposure
ECL
Total
Stage 3
Financial (1)
Property
Other (2)
Total
Stage 3
Total
Stage 3
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets
Cash and balances at central banks
103.1
-
103.1
-
-
-
-
-
-
103.1
-
Loans - amortised cost
(3)
392.0
3.5
388.5
3.5
37.4
248.2
21.8
307.4
3.1
81.1
0.4
Personal
(4)
223.7
1.9
221.8
2.2
0.9
207.5
-
208.4
2.0
13.4
0.2
Wholesale
(5)
168.3
1.6
166.7
1.3
36.5
40.7
21.8
99.0
1.1
67.7
0.2
Debt securities
50.1
-
50.1
-
-
-
-
-
-
50.1
-
Total financial assets
545.2
3.5
541.7
3.5
37.4
248.2
21.8
307.4
3.1
234.3
0.4
Contingent liabilities and commitments
Personal
(6,7)
35.6
-
35.6
0.3
1.0
4.0
-
5.0
-
30.6
0.3
Wholesale
96.4
0.1
96.3
0.4
2.6
7.1
4.1
13.8
0.1
82.5
0.3
Total off-balance sheet
132.0
0.1
131.9
0.7
3.6
11.1
4.1
18.8
0.1
113.1
0.6
Total exposure
677.2
3.6
673.6
4.2
41.0
259.3
25.9
326.2
3.2
347.4
1.0
2022
Financial assets
Cash and balances at central banks
143.2
-
143.2
-
-
-
-
-
-
143.2
-
Loans - amortised cost
(3)
377.2
3.3
373.9
3.4
31.8
243.1
21.7
296.6
3.0
77.3
0.4
Personal
(4)
217.2
1.7
215.5
1.9
0.9
202.1
-
203.0
1.7
12.5
0.2
Wholesale
(5)
160.0
1.6
158.4
1.5
30.9
41.0
21.7
93.6
1.3
64.8
0.2
Debt securities
29.9
-
29.9
-
-
-
-
-
-
29.9
-
Total financial assets
550.3
3.3
547.0
3.4
31.8
243.1
21.7
296.6
3.0
250.4
0.4
Contingent liabilities and commitments
Personal
(6,7)
43.2
-
43.2
0.3
0.7
4.4
-
5.1
-
38.1
0.3
Wholesale
93.9
0.1
93.8
0.4
3.1
7.4
4.0
14.5
0.1
79.3
0.3
Total off-balance sheet
137.0
0.1
136.9
0.7
3.8
11.8
4.0
19.6
0.1
117.3
0.6
Total exposure
687.3
3.4
683.9
4.1
35.6
254.9
25.7
316.2
3.1
367.7
1.0
\n
(1)
Includes cash and securities collateral.
\n
(2)
Includes guarantees, charges over trade debtors, other asset finance related physical collateral as well as the amount by which credit risk exposure is reduced through netting arrangements, mainly cash management pooling, which give NatWest Group a
\n
legal right to set off the financial asset against a financial liability due to the same counterparty.
\n
(3)
NatWest Group holds collateral in respect of individual loans \u2013 amortised cost to banks and customers. This collateral includes mortgages over property (both personal and commercial); charges over business assets such as plant and equipment;
\n
inventories and trade debtors; and guarantees of lending from parties other than the borrower. NatWest Group obtains collateral in the form of securities in reverse repurchase agreements. Collateral values are capped at the value of the loan.
\n
(4)
Stage 3 mortgage exposures have relatively limited uncovered exposure reflecting the security held. On unsecured credit cards and other personal borrowing, the residual uncovered amount reflects historical experience of continued cash recovery post
\n
default through ongoing engagement with customers.
\n
(5)
Stage 3 exposures post credit risk enhancement and mitigation in Wholesale mainly represent enterprise value and the impact of written down collateral values; an individual assessment to determine ECL will consider multiple scenarios and in some
\n
instances allocate a probability weighting to a collateral value in excess of the written down value.
\n
(6)
\u00a30.3 billion (2022
\u2013
\u00a30.3 billion) Personal Stage 3 balances primarily relate to loan commitments, the draw down of which is effectively prohibited.
\n
(7)
The Personal gross exposure value includes \u00a35.9 billion (2022
\u2013
\u00a314.0 billion) in respect of pipeline mortgages where a committed offer has been made to a customer but where the funds have not yet been drawn down. When drawn down, the exposure
\n
would be covered by a security over the borrower\u2019s property.
Personal portfolio (audited)
Disclosures in the Personal portfolio section include drawn exposure (gross of provisions).
\n \n
2023
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
Personal lending
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgages
192,915
13,222
2,200
-
208,337
Of which:
Owner occupied
174,167
11,629
1,464
-
187,260
Buy-to-let
18,748
1,593
736
-
21,077
Interest only
25,805
11,631
461
-
37,897
Mixed
(1)
10,068
25
10
-
10,103
ECL provisions
(2)
397
12
6
-
415
Other personal lending
(3)
13,758
1,395
222
13
15,388
ECL provisions
(2)
1,508
12
2
16
1,538
Total personal lending
206,673
14,617
2,422
13
223,725
Mortgage LTV ratios
- Owner occupied
55%
59%
56%
-
55%
- Stage 1
55%
59%
54%
-
55%
- Stage 2
54%
63%
54%
-
54%
- Stage 3
48%
61%
72%
-
49%
- Buy-to-let
52%
59%
52%
-
53%
- Stage 1
52%
60%
52%
-
53%
- Stage 2
50%
57%
49%
-
50%
- Stage 3
50%
53%
58%
-
51%
Gross new mortgage lending
29,664
1,400
180
-
31,244
Of which:
Owner occupied
27,718
1,267
136
-
29,121
- LTV > 90%
1,173
-
-
-
1,173
Weighted average LTV
(4)
70%
63%
69%
-
70%
Buy-to-let
1,946
133
44
-
2,123
Weighted average LTV
(4)
58%
65%
52%
-
58%
Interest only
2,680
1,224
23
-
3,927
Mixed
(1)
1,568
2
-
-
1,570
Mortgage forbearance
Forbearance flow
(5)
569
22
9
-
600
Forbearance stock
1,416
28
15
-
1,459
Current
950
10
6
-
966
1-3 months in arrears
116
2
2
-
120
>3 months in arrears
350
16
7
-
373
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n\n \n
2022
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
Personal lending
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgages
186,891
13,709
2,357
-
202,957
Of which:
Owner occupied
168,790
12,096
1,541
-
182,427
Buy-to-let
18,101
1,613
816
-
20,530
Interest only
21,469
11,877
519
-
33,865
Mixed
(1)
9,768
1
16
-
9,785
ECL provisions
(2)
355
9
6
-
370
Other personal lending
(3)
11,935
1,853
267
143
14,198
ECL provisions
(2)
1,257
15
3
26
1,301
Total personal lending
198,826
15,562
2,624
143
217,155
Mortgage LTV ratios
- Owner occupied
52%
59%
56%
-
53%
- Stage 1
52%
59%
56%
-
53%
- Stage 2
52%
61%
60%
-
52%
- Stage 3
45%
59%
74%
-
47%
- Buy-to-let
50%
59%
53%
-
51%
- Stage 1
51%
59%
53%
-
52%
- Stage 2
49%
53%
48%
-
49%
- Stage 3
47%
55%
57%
-
50%
Gross new mortgage lending
41,227
2,968
327
-
44,522
Of which:
Owner occupied
36,305
2,701
221
-
39,227
- LTV > 90%
1,265
-
-
-
1,265
Weighted average LTV
(4)
69%
65%
65%
-
69%
Buy-to-let
4,922
267
106
-
5,295
Weighted average LTV
(4)
64%
66%
60%
-
64%
Interest only
5,323
2,664
62
-
8,049
Mixed
(1)
2,309
-
2
-
2,311
Mortgage forbearance
Forbearance flow
(5)
182
7
4
-
193
Forbearance stock
1,015
16
8
-
1,039
Current
649
8
6
-
663
1-3 months in arrears
133
-
2
-
135
>3 months in arrears
233
8
-
-
241
\n
(1)
Includes accounts which have an interest only sub-account and a capital and
\n
interest sub-account to provide a more comprehensive view of interest only
\n
exposures.
\n
(2)
Retail Banking excludes a non-material amount of lending and provisions held
\n
on relatively small legacy portfolios.
\n
(3)
Comprises unsecured lending except for Private Banking, which includes both
\n
secured and unsecured lending. It excludes loans that are commercial in
\n
nature.
\n
(4)
New mortgage lending LTV reflects the LTV at the time of lending.
\n
(5)
Forbearance flows only include an account once per year, although some
\n
accounts may be subject to multiple forbearance deals. Forbearance deals post
\n
default are excluded from these flows.
\n
For the key points to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n
Mortgage LTV distribution by stage
\n
The table below shows gross mortgage lending and related ECL by LTV band for the Retail Banking portfolio. Mortgage lending not within the scope of governance and post model
\n
adjustments reflected portfolios carried at fair value.
\n\n \n
Mortgages
ECL provisions
ECL provisions coverage
Retail Banking
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
\u226450%
68,092
7,447
1,145
76,684
27
18
134
179
0.0
0.2
11.7
0.2
>50% and
\u226470%
65,777
7,011
767
73,555
35
26
85
146
0.1
0.4
11.1
0.2
>70% and
\u226480%
22,537
1,633
113
24,283
13
7
15
35
0.1
0.4
13.3
0.1
>80% and
\u226490%
13,583
1,143
47
14,773
9
6
7
22
0.1
0.5
14.9
0.1
>90% and
\u2264100%
3,008
370
14
3,392
2
3
3
8
0.1
0.8
21.4
0.2
>100%
22
6
11
39
-
-
5
5
-
-
45.5
12.8
Total with LTVs
173,019
17,610
2,097
192,726
86
60
249
395
0.1
0.3
11.9
0.2
Other
186
1
2
189
1
-
1
2
0.5
-
50.0
1.1
Total
173,205
17,611
2,099
192,915
87
60
250
397
0.1
0.3
11.9
0.2
2022
\u226450%
71,321
8,257
1,036
80,614
26
20
121
167
-
0.2
11.7
0.2
>50% and
\u226470%
68,178
7,792
616
76,586
32
30
71
133
-
0.4
11.5
0.2
>70% and
\u226480%
17,602
1,602
62
19,266
7
6
11
24
-
0.4
17.7
0.1
>80% and
\u226490%
7,918
944
17
8,879
6
5
5
16
0.1
0.5
29.4
0.2
>90% and
\u2264100%
1,409
18
6
1,433
3
-
2
5
0.2
-
33.3
0.3
>100%
35
7
10
52
2
-
4
6
5.7
-
40.0
11.5
Total with LTVs
166,463
18,620
1,747
186,830
76
61
214
351
-
0.3
12.3
0.2
Other
59
1
1
61
3
-
1
4
5.1
-
100.0
6.6
Total
166,522
18,621
1,748
186,891
79
61
215
355
-
0.3
12.3
0.2
\n
\ue001
Growth in the mortgage portfolio decreased in the second half of 2023, consistent with
trends in the wider UK mortgage market
.
\n
\ue001
Mortgage portfolio LTV increased, partly due to the higher relative proportion of new business from recent years\u2019 strong lending performance, as well as easing of house prices reflected in the
\n
Office for National Statistics house price indices.
\n
\ue001
The proportion of overall interest only mortgage balances increased in 2023 driven by the implementation of the Mortgage Charter. Interest only new lending reduced during the year
\n
consistent with the reduction in buy-to-let new lending.
\n
\ue001
Portfolios and new business were closely monitored against agreed operating limits. These included loan-to-value ratios, buy-to-let concentrations, new-build concentrations and credit quality.
\n
Lending criteria, affordability calculations and assumptions for new lending were adjusted during the year, considering inflationary pressure and interest rate rises, to maintain credit quality in
\n
line with appetite and to ensure customers are assessed fairly.
\n
\ue001
Support for customers was proactively promoted during the year. The flow and stock of forbearance increased during the year. The reported forbearance values included customers who
\n
used Mortgage Charter support if indicators of financial stress were already present before Mortgage Charter support was taken. The number of customers requesting support outside of
\n
Mortgage Charter (primarily forbearance) increased gradually during the year, but remained within expectations.
\n
\ue001
Other personal lending balances increased during the year mainly as a result of credit card new business. Lending criteria were carefully managed and the credit quality (based on new
\n
business PD) of the new business written improved, compared to 2022.
\n
\ue001
As noted previously, ECL increased. For further details on the movements in ECL provisions at product level, refer to the Flow statements section.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n
Retail Banking mortgage LTV distribution by region
\n\n \n
The table below shows gross mortgage lending by LTV band for Retail Banking, by geographical region.
Flood risk (1)
Weighted
Lending at high/
\u226450%
50%\u226480%
80%\u2264100%
>100%
Total
average LTV
Other
Total
Total
very high risk (2)
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
%
%
South East
14,645
18,510
3,107
1
36,263
54
2
36,265
19
5.0
Greater London
14,689
18,044
2,366
1
35,100
53
3
35,103
18
6.1
Scotland
5,051
5,938
1,445
1
12,435
54
2
12,437
6
4.2
North West
7,314
8,629
1,881
2
17,826
54
2
17,828
9
4.9
South West
7,308
8,296
1,379
1
16,984
53
1
16,985
9
3.7
West Midlands
5,391
7,072
1,404
1
13,868
55
1
13,869
7
2.5
East of England
8,576
11,810
2,208
-
22,594
55
2
22,596
12
4.5
Rest of the UK
13,711
19,540
4,374
32
37,657
56
175
37,832
20
4.5
Total
76,685
97,839
18,164
39
192,727
54
188
192,915
100
4.7
2022
South East
15,856
17,670
1,396
1
34,923
51
3
34,926
19
4.1
Greater London
15,200
17,550
1,336
1
34,087
51
3
34,090
18
2.3
Scotland
5,024
6,174
1,163
1
12,362
54
1
12,363
7
3.2
North West
7,670
8,672
1,236
2
17,580
52
2
17,582
9
2.2
South West
7,874
7,922
627
-
16,423
50
1
16,424
9
3.0
West Midlands
5,477
7,014
862
1
13,354
53
1
13,355
7
1.2
East of England
9,241
11,492
987
2
21,722
52
2
21,724
12
2.1
Rest of the UK
14,312
19,408
2,712
43
36,475
54
48
36,523
19
3.2
Total
80,654
95,902
10,319
51
186,926
52
61
186,987
100
2.8
\n
(1)
Not within the scope of the independent auditors\u2019 report.
\n
(2)
Flood risk is modelled by calculating an estimated loss for each flood source different types of flooding (Fluvial, pluvial, tidal), annualised for each source and combined for a total flood score. Flood defences are considered where available. Flood scores are
\n
allocated per property based on the potential annualised loss (\u00a3) to a property dependent on the type, frequency and depth of flooding modelled across different return periods. The scoring ranges from 0 to 100, with 0 being lowest and 100 being the
\n
highest risk. A score of 61 and above is considered to be high risk and properties with a score of 81 and above considered to be very high risk after flood mitigants are taken into account.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n
Retail Banking fixed rate mortgages by roll-off date
(1)
\n
The table below shows gross fixed rate mortgage lending for Retail Banking, by roll-off date.
\n\n \n
2023
2022
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Retail Banking mortgages - gross exposure
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fixed rate roll-off
< 1 year
30,867
3,670
295
34,832
37,391
4,644
276
42,311
>1 year < 2 years
39,013
3,513
290
42,816
32,266
4,063
240
36,569
> 2 years
87,402
7,461
590
95,453
84,116
7,103
438
91,657
Total
157,282
14,644
1,175
173,101
153,773
15,810
954
170,537
\n
Retail Banking mortgages by Energy Performance Certificate (EPC) rating
\n
(1)
\n
The table below represents the energy efficiency of Retail Banking residential mortgages.
\n\n \n
31 December 2023
31 December 2022
Owner occupied
Buy-to-let
Total
Owner occupied
Buy-to-let
Total
EPC rating
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
A
547
13
560
424
12
436
B
21,566
1,458
23,024
19,874
1,342
21,216
C
29,764
5,712
35,476
28,049
5,228
33,277
D
46,924
6,056
52,980
47,497
6,033
53,530
E
16,027
1,557
17,584
17,153
1,687
18,840
F
3,360
62
3,422
3,691
86
3,777
G
736
16
752
789
21
810
Unclassified
55,243
3,874
59,117
51,313
3,692
55,005
Total
174,167
18,748
192,915
168,790
18,101
186,891
\n
(1)
Not within the scope of the independent auditors\u2019 report.
\n
(2)
As at 31 December 2023, \u00a3140.8 billion, 67.6%, of the total residential mortgages portfolio had Energy Performance Certificate (EPC) data available (2022 \u2013 \u00a3138.8 billion, 68.3%). Of which, 44.1% were rated as EPC A to C (2022 \u2013 41.6%).
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Commercial real estate (CRE)
\n
CRE LTV distribution by stage (audited)
\n
The table below shows CRE current exposure and related ECL by LTV band.
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
\u226450%
7,173
664
61
7,898
38
15
9
62
0.5
2.3
14.8
0.8
>50% and
\u226470%
3,165
619
94
3,878
22
21
18
61
0.7
3.4
19.1
1.6
>70% and
\u2264100%
319
112
84
515
3
6
21
30
0.9
5.4
25.0
5.8
>100%
241
6
26
273
1
1
16
18
0.4
16.7
61.5
6.6
Total with LTVs
10,898
1,401
265
12,564
64
43
64
171
0.6
3.1
24.2
1.4
Total portfolio average LTV
47%
51%
72%
48%
Other
(1)
2,189
390
45
2,624
10
7
19
36
0.5
1.8
42.2
1.4
Investment
13,087
1,791
310
15,188
74
50
83
207
0.6
2.8
26.8
1.4
Development
(2)
1,717
147
49
1,913
12
5
25
42
0.7
3.4
51.0
2.2
Total
14,804
1,938
359
17,101
86
55
108
249
0.6
2.8
30.1
1.5
2022
\u226450%
7,010
658
57
7,725
36
12
16
64
0.5
1.8
28.1
0.8
>50% and
\u226470%
3,515
798
43
4,356
23
18
12
53
0.7
2.3
27.9
1.2
>70% and
\u2264100%
259
82
156
497
1
3
42
46
0.4
3.7
26.9
9.1
>100%
102
10
23
135
1
1
14
16
1.0
10.0
60.9
11.8
Total with LTVs
10,886
1,548
279
12,713
61
34
84
179
0.6
2.2
30.1
1.4
Total portfolio average LTV
45%
52%
75%
47%
Other
(1)
1,800
627
55
2,482
9
15
27
51
0.5
2.4
49.1
2.0
Investment
12,686
2,175
334
15,195
70
49
111
230
0.6
2.3
33.2
1.5
Development
(2)
1,553
332
57
1,942
13
8
28
49
0.8
2.4
49.1
2.5
Total
14,239
2,507
391
17,137
83
57
139
279
0.6
2.3
35.6
1.6
\n
(1)
Relates mainly to business banking and unsecured corporate lending.
\n
(2)
Relates to the development of commercial and residential properties. LTV is not a meaningful measure for this type of lending activity.
\n
\ue001
O
O
verall
\u2013 The majority of the CRE portfolio was located and managed in the UK.
\n
Business appetite and strategy was aligned across NatWest Group.
\n
\ue001
2023 trends
\u2013
In H2 2023, conditions were impacted by the uncertain interest rate
\n
outlook. Investment volumes were at historic lows for much of 2023, and values
\n
continued to drift downwards in some sectors. There were some early signs of
\n
improving sentiment following a sharp reduction in medium-term interest rates, but
\n
valuations remain somewhat uncertain, particularly in the office sector
.
\n
\ue001
C
C
redit quality
\u2013
The CRE portfolio has coped well to date with the fall in capital values
\n
and increase in rates, with no significant increase to loans coming into the Risk of
\n
Credit Loss Framework.
\n
\ue001
Risk appetite
\u2013
Lending appetite is subject to regular review.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n
The flow statements that follow show the main ECL and related income statement movements. They also show the changes in ECL as well as the changes in related financial assets
\n
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
\n
differences do not have a material ECL effect. Other points to note:
\n
\ue001
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
\n
included.
\n
\ue001
Stage transfers (for example, exposures moving from Stage 1 into Stage 2) are a key feature of the ECL movements, with the net re-measurement cost of transitioning to a worse
\n
stage being a primary driver of income statement charges. Similarly, there is an ECL benefit for accounts improving stage.
\n
\ue001
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
\n
write-off or accounting write-down.
\n
\ue001
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
\n
direct recovery costs. Other (P&L only items) affects the income statement but does not affect balance sheet ECL movements.
\n
\ue001
Amounts written-off represent the gross asset written-down against accounts with ECL, including the net asset write-down for any debt sale activity.
\n
\ue001
There were some flows from Stage 1 into Stage 3 including transfers due to unexpected default events with a post model adjustment in place for Commercial & Institutional to
\n
account for this risk.
\n
\ue001
The effect of any change in post model adjustments during the year is typically reported under changes in risk parameters, as are any effects arising from changes to the
\n
underlying models. Refer to the section on Governance and post model adjustments for further details.
\n
\ue001
All movements are captured monthly and aggregated. Interest suspended post default is included within Stage 3 ECL with the movement in the value of suspended interest during
\n
the year reported under currency translation and other adjustments.
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
NatWest Group total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
507,539
632
48,482
1,043
5,231
1,759
561,252
3,434
Currency translation and other adjustments
(2,462)
3
(232)
6
128
145
(2,566)
154
Transfers from Stage 1 to Stage 2
(49,502)
(318)
49,502
318
-
-
-
-
Transfers from Stage 2 to Stage 1
47,264
762
(47,264)
(762)
-
-
-
-
Transfers to Stage 3
(336)
(6)
(3,221)
(293)
3,557
299
-
-
Transfers from Stage 3
311
32
631
61
(942)
(93)
-
-
Net re-measurement of ECL on stage transfer
(544)
810
241
507
Changes in risk parameters
(52)
17
306
271
Other changes in net exposure
1,530
205
(7,516)
(188)
(1,946)
(193)
(7,932)
(176)
Other (P&L only items)
(6)
6
(24)
(24)
Income statement (releases)/charges
(397)
645
330
578
Transfers to disposal groups and fair value
1
(5)
(86)
(34)
(90)
(41)
(175)
(80)
Amounts written-off
-
-
(2)
(2)
(317)
(317)
(319)
(319)
Unwinding of discount
-
-
-
(146)
(146)
At 31 December 2023
504,345
709
40,294
976
5,621
1,960
550,260
3,645
Net carrying amount
503,636
39,318
3,661
546,615
At 1 January 2022
546,178
302
35,557
1,478
5,238
2,026
586,973
3,806
2022 movements
(38,639)
330
12,925
(435)
(7)
(267)
(25,721)
(372)
At 31 December 2022
507,539
632
48,482
1,043
5,231
1,759
561,252
3,434
Net carrying amount
506,907
47,439
3,472
557,818
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Retail Banking - mortgages
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
165,264
79
18,831
61
1,762
215
185,857
355
Currency translation and other adjustments
-
(1)
-
1
78
77
78
77
Transfers from Stage 1 to Stage 2
(18,779)
(19)
18,779
19
-
-
-
-
Transfers from Stage 2 to Stage 1
16,742
37
(16,742)
(37)
-
-
-
-
Transfers to Stage 3
(61)
-
(1,028)
(7)
1,089
7
-
-
Transfers from Stage 3
40
1
294
7
(334)
(8)
-
-
Net re-measurement of ECL on stage transfer
(21)
27
6
12
Changes in risk parameters
24
(5)
72
91
Other changes in net exposure
10,832
(13)
(2,307)
(6)
(497)
(43)
8,028
(62)
Other (P&L only items)
-
-
(9)
(9)
Income statement (releases)/charges
(10)
16
26
32
Amounts written-off
-
-
-
-
(30)
(30)
(30)
(30)
Unwinding of discount
-
-
(46)
(46)
At 31 December 2023
174,038
87
17,827
60
2,068
250
193,933
397
Net carrying amount
173,951
17,767
1,818
193,536
At 1 January 2022
159,966
24
10,748
155
1,267
250
171,981
429
2022 movements
5,298
55
8,083
(94)
495
(35)
13,876
(74)
At 31 December 2022
165,264
79
18,831
61
1,762
215
185,857
355
Net carrying amount
165,185
18,770
1,547
185,502
\n
\ue001
ECL levels for mortgages increased during 2023, reflecting continued strong growth.
\n
While portfolio performance remained stable, increased economic uncertainty is
\n
captured through ECL post model adjustments (reflected in changes in risk
\n
parameters).
\n
\ue001
There were net flows into Stage 2 from Stage 1 with an upward trend in early
\n
arrears coupled with the collective migration into Stage 2 of higher risk customers
\n
utilising new Mortgage Charter treatments (approximately \u00a30.9 billion exposure). PDs
\n
remained broadly stable due to the impact of improved economics since 2022 and
\n
balance paydown within Stage 2 resulted in a lower Stage 2 balance in 2023.
\n
\ue001
The increase in the cost of living post model adjustment during 2023 proportionately
\n
allocated more ECL to Stage 1 given the forward-looking nature of the affordability
\n
threat. Refer to the Governance and post model adjustments section for more
\n
information.
\n
\ue001
The Stage 3 inflows remained broadly stable, albeit with signs of an upward drift in
\n
default rates, reflecting slightly poorer arrears performance on mortgages recently
\n
rolled off onto higher product rates. Furthermore, the increase in Stage 3 ECL overall
\n
reflected recent house price index deterioration.
\n
\ue001
The relatively small ECL cost for net re-measurement on stage transfer included the
\n
effect of risk targeted ECL adjustments, when previously in the good book. Refer to
\n
the Governance and post model adjustments section for further details.
\n
\ue001
Write-off occurs once the repossessed property has been sold and there is a residual
\n
shortfall balance remaining outstanding. This would typically be within five years from
\n
default but can be longer.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Retail Banking - credit cards
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
3,062
61
1,098
120
113
71
4,273
252
Currency translation and other adjustments
-
-
-
-
4
4
4
4
Transfers from Stage 1 to Stage 2
(1,933)
(42)
1,933
42
-
-
-
-
Transfers from Stage 2 to Stage 1
753
52
(753)
(52)
-
-
-
-
Transfers to Stage 3
(21)
(1)
(122)
(45)
143
46
-
-
Transfers from Stage 3
2
1
7
3
(9)
(4)
-
-
Net re-measurement of ECL on stage transfer
(31)
162
41
172
Changes in risk parameters
18
25
8
51
Other changes in net exposure
1,612
12
(117)
(51)
(36)
(1)
1,459
(40)
Other (P&L only items)
-
-
1
1
Income statement (releases)/charges
(1)
136
49
184
Amounts written-off
-
-
-
-
(69)
(69)
(69)
(69)
Unwinding of discount
-
-
(7)
(7)
At 31 December 2023
3,475
70
2,046
204
146
89
5,667
363
Net carrying amount
3,405
1,842
57
5,304
At 1 January 2022
2,740
58
947
141
91
60
3,778
259
2022 movements
322
3
151
(21)
22
11
495
(7)
At 31 December 2022
3,062
61
1,098
120
113
71
4,273
252
Net carrying amount
3,001
978
42
4,021
\n
\ue001
The overall increase in ECL was mainly due to the increase in Stage 2 ECL.
\n
\ue001
While portfolio performance remained stable, a net flow into Stage 2 from Stage 1
\n
was observed as PDs increased with observed unemployment and PD modelling
\n
updates capturing more economic downside.
\n
\ue001
Credit card balances continued to grow since the 2022 year end, in line with industry
\n
trends in the UK, reflecting strong customer demand, while sustaining robust risk
\n
appetite.
\n
\ue001
Stage 3 inflows remained relatively stable during the year, although there was a
\n
modest upward trend in default levels, in line with growth and normalisation of risk
\n
parameters.
\n
\ue001
Charge-off (analogous to partial write-off) typically occurs after 12 missed payments.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Retail Banking - other personal unsecured
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
4,784
111
2,028
269
779
631
7,591
1,011
Currency translation and other adjustments
-
-
-
-
26
26
26
26
Transfers from Stage 1 to Stage 2
(2,775)
(118)
2,775
118
-
-
-
-
Transfers from Stage 2 to Stage 1
2,284
317
(2,284)
(317)
-
-
-
-
Transfers to Stage 3
(61)
(3)
(326)
(128)
387
131
-
-
Transfers from Stage 3
7
3
23
9
(30)
(12)
-
-
Net re-measurement of ECL on stage transfer
(224)
329
53
-
158
Changes in risk parameters
(41)
14
82
55
Other changes in net exposure
1,001
104
(558)
(55)
(111)
(33)
332
16
Other (P&L only items)
-
-
20
20
Income statement (releases)/charges
(161)
288
122
249
Amounts written-off
-
-
(1)
(1)
(88)
(88)
(89)
(89)
Unwinding of discount
-
-
(32)
(32)
At 31 December 2023
5,240
149
1,657
238
963
758
7,860
1,145
Net carrying amount
5,091
1,419
205
6,715
At 1 January 2022
4,548
52
1,967
294
629
540
7,144
886
2022 movements
236
59
61
(25)
150
91
447
125
At 31 December 2022
4,784
111
2,028
269
779
631
7,591
1,011
Net carrying amount
4,673
1,759
148
6,580
\n
\ue001
Total ECL increased, mainly in Stage 3. While default levels were broadly stable, they
\n
were higher than in 2022. This increase was in line with growth and normalisation of
\n
risk parameters. Furthermore, write-off levels were lower during 2023, which
\n
sustained a higher Stage 3 ECL position at 31 December 2023.
\n
\ue001
A slight rise in early arrears levels since 2022 and modest PD increases during the
\n
year resulted in a net migration from Stage 1 into Stage 2. However, good book ECL
\n
and coverage levels were largely consistent with 2022, with the improved economic
\n
outlook since 2022 mitigating further IFRS 9 PD increases and balance paydown
\n
within Stage 2.
\n
\ue001
Unsecured retail balances grew steadily until Q3 2023 but, in line with industry trends
\n
in the UK, stabilised in the last quarter of the year.
\n
\ue001
Write-off occurs once recovery activity with the customer has been concluded or
\n
there are no further recoveries expected, but no later than six years after default.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements
(audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
160,352
342
24,711
534
2,198
747
187,261
1,623
Currency translation and other adjustments
(1,702)
1
(226)
(1)
26
46
(1,902)
46
Inter-group transfers
-
-
-
-
-
-
-
-
Transfers from Stage 1 to Stage 2
(23,886)
(129)
23,886
129
-
-
-
-
Transfers from Stage 2 to Stage 1
25,353
334
(25,353)
(334)
-
-
-
-
Transfers to Stage 3
(109)
(2)
(1,523)
(90)
1,632
92
-
-
Transfers from Stage 3
180
27
266
34
(446)
(61)
-
-
Net re-measurement of ECL on stage transfer
(253)
276
129
152
Changes in risk parameters
(62)
(42)
136
32
Other changes in net exposure
16,114
98
(4,731)
(58)
(1,128)
(95)
10,255
(55)
Other (P&L only items)
(5)
6
(36)
(35)
Income statement (releases)/charges
(222)
182
134
94
Amounts written-off
-
-
(1)
(1)
(121)
(121)
(122)
(122)
Unwinding of discount
-
-
(54)
(54)
At 31 December 2022
176,302
356
17,029
447
2,161
819
195,492
1,622
Net carrying amount
175,946
16,582
1,342
193,870
At 1 January 2022
152,224
129
19,731
785
2,155
750
174,110
1,664
2022 movements
8,128
213
4,980
(251)
43
(3)
13,151
(41)
At 31 December 2022
160,352
342
24,711
534
2,198
747
187,261
1,623
Net carrying amount
160,010
24,177
1,451
185,638
\n
\ue001
Growth in exposures was mainly driven by financial institutions sectors.
\n
\ue001
ECL remained broadly stable during 2023 reflecting stable portfolio performance.
\n
\ue001
Reductions in modelled ECL from improving economic variables and risk metrics
\n
were partially offset by increases in post model adjustments to capture continued
\n
economic uncertainty.
\n
\ue001
Stage 3 ECL increased mainly due to charges on a few individual customers.
\n
\ue001
Overall impairment charges were low as the effects of inflation, high interest rates
\n
and supply chain disruption have, to date, not led to a significant increase in defaults.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional - corporate
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
53,595
218
19,235
431
1,434
504
74,264
1,153
Currency translation and other adjustments
(419)
2
(180)
-
25
41
(574)
43
Inter-group transfers
88
1
(66)
-
(30)
(2)
(8)
(1)
Transfers from Stage 1 to Stage 2
(17,161)
(96)
17,161
96
-
-
-
-
Transfers from Stage 2 to Stage 1
18,525
246
(18,525)
(246)
-
-
-
-
Transfers to Stage 3
(91)
(2)
(1,098)
(69)
1,189
71
-
-
Transfers from Stage 3
124
21
204
26
(328)
(47)
-
-
Net re-measurement of ECL on stage transfer
(189)
202
103
116
Changes in risk parameters
(36)
(44)
126
46
Other changes in net exposure
6,741
61
(4,455)
(51)
(758)
(75)
1,528
(65)
Other (P&L only items)
(5)
5
(37)
(37)
Income statement (releases)/charges
(169)
112
117
60
Amounts written-off
-
-
(1)
(1)
(78)
(78)
(79)
(79)
Unwinding of discount
-
-
(41)
(41)
At 31 December 2023
61,402
226
12,275
344
1,454
602
75,131
1,172
Net carrying amount
61,176
11,931
852
73,959
\n
\ue001
There was modest exposure growth, with increased new lending largely offset by
\n
repayments.
\n
\ue001
ECL remained broadly flat but reductions in Stage 2 ECL from repayments were
\n
offset by an increase in Stage 3 from a few individual customers.
\n
\ue001
Overall impairment charges were low as the effects of inflation, high interest rates
\n
and supply chain disruption have, to date, not led to a significant increase in defaults.
\n
The 2023 charge was largely driven by charges on a few individual customers.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional - property
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
24,878
92
3,986
89
628
214
29,492
395
Currency translation and other adjustments
(6)
(1)
(8)
-
1
(2)
(13)
(3)
Inter-group transfers
(38)
-
(8)
-
7
1
(39)
1
Transfers from Stage 1 to Stage 2
(5,010)
(30)
5,010
30
-
-
-
-
Transfers from Stage 2 to Stage 1
4,498
77
(4,498)
(77)
-
-
-
-
Transfers to Stage 3
(14)
(1)
(401)
(20)
415
21
-
-
Transfers from Stage 3
43
4
56
7
(99)
(11)
-
-
Net re-measurement of ECL on stage transfer
(54)
64
24
34
Changes in risk parameters
(24)
2
8
(14)
Other changes in net exposure
1,689
31
(982)
(6)
(313)
(16)
394
9
Other (P&L only items)
-
-
-
-
Income statement (releases)/charges
(47)
60
16
29
Amounts written-off
-
-
-
-
(33)
(33)
(33)
(33)
Unwinding of discount
-
-
(11)
(11)
At 31 December 2023
26,040
94
3,155
89
606
195
29,801
378
Net carrying amount
25,946
3,066
411
29,423
\n
\ue001
The property portfolio remained stable throughout 2023 with minor movements on
\n
exposure and ECL.
\n
\ue001
Overall, there was a small reduction on ECL as write-offs exceeded impairment
\n
charges.
\n
\ue001
Impairment charges were lower than historic trends, as the effects of inflation, high
\n
interest rates and supply chain disruption have, to date, not led to a significant
\n
increase in defaults.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional - other
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
81,879
32
1,490
14
136
29
83,505
75
Currency translation and other adjustments
(1,278)
(1)
(38)
-
-
5
(1,316)
4
Inter-group transfers
(49)
-
74
-
22
-
47
-
Transfers from Stage 1 to Stage 2
(1,716)
(3)
1,716
3
-
-
-
-
Transfers from Stage 2 to Stage 1
2,330
12
(2,330)
(12)
-
-
-
-
Transfers to Stage 3
(4)
-
(24)
(1)
28
1
-
-
Transfers from Stage 3
15
2
6
-
(21)
(2)
-
-
Net re-measurement of ECL on stage transfer
(11)
11
3
3
Changes in risk parameters
(2)
1
-
(1)
Other changes in net exposure
7,683
7
705
(2)
(56)
(4)
8,332
1
Other (P&L only items)
-
-
2
2
Income statement (releases)/charges
(6)
10
1
5
Amounts written-off
-
-
-
-
(8)
(8)
(8)
(8)
Unwinding of discount
-
-
(2)
(2)
At 31 December 2023
88,860
36
1,599
14
101
22
90,560
72
Net carrying amount
88,824
1,585
79
90,488
\n
\ue001
Growth in exposure was observed due to increased lending in the securitisation
\n
sector.
\n
\ue001
The growth was within high quality assets, so ECL was broadly flat with write-offs
\n
exceeding impairment charges.
\n
\ue001
Overall impairment charges were low as the effects of inflation, high interest rates
\n
and supply chain disruption have, to date, not led to a significant increase in defaults.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition arrears status and contributing factors
\n
The tables below show Stage 2 decomposition for the Personal and Wholesale portfolios.
\u00a0
UK mortgages
Credit cards
Other
Total
Loans
ECL
Loans
ECL
Loans
ECL
Loans
ECL
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
Currently >30 DPD
291
1
14
7
51
19
356
27
Currently <=30 DPD
17,563
60
2,008
200
1,582
219
21,153
479
- PD deterioration
12,807
48
1,455
160
831
126
15,093
334
- PD persistence
2,317
6
481
32
373
33
3,171
71
- Other driver (adverse credit, forbearance etc)
2,439
6
72
8
378
60
2,889
74
Total Stage 2
17,854
61
2,022
207
1,633
238
21,509
506
2022
Personal
Currently >30 DPD
205
1
10
5
52
18
267
24
Currently <=30 DPD
18,582
61
1,066
117
1,939
264
21,587
442
- PD deterioration
16,342
56
805
97
1,093
150
18,240
303
- PD persistence
867
2
200
13
185
16
1,252
31
- Other driver (adverse credit, forbearance etc)
1,373
3
61
7
661
98
2,095
108
Total Stage 2
18,787
62
1,076
122
1,991
282
21,854
466
\n
\ue001
The levels of PD driven deterioration decreased in 2023, mainly in the mortgage
\n
portfolio. The economic scenario updates during 2023 resulted in a reduction in
\n
lifetime PDs for the mortgage and personal loan portfolios. This drove a segment of
\n
lower risk cases out of PD SICR deterioration (and captured in PD persistence in the
\n
case of Q4 MES update).
\n
\ue001
The PD modelling update during H1 2023 on the credit card portfolio resulted in
\n
more downside risk captured through modelled ECL and this, alongside modest
\n
increase in early arrears levels, led to more PD SICR deterioration being captured
\n
during 2023.
\n
\ue001
Higher risk mortgage customers who utilised the new Mortgage Charter measures
\n
were collectively migrated into Stage 2, approximately \u00a30.9 billion of exposures, and
\n
captured in the other driver category.
\n
\ue001
Accounts that are less than 30 days past due continue to represent the vast majority
\n
of the Stage 2 population, whilst noting that the greater than 30 days past due
\n
population increased during 2023. As expected, ECL coverage was higher in
\n
accounts that were more than 30 days past due than those in Stage 2 for other
\n
reasons.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition arrears status and contributing factors
Property
Corporate
Financial institutions
Sovereign
Total
Loans
ECL
Loans
ECL
Loans
ECL
Loans
ECL
Loans
ECL
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Wholesale
Currently >30 DPD
99
4
342
9
10
-
-
-
451
13
Currently <=30 DPD
3,171
94
11,803
347
956
15
1
1
15,931
457
- PD deterioration
2,166
72
7,465
222
750
8
-
-
10,381
302
- PD persistence
220
4
838
16
13
-
-
-
1,071
20
- Other driver (forbearance, RoCL etc)
785
18
3,500
109
193
7
1
1
4,479
135
Total Stage 2
3,270
98
12,145
356
966
15
1
1
16,382
470
2022
Wholesale
Currently >30 DPD
255
3
487
11
3
-
-
-
745
14
Currently <=30 DPD
3,780
95
19,103
454
1,350
14
1
-
24,234
563
- PD deterioration
2,503
62
15,714
357
1,230
10
-
-
19,447
429
- PD persistence
81
3
269
9
5
-
-
-
355
12
- Other driver (forbearance, RoCL etc)
1,196
30
3,120
88
115
4
1
-
4,432
122
Total Stage 2
4,035
98
19,590
465
1,353
14
1
-
24,979
577
\n
\ue001
The improved economic outlook, including a more optimistic forecast for stock index
\n
and commercial real estate valuations, resulted in a reduction of IFRS 9 PDs.
\n
Consequently, compared to 2022, a large proportion of exposure no longer exhibited
\n
a SICR and migrated back into Stage 1 resulting in a reduction in Stage 2 exposure.
\n
\ue001
PD deterioration remained the primary trigger for identifying a SICR and Stage 2
\n
treatment.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition by a significant increase in credit risk trigger
UK mortgages
Credit cards
Other
Total
2023
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
Personal trigger
(1)
PD movement
12,969
72.5
1,469
72.7
866
52.9
15,304
71.1
PD persistence
2,317
13.0
481
23.8
374
22.9
3,172
14.7
Adverse credit bureau recorded with credit reference agency
1,047
5.9
49
2.4
99
6.1
1,195
5.6
Forbearance support provided
137
0.8
1
-
11
0.7
149
0.7
Customers in collections
178
1.0
2
0.1
8
0.5
188
0.9
Collective SICR and other reasons
(2)
1,087
6.1
20
1.0
266
16.3
1,373
6.4
Days past due >30
119
0.7
-
-
9
0.6
128
0.6
17,854
100.0
2,022
100.0
1,633
100.0
21,509
100.0
2022
Personal trigger
(1)
PD movement
16,477
87.7
814
75.7
1,129
56.7
18,420
84.3
PD persistence
866
4.6
200
18.6
186
9.3
1,252
5.7
Adverse credit bureau recorded with credit reference agency
929
4.9
52
4.8
96
4.8
1,077
4.9
Forbearance support provided
101
0.5
1
0.1
17
0.9
119
0.5
Customers in collections
153
0.8
2
0.2
4
0.2
159
0.7
Collective SICR and other reasons
(2)
195
1.0
7
0.7
546
27.4
748
3.4
Days past due >30
66
0.4
-
-
13
0.7
79
0.4
18,787
100.0
1,076
100.0
1,991
100.0
21,854
100.0
\n
For the notes to this table refer to the following page.
\n
\ue001
PD-related SICR triggers continued to represent the vast majority of Stage 2.
\n
\ue001
The levels of PD driven deterioration decreased in 2023, mainly in the mortgage
\n
portfolio. The economic scenario updates during 2023 resulted in a reduction in
\n
lifetime PDs for the mortgage and personal loan portfolios, which drove a segment of
\n
lower risk cases out of PD SICR deterioration.
\n
\ue001
The Q4 2023 economic modelling updates that reduced PDs on mortgages and loans
\n
are captured in PD persistence category (for at least three months).
\n
\ue001
The PD modelling update during H1 2023 on the credit card portfolio resulted in
\n
more downside risk captured through modelled ECL and this, alongside modest
\n
increase in early arrears levels, led to more PD SICR deterioration being captured
\n
during 2023.
\n
\ue001
Higher risk mortgage customers who utilised the new Mortgage Charter measures
\n
are collectively migrated into Stage 2, approximately \u00a30.9 billion of exposures. This is
\n
captured in the collective SICR and other reasons category.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition by a significant increase in credit risk trigger
Property
Corporate
Financial institutions
Sovereign
Total
2023
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
Wholesale trigger
(1)
PD movement
2,211
67.6
7,611
62.5
760
78.7
-
-
10,582
64.6
PD persistence
223
6.8
847
7.0
13
1.3
-
-
1,083
6.6
Risk of Credit Loss
563
17.2
2,630
21.7
120
12.4
-
-
3,313
20.2
Forbearance support provided
49
1.6
373
3.1
-
-
-
-
422
2.6
Customers in collections
7
0.2
23
0.2
-
-
-
-
30
0.2
Collective SICR and other reasons
(2)
70
2.1
457
3.8
72
7.5
1
100.0
600
3.7
Days past due >30
147
4.5
204
1.7
1
0.1
-
-
352
2.1
3,270
100.0
12,145
100.0
966
100.0
1
100.0
16,382
100.0
2022
Wholesale trigger
(1)
PD movement
2,569
63.7
15,962
81.5
1,231
91.0
-
-
19,762
79.2
PD persistence
82
2.0
269
1.4
5
0.4
-
-
356
1.4
Risk of Credit Loss
596
14.8
1,664
8.5
32
2.4
-
-
2,292
9.2
Forbearance support provided
41
1.0
476
2.4
19
1.4
-
-
536
2.1
Customers in collections
13
0.3
44
0.2
-
-
-
-
57
0.2
Collective SICR and other reasons
(2)
566
14.0
970
5.0
64
4.7
1
100.0
1,601
6.4
Days past due >30
168
4.2
205
1.0
2
0.1
-
-
375
1.5
4,035
100.0
19,590
100.0
1,353
100.0
1
100.0
24,979
100.0
\n
(1)
The table is prepared on a hierarchical basis from top to bottom, for example, accounts with PD deterioration may also trigger backstop(s) but are only reported under PD deterioration.
\n
(2)
Includes cases where a PD assessment cannot be made and accounts where the PD has deteriorated beyond a prescribed backstop threshold aligned to risk management practices.
\n
\ue001
PD deterioration continued to be the primary trigger of migration of exposures from
\n
Stage 1 into Stage 2. As the economic outlook improved, there was a reduction in
\n
cases triggering Stage 2.
\n
\ue001
Moving exposures on to the Risk of Credit Loss framework remained an important
\n
backstop indicator of a SICR. The exposures classified under the Stage 2 Risk of
\n
Credit Loss framework trigger increased over the year, as less exposures were
\n
captured under the PD deterioration Stage 2 trigger.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 3 vintage analysis
\n
The table below shows estimated vintage analysis of the material Stage 3 portfolios.
2023
2022
Retail Banking mortgages
(1)
Wholesale
Retail Banking mortgages
(1)
Wholesale
Stage 3 loans (\u00a3bn)
2.0
2.2
1.7
2.3
Vintage (time in default):
<1 year
45%
40%
43%
46%
1-3 years
32%
35%
26%
26%
3-5 years
9%
12%
12%
10%
>5 years
14%
13%
19%
18%
100%
100%
100%
100%
\n
(1)
Retail Banking excludes a non-material amount of lending held on relatively small legacy portfolios.
\n
(2)
Comparative data for Wholesale has been re-presented to correct the ageing profile.
\n
\ue001
The increase in the proportion of loans in Stage 3 for less than three years was mainly due to the adoption of the new regulatory definition of default from January 2022, including
\n
cases captured due to the regulatory default probation rules alone (which represented approximately 11% of Stage 3 Retail Banking mortgages and 9% of Stage 3 Wholesale
\n
balances).
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality
(audited)
\n
The table below shows asset quality bands of gross loans and ECL, by stage, for the Personal portfolio.
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
UK mortgages
AQ1-AQ4
110,694
7,572
-
118,266
51
20
-
71
0.1
0.3
-
0.1
AQ5-AQ8
77,290
9,578
-
86,868
37
37
-
74
0.1
0.4
-
0.1
AQ9
156
704
-
860
-
4
-
4
-
0.6
-
0.5
AQ10
-
-
2,281
2,281
-
-
271
271
-
-
11.9
11.9
188,140
17,854
2,281
208,275
88
61
271
420
0.1
0.3
11.9
0.2
Credit cards
AQ1-AQ4
124
-
-
124
1
-
-
1
0.8
-
-
0.8
AQ5-AQ8
3,612
1,965
-
5,577
75
193
-
268
2.1
9.8
-
4.8
AQ9
6
57
-
63
-
14
-
14
-
24.6
-
22.2
AQ10
-
-
140
140
-
-
93
93
-
-
66.4
66.4
3,742
2,022
140
5,904
76
207
93
376
2.0
10.2
66.4
6.4
Other personal
AQ1-AQ4
764
150
-
914
11
23
-
34
1.4
15.3
-
3.7
AQ5-AQ8
6,178
1,374
-
7,552
138
180
-
318
2.2
13.1
-
4.2
AQ9
41
109
-
150
3
35
-
38
7.3
32.1
-
25.3
AQ10
-
-
979
979
-
-
778
778
-
-
79.5
79.5
6,983
1,633
979
9,595
152
238
778
1,168
2.2
14.6
79.5
12.2
Total
AQ1-AQ4
111,582
7,722
-
119,304
63
43
-
106
0.1
0.6
-
0.1
AQ5-AQ8
87,080
12,917
-
99,997
250
410
-
660
0.3
3.2
-
0.7
AQ9
203
870
-
1,073
3
53
-
56
1.5
6.1
-
5.2
AQ10
-
-
3,400
3,400
-
-
1,142
1,142
-
-
33.6
33.6
198,865
21,509
3,400
223,774
316
506
1,142
1,964
0.2
2.4
33.6
0.9
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality (audited)
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
UK mortgages
AQ1-AQ4
116,559
9,208
-
125,767
45
24
-
69
0.0
0.3
-
0.1
AQ5-AQ8
65,510
8,962
-
74,472
36
34
-
70
0.1
0.4
-
0.1
AQ9
176
617
-
793
-
4
-
4
-
0.7
-
0.5
AQ10
-
-
1,925
1,925
-
-
233
233
-
-
12.1
12.1
182,245
18,787
1,925
202,957
81
62
233
376
00
0.3
12.1
0.2
Credit cards
AQ1-AQ4
98
-
-
98
-
-
-
-
-
-
-
-
AQ5-AQ8
3,172
1,036
-
4,208
61
112
-
173
1.9
10.8
-
4.1
AQ9
5
40
-
45
1
10
-
11
20.0
25.0
-
24.4
AQ10
-
-
109
109
-
-
73
73
-
-
67.0
67.0
3,275
1,076
109
4,460
62
122
73
257
1.9
11.3
67.0
5.8
Other personal
AQ1-AQ4
1,047
128
-
1,175
11
17
-
28
1.1
13.3
-
2.4
AQ5-AQ8
5,843
1,732
-
7,575
104
224
-
328
1.8
12.9
-
4.3
AQ9
28
131
-
159
2
41
-
43
7.1
31.3
-
27.0
AQ10
-
-
797
797
-
-
651
651
-
-
81.7
81.7
6,918
1,991
797
9,706
117
282
651
1,050
1.7
14.2
81.7
10.8
Total personal
AQ1-AQ4
117,704
9,336
-
127,040
56
41
-
97
0.1
0.4
-
0.1
AQ5-AQ8
74,525
11,730
-
86,255
201
370
-
571
0.3
3.2
-
0.7
AQ9
209
788
-
997
3
55
-
58
1.4
7.0
-
5.8
AQ10
-
-
2,831
2,831
-
-
957
957
-
-
33.8
33.8
192,438
21,854
2,831
217,123
260
466
957
1,683
0.1
2.1
33.8
0.8
\n
\ue001
In the Personal portfolio, the majority of exposures were in AQ4 and AQ5 within
\n
mortgages. The higher proportion of UK mortgage loans in bands AQ5-AQ8 was
\n
reflected in the overall average Basel PD for mortgages marginally increasing from
\n
0.65% to 0.67%.
\n
\ue001
In other personal, the relatively high level of exposures in AQ10 reflected that
\n
impaired assets can be held on the balance sheet, with commensurate ECL
\n
provision, for up to six years after default.
Furthermore, write-off levels were lower
\n
during 2023 than 2022.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality (audited)
\n
The table below shows asset quality bands of gross loans and ECL, by stage, for the Wholesale portfolio.
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
Property
AQ1-AQ4
14,961
405
-
15,366
16
5
-
21
0.1
1.2
-
0.1
AQ5-AQ8
12,346
2,799
-
15,145
86
88
-
174
0.7
3.1
-
1.2
AQ9
9
66
-
75
-
5
-
5
-
7.6
-
6.7
AQ10
-
-
621
621
-
-
198
198
-
-
31.9
31.9
27,316
3,270
621
31,207
102
98
198
398
0.4
3.0
31.9
1.3
Other
AQ1-AQ4
25,914
937
-
26,851
27
13
-
40
0.1
1.4
-
0.2
AQ5-AQ8
37,738
10,935
-
48,673
207
323
-
530
0.6
3.0
-
1.1
AQ9
38
273
-
311
-
20
-
20
-
7.3
-
6.4
AQ10
-
-
1,504
1,504
-
-
611
611
-
-
40.6
40.6
63,690
12,145
1,504
77,339
234
356
611
1,201
0.4
2.9
40.6
1.6
Financial institutions
AQ1-AQ4
52,702
665
-
53,367
28
6
-
34
0.1
0.9
-
0.1
AQ5-AQ8
3,402
284
-
3,686
16
9
-
25
0.5
3.2
-
0.7
AQ9
1
17
-
18
-
-
-
-
-
-
-
-
AQ10
-
-
16
16
-
-
7
7
-
-
43.8
43.8
56,105
966
16
57,087
44
15
7
66
0.1
1.6
43.8
0.1
Sovereign
AQ1-AQ4
2,487
1
-
2,488
13
1
-
14
0.5
100.0
-
0.6
AQ5-AQ8
123
-
-
123
-
-
-
-
-
-
-
-
AQ9
-
-
-
-
-
-
-
-
-
-
-
-
AQ10
-
-
22
22
-
-
2
2
-
-
9.1
9.1
2,610
1
22
2,633
13
1
2
16
0.5
100.0
9.1
0.6
Total
AQ1-AQ4
96,064
2,008
-
98,072
84
25
-
109
0.1
1.3
-
0.1
AQ5-AQ8
53,609
14,018
-
67,627
309
420
-
729
0.6
3.0
-
1.1
AQ9
48
356
-
404
-
25
-
25
-
7.0
-
6.2
AQ10
-
-
2,163
2,163
-
-
818
818
-
-
37.8
37.8
149,721
16,382
2,163
168,266
393
470
818
1,681
0.3
2.9
37.8
1.0
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality (audited)
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
Property
AQ1-AQ4
14,497
542
-
15,039
16
4
-
20
0.1
0.7
-
0.1
AQ5-AQ8
11,792
3,401
-
15,193
83
89
-
172
0.7
2.6
-
1.1
AQ9
11
92
-
103
-
5
-
5
-
5.4
-
4.9
AQ10
-
-
701
701
-
-
223
223
-
-
31.8
31.8
26,300
4,035
701
31,036
99
98
223
420
0.4
2.4
31.8
1.4
Other
AQ1-AQ4
20,409
5,316
-
25,725
24
38
-
62
0.1
0.7
-
0.2
AQ5-AQ8
36,511
13,942
-
50,453
202
404
-
606
0.6
2.9
-
1.2
AQ9
35
332
-
367
-
23
-
23
-
6.9
-
6.3
AQ10
-
-
1,515
1,515
-
-
560
560
-
-
37.0
37.0
56,955
19,590
1,515
78,060
226
465
560
1,251
0.4
2.4
37.0
1.6
Financial institutions
AQ1-AQ4
44,257
914
-
45,171
18
5
-
23
0.0
0.6
-
0.1
AQ5-AQ8
2,479
429
-
2,908
14
9
-
23
0.6
2.1
-
0.8
AQ9
2
10
-
12
-
-
-
-
-
-
-
-
AQ10
-
-
47
47
-
-
17
17
-
-
36.2
36.2
46,738
1,353
47
48,138
32
14
17
63
0.1
1.0
36.2
0.1
Sovereign
AQ1-AQ4
2,678
1
-
2,679
15
-
-
15
0.6
-
-
0.6
AQ5-AQ8
115
-
-
115
-
-
-
-
-
-
-
-
AQ9
-
-
-
-
-
-
-
-
-
-
-
-
AQ10
-
-
2
2
-
-
2
2
-
-
100.0
100.0
2,793
1
2
2,796
15
-
2
17
0.5
\u2014
100.0
0.6
Total
AQ1-AQ4
81,841
6,773
-
88,614
73
47
-
120
0.1
0.7
-
0.1
AQ5-AQ8
50,897
17,772
-
68,669
299
502
-
801
0.6
2.8
-
1.2
AQ9
48
434
-
482
-
28
-
28
-
6.5
-
5.8
AQ10
-
-
2,265
2,265
-
-
802
802
-
-
35.4
35.4
132,786
24,979
2,265
160,030
372
577
802
1,751
0.3
2.3
35.4
1.1
\n
\ue001
Asset quality remained stable.
\n
\ue001
Customer credit grades were reassessed as and when a request for financing was
\n
made, a scheduled customer credit review performed or a material credit event
\n
specific to that customer occurred. Credit grades are reassessed for all customers at
\n
least annually.
\n
\ue001
ECL provisions coverage showed the expected trend, with increased coverage in the
\n
weaker asset quality bands within Stage 2 compared to Stage 1 and within Stage 3
\n
compared to Stage 2.
\n\n\n\n\n\n\n\n\n\n\n\n
Credit risk \u2013 Trading activities
\n
This section details the credit risk profile of NatWest Group\u2019s trading activities.
\n
Securities financing transactions and collateral
(audited)
\n
The table below shows securities financing transactions in Commercial & Institutional and Central items & other. Balance sheet captions include balances held at all classifications under
\n
IFRS.
\n\n \n
Reverse Repos
Repos
Of which:
Outside netting
Of which:
Outside netting
Total
can be offset
arrangements
Total
can be offset
arrangements
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Gross
77,508
77,050
458
66,767
66,047
720
IFRS offset
(25,903)
(25,903)
-
(25,903)
(25,903)
-
Carrying value
51,605
51,147
458
40,864
40,144
720
Master netting arrangements
(669)
(669)
-
(669)
(669)
-
Securities collateral
(50,287)
(50,287)
-
(39,475)
(39,475)
-
Potential for offset not recognised under IFRS
(50,956)
(50,956)
-
(40,144)
(40,144)
-
Net
649
191
458
720
-
720
2022
Gross
61,775
61,241
534
55,226
50,743
4,483
IFRS offset
(20,211)
(20,211)
-
(20,211)
(20,211)
-
Carrying value
41,564
41,030
534
35,015
30,532
4,483
Master netting arrangements
(2,445)
(2,445)
-
(2,445)
(2,445)
-
Securities collateral
(38,387)
(38,387)
-
(28,087)
(28,087)
-
Potential for offset not recognised under IFRS
(40,832)
(40,832)
-
(30,532)
(30,532)
-
Net
732
198
534
4,483
-
4,483
\n\n\n\n\n\n\n\n\n\n\n\n\n
Derivatives
(audited)
\n
The table below shows 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. A
\n
significant proportion of the derivatives relate to trading activities in Commercial & Institutional. The table also includes hedging derivatives in Central items & other.
\n\n \n
2023
2022
Notional
GBP
USD
EUR
Other
Total
Assets
Liabilities
Notional
Assets
Liabilities
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3m
\u00a3m
\u00a3bn
\u00a3m
\u00a3m
Gross exposure
99,501
96,264
118,275
116,158
IFRS offset
(20,597)
(23,869)
(18,730)
(22,111)
Carrying value
3,244
3,025
6,012
1,122
13,403
78,904
72,395
13,925
99,545
94,047
Of which:
Interest rate
(1)
2,952
1,623
5,466
227
10,268
44,563
38,483
10,742
53,480
48,535
Exchange rate
291
1,397
537
895
3,120
34,161
33,586
3,168
45,829
45,237
Credit
1
5
9
-
15
180
326
15
236
275
Carrying value
13,403
78,904
72,395
13,925
99,545
94,047
Counterparty mark-to-market
netting
(60,355)
(60,355)
(77,365)
(77,365)
Cash collateral
(12,284)
(6,788)
(14,079)
(9,761)
Securities collateral
(3,408)
(1,664)
(4,571)
(1,185)
Net exposure
2,857
3,588
3,530
5,736
Banks
(2)
335
555
648
711
Other financial institutions
(3)
1,422
1,304
1,732
1,969
Corporate
(4)
1,063
1,690
1,068
2,969
Government
(5)
37
39
82
87
Net exposure
2,857
3,588
3,530
5,736
UK
1,283
1,912
1,271
2,878
Europe
800
1,209
1,196
2,015
US
607
381
753
626
RoW
167
86
310
217
Net exposure
2,857
3,588
3,530
5,736
Asset quality of uncollateralised derivative assets
AQ1-AQ4
2,382
3,014
AQ5-AQ8
471
500
AQ9-AQ10
4
16
Net exposure
2,857
3,530
\n
(1)
The notional amount of interest rate derivatives includes \u00a37,280 billion (2022 \u2013 \u00a38,065 billion) in respect of contracts cleared through central clearing counterparties.
\n
(2)
Transactions with certain counterparties with whom NatWest 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
\n
positions in certain jurisdictions where the collateral agreements are not deemed to be legally enforceable.
\n
(3)
Includes transactions with securitisation vehicles and funds where collateral posting is contingent on NatWest Group\u2019s external rating.
\n
(4)
Mainly large corporates with whom NatWest Group may have netting arrangements in place, but operational capability does not support collateral posting.
\n
(5)
Sovereigns and supranational entities with no collateral arrangements, collateral arrangements that are not considered enforceable, or one-way collateral agreements in their favour
.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Debt securities
(audited)
\n
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\u2019s, Moody\u2019s and Fitch.
\n
Refer to Note 13 on Trading assets and liabilities for details on short positions.
\n\n \n
Central and local government
UK
US
Other
Financial institutions
Corporate
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
AAA
-
-
1,333
1,132
-
2,465
AA to AA+
-
2,600
19
762
4
3,385
A to AA-
2,729
-
1,017
251
283
4,280
BBB- to A-
-
-
693
295
489
1,477
Non-investment grade
-
-
-
198
149
347
Unrated
-
-
-
-
-
-
Total
2,729
2,600
3,062
2,638
925
11,954
2022
AAA
-
-
469
766
3
1,238
AA to AA+
-
2,345
1,042
1,114
21
4,522
A to AA-
2,205
-
372
77
29
2,683
BBB- to A-
-
-
916
149
296
1,361
Non-investment grade
-
-
-
65
49
114
Unrated
-
-
-
1
3
4
Total
2,205
2,345
2,799
2,172
401
9,922
Cross border exposure
Cross border exposures comprise both banking and trading activities, including reverse repurchase agreements. Exposures comprise loans and advances, including finance leases and
instalment credit receivables, and other monetary assets, such as debt securities. The geographical breakdown is based on the country of domicile of the borrower or guarantor of
ultimate risk. Cross border exposures include non-local currency claims of overseas offices on local residents but exclude exposures to local residents in local currencies. The table
shows cross border exposures greater than 0.5% of NatWest Group\u2019s total assets.
\n \n
Government
Banks
Other
Total
Short positions
Net of short positions
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Western Europe
7,830
10,109
26,508
44,447
4,655
39,792
Of which: France
2,229
2,105
7,839
12,173
1,183
10,990
Germany
1,614
4,525
1,065
7,204
1,905
5,299
Luxembourg
1
317
7,045
7,363
-
7,363
Ireland
29
90
3,622
3,741
99
3,642
Jersey
-
-
4,394
4,394
-
4,394
United States
6,764
3,440
16,356
26,560
2,974
23,586
Canada
1,262
2,059
1,132
4,453
17
4,436
2022
Western Europe
5,608
7,385
19,018
32,011
4,438
27,573
Of which: France
1,875
1,911
3,958
7,744
1,414
6,330
Germany
794
3,717
839
5,350
1,053
4,297
Luxembourg
1
190
5,640
5,831
5
5,826
Ireland
28
70
2,823
2,921
66
2,855
Jersey
-
-
3,019
3,019
-
3,019
United States
8,080
3,852
12,931
24,863
1,429
23,434
Canada
35
1,885
402
2,322
12
2,310
", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f31135": { "value": "Credit risk \n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Page
Introduction
\u00a0
Definition, sources of risk and key developments in 2023
181
Governance and risk appetite
182
Identification and measurement
182
Mitigation
182
Assessment and monitoring
183
Problem debt management
184
Forbearance
185
Credit grading models
186
Impairment, provisioning and write-offs
186
Governance and post model adjustments
187
Significant increase in credit risk
189
Asset lifetimes
189
Economic loss drivers
190
Measurement uncertainty and ECL sensitivity analysis
196
Measurement uncertainty and ECL adequacy
199
Movement in ECL provision
199
Credit risk \u2013 Banking activities
\u00a0
Financial instruments within the scope of the IFRS 9 ECL framework
200
Segment analysis \u2013 portfolio summary
201
Segmental loans and impairment metrics
204
Sector analysis \u2013 portfolio summary
207
Wholesale forbearance
213
Credit risk enhancement and mitigation
215
Personal portfolio
216
Commercial real estate
221
Flow statements
222
Stage 2 decomposition \u2013 arrears status and contributing factors
230
Stage 2 decomposition \u2013 by a significant increase in credit risk trigger
232
Stage 3 vintage analysis
234
Asset quality
235
Credit risk \u2013 Trading activities
\u00a0
Securities financing transactions and collateral
239
Derivatives
240
Debt securities
241
Cross border exposure
242
\n
Definition (audited)
Credit risk is the risk that customers, counterparties or issuers fail to meet a contractual
obligation to settle outstanding amounts.
Sources of risk
(audited)
The principal sources of credit risk for NatWest Group are lending, off-balance sheet
products, derivatives and securities financing, and debt securities. NatWest Group is also
exposed to settlement risk through foreign exchange, trade finance and payments
activities.
Key developments in 2023
\ue001
Personal lending grew as a result of strong demand across both mortgages and
unsecured lending, although mortgage demand reduced during the second half of the
year in line with trends in the UK mortgage market. Adjustments were made to
affordability assumptions and stress rates to ensure that lending continued to be
assessed appropriately, given the high interest rate and inflationary environment.
Support for customers was proactively promoted during the year and the number of
customers requesting support (primarily forbearance) increased gradually. Although
there was an increase in arrears during the year, this was partly driven by overall
growth in Retail Banking portfolios in recent years, as well as adjustments to lending
criteria following COVID-19. Indicators of difficulty to pay remain at or below levels
observed before COVID-19.
\ue001
Wholesale lending increased during the year, driven by financial institutions sectors.
Sector appetite continues to be reviewed regularly, with particular focus on sector
clusters and sub-sectors that are deemed to represent a heightened risk, including
due to cost of living, supply chain and inflationary pressures.
\ue001
Overall expected credit loss (ECL) increased during 2023 reflecting portfolio growth
alongside broadly stable portfolio performance. There were Stage 3 default flow
increases, particularly in the Personal portfolio, but these were broadly in line with
expectations due to growth and normalisation of risk parameters. This was mitigated
by a net ECL reduction from 2023 updates to economic scenarios and
weightings.
ECL post model adjustments increased during the year reflecting
continued economic uncertainty from inflation, higher interest rates and liquidity
concerns.
\ue001
NatWest Group continued to align its financial planning process with the climate
transition planning process. This included adding climate policy and technology-
related transition assumptions into NatWest Group\u2019s base case macroeconomic
scenario used for financial planning and assessment of ECL in this IFRS 9 reporting
period. This resulted in an increase in ECL of \u00a36 million.
\ue001
Several models were redeveloped in 2023, most notably IFRS 9 probability of default
(PD) and loss given default (LGD) models for business loans and stress testing models
for Personal mortgages, financial institutions and non-UK corporates economic
response models for Wholesale lending.
\n
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\n
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Governance
(audited)
The credit risk function provides oversight and challenge of frontline credit risk
management activities. Governance activities include:
\ue001
Defining and proposing credit risk appetite measures for Board approval.
\ue001
Establishing credit risk policy, standards and toolkits which set out the mandatory
limits and parameters required to ensure that credit risk is managed within risk
appetite and which provide the minimum standards for the identification, assessment,
management, monitoring and reporting of credit risk.
\ue001
Oversight of the first line of defence to ensure that credit risk remains within the
appetite set by the Board and that it is being managed adequately and effectively.
\ue001
Assessing the adequacy of ECL provisions including approving key IFRS 9 inputs
(such as significant increase in credit risk (SICR) thresholds) and any necessary in-
model and post model adjustments through NatWest Group and business unit
provisions and model committees.
\ue001
Development and approval of credit grading models.
\ue001
Providing regular reporting on credit risk to the Board Risk Committee and Board.
Risk appetite
Credit risk appetite is approved by the Board and is set and monitored through risk
appetite frameworks tailored to NatWest Group\u2019s Personal and Wholesale segments. Risk
appetite statements and associated measures are reviewed at least annually by the
Board on the Board Risk Committee\u2019s recommendation to ensure they remain
appropriate and aligned to strategy.
Personal
The Personal credit risk appetite framework sets limits that control the quality and
concentration of both existing and new business for each relevant business segment.
These risk appetite measures consider the segments\u2019 ability to grow sustainably and the
level of losses expected under stress. Credit risk is further controlled through operational
limits specific to customer or product characteristics.
Wholesale
For Wholesale credit, the framework has been designed to reflect factors that influence
the ability to operate within risk appetite. Tools such as stress testing and economic
capital are used to measure credit risk volatility and develop links between the
framework and risk appetite limits.
Operational limits are used to manage concentrations of risk which may arise across four
lenses \u2013 single name, sector, country and product and asset classes. The framework is
supported by a suite of transactional acceptance standards that set out the risk
parameters within which businesses should operate.
Identification and measurement
Credit stewardship
(audited)
Risks are identified through relationship management and credit stewardship of
customers and portfolios. Credit stewardship takes place throughout the customer
relationship, beginning with the initial approval. It includes the application of credit
assessment standards, credit risk mitigation and collateral, ensuring that credit
documentation is complete and appropriate, carrying out regular portfolio or customer
reviews and problem debt identification and management.
Asset quality (audited)
All credit grades map to an asset quality (AQ) scale, used for financial reporting. This AQ
scale is based on Basel PDs. Performing loans are defined as AQ1-AQ9 (where the PD is
less than 100%) and defaulted non-performing loans as AQ10 or Stage 3 under IFRS 9
(where the PD is 100%). Loans are defined as defaulted when the payment status
becomes 90 days past due, or earlier if there is clear evidence that the borrower is
unlikely to repay, for example bankruptcy or insolvency.
Counterparty credit risk
Counterparty credit risk arises from the obligations of customers under derivative and
securities financing transactions. NatWest Group mitigates counterparty credit risk
through collateralisation and netting agreements, which allow amounts owed by NatWest
Group to a counterparty to be netted against amounts the counterparty owes NatWest
Group.
Mitigation
Mitigation techniques, as set out in the appropriate credit risk toolkits and transactional
acceptance standards, are used in the management of credit portfolios across NatWest
Group. These techniques mitigate credit concentrations in relation to an individual
customer, a borrower group or a collection of related borrowers. Where possible,
customer credit balances are netted against obligations. Mitigation tools can include
structuring a security interest in a physical or financial asset, the use of credit derivatives
including credit default swaps, credit-linked debt instruments and securitisation
structures, and the use of guarantees and similar instruments (for example, credit
insurance) from related and third parties.
Property is used to mitigate credit risk across a number of portfolios, in particular
residential mortgage lending and commercial real estate (CRE).
The valuation methodologies for collateral in the form of residential mortgage property
and CRE are detailed below.
\n
\n
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\n
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\n
\n
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\n
\n
\n
\n
\n
\n
\n
Residential mortgages
\u2013
NatWest Group takes collateral in the form of residential
\n
property to mitigate the credit risk arising from mortgages. NatWest Group values
\n
residential property individually during the loan underwriting process, either by obtaining
\n
an appraisal by a suitably qualified appraiser (for example, Royal Institution of Chartered
\n
Surveyors (RICS)) or using a statistically valid model.
In both cases, a sample of the
\n
valuation outputs are periodically reviewed by an independent RICS qualified appraiser.
\n
NatWest Group updates Retail Banking UK residential property values quarterly using
\n
country (Scotland, Wales and Northern Ireland) or English regional specific Office for
\n
National Statistics House Price indices.
\n
Within the Private Banking and RBSI segments, properties securing loans greater than
\n
\u00a32.5 million or \u20ac3 million are revalued every three years.
\n
The current indexed value of the property is a component of the ECL provisioning
\n
calculation.
\n
Commercial real estate valuations
\u2013
NatWest Group has an actively managed panel of
\n
chartered surveying firms that cover the spectrum of geography and property sectors in
\n
which NatWest Group takes collateral. Suitable RICS registered valuers for particular
\n
assets are contracted through a service agreement to ensure consistency of quality and
\n
advice. In the UK, an independent third-party market indexation is applied to update
\n
external valuations for commercial property once they are more than a year old. For
\n
loan obligations in excess of \u00a32.5 million and where the charged property has a book
\n
value in excess of \u00a30.5 million, a formal valuation review is commissioned at least every
\n
three years.
\n
Assessment and monitoring
\n
Practices for credit stewardship \u2013 including credit assessment, approval and monitoring
\n
as well as the identification and management of problem debts \u2013 differ between the
\n
Personal and Wholesale portfolios.
\n
Personal
\n
Personal customers are served through a lending approach that entails offering a large
\n
number of small-value loans. To ensure that these lending decisions are made
\n
consistently, NatWest Group analyses internal credit information as well as external data
\n
supplied by credit reference agencies (including historical debt servicing behaviour of
\n
customers with respect to both NatWest Group and other lenders). NatWest Group then
\n
sets its lending rules accordingly, developing different rules for different products.
\n
The process is then largely automated, with each customer receiving an individual credit
\n
score that reflects both internal and external behaviours and this score is compared with
\n
the lending rules set. For relatively high-value, complex personal loans, including some
\n
residential mortgage lending, specialist credit managers make the final lending decisions.
\n
These decisions are made within specified delegated authority limits that are issued
\n
dependent on the experience of the individual.
\n
Underwriting standards and portfolio performance are monitored on an ongoing basis to
\n
ensure they remain adequate in the current market environment and are not weakened
\n
materially to sustain growth.
\n
The actual performance of each portfolio is tracked relative to operational limits. The
\n
limits apply to a range of credit risk-related measures including projected credit default
\n
rates across products and the loan-to-value (LTV) ratio of the mortgage portfolios.
\n
Where operational limits identify areas of concern management action is taken to adjust
\n
credit or business strategy.
\n
Wholesale
\n
Wholesale customers, including corporates, banks and other financial institutions are
\n
managed on an individual basis. Customers are aggregated as a single risk when
\n
sufficiently interconnected to the extent that a failure of one could lead to the failure of
\n
another.
\n
A credit assessment is carried out before credit facilities are made available to
\n
customers. The assessment process is dependent on the complexity of the transaction.
\n
Credit approvals are subject to environmental, social and governance risk policies which
\n
restrict exposure to certain highly carbon intensive industries as well as those with
\n
potentially heightened reputational impacts. Customer specific climate risk commentary
\n
is now mandatory.
\n
For lower risk transactions below specific thresholds, credit decisions can be approved
\n
through a combination of fully automated or relationship manager self-sanctioning within
\n
the business. This process is facilitated through an auto-decision making system, which
\n
utilises scorecards, strategies and policy rules.
\n
For all other transactions, credit is only granted to customers following joint approval by
\n
an approver from the business and the credit risk function or by two credit officers. The
\n
joint business and credit approvers act within a delegated approval authority under the
\n
Wholesale Credit Authorities framework policy. The level of delegated authority held by
\n
approvers is dependent on their experience and expertise with only a small number of
\n
senior executives holding the highest approval authority.
\n
Transactional acceptance standards provide detailed transactional lending and risk
\n
acceptance metrics and structuring guidance. As such, these standards provide a
\n
mechanism to manage risk appetite at the customer/transaction level and are
\n
supplementary to the established credit risk appetite.
\n
Credit quality through PD credit grades or performance against a combination of risk
\n
triggers in business banking, and LGD are reviewed and if appropriate reapproved
\n
annually. The review process assesses borrower performance, including reconfirmation
\n
or adjustment of risk parameter estimates; the adequacy of security; compliance with
\n
terms and conditions; and refinancing risk.
\n
\n
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\n
\n
\n
Problem debt management
\n
Personal
\n
Early problem identification
\n
Pre-emptive triggers are in place to help identify customers that may be at risk of being
\n
in financial difficulty. These triggers are both internal, using NatWest Group data, and
\n
external using information from credit reference agencies. Proactive contact is then
\n
made with the customer to establish if they require help with managing their finances. By
\n
adopting this approach, the aim is to prevent a customer\u2019s financial position
\n
deteriorating.
\n
Personal customers experiencing financial difficulty are managed by the Collections
\n
team. If the Collections team is unable to provide appropriate support after discussing
\n
suitable options with the customer, management of that customer moves to the
\n
Recoveries team.
If at any point in the collections and recoveries process, the customer is
\n
identified as being potentially vulnerable, the customer will be separated from the regular
\n
process and supported by a specialist team to ensure the customer receives appropriate
\n
support for their circumstances.
\n
In July 2023, Mortgage Charter support was introduced for residential mortgage
\n
customers. Mortgage Charter support includes temporary interest only or term
\n
extensions at the customer\u2019s request. A request for Mortgage Charter does not, of itself
\n
trigger transfer to a specialist team.
\n
Collections
\n
When a customer exceeds an agreed limit or misses a regular monthly payment the
\n
customer is contacted by NatWest Group and requested to remedy the position. If the
\n
situation is not resolved then, where appropriate, the Collections team will become more
\n
involved and the customer will be supported by skilled debt management staff who
\n
endeavour to provide customers with bespoke solutions. Solutions include short-term
\n
account restructuring, refinance loans and forbearance which can include interest
\n
suspension and \u2018breathing space\u2019. All treatments available to customers experiencing
\n
financial difficulties are reviewed to ensure they remain appropriate for customers
\n
impacted by current economic conditions.
\n
In the event that an affordable and sustainable agreement with a customer cannot be
\n
reached, the debt will transition to the Recoveries team.
\n
For provisioning purposes, under IFRS 9, exposure to customers managed by the
\n
Collections team is categorised as Stage 2 and subject to a lifetime loss assessment,
\n
unless it is 90 days past due or has triggered any other unlikeliness to pay indicators, in
\n
which case it is categorised as Stage 3.
\n
R
R
ecoveries
\n
The Recoveries team will issue a notice of intention to default to the customer and, if
\n
appropriate, a formal demand, while also registering the account with credit reference
\n
agencies where appropriate. Following this, the customer\u2019s debt may then be placed
\n
with a third-party debt collection agency, or alternatively a solicitor, in order to agree an
\n
affordable repayment plan with the customer. An option that may also be considered, is
\n
the sale of unsecured debt. Exposures subject to formal debt recovery are defaulted and,
\n
under IFRS 9, categorised as Stage 3.
\n
Wholesale
\n
Early problem identification
\n
Each segment and sector have defined early warning indicators to identify customers
\n
experiencing financial difficulty, and to increase monitoring if needed. Early warning
\n
indicators may be internal, such as a customer\u2019s bank account activity, or external, such
\n
as a publicly-listed customer\u2019s share price. If early warning indicators show a customer is
\n
experiencing potential or actual difficulty, or if relationship managers or credit officers
\n
identify other signs of financial difficulty, they may decide to classify the customer within
\n
the Risk of Credit Loss framework.
\n
There is an equivalent process for Business Banking customers, with problem debt cases
\n
reallocated to increased monitoring and support under a Portfolio Management
\n
Relationship team or the Financial Health and Support Team. Broader macro-economic
\n
trends including commodity prices, foreign exchange rates and consumer and
\n
government spend are also tracked, helping inform decisions on sector risk appetite.
\n
Customer level early warning indicators are regularly reviewed to ensure alignment with
\n
prevailing economic conditions, ensuring both the volume and focus of alerts is aligned to
\n
the point-in-time risk within each sector.
\n
The aligned Risk of Credit Loss and Viability framework
\n
This framework focuses on all Wholesale customers to provide early identification of
\n
credit deterioration, support intelligent risk-taking, ensure fair and consistent customer
\n
outcomes and provide key insights into Wholesale lending portfolios. Expert judgment is
\n
applied by experienced credit risk officers to classify cases into categories that reflect
\n
progressively deteriorating credit risk to NatWest Group. There are two classifications in
\n
the framework that apply to non-defaulted customers who are in financial stress \u2013
\n
Heightened Monitoring and Risk of Credit Loss. For the purposes of provisioning, all
\n
exposures categorised as Heightened Monitoring or Risk of Credit Loss are categorised
\n
as Stage 2 and subject to a lifetime loss assessment. The framework also applies to
\n
those customers that have met NatWest Group\u2019s default criteria (AQ10 exposures).
\n
Defaulted exposures are categorised as Stage 3 impaired for provisioning purposes.
\n
Heightened Monitoring customers are performing customers that have met certain
\n
characteristics, which have led to significant credit deterioration. Collectively,
\n
characteristics reflect circumstances that may affect the customer\u2019s ability to meet
\n
repayment obligations. Characteristics include trading issues, covenant breaches,
\n
material PD downgrades and past due facilities.
\n
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Heightened Monitoring customers require pre-emptive actions (outside the customer\u2019s
\n
normal trading patterns) to return or maintain their facilities within NatWest Group\u2019s
\n
current risk appetite.
\n
Risk of Credit Loss customers are performing customers that have met the criteria for
\n
Heightened Monitoring and also pose a risk of credit loss to NatWest Group in the next
\n
12 months should mitigating action not be taken or not be successful.
\n
Once classified as either Heightened Monitoring or Risk of Credit Loss, a number of
\n
mandatory actions are taken in accordance with policies. Actions include a review of the
\n
customer\u2019s credit grade, facility and security documentation and the valuation of
\n
security. Depending on the severity of the financial difficulty and the size of the exposure,
\n
the customer relationship strategy is reassessed by credit officers, by specialist credit risk
\n
or relationship management units in the relevant business, or by Restructuring.
\n
Agreed customer management strategies are regularly monitored by both the business
\n
and credit teams. The largest Risk of Credit Loss exposures are regularly reviewed by a
\n
Risk of Credit Loss forum. The forum members are experienced credit, business and
\n
restructuring specialists. The purpose of the forum is to review and challenge the
\n
strategies undertaken for customers that pose the largest risk of credit loss to NatWest
\n
Group.
\n
Appropriate corrective action is taken when circumstances emerge that may affect the
\n
customer\u2019s ability to service its debt. Corrective actions may include granting a customer
\n
various types of concessions. Any decision to approve a concession will be a function of
\n
specific appetite, the credit quality of the customer, the market environment and the loan
\n
structure and security. All customers granted forbearance are classified Heightened
\n
Monitoring as a minimum.
\n
Other potential outcomes of the relationship review are to: return the customer to a
\n
satisfactory status, offer additional lending and continue monitoring, transfer the
\n
relationship to Restructuring if appropriate, or exit the relationship.
\n
The aligned Risk of Credit Loss and Viability framework does not apply to problem debt
\n
management for business banking customers. These customers are, where necessary,
\n
managed by specialist problem debt management teams, depending on the size of
\n
exposure or by the business banking recoveries team where a loan has been impaired.
\n
Restructuring
\n
Where customers are categorised as Risk of Credit Loss and the lending exposure is
\n
above \u00a31 million, relationships are supported by the Restructuring team. The objective of
\n
Restructuring is to protect NatWest Group\u2019s capital. Restructuring does this by working
\n
with corporate and commercial customers in financial difficulty to help them understand
\n
their options and how their restructuring or repayment strategies can be delivered.
\n
Helping viable customers return to financial health and restoring a normal banking
\n
relationship is always the preferred outcome; however, where this is not possible,
\n
NatWest Group will work with customers to achieve a solvent outcome.
\n
Throughout this period, the mainstream relationship manager will remain an integral part
\n
of the customer relationship. Insolvency is considered as a last resort and if deemed
\n
necessary, NatWest Group will work to recover its capital in a fair and efficient manner,
\n
while upholding the fair treatment of customers and NatWest Group\u2019s core values.
\n
Forbearance
(audited)
\n
Forbearance takes place when a concession is made on the contractual terms of a
\n
loan/debt in response to a customer\u2019s financial difficulties.
\n
The aim of forbearance is to support and restore the customer to financial health while
\n
minimising risk. To ensure that forbearance is appropriate for the needs of the customer,
\n
minimum standards are applied when assessing, recording, monitoring and reporting
\n
forbearance.
\n
A credit exposure may be forborne more than once, generally where a temporary
\n
concession has been granted and circumstances warrant another temporary or
\n
permanent revision of the loan\u2019s terms.
\n
Loans are reported as forborne until they meet the exit criteria as detailed in the
\n
appropriate regulatory guidance. These include being classified as performing for two
\n
years since the last forbearance event, making regular repayments and the loan/debt
\n
being less than 30 days past due.
\n
Types of forbearance
\n
Personal
\n
In the Personal portfolio, forbearance may involve payment concessions, loan
\n
rescheduling (including extensions in contractual maturity) and capitalisation of arrears.
\n
Forbearance support is provided for both mortgages and unsecured lending.
\n
Wholesale
\n
In the Wholesale portfolio, forbearance may involve covenant waivers, amendments to
\n
margins, payment concessions and loan rescheduling (including extensions in contractual
\n
maturity), capitalisation of arrears, and debt forgiveness or debt-for-equity swaps.
\n
Monitoring of forbearance
\n
Personal
\n
For Personal portfolios, forborne loans are separated and regularly monitored and
\n
reported while the forbearance strategy is implemented, until they exit forbearance.
\n
Wholesale
\n
In the Wholesale portfolio, customer PDs and facility LGDs are reassessed prior to
\n
finalising any forbearance arrangement. The ultimate outcome of a forbearance strategy
\n
is highly dependent on the co-operation of the borrower and a viable business or
\n
repayment outcome. Where forbearance is no longer appropriate, NatWest Group will
\n
consider other options such as the enforcement of security, insolvency proceedings or
\n
both, although these are options of last resort.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Provisioning for forbearance (audited)
\n
Personal
\n
The methodology used for provisioning in respect of Personal forborne loans will differ
\n
depending on whether the loans are performing or non-performing and which business is
\n
managing them due to local market conditions.
\n
Granting forbearance will only change the arrears status of the loan in specific
\n
circumstances, which can include capitalisation of principal and interest in arrears, where
\n
the loan may be returned to the performing book if the customer has demonstrated an
\n
ability to meet regular payments and is likely to continue to do so.
\n
The loan would continue to be reported as forborne until it meets the exit criteria set out
\n
by the appropriate regulatory guidance.
\n
For ECL provisioning, all forborne but performing exposures are categorised as Stage 2
\n
and are subject to a lifetime loss provisioning assessment. Where the forbearance
\n
treatment includes the cessation of interest on the customer balance (i.e. non-accrual),
\n
this will be treated as a Stage 3 default.
\n
For non-performing forborne loans, the Stage 3 loss assessment process is the same as
\n
for non-forborne loans.
\n
Wholesale
\n
Provisions for forborne loans are assessed in accordance with normal provisioning
\n
policies. The customer\u2019s financial position and prospects \u2013 as well as the likely effect of
\n
the forbearance, including any concessions granted, and revised PD or LGD gradings \u2013
\n
are considered in order to establish whether an impairment provision increase is
\n
required.
\n
Wholesale loans granted forbearance are individually credit assessed in most cases.
\n
Performing loans subject to forbearance treatment are categorised as Stage 2 and
\n
subject to a lifetime loss assessment.
\n
Forbearance may result in the value of the outstanding debt exceeding the present value
\n
of the estimated future cash flows. This difference will lead to a customer being classified
\n
as non-performing.
\n
In the case of non-performing forborne loans, an individual loan impairment provision
\n
assessment generally takes place prior to forbearance being granted. The amount of the
\n
loan impairment provision may change once the terms of the forbearance are known,
\n
resulting in an additional provision charge or a release of the provision in the period the
\n
forbearance is granted.
\n
The transfer of Wholesale loans from impaired to performing status follows assessment
\n
by relationship managers and credit. When no further losses are anticipated and the
\n
customer is expected to meet the loan\u2019s revised terms, any provision is written-off or
\n
released and the balance of the loan can be returned to performing status once the exit
\n
criteria, as set out by regulatory guidance, are met. Refer to pages 213 and 216 for
\n
further details on Wholesale and Personal forbearance.
\n
Credit grading models
\n
Credit grading models is the collective term used to describe all models, frameworks and
\n
methodologies used to calculate PD, exposure at default (EAD), LGD, maturity and the
\n
production of credit grades.
\n
Credit grading models are designed to provide:
\n
\ue001
An assessment of customer and transaction characteristics.
\n
\ue001
A meaningful differentiation of credit risk.
\n
\ue001
Accurate internal default rate, loss and exposure estimates that are used in the
\n
capital calculation or wider risk management purposes.
\n
Impairment, provisioning and write-offs (audited)
\n
In the overall assessment of credit risk, impairment provisioning and write-offs are used
\n
as key indicators of credit quality.
\n
NatWest Group\u2019s IFRS 9 provisioning models, which use existing IRB models as a starting
\n
point, incorporate term structures and forward-looking information. Regulatory
\n
conservatism within the IRB models has been removed as appropriate to comply with the
\n
IFRS 9 requirement for unbiased ECL estimates.
\n
Five key areas may materially influence the measurement of credit impairment under
\n
IFRS 9 \u2013 two of these relate to model build and three relate to model application:
\n
Model build:
\n
\ue001
The determination of economic indicators that have most influence on credit loss for
\n
each portfolio and the severity of impact (this leverages existing stress testing models
\n
which are reviewed annually).
\n
\ue001
The build of term structures to extend the determination of the risk of loss beyond 12
\n
months that will influence the impact of lifetime loss for exposures in Stage 2.
\n
Model application:
\n
\ue001
The assessment of the SICR and the formation of a framework capable of consistent
\n
application.
\n
\ue001
The determination of asset lifetimes that reflect behavioural characteristics while also
\n
representing management actions and processes (using historical data and
\n
experience).
\n
\ue001
The choice of forward-looking economic scenarios and their respective probability
\n
weights.
\n
For accounting policy information refer to Accounting policy 2.3
\n
IFRS 9 ECL model design principles (audited)
\n
Modelling of ECL for IFRS 9 follows the conventional approach to divide the estimation of
\n
credit losses into its component parts of PD, LGD and EAD.
\n
To meet IFRS 9 requirements, the PD, LGD and EAD parameters differ from their Pillar 1
\n
internal ratings based (IRB) counterparts in the following aspects:
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\ue001
Unbiased \u2013
material regulatory conservatism has been removed from IFRS 9
\n
parameters to produce unbiased estimates.
\n
\ue001
Point-in-time
\u2013 IFRS 9 parameters reflect actual economic conditions at the reporting
\n
date instead of long-run average or downturn conditions.
\n
\ue001
Economic forecasts
\u2013 IFRS 9 PD estimates and, where appropriate, EAD and LGD
\n
estimates reflect forward-looking economic conditions.
\n
\ue001
Lifetime measurement
\u2013 IFRS 9 PD, LGD and EAD are provided as multi-period term
\n
structures up to exposure lifetimes instead of over a fixed one-year horizon.
\n
IFRS 9 requires that at each reporting date, an entity shall assess whether the credit risk
\n
on an account has increased significantly since initial recognition. Part of this assessment
\n
requires a comparison to be made between the current lifetime PD (i.e. the PD over the
\n
remaining lifetime at the reporting date) and the equivalent lifetime PD as determined at
\n
the date of initial recognition.
\n
For assets originated before IFRS 9 was introduced, comparable lifetime origination PDs
\n
did not exist. These have been retrospectively created using the relevant model inputs
\n
applicable at initial recognition.
\n
PD estimates
\n
Personal models
\n
Personal PD models follow a discrete multi-horizon survival approach, predicting
\n
quarterly PDs up to lifetime at account level, with a key driver being scores from related
\n
IRB PD models. Forward-looking economic information is brought in by economic
\n
response models, which leverage the existing stress test model suite. The current suite of
\n
PD models was introduced in 2022 replacing the previous, first-generation models to
\n
remediate a range of model weaknesses.
\n
Wholesale models
\n
Wholesale PD models use a point-in-time/through-the-cycle framework to convert one-
\n
year regulatory PDs into point-in-time estimates that reflect economic conditions at the
\n
reporting date. The framework utilises credit cycle indices (CCIs) for a comprehensive set
\n
of region/industry segments. Further detail on CCIs is provided in the Economic loss
\n
drivers section.
\n
One year point-in-time PDs are extended to forward-looking lifetime PDs using a
\n
conditional transition matrix approach and a set of econometric forecasting models.
\n
LGD estimates
\n
The general approach for the IFRS 9 LGD models is to leverage corresponding IRB LGD
\n
models with bespoke adjustments to ensure estimates are unbiased and, where relevant,
\n
forward-looking.
\n
Personal
\n
Forward-looking information has only been incorporated for the secured portfolios,
\n
where changes in property prices can be readily accommodated. Analysis has shown
\n
minimal impact of economic conditions on LGDs for the other Personal portfolios.
\n
W
W
holesale
\n
Forward-looking economic information is incorporated into LGD estimates using the
\n
existing point-in-time/through-the-cycle framework. For low default portfolios, including
\n
sovereigns and banks, loss data is too scarce to substantiate estimates that vary with
\n
economic conditions. Consequently, for these portfolios, LGD estimates are assumed to
\n
be constant throughout the projection horizon.
\n
EAD estimates
\n
Personal
\n
The IFRS 9 Personal modelling approach for EAD is dependent on product type.
\n
\ue001
Revolving products use the existing IRB models as a basis, with appropriate
\n
adjustments incorporating a term structure based on time to default.
\n
\ue001
Amortising products use an amortising schedule, where a formula is used to calculate
\n
the expected balance based on remaining terms and interest rates.
\n
Analysis has indicated that there is minimal impact on EAD arising from changes in the
\n
economy for all Personal portfolios except mortgages. Therefore, forward-looking
\n
information is only incorporated in the mortgage EAD model (through forecast changes
\n
in interest rates).
\n
Wholesale
\n
For Wholesale, EAD values are projected using product specific credit conversion factors
\n
(CCFs), closely following the product segmentation and approach of the respective IRB
\n
model. However, the CCFs are estimated over multi-year time horizons and contain no
\n
regulatory conservatism or downturn assumptions.
\n
No explicit forward-looking information is incorporated, on the basis of analysis showing
\n
the temporal variation in CCFs is mainly attributable to changes in exposure
\n
management practices rather than economic conditions.
\n
Governance and post model adjustments
(audited)
\n
The IFRS 9 PD, EAD and LGD models are subject to NatWest Group\u2019s model risk policy
\n
that stipulates periodic model monitoring, periodic re-validation and defines approval
\n
procedures and authorities according to model materiality. Various post model
\n
adjustments were applied where management judged they were necessary to ensure an
\n
adequate level of overall ECL provision. All post model adjustments were subject to
\n
review, challenge and approval through model or provisioning committees.
\n
Post model adjustments will remain a key focus area of NatWest Group\u2019s ongoing ECL
\n
adequacy assessment process. A holistic framework has been established including
\n
reviewing a range of economic data, external benchmark information and portfolio
\n
performance trends with a particular focus on segments of the portfolio (both
\n
commercial and consumer) that are likely to be more susceptible to high inflation, high
\n
interest rates and supply chain disruption.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
ECL post model adjustments
\n
The table below shows ECL post model adjustments.
\n\n \n
Retail Banking
Commercial
Central items
Mortgages
Other
Private Banking
& Institutional
& other (1)
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Deferred model calibrations
-
-
1
23
-
24
Economic uncertainty
118
39
13
256
3
429
Other adjustments
1
-
-
8
23
32
Total
119
39
14
287
26
485
Of which:
- Stage 1
75
14
6
115
10
220
- Stage 2
31
25
8
167
9
240
- Stage 3
13
-
-
5
7
25
2022
Economic uncertainty
102
51
6
191
2
352
Other adjustments
8
20
-
16
15
59
Total
110
71
6
207
17
411
Of which:
- Stage 1
62
27
3
63
-
155
- Stage 2
32
44
3
139
16
234
- Stage 3
16
-
-
5
1
22
\n
.
\n
Post model adjustments increased since 31 December 2022, with notable shifts in all
\n
categories. This reflected:
\n
\ue001
The addition of deferred model calibration post model adjustments to account for
\n
elevated refinance risks on deteriorated exposures largely due to pressures from
\n
inflation and liquidity.
\n
\ue001
The increase in the economic uncertainty post model adjustments for Wholesale
\n
portfolios relating to inflation, supply chain and liquidity prompted by continued
\n
affordability risks, as a result of higher interest rates and sustained inflation. This was
\n
partially offset by a reduction in COVID-19 related post model adjustments.
\n
\ue001
Retail Banking
\u2013
The post model adjustments for economic uncertainty increased
\n
slightly to \u00a3157 million at 31 December 2023, from \u00a3153 million at 31 December
\n
2022. Continued consumer affordability risks, as a result of higher interest rates and
\n
sustained inflation, prompted an uplift in the cost of living post model adjustment (up
\n
from \u00a3127 million to \u00a3144 million). The cost of living post model adjustment captured
\n
the risk on segments in the Retail Banking portfolio that are more susceptible to the
\n
effects of cost of living rises. It focused on key affordability lenses, including
\n
customers with lower income in fuel poverty, over-indebted borrowers and
\n
customers vulnerable to a potential mortgage rate shock. This increase during the
\n
year was partly offset by some LGD post model adjustment reductions. Additionally,
\n
the judgemental post model adjustment relating to the modelling of cards EAD
\n
(\u00a320 million at 31 December 2022) was discontinued at H1 2023 and the latest
\n
update to the post model adjustment for legacy higher risk interest only residential
\n
mortgages resulted in a \u00a37 million reduction in the post model adjustment from 31
\n
December 2022, reflecting latest analysis of the portfolio segment.
\n
\ue001
Commercial & Institutional
\u2013 The post model adjustments for economic uncertainty
\n
increased to \u00a3256 million at 31 December 2023, from \u00a3191 million at 31 December
\n
2022. It included an overlay of \u00a350 million at 31 December 2023, from \u00a3108 million at
\n
31 December 2022, to cover the residual risks from COVID-19, including the risk that
\n
government support schemes could affect future recoveries and concerns
\n
surrounding associated debt, to customers that have utilised government support
\n
schemes. The inflation and supply chain post model adjustment was maintained with
\n
a mechanistic adjustment, via a sector-level downgrade, being applied to the sectors
\n
that were considered most at risk from these headwinds. A number of additional
\n
sectors were added to the sector-level downgrade reflecting the ongoing pressures
\n
from inflation being higher for longer plus broader concerns around reducing cash
\n
reserves across many sectors. The impact of the sector-level downgrades is a post
\n
model adjustment increase to \u00a3206 million at 31 December 2023 from \u00a383 million at
\n
31 December 2022, reflecting these significant headwinds which are not fully
\n
captured in the models. The \u00a323 million judgemental overlay for deferred model
\n
calibrations relates to refinance risk with the existing mechanistic modelling approach
\n
not fully capturing the risk on deteriorated exposures. Other adjustments included an
\n
overlay of \u00a37 million to mitigate the effect of operational timing delays in the
\n
identification and flagging of a SICR.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Significant increase in credit risk (SICR) (audited)
\n
Exposures that are considered significantly credit deteriorated since initial recognition are
\n
classified in Stage 2 and assessed for lifetime ECL measurement (exposures not
\n
considered deteriorated carry a 12 month ECL). NatWest Group has adopted a
\n
framework to identify deterioration based primarily on relative movements in lifetime PD
\n
supported by additional qualitative backstops. The principles applied are consistent
\n
across NatWest Group and align to credit risk management practices, where
\n
appropriate.
\n
The framework comprises the following elements:
\n
\ue001
IFRS 9 lifetime PD assessment (the primary driver)
\u2013
on modelled portfolios, the
\n
assessment is based on the relative deterioration in forward-looking lifetime PD and
\n
is assessed monthly. To assess whether credit deterioration has occurred, the
\n
residual lifetime PD at balance sheet date (which PD is established at date of initial
\n
recognition (DOIR)) is compared to the current PD. If the current lifetime PD exceeds
\n
the residual origination PD by more than a threshold amount, deterioration is
\n
assumed to have occurred and the exposure transferred into Stage 2 for a lifetime
\n
loss assessment. For Wholesale, a doubling of PD would indicate a SICR subject to a
\n
minimum PD uplift of 0.1%. For Personal portfolios, the criteria vary by risk band, with
\n
lower risk exposures needing to deteriorate more than higher risk exposures, as
\n
outlined in the following table:
\n
\ue001
Qualitative high-risk backstops
\u2013
the PD assessment is complemented with the use of
\n
qualitative high-risk backstops to further inform whether significant deterioration in
\n
lifetime risk of default has occurred. The qualitative high-risk backstop assessment
\n
includes the use of the mandatory 30+ days past due backstop, as prescribed by
\n
IFRS 9 guidance, and other features such as forbearance support, Wholesale
\n
exposures managed within the Risk of Credit Loss framework, and adverse credit
\n
bureau results for Personal customers.
\n
\ue001
Persistence (Personal and business banking customers only)
\u2013
the persistence rule
\n
ensures that accounts which have met the criteria for PD driven deterioration are still
\n
considered to be significantly deteriorated for three months thereafter. This additional
\n
rule enhances the timeliness of capture in Stage 2. The persistence rule is applied to
\n
PD driven deterioration only.
\n
The criteria are based on a significant amount of empirical analysis and seek to meet
\n
three key objectives:
\n
\ue001
Criteria effectiveness
\u2013
the criteria should be effective in identifying significant credit
\n
deterioration and prospective default population.
\n
\ue001
Stage 2
stability
\u2013 the criteria should not introduce unnecessary volatility in the Stage
\n
2 population.
\n
\ue001
Portfolio analysis
\u2013
the criteria should produce results which are intuitive when
\n
reported as part of the wider credit portfolio.
\n
Monitoring the effect on relative PD deterioration when originating new lending at times
\n
of weaker economic outlook (therefore, higher PDs at initial recognition) is important to
\n
ensure SICR criteria remains effective.
\n
Asset lifetimes
(audited)
\n
The choice of initial recognition and asset duration is another critical judgment in
\n
determining the quantum of lifetime losses that apply.
\n
\ue001
The date of initial recognition reflects the date that a transaction (or account) was
\n
first recognised on the balance sheet; the PD recorded at that time provides the
\n
baseline used for subsequent determination of SICR as detailed above.
\n
\ue001
For asset duration, the approach applied (in line with IFRS 9 requirements) is:
\n
\ue001
T
T
erm lending \u2013
the contractual maturity date, reduced for behavioural trends
\n
where appropriate (such as, expected prepayment and amortisation).
\n
\ue001
Revolving facilities
\u2013
for Personal portfolios (except credit cards), asset duration
\n
is based on behavioural life and this is normally greater than contractual life
\n
(which would typically be overnight). For Wholesale portfolios, asset duration is
\n
based on annual customer review schedules and will be set to the next review
\n
date.
\n
In the case of credit cards, the most significant judgment is to reflect the operational
\n
practice of card reissuance and the associated credit assessment as enabling a formal
\n
re-origination trigger. As a consequence, a capped lifetime approach of up to 36 months
\n
is used on credit card balances. If the approach was uncapped the ECL impact is
\n
estimated at approximately \u00a3110 million (2022 \u2013 \u00a380 million). However, credit card
\n
balances originated under the 0% balance transfer product and representing
\n
approximately 37% (2022 \u2013 19%) of performing card balances, have their ECL calculated
\n
on a behavioural lifetime approach as opposed to being capped at a maximum of three
\n
years.
\n
The capped approach reflects NatWest Group practice of a credit-based review of
\n
customers prior to credit card issuance and complies with IFRS 9. Benchmarking
\n
information indicates that peer UK banks use behavioural approaches in the main for
\n
credit card portfolios with average durations between three and ten years. Across
\n
Europe, durations are shorter and are, in some cases, as low as one year.
\n\n \n
PD bandings (based on
residual
PD deterioration threshold
Personal risk bands
lifetime PD calculated at DOIR)
criteria
Risk band A
<0.762%
PD@DOIR + 1%
Risk band B
<4.306%
PD@DOIR + 3%
Risk band C
>=4.306%
1.7 x PD@DOIR
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
(audited)
\n
Introduction
\n
The portfolio segmentation and selection of economic loss drivers for IFRS 9 follows the
\n
approach used in stress testing. To enable robust modelling the forecasting models for
\n
each portfolio segment (defined by product or asset class and where relevant, industry
\n
sector and region) are based on a selected, small number of economic variables,
\n
(typically three to four) that best explain the temporal variations in portfolio loss rates.
\n
The process to select economic loss drivers involves empirical analysis and expert
\n
judgement.
\n
The most significant economic loss drivers for the most material portfolios are shown in
\n
the table below:
\n\n \n
Portfolio
Economic loss drivers
UK Personal mortgages
UK unemployment rate, sterling swap rate, UK house
price index, UK real wage
UK Personal unsecured
UK unemployment rate, sterling swap rate, UK real
wage
UK corporates
UK stock price index, UK gross domestic product, Bank
of England base rate
UK commercial real estate
UK stock price index, UK commercial property price
index, UK GDP, Bank of England base rate
\n
Economic scenarios
\n
At 31 December 2023, the range of anticipated future economic conditions was defined
\n
by a set of four internally developed scenarios and their respective probabilities. In
\n
addition to the base case, they comprised upside, downside and extreme downside
\n
scenarios. The scenarios primarily reflected the current risks faced by the economy,
\n
particularly in relation to the path of inflation and interest rates.
\n
For 2023, the four scenarios were deemed appropriate in capturing the uncertainty in
\n
economic forecasts and the non-linearity in outcomes under different scenarios. These
\n
four scenarios were developed to provide sufficient coverage across potential rises in
\n
unemployment, inflation, asset price declines and the degree of permanent damage to
\n
the economy, around which there remains pronounced levels of uncertainty.
\n
Upside
\u2013
This scenario assumes robust growth as inflation falls sharply and rates are
\n
lowered more quickly than expected. Consumer spending is supported by savings built
\n
up since COVID-19 and further helped by fiscal support and strong business investment.
\n
The labour market remains resilient, with the unemployment rate falling. The housing
\n
market slows down compared to the previous year but remains robust.
\n
Compared to 31 December 2022, the upside scenario remains similarly configured,
\n
exploring a more benign set of economic outcomes, including a stronger performing
\n
stock market, real estate prices, and supported by a stronger global growth backdrop,
\n
relative to the base case view. Reflecting recent outturn data, inflation falls back quicker
\n
and the labour market is tighter than previously assumed.
\n
B
B
ase case
\u2013 High inflation and tight monetary policy leads to muted economic growth.
\n
However, continued disinflation allows an easing cycle to start in 2024. The
\n
unemployment rate rises modestly but there are no wide-spread job losses. Inflation
\n
moderates and falls to a target level of 2% by early 2025. The housing market
\n
experiences modest nominal price decline but the extent of the decline is lower than
\n
experienced during prior stresses. Housing market activities remain weak but gains pace
\n
gradually as interest rates fall and real income recovers.
\n
Since 31 December 2022, the economic outlook has improved as energy prices fell
\n
sharply and the labour market remained resilient. The near-term inflation outlook
\n
remains elevated and upside risks remain but they have reduced since last year. Rates
\n
increased to levels higher than expected previously and are expected to remain higher
\n
for longer. Economic growth is still expected to be muted in the near-term. The base
\n
case now assumes muted growth in 2023 as opposed to a mild recession assumed
\n
previously. The unemployment rate still rises but the peak is marginally lower and is
\n
underpinned by a resilient labour market The peak to trough house price correction
\n
remains broadly similar to the previous assumption but the timing of the fall is more
\n
spread out.
\n
D
D
ownside
\u2013
Inflation resurges as energy prices rise and core inflation remains persistently
\n
high. The economy experiences a recession as consumer confidence weakens due to a
\n
fall in real income. Interest rates are raised higher than the base case and remain
\n
elevated for longer. High rates are assumed to have a more significant impact on the
\n
labour market. Unemployment is higher than the base case scenario while house prices
\n
experience declines comparable to previous episodes of stress.
\n
Compared to 31 December 2022, the downside scenario explores risks associated with
\n
ongoing price pressures and significantly higher interest rates across the period. This
\n
contrasts with last year\u2019s scenario, which assumed lower rates than the base case view.
\n
Partly as a result, UK economic activity and labour market are slightly weaker. Nominal
\n
asset prices, while experiencing declines comparable with past downturns, perform
\n
slightly better than previously assumed.
\n
E
E
xtreme downside
\u2013
This scenario assumes a classical recession with loss of consumer
\n
confidence leading to a deep economic recession. This results in widespread job losses
\n
with the unemployment rate rising above the levels seen during the 2008 financial crisis.
\n
Rates are cut sharply in response, leading to some support to the recovery. House prices
\n
lose approximately a third of their value.
\n
Compared to 31 December 2022, the extreme downside again captures an extreme set
\n
of economic outcomes, with very sharp falls in asset prices and a marked deterioration in
\n
the labour market. The key difference is the assumed path for interest rates. Unlike at 31
\n
December 2022, when recessionary risks were explored in the context of a stubbornly
\n
high inflation environment, both inflation and interest rates are now assumed to follow a
\n
significantly lower trajectory \u2013 consistent with recession driven by material weakness in
\n
domestic demand.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
(audited)
\n
The main macroeconomic variables for each of the four scenarios used for expected credit loss (ECL) modelling are set out in the main macroeconomic variables table below.
\n
Main macroeconomic variables
\n\n \n
31 December 2023
31 December 2022
Extreme
Weighted
Extreme
Weighted
Upside
Base case
Downside
downside
average
Upside
Base case
Downside
downside
average
Five-year summary
%
%
%
%
%
%
%
%
%
%
GDP
1.8
1.0
0.5
(0.3)
0.9
2.2
1.3
0.8
0.4
1.2
Unemployment
3.5
4.6
5.2
6.8
4.8
3.9
4.5
4.9
6.7
4.8
House price index
3.9
0.3
(0.4)
(5.7)
0.3
5.1
0.8
(0.7)
(4.4)
0.6
Commercial real estate price
3.1
(0.2)
(2.0)
(6.8)
(0.6)
1.2
(1.9)
(2.8)
(9.1)
(2.5)
Consumer price index
1.7
2.6
5.2
1.8
2.8
3.6
4.2
4.4
8.2
4.8
Bank of England base rate
3.8
3.7
5.6
2.9
4.0
2.4
3.1
1.5
4.5
2.8
UK stock price index
4.8
3.3
1.2
(0.4)
2.8
3.0
1.4
(1.1)
(3.7)
0.5
World GDP
3.7
3.2
2.7
1.8
3.0
3.7
3.3
1.7
1.1
2.7
Probability weight
21.2
45.0
20.4
13.4
18.6
45.0
20.8
15.6
\n
(1)
The five-year summary runs from 2023-27 for 31 December 2023 and from 2022-26 for 31 December 2022.
\n
(2)
The table shows CAGR for annual GDP, average levels for the unemployment rate and Bank of England base rate and Q4 to Q4 CAGR for other parameters.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers (audited)
\n
Climate transition
\n
During 2023, NatWest Group continued to align its financial planning process with the
\n
climate transition planning process. This included adding climate policy and technology
\n
related transition assumptions into NatWest Group\u2019s base case macroeconomic scenario
\n
used for financial planning and assessment of ECL in this IFRS 9 reporting period. This
\n
resulted in an increase in ECL of less than \u00a31 million.
\n
As in the initial iteration of the Climate transition plan, included in NatWest Group\u2019s 2022
\n
Climate-related Disclosures Report, NatWest Group assesses the effects of climate
\n
transition policies within the base case macroeconomic scenario, using the UK Climate
\n
Change Committee (CCC) Balanced Net Zero (BNZ) scenario, aligned with the UK CCC
\n
sixth carbon budget, as a starting point. In addition, NatWest Group included estimated
\n
average policy delay into the climate economic assumptions for IFRS 9 purposes, based
\n
on the credibility ratings for sectoral policies provided by the UK CCC 2022 Progress
\n
Report to Parliament, to reflect estimated time delays based on credibility ratings as
\n
follows:
\n
\ue001
Credible policies
\u2013 estimated zero years of delayed adjustment to the BNZ pathway
\n
for the associated policy.
\n
\ue001
Policies with some or significant risk
\u2013 estimated three and five years of delay
\n
respectively for the associated policy.
\n
\ue001
Policies with insufficient plans
\u2013 estimated ten years of delay for the associated policy.
\n
The base case macroeconomic scenario now explicitly includes assumptions about the
\n
changes in transition policy expressed as an additional implicit carbon price. Implicit
\n
carbon price is an additional cost related to greenhouse gas emissions as a result of
\n
climate transition policy.
\n
NatWest Group assumes that between now and 2028, the transition policy will change
\n
slowly, and the implicit carbon price will increase modestly by \u00a310.5/tCO2e, which is
\n
consistent with the UK CCC BNZ scenario. The base case macroeconomic scenario also
\n
included assumptions about abatement technology development and specific sectors\u2019
\n
transition, for example, the switch from fossil fuels to renewable energy sources.
\n
NatWest Group will continue to enhance this analysis, including updates in the UK CCC
\n
2023 Progress Report to Parliament published in June 2023.
\n
While previous NatWest Group IFRS 9 base case scenarios included some climate
\n
transition considerations, they were based on all enacted policies and available
\n
technologies. The new approach described here applies to explicitly identifying the effect
\n
of additional climate transition policy.
\n
NatWest Group and its customers have a dependency on timely and appropriate
\n
government policies to provide the necessary impetus for technology development and
\n
customer behaviour changes, to enable the UK\u2019s successful transition to net zero. Policy
\n
delays and risks outlined in the UK CCC 2022 and 2023 Progress Reports, if not
\n
adequately addressed in a timely manner, put at risk the UK\u2019s net zero transition and in
\n
turn that of NatWest Group and its customers.
\n
For this first iteration of climate economic assumptions included within the base case
\n
macroeconomic scenario, NatWest Group focused on policy and technology related
\n
transition risks. It is assumed that in more extreme scenarios it is likely that climate policy
\n
changes would offset adverse/benign economic conditions. NatWest Group\u2019s tools,
\n
methodologies and assessment of climate risks will continue to evolve to further align
\n
financial planning and climate transition planning processes.
\n
Probability weightings of scenarios
\n
NatWest Group\u2019s quantitative approach to IFRS 9 multiple economic scenarios (MES)
\n
involves selecting a suitable set of discrete scenarios to characterise the distribution of
\n
risks in the economic outlook and assigning appropriate probability weights. This
\n
quantitative approach is used for 31 December 2023.
\n
The approach involves comparing UK GDP paths for NatWest Group\u2019s scenarios against
\n
a set of 1,000 model runs, following which, a percentile in the distribution is established
\n
that most closely corresponded to the scenario. Probability weight for base case is set
\n
first based on judgement, while probability weights for the alternate scenarios are
\n
assigned based on these percentiles scores.
\n
The assigned probability weights were judged to be aligned with the subjective
\n
assessment of balance of the risks in the economy. The weights were broadly
\n
comparable to those used at 31 December 2022 but with slightly less downside skew.
\n
This is reasonable as the inflation outturn since then has been encouraging, with
\n
continued disinflation and a reduced risk of stagflation. However, the risks still remain
\n
elevated and there is considerable uncertainty in the economic outlook, particularly with
\n
respect to persistence and the range of outcomes on inflation. Given that backdrop,
\n
NatWest Group judges it appropriate that downside-biased scenarios have higher
\n
combined probability weights than the upside-biased scenario. It presents good coverage
\n
to the range of outcomes assumed in the scenarios, including the potential for a robust
\n
recovery on the upside and exceptionally challenging outcomes on the downside. A
\n
21.2% weighting was applied to the upside scenario, a 45.0% weighting applied to the
\n
base case scenario, a 20.4% weighting applied to the downside scenario and a 13.4%
\n
weighting applied to the extreme downside scenario.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
\n
UK gross domestic product (\u00a3bn)
\n
2023Q1
2024Q1
2025Q1
2026Q1
2027Q1
2028Q1
\n
2000
\n
2100
\n
2200
\n
2300
\n
2400
\n
2500
\n
2600
\n
Upside
\n
Downside
\n
Base case
\n
Extreme downside
\n
Bank of England base rate (%)
\n
2023Q1
2024Q1
2025Q1
2026Q1
2027Q1
2028Q1
\n
0
\n
1
\n
2
\n
3
\n
4
\n
5
\n
6
\n
7
\n
Upside
\n
Downside
\n
Base case
\n
Extreme downside
\n
UK unemployment rate (%)
\n
2023Q1
2024Q1
2025Q1
2026Q1
2027Q1
2028Q1
\n
9
\n
8
\n
7
\n
6
\n
5
\n
4
\n
3
\n
2
\n
1
\n
0
\n
Upside
\n
Downside
\n
Base case
\n
Extreme downside
Economic loss drivers
(audited)
Annual figures
\n \n
GDP - annual growth
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
0.5
0.5
0.5
0.5
0.5
2024
3.6
0.4
(1.1)
(2.7)
0.3
2025
2.3
1.3
0.4
(1.6)
1.0
2026
1.2
1.6
1.2
1.2
1.4
2027
1.2
1.4
1.3
1.2
1.3
2028
1.2
1.4
1.3
1.2
1.3
Unemployment rate - annual average
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
4.2
4.2
4.2
4.2
4.2
2024
3.9
4.7
5.2
6.2
4.8
2025
3.2
4.7
5.8
8.4
5.1
2026
3.2
4.6
5.6
8.0
5.0
2027
3.3
4.6
5.5
7.4
4.8
2028
3.3
4.5
5.3
6.7
4.7
House price index - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
(2.9)
(2.9)
(2.9)
(2.9)
(2.9)
2024
7.2
(5.0)
(7.1)
(11.5)
(3.7)
2025
9.4
3.1
(3.1)
(14.2)
1.2
2026
2.8
3.4
5.5
(5.8)
2.7
2027
3.3
3.4
6.1
7.2
4.3
2028
3.5
3.4
4.4
6.6
3.9
Commercial real estate price - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
(7.2)
(7.2)
(7.2)
(7.2)
(7.2)
2024
12.7
-
(7.3)
(18.4)
(1.2)
2025
3.5
2.7
(2.0)
(20.0)
(0.5)
2026
4.6
2.0
3.8
6.7
3.4
2027
2.9
1.9
3.1
8.5
3.0
2028
1.3
0.8
2.6
8.6
2.0
\n \n
Consumer price index - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
4.6
4.6
4.6
4.6
4.6
2024
0.9
2.5
8.5
(1.2)
2.9
2025
0.7
2.0
5.3
1.7
2.4
2026
1.1
1.9
3.8
2.0
2.1
2027
1.2
1.9
3.7
2.0
2.2
2028
1.1
1.9
3.6
2.0
2.1
Bank of England base rate - annual average
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
4.68
4.68
4.68
4.68
4.68
2024
4.79
4.77
6.10
4.00
4.94
2025
3.46
3.46
6.08
2.06
3.81
2026
3.17
2.85
5.69
2.00
3.38
2027
2.75
2.75
5.31
2.00
3.17
2028
2.50
2.75
5.06
2.25
3.10
UK stock price index - four quarter change
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2023
3.7
3.7
3.7
3.7
3.7
2024
8.1
3.2
(17.4)
(41.5)
(5.9)
2025
5.1
3.2
8.7
24.9
6.5
2026
3.6
3.2
7.9
16.7
5.5
2027
3.6
3.2
5.6
11.0
4.6
2028
2.9
3.2
5.3
9.9
4.3
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Economic loss drivers
(audited)
\n
Worst points
\n\n \n
31 December 2023
31 December 2022
Extreme
Weighted
Extreme
Weighted
Downside
downside
average
Downside
downside
average
%
Quarter
%
Quarter
%
%
Quarter
%
Quarter
%
GDP
(1.2)
Q3 2024
(4.5)
Q4 2024
0.3
(3.2)
Q4 2023
(4.7)
Q4 2023
(0.8)
Unemployment rate - peak
5.8
Q1 2025
8.5
Q2 2025
5.2
6.0
Q1 2024
8.5
Q3 2024
5.4
House price index
(12.5)
Q4 2025
(31.7)
Q2 2026
(6.5)
(15.0)
Q1 2025
(26.2)
Q3 2025
(3.4)
Commercial real estate price
(16.6)
Q1 2025
(39.9)
Q3 2025
(10.2)
(21.8)
Q4 2023
(46.8)
Q3 2024
(16.4)
Consumer price index - highest four quarter change
10.3
Q1 2023
10.3
Q1 2023
10.3
15.7
Q1 2023
17.0
Q4 2023
11.7
Bank of England base rate
- extreme level
6.5
Q4 2024
5.3
Q4 2023
5.3
4.0
Q1 2023
6.0
Q1 2024
4.1
UK stock price index
(14.3)
Q4 2024
(39.3)
Q4 2024
(2.4)
(26.0)
Q4 2023
(48.7)
Q4 2023
(14.1)
\n
(1)
Unless specified otherwise, the figures show falls relative to the starting period. The calculations are performed over five years, with a starting point of Q4 2022 for 31 December 2023 scenarios and Q4 2021 for 31 December 2022 scenarios.
\n
Use of the scenarios in Personal lending
\n
Personal lending follows a discrete scenario approach. The PD, EAD, LGD and resultant
\n
ECL for each discrete scenario is calculated using product specific economic response
\n
models. Probability weighted averages across the suite of economic scenarios are then
\n
calculated for each of the model outputs, with the weighted PD being used for staging
\n
purposes.
\n
Business Banking utilises the Personal lending methodology rather than the Wholesale
\n
lending methodology.
\n
Use of the scenarios in Wholesale lending
\n
Wholesale lending follows a continuous scenario approach to calculate ECL. PD and LGD
\n
values arising from multiple economic forecasts (based on the concept of credit cycle
\n
indices) are simulated around the central projection. The central projection is a weighted
\n
average of economic scenarios with the scenarios translated into credit cycle indices
\n
using the Wholesale economic response models.
\n
UK economic uncertainty
\n
The high inflation environment alongside high interest rates are presenting significant
\n
headwinds for some businesses and consumers, in many cases compounding. These cost
\n
pressures remain a feature of the economic environment, though they are expected to
\n
moderate over 2024 and 2025 in the base case scenario. NatWest Group has considered
\n
where these are most likely to affect the customer base, with the cost of borrowing
\n
during 2023 for both businesses and consumers presenting an additional affordability
\n
challenge.
\n
The effects of these risks are not expected to be fully captured by forward-looking credit
\n
modelling, particularly given the high inflation environment, low unemployment base case
\n
outlook. Any incremental ECL effects for these risks will be captured via post model
\n
adjustments and are detailed further in the Governance and post model adjustments
\n
section.
\n
Model and monitoring enhancements
\n
During 2023, the monitoring framework for the retail model suite was enhanced to
\n
enable more granular performance tracking at key segment levels, such as balance
\n
transfers versus non-balance transfers for the credit cards models. A new Business
\n
Banking PD, EAD and LGD model suite was redeveloped in 2023, ensuring appropriate
\n
treatment of government-guaranteed loans.
\n
In addition, the retail economic response models, which are used to bring forward-
\n
looking information into the IFRS 9 PD models, were redeveloped to bring in more
\n
inflationary drivers. In Wholesale lending, new economic response models were
\n
introduced in 2022 and 2023 that follow an improved modelling approach and put higher
\n
weight on stock price indices compared to previous models.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL sensitivity analysis
(audited)
\n
The recognition and measurement of ECL is complex and involves the use of significant
\n
judgment and estimation, particularly in times of economic volatility and uncertainty. This
\n
includes the formulation and incorporation of multiple forward-looking economic
\n
conditions into ECL to meet the measurement objective of IFRS 9. The ECL provision is
\n
sensitive to the model inputs and economic assumptions underlying the estimate.
\n
The impact arising from the base case, upside, downside and extreme downside
\n
scenarios was simulated. These scenarios are used in the methodology for Personal
\n
multiple economic scenarios as described in the Economic loss drivers section. In the
\n
simulations, NatWest Group has assumed that the economic macro variables associated
\n
with these scenarios replace the existing base case economic assumptions, giving them a
\n
100% probability weighting and therefore serving as a single economic scenario.
\n
These scenarios were applied to all modelled portfolios in the analysis below, with the
\n
simulation impacting both PDs and LGDs. Post model adjustments included in the ECL
\n
estimates that were modelled were sensitised in line with the modelled ECL movements,
\n
but those that were judgmental in nature, primarily those for deferred model calibrations
\n
and economic uncertainty, were not (refer to the Governance and post model
\n
adjustments section) on the basis these would be re-evaluated by management through
\n
ECL governance for any new economic scenario outlook and not be subject to an
\n
automated calculation. As expected, the scenarios create differing impacts on ECL by
\n
portfolio and the impacts are deemed reasonable. In this simulation, it is assumed that
\n
existing modelled relationships between key economic variables and loss drivers hold, but
\n
in practice other factors would also have an impact, for example, potential customer
\n
behaviour changes and policy changes by lenders that might impact on the wider
\n
availability of credit.
\n
The focus of the simulations is on ECL provisioning requirements on performing
\n
exposures in Stage 1 and Stage 2. The simulations are run on a stand-alone basis and
\n
are independent of each other; the potential ECL impacts reflect the simulated impact at
\n
31 December 2023. Scenario impacts on SICR should be considered when evaluating the
\n
ECL movements of Stage 1 and Stage 2. In all scenarios the total exposure was the
\n
same but exposure by stage varied in each scenario.
\n
Stage 3 provisions are not subject to the same level of measurement uncertainty \u2013
\n
default is an observed event as at the balance sheet date. Stage 3 provisions therefore
\n
were not considered in this analysis.
\n
NatWest Group\u2019s core criterion to identify a SICR is founded on PD deterioration. Under
\n
the simulations, PDs change and result in exposures moving between Stage 1 and Stage
\n
2 contributing to the ECL impact.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL sensitivity analysis
(audited)
\n\n \n
Moderate
Moderate
Extreme
Base
upside
downside
downside
2023
Actual
scenario
scenario
scenario
scenario
Stage 1 modelled loans (\u00a3m)
Retail Banking - mortgages
173,982
174,642
175,311
171,320
165,143
Retail Banking - unsecured
8,802
8,838
8,992
8,652
8,334
Wholesale - property
26,933
27,088
27,200
26,645
22,326
Wholesale - non-property
123,228
124,107
124,742
122,243
104,657
332,945
334,675
336,245
328,860
300,460
Stage 1 modelled ECL (\u00a3m)
Retail Banking - mortgages
86
86
84
84
79
Retail Banking - unsecured
221
222
219
221
211
Wholesale - property
102
80
61
131
184
Wholesale - non-property
276
246
211
331
434
685
634
575
767
908
Stage 1 coverage
Retail Banking - mortgages
0.05%
0.05%
0.05%
0.05%
0.05%
Retail Banking - unsecured
2.51%
2.51%
2.44%
2.55%
2.53%
Wholesale - property
0.38%
0.30%
0.22%
0.49%
0.82%
Wholesale - non-property
0.22%
0.20%
0.17%
0.27%
0.41%
0.21%
0.19%
0.17%
0.23%
0.30%
Stage 2 modelled loans (\u00a3m)
Retail Banking - mortgages
17,825
17,165
16,496
20,487
26,664
Retail Banking - unsecured
3,772
3,736
3,582
3,922
4,240
Wholesale - property
3,306
3,151
3,039
3,594
7,913
Wholesale - non-property
13,512
12,633
11,998
14,497
32,083
38,415
36,685
35,115
42,500
70,900
Stage 2 modelled ECL (\u00a3m)
Retail Banking - mortgages
60
56
48
70
100
Retail Banking - unsecured
445
435
383
487
554
Wholesale - property
93
80
68
111
273
Wholesale - non-property
364
310
264
432
789
962
881
763
1,100
1,716
Stage 2 coverage
Retail Banking - mortgages
0.34%
0.33%
0.29%
0.34%
0.38%
Retail Banking - unsecured
11.80%
11.64%
10.69%
12.42%
13.07%
Wholesale - property
2.81%
2.54%
2.24%
3.09%
3.45%
Wholesale - non-property
2.69%
2.45%
2.20%
2.98%
2.46%
2.50%
2.40%
2.17%
2.59%
2.42%
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL sensitivity analysis
(audited)
\n\n \n
Moderate
Moderate
Extreme
Base
upside
downside
downside
2023
Actual
scenario
scenario
scenario
scenario
Stage 1 and Stage 2 modelled loans (\u00a3m)
Retail Banking - mortgages
191,807
191,807
191,807
191,807
191,807
Retail Banking - unsecured
12,574
12,574
12,574
12,574
12,574
Wholesale - property
30,239
30,239
30,239
30,239
30,239
Wholesale - non-property
136,740
136,740
136,740
136,740
136,740
371,360
371,360
371,360
371,360
371,360
Stage 1 and Stage 2 modelled ECL (\u00a3m)
Retail Banking - mortgages
146
142
132
154
179
Retail Banking - unsecured
666
657
602
708
765
Wholesale - property
195
160
129
242
457
Wholesale - non-property
640
556
475
763
1,223
1,647
1,515
1,338
1,867
2,624
Stage 1 and Stage 2 coverage
Retail Banking - mortgages
0.08%
0.07%
0.07%
0.08%
0.09%
Retail Banking - unsecured
5.30%
5.23%
4.79%
5.63%
6.08%
Wholesale - property
0.64%
0.53%
0.43%
0.80%
1.51%
Wholesale - non-property
0.47%
0.41%
0.35%
0.56%
0.89%
0.44%
0.41%
0.36%
0.50%
0.71%
Reconciliation to Stage 1 and Stage 2 ECL (\u00a3m)
ECL on modelled exposure
1,647
1,515
1,338
1,867
2,624
ECL on UBIDAC modelled exposures
8
8
8
8
8
ECL on non-modelled exposures
30
30
30
30
30
Total Stage 1 and Stage 2 ECL (\u00a3m)
1,685
1,553
1,376
1,905
2,662
Variance to actual total Stage 1 and Stage 2 ECL (\u00a3m)
(132)
(309)
220
977
Reconciliation to Stage 1 and Stage 2 flow exposure (\u00a3m)
Modelled loans
371,360
371,360
371,360
371,360
371,360
UBIDAC loans
318
318
318
318
318
Non-modelled loans
19,522
19,522
19,522
19,522
19,522
Other asset classes
153,439
153,439
153,439
153,439
153,439
\n
(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 31 December 2023 and therefore does not include variation in future undrawn exposure
\n
values.
\n
(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.
\n
(3)
Exposures related to Ulster Bank RoI continuing operations were not included in the simulations, the current Ulster Bank RoI ECL has been included across all scenarios to enable reconciliation to other disclosures.
\n
(4)
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 31 December 2023
The simulations change the composition of Stage 1 and Stage 2 exposure but total
\n
exposure is unchanged under each scenario as the loan population is static.
\n
(5)
Refer to the Economic loss drivers section for details of economic scenarios.
\n
(6)
Refer to the NatWest Group plc 2022 Annual Report and Accounts for 2022 comparatives.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Measurement uncertainty and ECL adequacy
(audited)
\n
\ue001
If the economics were as negative as observed in the extreme downside (i.e. 100%
\n
probability weighting), total Stage 1 and Stage 2 ECL was simulated to increase by
\n
around \u00a31 billion (approximately 58%). In this scenario, Stage 2 exposure increased
\n
significantly and was the key driver of the simulated ECL rise. The movement in
\n
Stage 2 balances in the other simulations was less significant.
\n
\ue001
In the Wholesale portfolio, there was a significant increase in ECL under both a
\n
moderate and extreme downside scenario. The Wholesale property ECL increase
\n
was mainly due to commercial real estate prices which showed negative growth until
\n
2025 and significant deterioration in the stock index. The non-property increase was
\n
mainly due to GDP contraction and significant deterioration in the stock index.
\n
\ue001
A net improvement in the economic scenarios since 2022 resulted in a reduction in
\n
modelled ECL.
\n
\ue001
Given that continued uncertainty remained due to high inflation, high interest rates
\n
during 2023 and supply chain disruption, NatWest Group utilised a framework of
\n
quantitative and qualitative measures to support the levels of ECL coverage. This
\n
included economic data, credit performance insights, supply chain contagion analysis
\n
and problem debt trends. This was particularly important for consideration of post
\n
model adjustments.
\n
\ue001
As the effects of these economic risks evolve into 2024, there is a risk of further
\n
credit deterioration. However, the income statement effect of this should have been
\n
mitigated by the forward-looking provisions retained on the balance sheet at 31
\n
December 2023.
\n
\ue001
There are a number of key factors that could drive further downside to impairments,
\n
through deteriorating economic and credit metrics and increased stage migration as
\n
credit risk increases for more customers. Such factors which could impact the IFRS 9
\n
models, include an adverse deterioration in unemployment and GDP in the economies
\n
in which NatWest Group operates.
\n
Movement in ECL provision
\n
(1)
\n
The table below shows the main ECL provision movements during the year.
\n\n \n
ECL provision
\u00a3m
At 1 January 2023
3,434
Transfers to disposal groups and reclassifications
(80)
Changes in economic forecasts
(125)
Changes in risk metrics and exposure: Stage 1 and Stage 2
95
Changes in risk metrics and exposure: Stage 3
557
Judgmental changes:
Changes in post model adjustments for Stage 1, Stage 2 and Stage 3
74
Write-offs and other
(310)
At 31 December 2023
3,645
At 1 January 2022
3,806
2022 movements
(372)
At 31 December 2022
3,434
\n
(1)
The above table is not within the scope of the independent auditors\u2019 report
.
\n
\ue001
During the year, overall ECL increased reflecting portfolio growth alongside broadly
\n
stable portfolio performance. There were Stage 3 default flow increases, particularly
\n
in the Personal portfolio, but these were broadly in line with expectations due to
\n
growth and normalisation of risk parameters. This was mitigated by a net ECL
\n
reduction from 2023 updates to economic scenarios and weightings.
\n
\ue001
Judgemental ECL post model adjustments, increased from 31 December 2022,
\n
reflecting continued economic uncertainty from inflation being higher for longer,
\n
higher interest rates and liquidity concerns, and represented 13% of total ECL (2022
\n
\u2013 12%).
\n
\ue001
For the Wholesale portfolio, default levels were lower than historic trends as the
\n
effects of higher inflation, supply chain disruption and higher interest rates, had to
\n
date, not led to a significant change in defaults.
\n
\ue001
Stage 3 balances increased due to default flows, as described above, alongside
\n
reduced write-off activity in 2023.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Credit risk \u2013 Banking activities
\n
Introduction
\n
This section details the credit risk profile of NatWest Group\u2019s banking activities. Refer to Accounting policy 2.3 and
\n
Note 15 to the consolidated financial statements for policies and critical judgments relating to impairment loss
\n
determination.
\n
Financial instruments within the scope of the IFRS 9 ECL framework (audited)
\n
Refer to Note 10 to the consolidated financial statements for balance sheet analysis of financial assets that are
\n
classified as amortised cost or fair value through other comprehensive income (FVOCI), the starting point for IFRS 9
\n
ECL framework assessment.
\n\n \n
31 December 2023
31 December 2022
Gross
ECL
Net
Gross
ECL
Net
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Balance sheet total gross amortised cost and FVOCI
553.8
554.3
In scope of IFRS 9 ECL framework
545.3
550.3
% in scope
98%
99%
Loans to customers - in scope - amortised cost
385.3
3.6
381.7
370.1
3.3
366.8
Loans to customers - in scope - FVOCI
0.1
-
0.1
0.1
-
0.1
Loans to banks - in scope - amortised cost
6.7
-
6.7
6.9
-
6.9
Total loans - in scope
392.1
3.6
388.5
377.1
3.3
373.8
Stage 1
348.6
0.7
347.9
325.2
0.6
324.6
Stage 2
37.9
0.9
37.0
46.8
0.9
45.9
Stage 3
5.6
2.0
3.6
5.1
1.8
3.3
Other financial assets - in scope - amortised cost
124.9
-
124.9
156.4
-
156.4
Other financial assets - in scope - FVOCI
28.3
-
28.3
16.8
-
16.8
Total other financial assets - in scope
153.2
-
153.2
173.2
-
173.2
Stage 1
152.0
-
152.0
172.4
-
172.4
Stage 2
1.2
-
1.2
0.8
-
0.8
Out of scope of IFRS 9 ECL framework
8.5
na
8.5
4.0
na
4.0
Loans to customers - out of scope - amortised cost
(0.4)
na
(0.4)
(0.4)
na
(0.4)
Loans to banks - out of scope - amortised cost
0.3
na
0.3
0.2
na
0.2
Other financial assets - out of scope - amortised cost
8.3
na
8.3
4.1
na
4.1
Other financial assets - out of scope - FVOCI
0.3
na
0.3
0.1
na
0.1
na = not applicable
\n
The assets outside the scope of IFRS 9 ECL framework
\n
were as follows:
\n
\ue001
Settlement balances, items in the course of collection,
\n
cash balances and other non-credit risk assets of \u00a38.6
\n
billion (2022 \u2013 \u00a34.3 billion). These were assessed as
\n
having no ECL unless there was evidence that they
\n
were defaulted.
\n
\ue001
Equity shares of \u00a30.3 billion (2022 \u2013 \u00a30.4 billion) as not
\n
within the IFRS 9 ECL framework by definition.
\n
\ue001
Fair value adjustments on loans hedged by interest rate
\n
swaps, where the underlying loan was within the IFRS 9
\n
ECL scope of \u00a3(0.3) billion (2022 \u2013 \u00a3(0.6) billion).
\n
Contingent liabilities and commitments
\n
In addition to contingent liabilities and commitments
\n
disclosed in Note 26 to the consolidated financial
\n
statements, reputationally-committed limits were also
\n
included in the scope of the IFRS 9 ECL framework. These
\n
were offset by \u00a30.1 billion (2022 \u2013 \u00a3(0.1) billion) out of scope
\n
balances primarily related to facilities that, if drawn, would
\n
not be classified as amortised cost or FVOCI, or undrawn
\n
limits relating to financial assets exclusions. Total
contingent
\n
liabilities (including financial guarantees) and commitments
\n
within IFRS 9 ECL scope of \u00a3132.0 billion (2022 \u2013 \u00a3137.2
\n
billion) comprised Stage 1 \u00a3120.6 billion (2022 \u2013 \u00a3119.2
\n
billion); Stage 2 \u00a310.7 billion (2022 \u2013 \u00a317.3 billion); and
\n
Stage 3 \u00a30.7 billion (2022 \u2013 \u00a30.7 billion).
\n
The ECL relating to off balance sheet exposures was \u00a30.1
\n
billion (2022 \u2013 \u00a30.1 billion). The total ECL in the remainder
\n
of the Credit risk section of \u00a33.6 billion (2022 \u2013 \u00a33.4 billion)
\n
included ECL for both on and off-balance sheet exposures
\n
for non-disposal groups.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segment analysis \u2013 portfolio summary (audited)
\n
The table below shows gross loans and ECL, by segment and stage, within the scope of the IFRS 9 ECL framework.
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans - amortised cost and FVOCI
(1)
Stage 1
182,297
17,565
119,047
29,677
348,586
Stage 2
21,208
906
15,771
6
37,891
Stage 3
3,133
258
2,162
10
5,563
Of which: individual
-
186
845
-
1,031
Of which: collective
3,133
72
1,317
10
4,532
Subtotal excluding disposal group loans
206,638
18,729
136,980
29,693
392,040
Disposal group loans
67
67
Total
29,760
392,107
ECL provisions
(2)
Stage 1
306
20
356
27
709
Stage 2
502
20
447
7
976
Stage 3
1,097
34
819
10
1,960
Of which: individual
-
34
298
-
332
Of which: collective
1,097
-
521
10
1,628
Subtotal excluding ECL provisions on disposal group loans
1,905
74
1,622
44
3,645
ECL provisions on disposal group loans
36
36
Total
80
3,681
ECL provisions coverage
(3)
Stage 1 (%)
0.17
0.11
0.30
0.09
0.20
Stage 2 (%)
2.37
2.21
2.83
nm
2.58
Stage 3 (%)
35.01
13.18
37.88
100.00
35.23
ECL provisions coverage excluding disposal group loans
0.92
0.40
1.18
0.15
0.93
ECL provisions coverage on disposal group loans
53.73
53.73
Total
0.27
0.94
Impairment (releases)/losses
ECL (release)/charge
(4)
465
14
94
5
578
Stage 1
(172)
(9)
(222)
6
(397)
Stage 2
440
15
182
8
645
Stage 3
197
8
134
(9)
330
Of which: individual
-
8
80
1
89
Of which: collective
197
-
54
(10)
241
Continuing operations
465
14
94
5
578
Discontinued operations
(6)
(6)
Total
(1)
572
Amounts written-off
188
2
122
7
319
Of which: individual
-
2
40
-
42
Of which: collective
188
-
82
7
277
\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segment analysis \u2013 portfolio summary (audited)
\n \n
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans - amortised cost and FVOCI
(1)
Stage 1
174,727
18,367
108,791
23,339
325,224
Stage 2
21,561
801
24,226
245
46,833
Stage 3
2,565
242
2,166
123
5,096
Of which: individual
-
168
905
48
1,121
Of which: collective
2,565
74
1,261
75
3,975
Subtotal excluding disposal group loans
198,853
19,410
135,183
23,707
377,153
Disposal group loans
1,502
1,502
Total
25,209
378,655
ECL provisions
(2)
Stage 1
251
21
342
18
632
Stage 2
450
14
534
45
1,043
Stage 3
917
26
747
69
1,759
Of which: individual
-
26
251
10
287
Of which: collective
917
-
496
59
1,472
Subtotal excluding ECL provisions on disposal group loans
1,618
61
1,623
132
3,434
ECL provisions on disposal group loans
53
53
Total
185
3,487
ECL provisions coverage
(3)
Stage 1 (%)
0.14
0.11
0.31
0.08
0.19
Stage 2 (%)
2.09
1.75
2.20
18.37
2.23
Stage 3 (%)
35.75
10.74
34.49
56.10
34.52
ECL provisions coverage excluding disposal group loans
0.81
0.31
1.20
0.56
0.91
ECL provisions coverage on disposal group loans
3.53
3.53
Total
0.73
0.92
Impairment (releases)/losses
ECL (release)/charge
(4)
229
(2)
122
(12)
337
Stage 1
(146)
2
(135)
(11)
(290)
Stage 2
268
(7)
108
24
393
Stage 3
107
3
149
(25)
234
Of which: individual
-
3
57
(6)
54
Of which: collective
107
-
92
(19)
180
Continuing operations
229
(2)
122
(12)
337
Discontinued operations
(71)
(71)
Total
(83)
266
Amounts written-off
216
15
224
27
482
Of which: individual
-
15
153
-
168
Of which: collective
216
-
71
27
314
\n
(1)
Includes loans to customers and banks.
\n
(2)
Includes \u00a39 million (2022 \u2013 \u00a33 million) related to assets classified as FVOCI and
\n
\u00a30.1 billion (2022 \u2013 \u00a30.1 billion) related to off-balance sheet exposures.
\n
(3)
ECL provisions coverage is calculated as ECL provisions divided by loans \u2013
\n
amortised cost and FVOCI. It is calculated on loans and total ECL provisions,
\n
including ECL for other (non-loan) assets and unutilised exposure. Some
\n
segments with a high proportion of debt securities or unutilised exposure may
\n
result in a not meaningful coverage ratio.
\n
(4)
Includes a \u00a316 million release (2022 \u2013 \u00a33 million charge) related to other
\n
financial assets, of which \u00a36 million charge (2022 \u2013 nil) related to assets
\n
classified as FVOCI, and includes a \u00a39 million release (2022 \u2013 \u00a35 million release)
\n
related to contingent liabilities.
\n
(5)
The table shows gross loans only and excludes amounts that were outside the
\n
scope of the ECL framework. Refer to the Financial instruments within the
\n
scope of the IFRS 9 ECL framework section for further details. Other financial
\n
assets within the scope of the IFRS 9 ECL framework were cash and balances
\n
at central banks totalling \u00a3103.1 billion (2022 \u2013 \u00a3143.3 billion) and debt
\n
securities of \u00a350.1 billion (2022 \u2013 \u00a329.9 billion).
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segment analysis \u2013 portfolio summary (audited)
\n
The table below shows Ulster Bank RoI disposal groups for Personal and Wholesale, by stage, for gross loans, off-balance sheet exposures and ECL. The tables in the rest of the Credit
\n
risk section are shown on a continuing basis and therefore exclude these exposures.
Off-balance sheet
Loans - amortised cost and FVOCI
Loan
Contingent
ECL provisions
Stage 1
Stage 2
Stage 3
Total
commitments
liabilities
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
2
4
2
8
-
-
-
1
1
2
Wholesale
6
15
38
59
1
2
3
7
24
34
Total
8
19
40
67
1
2
3
8
25
36
2022
Personal
-
-
-
-
-
-
-
-
-
-
Wholesale
1,269
193
40
1,502
413
19
17
19
17
53
Total
1,269
193
40
1,502
413
19
17
19
17
53
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segmental loans and impairment metrics (audited)
\n
The table below shows gross loans and ECL provisions, by days past due, by segment and stage, within the scope of the ECL framework.
Gross loans
ECL provisions
(2)
Stage 2
(1)
Stage 2
(1)
Not past
Not past
Stage 1
due
1-30 DPD
>30 DPD
Total
Stage 3
Total
Stage 1
due
1-30 DPD
>30 DPD
Total
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Retail Banking
182,297
20,128
738
342
21,208
3,133
206,638
306
453
15
34
502
1,097
1,905
Private Banking
17,565
772
77
57
906
258
18,729
20
18
1
1
20
34
74
Personal
14,296
158
73
24
255
209
14,760
3
2
-
-
2
20
25
Wholesale
3,269
614
4
33
651
49
3,969
17
16
1
1
18
14
49
Commercial & Institutional
119,047
14,689
657
425
15,771
2,162
136,980
356
415
21
11
447
819
1,622
Personal
2,268
15
21
7
43
52
2,363
2
-
-
-
-
16
18
Wholesale
116,779
14,674
636
418
15,728
2,110
134,617
354
415
21
11
447
803
1,604
Central items & other
29,677
5
-
1
6
10
29,693
27
6
-
1
7
10
44
Personal
4
2
-
1
3
6
13
5
1
-
1
2
9
16
Wholesale
29,673
3
-
-
3
4
29,680
22
5
-
-
5
1
28
Total loans
348,586
35,594
1,472
825
37,891
5,563
392,040
709
892
37
47
976
1,960
3,645
Of which:
Personal
198,865
20,303
832
374
21,509
3,400
223,774
316
456
15
35
506
1,142
1,964
Wholesale
149,721
15,291
640
451
16,382
2,163
168,266
393
436
22
12
470
818
1,681
2022
Retail Banking
174,727
20,653
605
303
21,561
2,565
198,853
251
406
14
30
450
917
1,618
Private Banking
18,367
730
39
32
801
242
19,410
21
14
-
-
14
26
61
Personal
15,182
122
35
16
173
207
15,562
5
1
-
-
1
17
23
Wholesale
3,185
608
4
16
628
35
3,848
16
13
-
-
13
9
38
Commercial & Institutional
108,791
22,520
956
750
24,226
2,166
135,183
342
491
26
17
534
747
1,623
Personal
2,475
17
17
7
41
46
2,562
3
1
-
-
1
12
16
Wholesale
106,316
22,503
939
743
24,185
2,120
132,621
339
490
26
17
533
735
1,607
Central items & other
23,339
234
4
7
245
123
23,707
18
42
1
2
45
69
132
Personal
54
70
3
6
79
13
146
1
11
1
2
14
11
26
Wholesale
23,285
164
1
1
166
110
23,561
17
31
-
-
31
58
106
Total loans
325,224
44,137
1,604
1,092
46,833
5,096
377,153
632
953
41
49
1,043
1,759
3,434
Of which:
Personal
192,438
20,862
660
332
21,854
2,831
217,123
260
419
15
32
466
957
1,683
Wholesale
132,786
23,275
944
760
24,979
2,265
160,030
372
534
26
17
577
802
1,751
\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segmental loans and impairment metrics (audited)
\n
The table below shows ECL and ECL provisions coverage, by days past due, by segment and stage, within the scope of the ECL framework.
ECL provisions coverage
ECL
Stage 2
(1,2)
Total (release)
Amounts
Stage 1
Not past due
1-30 DPD
>30 DPD
Total
Stage 3
Total
/charge
written-off
%
2023
%
%
%
%
%
%
\u00a3m
\u00a3m
Retail Banking
0.17
2.25
2.03
9.94
2.37
35.01
0.92
465
188
Private Banking
0.11
2.33
1.30
1.75
2.21
13.18
0.40
14
2
Personal
0.02
1.27
-
-
0.78
9.57
0.17
(3)
2
Wholesale
0.52
2.61
25.00
3.03
2.76
28.57
1.23
17
-
Commercial & Institutional
0.30
2.83
3.20
2.59
2.83
37.88
1.18
94
122
Personal
0.09
-
-
-
-
30.77
0.76
5
1
Wholesale
0.30
2.83
3.30
2.63
2.84
38.06
1.19
89
121
Central items & other
0.09
nm
-
nm
nm
nm
0.15
5
7
Personal
nm
nm
-
nm
nm
nm
nm
15
2
Wholesale
0.07
nm
-
-
nm
25.00
0.09
(10)
5
Total loans
0.20
2.51
2.51
5.70
2.58
35.23
0.93
578
319
Of which:
Personal
0.16
2.25
1.80
9.36
2.35
33.59
0.88
482
193
Wholesale
0.26
2.85
3.44
2.66
2.87
37.82
1.00
96
126
2022
Retail Banking
0.14
1.97
2.31
9.90
2.09
35.75
0.81
229
216
Private Banking
0.11
1.92
-
-
1.75
10.74
0.31
(2)
15
Personal
0.03
0.82
-
-
0.58
8.21
0.15
(3)
2
Wholesale
0.50
2.14
-
-
2.07
25.71
0.99
1
13
Commercial & Institutional
0.31
2.18
2.72
2.27
2.20
34.49
1.20
122
224
Personal
0.12
5.88
-
-
2.44
26.09
0.62
4
2
Wholesale
0.32
2.18
2.77
2.29
2.20
34.67
1.21
118
222
Central items & other
0.08
17.95
25.00
28.57
18.37
56.10
0.56
(12)
27
Personal
1.85
15.71
33.33
33.33
17.72
84.62
17.81
11
1
Wholesale
0.07
18.90
-
-
18.67
52.73
0.45
(23)
26
Total loans
0.19
2.16
2.56
4.49
2.23
34.52
0.91
337
482
Of which:
Personal
0.14
2.01
2.27
9.64
2.13
33.80
0.78
241
221
Wholesale
0.28
2.29
2.75
2.24
2.31
35.41
1.09
96
261
\n
(1)
30 DPD \u2013 30 days past due, the mandatory 30 days past due backstop as prescribed by the IFRS 9 guidance for a SICR.
\n
(2)
Some segments with a high proportion of debt securities or unutilised exposure may result in a not meaningful coverage ratio.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Segmental loans and impairment metrics (audited)
\n
\ue001
Retail Banking
\u2013 Balance sheet growth continued during H2 2023, although at a
\n
reduced pace compared to H1 2023, reflecting the wider UK mortgage market
\n
trends. Unsecured balances growth in H2 2023, primarily in credit cards, was a
\n
continuation of the strong customer demand seen in the first half of the year.
\n
Lending criteria and affordability assumptions continue to be reviewed to ensure
\n
new business is assessed appropriately in the higher interest rate and inflationary
\n
environment. While portfolio performance continued to remain stable, total ECL
\n
coverage increased. The rise in coverage was reflective of increased Stage 3 ECL
\n
on unsecured portfolios, mainly due to reduced write-off activity, however, Stage 3
\n
inflows were higher this year, in line with growth and normalisation of risk
\n
parameters. The modest increase in good book coverage during the year reflected
\n
a slight increase in early arrears levels and a rise in the unsecured mix of the
\n
portfolio. Furthermore, post model adjustments to capture increased affordability
\n
pressures on customers due to high inflation and interest rates have increased
\n
during the year, ensuring ECL reflects the continued uncertainty despite modelled
\n
ECL reductions due to improved forward-looking economic updates since the end
\n
of 2022.
\n
\ue001
Commercial & Institutional
\u2013 Growth in exposure in Commercial & Institutional was
\n
driven by increased exposure to financial institutions, partially offset by reductions
\n
in other sectors including retail. There were also continued repayments of COVID-
\n
19 government lending schemes, and strategic reductions in certain sectors.
\n
Sector appetite continues to be reviewed regularly, with particular focus on sector
\n
clusters and sub-sectors that are vulnerable to inflationary and supply chain
\n
pressures or deemed to represent a heightened risk. Stage 2 ECL reduced due to
\n
positive portfolio performance and improvements in the latest economic scenarios.
\n
Coverage decreased due to portfolio growth with ECL broadly flat, but coverage
\n
on Stage 1 and Stage 2 was significantly above pre-COVID-19 levels, reflecting
\n
continued economic uncertainty.
\n
\ue001
Other
\u2013 Balance sheet growth in 2023 compared to 2022 was mainly due to an
\n
increase in central items held in the course of treasury related management
\n
activities.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
\n
The table below shows financial assets and off-balance sheet exposures gross of ECL and related ECL provisions, impairment and past due by sector, asset quality and geographical
\n
region.
Personal
Wholesale
Mortgages (1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans by geography
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- UK
208,275
5,893
9,592
223,760
30,703
65,033
39,906
2,016
137,658
361,418
- RoI
-
11
3
14
9
888
279
-
1,176
1,190
- Other Europe
-
-
-
-
375
5,096
7,865
399
13,735
13,735
- RoW
-
-
-
-
120
6,322
9,037
218
15,697
15,697
Loans by stage
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- Stage 1
188,140
3,742
6,983
198,865
27,316
63,690
56,105
2,610
149,721
348,586
- Stage 2
17,854
2,022
1,633
21,509
3,270
12,145
966
1
16,382
37,891
- Stage 3
2,281
140
979
3,400
621
1,504
16
22
2,163
5,563
- Of which: individual
122
-
20
142
240
625
2
22
889
1,031
- Of which: collective
2,159
140
959
3,258
381
879
14
-
1,274
4,532
Loans - past due analysis
(2)
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- Not past due
205,405
5,743
8,578
219,726
30,264
74,052
56,735
2,633
163,684
383,410
- Past due 1-30 days
1,178
41
71
1,290
491
2,222
332
-
3,045
4,335
- Past due 31-90 days
518
38
112
668
179
437
12
-
628
1,296
- Past due 91-180 days
445
32
103
580
42
71
2
-
115
695
- Past due >180 days
729
50
731
1,510
231
557
6
-
794
2,304
Loans - Stage 2
17,854
2,022
1,633
21,509
3,270
12,145
966
1
16,382
37,891
- Not past due
16,803
1,971
1,529
20,303
3,071
11,287
932
1
15,291
35,594
- Past due 1-30 days
765
27
40
832
100
516
24
-
640
1,472
- Past due 31-90 days
286
24
64
374
99
342
10
-
451
825
Weighted average life
(3)
- ECL measurement (years)
9
3
6
6
6
6
2
-
6
6
Weighted average 12 months PDs
(3)
- IFRS 9 (%)
0.50
3.45
5.29
0.75
1.45
1.59
0.19
0.37
1.07
0.89
- Basel (%)
0.67
3.37
3.15
0.84
0.94
1.25
0.17
0.37
0.81
0.83
ECL provisions by geography
420
376
1,168
1,964
398
1,201
66
16
1,681
3,645
- UK
420
365
1,163
1,948
384
999
38
13
1,434
3,382
- RoI
-
11
5
16
-
6
1
-
7
23
- Other Europe
-
-
-
-
7
146
12
-
165
165
- RoW
-
-
-
-
7
50
15
3
75
75
\n
For the notes to this table refer to page 211.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
Personal
Wholesale
Mortgages
(1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
ECL provisions by stage
420
376
1,168
1,964
398
1,201
66
16
1,681
3,645
- Stage 1
88
76
152
316
102
234
44
13
393
709
- Stage 2
61
207
238
506
98
356
15
1
470
976
- Stage 3
271
93
778
1,142
198
611
7
2
818
1,960
- Of which: individual
12
-
14
26
60
242
2
2
306
332
- Of which: collective
259
93
764
1,116
138
369
5
-
512
1,628
ECL provisions coverage (%)
0.20
6.37
12.17
0.88
1.28
1.55
0.12
0.61
1.00
0.93
- Stage 1 (%)
0.05
2.03
2.18
0.16
0.37
0.37
0.08
0.50
0.26
0.20
- Stage 2 (%)
0.34
10.24
14.57
2.35
3.00
2.93
1.55
100.00
2.87
2.58
- Stage 3 (%)
11.88
66.43
79.47
33.59
31.88
40.63
43.75
9.09
37.82
35.23
ECL (release)/charge
35
193
254
482
34
58
6
(2)
96
578
- UK
35
184
249
468
42
61
(4)
(2)
97
565
- RoI
-
9
5
14
(2)
(8)
1
-
(9)
5
- Other Europe
-
-
-
-
(6)
55
11
-
60
60
- RoW
-
-
-
-
-
(50)
(2)
-
(52)
(52)
Amounts written-off
32
70
91
193
39
86
1
-
126
319
Loans by residual maturity
208,275
5,904
9,595
223,774
31,207
77,339
57,087
2,633
168,266
392,040
- <1 year
3,375
3,398
3,169
9,942
5,696
25,312
43,497
489
74,994
84,936
- 1-5 year
9,508
2,506
5,431
17,445
17,216
32,573
11,616
1,872
63,277
80,722
- > 5 < 15 year
46,453
-
993
47,446
5,701
14,167
1,939
199
22,006
69,452
- > 15 year
148,939
-
2
148,941
2,594
5,287
35
73
7,989
156,930
Other financial assets by asset quality
(4)
-
-
-
-
1
2,689
26,816
123,683
153,189
153,189
- AQ1-AQ4
-
-
-
-
1
2,689
26,084
123,683
152,457
152,457
- AQ5-AQ8
-
-
-
-
-
-
732
-
732
732
Off-balance sheet
9,843
17,284
8,462
35,589
14,205
59,716
22,221
227
96,369
131,958
- Loan commitments
9,843
17,284
8,417
35,544
13,861
57,081
20,765
227
91,934
127,478
- Financial guarantees
-
-
45
45
344
2,635
1,456
-
4,435
4,480
Off-balance sheet by asset quality
(4)
9,843
17,284
8,462
35,589
14,205
59,716
22,221
227
96,369
131,958
- AQ1-AQ4
9,099
448
7,271
16,818
10,916
36,380
20,644
165
68,105
84,923
- AQ5-AQ8
721
16,518
1,162
18,401
3,266
23,030
1,574
45
27,915
46,316
- AQ9
7
6
4
17
3
12
-
-
15
32
- AQ10
16
312
25
353
20
294
3
17
334
687
\n
For the notes to this table refer to page 211.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
Personal
Wholesale
Mortgages (1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2022 (5)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans by geography
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- UK
202,957
4,420
9,602
216,979
29,935
65,867
32,480
2,253
130,535
347,514
- RoI
-
40
104
144
34
1,102
74
-
1,210
1,354
- Other Europe
-
-
-
-
607
4,815
6,967
346
12,735
12,735
- RoW
-
-
-
-
460
6,276
8,617
197
15,550
15,550
Loans by stage
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- Stage 1
182,245
3,275
6,918
192,438
26,300
56,955
46,738
2,793
132,786
325,224
- Stage 2
18,787
1,076
1,991
21,854
4,035
19,590
1,353
1
24,979
46,833
- Stage 3
1,925
109
797
2,831
701
1,515
47
2
2,265
5,096
- Of which: individual
172
-
13
185
309
592
33
2
936
1,121
- Of which: collective
1,753
109
784
2,646
392
923
14
-
1,329
3,975
Loans - past due analysis
(2)
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- Not past due
200,634
4,335
8,825
213,794
29,986
74,251
47,824
2,796
154,857
368,651
- Past due 1-30 days
916
33
86
1,035
462
2,637
278
-
3,377
4,412
- Past due 31-90 days
510
29
104
643
297
563
5
-
865
1,508
- Past due 91-180 days
380
24
79
483
48
35
24
-
107
590
- Past due >180 days
517
39
612
1,168
243
574
7
-
824
1,992
Loans - Stage 2
18,787
1,076
1,991
21,854
4,035
19,590
1,353
1
24,979
46,833
- Not past due
17,951
1,039
1,872
20,862
3,595
18,335
1,344
1
23,275
44,137
- Past due 1-30 days
588
19
53
660
180
759
5
-
944
1,604
- Past due 31-90 days
248
18
66
332
260
496
4
-
760
1,092
Weighted average life
(3)
- ECL measurement (years)
8
2
6
5
4
6
3
-
5
5
Weighted average 12 months PDs
(3)
- IFRS 9 (%)
0.50
2.62
4.78
0.71
1.84
2.05
0.23
0.24
1.41
1.01
- Basel (%)
0.65
2.97
3.11
0.79
1.01
1.40
0.16
0.24
0.92
0.85
ECL provisions by geography
376
257
1,050
1,683
420
1,251
63
17
1,751
3,434
- UK
376
254
1,027
1,657
386
1,004
42
13
1,445
3,102
- RoI
-
3
23
26
13
66
1
-
80
106
- Other Europe
-
-
-
-
13
76
7
-
96
96
- RoW
-
-
-
-
8
105
13
4
130
130
\n
For the notes to this table refer to the following page.
\n
S
S
e
e
c
c
t
t
o
o
r
r
a
a
n
n
a
a
l
l
y
y
s
s
i
i
s
s
\u2013
\u2013
p
p
o
o
r
r
t
t
f
f
o
o
l
l
i
i
o
o
s
s
u
u
m
m
m
m
a
a
r
r
y
y
(
(
a
a
u
u
d
d
i
i
t
t
e
e
d
d
)
)
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n\n \n
Personal
Wholesale
Mortgages (1)
Credit cards
Other personal
Total
Property
Other wholesale
FI
Sovereign
Total
Total
2022 (5)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
ECL provisions by stage
376
257
1,050
1,683
420
1,251
63
17
1,751
3,434
- Stage 1
81
62
117
260
99
226
32
15
372
632
- Stage 2
62
122
282
466
98
465
14
-
577
1,043
- Stage 3
233
73
651
957
223
560
17
2
802
1,759
- Of which: individual
18
-
10
28
79
165
13
2
259
287
- Of which: collective
215
73
641
929
144
395
4
-
543
1,472
ECL provisions coverage (%)
0.19
5.76
10.82
0.78
1.35
1.60
0.13
0.61
1.09
0.91
- Stage 1 (%)
0.04
1.89
1.69
0.14
0.38
0.40
0.07
0.54
0.28
0.19
- Stage 2 (%)
0.33
11.34
14.16
2.13
2.43
2.37
1.03
-
2.31
2.23
- Stage 3 (%)
12.10
66.97
81.68
33.80
31.81
36.96
36.17
100.00
35.41
34.52
ECL (release)/charge
(74)
56
259
241
108
(27)
19
(4)
96
337
- UK
(74)
57
247
230
103
(51)
14
(4)
62
292
- RoI
-
(1)
12
11
1
(26)
(2)
-
(27)
(16)
- Other Europe
-
-
-
-
1
04
1
(1)
5
5
- RoW
-
-
-
-
3
46
6
1
56
56
Amounts written-off
31
67
123
221
34
187
40
-
261
482
Loans by residual maturity
202,957
4,460
9,706
217,123
31,036
78,060
48,138
2,796
160,030
377,153
- <1 year
3,347
2,655
3,368
9,370
6,118
26,971
36,192
906
70,187
79,557
- 1-5 year
10,968
1,805
5,387
18,160
16,768
33,071
10,380
1,630
61,849
80,009
- > 5 < 15 year
46,500
-
950
47,450
5,259
13,392
1,379
184
20,214
67,664
- > 15 year
142,142
-
1
142,143
2,891
4,626
187
76
7,780
149,923
Other financial assets by asset quality
(4)
-
-
-
-
49
581
14,704
157,860
173,194
173,194
- AQ1-AQ4
-
-
-
-
-
567
14,156
157,860
172,583
172,583
- AQ5-AQ8
-
-
-
-
49
14
548
-
611
611
Off-balance sheet
18,782
15,848
8,547
43,177
14,308
59,718
19,555
268
93,849
137,026
- Loan commitments
18,782
15,848
8,496
43,126
13,895
56,500
18,223
268
88,886
132,012
- Financial guarantees
-
-
51
51
413
3,218
1,332
-
4,963
5,014
Off-balance sheet by asset quality
(4)
18,782
15,848
8,547
43,177
14,308
59,718
19,555
268
93,849
137,026
- AQ1-AQ4
17,676
436
7,353
25,465
11,573
37,265
17,899
205
66,942
92,407
- AQ5-AQ8
1,089
15,048
1,170
17,307
2,706
22,094
1,655
62
26,517
43,824
- AQ9
2
74
4
80
4
25
-
-
29
109
- AQ10
15
290
20
325
25
334
1
1
361
686
\n
(1)
Includes a portion of Private Banking lending secured against residential real estate, in line with ECL calculation methodology. Private Banking and RBS International mortgages are reported in UK, reflecting the country of lending origination and includes
\n
crown dependencies.
\n
(2)
30 DPD \u2013 30 days past due, the mandatory 30 days past due backstop as prescribed by the IFRS 9 guidance for a SICR.
\n
(3)
Not within the scope of the Independent auditors\u2019 report.
\n
(4)
AQ bandings are based on Basel PDs and mapping is as follows:
\n\n \n
Internal asset quality band
Probability of default range
Indicative S&P rating
Internal asset quality band
Probability of default range
Indicative S&P rating
AQ1
0% - 0.034%
AAA to AA
AQ6
1.076% - 2.153%
BB- to B+
AQ2
0.034% - 0.048%
AA to AA-
AQ7
2.153% - 6.089%
B+ to B
AQ3
0.048% - 0.095%
A+ to A
AQ8
6.089% - 17.222%
B- to CCC+
AQ4
0.095% - 0.381%
BBB+ to BBB-
AQ9
17.222% - 100%
CCC to C
AQ5
0.381% - 1.076%
BB+ to BB
AQ10
100%
D
\n
\u00a30.3 billion (2022 \u2013 \u00a30.3 billion) of AQ10 Personal balances primarily relate to loan commitments, the drawdown of which is effectively prohibited.
\n
(5)
Previously published sectors for the Wholesale portfolio have been re-presented to reflect updated internal sector reporting.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
\n
The table below shows ECL by stage, for the Personal portfolio and selected sectors of the Wholesale portfolio including those that contain an element of exposure classified as
\n
heightened climate-related risk.
\n\n \n
Loans - amortised cost and FVOCI
Off-balance sheet
ECL provisions
Stage 1
Stage 2
Stage 3
Total
Loan commitments
Contingent liabilities
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
198,865
21,509
3,400
223,774
35,544
45
316
506
1,142
1,964
Mortgages
188,140
17,854
2,281
208,275
9,843
-
88
61
271
420
Credit cards
3,742
2,022
140
5,904
17,284
-
76
207
93
376
Other personal
6,983
1,633
979
9,595
8,417
45
152
238
778
1,168
Wholesale
149,721
16,382
2,163
168,266
91,934
4,435
393
470
818
1,681
Property
27,316
3,270
621
31,207
13,861
344
102
98
198
398
Financial institutions
(1)
56,105
966
16
57,087
20,765
1,456
44
15
7
66
Sovereigns
2,610
1
22
2,633
227
-
13
1
2
16
Other wholesale
63,690
12,145
1,504
77,339
57,081
2,635
234
356
611
1,201
Of which:
Agriculture
3,851
1,011
90
4,952
950
21
19
35
34
88
Airlines and aerospace
1,525
454
3
1,982
1,788
178
4
7
2
13
Automotive
7,223
1,008
76
8,307
3,844
103
18
18
26
62
Building materials
1,204
282
72
1,558
1,475
72
6
9
8
23
Chemicals
354
62
4
420
785
13
1
9
1
11
Industrials
2,269
543
70
2,882
2,896
148
10
18
23
51
Land transport & logistics
4,231
578
61
4,870
3,025
184
11
14
18
43
Leisure
4,394
2,245
288
6,927
1,887
145
31
74
91
196
Mining & metals
241
32
4
277
545
7
-
-
4
4
Oil and gas
915
125
27
1,067
1,959
237
3
2
29
34
Power utilities
5,604
418
40
6,062
8,257
554
13
13
24
50
Retail
5,846
1,318
224
7,388
4,717
429
23
35
118
176
Shipping
207
35
3
245
71
31
-
1
2
3
Water & waste
3,536
173
13
3,722
1,904
84
4
5
4
13
Total
348,586
37,891
5,563
392,040
127,478
4,480
709
976
1,960
3,645
\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Sector analysis \u2013 portfolio summary (audited)
\n\n \n
Loans - amortised cost and FVOCI
Off-balance sheet
ECL provisions
Stage 1
Stage 2
Stage 3
Total
Loan commitments
Contingent liabilities
Stage 1
Stage 2
Stage 3
Total
2022 (2)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
192,438
21,854
2,831
217,123
43,126
51
260
466
957
1,683
Mortgages
182,245
18,787
1,925
202,957
18,782
-
81
62
233
376
Credit cards
3,275
1,076
109
4,460
15,848
-
62
122
73
257
Other personal
6,918
1,991
797
9,706
8,496
51
117
282
651
1,050
Wholesale
132,786
24,979
2,265
160,030
88,886
4,963
372
577
802
1,751
Property
26,300
4,035
701
31,036
13,895
413
99
98
223
420
Financial institutions
(1)
46,738
1,353
47
48,138
18,223
1,332
32
14
17
63
Sovereigns
2,793
1
2
2,796
269
-
15
-
2
17
Other wholesale
56,955
19,590
1,515
78,060
56,499
3,218
226
465
560
1,251
Of which:
Agriculture
3,646
1,034
93
4,773
968
24
21
31
43
95
Airlines and aerospace
483
1,232
19
1,734
1,715
174
2
40
8
50
Automotive
5,776
1,498
30
7,304
4,009
99
18
18
11
47
Building materials
1,244
284
15
1,543
1,407
78
7
7
7
21
Chemicals
384
117
1
502
650
12
1
2
1
4
Industrials
2,148
1,037
82
3,267
3,135
195
10
16
24
50
Land transport & logistics
3,863
1,304
72
5,239
3,373
190
13
34
18
65
Leisure
3,416
3,787
260
7,463
1,907
102
27
147
115
289
Mining & metals
173
230
5
408
545
5
-
1
5
6
Oil and gas
953
159
60
1,172
2,157
248
3
3
31
37
Power utilities
4,228
406
6
4,640
6,960
1,182
9
11
1
21
Retail
6,497
1,746
150
8,393
4,682
416
21
29
68
118
Shipping
161
151
14
326
110
22
-
7
6
13
Water & waste
3,026
335
7
3,368
2,143
101
4
4
4
12
Total
325,224
46,833
5,096
377,153
132,012
5,014
632
1,043
1,759
3,434
\n
(1)
Financial institutions include transactions, such as securitisations, where the underlying assets may be in other sectors.
\n
(2)
Previously published sectors for the Wholesale portfolio have been re-presented to reflect updated internal sector reporting.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Wholesale forbearance (audited)
\n
The table below shows Wholesale forbearance, Heightened Monitoring and Risk of Credit Loss by sector. Personal forbearance is disclosed in the Personal portfolio section. The table
\n
shows current exposure but reflects risk transfers where there is a guarantee by another customer.
\n\n \n
Property
Financial institution
Sovereign
Other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Forbearance (flow)
916
56
22
2,568
3,562
Forbearance (stock)
1,071
70
22
3,752
4,915
Heightened Monitoring and Risk of Credit Loss
1,089
276
-
4,119
5,484
2022
Forbearance (flow)
723
105
-
2,598
3,426
Forbearance (stock)
900
107
-
4,742
5,749
Heightened Monitoring and Risk of Credit Loss
920
112
-
3,501
4,533
\n
Sector analysis \u2013 portfolio summary (audited)
\n
\ue001
Loans by geography and sector
\u2013 In line with NatWest Group\u2019s strategic focus,
\n
exposures continued to be mainly in the UK. Exposure to the Republic of Ireland
\n
reduced during 2023 as part of the phased withdrawal of Ulster Bank RoI.
\n
\ue001
Loans by stage
\u2013 There was an increase in Stage 1 exposure due to mortgage
\n
growth in Personal and lending to financial institutions in Wholesale. An overall
\n
improvement in forward-looking economics during 2023 drove a reduction in IFRS 9
\n
PDs, meaning a reduction in the proportion of most portfolio segments triggering PD
\n
deterioration rules, resulting in a net migration of exposures from Stage 2 into Stage
\n
1 during 2023.
\n
\ue001
Loans \u2013 Past due analysis
\u2013 In Personal, the value of arrears increased during 2023
\n
as expected with portfolio growth in recent years and adjustments to lending criteria
\n
following COVID-19.
\n
\ue001
Weighted average 12 months PDs
\u2013
IFRS 9 PDs remained broadly stable overall, with
\n
some increases in Personal portfolios, most notably in credit cards which had a PD
\n
modelling update. In Wholesale, some reductions were observed in PDs in corporate
\n
and property portfolios, linked to the economic scenario updates during the year.
\n
\ue001
ECL provisions by stage
\u2013
Portfolio growth was the key driver behind an increase in
\n
Stage 1 provisions. Stage 2 provisions reduced during 2023, reflecting broadly stable
\n
credit performance of the portfolios and the effect of improved 2023 forward-looking
\n
scenario updates. As outlined previously, Stage 3 provisions have yet to be materially
\n
affected by the customer affordability risks linked to the current economic
\n
uncertainty prevalent in the UK. However, there has been an increase in Stage 3
\n
ECL linked to a modest rise in default levels and reduced write-off activity.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Wholesale support schemes
\n
(1)
\n
The table below shows the sector split for the Bounce Back Loans Scheme (BBLS) as well as associated debt split by stage. Associated debt refers to non-BBLS lending to customers
\n
who also have BBLS lending.
\n\n \n
Gross carrying amount
BBL
Associated debt
ECL on associated debt
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
31 December 2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Wholesale
Property
661
150
27
838
687
202
82
971
7
13
33
Financial institutions
16
3
1
20
7
2
-
9
-
-
-
Other
2,210
495
231
2,936
2,080
849
163
3,092
24
53
93
Total
2,887
648
259
3,794
2,774
1,053
245
4,072
31
66
126
Gross carrying amount
BBL
Associated debt
ECL on associated debt
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
31 December 2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Wholesale
Property
966
186
48
1,200
874
205
60
1,139
10
14
26
Financial institutions
24
4
-
28
9
2
-
11
-
-
1
Other
3,233
641
342
4,216
2,338
884
117
3,339
26
57
70
Total
4,223
831
390
5,444
3,221
1,091
177
4,489
36
71
97
\n
(1)
Not within the scope of the independent auditors\u2019 report.
\n
Sector analysis \u2013 portfolio summary (audited)
\n
\ue001
ECL provisions coverage
\u2013
Overall provisions coverage remained broadly consistent
\n
with 31 December 2022. This was mainly a result of continued stable portfolio
\n
performance and MES economics-driven modelled ECL releases contrasted with
\n
increased economic uncertainty, captured through ECL post model adjustments.
\n
\ue001
ECL charge \u2013
The impairment charge for 2023 of \u00a3578 million primarily reflected the
\n
underlying Stage 3 charges and portfolio growth.
\n
\ue001
Loans by residual maturity
\u2013
The maturity profile of the portfolios remained
\n
consistent with prior periods. In mortgages, as expected, the vast majority of
\n
exposures were greater than five years. In unsecured lending, cards and other
\n
exposures were concentrated in less than five years. In Wholesale, more than 80% of
\n
exposures mature in less than five years.
\n
\ue001
Other financial assets by asset quality
\u2013 Consisting almost entirely of cash and
\n
balances at central banks and debt securities held in the course of treasury related
\n
management activities, these assets were mainly within the AQ1-AQ4 bands.
\n
\ue001
Off-balance sheet exposures by asset quality
\u2013
In Personal, undrawn exposures were
\n
reflective of available credit lines in credit cards and current accounts. Additionally,
\n
the mortgage portfolio had undrawn exposures, where a formal offer had been made
\n
to a customer but had not yet drawn down; the value decreased in line with the
\n
pipeline of offers. There was also a legacy portfolio of flexible mortgages where a
\n
customer had the right and ability to draw down further funds.
\n
The asset quality was aligned to the wider portfolio. In Wholesale, off-balance sheet
\n
exposures increased due to a rise in securitisations lending within financial
\n
institutions, with asset quality in line with existing off-balance sheet exposures.
\n
\ue001
Wholesale forbearance \u2013
Increased levels of forbearance were observed in Q4 2023.
\n
The retail, leisure, commercial real estate and power and utilities sectors represented
\n
the largest share of completed forbearance. Labour shortages/increased cost of
\n
labour, rising energy prices, supply chain issues and higher interest rates continue to
\n
weigh on these sectors. Payment holidays and covenant waivers were the most
\n
common forms of forbearance granted.
\n
\ue001
Heightened Monitoring and Risk of Credit Loss \u2013
Risk of Credit Loss framework
\n
exposures and inflows increased in 2023 compared to 2022. Heightened inflows were
\n
seen in the mobility and logistics, renewables and utilities, and technology, media and
\n
telecoms sector clusters, offset by decreases in consumer industries. Heightened
\n
inflows were seen in the automotive, media, power utilities and leveraged funds
\n
sectors, partially offset by leisure, airlines and aerospace and land transport and
\n
logistics. Retail SME customers do not form part of the Wholesale Risk of Credit Loss
\n
framework. Customers in financial difficulty within this group are managed by
\n
specialist problem debt management teams. The balances in arrears and recoveries
\n
remained flat in 2023, with inflows continuing to be driven by Bounce Back Loan
\n
Scheme (BBLS) exposures. Excluding BBLS balances, the debt value for this
\n
population that are in problem debt/recoveries also remained stable.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Credit risk enhancement and mitigation (audited)
\n
The table below shows exposures of modelled portfolios within the scope of the ECL framework and related credit risk enhancement and mitigation (CREM).
\n\n \n
Gross
Maximum credit risk
CREM by type
CREM coverage
Exposure post CREM
exposure
ECL
Total
Stage 3
Financial (1)
Property
Other (2)
Total
Stage 3
Total
Stage 3
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets
Cash and balances at central banks
103.1
-
103.1
-
-
-
-
-
-
103.1
-
Loans - amortised cost
(3)
392.0
3.5
388.5
3.5
37.4
248.2
21.8
307.4
3.1
81.1
0.4
Personal
(4)
223.7
1.9
221.8
2.2
0.9
207.5
-
208.4
2.0
13.4
0.2
Wholesale
(5)
168.3
1.6
166.7
1.3
36.5
40.7
21.8
99.0
1.1
67.7
0.2
Debt securities
50.1
-
50.1
-
-
-
-
-
-
50.1
-
Total financial assets
545.2
3.5
541.7
3.5
37.4
248.2
21.8
307.4
3.1
234.3
0.4
Contingent liabilities and commitments
Personal
(6,7)
35.6
-
35.6
0.3
1.0
4.0
-
5.0
-
30.6
0.3
Wholesale
96.4
0.1
96.3
0.4
2.6
7.1
4.1
13.8
0.1
82.5
0.3
Total off-balance sheet
132.0
0.1
131.9
0.7
3.6
11.1
4.1
18.8
0.1
113.1
0.6
Total exposure
677.2
3.6
673.6
4.2
41.0
259.3
25.9
326.2
3.2
347.4
1.0
2022
Financial assets
Cash and balances at central banks
143.2
-
143.2
-
-
-
-
-
-
143.2
-
Loans - amortised cost
(3)
377.2
3.3
373.9
3.4
31.8
243.1
21.7
296.6
3.0
77.3
0.4
Personal
(4)
217.2
1.7
215.5
1.9
0.9
202.1
-
203.0
1.7
12.5
0.2
Wholesale
(5)
160.0
1.6
158.4
1.5
30.9
41.0
21.7
93.6
1.3
64.8
0.2
Debt securities
29.9
-
29.9
-
-
-
-
-
-
29.9
-
Total financial assets
550.3
3.3
547.0
3.4
31.8
243.1
21.7
296.6
3.0
250.4
0.4
Contingent liabilities and commitments
Personal
(6,7)
43.2
-
43.2
0.3
0.7
4.4
-
5.1
-
38.1
0.3
Wholesale
93.9
0.1
93.8
0.4
3.1
7.4
4.0
14.5
0.1
79.3
0.3
Total off-balance sheet
137.0
0.1
136.9
0.7
3.8
11.8
4.0
19.6
0.1
117.3
0.6
Total exposure
687.3
3.4
683.9
4.1
35.6
254.9
25.7
316.2
3.1
367.7
1.0
\n
(1)
Includes cash and securities collateral.
\n
(2)
Includes guarantees, charges over trade debtors, other asset finance related physical collateral as well as the amount by which credit risk exposure is reduced through netting arrangements, mainly cash management pooling, which give NatWest Group a
\n
legal right to set off the financial asset against a financial liability due to the same counterparty.
\n
(3)
NatWest Group holds collateral in respect of individual loans \u2013 amortised cost to banks and customers. This collateral includes mortgages over property (both personal and commercial); charges over business assets such as plant and equipment;
\n
inventories and trade debtors; and guarantees of lending from parties other than the borrower. NatWest Group obtains collateral in the form of securities in reverse repurchase agreements. Collateral values are capped at the value of the loan.
\n
(4)
Stage 3 mortgage exposures have relatively limited uncovered exposure reflecting the security held. On unsecured credit cards and other personal borrowing, the residual uncovered amount reflects historical experience of continued cash recovery post
\n
default through ongoing engagement with customers.
\n
(5)
Stage 3 exposures post credit risk enhancement and mitigation in Wholesale mainly represent enterprise value and the impact of written down collateral values; an individual assessment to determine ECL will consider multiple scenarios and in some
\n
instances allocate a probability weighting to a collateral value in excess of the written down value.
\n
(6)
\u00a30.3 billion (2022
\u2013
\u00a30.3 billion) Personal Stage 3 balances primarily relate to loan commitments, the draw down of which is effectively prohibited.
\n
(7)
The Personal gross exposure value includes \u00a35.9 billion (2022
\u2013
\u00a314.0 billion) in respect of pipeline mortgages where a committed offer has been made to a customer but where the funds have not yet been drawn down. When drawn down, the exposure
\n
would be covered by a security over the borrower\u2019s property.
Personal portfolio (audited)
Disclosures in the Personal portfolio section include drawn exposure (gross of provisions).
\n \n
2023
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
Personal lending
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgages
192,915
13,222
2,200
-
208,337
Of which:
Owner occupied
174,167
11,629
1,464
-
187,260
Buy-to-let
18,748
1,593
736
-
21,077
Interest only
25,805
11,631
461
-
37,897
Mixed
(1)
10,068
25
10
-
10,103
ECL provisions
(2)
397
12
6
-
415
Other personal lending
(3)
13,758
1,395
222
13
15,388
ECL provisions
(2)
1,508
12
2
16
1,538
Total personal lending
206,673
14,617
2,422
13
223,725
Mortgage LTV ratios
- Owner occupied
55%
59%
56%
-
55%
- Stage 1
55%
59%
54%
-
55%
- Stage 2
54%
63%
54%
-
54%
- Stage 3
48%
61%
72%
-
49%
- Buy-to-let
52%
59%
52%
-
53%
- Stage 1
52%
60%
52%
-
53%
- Stage 2
50%
57%
49%
-
50%
- Stage 3
50%
53%
58%
-
51%
Gross new mortgage lending
29,664
1,400
180
-
31,244
Of which:
Owner occupied
27,718
1,267
136
-
29,121
- LTV > 90%
1,173
-
-
-
1,173
Weighted average LTV
(4)
70%
63%
69%
-
70%
Buy-to-let
1,946
133
44
-
2,123
Weighted average LTV
(4)
58%
65%
52%
-
58%
Interest only
2,680
1,224
23
-
3,927
Mixed
(1)
1,568
2
-
-
1,570
Mortgage forbearance
Forbearance flow
(5)
569
22
9
-
600
Forbearance stock
1,416
28
15
-
1,459
Current
950
10
6
-
966
1-3 months in arrears
116
2
2
-
120
>3 months in arrears
350
16
7
-
373
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
For the notes to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n\n \n
2022
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
Personal lending
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgages
186,891
13,709
2,357
-
202,957
Of which:
Owner occupied
168,790
12,096
1,541
-
182,427
Buy-to-let
18,101
1,613
816
-
20,530
Interest only
21,469
11,877
519
-
33,865
Mixed
(1)
9,768
1
16
-
9,785
ECL provisions
(2)
355
9
6
-
370
Other personal lending
(3)
11,935
1,853
267
143
14,198
ECL provisions
(2)
1,257
15
3
26
1,301
Total personal lending
198,826
15,562
2,624
143
217,155
Mortgage LTV ratios
- Owner occupied
52%
59%
56%
-
53%
- Stage 1
52%
59%
56%
-
53%
- Stage 2
52%
61%
60%
-
52%
- Stage 3
45%
59%
74%
-
47%
- Buy-to-let
50%
59%
53%
-
51%
- Stage 1
51%
59%
53%
-
52%
- Stage 2
49%
53%
48%
-
49%
- Stage 3
47%
55%
57%
-
50%
Gross new mortgage lending
41,227
2,968
327
-
44,522
Of which:
Owner occupied
36,305
2,701
221
-
39,227
- LTV > 90%
1,265
-
-
-
1,265
Weighted average LTV
(4)
69%
65%
65%
-
69%
Buy-to-let
4,922
267
106
-
5,295
Weighted average LTV
(4)
64%
66%
60%
-
64%
Interest only
5,323
2,664
62
-
8,049
Mixed
(1)
2,309
-
2
-
2,311
Mortgage forbearance
Forbearance flow
(5)
182
7
4
-
193
Forbearance stock
1,015
16
8
-
1,039
Current
649
8
6
-
663
1-3 months in arrears
133
-
2
-
135
>3 months in arrears
233
8
-
-
241
\n
(1)
Includes accounts which have an interest only sub-account and a capital and
\n
interest sub-account to provide a more comprehensive view of interest only
\n
exposures.
\n
(2)
Retail Banking excludes a non-material amount of lending and provisions held
\n
on relatively small legacy portfolios.
\n
(3)
Comprises unsecured lending except for Private Banking, which includes both
\n
secured and unsecured lending. It excludes loans that are commercial in
\n
nature.
\n
(4)
New mortgage lending LTV reflects the LTV at the time of lending.
\n
(5)
Forbearance flows only include an account once per year, although some
\n
accounts may be subject to multiple forbearance deals. Forbearance deals post
\n
default are excluded from these flows.
\n
For the key points to this table refer to the following page.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n
Mortgage LTV distribution by stage
\n
The table below shows gross mortgage lending and related ECL by LTV band for the Retail Banking portfolio. Mortgage lending not within the scope of governance and post model
\n
adjustments reflected portfolios carried at fair value.
\n\n \n
Mortgages
ECL provisions
ECL provisions coverage
Retail Banking
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
\u226450%
68,092
7,447
1,145
76,684
27
18
134
179
0.0
0.2
11.7
0.2
>50% and
\u226470%
65,777
7,011
767
73,555
35
26
85
146
0.1
0.4
11.1
0.2
>70% and
\u226480%
22,537
1,633
113
24,283
13
7
15
35
0.1
0.4
13.3
0.1
>80% and
\u226490%
13,583
1,143
47
14,773
9
6
7
22
0.1
0.5
14.9
0.1
>90% and
\u2264100%
3,008
370
14
3,392
2
3
3
8
0.1
0.8
21.4
0.2
>100%
22
6
11
39
-
-
5
5
-
-
45.5
12.8
Total with LTVs
173,019
17,610
2,097
192,726
86
60
249
395
0.1
0.3
11.9
0.2
Other
186
1
2
189
1
-
1
2
0.5
-
50.0
1.1
Total
173,205
17,611
2,099
192,915
87
60
250
397
0.1
0.3
11.9
0.2
2022
\u226450%
71,321
8,257
1,036
80,614
26
20
121
167
-
0.2
11.7
0.2
>50% and
\u226470%
68,178
7,792
616
76,586
32
30
71
133
-
0.4
11.5
0.2
>70% and
\u226480%
17,602
1,602
62
19,266
7
6
11
24
-
0.4
17.7
0.1
>80% and
\u226490%
7,918
944
17
8,879
6
5
5
16
0.1
0.5
29.4
0.2
>90% and
\u2264100%
1,409
18
6
1,433
3
-
2
5
0.2
-
33.3
0.3
>100%
35
7
10
52
2
-
4
6
5.7
-
40.0
11.5
Total with LTVs
166,463
18,620
1,747
186,830
76
61
214
351
-
0.3
12.3
0.2
Other
59
1
1
61
3
-
1
4
5.1
-
100.0
6.6
Total
166,522
18,621
1,748
186,891
79
61
215
355
-
0.3
12.3
0.2
\n
\ue001
Growth in the mortgage portfolio decreased in the second half of 2023, consistent with
trends in the wider UK mortgage market
.
\n
\ue001
Mortgage portfolio LTV increased, partly due to the higher relative proportion of new business from recent years\u2019 strong lending performance, as well as easing of house prices reflected in the
\n
Office for National Statistics house price indices.
\n
\ue001
The proportion of overall interest only mortgage balances increased in 2023 driven by the implementation of the Mortgage Charter. Interest only new lending reduced during the year
\n
consistent with the reduction in buy-to-let new lending.
\n
\ue001
Portfolios and new business were closely monitored against agreed operating limits. These included loan-to-value ratios, buy-to-let concentrations, new-build concentrations and credit quality.
\n
Lending criteria, affordability calculations and assumptions for new lending were adjusted during the year, considering inflationary pressure and interest rate rises, to maintain credit quality in
\n
line with appetite and to ensure customers are assessed fairly.
\n
\ue001
Support for customers was proactively promoted during the year. The flow and stock of forbearance increased during the year. The reported forbearance values included customers who
\n
used Mortgage Charter support if indicators of financial stress were already present before Mortgage Charter support was taken. The number of customers requesting support outside of
\n
Mortgage Charter (primarily forbearance) increased gradually during the year, but remained within expectations.
\n
\ue001
Other personal lending balances increased during the year mainly as a result of credit card new business. Lending criteria were carefully managed and the credit quality (based on new
\n
business PD) of the new business written improved, compared to 2022.
\n
\ue001
As noted previously, ECL increased. For further details on the movements in ECL provisions at product level, refer to the Flow statements section.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n
Retail Banking mortgage LTV distribution by region
\n\n \n
The table below shows gross mortgage lending by LTV band for Retail Banking, by geographical region.
Flood risk (1)
Weighted
Lending at high/
\u226450%
50%\u226480%
80%\u2264100%
>100%
Total
average LTV
Other
Total
Total
very high risk (2)
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
%
%
South East
14,645
18,510
3,107
1
36,263
54
2
36,265
19
5.0
Greater London
14,689
18,044
2,366
1
35,100
53
3
35,103
18
6.1
Scotland
5,051
5,938
1,445
1
12,435
54
2
12,437
6
4.2
North West
7,314
8,629
1,881
2
17,826
54
2
17,828
9
4.9
South West
7,308
8,296
1,379
1
16,984
53
1
16,985
9
3.7
West Midlands
5,391
7,072
1,404
1
13,868
55
1
13,869
7
2.5
East of England
8,576
11,810
2,208
-
22,594
55
2
22,596
12
4.5
Rest of the UK
13,711
19,540
4,374
32
37,657
56
175
37,832
20
4.5
Total
76,685
97,839
18,164
39
192,727
54
188
192,915
100
4.7
2022
South East
15,856
17,670
1,396
1
34,923
51
3
34,926
19
4.1
Greater London
15,200
17,550
1,336
1
34,087
51
3
34,090
18
2.3
Scotland
5,024
6,174
1,163
1
12,362
54
1
12,363
7
3.2
North West
7,670
8,672
1,236
2
17,580
52
2
17,582
9
2.2
South West
7,874
7,922
627
-
16,423
50
1
16,424
9
3.0
West Midlands
5,477
7,014
862
1
13,354
53
1
13,355
7
1.2
East of England
9,241
11,492
987
2
21,722
52
2
21,724
12
2.1
Rest of the UK
14,312
19,408
2,712
43
36,475
54
48
36,523
19
3.2
Total
80,654
95,902
10,319
51
186,926
52
61
186,987
100
2.8
\n
(1)
Not within the scope of the independent auditors\u2019 report.
\n
(2)
Flood risk is modelled by calculating an estimated loss for each flood source different types of flooding (Fluvial, pluvial, tidal), annualised for each source and combined for a total flood score. Flood defences are considered where available. Flood scores are
\n
allocated per property based on the potential annualised loss (\u00a3) to a property dependent on the type, frequency and depth of flooding modelled across different return periods. The scoring ranges from 0 to 100, with 0 being lowest and 100 being the
\n
highest risk. A score of 61 and above is considered to be high risk and properties with a score of 81 and above considered to be very high risk after flood mitigants are taken into account.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Personal portfolio (audited)
\n
Retail Banking fixed rate mortgages by roll-off date
(1)
\n
The table below shows gross fixed rate mortgage lending for Retail Banking, by roll-off date.
\n\n \n
2023
2022
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Retail Banking mortgages - gross exposure
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fixed rate roll-off
< 1 year
30,867
3,670
295
34,832
37,391
4,644
276
42,311
>1 year < 2 years
39,013
3,513
290
42,816
32,266
4,063
240
36,569
> 2 years
87,402
7,461
590
95,453
84,116
7,103
438
91,657
Total
157,282
14,644
1,175
173,101
153,773
15,810
954
170,537
\n
Retail Banking mortgages by Energy Performance Certificate (EPC) rating
\n
(1)
\n
The table below represents the energy efficiency of Retail Banking residential mortgages.
\n\n \n
31 December 2023
31 December 2022
Owner occupied
Buy-to-let
Total
Owner occupied
Buy-to-let
Total
EPC rating
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
A
547
13
560
424
12
436
B
21,566
1,458
23,024
19,874
1,342
21,216
C
29,764
5,712
35,476
28,049
5,228
33,277
D
46,924
6,056
52,980
47,497
6,033
53,530
E
16,027
1,557
17,584
17,153
1,687
18,840
F
3,360
62
3,422
3,691
86
3,777
G
736
16
752
789
21
810
Unclassified
55,243
3,874
59,117
51,313
3,692
55,005
Total
174,167
18,748
192,915
168,790
18,101
186,891
\n
(1)
Not within the scope of the independent auditors\u2019 report.
\n
(2)
As at 31 December 2023, \u00a3140.8 billion, 67.6%, of the total residential mortgages portfolio had Energy Performance Certificate (EPC) data available (2022 \u2013 \u00a3138.8 billion, 68.3%). Of which, 44.1% were rated as EPC A to C (2022 \u2013 41.6%).
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Commercial real estate (CRE)
\n
CRE LTV distribution by stage (audited)
\n
The table below shows CRE current exposure and related ECL by LTV band.
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
\u226450%
7,173
664
61
7,898
38
15
9
62
0.5
2.3
14.8
0.8
>50% and
\u226470%
3,165
619
94
3,878
22
21
18
61
0.7
3.4
19.1
1.6
>70% and
\u2264100%
319
112
84
515
3
6
21
30
0.9
5.4
25.0
5.8
>100%
241
6
26
273
1
1
16
18
0.4
16.7
61.5
6.6
Total with LTVs
10,898
1,401
265
12,564
64
43
64
171
0.6
3.1
24.2
1.4
Total portfolio average LTV
47%
51%
72%
48%
Other
(1)
2,189
390
45
2,624
10
7
19
36
0.5
1.8
42.2
1.4
Investment
13,087
1,791
310
15,188
74
50
83
207
0.6
2.8
26.8
1.4
Development
(2)
1,717
147
49
1,913
12
5
25
42
0.7
3.4
51.0
2.2
Total
14,804
1,938
359
17,101
86
55
108
249
0.6
2.8
30.1
1.5
2022
\u226450%
7,010
658
57
7,725
36
12
16
64
0.5
1.8
28.1
0.8
>50% and
\u226470%
3,515
798
43
4,356
23
18
12
53
0.7
2.3
27.9
1.2
>70% and
\u2264100%
259
82
156
497
1
3
42
46
0.4
3.7
26.9
9.1
>100%
102
10
23
135
1
1
14
16
1.0
10.0
60.9
11.8
Total with LTVs
10,886
1,548
279
12,713
61
34
84
179
0.6
2.2
30.1
1.4
Total portfolio average LTV
45%
52%
75%
47%
Other
(1)
1,800
627
55
2,482
9
15
27
51
0.5
2.4
49.1
2.0
Investment
12,686
2,175
334
15,195
70
49
111
230
0.6
2.3
33.2
1.5
Development
(2)
1,553
332
57
1,942
13
8
28
49
0.8
2.4
49.1
2.5
Total
14,239
2,507
391
17,137
83
57
139
279
0.6
2.3
35.6
1.6
\n
(1)
Relates mainly to business banking and unsecured corporate lending.
\n
(2)
Relates to the development of commercial and residential properties. LTV is not a meaningful measure for this type of lending activity.
\n
\ue001
O
O
verall
\u2013 The majority of the CRE portfolio was located and managed in the UK.
\n
Business appetite and strategy was aligned across NatWest Group.
\n
\ue001
2023 trends
\u2013
In H2 2023, conditions were impacted by the uncertain interest rate
\n
outlook. Investment volumes were at historic lows for much of 2023, and values
\n
continued to drift downwards in some sectors. There were some early signs of
\n
improving sentiment following a sharp reduction in medium-term interest rates, but
\n
valuations remain somewhat uncertain, particularly in the office sector
.
\n
\ue001
C
C
redit quality
\u2013
The CRE portfolio has coped well to date with the fall in capital values
\n
and increase in rates, with no significant increase to loans coming into the Risk of
\n
Credit Loss Framework.
\n
\ue001
Risk appetite
\u2013
Lending appetite is subject to regular review.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n
The flow statements that follow show the main ECL and related income statement movements. They also show the changes in ECL as well as the changes in related financial assets
\n
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
\n
differences do not have a material ECL effect. Other points to note:
\n
\ue001
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
\n
included.
\n
\ue001
Stage transfers (for example, exposures moving from Stage 1 into Stage 2) are a key feature of the ECL movements, with the net re-measurement cost of transitioning to a worse
\n
stage being a primary driver of income statement charges. Similarly, there is an ECL benefit for accounts improving stage.
\n
\ue001
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
\n
write-off or accounting write-down.
\n
\ue001
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
\n
direct recovery costs. Other (P&L only items) affects the income statement but does not affect balance sheet ECL movements.
\n
\ue001
Amounts written-off represent the gross asset written-down against accounts with ECL, including the net asset write-down for any debt sale activity.
\n
\ue001
There were some flows from Stage 1 into Stage 3 including transfers due to unexpected default events with a post model adjustment in place for Commercial & Institutional to
\n
account for this risk.
\n
\ue001
The effect of any change in post model adjustments during the year is typically reported under changes in risk parameters, as are any effects arising from changes to the
\n
underlying models. Refer to the section on Governance and post model adjustments for further details.
\n
\ue001
All movements are captured monthly and aggregated. Interest suspended post default is included within Stage 3 ECL with the movement in the value of suspended interest during
\n
the year reported under currency translation and other adjustments.
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
NatWest Group total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
507,539
632
48,482
1,043
5,231
1,759
561,252
3,434
Currency translation and other adjustments
(2,462)
3
(232)
6
128
145
(2,566)
154
Transfers from Stage 1 to Stage 2
(49,502)
(318)
49,502
318
-
-
-
-
Transfers from Stage 2 to Stage 1
47,264
762
(47,264)
(762)
-
-
-
-
Transfers to Stage 3
(336)
(6)
(3,221)
(293)
3,557
299
-
-
Transfers from Stage 3
311
32
631
61
(942)
(93)
-
-
Net re-measurement of ECL on stage transfer
(544)
810
241
507
Changes in risk parameters
(52)
17
306
271
Other changes in net exposure
1,530
205
(7,516)
(188)
(1,946)
(193)
(7,932)
(176)
Other (P&L only items)
(6)
6
(24)
(24)
Income statement (releases)/charges
(397)
645
330
578
Transfers to disposal groups and fair value
1
(5)
(86)
(34)
(90)
(41)
(175)
(80)
Amounts written-off
-
-
(2)
(2)
(317)
(317)
(319)
(319)
Unwinding of discount
-
-
-
(146)
(146)
At 31 December 2023
504,345
709
40,294
976
5,621
1,960
550,260
3,645
Net carrying amount
503,636
39,318
3,661
546,615
At 1 January 2022
546,178
302
35,557
1,478
5,238
2,026
586,973
3,806
2022 movements
(38,639)
330
12,925
(435)
(7)
(267)
(25,721)
(372)
At 31 December 2022
507,539
632
48,482
1,043
5,231
1,759
561,252
3,434
Net carrying amount
506,907
47,439
3,472
557,818
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Retail Banking - mortgages
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
165,264
79
18,831
61
1,762
215
185,857
355
Currency translation and other adjustments
-
(1)
-
1
78
77
78
77
Transfers from Stage 1 to Stage 2
(18,779)
(19)
18,779
19
-
-
-
-
Transfers from Stage 2 to Stage 1
16,742
37
(16,742)
(37)
-
-
-
-
Transfers to Stage 3
(61)
-
(1,028)
(7)
1,089
7
-
-
Transfers from Stage 3
40
1
294
7
(334)
(8)
-
-
Net re-measurement of ECL on stage transfer
(21)
27
6
12
Changes in risk parameters
24
(5)
72
91
Other changes in net exposure
10,832
(13)
(2,307)
(6)
(497)
(43)
8,028
(62)
Other (P&L only items)
-
-
(9)
(9)
Income statement (releases)/charges
(10)
16
26
32
Amounts written-off
-
-
-
-
(30)
(30)
(30)
(30)
Unwinding of discount
-
-
(46)
(46)
At 31 December 2023
174,038
87
17,827
60
2,068
250
193,933
397
Net carrying amount
173,951
17,767
1,818
193,536
At 1 January 2022
159,966
24
10,748
155
1,267
250
171,981
429
2022 movements
5,298
55
8,083
(94)
495
(35)
13,876
(74)
At 31 December 2022
165,264
79
18,831
61
1,762
215
185,857
355
Net carrying amount
165,185
18,770
1,547
185,502
\n
\ue001
ECL levels for mortgages increased during 2023, reflecting continued strong growth.
\n
While portfolio performance remained stable, increased economic uncertainty is
\n
captured through ECL post model adjustments (reflected in changes in risk
\n
parameters).
\n
\ue001
There were net flows into Stage 2 from Stage 1 with an upward trend in early
\n
arrears coupled with the collective migration into Stage 2 of higher risk customers
\n
utilising new Mortgage Charter treatments (approximately \u00a30.9 billion exposure). PDs
\n
remained broadly stable due to the impact of improved economics since 2022 and
\n
balance paydown within Stage 2 resulted in a lower Stage 2 balance in 2023.
\n
\ue001
The increase in the cost of living post model adjustment during 2023 proportionately
\n
allocated more ECL to Stage 1 given the forward-looking nature of the affordability
\n
threat. Refer to the Governance and post model adjustments section for more
\n
information.
\n
\ue001
The Stage 3 inflows remained broadly stable, albeit with signs of an upward drift in
\n
default rates, reflecting slightly poorer arrears performance on mortgages recently
\n
rolled off onto higher product rates. Furthermore, the increase in Stage 3 ECL overall
\n
reflected recent house price index deterioration.
\n
\ue001
The relatively small ECL cost for net re-measurement on stage transfer included the
\n
effect of risk targeted ECL adjustments, when previously in the good book. Refer to
\n
the Governance and post model adjustments section for further details.
\n
\ue001
Write-off occurs once the repossessed property has been sold and there is a residual
\n
shortfall balance remaining outstanding. This would typically be within five years from
\n
default but can be longer.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Retail Banking - credit cards
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
3,062
61
1,098
120
113
71
4,273
252
Currency translation and other adjustments
-
-
-
-
4
4
4
4
Transfers from Stage 1 to Stage 2
(1,933)
(42)
1,933
42
-
-
-
-
Transfers from Stage 2 to Stage 1
753
52
(753)
(52)
-
-
-
-
Transfers to Stage 3
(21)
(1)
(122)
(45)
143
46
-
-
Transfers from Stage 3
2
1
7
3
(9)
(4)
-
-
Net re-measurement of ECL on stage transfer
(31)
162
41
172
Changes in risk parameters
18
25
8
51
Other changes in net exposure
1,612
12
(117)
(51)
(36)
(1)
1,459
(40)
Other (P&L only items)
-
-
1
1
Income statement (releases)/charges
(1)
136
49
184
Amounts written-off
-
-
-
-
(69)
(69)
(69)
(69)
Unwinding of discount
-
-
(7)
(7)
At 31 December 2023
3,475
70
2,046
204
146
89
5,667
363
Net carrying amount
3,405
1,842
57
5,304
At 1 January 2022
2,740
58
947
141
91
60
3,778
259
2022 movements
322
3
151
(21)
22
11
495
(7)
At 31 December 2022
3,062
61
1,098
120
113
71
4,273
252
Net carrying amount
3,001
978
42
4,021
\n
\ue001
The overall increase in ECL was mainly due to the increase in Stage 2 ECL.
\n
\ue001
While portfolio performance remained stable, a net flow into Stage 2 from Stage 1
\n
was observed as PDs increased with observed unemployment and PD modelling
\n
updates capturing more economic downside.
\n
\ue001
Credit card balances continued to grow since the 2022 year end, in line with industry
\n
trends in the UK, reflecting strong customer demand, while sustaining robust risk
\n
appetite.
\n
\ue001
Stage 3 inflows remained relatively stable during the year, although there was a
\n
modest upward trend in default levels, in line with growth and normalisation of risk
\n
parameters.
\n
\ue001
Charge-off (analogous to partial write-off) typically occurs after 12 missed payments.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Retail Banking - other personal unsecured
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
4,784
111
2,028
269
779
631
7,591
1,011
Currency translation and other adjustments
-
-
-
-
26
26
26
26
Transfers from Stage 1 to Stage 2
(2,775)
(118)
2,775
118
-
-
-
-
Transfers from Stage 2 to Stage 1
2,284
317
(2,284)
(317)
-
-
-
-
Transfers to Stage 3
(61)
(3)
(326)
(128)
387
131
-
-
Transfers from Stage 3
7
3
23
9
(30)
(12)
-
-
Net re-measurement of ECL on stage transfer
(224)
329
53
-
158
Changes in risk parameters
(41)
14
82
55
Other changes in net exposure
1,001
104
(558)
(55)
(111)
(33)
332
16
Other (P&L only items)
-
-
20
20
Income statement (releases)/charges
(161)
288
122
249
Amounts written-off
-
-
(1)
(1)
(88)
(88)
(89)
(89)
Unwinding of discount
-
-
(32)
(32)
At 31 December 2023
5,240
149
1,657
238
963
758
7,860
1,145
Net carrying amount
5,091
1,419
205
6,715
At 1 January 2022
4,548
52
1,967
294
629
540
7,144
886
2022 movements
236
59
61
(25)
150
91
447
125
At 31 December 2022
4,784
111
2,028
269
779
631
7,591
1,011
Net carrying amount
4,673
1,759
148
6,580
\n
\ue001
Total ECL increased, mainly in Stage 3. While default levels were broadly stable, they
\n
were higher than in 2022. This increase was in line with growth and normalisation of
\n
risk parameters. Furthermore, write-off levels were lower during 2023, which
\n
sustained a higher Stage 3 ECL position at 31 December 2023.
\n
\ue001
A slight rise in early arrears levels since 2022 and modest PD increases during the
\n
year resulted in a net migration from Stage 1 into Stage 2. However, good book ECL
\n
and coverage levels were largely consistent with 2022, with the improved economic
\n
outlook since 2022 mitigating further IFRS 9 PD increases and balance paydown
\n
within Stage 2.
\n
\ue001
Unsecured retail balances grew steadily until Q3 2023 but, in line with industry trends
\n
in the UK, stabilised in the last quarter of the year.
\n
\ue001
Write-off occurs once recovery activity with the customer has been concluded or
\n
there are no further recoveries expected, but no later than six years after default.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements
(audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
160,352
342
24,711
534
2,198
747
187,261
1,623
Currency translation and other adjustments
(1,702)
1
(226)
(1)
26
46
(1,902)
46
Inter-group transfers
-
-
-
-
-
-
-
-
Transfers from Stage 1 to Stage 2
(23,886)
(129)
23,886
129
-
-
-
-
Transfers from Stage 2 to Stage 1
25,353
334
(25,353)
(334)
-
-
-
-
Transfers to Stage 3
(109)
(2)
(1,523)
(90)
1,632
92
-
-
Transfers from Stage 3
180
27
266
34
(446)
(61)
-
-
Net re-measurement of ECL on stage transfer
(253)
276
129
152
Changes in risk parameters
(62)
(42)
136
32
Other changes in net exposure
16,114
98
(4,731)
(58)
(1,128)
(95)
10,255
(55)
Other (P&L only items)
(5)
6
(36)
(35)
Income statement (releases)/charges
(222)
182
134
94
Amounts written-off
-
-
(1)
(1)
(121)
(121)
(122)
(122)
Unwinding of discount
-
-
(54)
(54)
At 31 December 2022
176,302
356
17,029
447
2,161
819
195,492
1,622
Net carrying amount
175,946
16,582
1,342
193,870
At 1 January 2022
152,224
129
19,731
785
2,155
750
174,110
1,664
2022 movements
8,128
213
4,980
(251)
43
(3)
13,151
(41)
At 31 December 2022
160,352
342
24,711
534
2,198
747
187,261
1,623
Net carrying amount
160,010
24,177
1,451
185,638
\n
\ue001
Growth in exposures was mainly driven by financial institutions sectors.
\n
\ue001
ECL remained broadly stable during 2023 reflecting stable portfolio performance.
\n
\ue001
Reductions in modelled ECL from improving economic variables and risk metrics
\n
were partially offset by increases in post model adjustments to capture continued
\n
economic uncertainty.
\n
\ue001
Stage 3 ECL increased mainly due to charges on a few individual customers.
\n
\ue001
Overall impairment charges were low as the effects of inflation, high interest rates
\n
and supply chain disruption have, to date, not led to a significant increase in defaults.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional - corporate
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
53,595
218
19,235
431
1,434
504
74,264
1,153
Currency translation and other adjustments
(419)
2
(180)
-
25
41
(574)
43
Inter-group transfers
88
1
(66)
-
(30)
(2)
(8)
(1)
Transfers from Stage 1 to Stage 2
(17,161)
(96)
17,161
96
-
-
-
-
Transfers from Stage 2 to Stage 1
18,525
246
(18,525)
(246)
-
-
-
-
Transfers to Stage 3
(91)
(2)
(1,098)
(69)
1,189
71
-
-
Transfers from Stage 3
124
21
204
26
(328)
(47)
-
-
Net re-measurement of ECL on stage transfer
(189)
202
103
116
Changes in risk parameters
(36)
(44)
126
46
Other changes in net exposure
6,741
61
(4,455)
(51)
(758)
(75)
1,528
(65)
Other (P&L only items)
(5)
5
(37)
(37)
Income statement (releases)/charges
(169)
112
117
60
Amounts written-off
-
-
(1)
(1)
(78)
(78)
(79)
(79)
Unwinding of discount
-
-
(41)
(41)
At 31 December 2023
61,402
226
12,275
344
1,454
602
75,131
1,172
Net carrying amount
61,176
11,931
852
73,959
\n
\ue001
There was modest exposure growth, with increased new lending largely offset by
\n
repayments.
\n
\ue001
ECL remained broadly flat but reductions in Stage 2 ECL from repayments were
\n
offset by an increase in Stage 3 from a few individual customers.
\n
\ue001
Overall impairment charges were low as the effects of inflation, high interest rates
\n
and supply chain disruption have, to date, not led to a significant increase in defaults.
\n
The 2023 charge was largely driven by charges on a few individual customers.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional - property
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
24,878
92
3,986
89
628
214
29,492
395
Currency translation and other adjustments
(6)
(1)
(8)
-
1
(2)
(13)
(3)
Inter-group transfers
(38)
-
(8)
-
7
1
(39)
1
Transfers from Stage 1 to Stage 2
(5,010)
(30)
5,010
30
-
-
-
-
Transfers from Stage 2 to Stage 1
4,498
77
(4,498)
(77)
-
-
-
-
Transfers to Stage 3
(14)
(1)
(401)
(20)
415
21
-
-
Transfers from Stage 3
43
4
56
7
(99)
(11)
-
-
Net re-measurement of ECL on stage transfer
(54)
64
24
34
Changes in risk parameters
(24)
2
8
(14)
Other changes in net exposure
1,689
31
(982)
(6)
(313)
(16)
394
9
Other (P&L only items)
-
-
-
-
Income statement (releases)/charges
(47)
60
16
29
Amounts written-off
-
-
-
-
(33)
(33)
(33)
(33)
Unwinding of discount
-
-
(11)
(11)
At 31 December 2023
26,040
94
3,155
89
606
195
29,801
378
Net carrying amount
25,946
3,066
411
29,423
\n
\ue001
The property portfolio remained stable throughout 2023 with minor movements on
\n
exposure and ECL.
\n
\ue001
Overall, there was a small reduction on ECL as write-offs exceeded impairment
\n
charges.
\n
\ue001
Impairment charges were lower than historic trends, as the effects of inflation, high
\n
interest rates and supply chain disruption have, to date, not led to a significant
\n
increase in defaults.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Flow statements (audited)
\n\n \n
Stage 1
Stage 2
Stage 3
Total
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Financial assets
ECL
Commercial & Institutional - other
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
81,879
32
1,490
14
136
29
83,505
75
Currency translation and other adjustments
(1,278)
(1)
(38)
-
-
5
(1,316)
4
Inter-group transfers
(49)
-
74
-
22
-
47
-
Transfers from Stage 1 to Stage 2
(1,716)
(3)
1,716
3
-
-
-
-
Transfers from Stage 2 to Stage 1
2,330
12
(2,330)
(12)
-
-
-
-
Transfers to Stage 3
(4)
-
(24)
(1)
28
1
-
-
Transfers from Stage 3
15
2
6
-
(21)
(2)
-
-
Net re-measurement of ECL on stage transfer
(11)
11
3
3
Changes in risk parameters
(2)
1
-
(1)
Other changes in net exposure
7,683
7
705
(2)
(56)
(4)
8,332
1
Other (P&L only items)
-
-
2
2
Income statement (releases)/charges
(6)
10
1
5
Amounts written-off
-
-
-
-
(8)
(8)
(8)
(8)
Unwinding of discount
-
-
(2)
(2)
At 31 December 2023
88,860
36
1,599
14
101
22
90,560
72
Net carrying amount
88,824
1,585
79
90,488
\n
\ue001
Growth in exposure was observed due to increased lending in the securitisation
\n
sector.
\n
\ue001
The growth was within high quality assets, so ECL was broadly flat with write-offs
\n
exceeding impairment charges.
\n
\ue001
Overall impairment charges were low as the effects of inflation, high interest rates
\n
and supply chain disruption have, to date, not led to a significant increase in defaults.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition arrears status and contributing factors
\n
The tables below show Stage 2 decomposition for the Personal and Wholesale portfolios.
\u00a0
UK mortgages
Credit cards
Other
Total
Loans
ECL
Loans
ECL
Loans
ECL
Loans
ECL
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Personal
Currently >30 DPD
291
1
14
7
51
19
356
27
Currently <=30 DPD
17,563
60
2,008
200
1,582
219
21,153
479
- PD deterioration
12,807
48
1,455
160
831
126
15,093
334
- PD persistence
2,317
6
481
32
373
33
3,171
71
- Other driver (adverse credit, forbearance etc)
2,439
6
72
8
378
60
2,889
74
Total Stage 2
17,854
61
2,022
207
1,633
238
21,509
506
2022
Personal
Currently >30 DPD
205
1
10
5
52
18
267
24
Currently <=30 DPD
18,582
61
1,066
117
1,939
264
21,587
442
- PD deterioration
16,342
56
805
97
1,093
150
18,240
303
- PD persistence
867
2
200
13
185
16
1,252
31
- Other driver (adverse credit, forbearance etc)
1,373
3
61
7
661
98
2,095
108
Total Stage 2
18,787
62
1,076
122
1,991
282
21,854
466
\n
\ue001
The levels of PD driven deterioration decreased in 2023, mainly in the mortgage
\n
portfolio. The economic scenario updates during 2023 resulted in a reduction in
\n
lifetime PDs for the mortgage and personal loan portfolios. This drove a segment of
\n
lower risk cases out of PD SICR deterioration (and captured in PD persistence in the
\n
case of Q4 MES update).
\n
\ue001
The PD modelling update during H1 2023 on the credit card portfolio resulted in
\n
more downside risk captured through modelled ECL and this, alongside modest
\n
increase in early arrears levels, led to more PD SICR deterioration being captured
\n
during 2023.
\n
\ue001
Higher risk mortgage customers who utilised the new Mortgage Charter measures
\n
were collectively migrated into Stage 2, approximately \u00a30.9 billion of exposures, and
\n
captured in the other driver category.
\n
\ue001
Accounts that are less than 30 days past due continue to represent the vast majority
\n
of the Stage 2 population, whilst noting that the greater than 30 days past due
\n
population increased during 2023. As expected, ECL coverage was higher in
\n
accounts that were more than 30 days past due than those in Stage 2 for other
\n
reasons.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition arrears status and contributing factors
Property
Corporate
Financial institutions
Sovereign
Total
Loans
ECL
Loans
ECL
Loans
ECL
Loans
ECL
Loans
ECL
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Wholesale
Currently >30 DPD
99
4
342
9
10
-
-
-
451
13
Currently <=30 DPD
3,171
94
11,803
347
956
15
1
1
15,931
457
- PD deterioration
2,166
72
7,465
222
750
8
-
-
10,381
302
- PD persistence
220
4
838
16
13
-
-
-
1,071
20
- Other driver (forbearance, RoCL etc)
785
18
3,500
109
193
7
1
1
4,479
135
Total Stage 2
3,270
98
12,145
356
966
15
1
1
16,382
470
2022
Wholesale
Currently >30 DPD
255
3
487
11
3
-
-
-
745
14
Currently <=30 DPD
3,780
95
19,103
454
1,350
14
1
-
24,234
563
- PD deterioration
2,503
62
15,714
357
1,230
10
-
-
19,447
429
- PD persistence
81
3
269
9
5
-
-
-
355
12
- Other driver (forbearance, RoCL etc)
1,196
30
3,120
88
115
4
1
-
4,432
122
Total Stage 2
4,035
98
19,590
465
1,353
14
1
-
24,979
577
\n
\ue001
The improved economic outlook, including a more optimistic forecast for stock index
\n
and commercial real estate valuations, resulted in a reduction of IFRS 9 PDs.
\n
Consequently, compared to 2022, a large proportion of exposure no longer exhibited
\n
a SICR and migrated back into Stage 1 resulting in a reduction in Stage 2 exposure.
\n
\ue001
PD deterioration remained the primary trigger for identifying a SICR and Stage 2
\n
treatment.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition by a significant increase in credit risk trigger
UK mortgages
Credit cards
Other
Total
2023
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
Personal trigger
(1)
PD movement
12,969
72.5
1,469
72.7
866
52.9
15,304
71.1
PD persistence
2,317
13.0
481
23.8
374
22.9
3,172
14.7
Adverse credit bureau recorded with credit reference agency
1,047
5.9
49
2.4
99
6.1
1,195
5.6
Forbearance support provided
137
0.8
1
-
11
0.7
149
0.7
Customers in collections
178
1.0
2
0.1
8
0.5
188
0.9
Collective SICR and other reasons
(2)
1,087
6.1
20
1.0
266
16.3
1,373
6.4
Days past due >30
119
0.7
-
-
9
0.6
128
0.6
17,854
100.0
2,022
100.0
1,633
100.0
21,509
100.0
2022
Personal trigger
(1)
PD movement
16,477
87.7
814
75.7
1,129
56.7
18,420
84.3
PD persistence
866
4.6
200
18.6
186
9.3
1,252
5.7
Adverse credit bureau recorded with credit reference agency
929
4.9
52
4.8
96
4.8
1,077
4.9
Forbearance support provided
101
0.5
1
0.1
17
0.9
119
0.5
Customers in collections
153
0.8
2
0.2
4
0.2
159
0.7
Collective SICR and other reasons
(2)
195
1.0
7
0.7
546
27.4
748
3.4
Days past due >30
66
0.4
-
-
13
0.7
79
0.4
18,787
100.0
1,076
100.0
1,991
100.0
21,854
100.0
\n
For the notes to this table refer to the following page.
\n
\ue001
PD-related SICR triggers continued to represent the vast majority of Stage 2.
\n
\ue001
The levels of PD driven deterioration decreased in 2023, mainly in the mortgage
\n
portfolio. The economic scenario updates during 2023 resulted in a reduction in
\n
lifetime PDs for the mortgage and personal loan portfolios, which drove a segment of
\n
lower risk cases out of PD SICR deterioration.
\n
\ue001
The Q4 2023 economic modelling updates that reduced PDs on mortgages and loans
\n
are captured in PD persistence category (for at least three months).
\n
\ue001
The PD modelling update during H1 2023 on the credit card portfolio resulted in
\n
more downside risk captured through modelled ECL and this, alongside modest
\n
increase in early arrears levels, led to more PD SICR deterioration being captured
\n
during 2023.
\n
\ue001
Higher risk mortgage customers who utilised the new Mortgage Charter measures
\n
are collectively migrated into Stage 2, approximately \u00a30.9 billion of exposures. This is
\n
captured in the collective SICR and other reasons category.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 2 decomposition by a significant increase in credit risk trigger
Property
Corporate
Financial institutions
Sovereign
Total
2023
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
Wholesale trigger
(1)
PD movement
2,211
67.6
7,611
62.5
760
78.7
-
-
10,582
64.6
PD persistence
223
6.8
847
7.0
13
1.3
-
-
1,083
6.6
Risk of Credit Loss
563
17.2
2,630
21.7
120
12.4
-
-
3,313
20.2
Forbearance support provided
49
1.6
373
3.1
-
-
-
-
422
2.6
Customers in collections
7
0.2
23
0.2
-
-
-
-
30
0.2
Collective SICR and other reasons
(2)
70
2.1
457
3.8
72
7.5
1
100.0
600
3.7
Days past due >30
147
4.5
204
1.7
1
0.1
-
-
352
2.1
3,270
100.0
12,145
100.0
966
100.0
1
100.0
16,382
100.0
2022
Wholesale trigger
(1)
PD movement
2,569
63.7
15,962
81.5
1,231
91.0
-
-
19,762
79.2
PD persistence
82
2.0
269
1.4
5
0.4
-
-
356
1.4
Risk of Credit Loss
596
14.8
1,664
8.5
32
2.4
-
-
2,292
9.2
Forbearance support provided
41
1.0
476
2.4
19
1.4
-
-
536
2.1
Customers in collections
13
0.3
44
0.2
-
-
-
-
57
0.2
Collective SICR and other reasons
(2)
566
14.0
970
5.0
64
4.7
1
100.0
1,601
6.4
Days past due >30
168
4.2
205
1.0
2
0.1
-
-
375
1.5
4,035
100.0
19,590
100.0
1,353
100.0
1
100.0
24,979
100.0
\n
(1)
The table is prepared on a hierarchical basis from top to bottom, for example, accounts with PD deterioration may also trigger backstop(s) but are only reported under PD deterioration.
\n
(2)
Includes cases where a PD assessment cannot be made and accounts where the PD has deteriorated beyond a prescribed backstop threshold aligned to risk management practices.
\n
\ue001
PD deterioration continued to be the primary trigger of migration of exposures from
\n
Stage 1 into Stage 2. As the economic outlook improved, there was a reduction in
\n
cases triggering Stage 2.
\n
\ue001
Moving exposures on to the Risk of Credit Loss framework remained an important
\n
backstop indicator of a SICR. The exposures classified under the Stage 2 Risk of
\n
Credit Loss framework trigger increased over the year, as less exposures were
\n
captured under the PD deterioration Stage 2 trigger.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
Stage 3 vintage analysis
\n
The table below shows estimated vintage analysis of the material Stage 3 portfolios.
2023
2022
Retail Banking mortgages
(1)
Wholesale
Retail Banking mortgages
(1)
Wholesale
Stage 3 loans (\u00a3bn)
2.0
2.2
1.7
2.3
Vintage (time in default):
<1 year
45%
40%
43%
46%
1-3 years
32%
35%
26%
26%
3-5 years
9%
12%
12%
10%
>5 years
14%
13%
19%
18%
100%
100%
100%
100%
\n
(1)
Retail Banking excludes a non-material amount of lending held on relatively small legacy portfolios.
\n
(2)
Comparative data for Wholesale has been re-presented to correct the ageing profile.
\n
\ue001
The increase in the proportion of loans in Stage 3 for less than three years was mainly due to the adoption of the new regulatory definition of default from January 2022, including
\n
cases captured due to the regulatory default probation rules alone (which represented approximately 11% of Stage 3 Retail Banking mortgages and 9% of Stage 3 Wholesale
\n
balances).
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality
(audited)
\n
The table below shows asset quality bands of gross loans and ECL, by stage, for the Personal portfolio.
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
UK mortgages
AQ1-AQ4
110,694
7,572
-
118,266
51
20
-
71
0.1
0.3
-
0.1
AQ5-AQ8
77,290
9,578
-
86,868
37
37
-
74
0.1
0.4
-
0.1
AQ9
156
704
-
860
-
4
-
4
-
0.6
-
0.5
AQ10
-
-
2,281
2,281
-
-
271
271
-
-
11.9
11.9
188,140
17,854
2,281
208,275
88
61
271
420
0.1
0.3
11.9
0.2
Credit cards
AQ1-AQ4
124
-
-
124
1
-
-
1
0.8
-
-
0.8
AQ5-AQ8
3,612
1,965
-
5,577
75
193
-
268
2.1
9.8
-
4.8
AQ9
6
57
-
63
-
14
-
14
-
24.6
-
22.2
AQ10
-
-
140
140
-
-
93
93
-
-
66.4
66.4
3,742
2,022
140
5,904
76
207
93
376
2.0
10.2
66.4
6.4
Other personal
AQ1-AQ4
764
150
-
914
11
23
-
34
1.4
15.3
-
3.7
AQ5-AQ8
6,178
1,374
-
7,552
138
180
-
318
2.2
13.1
-
4.2
AQ9
41
109
-
150
3
35
-
38
7.3
32.1
-
25.3
AQ10
-
-
979
979
-
-
778
778
-
-
79.5
79.5
6,983
1,633
979
9,595
152
238
778
1,168
2.2
14.6
79.5
12.2
Total
AQ1-AQ4
111,582
7,722
-
119,304
63
43
-
106
0.1
0.6
-
0.1
AQ5-AQ8
87,080
12,917
-
99,997
250
410
-
660
0.3
3.2
-
0.7
AQ9
203
870
-
1,073
3
53
-
56
1.5
6.1
-
5.2
AQ10
-
-
3,400
3,400
-
-
1,142
1,142
-
-
33.6
33.6
198,865
21,509
3,400
223,774
316
506
1,142
1,964
0.2
2.4
33.6
0.9
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality (audited)
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
UK mortgages
AQ1-AQ4
116,559
9,208
-
125,767
45
24
-
69
0.0
0.3
-
0.1
AQ5-AQ8
65,510
8,962
-
74,472
36
34
-
70
0.1
0.4
-
0.1
AQ9
176
617
-
793
-
4
-
4
-
0.7
-
0.5
AQ10
-
-
1,925
1,925
-
-
233
233
-
-
12.1
12.1
182,245
18,787
1,925
202,957
81
62
233
376
00
0.3
12.1
0.2
Credit cards
AQ1-AQ4
98
-
-
98
-
-
-
-
-
-
-
-
AQ5-AQ8
3,172
1,036
-
4,208
61
112
-
173
1.9
10.8
-
4.1
AQ9
5
40
-
45
1
10
-
11
20.0
25.0
-
24.4
AQ10
-
-
109
109
-
-
73
73
-
-
67.0
67.0
3,275
1,076
109
4,460
62
122
73
257
1.9
11.3
67.0
5.8
Other personal
AQ1-AQ4
1,047
128
-
1,175
11
17
-
28
1.1
13.3
-
2.4
AQ5-AQ8
5,843
1,732
-
7,575
104
224
-
328
1.8
12.9
-
4.3
AQ9
28
131
-
159
2
41
-
43
7.1
31.3
-
27.0
AQ10
-
-
797
797
-
-
651
651
-
-
81.7
81.7
6,918
1,991
797
9,706
117
282
651
1,050
1.7
14.2
81.7
10.8
Total personal
AQ1-AQ4
117,704
9,336
-
127,040
56
41
-
97
0.1
0.4
-
0.1
AQ5-AQ8
74,525
11,730
-
86,255
201
370
-
571
0.3
3.2
-
0.7
AQ9
209
788
-
997
3
55
-
58
1.4
7.0
-
5.8
AQ10
-
-
2,831
2,831
-
-
957
957
-
-
33.8
33.8
192,438
21,854
2,831
217,123
260
466
957
1,683
0.1
2.1
33.8
0.8
\n
\ue001
In the Personal portfolio, the majority of exposures were in AQ4 and AQ5 within
\n
mortgages. The higher proportion of UK mortgage loans in bands AQ5-AQ8 was
\n
reflected in the overall average Basel PD for mortgages marginally increasing from
\n
0.65% to 0.67%.
\n
\ue001
In other personal, the relatively high level of exposures in AQ10 reflected that
\n
impaired assets can be held on the balance sheet, with commensurate ECL
\n
provision, for up to six years after default.
Furthermore, write-off levels were lower
\n
during 2023 than 2022.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality (audited)
\n
The table below shows asset quality bands of gross loans and ECL, by stage, for the Wholesale portfolio.
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
Property
AQ1-AQ4
14,961
405
-
15,366
16
5
-
21
0.1
1.2
-
0.1
AQ5-AQ8
12,346
2,799
-
15,145
86
88
-
174
0.7
3.1
-
1.2
AQ9
9
66
-
75
-
5
-
5
-
7.6
-
6.7
AQ10
-
-
621
621
-
-
198
198
-
-
31.9
31.9
27,316
3,270
621
31,207
102
98
198
398
0.4
3.0
31.9
1.3
Other
AQ1-AQ4
25,914
937
-
26,851
27
13
-
40
0.1
1.4
-
0.2
AQ5-AQ8
37,738
10,935
-
48,673
207
323
-
530
0.6
3.0
-
1.1
AQ9
38
273
-
311
-
20
-
20
-
7.3
-
6.4
AQ10
-
-
1,504
1,504
-
-
611
611
-
-
40.6
40.6
63,690
12,145
1,504
77,339
234
356
611
1,201
0.4
2.9
40.6
1.6
Financial institutions
AQ1-AQ4
52,702
665
-
53,367
28
6
-
34
0.1
0.9
-
0.1
AQ5-AQ8
3,402
284
-
3,686
16
9
-
25
0.5
3.2
-
0.7
AQ9
1
17
-
18
-
-
-
-
-
-
-
-
AQ10
-
-
16
16
-
-
7
7
-
-
43.8
43.8
56,105
966
16
57,087
44
15
7
66
0.1
1.6
43.8
0.1
Sovereign
AQ1-AQ4
2,487
1
-
2,488
13
1
-
14
0.5
100.0
-
0.6
AQ5-AQ8
123
-
-
123
-
-
-
-
-
-
-
-
AQ9
-
-
-
-
-
-
-
-
-
-
-
-
AQ10
-
-
22
22
-
-
2
2
-
-
9.1
9.1
2,610
1
22
2,633
13
1
2
16
0.5
100.0
9.1
0.6
Total
AQ1-AQ4
96,064
2,008
-
98,072
84
25
-
109
0.1
1.3
-
0.1
AQ5-AQ8
53,609
14,018
-
67,627
309
420
-
729
0.6
3.0
-
1.1
AQ9
48
356
-
404
-
25
-
25
-
7.0
-
6.2
AQ10
-
-
2,163
2,163
-
-
818
818
-
-
37.8
37.8
149,721
16,382
2,163
168,266
393
470
818
1,681
0.3
2.9
37.8
1.0
\n\n\n\n\n\n\n\n\n\n\n\n\n
Asset quality (audited)
\n\n \n
Gross loans
ECL provisions
ECL provisions coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
%
%
Property
AQ1-AQ4
14,497
542
-
15,039
16
4
-
20
0.1
0.7
-
0.1
AQ5-AQ8
11,792
3,401
-
15,193
83
89
-
172
0.7
2.6
-
1.1
AQ9
11
92
-
103
-
5
-
5
-
5.4
-
4.9
AQ10
-
-
701
701
-
-
223
223
-
-
31.8
31.8
26,300
4,035
701
31,036
99
98
223
420
0.4
2.4
31.8
1.4
Other
AQ1-AQ4
20,409
5,316
-
25,725
24
38
-
62
0.1
0.7
-
0.2
AQ5-AQ8
36,511
13,942
-
50,453
202
404
-
606
0.6
2.9
-
1.2
AQ9
35
332
-
367
-
23
-
23
-
6.9
-
6.3
AQ10
-
-
1,515
1,515
-
-
560
560
-
-
37.0
37.0
56,955
19,590
1,515
78,060
226
465
560
1,251
0.4
2.4
37.0
1.6
Financial institutions
AQ1-AQ4
44,257
914
-
45,171
18
5
-
23
0.0
0.6
-
0.1
AQ5-AQ8
2,479
429
-
2,908
14
9
-
23
0.6
2.1
-
0.8
AQ9
2
10
-
12
-
-
-
-
-
-
-
-
AQ10
-
-
47
47
-
-
17
17
-
-
36.2
36.2
46,738
1,353
47
48,138
32
14
17
63
0.1
1.0
36.2
0.1
Sovereign
AQ1-AQ4
2,678
1
-
2,679
15
-
-
15
0.6
-
-
0.6
AQ5-AQ8
115
-
-
115
-
-
-
-
-
-
-
-
AQ9
-
-
-
-
-
-
-
-
-
-
-
-
AQ10
-
-
2
2
-
-
2
2
-
-
100.0
100.0
2,793
1
2
2,796
15
-
2
17
0.5
\u2014
100.0
0.6
Total
AQ1-AQ4
81,841
6,773
-
88,614
73
47
-
120
0.1
0.7
-
0.1
AQ5-AQ8
50,897
17,772
-
68,669
299
502
-
801
0.6
2.8
-
1.2
AQ9
48
434
-
482
-
28
-
28
-
6.5
-
5.8
AQ10
-
-
2,265
2,265
-
-
802
802
-
-
35.4
35.4
132,786
24,979
2,265
160,030
372
577
802
1,751
0.3
2.3
35.4
1.1
\n
\ue001
Asset quality remained stable.
\n
\ue001
Customer credit grades were reassessed as and when a request for financing was
\n
made, a scheduled customer credit review performed or a material credit event
\n
specific to that customer occurred. Credit grades are reassessed for all customers at
\n
least annually.
\n
\ue001
ECL provisions coverage showed the expected trend, with increased coverage in the
\n
weaker asset quality bands within Stage 2 compared to Stage 1 and within Stage 3
\n
compared to Stage 2.
\n\n\n\n\n\n\n\n\n\n\n\n
Credit risk \u2013 Trading activities
\n
This section details the credit risk profile of NatWest Group\u2019s trading activities.
\n
Securities financing transactions and collateral
(audited)
\n
The table below shows securities financing transactions in Commercial & Institutional and Central items & other. Balance sheet captions include balances held at all classifications under
\n
IFRS.
\n\n \n
Reverse Repos
Repos
Of which:
Outside netting
Of which:
Outside netting
Total
can be offset
arrangements
Total
can be offset
arrangements
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Gross
77,508
77,050
458
66,767
66,047
720
IFRS offset
(25,903)
(25,903)
-
(25,903)
(25,903)
-
Carrying value
51,605
51,147
458
40,864
40,144
720
Master netting arrangements
(669)
(669)
-
(669)
(669)
-
Securities collateral
(50,287)
(50,287)
-
(39,475)
(39,475)
-
Potential for offset not recognised under IFRS
(50,956)
(50,956)
-
(40,144)
(40,144)
-
Net
649
191
458
720
-
720
2022
Gross
61,775
61,241
534
55,226
50,743
4,483
IFRS offset
(20,211)
(20,211)
-
(20,211)
(20,211)
-
Carrying value
41,564
41,030
534
35,015
30,532
4,483
Master netting arrangements
(2,445)
(2,445)
-
(2,445)
(2,445)
-
Securities collateral
(38,387)
(38,387)
-
(28,087)
(28,087)
-
Potential for offset not recognised under IFRS
(40,832)
(40,832)
-
(30,532)
(30,532)
-
Net
732
198
534
4,483
-
4,483
\n\n\n\n\n\n\n\n\n\n\n\n\n
Derivatives
(audited)
\n
The table below shows 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. A
\n
significant proportion of the derivatives relate to trading activities in Commercial & Institutional. The table also includes hedging derivatives in Central items & other.
\n\n \n
2023
2022
Notional
GBP
USD
EUR
Other
Total
Assets
Liabilities
Notional
Assets
Liabilities
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3m
\u00a3m
\u00a3bn
\u00a3m
\u00a3m
Gross exposure
99,501
96,264
118,275
116,158
IFRS offset
(20,597)
(23,869)
(18,730)
(22,111)
Carrying value
3,244
3,025
6,012
1,122
13,403
78,904
72,395
13,925
99,545
94,047
Of which:
Interest rate
(1)
2,952
1,623
5,466
227
10,268
44,563
38,483
10,742
53,480
48,535
Exchange rate
291
1,397
537
895
3,120
34,161
33,586
3,168
45,829
45,237
Credit
1
5
9
-
15
180
326
15
236
275
Carrying value
13,403
78,904
72,395
13,925
99,545
94,047
Counterparty mark-to-market
netting
(60,355)
(60,355)
(77,365)
(77,365)
Cash collateral
(12,284)
(6,788)
(14,079)
(9,761)
Securities collateral
(3,408)
(1,664)
(4,571)
(1,185)
Net exposure
2,857
3,588
3,530
5,736
Banks
(2)
335
555
648
711
Other financial institutions
(3)
1,422
1,304
1,732
1,969
Corporate
(4)
1,063
1,690
1,068
2,969
Government
(5)
37
39
82
87
Net exposure
2,857
3,588
3,530
5,736
UK
1,283
1,912
1,271
2,878
Europe
800
1,209
1,196
2,015
US
607
381
753
626
RoW
167
86
310
217
Net exposure
2,857
3,588
3,530
5,736
Asset quality of uncollateralised derivative assets
AQ1-AQ4
2,382
3,014
AQ5-AQ8
471
500
AQ9-AQ10
4
16
Net exposure
2,857
3,530
\n
(1)
The notional amount of interest rate derivatives includes \u00a37,280 billion (2022 \u2013 \u00a38,065 billion) in respect of contracts cleared through central clearing counterparties.
\n
(2)
Transactions with certain counterparties with whom NatWest 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
\n
positions in certain jurisdictions where the collateral agreements are not deemed to be legally enforceable.
\n
(3)
Includes transactions with securitisation vehicles and funds where collateral posting is contingent on NatWest Group\u2019s external rating.
\n
(4)
Mainly large corporates with whom NatWest Group may have netting arrangements in place, but operational capability does not support collateral posting.
\n
(5)
Sovereigns and supranational entities with no collateral arrangements, collateral arrangements that are not considered enforceable, or one-way collateral agreements in their favour
.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Debt securities
(audited)
\n
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\u2019s, Moody\u2019s and Fitch.
\n
Refer to Note 13 on Trading assets and liabilities for details on short positions.
\n\n \n
Central and local government
UK
US
Other
Financial institutions
Corporate
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
AAA
-
-
1,333
1,132
-
2,465
AA to AA+
-
2,600
19
762
4
3,385
A to AA-
2,729
-
1,017
251
283
4,280
BBB- to A-
-
-
693
295
489
1,477
Non-investment grade
-
-
-
198
149
347
Unrated
-
-
-
-
-
-
Total
2,729
2,600
3,062
2,638
925
11,954
2022
AAA
-
-
469
766
3
1,238
AA to AA+
-
2,345
1,042
1,114
21
4,522
A to AA-
2,205
-
372
77
29
2,683
BBB- to A-
-
-
916
149
296
1,361
Non-investment grade
-
-
-
65
49
114
Unrated
-
-
-
1
3
4
Total
2,205
2,345
2,799
2,172
401
9,922
Cross border exposure
Cross border exposures comprise both banking and trading activities, including reverse repurchase agreements. Exposures comprise loans and advances, including finance leases and
instalment credit receivables, and other monetary assets, such as debt securities. The geographical breakdown is based on the country of domicile of the borrower or guarantor of
ultimate risk. Cross border exposures include non-local currency claims of overseas offices on local residents but exclude exposures to local residents in local currencies. The table
shows cross border exposures greater than 0.5% of NatWest Group\u2019s total assets.
\n \n
Government
Banks
Other
Total
Short positions
Net of short positions
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Western Europe
7,830
10,109
26,508
44,447
4,655
39,792
Of which: France
2,229
2,105
7,839
12,173
1,183
10,990
Germany
1,614
4,525
1,065
7,204
1,905
5,299
Luxembourg
1
317
7,045
7,363
-
7,363
Ireland
29
90
3,622
3,741
99
3,642
Jersey
-
-
4,394
4,394
-
4,394
United States
6,764
3,440
16,356
26,560
2,974
23,586
Canada
1,262
2,059
1,132
4,453
17
4,436
2022
Western Europe
5,608
7,385
19,018
32,011
4,438
27,573
Of which: France
1,875
1,911
3,958
7,744
1,414
6,330
Germany
794
3,717
839
5,350
1,053
4,297
Luxembourg
1
190
5,640
5,831
5
5,826
Ireland
28
70
2,823
2,921
66
2,855
Jersey
-
-
3,019
3,019
-
3,019
United States
8,080
3,852
12,931
24,863
1,429
23,434
Canada
35
1,885
402
2,322
12
2,310
2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured
at amortised cost or at fair value through other comprehensive income, issued financial
guarantee and loan commitment (other than those classified as held for trading) is
assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.
ECL are a probability-weighted estimate of credit losses. The probability is determined by
the risk of default which is applied to the cash flow estimates. In the absence of a change
in credit rating, allowances are recognised when there is a reduction in the net present
value of expected cash flows. Following a significant increase in credit risk, ECL are
adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make
payments as they fall due. Future cashflows are discounted, so long-dated cashflows are
less likely to affect current expectations on credit loss. Our assessment of sector specific
risks, and whether additional adjustments are required, include expectations of the ability
of those sectors to meet their financing needs in the market. Changes in credit risk
appetite and how we manage credit positions that stem from climate considerations,
such as oil and gas, will directly affect our positions.
Judgement is exercised as follows:
\ue001
Models
\u2013 in certain low default portfolios, Basel parameter estimates are also applied
for IFRS 9.
\ue001
Non-modelled portfolios
\u2013 use a standardised capital requirement under Basel II.
Under IFRS 9, they have bespoke treatments for the identification of significant
increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for
appropriateness. The ECL calculation is based on expected future cash flows, which
is typically applied at a portfolio level.
\ue001
Multiple economic scenarios (MES)
\u2013 the central, or base, scenario is most critical to
the ECL calculation, independent of the method used to generate a range of
alternative outcomes and their probabilities.
\ue001
Significant increase in credit risk
\u2013
IFRS 9 requires that at each reporting date, an
entity shall assess whether the credit risk on an account has increased significantly
since initial recognition. Part of this assessment requires a comparison to be made
between the current lifetime PD (i.e. the current probability of default over the
remaining lifetime) with the equivalent lifetime PD as determined at the date of initial
recognition.
.
On restructuring where a financial asset is not derecognised, the revised cash flows are
used in re-estimating the credit loss. Where restructuring causes derecognition of the
original financial asset, the fair value of the replacement asset is used as the closing cash
flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares
or property, the exchange is accounted for as the sale of the loan and the acquisition of
equity securities or investment property. Where our acquired interest is in equity shares,
relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance
sheet when we conclude that there is no longer any realistic prospect of recovery of
part, or all, of the loan. For financial assets that are individually assessed for impairment,
the timing of the write-off is determined on a case-by-case basis. Such financial assets
are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-
negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed
portfolios are:
\ue001
Retail mortgages: write-off usually occurs within five years, or earlier, when an
account is closed, but can be longer where the customer engages constructively;
\ue001
Credit cards: the irrecoverable amount is typically written off after twelve arrears
cycles or at four years post default any remaining amounts outstanding are written
off;
\ue001
Overdrafts and other unsecured loans: write-off occurs within six years;
\ue001
Commercial loans: write-offs are determined in the light of individual circumstances;
and Business loans are generally written off within five years.15 Loan impairment provisions
There is a risk that customers and counterparties fail to meet their contractual obligation to settle outstanding amounts, known as expected credit losses (ECL). The
calculation of ECL considers historic, current and forward-looking information to determine the amount we do not expect to recover. ECL is recognised on current and
potential exposures, and contingent liabilities.
For accounting policy information refer to Accounting policy 2.3. Further disclosures on credit risk and information on ECL methodology are shown from page 186.
Loan exposure and impairment metrics
The table below summarises loans and credit impairment measures within the scope of IFRS 9 Expected credit losses
framework.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Loans - amortised cost and FVOCI
\u00a0 \u00a0
Stage 1
348,586
325,224
Stage 2
37,891
46,833
Stage 3
5,563
5,096
Of which: individual
1,031
1,121
Of which: collective
4,532
3,975
\u00a0
392,040
377,153
ECL provisions
(1)
\u00a0 \u00a0
- Stage 1
709
632
- Stage 2
976
1,043
- Stage 3
1,960
1,759
Of which: individual
332
287
Of which: collective
1,628
1,472
\u00a0
3,645
3,434
ECL provision coverage
(2)
\u00a0 \u00a0
- Stage 1 (%)
0.20
0.19
- Stage 2 (%)
2.58
2.23
- Stage 3 (%)
35.23
34.52
\u00a0
0.93
0.91
Continuing operations
\u00a0 \u00a0
Impairment (releases)/losses
\u00a0 \u00a0
ECL (release)/charge
(3,4)
578
337
Stage 1
(397)
(290)
Stage 2
645
393
Stage 3
330
234
Of which: individual
89
54
Of which: collective
241
180
Amounts written off
319
482
Of which: individual
42
168
Of which: collective
277
314
\n
(1)
Includes loans to customers and banks.
(2)
Includes \u00a39 million (2022 - \u00a33 million) related to assets classified as FVOCI and
\u00a30.1 billion (2022 - \u00a30.1 billion) related to off-balance sheet exposures.
(3)
ECL provisions coverage is calculated as ECL provisions divided by loans \u2013
amortised cost and FVOCI. It is calculated on loans and total ECL provisions,
including ECL for other (non-loan) assets and unutilised exposure. Some
segments with a high proportion of debt securities or unutilised exposure may
result in a not meaningful coverage ratio.
(4)
Includes a \u00a316 million release (2022 - \u00a33 million charge) related to other
financial assets, of which \u00a36 million charge (2022 - nil) related to assets
classified as FVOCI; and \u00a39 million release (2022 - \u00a35 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 Financial instruments within the scope of
the IFRS 9 ECL framework for further details. Other financial assets within the
scope of the IFRS 9 ECL framework were cash and balances at central banks
totalling \u00a3103.1 billion (2022 \u2013 \u00a3143.3 billion) and debt securities of \u00a350.1 billion
(2022 \u2013 \u00a329.9 billion).
Credit risk enhancement and mitigation
For information on Credit risk enhancement and mitigation held as security, refer to Risk and capital management \u2013 Credit risk enhancement and mitigation section.
Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2023, customer loan impairment provisions amounted to \u00a33,645 million (2022 - \u00a33,434
million). A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan was advanced. Such evidence includes, changes in
the credit rating of a borrower, the failure to make payments in accordance with the loan agreement, significant reduction in the value of any security, breach of limits or covenants,
and observable data about relevant macroeconomic measures.
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management\u2019s assessment of any potential deterioration in the creditworthiness of the
borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of
impairment losses. For further information and sensitivity analysis, refer to Risk and capital management \u2013 Measurement uncertainty and ECL sensitivity analysis section.
IFRS 9 ECL model design principles
Refer to Credit risk \u2013 IFRS 9 ECL model design principles section for further details.
Approach for multiple economic scenarios (MES)
The base scenario plays a greater part in the calculation of ECL than the approach to MES. Refer to Credit risk \u2013 Economic loss drivers - Probability weightings of scenarios section for
further details.", "dimensions": { "concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f59172": { "value": "Capital, liquidity and funding risk
NatWest Group continually ensures a comprehensive approach is taken to the
management of capital, liquidity and funding, underpinned by frameworks, risk appetite
and policies, to manage and mitigate its capital, liquidity and funding risks. The
framework ensures the tools and capability are in place to facilitate the management
and mitigation of risk ensuring NatWest Group operates within its regulatory
requirements and risk appetite.
Definitions
(audited)
Regulatory capital consists of reserves and instruments issued that are available, have a
degree of permanency and are capable of absorbing losses. A number of strict
conditions set by regulators must be satisfied to be eligible as capital.
Capital risk is the inability to conduct business in base or stress conditions on a risk or
leverage basis due to insufficient qualifying capital as well as the failure to assess,
monitor, plan and manage capital adequacy requirements.
Liquidity consists of assets that can be readily converted to cash within a short
timeframe at a reliable value. Liquidity risk is the risk of being unable to meet actual or
potential financial obligations in a timely manner when they fall due in the short term.
Funding consists of on-balance sheet liabilities that are used to provide cash to finance
assets. Funding risk is the risk that current or prospective financial obligations cannot be
met as they fall due in the medium to long term, either at all or without increasing
funding costs unacceptably.
Liquidity and funding risks arise in a number of ways, including through the maturity
transformation role that banks perform. The risks are dependent on factors such as:
\ue001
Maturity profile;
\ue001
Composition of sources and uses of funding;
\ue001
The quality and size of the liquidity portfolio;
\ue001
Wholesale market conditions; and
\ue001
Depositor and investor behaviour.
Sources of risk
(audited)
Capital
The eligibility of instruments and financial resources as regulatory capital is laid down by
applicable regulation. Capital is categorised under two tiers (Tier 1 and Tier 2) according
to the ability to absorb losses, degree of permanency and the ranking of absorbing losses
on either a going or gone concern basis. There are three broad categories of capital
across these two tiers:
\ue001
CET1 capital
-
CET1 capital must be perpetual and capable of unrestricted and
immediate use to cover risks or losses as soon as these occur. This includes ordinary
shares issued and retained earnings.
\ue001
Additional Tier 1 (AT1) capital -
This is the second type of loss absorbing capital and
must be capable of absorbing losses on a going concern basis. These instruments are
either written down or converted into CET1 capital when the CET1 ratio falls below a
pre-specified level.
\ue001
Tier 2 capital -
Tier 2 capital is supplementary capital and provides loss absorption on
a gone concern basis. Tier 2 capital absorbs losses after Tier 1 capital. It typically
consists of subordinated debt securities with a minimum maturity of five years at the
point of issuance.
Minimum requirement for own funds and eligible liabilities (MREL)
In addition to capital, other specific loss-absorbing instruments, including senior notes
and Tier 2 capital instruments with certain qualifying criteria issued by NatWest Group,
may be used to cover certain gone concern capital requirements, which is referred to as
MREL. Gone concern refers to the situation in which resources must be available to
enable an orderly resolution, in the event that the Bank of England (BoE) deems that
NatWest Group has failed or is likely to fail.
Liquidity
NatWest Group maintains a prudent approach to the definition of liquidity portfolio to
ensure it is available when and where required, taking into account regulatory, legal and
other constraints. Following ringfencing legislation, liquidity is no longer considered
fungible across NatWest Group. Principal liquidity portfolios are maintained in the UK
Domestic Liquidity Sub-Group (UKDoLSub) (primarily in NatWest Bank Plc), NatWest
Markets Plc, RBS International Limited, NWM N.V and NatWest Bank Europe GmbH.
Some disclosures in this section where relevant are presented, on a consolidated basis,
for NatWest Group and the UK DoLSub.
Liquidity portfolio is divided into primary and secondary liquidity as follows:
\ue001
Primary liquidity is LCR eligible assets and includes cash and balances at central
banks, Treasury bills and high quality government securities.
\ue001
Secondary liquidity is assets
eligible as collateral for local central bank liquidity
facilities. These assets include own-issued securitisations or whole loans that are
retained on balance sheet and pre-positioned with a central bank so that they may
be converted into additional sources of liquidity at very short notice
.
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n
Funding
\n
NatWest Group maintains a diversified set of funding sources, including customer
\n
deposits, wholesale deposits and term debt issuance taking into account regulatory
\n
metrics (Net Stable Funding Ratio).
The principal levels at which funding risk is managed
\n
are at NatWest Group, NatWest Holdings Group, UK DoLSub, NatWest Markets Plc, RBS
\n
International Limited, NWM N.V. and NatWest Bank Europe GmbH. NatWest Group also
\n
retains access to central bank funding facilities.
\n
For further details on capital constituents and the regulatory framework covering capital,
\n
liquidity and funding requirements, refer to the 2023 NatWest Group Pillar 3 Report.
\n
Capital risk management
\n
Capital management ensures that there is sufficient capital and other loss-absorbing
\n
instruments to operate effectively including meeting minimum regulatory requirements,
\n
operating within Board-approved risk appetite, maintaining its credit rating and
\n
supporting its strategic goals.
\n
Capital management is critical in supporting the businesses and is enacted through an
\n
end-to-end framework across businesses and legal entities. Capital is managed within
\n
the organisation at the following levels; NatWest Group consolidated, NWH Group sub
\n
consolidated, NatWest Markets Plc, NatWest Markets N.V. and RBS International Limited.
\n
The banking subsidiaries within NWH Group are governed by the same principles,
\n
processes and management as NatWest Group. Note that although the aforementioned
\n
entities are regulated in line with Basel III principles, local implementation of the
\n
framework differs across geographies.
\n
Capital planning is integrated into NatWest Group\u2019s wider annual budgeting process and
\n
is assessed and updated at least monthly. Regular returns are submitted to the PRA
\n
which include a two-year rolling forecast view. Other elements of capital management,
\n
including risk appetite and stress testing, are set out on pages 175 to 177.
\n
Produce capital plans
\n
Capital plans are produced for NatWest Group, its key operating entities and its
\n
businesses over a five year planning horizon under expected and stress conditions.
\n
Stressed capital plans are produced to support internal stress testing in the ICAAP for
\n
regulatory purposes.
\n
Shorter term forecasts are developed frequently in response to actual performance,
\n
changes in internal and external business environment and to manage risks and
\n
opportunities.
\n
Assess capital adequacy
\n
Capital plans are developed to maintain capital of sufficient quantity and quality to
\n
support NatWest Group\u2019s business, its subsidiaries and strategic plans over the planning
\n
horizon within approved risk appetite, as determined via stress testing, and minimum
\n
regulatory requirements.
\n
Capital resources and capital requirements are assessed across a defined planning
\n
horizon.
\n
Impact assessment captures input from across NatWest Group including from
\n
businesses.
\n
Inform capital actions
\n
Capital planning informs potential capital actions including buy backs, redemptions,
\n
dividends and new issuance to external investors or via internal transactions.
\n
Decisions on capital actions will be influenced by strategic and regulatory requirements,
\n
risk appetite, costs and prevailing market conditions.
\n
As part of capital planning, NatWest Group will monitor its portfolio of external capital
\n
securities and assess the optimal blend and most cost effective means of financing.
\n
Capital planning is one of the tools that NatWest Group uses to monitor and manage
\n
capital risk on a going and gone concern basis, including the risk of excessive leverage.
\n
Liquidity risk management
\n
NatWest Group manages its liquidity risk taking into account regulatory, legal and other
\n
constraints to ensure sufficient liquidity is available where required to cover liquidity
\n
stresses. The principal levels at which liquidity risk is managed are:
\n
\ue001
NatWest Group
\n
\ue001
NatWest Holdings Group
\n
\ue001
UK DoLSub
\n
\ue001
NatWest Markets Plc
\n
\ue001
NatWest Markets Securities Inc.
\n
\ue001
RBS International Limited
\n
\ue001
NWM N.V.
\n
\ue001
NatWest Bank Europe GmbH
\n
The UK DoLSub is PRA regulated and comprises NatWest Group\u2019s three licensed
\n
deposit-taking UK banks: National Westminster Bank Plc (NWB Plc), The Royal Bank of
\n
Scotland plc (RBS plc) and Coutts & Company.
\n
NatWest Group categorises its liquidity portfolio, including its locally managed liquidity
\n
portfolios, into primary and secondary liquid assets. The size of the liquidity portfolios are
\n
determined by referencing NatWest Group\u2019s liquidity risk appetite. NatWest Group
\n
retains a prudent approach to setting the composition of the liquidity portfolios, which is
\n
subject to internal policies applicable to all entities and limits over quality of counterparty,
\n
maturity mix and currency mix.
\n
RBS International Limited and NWM N.V. hold locally managed portfolios that comply
\n
with local regulations that may differ from PRA rules.
\n
The liquidity value of the portfolio is determined by taking current market prices and
\n
applying a discount or haircut, to give a liquidity value that represents the amount of
\n
cash that can be generated by the asset.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Funding risk management
\n
NatWest Group manages funding risk through a comprehensive framework which
\n
measures and monitors the funding risk on the balance sheet including quantitative and
\n
qualitative analysis of the behavioural aspects of its assets and liabilities as well as the
\n
funding concentration.
\n
Prudential regulation changes that may impact capital requirements
\n
NatWest Group faces numerous changes in prudential regulation that may impact the
\n
minimum amount of capital it must hold and consequently may increase funding costs
\n
and reduce return on equity.
\n
Regulatory changes are actively monitored by NatWest Group, including engagement
\n
with industry associations and regulators and participation in quantitative impact studies.
\n
Monitoring the changing regulatory landscape forms a fundamental part of capital
\n
planning and management of its business. NatWest Group believes that its strategy to
\n
focus on simpler, lower risk activities within a more resilient recovery and resolution
\n
framework will enable it to manage the impact of these.
\n
UK and EU implementation of Basel framework
\n
The Basel framework is an internationally agreed set of measures developed by the
\n
Basel Committee on Banking Supervision (BCBS). The Basel III standards are minimum
\n
requirements which apply to internationally active banks, which ensure a global level
\n
playing field on financial regulation.
Individual jurisdictions must decide how to implement
\n
the standards.
\n
From 1 January 2021, NatWest Group has been regulated under the on-shored CRR and
\n
associated on-shored binding technical standards which were created by the European
\n
Union (Withdrawal) Act 2018 and amending statutory instruments. As the Withdrawal
\n
Act applied to the CRR in place as of 31 December 2020, changes to the CRR in the EU
\n
are not reflected in the UK CRR unless separately legislated and amended by statutory
\n
instruments. Going forward, the Financial Services Bill gives the PRA the power to write
\n
prudential rules directly into the PRA rulebook and it will co-ordinate with HM Treasury
\n
to implement any required changes to the UK CRR.
\n
On 1 January 2022, PRA implemented changes to the UK CRR to align to the Basel III
\n
standards which included the introduction of a new standardised approach for
\n
counterparty credit risk (SA-CCR), amendments to the LCR and NSFR rules as well as
\n
new regulation applicable to internal ratings (IRB) models. Changes were also introduced
\n
to the UK Leverage Ratio framework. Equivalent reforms were implemented in the EU in
\n
June 2021, known as CRR2.
\n
On 30 November 2022, the PRA published its consultation paper CP16/22 setting out its
\n
proposed rules and expectations with respect to
the remaining Basel III standards to be
\n
implemented in the UK, also referred to as \u201cBasel 3.1 standards\u201d. This will complete the
\n
implementation of post-global financial crisis prudential reforms, which were designed to
\n
i) increase the quantity of capital in the system, per unit of risk; ii) increase the quality
\n
capital held by firms; and iii) improve the accuracy of risk-management firms, reducing
\n
the variability of risk-weighted assets (RWAs).
\n
The Basel 3.1 changes mainly impact capital requirements for STD and IRB Credit Risk,
\n
Market Risk, Credit Valuation Adjustment (CVA), Counterparty Credit Risk (CCR) and
\n
Operational Risk. An aggregate \u201coutput floor\u201d is also being introduced to ensure that
\n
total RWAs for firms using advanced or internally modelled methods and subject to the
\n
floor cannot fall below 72.5% of RWAs under the standardised approach. The proposal
\n
does not include further changes to the Leverage Ratio, Large Exposures and Liquidity
\n
Risk frameworks.
\n
The consultation paper has been followed up with the publication of the PRA\u2019s policy
\n
statement PS17/23 Implementation of the Basel 3.1 standards near-final part 1.
This
\n
contains the near final rules on Market Risk, CVA, CCR and Operational Risk sections,
\n
along with some Pillar 2 guidance relating to these topics.
Part 2, containing rules on the
\n
remaining Basel 3.1 changes, is expected to be published in Q2 2024.
\n
The PRA rules are expected to be implemented from 1 July 2025.
\n
Equivalent changes relating to the Basel 3.1 standards will be implemented in EU by
\n
CRR3 and CRD6 for which the European Commission issued a proposal in October 2021,
\n
with the near final rules published December 2023. The EU implementation date is
\n
expected to be 1 January 2025.
Their impact will be limited to NatWest Group\u2019s EU
\n
subsidiaries.
\n
Other developments in 2023
\n
On 13 November 2023, the PRA published PS14/13 which formally phased out the CET1
\n
capital deduction for NPEs (Non- Performing Exposures). The requirement was originally
\n
introduced in EU CRR and adopted in the UK; however, the PRA considered that it would
\n
not be appropriate in a UK context to apply the NPE deduction requirement going
\n
forward. Capital disclosures as of 31 December 2023 reflect the benefit because of the
\n
reversal of this deduction.
\n
On 20 November 2023, the PRA announced its 2023 list of O-SIIs (Other Systemically
\n
Important Institutions) as well as the 2023 O-SII buffers for ring-fenced banks (RFBs). The
\n
PRA is required to identify O-SIIs on an annual basis. NatWest Group Plc is part of the
\n
PRA\u2019s O-SII list and the O-SII buffer for its ring-fenced sub-group (i.e. NatWest Holdings
\n
Group) was kept at 1.5%. The 2023 O-SII rates will apply from 1 January 2025. An O-SII
\n
buffer can apply to O-SIIs, or parts of an O-SII that are ring-fenced banks.
\n
NatWest Group, as a third-country group with two or more subsidiary banking
\n
institutions in the EU, was approved by the European Central Bank (ECB) to establish a
\n
dual IPU (Intermediate Parent Undertaking) structure on behalf of its European
\n
subsidiaries. As a result, NatWest Bank Europe GmbH, a wholly owned subsidiary of
\n
NatWest Holdings Group, will act as the ring-fenced IPU. RBS Holdings N.V., a wholly
\n
owned subsidiary of NatWest Markets Plc, will act as the non-ring fenced IPU. Both IPUs
\n
became subject to ECB supervision from 1 January 2024.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Summary of future changes to prudential regulation in UK that may impact NatWest Group
\n
The table below covers expected future changes to prudential regulation in the UK which may impact NatWest Group at a consolidated level. Certain entities within the group will be
\n
exposed to changes in prudential regulation from other legislative bodies and/or local supervisory authorities where NatWest Group\u2019s entities are authorised (e.g. EU and Jersey) on a
\n
solo basis and these changes may be different in substance, scope and timing than those highlighted below.
\n\n \n
Area of development
Key changes
Source of changes/implementation date
IFRS 9 transitional relief
\ue001
IFRS 9 CET1 add-back phased out in period to 31 December 2024
\ue001
Implementation: 1 January 2024
In respect to ECL
\ue001
The transitional factor will reduce further from 50% to 25% from January 2024
provisions
Capital \u2013 Output floor
\ue001
Level of application: Applies at highest level of application: Consolidated level for UK Groups; sub-consolidated level
\ue001
PRA Basel 3.1 CP16/22
for Ring Fenced sub-groups.
\ue001
Implementation: 1 July 2025
\ue001
Capital stack: Applies to full capital stack including capital buffers.
\ue001
Transitional
period
for
the
application;
starting
with
50%
at
1
July
2025
through
to
72.5%
at
1
January
2030.
Credit risk (STD, IRB,
\ue001
Significant revisions to standardised credit risk, including to unrated corporates, SMEs, specialised lending,
\ue001
PRA Basel 3.1 CP16/22
FIRB)
mortgages & equity exposures.
\ue001
Implementation: 1 July 2025
\ue001
Changes to IRB; restrictions on IRB modelling (switch to standardised on central governments and equities, switch
to FIRB on financial institutions and large corporates), inclusion of input floors and other modelling changes.
\ue001
Removal of SME & Infrastructure supporting factors (IRB & standardised).
\ue001
Amendments to credit risk mitigation, including the withdrawal of some internal modelling approaches, the removal
of double default and a new risk weight substitution approach on some exposures.
Market risk
\ue001
Implementation of FRTB - new standardised & modelled approaches (Expected Shortfall replaces VaR), revised
\ue001
PRA Basel 3.1 CP16/22
banking/trading book boundary.
\ue001
Near final rules published in PRA PS17/23
\ue001
Model approval applications are required to be provided during 2024 for standardised MR & CVA.
\ue001
Implementation: 1 July 2025
CVA & counterparty
\ue001
Removal of modelled approach.
\ue001
PRA Basel 3.1 CP16/22
credit risk
\ue001
New standardised approach, aligned to Basel framework, including the removal of CVA exemptions on sovereigns,
\ue001
Near final rules published in PRA PS17/23
non-financial counterparties and pension funds.
\ue001
Implementation: 1 July 2025
\ue001
Reduced SA-CCR alpha factor from 1.4 to 1 for non-financial counterparties and pension funds.
Operational risk
\ue001
New standardised approach
\ue001
PRA Basel 3.1 CP16/22
\ue001
Internal loss multiplier (ILM) set to 1.
\ue001
Near final rules published in PRA PS17/23
\ue001
Changes to the income requirements in scope of the business indicator.
\ue001
Implementation: 1 July 2025
Pillar 2
\ue001
PRA commitment to review Pillar 2A methodologies in 2024, to adjust requirements ahead of implementation of the
\ue001
PRA Basel 3.1 CP16/22
Pillar 1
\ue001
Implementation: 1 July 2025
Capitalisation of foreign
\ue001
PRA proposal to clarify that items held at historical foreign exchange rates, which only re-value in certain
\ue001
PRA consultation under CP17/23 closes on
exchange positions for
circumstances, are not included in Pillar 1 foreign exchange risk requirements as their sensitivity to foreign
31 January 2023
market risk
exchange rates is generally zero.
\ue001
Implementation: 1 July 2025
Identification and
\ue001
PRA proposal to implement Basel guidelines for step-in risk in the PRA Rulebook.
\ue001
PRA consultation under CP23/23 closes on
management of step-in
\ue001
PRA proposal to adopt EBA guidelines for limits on exposures to shadow banking entities and connected clients in
5 March 2024
risk, shadow banking
the Large Exposures (CRR) part of the PRA Rulebook.
\ue001
Implementation: 1 January 2026
entities and groups of
connected clients
\n\n\n\n\n\n\n\n\n\n\n\n\n
Key points
\n
CET1 ratio
\n
13.4%
\n
(2022 \u2013 14.2%)
\n
MREL
\n
\u00a355.8bn
\n
(2022 - \u00a355.5bn)
\n
RWAs
\n
\u00a3183.0bn
\n
(2022 - \u00a3176.1bn)
\n
The CET1 ratio decreased 80 basis points due to a \u00a36.9
\n
billion increase in RWAs and a \u00a30.6 billion decrease in
\n
CET1. The CET1 capital decrease was mainly driven by
\n
\ue001
distributions to shareholders of \u00a33.6 billion (210
\n
basis points); consisting of directed buyback of \u00a31.3
\n
billion; an ordinary interim dividend of \u00a30.5 billion; a
\n
foreseeable final ordinary dividend of \u00a31.0 billion;
\n
and a \u00a30.8 billion decrease for the on-market
\n
ordinary share buyback programme, of which \u00a30.5
\n
billion is reported as a foreseeable charge;
\n
\ue001
a \u00a30.2 billion decrease in the IFRS 9 transitional
\n
adjustment, primarily due to the annual update in
\n
the dynamic stage transition percentage and the
\n
end of transition on the static and historic stages;
\n
\ue001
an increase in the intangible assets deduction of
\n
\u00a30.5 billion;
\n
\ue001
and other movements on reserves and regulatory
\n
adjustments of \u00a30.7 billion.
\n
These reductions were partially offset by the \u00a34.4 billion
\n
attributable profit in the period.
\n
Minimum Requirements of own Funds and eligible
\n
Liabilities increased by \u00a30.3 billion to \u00a355.8 billion
\n
primarily due to a \u00a30.6 billion decrease in CET1, a \u00a30.1
\n
billion decrease in MREL eligible Tier 2 capital and a
\n
\u00a31.0 billion increase in senior unsecured debt. The \u00a30.1
\n
billion decrease in eligible Tier 2 capital is driven by
\n
redemptions and foreign exchange movements offset by
\n
the issuance of \u20ac0.7 billion subordinated debt in the
\n
period and other regulatory adjustments. The \u00a31.0
\n
billion increase in senior unsecured debt is driven by
\n
new issuances offset by redemptions and foreign
\n
exchange movements.
\n
Total RWAs increased by \u00a36.9 billion to \u00a3183.0 billion
\n
mainly reflecting:
\n
\ue001
an increase in credit risk RWAs of \u00a35.6 billion,
\n
driven by an increase in IRB Temporary Model
\n
Adjustment related to mortgages within Retail
\n
Banking as well as increased exposures within
\n
Commercial & Institutional and Retail Banking.
\n
This was partially offset by reduced exposures
\n
within Ulster Bank RoI as a result of the
\n
phased withdrawal from the Republic of
\n
Ireland.
\n
\ue001
an increase in counterparty credit risk RWAs
\n
of \u00a31.1 billion, primarily due to the call of a
\n
credit default swap trade in Q2 2023 and the
\n
subsequent removal of credit risk mitigation.
\n
\ue001
an increase in operational risk RWAs of \u00a31.1
\n
billion following the annual recalculation.
\n
\ue001
a reduction in market risk RWAs of \u00a30.9 billion,
\n
driven by reduced market volatility in H1 and
\n
hedging activity as part of ongoing risk
\n
management in Q4 2023.
\n
UK leverage ratio
\n
5.0%
\n
(2022 \u2013 5.4%)
\n
Liquidity portfolio
\n
\u00a3222.8bn
\n
(2022 - \u00a3232.6bn)
\n
LCR
\n
144%
\n
(2022 \u2013 145%)
\n
NSFR
\n
133%
\n
(2022 \u2013 145%)
\n
The leverage ratio decreased by 40
\n
basis points to 5.0%. The decrease was
\n
due to a \u00a30.6 billion reduction in Tier 1
\n
capital and a \u00a328.2 billion increase in
\n
leverage exposure. The key driver in the
\n
leverage exposure was an increase in
\n
other financial assets partially offset by
\n
a reduction in held for sale assets.
\n
The portfolio decreased by \u00a39.8 billion to
\n
\u00a3222.8 billion, with primary liquidity
\n
decreasing by \u00a320.6 billion to \u00a3148.1
\n
billion. The decrease in primary liquidity
\n
is driven by increased lending and
\n
reduced deposits, offset by UBIDAC
\n
asset sale and increased certificates of
\n
deposit and commercial paper issuance.
\n
The growth in secondary liquidity is due
\n
to an increase in the pre-positioned
\n
collateral at the Bank of England.
\n
The Liquidity Coverage Ratio (LCR)
\n
decreased to 144% during the year
\n
driven by growth in customer lending
\n
and reduced customer deposits offset
\n
by an increase in wholesale funding and
\n
UBIDAC asset sale.
\n
The net stable funding ratio (NSFR)
\n
decreased 12% during the year to 133%
\n
driven by reduced customer deposits
\n
and increased lending
.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Minimum requirements
\n
Maximum Distributable Amount (MDA) and Minimum Capital Requirements
\n
NatWest Group is subject to minimum capital requirements relative to RWAs. The table
\n
below summarises the minimum capital requirements (the sum of Pillar 1 and Pillar 2A),
\n
and the additional capital buffers which are held in excess of the regulatory minimum
\n
requirements and are usable in stress.
\n
Where the CET1 ratio falls below the sum of the minimum capital and the combined
\n
buffer requirement, there is a subsequent automatic restriction on the amount available
\n
to service discretionary payments (including AT1 coupons), known as the MDA. Note
\n
that different capital requirements apply to individual legal entities or sub-groups and the
\n
table shown does not reflect any incremental PRA buffer requirements, which are not
\n
disclosable.
\n
The current capital position provides significant headroom above both our minimum
\n
requirements and our MDA threshold requirements.
\n\n \n
Type
CET1
Total Tier 1
Total capital
Pillar 1 requirements
4.5%
6.0%
8.0%
Pillar 2A requirements
1.8%
2.4%
3.2%
Minimum Capital Requirements
6.3%
8.4%
11.2%
Capital conservation buffer
2.5%
2.5%
2.5%
Countercyclical capital buffer
(1)
1.7%
1.7%
1.7%
MDA threshold
(2)
10.5%
n/a
n/a
Overall capital requirement
10.5%
12.6%
15.4%
Capital ratios at 31 December 2023
13.4%
15.5%
18.4%
Headroom
(3) (4)
2.9%
2.9%
3.0%
\n
(1)
The Financial Policy Committee increased the UK CCyB rate from 1% to 2% effective from 5 July 2023. The Central Bank
\n
of Ireland increased CCyB on Irish exposures from 0% to 0.5% applicable 15 June 2023 and 1% from 24 November 2023.
\n
A further increase to 1.5% will be effective 7 June 2024.
\n
(2)
Pillar 2A requirements for NatWest Group are set as a variable amount with the exception of some fixed add-ons.
\n
(3)
The headroom does not reflect excess distributable capital and may vary over time.
\n
(4)
Headroom as at 31 December 2022 was CET1 4.7%, Total Tier 1 4.8% and Total Capital 5.0%.
\n
Leverage ratios
\n
The table below summarises the minimum ratios of capital to leverage exposure under
\n
the binding PRA UK leverage framework applicable for NatWest Group.
\n\n \n
Type
CET1
Total Tier 1
Minimum ratio
2.44%
3.25%
Countercyclical leverage ratio buffer
(1)
0.6%
0.6%
Total
3.04%
3.85%
\n
(1)
The countercyclical leverage ratio buffer is set at 35% of NatWest Group\u2019s CCyB. The UK CCyB increased from 1% to
\n
2% from 5 July 2023. Foreign exposure may be subject to different CCyB rates depending on the rates set in those
\n
jurisdictions.
\n
Liquidity and funding ratios
\n
The table below summarises the minimum requirements for key liquidity and funding
\n
metrics under the PRA framework.
\n\n \n
Type
Liquidity Coverage Ratio (LCR)
100%
Net Stable Funding Ratio (NSFR)
100%
\n\n\n\n\n\n\n\n\n\n\n\n\n
Measurement
\n
Capital, risk-weighted assets and leverage: Key metrics
\n
The table below sets out the key capital and leverage ratios. NatWest Group is subject to
\n
the requirements set out in the PRA Rulebook. The capital and leverage ratios are
\n
therefore being presented under these frameworks on a transitional basis.
\n \n \n
2023
2022
Capital adequacy ratios
(1)
%
%
CET1
13.4
14.2
Tier 1
15.5
16.4
Total
18.4
19.3
\n\n \n
RWAs
\u00a3m
\u00a3m
Credit risk
147,598
141,963
Counterparty credit risk
7,830
6,723
Market risk
7,363
8,300
Operational risk
20,198
19,115
Total RWAs
182,989
176,101
\n\n \n
Capital
\u00a3m
\u00a3m
CET1
24,440
24,992
Tier1
28,315
28,867
Total
33,632
33,920
\n\n \n
Leverage ratios
\u00a3m
\u00a3m
Tier 1 capital
28,315
28,867
UK leverage exposure
562,843
534,613
UK leverage ratio (%)
(2)
5.0%
5.4%
UK average Tier 1 capital
(3)
28,323
29,564
UK average leverage exposure
(3)
571,225
531,429
UK average leverage ratio (%)
(3)
5.0%
5.6%
\n
(1)
31 December 2023 includes the transitional arrangements for the capital impact of IFRS 9 expected credit loss (ECL)
\n
accounting and prior periods also include the transitional relief on grandfathered capital instruments. The impact of the
\n
IFRS 9 transitional adjustments at 31 December 2023 was \u00a30.2 billion for CET1 capital, \u00a354 million for total capital and
\n
\u00a317 million RWAs (31 December 2022 - \u00a30.4 billion CET1 capital, \u00a336 million total capital and \u00a371 million RWAs).
\n
Excluding these adjustments, the CET1 ratio would be 13.2% (31 December 2022 - 14.0%). The transitional relief on
\n
grandfathered instruments at 31 December 2023 was nil (31 December 2022 - \u00a30.1 billion). Excluding both the
\n
transitional relief on grandfathered capital instruments and the transitional arrangements for the capital impact of IFRS 9
\n
expected credit loss (ECL) accounting, the end-point Tier 1 capital ratio would be 15.4% (31 December 2022 \u2013 16.2%)
\n
and the end-point Total capital ratio would be 18.4% (31 December 2022 \u2013 19.3%).
\n
(2)
The UK leverage exposure and transitional Tier 1 capital are calculated in accordance with current PRA rules. Excluding
\n
the IFRS 9 transitional adjustment, the UK leverage ratio would be 5.0% (31 December 2022 \u2013 5.3%).
\n
(3)
Based on the daily average of on-balance sheet items and three month-end average of off-balance sheet items and Tier
\n
1 capital.
\n
Capital flow statement
\n
table below analyses the movement in CET1, AT1 and Tier 2 capital for the year
The
\n
ended 31 December 2023. It is being presented on a transitional basis based on current
\n
PRA rules.
\n\n \n
CET1
AT1
Tier 2
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 31 December 2022
24,992
3,875
5,053
33,920
Attributable profit for the period
4,394
4,394
Ordinary interim dividend paid
(491)
(491)
Directed buyback
(1,259)
(1,259)
Foreseeable ordinary dividends
(1,013)
(1,013)
Foreseeable charges
(870)
(870)
Foreign exchange reserve
(637)
(637)
FVOCI reserve
53
53
Own credit
48
48
Share capital and reserve movements in
respect of employee share schemes
93
93
Goodwill and intangibles deduction
(498)
(498)
Deferred tax assets
(67)
(67)
Prudential valuation adjustments
(4)
(4)
Net dated subordinated debt instruments
269
269
Foreign exchange movements
(115)
(115)
Adjustment under IFRS 9 transitional
arrangements
(159)
(159)
Other movements
(142)
110
(32)
At 31 December 2023
24,440
3,875
5,317
33,632
\n
\ue001
For CET1 movements refer to the key points on page 247.
\n
\ue001
Tier 2 movements of \u00a30.2 billion include an increase of \u00a30.6 billion for a \u20ac0.7 billion
\n
5.763% Fixed to Fixed Reset Tier 2 Notes 2034 issued in February 2023, partially
\n
offset by the \u00a30.1 billion redemption of the UBIDAC subordinated notes, \u00a30.1 billion
\n
partial redemption of 5.125% Subordinated Tier 2 Notes 2024, \u00a30.1 billion redemption
\n
of 6.000% Subordinated Tier 2 Notes 2023, amortisation, foreign exchange
\n
movements \u00a30.1 billion and maturities with minimum regulatory value.
\n
\ue001
Within Tier 2, there was also a \u00a30.1 billion increase in the Tier 2 surplus provisions.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Risk-weighted assets
\n
The table below analyses the movement in RWAs during the year, by key drivers.
\n\n \n
Credit
Counterparty
Market
Operational
risk
credit risk
risk
risk
Total
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
At 31 December 2022
142.0
6.7
8.3
19.1
176.1
Foreign exchange movement
(0.9)
-
-
-
(0.9)
Business movement
8.4
0.2
(0.9)
1.1
8.8
Risk parameter changes
(1.9)
-
-
-
(1.9)
Model updates
3.0
-
-
-
3.0
Other movement
-
0.9
-
-
0.9
Acquisitions and disposals
(3.0)
-
-
-
(3.0)
At 31 December 2023
147.6
7.8
7.4
20.2
183.0
\n
The table below analyses the movement in RWAs by segment during the year.
\n\n \n
Retail
Private
Commercial &
Central items
Total NatWest
Banking
Banking
Institutional
& other (1)
Group
Total RWAs
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
At 31 December 2022
54.7
11.2
103.2
7.0
176.1
Foreign exchange movement
-
-
(0.8)
(0.1)
(0.9)
Business movement
3.6
-
6.3
(1.1)
8.8
Risk parameter changes
-
-
(1.9)
-
(1.9)
Model updates
3.3
-
(0.3)
-
3.0
Other movement
-
-
0.9
-
0.9
Acquisitions and disposals
-
-
-
(3.0)
(3.0)
At 31 December 2023
61.6
11.2
107.4
2.8
183.0
Credit risk
53.9
9.8
81.9
2.0
147.6
Counterparty credit risk
0.3
-
7.5
-
7.8
Market risk
0.2
-
7.2
-
7.4
Operational risk
7.2
1.4
10.8
0.8
20.2
Total RWAs
61.6
11.2
107.4
2.8
183.0
\n
(1)
\u00a3
1.4 billion of Central items & other relates to Ulster RoI.
\n
Total RWAs increased by \u00a36.9 billion during the period mainly reflecting:
\n
\ue001
Business movements totalling \u00a38.8 billion, primarily driven by increased credit risk
\n
exposures within Commercial & Institutional and Retail Banking. There is an additional
\n
increase following the annual recalculation of operational risk RWAs. This was
\n
partially offset by a reduction in market risk RWAs reflecting reduced market volatility
\n
and tighter risk management in Q4 2023.
\n
\ue001
Model updates totalling \u00a33.0 billion, driven by IRB Temporary Model Adjustment
\n
related to mortgages within Retail Banking with a partial offset within Commercial &
\n
Institutional.
\n
\ue001
Other changes of \u00a30.9 billion, driven by the termination of portfolio credit default
\n
swap resulting in removal of the CRM benefit.
\n
\ue001
Disposals relating to the phased withdrawal from the Republic of Ireland, reducing
\n
RWAs by \u00a33.0 billion.
\n
\ue001
Risk parameters reflecting changes in regulatory treatment for certain structured
\n
transactions, reducing RWAs by \u00a31.9 billion.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Leverage exposure
\n
The leverage metrics for UK entities are calculated in accordance with the Leverage
\n
ratio (CRR) part of the PRA Rulebook.
\n\n \n
31 December
31 December
2023
2022
\u00a3m
\u00a3m
Cash and balances at central banks
104,262
144,832
Trading assets
45,551
45,577
Derivatives
78,904
99,545
Financial assets
439,449
404,374
Other assets
23,605
18,864
Assets of disposal groups
902
6,861
Total assets
692,673
720,053
Derivatives
- netting and variation margin
(79,299)
(100,356)
- potential future exposures
17,212
18,327
Securities financing transactions gross up
1,868
4,147
Other off balance sheet items
50,961
46,144
Regulatory deductions and other adjustments
(16,043)
(7,114)
Claims on central banks
(100,735)
(141,144)
Exclusion of bounce back loans
(3,794)
(5,444)
UK leverage exposure
562,843
534,613
UK leverage ratio (%)
5.0
5.4
\n
Liquidity key metrics
\n
The table below sets out the key liquidity and related metrics monitored by NatWest
\n
Group.
\n\n \n
2023
2022
NatWest Group
UK DoLSub
NatWest Group
UK DoLSub
Liquidity Coverage Ratio
144%
138%
145%
131%
Stressed Outflow Coverage
(1)
153%
143%
150%
131%
Net Stable Funding Ratio
133%
126%
145%
137%
\n
(1)
NatWest Group\u2019s Stressed Outflow Coverage (SOC) is an internal measure calculated by reference to liquid assets as a
\n
percentage of net stressed contractual and behavioural outflows over three months under the worst of three severe
\n
stress scenarios of a market-wide stress, an idiosyncratic stress and a combination of both as per ILAAP. This
\n
assessment is performed in accordance with PRA guidance.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Minimum requirements of own funds and eligible liabilities (MREL)
\n
The following table illustrates the components of estimated Minimum requirements of own funds and eligible liabilities (MREL) in NatWest Group and operating subsidiaries and includes
\n
external issuances only. The roll-off profile relating to senior debt and subordinated debt instruments is set out on page 254.
\n\n \n
2023
2022
Par value (1)
Balance sheet value
Regulatory value
MREL value (3)
Par value
Balance sheet value
Regulatory value (2)
MREL value
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
CET1 capital
(4)
24.4
24.4
24.4
24.4
25.0
25.0
25.0
25.0
Tier 1 capital: end-point CRR compliant AT1
of which: NatWest Group plc (holdco)
3.9
3.9
3.9
3.9
3.9
3.9
3.9
3.9
of which: NatWest Group plc operating subsidiaries (opcos)
-
-
-
-
-
-
-
-
3.9
3.9
3.9
3.9
3.9
3.9
3.9
3.9
Tier 1 capital: end-point CRR non-compliant
(5)
of which: holdco
-
-
-
-
-
-
-
-
of which: opcos
0.1
0.1
-
-
0.1
0.1
-
-
0.1
0.1
-
-
0.1
0.1
-
-
Tier 2 capital: end-point CRR compliant
of which: holdco
5.6
5.3
5.2
5.2
6.0
5.5
4.9
5.4
of which: opcos
-
-
-
-
0.1
0.1
-
-
5.6
5.3
5.2
5.2
6.1
5.6
4.9
5.4
Tier 2 capital: end-point CRR non compliant
(5)
of which: holdco
-
-
-
-
-
-
-
-
of which: opcos
0.2
0.3
-
-
0.3
0.5
0.1
-
0.2
0.3
-
-
0.3
0.5
0.1
-
Senior unsecured debt securities
of which: holdco
22.2
21.7
-
22.2
23.4
22.3
-
21.2
of which: opcos
33.4
29.9
-
-
26.1
22.9
-
\u2014
55.6
51.6
-
22.2
49.5
45.2
-
21.2
Tier 2 capital
Other regulatory adjustments
-
-
0.1
0.1
-
-
-
-
Total
89.8
85.6
33.6
55.8
84.9
80.3
33.9
55.5
RWAs
183.0
176.1
UK leverage exposure
562.9
534.6
MREL as a ratio of RWAs
30.5%
31.5%
MREL as a ratio of UK leverage exposure
9.9%
10.4%
\n
(1)
Par value reflects the nominal value of securities issued.
\n
(2)
Regulatory amounts as at December 2022 reported for AT1, Tier 1, and Tier 2 instruments from operating companies incudes grandfathered instrument as per the transitional provisions allowed under CRR2 (until 28 June 2025). 3 Tier 2 instruments from
\n
UBIDAC were classified as grandfathered which were redeemed in November 2023.
\n
(3)
MREL value reflects NatWest Group\u2019s interpretation of the Bank of England\u2019s approach to setting a minimum requirement for own funds and eligible liabilities (MREL), published in December 2021 (Updating June 2018). Liabilities excluded from MREL
\n
include instruments with less than one year remaining to maturity, structured debt, operating company senior debt, and other instruments that do not meet the MREL criteria. The MREL calculation includes Tier 1 and Tier 2 securities before the application
\n
of any regulatory caps or adjustments.
\n
(4)
Shareholders\u2019 equity was \u00a337.2 billion (2022 - \u00a336.5 billion).
\n
(5)
CRR2 non-compliant instruments- as at Dec 2022, all Tier 1 and Tier 2 instruments were grandfathered under CRR2 compliance (until 28 June 2025) were reported under Tier 1 capital: end-point CRR non-compliant and Tier 2 capital: end-point CRR non-
\n
compliant category. As at December 2023, we have no grandfathered instrument outstanding.
\n\n\n\n\n\n\n\n\n\n\n\n\n
\n
The following table illustrates the components of the stock of outstanding issuance in NatWest Group and its operating subsidiaries including external and internal issuances.
NatWest
NWM
RBS
NatWest
Holdings
NatWest
Securities
International
Group plc
Limited
NWB Plc
RBS plc
UBIDAC
NWM Plc
Markets N.V.
Inc.(6)
Limited (7)
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Additional Tier 1
Externally issued
3.9
-
0.1
-
-
-
-
-
-
Additional Tier 1
Internally issued
-
3.7
2.5
0.5
-
0.9
0.2
-
0.3
3.9
3.7
2.6
0.5
-
0.9
0.2
-
0.3
Tier 2
Externally issued
5.3
-
-
-
-
-
0.3
-
-
Tier 2
Internally issued
-
4.7
3.6
0.4
-
1.0
0.1
0.3
-
5.3
4.7
3.6
0.4
-
1.0
0.4
0.3
-
Senior unsecured
Externally issued
21.7
-
-
-
-
-
-
-
-
Senior unsecured
Internally issued
-
11.4
6.5
1.4
0.5
3.1
-
-
0.3
21.7
11.4
6.5
1.4
0.5
3.1
-
-
0.3
Total outstanding issuance
30.9
19.8
12.7
2.3
0.5
5.0
0.6
0.3
0.6
\n
(1)
For AT1 & Tier 2, the balances are the IFRS balance sheet carrying amounts, which may differ from the amount which the instrument contributes to regulatory capital. Regulatory balances exclude, for example, issuance costs and fair value movements,
\n
while dated capital is required to be amortised on a straight-line basis over the final five years of maturity.
\n
(2)
Balance sheet amounts reported for AT1 and Tier 2 instruments are before grandfathering restrictions imposed by CRR.
\n
(3)
Internal issuance for NWB Plc, RBS plc and UBIDAC represents AT1, Tier 2 or Senior unsecured issuance to NatWest Holdings Limited and for NWM N.V. and NWM SI to NWM Plc.
\n
(4)
The balances are the IFRS balance sheet carrying amounts for Senior unsecured debt category and it does not include CP, CD and short term/medium notes issued from NatWest Group operating subsidiaries
\n
(5)
The above table does not include CET1 numbers.
\n
(6)
NWM Securities Inc - regulated under US broker dealer rules.
\n
(7)
RBS International limited - MREL resolution rules under consultation in Jersey.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Roll-off profile
\n
The following table illustrates the roll-off profile and weighted average spreads of NatWest Group\u2019s major wholesale funding programmes.
\n\n \n
As at and for year
Roll-off profile
Senior debt roll-off profile
(1)
ended 31 December 2023
H1 2024
H2 2024
2025
2026
2027 & 2028
2029 & later
NatWest Group plc
- amount (\u00a3m)
21,660
-
-
2,865
4,385
5,727
8,683
- weighted average rate spread (bps)
182
-
-
176
221
167
173
NWM Plc
- amount (\u00a3m)
20,338
4,014
2,362
5,611
3,785
3,841
725
- weighted average rate spread (bps)
42
69
31
49
41
(7)
122
NatWest Bank Plc
- amount (\u00a3m)
6,008
5,042
966
-
-
-
-
- weighted average rate spread (bps)
36
34
46
-
-
-
-
NWM N.V.
- amount (\u00a3m)
2,193
948
959
65
77
-
144
- weighted average rate spread (bps)
(69)
(115)
(62)
(49)
106
-
94
Covered bonds
-
amount (\u00a3m)
2,122
2,122
-
-
-
-
-
-
weighted average rate spread (bps)
158
158
-
-
-
-
-
Total notes issued - amount (\u00a3m)
52,321
12,126
4,287
8,541
8,247
9,568
9,552
Weighted average rate spread (bps)
99
55
14
91
137
99
168
Subordinated debt instruments roll-off profile
(2)
NatWest Group plc (\u00a3m)
5,318
417
574
957
919
1,909
542
NWM Plc (\u00a3m)
20
-
-
-
18
-
2
NWM N.V. (\u00a3m)
255
-
-
-
-
-
255
Total (\u00a3m)
5,593
417
574
957
937
1,909
799
\n
(1)
Based on final contractual instrument maturity.
\n
(2)
Based on first call date of instrument, however this does not indicate NatWest Group\u2019s strategy on capital and funding management. The table above does not include debt accounted Tier 1 instruments although those instruments form part of the total
\n
subordinated debt balance.
\n
(3)
The weighted average spread reflects the average net funding cost to NatWest Group and is calculated on an indicative basis and are quoted over term SONIA at the time of issuance.
\n
(4)
The roll-off table is based on sterling-equivalent balance sheet values.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Liquidity portfolio
\n
The table below shows the composition of the liquidity portfolio with primary liquidity aligned to high-quality liquid assets on a regulatory LCR basis. Secondary liquidity comprises of
\n
assets which are eligible as collateral for local central bank liquidity facilities and do not form part of the LCR eligible high-quality liquid assets.
\n\n \n
2023
2022
(7)
NatWest
NWH
UK DoL
NatWest
NWH
UK DoL
Group (1)
Group (2)
Sub
Group
Group
Sub
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
99,855
68,495
67,954
142,011
108,047
104,606
High quality government/MDB/PSE and GSE bonds
(4)
36,250
26,510
26,510
22,141
11,921
11,714
Extremely high quality covered bonds
4,164
4,164
4,164
2,093
2,092
1,812
LCR level 1 Eligible Assets
140,269
99,169
98,628
166,245
122,060
118,132
LCR level 2 Eligible Assets
(5)
7,796
7,320
7,320
2,401
2,072
2,032
Primary liquidity (HQLA)
(6)
148,065
106,489
105,948
168,646
124,132
120,164
Secondary liquidity
74,722
74,683
74,683
63,917
63,849
63,849
Total liquidity value
222,787
181,172
180,631
232,563
187,981
184,013
\n
(1)
NatWest Group includes the UK Domestic Liquidity Sub-Group (NWB Plc, RBS plc and Coutts & Co) NatWest Markets Plc and other significant operating subsidiaries that hold liquidity portfolios.
These include The Royal Bank of Scotland International
\n
Limited and NWM N.V. who hold managed portfolios that comply with local regulations that may differ from PRA rules.
\n
(2)
NWH Group comprises UK DoLSub and NatWest Bank Europe GmbH who hold managed portfolios that comply with local regulations that may differ from PRA rules.
\n
(3)
NatWest Markets Plc liquidity portfolio is reported in the NatWest Markets Plc Annual Report and Accounts.
\n
(4)
Multilateral development bank abbreviated to MDB, public sector entities abbreviated to PSE and government sponsored entities abbreviated to GSE.
\n
(5)
Includes Level 2A and Level 2B.
\n
(6)
High-quality liquid assets abbreviated to HQLA.
\n
(7)
Comparative periods have been re-presented on an LCR basis in line with the Liquidity portfolio definition as of 31 December 2023
Funding sources
(audited)
The table below shows the carrying values of the principal funding sources based on contractual maturity. Balance sheet captions include balances held at all classifications under
IFRS 9.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Short-term less
Long-term more
\u00a0
Short-term less
Long-term more
\u00a0
\u00a0
than 1 year
than 1 year
Total
than 1 year
than 1 year
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bank Deposits
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Repos
3,118
-
3,118
1,446
-
1,446
Other bank deposits
(1)
5,836
13,236
19,072
6,353
12,642
18,995
\u00a0
8,954
13,236
22,190
7,799
12,642
20,441
Customer Deposits
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Repos
10,844
-
10,844
9,575
254
9,829
Non-bank financial institutions
46,875
13
46,888
50,226
9
50,235
Personal
216,456
6,436
222,892
224,706
1,209
225,915
Corporate
150,718
35
150,753
164,314
25
164,339
\u00a0
424,893
6,484
431,377
448,821
1,497
450,318
Trading liabilities
(2)
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Repos
(3)
26,634
268
26,902
23,740
-
23,740
Derivatives collateral
15,075
-
15,075
17,680
-
17,680
Other bank and customer deposits
768
382
1,150
413
654
1,067
Debt securities in issue - Medium term notes
418
288
706
54
743
797
\u00a0
42,895
938
43,833
41,887
1,397
43,284
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Customer deposits
194
1,086
1,280
253
797
1,050
Debt securities in issue:
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Commercial paper and certificates of deposit
11,116
205
11,321
5,587
85
5,672
Medium term notes
6,878
32,625
39,503
6,934
31,750
38,684
Covered bonds
2,122
-
2,122
804
2,038
2,842
Securitisation
-
863
863
-
859
859
\u00a0
20,310
34,779
55,089
13,578
35,529
49,107
Subordinated liabilities
1,047
4,667
5,714
974
5,286
6,260
Total funding
498,099
60,104
558,203
513,059
56,351
569,410
Of which: available in resolution
(4)
-
-
26,561
-
-
24,899
\n
(1)
Includes \u00a312.0 billion (2022 \u2013 \u00a312.0 billion) relating to Term Funding Scheme with additional incentives for Small and Medium-sized Enterprises participation.
(2)
Excludes short positions of \u00a39.8 billion (2022 \u2013 \u00a39.5 billion).
(3)
Comprises central & other bank repos of \u00a34.0 billion (2022 \u2013 \u00a31.6 billion), other financial institution repos of \u00a320.4 billion (2022 \u2013 \u00a319.4 billion) and other corporate repos of \u00a32.5 billion (2022 \u2013 \u00a32.7 billion).
(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 by the
Bank of England in December 2021 (updating June 2018). The balance consists of \u00a321.7 billion (2022 \u2013 \u00a320.0 billion) under debt securities in issue (senior MREL) and \u00a34.9 billion (2022 \u2013 \u00a34.9 billion) under subordinated liabilities.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Contractual maturity
(audited)
\n
This table shows the residual maturity of financial instruments, based on contractual date of maturity of NatWest Group\u2019s banking activities, including hedging derivatives. Trading
\n
activities, comprising mandatory fair value through profit or loss (MFVTPL) assets and held-for-trading (HFT) liabilities have been excluded from the maturity analysis and are shown in
\n
total in the table below.
\n\n \n
Banking activities
Less than
6 months-
More than
Trading
1 months
1-3 months
3-6 months
1 year
Subtotal
1-3 years
3-5 years
5 years
Total
activities
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
104,262
-
-
-
104,262
-
-
-
104,262
-
104,262
Trading assets
-
-
-
-
-
-
-
-
-
45,551
45,551
Derivatives
(1)
(4)
(5)
(4)
(14)
42
84
1
113
78,791
78,904
Settlement balances
7,231
-
-
-
7,231
-
-
-
7,231
-
7,231
Loans to banks - amortised cost
5,120
90
1,429
11
6,650
14
250
-
6,914
-
6,914
Loans to customers -
amortised cost
(1)
34,507
20,130
13,602
23,299
91,538
60,679
43,477
189,266
384,960
-
384,960
Personal
4,643
2,337
3,201
6,133
16,314
23,138
21,203
162,890
223,545
-
223,545
Corporate
19,226
4,551
4,569
7,787
36,133
28,661
20,020
24,679
109,493
-
109,493
Non-bank financial institutions
10,638
13,242
5,832
9,379
39,091
8,880
2,254
1,697
51,922
-
51,922
Other financial assets
2,278
1,835
2,669
2,920
9,702
10,929
10,815
18,948
50,394
708
51,102
Total financial assets
153,397
22,051
17,695
26,226
219,369
71,664
54,626
208,215
553,874
125,050
678,924
2022
Total financial assets
187,577
18,259
16,461
25,223
247,520
68,679
50,450
187,808
554,457
145,766
700,223
\n
(1)
Loans to customers excludes \u00a33.5 billion (2022 - \u00a33.3 billion) of impairment provisions.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Contractual maturity
(audited)
\n\n \n
Banking activities
Less than
6 months - 1
More than
Trading
1 months
1-3 months
3-6 months
year
Subtotal
1-3 years
3-5 years
5 years
Total
activities
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bank deposits excluding repos
4,822
217
527
270
5,836
5,036
8,200
-
19,072
-
19,072
Bank repos
2,649
469
-
-
3,118
-
-
-
3,118
-
3,118
Customer repos
8,287
32
2,029
496
10,844
-
-
-
10,844
-
10,844
Customer deposits excluding repos
364,492
20,485
13,501
15,571
414,049
6,456
9
19
420,533
-
420,533
Personal
193,523
4,574
6,163
12,196
216,456
6,433
3
-
222,892
-
222,892
Corporate
129,939
11,376
6,656
2,747
150,718
13
3
19
150,753
-
150,753
Non-bank financial institutions
41,030
4,535
682
628
46,875
10
3
-
46,888
-
46,888
Settlement balances
6,645
-
-
-
6,645
-
-
-
6,645
-
6,645
Trading liabilities
-
-
-
-
-
-
-
-
-
53,636
53,636
Derivatives
14
14
23
63
114
125
20
10
269
72,126
72,395
Other financial liabilities
2,797
5,918
6,379
5,216
20,310
17,496
12,590
4,693
55,089
-
55,089
CPs and CDs
1,673
3,222
3,860
2,361
11,116
205
-
-
11,321
-
11,321
Medium term notes
50
2,674
1,416
2,738
6,878
16,188
11,953
4,484
39,503
-
39,503
Covered bonds
1,047
-
1,075
-
2,122
-
-
-
2,122
-
2,122
Securitisations
-
-
-
-
-
297
377
189
863
-
863
Customer deposits DFV
27
22
28
117
194
806
260
20
1,280
-
1,280
Subordinated liabilities
-
43
431
573
1,047
1,877
1,874
916
5,714
-
5,714
Notes in circulation
3,237
-
-
-
3,237
-
-
-
3,237
-
3,237
Lease liabilities
14
17
24
47
102
156
94
318
670
-
670
Total financial liabilities
392,957
27,195
22,914
22,236
465,302
31,146
22,787
5,956
525,191
125,762
650,953
2022
Total financial liabilities
436,251
19,253
12,620
8,483
476,607
26,194
20,782
9,023
532,606
146,723
679,329
\n\n\n\n\n\n\n\n\n\n\n\n\n
Senior notes and subordinated liabilities - residual maturity profile by instrument type
(audited)
\n
The table below shows NatWest Group\u2019s debt securities in issue and subordinated liabilities by residual maturity.
\n\n \n
Trading
liabilities
Other financial liabilities
Debt securities in issue
Debt securities
Commercial
Covered
Subordinated
Total notes
in issue MTNs
paper and CDs
MTNs
bonds
Securitisation
liabilities
Total
in issue
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Less than 1 year
418
11,116
6,878
2,122
-
1,047
21,163
21,581
1-3 years
48
205
16,188
-
297
1,877
18,567
18,615
3-5 years
-
-
11,953
-
376
1,874
14,203
14,203
More than 5 years
240
-
4,484
-
190
916
5,590
5,830
Total
706
11,321
39,503
2,122
863
5,714
59,523
60,229
\n\n \n
2022
Less than 1 year
54
5,587
6,934
804
-
974
14,299
14,353
1-3 years
475
73
15,161
2,038
296
2,195
19,763
20,238
3-5 years
35
12
9,989
-
375
1,458
11,834
11,869
More than 5 years
233
-
6,600
-
188
1,633
8,421
8,654
Total
797
5,672
38,684
2,842
859
6,260
54,317
55,114
\n
The table below shows the currency breakdown.
\n\n \n
GBP
USD
EUR
Other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Commercial paper and CDs
4,599
3,015
3,707
-
11,321
MTNs
4,421
17,214
15,496
3,078
40,209
Covered bonds
1,047
-
1,075
-
2,122
Securitisation
863
-
-
-
863
Subordinated liabilities
2,675
1,551
1,488
-
5,714
Total
13,605
21,780
21,766
3,078
60,229
2022
10,897
22,399
19,050
2,768
55,114
\n\n\n\n\n\n\n\n\n\n\n\n\n
Funding gap: maturity and segment analysis
\n
The contractual maturity of loans to customers and customer deposits are shown
\n
below. The table demonstrates the maturity transformation role being performed by
\n
NatWest Group of lending long-term whilst relying largely on short-term funding. This
\n
is possible as the behavioural profiles of many customer deposits, which tend to be
\n
repayable on demand, show longer maturity and greater stability than their
\n
contractual agreements.
\n
NatWest Group forms expectations on customer behaviours through both qualitative
\n
and quantitative techniques, incorporating observed customer behaviours over historic
\n
time periods, which includes the more recent periods of interest rate change.
\n
Customer behaviour assumptions are approved by the Natwest Group Balance Sheet
\n
Committee and have been used to prepare the funding gap analysis, which reduces
\n
maturity mismatch across the periods shown.
\n\n \n
Contractual maturity
Behavioural maturity
Loans to customers (1)
Customer deposits
Net surplus/(gap)
Net surplus/(gap)
Greater
Greater
Greater
Greater
Less than
1-5
than
Less than
1-5
than
Less than
1-5
than
Less than
1-5
than
1 year
years
5 years
Total
1 year
years
5 years
Total
1 year
years
5 years
Total
1 year
years
5 years
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Retail Banking
12
41
152
205
182
6
-
188
170
(35)
(152)
(17)
(5)
(6)
(6)
(17)
Private Banking
3
6
9
18
38
-
-
38
35
(6)
(9)
20
16
6
(2)
20
Commercial & Institutional
51
58
28
137
199
1
-
200
148
(57)
(28)
63
15
50
(2)
63
Central items & other
-
-
-
-
2
-
-
2
2
-
-
2
2
-
-
2
Total
66
105
189
360
421
7
-
428
355
(98)
(189)
68
28
50
(10)
68
2022
Total
73
103
180
356
450
2
-
452
377
(101)
(180)
96
12
74
10
96
\n
(1)
Loans to customers and customer deposits include trading assets and trading liabilities respectively and excludes reverse repos and repos.
\n
\ue001
The net customer funding surplus has decreased by \u00a328 billion during 2023 to \u00a368 billion driven by a \u00a324 billion decline in deposits and a \u00a34 billion increase in loans to customers.
\n
\ue001
During 2023 there was a change in the customer deposit mix with a shift from instant access and current account to term products, with additional prudence applied to customer
\n
account depositor behavioural assumptions.
\n
Encumbrance
(audited)
\n
NatWest Group evaluates the extent to which assets can be financed in a secured form
\n
(encumbrance), but certain asset types lend themselves more readily to encumbrance.
\n
The typical characteristics that support encumbrance are an ability to pledge those
\n
assets to another counterparty or entity through operation of law without necessarily
\n
requiring prior notification, homogeneity, predictable and measurable cash flows, and a
\n
consistent and uniform underwriting and collection process. Retail assets including
\n
residential mortgages, credit card receivables and personal loans display many of these
\n
features.
\n
NatWest Group categorises its assets into four broad groups, those that are:
\n
\ue001
Already encumbered and used to support funding currently in place through own-
\n
asset securitisations, covered bonds and securities repurchase agreements.
\n
\ue001
Pre-positioned with central banks as part of funding schemes and those encumbered
\n
under such schemes.
\n
\ue001
Ring-fenced to meet regulatory requirements, where NatWest Group has in place an
\n
operational continuity in resolution (OCIR) investment mandate wherein the PRA
\n
requires critical service providers to hold segregated liquidity buffers covering at least
\n
50% of their annual fixed overheads.
\n
\ue001
Unencumbered. In this category, NatWest Group has in place an enablement
\n
programme which seeks to identify assets capable of being encumbered and to
\n
identify the actions to facilitate such encumbrance whilst not affecting customer
\n
relationships or servicing. Programmes to manage the use of assets to actively
\n
support funding are established within UK DoLSub and NatWest Markets Plc.
Balance sheet encumbrance
The table shows the retained encumbered assets of NatWest Group.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Encumbered as a result of transactions with
\u00a0\u00a0
Unencumbered assets not pre-positioned with central banks
\u00a0
\u00a0
counterparties other than central banks
Pre-positioned
Collateral
\u00a0\u00a0\u00a0\u00a0\u00a0
\u00a0\u00a0
SFT,
\u00a0
& encumbered
ring-fenced to
\u00a0\u00a0\u00a0\u00a0\u00a0
\u00a0
Covered
derivatives and
Total
assets held at
meet regulatory
Readily
Other
Cannot
\u00a0\u00a0
\u00a0
debts
other (1,2)
\u00a0
central banks
requirement
available
available (3)
be used (4)
Total
Total (5)
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Cash and balances at central banks
-
5.1
5.1
-
-
99.2
-
-
99.2
104.3
Trading assets
-
18.9
18.9
-
-
2.5
0.5
23.7
26.7
45.6
Derivatives
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
78.9
78.9
78.9
Settlement balances
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
7.2
7.2
7.2
Loans to banks - amortised cost
-
0.1
0.1
-
-
5.3
0.7
0.8
6.8
6.9
Loans to customers - amortised cost
(6)
13.4
0.3
13.7
112.0
-
84.9
122.3
48.5
255.7
381.4
Other financial assets
(7)
-
15.3
15.3
-
1.9
31.9
0.3
1.7
33.9
51.1
Intangible assets
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
7.6
7.6
7.6
Other assets
-
-
-
-
-
-
2.5
6.3
8.8
8.8
Assets of disposal groups
(8)
-
-
-
-
-
-
-
0.9
0.9
0.9
Total assets
13.4
39.7
53.1
112.0
1.9
223.8
126.3
175.6
525.7
692.7
2022
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
Total assets
11.5
33.8
45.3
99.9
1.8
260.1
127.1
185.8
573.0
720.0
\n
(1)
Repos and other secured deposits, cash, coin and nostro balance held with the Bank of England as collateral against deposits and notes in circulation are included here rather than within those positioned at the central bank as they are part of normal
banking operations. Securities financing transactions (SFT) include collateral given to secure derivative liabilities.
(2)
Derivative cash collateral of \u00a39.9 billion (2022 - \u00a313 billion) has been included in the encumbered assets.
(3)
Other assets that are capable of being encumbered are those assets on the balance sheet that are available for funding and collateral purposes but are not readily realisable in their current form. These assets include loans that could be pre-positioned
with central banks but have not been subject to internal and external documentation review and diligence work.
(4)
Cannot be used includes:
a)
Derivatives, reverse repurchase agreements and trading related settlement balances.
b)
Non-financial assets such as intangibles, prepayments and deferred tax.
c)
Loans that are not encumbered and cannot be pre-positioned with central banks on criteria set by the central banks, including those relating to date of origination and level of documentation.
d)
Non-recourse invoice financing balances and certain shipping loans whose terms and structure prohibit their use as collateral.
(5)
In accordance with market practice, NatWest Group employs securities recognised on the balance sheet, and securities received under reverse repo transactions as collateral for repos.
(6)
The pre-positioned and encumbered assets held at central banks of \u00a3112.0 billion includes the encumbered residential mortgages of \u00a321.6 billion. \u00a370.9 billion of residential UK mortgages are included in \u00a384.9 billion readily available loans to customers.
(7)
Other financial assets under SFT, derivatives and other include \u00a30.5 billion of debt securities under the continuing control of NWB Plc. This follows the agreement between NWB Plc and the Group Pension Fund to establish a bankruptcy remote reservoir
trust to hold these assets. Refer to Note 5 for additional information.
(8)
The majority of UBIDAC assets are in contracted loan sale agreements as part of its phased withdrawal strategy and are unavailable for any alternative contingent liquidity arrangements. UBIDAC has in place a committed unsecured liquidity line from
NatWest Bank to support the withdrawal.", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f63273": { "value": "Funding sources
(audited)
The table below shows the carrying values of the principal funding sources based on contractual maturity. Balance sheet captions include balances held at all classifications under
IFRS 9.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Short-term less
Long-term more
\u00a0
Short-term less
Long-term more
\u00a0
\u00a0
than 1 year
than 1 year
Total
than 1 year
than 1 year
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bank Deposits
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Repos
3,118
-
3,118
1,446
-
1,446
Other bank deposits
(1)
5,836
13,236
19,072
6,353
12,642
18,995
\u00a0
8,954
13,236
22,190
7,799
12,642
20,441
Customer Deposits
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Repos
10,844
-
10,844
9,575
254
9,829
Non-bank financial institutions
46,875
13
46,888
50,226
9
50,235
Personal
216,456
6,436
222,892
224,706
1,209
225,915
Corporate
150,718
35
150,753
164,314
25
164,339
\u00a0
424,893
6,484
431,377
448,821
1,497
450,318
Trading liabilities
(2)
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Repos
(3)
26,634
268
26,902
23,740
-
23,740
Derivatives collateral
15,075
-
15,075
17,680
-
17,680
Other bank and customer deposits
768
382
1,150
413
654
1,067
Debt securities in issue - Medium term notes
418
288
706
54
743
797
\u00a0
42,895
938
43,833
41,887
1,397
43,284
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Customer deposits
194
1,086
1,280
253
797
1,050
Debt securities in issue:
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Commercial paper and certificates of deposit
11,116
205
11,321
5,587
85
5,672
Medium term notes
6,878
32,625
39,503
6,934
31,750
38,684
Covered bonds
2,122
-
2,122
804
2,038
2,842
Securitisation
-
863
863
-
859
859
\u00a0
20,310
34,779
55,089
13,578
35,529
49,107
Subordinated liabilities
1,047
4,667
5,714
974
5,286
6,260
Total funding
498,099
60,104
558,203
513,059
56,351
569,410
Of which: available in resolution
(4)
-
-
26,561
-
-
24,899
\n
(1)
Includes \u00a312.0 billion (2022 \u2013 \u00a312.0 billion) relating to Term Funding Scheme with additional incentives for Small and Medium-sized Enterprises participation.
(2)
Excludes short positions of \u00a39.8 billion (2022 \u2013 \u00a39.5 billion).
(3)
Comprises central & other bank repos of \u00a34.0 billion (2022 \u2013 \u00a31.6 billion), other financial institution repos of \u00a320.4 billion (2022 \u2013 \u00a319.4 billion) and other corporate repos of \u00a32.5 billion (2022 \u2013 \u00a32.7 billion).
(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 by the
Bank of England in December 2021 (updating June 2018). The balance consists of \u00a321.7 billion (2022 \u2013 \u00a320.0 billion) under debt securities in issue (senior MREL) and \u00a34.9 billion (2022 \u2013 \u00a34.9 billion) under subordinated liabilities.3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.24 Asset transfers
This note provides an overview of assets that have been transferred but where
the NatWest Group retains substantially all the risks and rewards of the
transferred assets and therefore continues to recognize them on
its
balance
sheet.
Transfers that do not qualify for derecognition
NatWest Group enters into securities repurchase, lending and total return transactions in
accordance with normal market practice which includes the provision of additional
collateral if necessary. Under standard terms in the UK and US markets, the recipient
has an unrestricted right to sell or repledge collateral, subject to returning equivalent
securities on settlement of the transaction.
Securities sold under repurchase transactions and transactions with the substance of
securities repurchase agreements are not derecognised if NatWest Group retains
substantially all the risks and rewards of ownership. The fair value (and carrying value) of
securities transferred under such transactions included on the balance sheet, are set out
below. All of these securities could be sold or repledged by the holder.
\u00a0
2023
2022
The following assets have failed derecognition
(1)
\u00a3m
\u00a3m
Trading assets
7,907
6,668
Loans to bank - amortised cost
10
16
Loans to customers - amortised cost
281
398
Other financial assets
8,764
2,901
Total
16,962
9,983
(1)
Associated liabilities were \u00a316,522 million (2022 \u2013 \u00a39,501 million).
Assets pledged as collateral
NatWest Group pledges collateral with its counterparties in respect of derivative liabilities,
bank and stock borrowings and other transactions.
\u00a0
2023
2022
Assets pledged against liabilities
\u00a3m
\u00a3m
Trading assets
10,976
15,062
Loans to banks - amortised cost
63
66
Loans to customers - amortised cost
21,611
17,493
Other financial assets
(1)
6,506
3,351
Total
39,156
35,972
(1)
Includes assets pledged for pension derivatives and \u00a3482 million of debt securities under the continuing control of NWB
Plc. This follows the agreement between NWB Plc and the Group Pension Fund to establish a bankruptcy remote
reservoir trust to hold these assets. Refer to Note 5 for additional information.
As part of the covered debt programme \u00a311,067 million of loans to customers and other
debt instruments (2022 \u2013 \u00a38,156 million) have been transferred to bankruptcy remote
limited liability partnerships within the NatWest Group to provide collateral for issues of
debt securities and other borrowing by the NatWest Group of \u00a33,619 million (2022 \u2013
\u00a34,132 million). Refer to Note 23.", "dimensions": { "concept": "ifrs-full:DisclosureOfRepurchaseAndReverseRepurchaseAgreementsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f66318": { "value": "Market risk
NatWest Group is exposed to non-traded market risk through its banking activities and
to traded market risk through its trading activities. Non-traded and traded market risk
exposures are managed and discussed separately. The non-traded market risk section
begins below. The traded market risk section begins on page 269. Pension-related
activities also give rise to market risk. Refer to page 274 for more information on risk
related to pensions.
Non-traded market risk
Definition
(audited)
Non-traded market risk is the risk to the value of assets or liabilities outside the trading
book, or the risk to income, that arises from changes in market prices such as interest
rates, foreign exchange rates and equity prices, or from changes in managed rates.
Sources of risk
(audited)
The key sources of non-traded market risk are interest rate risk, credit spread risk,
foreign exchange risk, equity risk and accounting volatility risk. For detailed qualitative
and quantitative information on each of these risk types, refer to the separate sub-
sections following the VaR table below.
Key developments in 2023
\ue001
In the UK, the Bank of England base rate rose from 3.50% at 31 December 2022 to
5.25% at 31 December 2023 as inflation pressures persisted in the short term.
However, the five-year sterling overnight index interest rate swap rate rose from
4.10% at 31 December 2022 to a peak of 5.37% in the third quarter of 2023, but fell
back to 3.38% at 31 December 2023. The corresponding ten-year rate rose from
3.75% at 31 December 2022 to a peak of 4.68% in the third quarter of 2023, but fell
back to 3.29% at 31 December 2023.
\ue001
Overall, non-traded market risk VaR increased in 2023, on both an average and
period-end basis. This was driven by an increase in credit spread VaR, notably in the
second half of the year, reflecting increased holdings of bonds in the liquidity portfolio.
Interest rate VaR fell slightly in H2, driven by a reduction in the interest rate-sensitive
position, particularly in sterling. By the end of 2023, credit spread risk had replaced
interest rate risk as the main driver of non-traded market risk VaR.
\ue001
NatWest Group\u2019s structural hedge notional reduced to \u00a3207 billion at 31 December
2023 from \u00a3231 billion at 31 December 2022 mainly as a result of lower current
account and instant access savings deposits. This also reflected the impact of
changes in the deposit mix, whereby customers have moved balances into fixed-
term savings accounts. Higher swap rates were reflected in a higher yield on the
structural hedge, which rose from 0.98% in 2022 to 1.47% in 2023.
\ue001
The sensitivity of net interest earnings to a 25-basis-point upward shift in the yield
curve was a cumulative \u00a3760 million over three years at 31 December 2023,
compared to \u00a3893 million at 31 December 2022. The main contributors to the
reduced sensitivity were lower volumes of managed margin deposits and current
accounts, which included the migration to fixed-term savings accounts.
\ue001
Sterling strengthened against the US dollar, to 1.27 at 31 December 2023 compared
to 1.21 at 31 December 2022. It also strengthened against the euro, to 1.15 at 31
December 2023 compared to 1.13 at 31 December 2022. Net investments in foreign
operations decreased by \u00a31.8 billion in sterling equivalent terms over the year, mainly
reflecting the UBIDAC wind-down. However, after hedging, residual structural foreign
currency exposures were broadly stable, decreasing, in sterling equivalent terms, by
\u00a30.2 billion.
Governance
(audited)
Responsibility for identifying, measuring, monitoring and controlling market risk arising
from non-trading activities lies with the relevant business. Oversight is provided by the
independent Risk function.
Risk positions are reported regularly to the Executive Risk Committee, the Board Risk
Committee, and the Board as well as to the Asset & Liability Management Committee.
Non-traded market risk policy sets out the governance and risk management
framework.
Risk appetite
NatWest Group\u2019s qualitative appetite is set out in the non-traded market risk appetite
statement.
Its quantitative appetite is expressed in terms of value-at-risk (VaR), stressed value-at-
risk (SVaR), sensitivity and stress limits, and earnings-at-risk limits.
The limits are reviewed to reflect changes in risk appetite, business plans, portfolio
composition and the market and economic environments. To ensure approved limits are
not breached and that NatWest Group remains within its risk appetite, triggers have
been set and are actively managed.
The risk appetite statements and associated measures are reviewed at least annually by
the Board on the Board Risk Committee\u2019s recommendation to ensure they remain
appropriate and aligned to strategy. For further information on risk appetite and risk
controls, refer to pages 175 and 176.
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n
Risk measurement
\n
Non-traded internal VaR (1-day 99%)
\n
The following table shows one-day internal banking book value-at-risk (VaR) at a 99% confidence level, split by risk type. VaR values for each year are calculated based on one-day
\n
values for each of the 12 month-end reporting dates.
\n
NatWest Group\u2019s VaR metrics are explained on page 271. Each of the key risk types are discussed in greater detail in their individual sub-sections following this table.
\n\n \n
2023
2022
Average
Maximum
Minimum
Period end
Average
Maximum
Minimum
Period end
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest rate
38.0
63.2
24.6
24.6
30.4
60.7
7.6
37.7
Credit spread
33.1
54.2
20.9
54.2
36.3
86.6
19.9
20.3
Structural foreign exchange rate
11.2
13.6
8.4
12.1
8.9
11.3
6.1
11.3
Equity
14.2
19.0
10.4
10.4
18.1
22.2
13.7
14.7
Pipeline risk
(1)
3.3
7.1
1.4
7.1
1.5
4.5
0.3
2.4
Diversification
(2)
(34.4)
(29.9)
(36.9)
(34.9)
Total
65.4
83.4
52.1
78.5
58.3
91.2
45.5
51.5
\n
(1)
Pipeline risk is the risk of loss arising from personal customers owning an option to draw down a loan \u2013 typically a mortgage \u2013 at a committed rate, where interest rate changes may result in greater or fewer customers than anticipated taking up the
\n
committed offer.
\n
(2)
NatWest 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
\n
diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
\n
\ue001
Overall, non-traded market risk VaR increased in 2023, on both an average and period-end basis. This was driven by an increase in credit spread VaR, notably in the second half of
\n
the year, reflecting increased holdings of bonds in the liquidity portfolio.
\n
\ue001
Interest rate VaR fell slightly in H2, driven by a reduction in the interest-rate-sensitive position, particularly in sterling.
\n
\ue001
By the end of 2023, credit spread risk had replaced interest rate risk as the main driver of non-traded market risk VaR.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Interest rate risk
\n
Non-traded interest rate risk (NTIRR) arises from the provision to customers of a range
\n
of banking products with differing interest rate characteristics. When aggregated, these
\n
products form portfolios of assets and liabilities with varying degrees of sensitivity to
\n
changes in market interest rates. Mismatches can give rise to volatility in net interest
\n
income as interest rates vary.
\n
NTIRR comprises the following three primary risk types:
\n
\ue001
Gap risk: arises from the timing of rate changes in non-trading book instruments. The
\n
extent of gap risk depends on whether changes to the term structure of interest
\n
rates occur consistently across the yield curve (parallel risk) or differentially by period
\n
(non-parallel risk).
\n
\ue001
Basis risk: captures the impact of relative changes in interest rates for financial
\n
instruments that have similar tenors but are priced using different interest rate
\n
indices, or on the same interest rate indices but with different tenors.
\n
\ue001
Option risk: arises from option derivative positions or from optional elements
\n
embedded in assets, liabilities and/or off-balance sheet items, where NatWest Group
\n
or its customer can alter the level and timing of their cash flows. Option risk also
\n
includes pipeline risk.
\n
To manage exposures within its risk appetite, NatWest Group aggregates interest rate
\n
positions and hedges its residual exposure, primarily with interest rate swaps.
\n
Structural hedging aims to reduce gap risk and the sensitivity of earnings to interest rate
\n
shocks. It also provides some protection against prolonged periods of falling rates.
\n
Structural hedging is explained in greater detail below, followed by information on how
\n
NatWest Group measures NTIRR from both an economic value-based and an earnings-
\n
based perspective.
\n
Structural hedging
\n
NatWest Group has a significant pool of stable, non and low interest-bearing liabilities,
\n
principally comprising current accounts and savings, in addition to its equity and
\n
reserves. A proportion of these balances are hedged, either by investing directly in
\n
longer-term fixed-rate assets (such as fixed-rate mortgages) or by using interest rate
\n
swaps, which are generally booked as cash flow hedges of floating-rate assets, in order
\n
to provide a consistent and predictable revenue stream.
\n
After hedging the net interest rate exposure externally, NatWest Group allocates income
\n
to equity or products in structural hedges by reference to the relevant interest rate swap
\n
curve. Over time, this approach has provided a basis for stable income attribution for
\n
management purposes to products and interest rate returns. The programme aims to
\n
track a time series of medium-term swap rates, but the yield will be affected by changes
\n
in product volumes and NatWest Group\u2019s equity capital.
\n
The table below shows hedge income, total yield, incremental income and the period-end
\n
and average notional balances allocated to equity and products in respect of the
\n
structural hedges managed by NatWest Group. Hedge income represents the fixed leg of
\n
the hedge, while incremental income represents the difference between hedge income
\n
and short-term cash rates. Both years are presented on a revised basis of preparation
\n
vs. the 2022 Annual Report and Accounts. UBIDAC is no longer included. In addition, the
\n
\u2018Other\u2019 category is no longer used: hedges booked in Coutts & Co. have now been
\n
allocated between product hedges and equity hedges, while hedges booked in RBS
\n
International have been allocated to product hedges.
\n\n \n
2023
2022
Incremental
Hedge
Period end
Average
Total
Incremental
Hedge
Period end
Average
Total
income (1)
income
notional
notional
yield
income (1)
income
notional
notional
yield
\u00a3m
\u00a3m
\u00a3bn
\u00a3bn
%
\u00a3m
\u00a3m
\u00a3bn
\u00a3bn
%
Equity
(611)
418
22
22
1.87
63
372
23
22
1.72
Product
(6,321)
2,822
185
199
1.42
(1,074)
1,780
208
197
0.90
Total
(6,932)
3,240
207
221
1.47
(1,011)
2,152
231
219
0.98
\n
(1)
Incremental income represents the difference between hedge income and an unhedged return that is based on short-term cash rates. For example, the sterling overnight index average (SONIA) is used to estimate incremental income from sterling
\n
structural hedges.
\n
Equity structural hedges refer to income allocated primarily to equity and reserves. At 31 December 2023, the equity structural hedge notional was allocated between NWH Group and
\n
NWM Group in a ratio of approximately 78%/22% respectively.
\n
Product structural hedges refer to income allocated to customer products by NWH Group Treasury, mainly current account and savings balances in Commercial & Institutional, Retail
\n
Banking and Private Banking.
\n
At 31 December 2023, approximately 94% by notional of total structural hedges were sterling-denominated.
\n\n\n\n\n\n\n\n\n\n\n\n\n
\ue001
The structural hedge period-end notional fell, mainly due to lower volumes of current
\n
account and managed rate savings deposits. This also reflected the impact of
\n
changes in the deposit mix, whereby customers have moved balances into fixed-
\n
term savings accounts.
\n
\ue001
The five-year sterling swap rate fell to 3.38% at 31 December 2023 from 4.10% at 31
\n
December 2022. The ten-year sterling swap rate also fell, to 3.29% from 3.75%. The
\n
structural hedge yield rose to 1.47% in 2023 from 0.98% in 2022.
\n
\ue001
Hedge income rose by \u00a31,088 million to \u00a33,240 million from \u00a32,152 million. Despite
\n
the increase in hedge income, incremental income fell. This illustrates the relative
\n
stability of hedge income compared to an unhedged portfolio that would earn short-
\n
term cash rates. Compared to the 49-basis-point increase in the structural hedge
\n
total yield, SONIA increased 176 basis points to 5.19% at 31 December 2023 from
\n
3.43% at 31 December 2022.
\n
The following table presents the incremental income associated with product structural
\n
hedges at segment level.
\n\n \n
2023
2022
\u00a3m
\u00a3m
Retail Banking
(2,644)
(463)
Commercial & Institutional
(3,213)
(537)
Private Banking & Other
(464)
(74)
Total
(6,321)
(1,074)
\n
NTIRR can be measured using value-based or earnings-based approaches. Value-based
\n
approaches measure the change in value of the balance sheet assets and liabilities
\n
including all cash flows. Earnings-based approaches measure the potential impact on the
\n
income statement of changes in interest rates over a defined horizon, generally one to
\n
three years.
\n
NatWest Group uses VaR as its value-based approach and sensitivity of net interest
\n
earnings as its earnings-based approach.
\n
These two approaches provide complementary views of the impact of interest rate risk
\n
on the balance sheet at a point in time. The scenarios employed in the net interest
\n
earnings sensitivity approach may incorporate assumptions about how NatWest Group
\n
and its customers will respond to a change in the level of interest rates. In contrast, the
\n
VaR approach measures the sensitivity of the balance sheet at a point in time. Capturing
\n
all cash flows, VaR also highlights the impact of duration and repricing risks beyond the
\n
one-to-three-year period shown in earnings sensitivity calculations.
\n
Value-at-risk
\n
VaR is a statistical estimate of the potential change in the market value of a portfolio
\n
(and, thus, the impact on the income statement) over a specified time horizon at a given
\n
confidence level.
\n
NatWest Group\u2019s standard VaR metrics \u2013 which assume a time horizon of one trading
\n
day and a confidence level of 99% \u2013 are based on interest rate repricing gaps at the
\n
reporting date. Daily rate moves are modelled using observations from the last 500
\n
business days. These incorporate customer products plus associated funding and
\n
hedging transactions as well as non-financial assets and liabilities. Behavioural
\n
assumptions are applied as appropriate.
\n
The non-traded interest rate risk VaR metrics for NatWest Group\u2019s retail and commercial
\n
banking activities are included in the banking book VaR table presented earlier in this
\n
section. The VaR captures the risk resulting from mismatches in the repricing dates of
\n
assets and liabilities.
\n
It also includes any mismatch between the maturity profile of external hedges and
\n
NatWest Group\u2019s target maturity profile for the hedge.
\n
Sensitivity of net interest earnings
\n
Net interest earnings are sensitive to changes in the level of interest rates, mainly
\n
because maturing structural hedges are replaced at higher or lower rates and changes
\n
to coupons on managed rate customer products do not always match changes in
\n
market rates of interest or central bank policy rates.
\n
Earnings sensitivity is derived from a market-implied forward rate curve, which will
\n
incorporate expected changes in central bank policy rates such as the Bank of England
\n
base rate. A simple scenario is shown that projects forward earnings based on the 31
\n
December 2023 balance sheet, which is assumed to remain constant. An earnings
\n
projection is derived from the market-implied curve, which is then subject to interest rate
\n
shocks. The difference between the market-implied projection and the shock gives an
\n
indication of underlying sensitivity to interest rate movements.
\n
Reported sensitivities should not be considered a forecast of future performance in these
\n
rate scenarios. Actions that could reduce interest earnings sensitivity include changes in
\n
pricing strategies on customer loans and deposits as well as hedging. Management
\n
action may also be taken to stabilise total income also taking into account non-interest
\n
income.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Three-year 25-basis-point sensitivity table
\n
The table below shows the sensitivity of net interest earnings \u2013 for both structural hedges and managed rate accounts \u2013 on a one, two and three-year forward-looking basis to an
\n
upward or downward interest rate shift of 25 basis points.
\n
In all scenarios, yield curves are assumed to move in parallel. For more information and assumptions relating to this and the following table, refer to the previous page.
\n\n \n
+25 basis points upward shift
-25 basis points downward shift
Year 1
Year 2
Year 3
Year 1
Year 2
Year 3
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Structural hedges
44
138
227
(44)
(138)
(227)
Managed margin
120
117
114
(125)
(121)
(105)
Total
164
255
341
(169)
(259)
(332)
2022
Structural hedges
50
158
260
(50)
(158)
(260)
Managed margin
148
141
136
(170)
(140)
(129)
Total
198
299
396
(220)
(298)
(389)
\n
(1)
Earnings sensitivity considers only the main drivers, namely structural hedging and margin management.
\n
\ue001
The overall reduction in the sensitivity of net interest income earnings in all scenarios mainly reflects lower managed rate deposit and current account volumes. This includes
\n
changes in the deposit mix, whereby customers have moved balances into fixed-term savings from managed-rate savings accounts.
\n
One-year 25 and 100-basis-point sensitivity table
\n
The following table presents the one-year sensitivity to upward and downward 25-basis-point and 100-basis-point shifts in the yield curve, analysed by currency.
\n\n \n
2023
2022
Shifts in yield curve
Shifts in yield curve
+25 basis points
-25 basis points
+100 basis points
-100 basis points
+25 basis points
-25 basis points
+100 basis points
-100 basis points
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Euro
7
(11)
38
(45)
13
(12)
48
(50)
Sterling
138
(139)
504
(577)
172
(194)
698
(784)
US dollar
14
(14)
54
(56)
10
(11)
42
(53)
Other
5
(5)
21
(22)
3
(3)
13
(16)
Total
164
(169)
617
(700)
198
(220)
801
(903)
\n\n\n\n\n\n\n\n\n\n\n\n\n
Sensitivity of fair value through other comprehensive income (FVOCI) portfolios
\n
and cash flow hedging reserves to interest rate movements
\n
NatWest Group holds most of the bonds in its liquidity portfolio at fair value and the
\n
bonds are generally classified as FVOCI for accounting purposes. Valuation changes
\n
arising from unexpected movements in market rates are initially recognised in FVOCI
\n
reserves.
\n
Interest rate swaps are used to implement the structural hedging programme and also
\n
hedging of some personal and commercial lending portfolios, primarily fixed-rate
\n
mortgages. Generally, these swaps are booked in cash flow hedge accounting
\n
relationships. Changes in the valuation of swaps that are in effective cash flow hedge
\n
accounting relationships are recognised in cash flow hedge reserves.
\n
The table below shows the sensitivity of bonds initially classified as FVOCI and swaps
\n
subject to cash flow hedge accounting to a parallel shift in all rates. Valuation changes
\n
affecting interest rate swaps that hedge bonds in the liquidity portfolio are also included.
\n
Where FVOCI bonds and swaps are booked in fair value hedge accounting relationships,
\n
the valuation change affecting both instruments would be recognised in the income
\n
statement. Cash flow hedges are assumed to be fully effective.
\n
Note that the effectiveness of cash flow and fair value hedge relationships is monitored
\n
and regularly tested in accordance with IFRS requirements. Note also that valuation
\n
changes affecting the cash flow hedge reserve affect tangible net asset value, but would
\n
not be expected to affect CET1 capital.
\n\n \n
2023
2022
+25 basis points
-25 basis points
+100 basis points
-100 basis points
+25 basis points
-25 basis points
+100 basis points
-100 basis points
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
FVOCI reserves
(1)
1
(10)
(1)
(3)
2
(13)
5
Cash flow hedge reserves
(251)
254
(981)
1,041
(278)
281
(1,097)
1,138
Total
(252)
255
(991)
1,040
(281)
283
(1,110)
1,143
\n
\ue001
The sensitivity of FVOCI and cash flow hedge reserves was broadly stable in 2023 compared to 2022. The movement in cash flow hedge reserves in 2023 is shown in the
\n
statement of changes in equity on page 301.
\n
Credit spread risk
\n
Credit spread risk arises from the potential adverse economic impact of a change in the
\n
spread between bond yields and swap rates, where the bond portfolios are accounted at
\n
fair value through other comprehensive income.
\n
NatWest Group\u2019s bond portfolios primarily comprise high-quality securities maintained as
\n
a liquidity buffer to ensure it can continue to meet its obligations in the event that access
\n
to wholesale funding markets is restricted. Additionally, other high-quality bond portfolios
\n
are held for collateral purposes and to support payment systems.
\n
Credit spread risk is monitored daily through sensitivities and VaR measures (refer to the
\n
non-traded market risk VaR table earlier in this section). Exposures and limit utilisations
\n
are reported to senior management on a regular basis. Dealing mandates in place for
\n
the bond portfolios further mitigate the risk by imposing constraints by duration, asset
\n
class and credit rating.
\n
Foreign exchange risk
\n
Non-traded foreign exchange risk arises from three main sources:
\n
\ue001
Structural foreign exchange rate risk \u2013 mainly arises from the capital deployed in
\n
foreign subsidiaries and branches.
\n
\ue001
Transactional foreign exchange rate risk \u2013 arises from customer transactions and
\n
profits and losses that are in a currency other than the functional currency.
\n
\ue001
Forecast earnings or costs in foreign currencies \u2013 NatWest Group assesses its
\n
potential exposure to forecast foreign currency income and expenses. NatWest
\n
Group hedges forward some forecast expenses.
\n
The most material non-traded open currency positions are the structural foreign
\n
exchange exposures arising from investments in foreign subsidiaries and branches.
\n
These exposures are assessed and managed to predefined risk appetite levels under
\n
delegated authority agreed by the CFO with support from the Asset & Liability
\n
Management Committee. NatWest Group seeks to limit the potential volatility impact on
\n
its CET1 ratio from exchange rate movements by deliberately maintaining a structural
\n
open currency position. Gains or losses arising from the retranslation of net investments
\n
in overseas operations are recognised in other comprehensive income and reduce the
\n
sensitivity of capital ratios to foreign exchange rate movements primarily arising from the
\n
retranslation of non-sterling denominated RWAs. Sensitivity is minimised where, for a
\n
given currency, the ratio of the structural open position to RWAs equals the CET1 ratio.
\n
The sensitivity of this ratio to exchange rates is monitored monthly and reported to the
\n
Asset & Liability Management Committee at least quarterly. Foreign exchange exposures
\n
arising from customer transactions are hedged by businesses on a regular basis in line
\n
with NatWest Group policy.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Foreign exchange risk
\n
The table below shows structural foreign currency exposures.
\n\n \n
Net investments
Net investment
Structural foreign currency
Residual structural
in foreign operations
hedges
exposures pre-economic hedges
Economic hedges (1)
foreign currency exposures
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
US dollar
1,185
(228)
957
(957)
-
Euro
4,475
(2,585)
1,890
-
1,890
Other non-sterling
963
(429)
534
-
534
Total
6,623
(3,242)
3,381
(957)
2,424
\n\n \n
2022
US dollar
1,278
(303)
975
(975)
-
Euro
6,189
(4,164)
2,025
-
2,025
Other non-sterling
996
(431)
565
-
565
Total
8,463
(4,898)
3,565
(975)
2,590
\n
(1)
Economic hedges of US dollar net investments in foreign operations represent US dollar AT1 equity securities that do not qualify as net investment hedges for accounting purposes. They provide an offset to structural foreign exchange exposures to the
\n
extent that there are net assets in overseas operations available, but they are accounted for at historical cost under IFRS until redemption.
\n
\ue001
The reduction in both net investments in foreign operations and net investment hedges mainly reflected the wind-down of UBIDAC.
\n
\ue001
Changes in foreign currency exchange rates affect equity in proportion to structural foreign currency exposure pre economic hedges. For example, a 5% strengthening or
\n
weakening in foreign currencies against sterling would result in a gain or loss of \u00a30.2 billion in equity, respectively.
\n
Equity risk
(audited)
\n
Non-traded equity risk is the potential variation in income and reserves arising from
\n
changes in equity valuations. Equity positions are carried on the balance sheet at fair
\n
value based on market prices where available. Equity positions may take the form of
\n
shares that are publicly listed on a recognised exchange, such as NatWest Group\u2019s
\n
investment in Permanent TSB, privately owned investments such as the investment in
\n
Vodeno and shareholdings in industry participations including SWIFT. Further disclosure
\n
of NatWest Group\u2019s investments in equity shareholdings, fair value gains and losses and
\n
valuation techniques may be found in the notes to the consolidated financial statements.
\n
Investments, acquisitions or disposals of a strategic nature are referred to the
\n
Acquisitions & Disposals Committee. Once approved by the CFO with support from the
\n
Acquisitions & Disposals Committee for execution, such transactions are referred for
\n
approval to the Board, the Executive Committee, the Chief Executive, the Chief Financial
\n
Officer or as otherwise required. Decisions to acquire or hold equity positions in the non-
\n
trading book that are not of a strategic nature are taken by authorised persons with
\n
delegated authority.
\n
Non-traded equity value at risk is monitored monthly and capital allocation to the risk is
\n
included in NatWest Group\u2019s annual Internal Capital Adequacy Assessment Process
\n
(ICAAP).
\n
Accounting volatility risk
\n
Accounting volatility risk arises when an exposure is accounted for at amortised cost but
\n
economically hedged by a derivative that is accounted for at fair value. Although this is
\n
not an economic risk, the difference in accounting between the exposure and the hedge
\n
creates volatility in the income statement.
\n
Accounting volatility can be mitigated through hedge accounting. However, residual
\n
volatility will remain in cases where accounting rules mean that hedge accounting is not
\n
an option, or where there is some hedge ineffectiveness. Accounting volatility risk is
\n
reported to the Asset & Liability Management Committee monthly and capitalised as part
\n
of the ICAAP.
\n\n\n\n\n\n\n\n\n\n\n\n\n
Traded market risk
\n
Definition (audited)
\n
Traded market risk is the risk of losses in trading book positions from fluctuations in
\n
market variables, such as interest rates, credit spreads, foreign exchange rates, equity
\n
prices, implied volatilities and asset correlations.
\n
Sources of risk
(audited)
\n
Traded market risk mainly arises from NatWest Group\u2019s trading activities. These
\n
activities provide a range of financing, risk management and investment services to
\n
clients
\u2212
including corporations and financial institutions
\u2212
around the world. From a
\n
market risk perspective, activities are focused on rates; currencies; and traded credit.
\n
NatWest Group undertakes transactions in financial instruments including debt securities,
\n
as well as securities financing and derivatives.
\n
All material traded market risk resides in NatWest Markets. The key categories are
\n
interest rate risk, credit spread risk and foreign currency price risk.
\n
Trading activities may also give rise to counterparty credit risk. For further detail refer to
\n
the Credit risk section.
\n
Key developments in 2023
\n
\ue001
The year was marked by periods of increased market volatility reflecting UK political
\n
developments, global inflationary concerns, the ongoing Russia-Ukraine conflict and
\n
the Israel\u2013Hamas conflict.
\n
\ue001
The significant volatility in Gilts, sterling swaps and inflation entered the rolling
\n
window for VaR calculation during 2023. However, traded VaR and SVaR remained
\n
within appetite and, on an average basis, at similar levels compared to 2022, aided
\n
by NatWest Group\u2019s continued disciplined approach to risk-taking.
\n
Governance
(audited)
\n
Market risk policy statements set out the governance and risk management framework.
\n
Responsibility for identifying, measuring, monitoring and controlling market risk arising
\n
from trading activities lies with the relevant trading business. The Market Risk function
\n
independently advises on, monitors and challenges the risk-taking activities undertaken
\n
by the trading business ensuring these are within the constraints of the market risk
\n
framework, policies, and risk appetite statements and measures.
\n
Risk appetite
\n
NatWest Group\u2019s qualitative appetite for traded market risk is set out in the traded
\n
market risk appetite statement. Quantitative appetite is expressed in terms of exposure
\n
limits. The limits at NatWest Group level comprise value-at-risk (VaR), stressed value-at-
\n
risk (SVaR) and stress-testing. More details on these are provided on the following pages.
\n
For each trading business, a document known as a dealing authority compiles details of
\n
all applicable limits and trading restrictions. The desk-level mandates comprise qualitative
\n
limits related to the product types within the scope of each desk, as well as quantitative
\n
metrics specific to the desk\u2019s market risk exposures. These additional limits and metrics
\n
aim to control various risk dimensions such as exposure size, aged inventory, currency
\n
and tenor.
\n
The limits are reviewed to reflect changes in risk appetite, business plans, portfolio
\n
composition and the market and economic environments and recalibrated to ensure that
\n
they remain aligned to NatWest Group RWA targets. Limit reviews focus on optimising
\n
the alignment between traded market risk exposure and capital usage.
\n
To ensure approved limits are not breached and that NatWest Group remains within its
\n
risk appetite, triggers have been set such that if exposures exceed a specified level,
\n
action plans are developed by the relevant business and the Market Risk function and
\n
implemented. The risk appetite statements and associated measures are reviewed at
\n
least annually by the Board on the Board Risk Committee\u2019s recommendation to ensure
\n
they remain appropriate and aligned to strategy. For more detail on risk appetite and
\n
risk controls, refer to pages 175 and 176.
\n
Monitoring and mitigation
\n
Traded market risk is identified and assessed by gathering, analysing, monitoring and
\n
reporting market risk information at desk, business, business segment and NatWest
\n
Group-wide levels. Industry expertise, continued system developments and techniques
\n
such as stress testing are also used to enhance the effectiveness of the identification and
\n
assessment of all material market risks.
\n
Traded market risk exposures are monitored against limits and analysed daily. A daily
\n
report summarising the position of exposures against limits at desk, business, business
\n
segment and NatWest Group levels is provided to senior management and market risk
\n
managers across the function. Limit reporting is supplemented with regulatory capital
\n
and stress testing information as well as ad-hoc reporting.
\n\n\n\n\n\n\n\n\n\n\n\n\n
A risk review of trading businesses is undertaken weekly with senior risk and front office
\n
staff. This includes a review of profit and loss drivers, notable position concentrations and
\n
other positions of concern.
\n
Business profit and loss performance is monitored automatically through loss triggers
\n
which, if breached, require a remedial action plan to be agreed between the Market Risk
\n
function and the business. The loss triggers are set using both a fall-from-peak approach
\n
and an absolute loss level. In addition, regular updates on traded market risk positions
\n
are provided to the Executive Risk Committee, the Board Risk Committee and the Board.
\n
Measurement
\n
NatWest Group uses VaR, SVaR and the incremental risk charge (IRC) to capitalise
\n
traded market risk. Risks that are not adequately captured by VaR or SVaR are captured
\n
by the Risks Not In VaR (RNIV) framework to ensure that NatWest Group is adequately
\n
capitalised for market risk. In addition, stress testing is used to identify any vulnerabilities
\n
and potential losses.
\n
The key inputs into these measurement methods are market data and risk factor
\n
sensitivities. Sensitivities refer to the changes in trade or portfolio value that result from
\n
small changes in market parameters that are subject to the market risk limit framework.
\n
Revaluation ladders are used in place of sensitivities to capture the impact of large
\n
moves in risk factors or the joint impact of two risk factors.
\n
These methods have been designed to capture correlation effects and allow NatWest
\n
Group to form an aggregated view of its traded market risk across risk types, markets
\n
and business lines while also taking into account the characteristics of each risk type.
\n
Value-at-risk
\n
For internal risk management purposes, VaR assumes a time horizon of one trading day
\n
and a confidence level of 99%.
\n
The internal VaR model \u2013 which captures all trading book positions including those
\n
products approved by the regulator \u2013 is based on a historical simulation, utilising market
\n
data from the previous 500 days. During 2023, an update was made to the VaR model
\n
to make it more sensitive to recent market conditions, following approval from the PRA.
\n
The model also captures the potential impact of interest rate risk; credit spread risk;
\n
foreign currency price risk; equity price risk; and commodity price risk.
\n
When simulating potential movements in such risk factors, a combination of absolute,
\n
relative and rescaled returns is used.
\n
The performance and adequacy of the VaR model are tested regularly through the
\n
following processes:
\n
\ue001
Back-testing: Internal and regulatory back-testing is conducted on a daily basis.
\n
Information on internal back-testing is provided in this section. Information on
\n
regulatory back-testing appears in the Pillar 3 Report.
\n
\ue001
Ongoing model validation: VaR model performance is assessed both regularly, and on
\n
an ad-hoc basis, if market conditions or portfolio profile change significantly.
\n
\ue001
Model Risk Management review: As part of the model lifecycle, all risk models
\n
(including the VaR model) are independently reviewed to ensure the model is still fit
\n
for purpose given current market conditions and portfolio profile. For further detail on
\n
the independent model validation carried out by Model Risk Management refer to
\n
page 281. More information relating to pricing and market risk models is presented in
\n
the Pillar 3 Report.
\n\n\n\n\n\n\n\n\n\n\n\n\n
One-day 99% traded internal VaR
\n
Traded VaR (1-day 99%) (audited)
\n
The table below shows one-day 99% internal VaR for NatWest Group\u2019s trading portfolios, split by exposure type.
\n\n \n
2023
2022
Average
Maximum
Minimum
Period end
Average
Maximum
Minimum
Period end
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest rate
9.8
19.3
4.3
7.4
7.3
12.6
4.1
9.0
Credit spread
6.2
7.1
4.9
6.8
7.8
12.0
6.0
6.4
Currency
2.3
7.0
0.9
1.8
3.1
8.0
1.2
1.5
Equity
-
0.1
-
0.1
-
0.3
-
-
Diversification
(1)
(7.0)
(7.2)
(7.5)
(6.8)
Total
11.3
20.0
6.6
8.9
10.7
15.1
7.2
10.1
\n
(1)
NatWest 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
\n
diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
\n
\ue001
On an average basis, traded VaR remained at similar levels in 2023 compared to 2022.
\n
\ue001
The increase in average interest rate VaR, compared to 2022, reflected an increase in curve risk in sterling and euro flow trading.
\n
\ue001
The decrease in average credit spread VaR mostly reflected a tightening of credit spreads on the net longer credit profile over the period
.
\n
0
\n
5
\n
10
\n
15
\n
20
\n
25
\n
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
\n
Total Trading VaR
Interest Rate VaR
Credit VaR
FX VaR
Equity VaR
\n
\u00a3m
\n\n\n\n\n\n\n\n\n\n\n\n\n
VaR back-testing
\n
The main approach employed to assess the VaR model\u2019s ongoing performance is back-
\n
testing, which counts the number of days when a loss exceeds the corresponding daily
\n
VaR estimate, measured at a 99% confidence level.
\n
Two types of profit and loss (P&L) are used in back-testing comparisons: Actual P&L and
\n
Hypothetical P&L. For more details on the back-testing approach, refer to the Pillar 3
\n
Report.
\n
The table below shows internal back-testing exceptions in the major NatWest Markets
\n
businesses for the 250-business-day period to 31 December 2023. Internal back-testing
\n
compares one-day 99% traded internal VaR with Actual and Hypothetical (Hypo) P&L.
\n\n \n
Back-testing exceptions
Actual
Hypo
Rates
-
-
Currencies
-
-
Credit
1
1
xVA
-
-
\n
\ue001
The back-testing exception was driven by losses in Financials in March 2023 due to
\n
increased credit market volatility following the collapse of Silicon Valley Bank.
\n
Stressed VaR (SVaR)
\n
As with VaR, the SVaR methodology produces estimates of the potential change in the
\n
market value of a portfolio, over a specified time horizon, at a given confidence level.
\n
SVaR is a VaR-based measure using historical data from a one-year period of stressed
\n
market conditions.
\n
A simulation of 99% VaR is run on the current portfolio for each 250-day period from
\n
2005 to the current VaR date, moving forward one day at a time. The SVaR is the worst
\n
VaR outcome of the simulated results.
\n
This is in contrast with VaR, which is based on a rolling 500-day historical data set. A
\n
time horizon of ten trading days is assumed with a confidence level of 99%.
\n
The internal traded SVaR model captures all trading book positions.
\n\n \n
2023
2022
Period
Period
Average
Maximum
Minimum
end
Average
Maximum
Minimum
end
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Total internal
traded SVaR
56
140
28
36
70
206
34
40
\n
\ue001
Traded SVaR was, on an average basis, lower in 2023 than in 2022, following the
\n
reduction in tenor basis risk in sterling flow trading resulting from the VaR model
\n
update in Q3 2022.
\n
Risks Not In VaR (RNIVs)
\n
The RNIV framework is used to identify and quantify market risks that are not fully
\n
captured by the internal VaR and SVaR models.
\n
RNIV calculations form an integral part of ongoing model and data improvement efforts
\n
to capture all market risks in scope for model approval in VaR and SVaR.
\n
For further qualitative and quantitative disclosures on RNIVs, refer to the Market risk
\n
section of the Pillar 3 Report.
\n
Stress testing
\n
For information on stress testing, refer to page 177.
\n
Incremental risk charge (IRC)
\n
The IRC model quantifies the impact of rating migration and default events on the
\n
market value of instruments with embedded credit risk (in particular, bonds and credit
\n
default swaps) held in the trading book. It further captures basis risk between different
\n
instruments, maturities and reference entities. For further qualitative and quantitative
\n
disclosures on the IRC, refer to the Market risk section of the Pillar 3 Report.
Market risk \u2013 linkage to balance sheet
The table below analyses NatWest Group\u2019s balance sheet by non-trading and trading business.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
\u00a0 \u00a0
Non-trading
Trading
\u00a0
Non-trading
Trading
\u00a0
\u00a0
Total
business (1)
business (2)
Total
business (1)
business (2)
\u00a0
\u00a0
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Primary market risk factor
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104.3
104.3
-
144.8
144.8
-
Interest rate
Trading assets
45.6
0.8
44.8
45.6
1.2
44.4
\u00a0
Reverse repos
23.7
-
23.7
21.5
-
21.5
Interest rate
Securities
12.0
-
12.0
9.9
-
9.9
Interest rate, credit spreads, equity
Other
9.9
0.8
9.1
14.2
1.2
13.0
Interest rate
Derivatives
78.9
1.0
77.9
99.5
1.3
98.2
Interest rate, credit spreads, equity
Settlement balances
7.2
0.9
6.3
2.6
0.2
2.4
Settlement
Loans to banks
6.9
6.8
0.1
7.1
7.0
0.1
Interest rate
Loans to customers
381.4
381.4
-
366.3
366.2
0.1
Interest rate
Other financial assets
51.1
51.1
-
30.9
30.9
-
Interest rate, credit spreads, equity
Intangible assets
7.6
7.6
-
7.1
7.1
-
Interest rate, credit spreads, equity
Other assets
8.8
8.8
-
9.3
9.3
-
\u00a0
Assets of disposal groups
0.9
0.9
-
6.9
6.9
-
\u00a0
Total assets
692.7
563.6
129.1
720.1
574.9
145.2
\u00a0
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
22.2
22.2
-
20.4
20.4
-
Interest rate
Customer deposits
431.4
431.4
-
450.3
450.3
-
Interest rate
Settlement balances
6.6
-
6.6
2.0
-
2.0
Settlement
Trading liabilities
53.6
-
53.6
52.8
-
52.8
\u00a0
Repos
26.9
-
26.9
23.7
-
23.7
Interest rate
Short positions
9.8
-
9.8
9.5
-
9.5
Interest rate, credit spreads
Other
16.9
-
16.9
19.6
-
19.6
Interest rate
Derivatives
72.4
1.2
71.2
94.0
1.5
92.5
Interest rate, credit spreads
Other financial liabilities
55.1
55.0
0.1
49.1
49.0
0.1
Interest rate
Subordinated liabilities
5.7
5.7
-
6.3
6.3
-
Interest rate
Notes in circulation
3.2
3.2
-
3.2
3.2
-
Interest rate
Other liabilities
5.3
5.3
-
5.5
5.5
-
\u00a0
Total liabilities
655.5
524.0
131.5
683.6
536.2
147.4
\u00a0
\n
(1)
Non-trading businesses are entities that primarily have exposures that are not classified as trading book. For these exposures, with the exception of pension-related activities, the main measurement methods are sensitivity analysis of net interest income,
internal non-traded market risk VaR and fair value calculations. For more information refer to the non-traded market risk section.
(2)
Trading businesses are entities that primarily have exposures that are classified as trading book under regulatory rules. For these exposures, the main methods used by NatWest Group to measure market risk are detailed in the traded market risk section.
(3)
Foreign exchange risk affects all non-sterling denominated exposures on the balance sheet across trading and non-trading businesses, and therefore has not been listed in the above tables.", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f76628": { "value": "21026000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:RevenueFromInterest", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f76631": { "value": "12637000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:RevenueFromInterest", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f76634": { "value": "9234000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:RevenueFromInterest", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f76641": { "value": "9977000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestExpense", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f76644": { "value": "2795000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestExpense", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f76647": { "value": "1699000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestExpense", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f76655": { "value": "11049000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestRevenueExpense", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f76658": { "value": "9842000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestRevenueExpense", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f76661": { "value": "7535000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestRevenueExpense", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f76668": { "value": "2983000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:FeeAndCommissionIncome", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f76671": { "value": "2915000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:FeeAndCommissionIncome", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f76674": { "value": "2694000000", "decimals": -6, 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15
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Howard Davies
Chairman
John-Paul Thwaite
Group Chief Executive Officer
Katie Murray
Group Chief Financial Officer
NatWest Group plc
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"f80477": { "value": "-39625000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:IncreaseDecreaseInCashAndCashEquivalents", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80480": { "value": "-32257000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:IncreaseDecreaseInCashAndCashEquivalents", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80483": { "value": "51507000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:IncreaseDecreaseInCashAndCashEquivalents", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80490": { "value": "158449000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80493": { "value": "190706000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80496": { "value": "139199000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2021-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80504": { "value": "118824000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80507": { "value": "158449000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80510": { "value": "190706000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80522": { "value": "20345000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestReceivedClassifiedAsOperatingActivities", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80523": { "value": "12638000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestReceivedClassifiedAsOperatingActivities", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80525": { "value": "9696000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestReceivedClassifiedAsOperatingActivities", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80526": { "value": "8871000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestPaidClassifiedAsOperatingActivities", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80527": { "value": "2357000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestPaidClassifiedAsOperatingActivities", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80529": { "value": "1668000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:InterestPaidClassifiedAsOperatingActivities", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80532": { "value": "122000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashOutflowForLeases", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80533": { "value": "170000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashOutflowForLeases", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80534": { "value": "195000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashOutflowForLeases", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80536": { "value": "102000000", "decimals": -6, "dimensions": { "concept": "nwg:PaymentsOfPrincipalAmountLeaseLiabilities", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80537": { "value": "145000000", "decimals": -6, "dimensions": { "concept": "nwg:PaymentsOfPrincipalAmountLeaseLiabilities", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80539": { "value": "164000000", "decimals": -6, "dimensions": { "concept": "nwg:PaymentsOfPrincipalAmountLeaseLiabilities", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f80566": { "value": "Accounting policies
This section includes the basis of preparation, critical and material
accounting policies used to prepare the financial statements.
Our accounting policies are the specific principles, bases, conventions, rules,
and practices we apply in preparing and presenting the financial statements.
Further information is provided where judgement and estimation is applied to
critical accounting policies and key sources of estimation uncertainty.
Future accounting developments details new, or amendments to existing,
accounting standards, when they are effective from and where we are
assessing their impact on future financial statements.
1. Presentation of financial statements
NatWest Group plc is incorporated in the UK and registered in Scotland. The financial
statements are presented in the functional currency, pounds sterling.
The audited financial statements include audited sections of the Risk and capital
management section. The directors have prepared the financial statements on a going
concern basis after assessing the principal risks, forecasts, projections and other relevant
evidence over the twelve months from the date the financial statements are approved
(refer to the Report of the directors) and in accordance with UK adopted International
Accounting Standards (IAS), and International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB). The critical and material
accounting policies and related judgements are set out below.
The financial statements are presented on a historical cost basis except for certain
financial instruments which are stated at fair value.
The effect of the amendments to IFRS effective from 1 January 2023 on our financial
statements was immaterial.
We have applied the exception issued by the IASB in May 2023 from the accounting
requirements for deferred taxes in IAS 12 Income taxes in respect of Pillar Two income
taxes. Accordingly, we have not recognised or disclosed information about deferred tax
assets and liabilities related to Pillar Two income taxes.
Our consolidated financial statements incorporate the results of NatWest Group plc and
the entities it controls. Control arises when we have the power to direct the activities of
an entity so as to affect the return from the entity. Control is assessed by reference to
our ability to enforce our will on the other entity, typically through voting rights. The
consolidated financial statements are prepared under consistent accounting policies.
A subsidiary is included in the consolidated financial statements at fair value on
acquisition from the date it is controlled by us until the date we cease to control it
through a sale or a significant change in circumstances. Changes in our interest in a
subsidiary that do not result in us ceasing to control that subsidiary are accounted for as
equity transactions.
We apply accounting for associates and joint arrangements to entities where we have
significant influence, but not control, over the operating and financial policies. We assess
significant influence by reference to a presumption of voting rights of more than 20%, but
less than 50%, supplemented by a qualitative assessment of substantive rights which
include representation at the Board of Directors, significant exchange of managerial
personnel or technology amongst others.
Investments in associates and joint ventures are recorded upon initial recognition at cost,
increased or decreased each period by the share of the subsequent levels of profit or
loss, and other changes in equity are considered in line with their nature.
The judgements and assumptions involved in our accounting policies that are considered
by the Board to be the most important to the portrayal of its financial condition are
noted below. The use of estimates, assumptions or models that differ from those adopted
by us would affect our reported results.
How Climate risk affects our accounting judgements and estimates
Business planning
Key financial estimates are based on management's latest five-year revenue and cost
forecasts. The outputs from this forecast affect forward-looking accounting estimates.
Measurement of deferred tax and expected credit losses are highly sensitive to
reasonably possible changes in those anticipated conditions. In 2023, our scenario
planning was enhanced by the further integration of NatWest Group\u2019s climate transition
plan, including the assessment of climate-related risks and opportunities.
\ue001
Our Climate transition plan includes an assessment of:
\ue001
changes in products, services and business operations to support customer
transition towards net zero;
\ue001
financial impacts of supporting customer transition, including investment
required. The linkage between our financial plan and our Climate transition plan
will continue to be developed and refreshed annually as part of the financial
planning cycle;
\ue001
the climate impact of policies, using the UK Climate Change Committee (UK
CCC) Balanced Net Zero (BNZ) pathway scenario, aligned with the UK\u2019s Sixth
Carbon Budget. In addition, we have used the credibility ratings for sectoral
policies provided by the UK CCC 2023 Progress Report, published in June, to
the Parliament to develop a BNZ adjusted pathway to reflect estimated time
delays of these policies.
\ue001
There remains considerable uncertainty regarding this policy response, including the
effect of wider geo-political uncertainty on governmental ambitions regarding climate
transition and the effect of decarbonisation on wider economic growth, technology
development and customer behaviours.
Information used in other accounting estimates
We make use of reasonable and supportable information to make accounting judgements
and estimates. This includes information about the observable effects of the physical and
transition risks of climate change on the current creditworthiness of borrowers, asset
values and market indicators. It also includes the effect on our competitiveness and
profitability. Many of the effects arising from climate change will be longer term in
nature, with an inherent level of uncertainty, and have limited effect on accounting
judgements and estimates for the current period. Some physical and transition risks can
manifest in the shorter term. The following items represent the most significant effects:
\ue001
The classification of financial instruments linked to climate, or other sustainability
indicators: consideration is given to whether the effect of climate related terms
prevent the instrument cashflows being solely payments of principal and interest.
\ue001
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.
E
E
ffect of climate change in the estimation of expected credit loss
We are monitoring the effect of the physical and transition consequences of climate
change on our experience of loan loss. We use available information regarding the effect
of climate transition policy largely driven by carbon prices as an adjustment to
macroeconomic factors that are used as inputs to the models that generate PD and LGD
outcomes, which are key inputs to the ECL calculation. The determination of whether
specific loss drivers and climate events generate specific losses is ongoing and is
necessary to determine how sensitive changes in ECL could be to climate inputs.
Future cashflows are discounted, so long dated cashflows are less likely to affect current
expectations on credit loss. Our assessment of sector specific risks, and whether
additional adjustments are required, include expectations of the ability of those sectors to
meet their financing needs in the market. Changes in credit stewardship and credit risk
appetite that stem from climate considerations, such as oil and gas, will directly affect
our positions.
2. Critical accounting policies
The judgements and assumptions involved in our accounting policies that are considered by the Board to be the most important to the portrayal of our financial condition are noted
below. The use of estimates, assumptions or models that differ from those adopted by us would affect our reported results. Management\u2019s consideration of uncertainty is outlined in the
relevant sections, including the ECL estimate in the Risk and capital management section.
Information used for significant estimate
Policy
Judgement
Estimate
Further information
Deferred tax
Determination of whether sufficient sustainable taxable profits will
Our estimates are based on the five year revenue and cost
Note 7
\u00a0
be generated in future years to recover the deferred tax asset.
forecasts (which include inherent uncertainties).
\u00a0
Fair value \u2013 financial
Classification of a fair value instrument as level 3, where the
Estimation of the fair value, where it is reasonably possible
Note 11
instruments
valuation is driven by unobservable inputs.
to have alternative assumptions in determining the FV.
\u00a0
Loan impairment
Definition of default against which to apply PD, LGD and EAD
ECL estimates contain a number of measurement
Note 15
provisions
models.
uncertainties (such as the weighting of multiple economic
\u00a0
\u00a0
Selection of multiple economic scenarios.
scenarios) and disclosures include sensitivities to show
\u00a0
\u00a0
Criteria for a significant increase in credit risk.
impact on other reasonably possible scenarios.
\u00a0
\u00a0
Identification of risks not captured by the models.
\u00a0\u00a0
Provisions for liabilities
Determination of whether a present obligation exists in respect of
Provisions remain sensitive to the assumptions used in the
Note 21
and charges
customer redress, litigation and other regulatory, property and
estimate. We consider a wide range of possible outcomes. It
\u00a0
\u00a0
other provisions. Legal proceedings often require a high degree of
is often not practical to meaningfully quantify ranges of
\u00a0
\u00a0
judgement and these are likely to change as the matter
possible outcomes, given the uncertainties involved.
\u00a0
\u00a0
progresses.
\u00a0\u00a0
\n
Changes in judgements and assumptions could result in a material adjustment to those estimates in future reporting periods.
2.1. Deferred tax
Deferred tax is the estimated tax expected to be payable or recoverable in respect of
temporary differences between the carrying amount of an asset or liability for accounting
purposes and the carrying amount for tax purposes in the future. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent their recovery is probable.
Deferred tax is calculated using tax rates expected to apply in the periods when the
assets will be realised or the liabilities settled, based on tax rates and laws enacted, or
substantively enacted, at the balance sheet date.
Deferred tax asset recoverability is based on the level of supporting offsetable deferred
tax liabilities we have and of our future taxable profits. These future taxable profits are
based on our five-year revenue and cost forecasts and the expectation of long term
economic growth beyond this period. The five-year forecast takes account of
management\u2019s current expectations on competitiveness and profitability. The long term
growth rate reflects external indicators which will include market expectations on climate
risk. We do not consider any additional adjustments to this indicator.
2.2. Fair value \u2013 financial instruments
We measure financial instruments at fair value when they are classified as mandatory
fair value through profit or loss; held-for-trading; designated fair value through profit or
loss and fair value through other comprehensive income and they are recognised in the
financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net
exposure to either market or credit risk. In these cases, the fair value is derived from the
net risk exposure of that portfolio with portfolio level adjustments applied to incorporate
bid-offer spreads, counterparty credit risk, and funding costs (refer to \u2018Valuation
Adjustments\u2019).
Where the market for a financial instrument is not active, fair value is established using a
valuation technique. These valuation techniques involve a degree of estimation, the
extent of which depends on the instrument\u2019s complexity and the availability of market-
based data. The complexity and uncertainty in the financial instrument\u2019s fair value is
categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.
2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured
at amortised cost or at fair value through other comprehensive income, issued financial
guarantee and loan commitment (other than those classified as held for trading) is
assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.
ECL are a probability-weighted estimate of credit losses. The probability is determined by
the risk of default which is applied to the cash flow estimates. In the absence of a change
in credit rating, allowances are recognised when there is a reduction in the net present
value of expected cash flows. Following a significant increase in credit risk, ECL are
adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make
payments as they fall due. Future cashflows are discounted, so long-dated cashflows are
less likely to affect current expectations on credit loss. Our assessment of sector specific
risks, and whether additional adjustments are required, include expectations of the ability
of those sectors to meet their financing needs in the market. Changes in credit risk
appetite and how we manage credit positions that stem from climate considerations,
such as oil and gas, will directly affect our positions.
Judgement is exercised as follows:
\ue001
Models
\u2013 in certain low default portfolios, Basel parameter estimates are also applied
for IFRS 9.
\ue001
Non-modelled portfolios
\u2013 use a standardised capital requirement under Basel II.
Under IFRS 9, they have bespoke treatments for the identification of significant
increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for
appropriateness. The ECL calculation is based on expected future cash flows, which
is typically applied at a portfolio level.
\ue001
Multiple economic scenarios (MES)
\u2013 the central, or base, scenario is most critical to
the ECL calculation, independent of the method used to generate a range of
alternative outcomes and their probabilities.
\ue001
Significant increase in credit risk
\u2013
IFRS 9 requires that at each reporting date, an
entity shall assess whether the credit risk on an account has increased significantly
since initial recognition. Part of this assessment requires a comparison to be made
between the current lifetime PD (i.e. the current probability of default over the
remaining lifetime) with the equivalent lifetime PD as determined at the date of initial
recognition.
.
On restructuring where a financial asset is not derecognised, the revised cash flows are
used in re-estimating the credit loss. Where restructuring causes derecognition of the
original financial asset, the fair value of the replacement asset is used as the closing cash
flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares
or property, the exchange is accounted for as the sale of the loan and the acquisition of
equity securities or investment property. Where our acquired interest is in equity shares,
relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance
sheet when we conclude that there is no longer any realistic prospect of recovery of
part, or all, of the loan. For financial assets that are individually assessed for impairment,
the timing of the write-off is determined on a case-by-case basis. Such financial assets
are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-
negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed
portfolios are:
\ue001
Retail mortgages: write-off usually occurs within five years, or earlier, when an
account is closed, but can be longer where the customer engages constructively;
\ue001
Credit cards: the irrecoverable amount is typically written off after twelve arrears
cycles or at four years post default any remaining amounts outstanding are written
off;
\ue001
Overdrafts and other unsecured loans: write-off occurs within six years;
\ue001
Commercial loans: write-offs are determined in the light of individual circumstances;
and Business loans are generally written off within five years.
2.4. Provisions
We recognise a provision for a present obligation resulting from a past event when it is
more likely than not that we will be required to pay to settle the obligation and the
amount of the obligation can be estimated reliably.
Provision is made for restructuring costs, including the costs of redundancy, when we
have a constructive obligation. An obligation exists when we have a detailed formal plan
for the restructuring and have raised a valid expectation in those affected either by
starting to implement the plan or by announcing its main features.
We recognise any onerous cost of the present obligation under a contract as a provision.
An onerous cost is the unavoidable cost of meeting our contractual obligations that
exceed the expected economic benefits. When we intend to vacate a leasehold property
or right of use asset, the asset would be tested for impairment and a provision may be
recognised for the ancillary contractual occupancy costs.
3. Material accounting policies
3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the
effective interest rate method for: all financial instruments measured at amortised cost;
debt instruments measured as fair value through other comprehensive income; and the
effective part of any related accounting hedging instruments. Finance lease income is
recognised at a constant periodic rate of return before tax on the net investment on the
lease.
Other interest relating to financial instruments measured at fair value is recognised as
part of the movement in fair value and is reported in income from trading activities or
other operating income as relevant. Fees in respect of services are recognised as the
right to consideration accrues through the performance of each distinct service
obligation to the customer. The arrangements are generally contractual and the cost of
providing the service is incurred as the service is rendered. The price is usually fixed and
always determinable.
3.2. Discontinued operations, Held for sale and Disposal group
The results of discontinued operations are excluded from the results of continuing
operations and are presented as a single amount as profit/(loss) from discontinued
operations, net of tax in the income statement. Comparatives are represented for the
income statement, cash flow statement, statement of changes in equity and related
notes.
An asset or disposal group (assets and liabilities) is classified as held for sale if we will
recover its carrying amount principally through a sale transaction rather than through
continuing use. These are measured at the lower of its carrying amount or fair value less
cost to sell unless the existing measurement provisions of IFRS apply. These are
presented as single amounts; comparatives are not represented.
3.3. Staff costs
Employee costs, such as salaries, paid absences, and other benefits are recognised over
the period in which the employees provide the related services to us. Employees may
receive variable compensation in cash, in deferred cash or debt instruments of NatWest
Group or in ordinary shares of NatWest Group plc subject to deferral, clawback and
forfeiture criteria. We operate a number of share-based compensation schemes under
which we grant awards of NatWest Group plc shares and share options to our
employees. Such awards are subject to vesting conditions.
Variable compensation that is settled in cash or debt instruments is charged to the
income statement on a straight-line basis over the period during which services are
provided, taking account of forfeiture and clawback criteria. The value of employee
services received in exchange for NatWest Group plc shares and share options is
recognised as an expense over the vesting period, subject to deferral, clawback,
cancelation and forfeiture criteria with a corresponding increase in equity. The fair value
of shares granted is the market price adjusted for the expected effect of dividends as
employees are not entitled to dividends until shares are vested.
The fair value of options granted is determined using option pricing models to estimate
the numbers of shares likely to vest. These consider the exercise price of the option, the
current share price, the risk-free interest rate, the expected volatility of the share price
over the life of the option and other relevant factors such as the dividend yield.
Defined contribution pension scheme
A scheme where we pay fixed contributions and there is no legal or constructive
obligation to pay further contributions or benefits. Contributions are recognised in the
income statement as employee service costs accrue.
Defined benefit pension scheme
A scheme that defines the benefit an employee will receive on retirement and is
dependent on one or more factors such as age, salary, and years of service. The net of
the recognisable scheme assets and obligations is reported on the balance sheet in other
assets or other liabilities. The defined benefit obligation is measured on an actuarial basis.
The charge to the income statement for pension costs (mainly the service cost and the
net interest on the net defined benefit asset or liability) is recognised in operating
expenses.
Actuarial gains and losses (i.e. gains and/or losses on re-measuring the net defined
benefit asset or liability due to changes in actuarial measurement assumptions) are
recognised in other comprehensive income in full in the period in which they arise, and
not subject to recycling to the income statement.
The difference between scheme assets and scheme liabilities, the net defined benefit
asset or liability, is recognised on the balance sheet if the criteria of the asset ceiling test
are met. This requires the net defined benefit surplus to be limited to the present value of
any economic benefits available to us in the form of refunds from the plan or reduced
contributions to it.
We will recognise a liability where a minimum funding requirement exists for any of our
defined benefit pension schemes. This reflects agreed minimum funding and the
availability of a net surplus as determined as described above. When estimating the
liability for minimum funding requirements we only include contributions that are
substantively or contractually agreed and do not include contingent and discretionary
features, including dividend-linked contributions or contributions subject to contingent
events requiring future verification.
We will recognise a net defined benefit asset when the net defined benefit surplus can
generate a benefit in the form of a refund or reduction in future contributions to the plan.
The net benefit pension asset is recognised at the present value of the benefits that will
be available to us excluding interest and the effect of the asset ceiling (if any, excluding
interest). Changes in the present value of the net benefit pension asset are recognised
immediately in other comprehensive income.
In instances where Trustees have the ability to declare augmented benefits to
participants, we do not recognise a defined benefit pension asset and write-off the
surplus immediately in other comprehensive income.
3.4. Intangible assets and goodwill
Intangible assets are identifiable non-monetary assets without physical substance
acquired or developed by us, and are stated at cost less accumulated amortisation and
impairment losses. Amortisation is a method to spread the cost of such assets over time
in the income statement.
This is charged to the income statement over the assets' estimated useful economic lives
using methods that best reflect the pattern of economic benefits.
The estimated useful economic lives are:
Computer software
3 to 10 years
Other acquired intangibles
3 to 5 years
Direct costs relating to the development of internal-use computer software are reported
on the balance sheet after technical feasibility and economic viability have been
established.
These direct costs include payroll, the costs of materials and services, and directly
attributable overheads. Capitalisation of costs ceases when the software can operate as
intended.
During and after development, accumulated costs are reviewed for impairment against
the benefits that the software is expected to generate. Costs incurred prior to the
establishment of technical feasibility and economic viability are expensed to the income
statement as incurred, as are all training costs and general overheads. The costs of
licences to use computer software that are expected to generate economic benefits
beyond three years are also reported on the balance sheet.
Goodwill on the acquisition of a subsidiary is the excess of the fair value of the
consideration paid, the fair value of any existing interest in the subsidiary and the
amount of any non-controlling interest measured either at fair value or at its share of the
subsidiary\u2019s net assets over the net fair value of the subsidiary\u2019s identifiable assets,
liabilities, and contingent liabilities.
Goodwill is measured at initial cost less any subsequent impairment losses. The gain or
loss on the disposal of a subsidiary includes the carrying value of any related goodwill
when such transactions occur.
3.5. Impairment of non-financial assets
Goodwill is tested for impairment annually or more frequently if events or changes in
circumstances indicate that it might be impaired.
At each balance sheet date, we assess whether there is any indication that other
intangible assets or property, plant and equipment are impaired. If any such indication
exists, we estimate the recoverable amount of the asset and compare it to its balance
sheet value to calculate if an impairment loss should be recognised in the income
statement. A reversal of an impairment loss on other intangible assets or property, plant
and equipment is recognised in the income statement provided the increased carrying
value is not greater than it would have been had no impairment loss been recognised.
The recoverable amount of an asset that does not generate cash flows that are
independent from those of other assets or groups of assets, is determined as part of the
cash-generating unit to which the asset belongs. A cash-generating unit is the smallest
identifiable group of assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets. For the purposes of impairment
testing, goodwill acquired in a business combination is allocated to our cash-generating
units or groups of cash-generating units expected to benefit from the combination.
The recoverable amount of an asset or cash-generating unit is the higher of its fair value
less cost to sell or its value in use. Value in use is the present value of future cash flows
from the asset or cash-generating unit discounted at a rate that reflects market interest
rates adjusted for risks specific to the asset or cash-generating unit that have not been
considered in estimating future cash flows.
The assessment of asset impairment is based upon value in use. This represents the
value of future cashflows and uses our five-year revenue and cost forecasts and the
expectation of long term economic growth beyond this period. The five-year forecast
takes account of management\u2019s current expectations on competitiveness and
profitability, including near term effects of climate transition risk. The long term growth
rate reflects external indicators which will include market expectations on climate risk.
We do not consider any additional adjustments to this indicator.
3.6. Foreign currencies
Foreign exchange differences arising on the settlement of foreign currency transactions
and from the translation of monetary assets and liabilities are reported in income from
trading activities except for differences arising on cash flow hedges and hedges of net
investments in foreign operations.
Non-monetary items denominated in foreign currencies that are stated at fair value are
translated into the functional currency at the foreign exchange rates ruling at the dates
the values are determined. Translation differences are recognised in the income
statement except for differences arising on non-monetary financial assets classified as
fair value through other comprehensive income.
Income and expenses of foreign subsidiaries and branches are translated into sterling at
average exchange rates unless these do not approximate the foreign exchange rates
ruling at the dates of the transactions. Foreign exchange differences arising on the
translation of a foreign operation are recognised in other comprehensive income. The
amount accumulated in equity is reclassified from equity to the income statement on
disposal of a foreign operation.
3.7. Tax
Tax encompassing current tax and deferred tax is recognised in the income statement
except when taxable items are recognised in other comprehensive income or equity. Tax
consequences arising from servicing financial instruments classified as equity are
recognised in the income statement.
Accounting for taxes is judgemental and carries a degree of uncertainty because tax law
is subject to interpretation, which might be questioned by the relevant tax authority. We
recognise the most likely current and deferred tax liability or asset, assessed for
uncertainty using consistent judgements and estimates. Current and deferred tax assets
are only recognised where their recovery is deemed probable, and current and deferred
tax liabilities are recognised at the amount that represents the best estimate of the
probable outcome having regard to their acceptance by the tax authorities.
3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.
3.9. Netting
Financial assets and financial liabilities are offset, and the net amount presented on the
balance sheet when, and only when, we currently have a legally enforceable right to set
off the recognised amounts and we intend either to settle on a net basis or to realise the
asset and settle the liability simultaneously. We are party to a number of arrangements,
including master netting agreements, that give us the right to offset financial assets and
financial liabilities, but where we do not intend to settle the amounts net or
simultaneously, the assets and liabilities concerned are presented separately on the
balance sheet.
3.10. Capital instruments
We classify a financial instrument that we issue as a liability if it is a contractual obligation
to deliver cash or another financial asset, or to exchange financial assets or financial
liabilities on potentially unfavourable terms and as equity if we evidence a residual
interest in our assets after the deduction of liabilities. Incremental costs and related tax
that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known
as treasury shares or own shares held) is deducted from retained earnings. On the
cancellation of treasury shares their nominal value is removed from retained earnings
and a consequential amount recognised in capital redemption in compliance with the
Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are
credited to equity, net of any directly attributable incremental costs.
3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.
4. Future accounting developments
International Financial Reporting Standards
Effective 1 January 2024
\ue001
Classification of Liabilities as Current or Non-current (Amendments to IAS 1);
\ue001
Non-current Liabilities with Covenants (Amendments to IAS 1)
\ue001
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
\ue001
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
Effective 1 January 2025
\ue001
Lack of Exchangeability (Amendments to IAS 21)
We are assessing the effect of adopting these amendments on our financial statements
but do not expect the effect to be material.Significant judgement is required when setting the criteria for bonds to be included in the basket of bonds that is used to determine the discount rate used in the IAS 19 valuations. The
criteria include issue size, quality of pricing and the exclusion of outliers. Judgement is also required in determining the shape of the yield curve at long durations; a constant credit
spread relative to gilts is assumed. Sensitivity to the main assumptions is presented below.Judgement: tax contingencies
NatWest Group\u2019s corporate income tax charge and its provisions for corporate income taxes necessarily involve a degree of estimation and judgement. The tax treatment of some
transactions is uncertain and tax computations are yet to be agreed with the relevant tax authorities. NatWest Group recognises anticipated tax liabilities based on all available
evidence and, where appropriate, in the light of external advice. Any difference between the final outcome and the amounts provided will affect current and deferred income tax
charges in the period when the matter is resolved.Critical accounting policy: Deferred tax
NatWest Group has recognised a deferred tax asset of \u00a31,894 million (2022 - \u00a32,178
million) and a deferred tax liability of \u00a3141 million (2022 - \u00a3227 million). These include
amounts recognised in respect of UK and overseas tax losses of \u00a31,019 million (2022 -
\u00a3952 million).
The main UK corporation tax increased from 19% to 25%, and the UK banking surcharge
decreased from 8% to 3%, from 1 April 2023. NatWest Group\u2019s closing deferred tax
assets and liabilities are therefore recognised based on these rates.
Judgement
\u2013
NatWest Group has considered the carrying value of deferred tax assets
and concluded that, based on management\u2019s estimates, sufficient sustainable taxable
profits will be generated in future years to recover recognised deferred tax assets.
Estimates
\u2013
These estimates are partly based on forecast performance beyond the
horizon for management\u2019s detailed plans. They have regard to inherent uncertainties.
The deferred tax assets in NWM Plc and UBIDAC are supported by future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023.
UK tax losses
Under UK tax rules, tax losses can be carried forward indefinitely. As the recognised tax
losses in NatWest Group arose prior to 1 April 2015, credit in future periods is given
against 25% of profits at the main rate of UK corporation tax, excluding the Banking
Surcharge rate introduced by The Finance (No. 2) Act 2015.
NWM Plc
\u2013
A deferred tax asset of nil (2022 - \u00a33 million) has been recognised at 31
December 2023. The basis of recognition in NWM plc is by way of future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023. Losses of \u00a35,558 million have not been recognised in the deferred tax
balance at 31 December 2023.
N
N
WB Plc
\u2013
A deferred tax asset of \u00a3362 million (2022 - \u00a3445 million) has been
recognised in respect of losses of \u00a31,448 million of total losses of \u00a32,308 million carried
forward at 31 December 2023. The losses arose principally as a result of significant
impairment and conduct charges between 2009 and 2012 during challenging economic
conditions in the UK banking sector. NWB Plc returned to tax profitability during 2015,
and based on a 5 year recovery period, expects the deferred tax asset to be utilised
against future taxable profits by the end of 2028.
RBS plc
\u2013
A deferred tax asset of \u00a3597 million (2022 - \u00a3452 million) has been recognised
in respect of losses of \u00a32,388 million of total losses of \u00a33,297 million carried forward at
31 December 2023. The losses were transferred from NatWest Markets Plc as a
consequence of the ring fencing regulations. Based on a 7 year recovery period, RBS plc
expects the deferred tax asset to be utilised against future taxable profits by the end of
2030.
Overseas tax losses
UBIDAC
\u2013
A deferred tax asset of \u00a35 million (2022 - \u00a36 million) has been recognised in
respect of losses of \u00a340 million, and is now entirely supported by way of future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023.
NatWest Markets N.V. (NWM N.V.)
\u2013
A deferred tax asset of \u00a355 million (2022 - \u00a346
million) has been recognised in respect of losses of \u00a3213 million of total losses of \u00a32,496
million carried forward at 31 December 2023. NWM N.V. Group considers it to be
probable, based on its 5-year budget forecast, that future taxable profits will be available
against which the tax losses and tax credits can be partially utilised. The tax losses and
the tax credits have no expiry date.
Unrecognised deferred tax
Deferred tax assets of \u00a35,168 million (2022 - \u00a35,534 million; 2021 - \u00a35,437 million) have
not been recognised in respect of tax losses and other deductible temporary differences
carried forward of \u00a324,438 million (2022 - \u00a325,742 million; 2021 - \u00a324,699 million) in
jurisdictions where doubt exists over the availability of future taxable profits. Of these
losses and other deductible temporary differences, \u00a334 million expire within five years
and \u00a34,488 million thereafter. The balance of tax losses and other deductible temporary
differences carried forward has no expiry date.
Deferred tax liabilities of \u00a3256 million (2022 - \u00a3257 million; 2021 - \u00a3302 million) on
aggregate underlying temporary differences of \u00a31,005 million (2022 - \u00a31,010 million;
2021 - \u00a31,032 million) have not been recognised in respect of retained earnings of
overseas subsidiaries and held-over gains on the incorporation of certain overseas
branches. Retained earnings of overseas subsidiaries are expected to be reinvested
indefinitely or remitted to the UK free from further taxation. No taxation is expected to
arise in the foreseeable future in respect of held-over gains on which deferred tax is not
recognised. Changes to UK tax legislation largely exempts from UK tax overseas
dividends received on or after 1 July 2009.Judgement: classification of financial assets
Classification of financial assets between amortised cost and
fair value through other comprehensive income requires a
degree of judgement in respect of business models and
contractual cashflows.
\ue001
The business model criteria is assessed at a portfolio level
to determine whether assets are classified as held to
collect or held to collect and sell. Information that is
considered in determining the applicable business model
includes: the portfolio\u2019s policies and objectives; how the
performance and risks of the portfolio are managed,
evaluated and reported to management; and the
frequency, volume and timing of sales in prior periods,
sales expectation for future periods, and the reasons for
sales.
\ue001
The contractual cash flow characteristics of financial
assets are assessed with reference to whether the cash
flows represent solely payments of principal and interest
(SPPI). A level of judgement is made in assessing terms
that could change the contractual cash flows so that it
would not meet the condition for SPPI, including contingent
and leverage features,
non-recourse arrangements and
features that could modify the time value of money.
For accounting policy information refer to Accounting policies
3.8, 3.9 and 3.11.Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.Key areas of judgement
Over the years the business has simplified, with most products classified as level 1 or 2 of
the fair value hierarchy. However, the diverse range of products historically traded by
NatWest Group means some products remain classified as level 3. Level 3 indicates a
significant level of pricing uncertainty, where expert judgement is used. As such, extra
disclosures are required in respect of level 3 instruments.
In general, the degree of expert judgement used and hence valuation uncertainty
depends on the degree of liquidity of an instrument or input.
Where markets are liquid, little judgement is required. However, when the information
regarding the liquidity in a particular market is not clear, a judgement may need to be
made. For example, for an equity traded on an exchange, daily volumes of trading can
be seen, but for an OTC derivative, assessing the liquidity of the market with no central
exchange is more challenging.
A key related matter is where a market moves from liquid to illiquid or vice versa. Where
this movement is considered temporary, the fair value level is not changed. For example,
if there is little market trading in a product on a reporting date but at the previous
reporting date and during the intervening period the market has been liquid. In this case,
the instrument will continue to be classified at the same level in the hierarchy. This is to
provide consistency so that transfers between levels are driven by genuine changes in
market liquidity and do not reflect short term or seasonal effects. Material movements
between levels are reviewed quarterly by the business and IPV.
The breadth and depth of the IPV data allows for a rules-based quality assessment to be
made of market activity, liquidity, and pricing uncertainty, which assists with the process
of allocation to an appropriate level. Where suitable independent pricing information is
not readily available, the quality assessment will result in the instrument being assessed
as level 3.Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2023, customer loan impairment provisions amounted to \u00a33,645 million (2022 - \u00a33,434
million). A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan was advanced. Such evidence includes, changes in
the credit rating of a borrower, the failure to make payments in accordance with the loan agreement, significant reduction in the value of any security, breach of limits or covenants,
and observable data about relevant macroeconomic measures.
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management\u2019s assessment of any potential deterioration in the creditworthiness of the
borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of
impairment losses. For further information and sensitivity analysis, refer to Risk and capital management \u2013 Measurement uncertainty and ECL sensitivity analysis section.
IFRS 9 ECL model design principles
Refer to Credit risk \u2013 IFRS 9 ECL model design principles section for further details.
Approach for multiple economic scenarios (MES)
The base scenario plays a greater part in the calculation of ECL than the approach to MES. Refer to Credit risk \u2013 Economic loss drivers - Probability weightings of scenarios section for
further details.Critical accounting policy: Provisions for liabilities
The key judgement is involved in determining whether a present obligation exists. There
is often a high degree of uncertainty and judgement is based on the specific facts and
circumstances relating to individual events in determining whether there is a present
obligation. Judgement is also involved in estimation of the probability, timing and amount
of any outflows. Where NatWest Group can look to another party such as an insurer to
pay some or all of the expenditure required to settle a provision, any reimbursement is
recognised when, and only when, it is virtually certain that it will be received.
E
E
stimates
-
Provisions are liabilities of uncertain timing or amount and are recognised
when there is a present obligation as a result of a past event, the outflow of economic
benefit is probable and the outflow can be estimated reliably.
Any difference between the final outcome and the amounts provided will affect the
reported results in the period when the matter is resolved.
\ue001
Customer redress: Provisions reflect the estimated cost of redress attributable to
claims where it is determined that a present obligation exists.
\ue001
Litigation and other regulatory: NatWest Group is engaged in various legal
proceedings, both in the UK and in overseas jurisdictions, including the US. For
further information in relation to legal proceedings and discussion of the associated
uncertainties, refer to Note 26.
\ue001
Property: This includes provision for contractual costs associated with vacant
properties.
\ue001
Other provisions: These materially comprise provisions for onerous contracts and
restructuring costs. Onerous contract provisions comprise an estimate of the costs
involved in fulfilling the terms and conditions of contracts net of any expected
benefits to be received. This includes provision for contractual costs associated with
vacant properties. Redundancy and restructuring provisions comprise the estimated
cost of restructuring, including redundancy costs where an obligation exists.
Background information for all material provisions is given in Note 26.", "dimensions": { "concept": "ifrs-full:DisclosureOfMaterialAccountingPolicyInformationExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80578": { "value": "1. Presentation of financial statements
NatWest Group plc is incorporated in the UK and registered in Scotland. The financial
statements are presented in the functional currency, pounds sterling.
The audited financial statements include audited sections of the Risk and capital
management section. The directors have prepared the financial statements on a going
concern basis after assessing the principal risks, forecasts, projections and other relevant
evidence over the twelve months from the date the financial statements are approved
(refer to the Report of the directors) and in accordance with UK adopted International
Accounting Standards (IAS), and International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB). The critical and material
accounting policies and related judgements are set out below.
The financial statements are presented on a historical cost basis except for certain
financial instruments which are stated at fair value.
The effect of the amendments to IFRS effective from 1 January 2023 on our financial
statements was immaterial.
We have applied the exception issued by the IASB in May 2023 from the accounting
requirements for deferred taxes in IAS 12 Income taxes in respect of Pillar Two income
taxes. Accordingly, we have not recognised or disclosed information about deferred tax
assets and liabilities related to Pillar Two income taxes.
Our consolidated financial statements incorporate the results of NatWest Group plc and
the entities it controls. Control arises when we have the power to direct the activities of
an entity so as to affect the return from the entity. Control is assessed by reference to
our ability to enforce our will on the other entity, typically through voting rights. The
consolidated financial statements are prepared under consistent accounting policies.
A subsidiary is included in the consolidated financial statements at fair value on
acquisition from the date it is controlled by us until the date we cease to control it
through a sale or a significant change in circumstances. Changes in our interest in a
subsidiary that do not result in us ceasing to control that subsidiary are accounted for as
equity transactions.
We apply accounting for associates and joint arrangements to entities where we have
significant influence, but not control, over the operating and financial policies. We assess
significant influence by reference to a presumption of voting rights of more than 20%, but
less than 50%, supplemented by a qualitative assessment of substantive rights which
include representation at the Board of Directors, significant exchange of managerial
personnel or technology amongst others.
Investments in associates and joint ventures are recorded upon initial recognition at cost,
increased or decreased each period by the share of the subsequent levels of profit or
loss, and other changes in equity are considered in line with their nature.
The judgements and assumptions involved in our accounting policies that are considered
by the Board to be the most important to the portrayal of its financial condition are
noted below. The use of estimates, assumptions or models that differ from those adopted
by us would affect our reported results.
How Climate risk affects our accounting judgements and estimates
Business planning
Key financial estimates are based on management's latest five-year revenue and cost
forecasts. The outputs from this forecast affect forward-looking accounting estimates.
Measurement of deferred tax and expected credit losses are highly sensitive to
reasonably possible changes in those anticipated conditions. In 2023, our scenario
planning was enhanced by the further integration of NatWest Group\u2019s climate transition
plan, including the assessment of climate-related risks and opportunities.
\ue001
Our Climate transition plan includes an assessment of:
\ue001
changes in products, services and business operations to support customer
transition towards net zero;
\ue001
financial impacts of supporting customer transition, including investment
required. The linkage between our financial plan and our Climate transition plan
will continue to be developed and refreshed annually as part of the financial
planning cycle;
\ue001
the climate impact of policies, using the UK Climate Change Committee (UK
CCC) Balanced Net Zero (BNZ) pathway scenario, aligned with the UK\u2019s Sixth
Carbon Budget. In addition, we have used the credibility ratings for sectoral
policies provided by the UK CCC 2023 Progress Report, published in June, to
the Parliament to develop a BNZ adjusted pathway to reflect estimated time
delays of these policies.
\ue001
There remains considerable uncertainty regarding this policy response, including the
effect of wider geo-political uncertainty on governmental ambitions regarding climate
transition and the effect of decarbonisation on wider economic growth, technology
development and customer behaviours.
Information used in other accounting estimates
We make use of reasonable and supportable information to make accounting judgements
and estimates. This includes information about the observable effects of the physical and
transition risks of climate change on the current creditworthiness of borrowers, asset
values and market indicators. It also includes the effect on our competitiveness and
profitability. Many of the effects arising from climate change will be longer term in
nature, with an inherent level of uncertainty, and have limited effect on accounting
judgements and estimates for the current period. Some physical and transition risks can
manifest in the shorter term. The following items represent the most significant effects:
\ue001
The classification of financial instruments linked to climate, or other sustainability
indicators: consideration is given to whether the effect of climate related terms
prevent the instrument cashflows being solely payments of principal and interest.
\ue001
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.
E
E
ffect of climate change in the estimation of expected credit loss
We are monitoring the effect of the physical and transition consequences of climate
change on our experience of loan loss. We use available information regarding the effect
of climate transition policy largely driven by carbon prices as an adjustment to
macroeconomic factors that are used as inputs to the models that generate PD and LGD
outcomes, which are key inputs to the ECL calculation. The determination of whether
specific loss drivers and climate events generate specific losses is ongoing and is
necessary to determine how sensitive changes in ECL could be to climate inputs.
Future cashflows are discounted, so long dated cashflows are less likely to affect current
expectations on credit loss. Our assessment of sector specific risks, and whether
additional adjustments are required, include expectations of the ability of those sectors to
meet their financing needs in the market. Changes in credit stewardship and credit risk
appetite that stem from climate considerations, such as oil and gas, will directly affect
our positions.", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80579": { "value": "1. Presentation of financial statementsThe directors have prepared the financial statements on a going
concern basis after assessing the principal risks, forecasts, projections and other relevant
evidence over the twelve months from the date the financial statements are approved
(refer to the Report of the directors) and in accordance with UK adopted International
Accounting Standards (IAS), and International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80580": { "value": "1. Presentation of financial statements
NatWest Group plc is incorporated in the UK and registered in Scotland. The financial
statements are presented in the functional currency, pounds sterling.
The audited financial statements include audited sections of the Risk and capital
management section. The directors have prepared the financial statements on a going
concern basis after assessing the principal risks, forecasts, projections and other relevant
evidence over the twelve months from the date the financial statements are approved
(refer to the Report of the directors) and in accordance with UK adopted International
Accounting Standards (IAS), and International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB). The critical and material
accounting policies and related judgements are set out below.
The financial statements are presented on a historical cost basis except for certain
financial instruments which are stated at fair value.
The effect of the amendments to IFRS effective from 1 January 2023 on our financial
statements was immaterial.
We have applied the exception issued by the IASB in May 2023 from the accounting
requirements for deferred taxes in IAS 12 Income taxes in respect of Pillar Two income
taxes. Accordingly, we have not recognised or disclosed information about deferred tax
assets and liabilities related to Pillar Two income taxes.
Our consolidated financial statements incorporate the results of NatWest Group plc and
the entities it controls. Control arises when we have the power to direct the activities of
an entity so as to affect the return from the entity. Control is assessed by reference to
our ability to enforce our will on the other entity, typically through voting rights. The
consolidated financial statements are prepared under consistent accounting policies.
A subsidiary is included in the consolidated financial statements at fair value on
acquisition from the date it is controlled by us until the date we cease to control it
through a sale or a significant change in circumstances. Changes in our interest in a
subsidiary that do not result in us ceasing to control that subsidiary are accounted for as
equity transactions.
We apply accounting for associates and joint arrangements to entities where we have
significant influence, but not control, over the operating and financial policies. We assess
significant influence by reference to a presumption of voting rights of more than 20%, but
less than 50%, supplemented by a qualitative assessment of substantive rights which
include representation at the Board of Directors, significant exchange of managerial
personnel or technology amongst others.
Investments in associates and joint ventures are recorded upon initial recognition at cost,
increased or decreased each period by the share of the subsequent levels of profit or
loss, and other changes in equity are considered in line with their nature.
The judgements and assumptions involved in our accounting policies that are considered
by the Board to be the most important to the portrayal of its financial condition are
noted below. The use of estimates, assumptions or models that differ from those adopted
by us would affect our reported results.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80584": { "value": "NatWest Group plc", "dimensions": { "concept": "ifrs-full:NameOfUltimateParentOfGroup", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80585": { "value": "NatWest Group plc", "dimensions": { "concept": "ifrs-full:NameOfParentEntity", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80586": { "value": "NatWest Group plc", "dimensions": { "concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80587": { "value": "plc", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80588": { "value": "UK", "dimensions": { "concept": "ifrs-full:DomicileOfEntity", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80591": { "value": "The audited financial statements include audited sections of the Risk and capital
management section. The directors have prepared the financial statements on a going
concern basis after assessing the principal risks, forecasts, projections and other relevant
evidence over the twelve months from the date the financial statements are approved
(refer to the Report of the directors) and in accordance with UK adopted International
Accounting Standards (IAS), and International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB). The critical and material
accounting policies and related judgements are set out below.", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80599": { "value": "UK ", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80614": { "value": "Our consolidated financial statements incorporate the results of NatWest Group plc and
the entities it controls. Control arises when we have the power to direct the activities of
an entity so as to affect the return from the entity. Control is assessed by reference to
our ability to enforce our will on the other entity, typically through voting rights. The
consolidated financial statements are prepared under consistent accounting policies.
A subsidiary is included in the consolidated financial statements at fair value on
acquisition from the date it is controlled by us until the date we cease to control it
through a sale or a significant change in circumstances. Changes in our interest in a
subsidiary that do not result in us ceasing to control that subsidiary are accounted for as
equity transactions.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80641": { "value": "How Climate risk affects our accounting judgements and estimates
Business planning
Key financial estimates are based on management's latest five-year revenue and cost
forecasts. The outputs from this forecast affect forward-looking accounting estimates.
Measurement of deferred tax and expected credit losses are highly sensitive to
reasonably possible changes in those anticipated conditions. In 2023, our scenario
planning was enhanced by the further integration of NatWest Group\u2019s climate transition
plan, including the assessment of climate-related risks and opportunities.
\ue001
Our Climate transition plan includes an assessment of:
\ue001
changes in products, services and business operations to support customer
transition towards net zero;
\ue001
financial impacts of supporting customer transition, including investment
required. The linkage between our financial plan and our Climate transition plan
will continue to be developed and refreshed annually as part of the financial
planning cycle;
\ue001
the climate impact of policies, using the UK Climate Change Committee (UK
CCC) Balanced Net Zero (BNZ) pathway scenario, aligned with the UK\u2019s Sixth
Carbon Budget. In addition, we have used the credibility ratings for sectoral
policies provided by the UK CCC 2023 Progress Report, published in June, to
the Parliament to develop a BNZ adjusted pathway to reflect estimated time
delays of these policies.
\ue001
There remains considerable uncertainty regarding this policy response, including the
effect of wider geo-political uncertainty on governmental ambitions regarding climate
transition and the effect of decarbonisation on wider economic growth, technology
development and customer behaviours.
Information used in other accounting estimates
We make use of reasonable and supportable information to make accounting judgements
and estimates. This includes information about the observable effects of the physical and
transition risks of climate change on the current creditworthiness of borrowers, asset
values and market indicators. It also includes the effect on our competitiveness and
profitability. Many of the effects arising from climate change will be longer term in
nature, with an inherent level of uncertainty, and have limited effect on accounting
judgements and estimates for the current period. Some physical and transition risks can
manifest in the shorter term. The following items represent the most significant effects:
\ue001
The classification of financial instruments linked to climate, or other sustainability
indicators: consideration is given to whether the effect of climate related terms
prevent the instrument cashflows being solely payments of principal and interest.
\ue001
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.
E
E
ffect of climate change in the estimation of expected credit loss
We are monitoring the effect of the physical and transition consequences of climate
change on our experience of loan loss. We use available information regarding the effect
of climate transition policy largely driven by carbon prices as an adjustment to
macroeconomic factors that are used as inputs to the models that generate PD and LGD
outcomes, which are key inputs to the ECL calculation. The determination of whether
specific loss drivers and climate events generate specific losses is ongoing and is
necessary to determine how sensitive changes in ECL could be to climate inputs.
Future cashflows are discounted, so long dated cashflows are less likely to affect current
expectations on credit loss. Our assessment of sector specific risks, and whether
additional adjustments are required, include expectations of the ability of those sectors to
meet their financing needs in the market. Changes in credit stewardship and credit risk
appetite that stem from climate considerations, such as oil and gas, will directly affect
our positions.
2. Critical accounting policies
The judgements and assumptions involved in our accounting policies that are considered by the Board to be the most important to the portrayal of our financial condition are noted
below. The use of estimates, assumptions or models that differ from those adopted by us would affect our reported results. Management\u2019s consideration of uncertainty is outlined in the
relevant sections, including the ECL estimate in the Risk and capital management section.
Information used for significant estimate
Policy
Judgement
Estimate
Further information
Deferred tax
Determination of whether sufficient sustainable taxable profits will
Our estimates are based on the five year revenue and cost
Note 7
\u00a0
be generated in future years to recover the deferred tax asset.
forecasts (which include inherent uncertainties).
\u00a0
Fair value \u2013 financial
Classification of a fair value instrument as level 3, where the
Estimation of the fair value, where it is reasonably possible
Note 11
instruments
valuation is driven by unobservable inputs.
to have alternative assumptions in determining the FV.
\u00a0
Loan impairment
Definition of default against which to apply PD, LGD and EAD
ECL estimates contain a number of measurement
Note 15
provisions
models.
uncertainties (such as the weighting of multiple economic
\u00a0
\u00a0
Selection of multiple economic scenarios.
scenarios) and disclosures include sensitivities to show
\u00a0
\u00a0
Criteria for a significant increase in credit risk.
impact on other reasonably possible scenarios.
\u00a0
\u00a0
Identification of risks not captured by the models.
\u00a0\u00a0
Provisions for liabilities
Determination of whether a present obligation exists in respect of
Provisions remain sensitive to the assumptions used in the
Note 21
and charges
customer redress, litigation and other regulatory, property and
estimate. We consider a wide range of possible outcomes. It
\u00a0
\u00a0
other provisions. Legal proceedings often require a high degree of
is often not practical to meaningfully quantify ranges of
\u00a0
\u00a0
judgement and these are likely to change as the matter
possible outcomes, given the uncertainties involved.
\u00a0
\u00a0
progresses.
\u00a0\u00a0
\nChanges in judgements and assumptions could result in a material adjustment to those estimates in future reporting periods.4. Future accounting developments
International Financial Reporting Standards
Effective 1 January 2024
\ue001
Classification of Liabilities as Current or Non-current (Amendments to IAS 1);
\ue001
Non-current Liabilities with Covenants (Amendments to IAS 1)
\ue001
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
\ue001
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
Effective 1 January 2025
\ue001
Lack of Exchangeability (Amendments to IAS 21)
We are assessing the effect of adopting these amendments on our financial statements
but do not expect the effect to be material.", "dimensions": { "concept": "ifrs-full:ExplanationOfAssumptionAboutFutureWithSignificantRiskOfResultingInMaterialAdjustments", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80775": { "value": "2. Critical accounting policies
The judgements and assumptions involved in our accounting policies that are considered by the Board to be the most important to the portrayal of our financial condition are noted
below. The use of estimates, assumptions or models that differ from those adopted by us would affect our reported results. Management\u2019s consideration of uncertainty is outlined in the
relevant sections, including the ECL estimate in the Risk and capital management section.
Information used for significant estimate
Policy
Judgement
Estimate
Further information
Deferred tax
Determination of whether sufficient sustainable taxable profits will
Our estimates are based on the five year revenue and cost
Note 7
\u00a0
be generated in future years to recover the deferred tax asset.
forecasts (which include inherent uncertainties).
\u00a0
Fair value \u2013 financial
Classification of a fair value instrument as level 3, where the
Estimation of the fair value, where it is reasonably possible
Note 11
instruments
valuation is driven by unobservable inputs.
to have alternative assumptions in determining the FV.
\u00a0
Loan impairment
Definition of default against which to apply PD, LGD and EAD
ECL estimates contain a number of measurement
Note 15
provisions
models.
uncertainties (such as the weighting of multiple economic
\u00a0
\u00a0
Selection of multiple economic scenarios.
scenarios) and disclosures include sensitivities to show
\u00a0
\u00a0
Criteria for a significant increase in credit risk.
impact on other reasonably possible scenarios.
\u00a0
\u00a0
Identification of risks not captured by the models.
\u00a0\u00a0
Provisions for liabilities
Determination of whether a present obligation exists in respect of
Provisions remain sensitive to the assumptions used in the
Note 21
and charges
customer redress, litigation and other regulatory, property and
estimate. We consider a wide range of possible outcomes. It
\u00a0
\u00a0
other provisions. Legal proceedings often require a high degree of
is often not practical to meaningfully quantify ranges of
\u00a0
\u00a0
judgement and these are likely to change as the matter
possible outcomes, given the uncertainties involved.
\u00a0
\u00a0
progresses.
\u00a0\u00a0
Changes in judgements and assumptions could result in a material adjustment to those estimates in future reporting periods.
2.1. Deferred tax
Deferred tax is the estimated tax expected to be payable or recoverable in respect of
temporary differences between the carrying amount of an asset or liability for accounting
purposes and the carrying amount for tax purposes in the future. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent their recovery is probable.
Deferred tax is calculated using tax rates expected to apply in the periods when the
assets will be realised or the liabilities settled, based on tax rates and laws enacted, or
substantively enacted, at the balance sheet date.
Deferred tax asset recoverability is based on the level of supporting offsetable deferred
tax liabilities we have and of our future taxable profits. These future taxable profits are
based on our five-year revenue and cost forecasts and the expectation of long term
economic growth beyond this period. The five-year forecast takes account of
management\u2019s current expectations on competitiveness and profitability. The long term
growth rate reflects external indicators which will include market expectations on climate
risk. We do not consider any additional adjustments to this indicator.
2.2. Fair value \u2013 financial instruments
We measure financial instruments at fair value when they are classified as mandatory
fair value through profit or loss; held-for-trading; designated fair value through profit or
loss and fair value through other comprehensive income and they are recognised in the
financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net
exposure to either market or credit risk. In these cases, the fair value is derived from the
net risk exposure of that portfolio with portfolio level adjustments applied to incorporate
bid-offer spreads, counterparty credit risk, and funding costs (refer to \u2018Valuation
Adjustments\u2019).
Where the market for a financial instrument is not active, fair value is established using a
valuation technique. These valuation techniques involve a degree of estimation, the
extent of which depends on the instrument\u2019s complexity and the availability of market-
based data. The complexity and uncertainty in the financial instrument\u2019s fair value is
categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.
2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured
at amortised cost or at fair value through other comprehensive income, issued financial
guarantee and loan commitment (other than those classified as held for trading) is
assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.
ECL are a probability-weighted estimate of credit losses. The probability is determined by
the risk of default which is applied to the cash flow estimates. In the absence of a change
in credit rating, allowances are recognised when there is a reduction in the net present
value of expected cash flows. Following a significant increase in credit risk, ECL are
adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make
payments as they fall due. Future cashflows are discounted, so long-dated cashflows are
less likely to affect current expectations on credit loss. Our assessment of sector specific
risks, and whether additional adjustments are required, include expectations of the ability
of those sectors to meet their financing needs in the market. Changes in credit risk
appetite and how we manage credit positions that stem from climate considerations,
such as oil and gas, will directly affect our positions.
Judgement is exercised as follows:
\ue001
Models
\u2013 in certain low default portfolios, Basel parameter estimates are also applied
for IFRS 9.
\ue001
Non-modelled portfolios
\u2013 use a standardised capital requirement under Basel II.
Under IFRS 9, they have bespoke treatments for the identification of significant
increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for
appropriateness. The ECL calculation is based on expected future cash flows, which
is typically applied at a portfolio level.
\ue001
Multiple economic scenarios (MES)
\u2013 the central, or base, scenario is most critical to
the ECL calculation, independent of the method used to generate a range of
alternative outcomes and their probabilities.
\ue001
Significant increase in credit risk
\u2013
IFRS 9 requires that at each reporting date, an
entity shall assess whether the credit risk on an account has increased significantly
since initial recognition. Part of this assessment requires a comparison to be made
between the current lifetime PD (i.e. the current probability of default over the
remaining lifetime) with the equivalent lifetime PD as determined at the date of initial
recognition.
.
On restructuring where a financial asset is not derecognised, the revised cash flows are
used in re-estimating the credit loss. Where restructuring causes derecognition of the
original financial asset, the fair value of the replacement asset is used as the closing cash
flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares
or property, the exchange is accounted for as the sale of the loan and the acquisition of
equity securities or investment property. Where our acquired interest is in equity shares,
relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance
sheet when we conclude that there is no longer any realistic prospect of recovery of
part, or all, of the loan. For financial assets that are individually assessed for impairment,
the timing of the write-off is determined on a case-by-case basis. Such financial assets
are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-
negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed
portfolios are:
\ue001
Retail mortgages: write-off usually occurs within five years, or earlier, when an
account is closed, but can be longer where the customer engages constructively;
\ue001
Credit cards: the irrecoverable amount is typically written off after twelve arrears
cycles or at four years post default any remaining amounts outstanding are written
off;
\ue001
Overdrafts and other unsecured loans: write-off occurs within six years;
\ue001
Commercial loans: write-offs are determined in the light of individual circumstances;
and Business loans are generally written off within five years.
2.4. Provisions
We recognise a provision for a present obligation resulting from a past event when it is
more likely than not that we will be required to pay to settle the obligation and the
amount of the obligation can be estimated reliably.
Provision is made for restructuring costs, including the costs of redundancy, when we
have a constructive obligation. An obligation exists when we have a detailed formal plan
for the restructuring and have raised a valid expectation in those affected either by
starting to implement the plan or by announcing its main features.
We recognise any onerous cost of the present obligation under a contract as a provision.
An onerous cost is the unavoidable cost of meeting our contractual obligations that
exceed the expected economic benefits. When we intend to vacate a leasehold property
or right of use asset, the asset would be tested for impairment and a provision may be
recognised for the ancillary contractual occupancy costs.4. Future accounting developments
International Financial Reporting Standards
Effective 1 January 2024
\ue001
Classification of Liabilities as Current or Non-current (Amendments to IAS 1);
\ue001
Non-current Liabilities with Covenants (Amendments to IAS 1)
\ue001
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
\ue001
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
Effective 1 January 2025
\ue001
Lack of Exchangeability (Amendments to IAS 21)
We are assessing the effect of adopting these amendments on our financial statements
but do not expect the effect to be material.Judgement: tax contingencies
NatWest Group\u2019s corporate income tax charge and its provisions for corporate income taxes necessarily involve a degree of estimation and judgement. The tax treatment of some
transactions is uncertain and tax computations are yet to be agreed with the relevant tax authorities. NatWest Group recognises anticipated tax liabilities based on all available
evidence and, where appropriate, in the light of external advice. Any difference between the final outcome and the amounts provided will affect current and deferred income tax
charges in the period when the matter is resolved.Critical accounting policy: Deferred tax
NatWest Group has recognised a deferred tax asset of \u00a31,894 million (2022 - \u00a32,178
million) and a deferred tax liability of \u00a3141 million (2022 - \u00a3227 million). These include
amounts recognised in respect of UK and overseas tax losses of \u00a31,019 million (2022 -
\u00a3952 million).
The main UK corporation tax increased from 19% to 25%, and the UK banking surcharge
decreased from 8% to 3%, from 1 April 2023. NatWest Group\u2019s closing deferred tax
assets and liabilities are therefore recognised based on these rates.
Judgement
\u2013
NatWest Group has considered the carrying value of deferred tax assets
and concluded that, based on management\u2019s estimates, sufficient sustainable taxable
profits will be generated in future years to recover recognised deferred tax assets.
Estimates
\u2013
These estimates are partly based on forecast performance beyond the
horizon for management\u2019s detailed plans. They have regard to inherent uncertainties.
The deferred tax assets in NWM Plc and UBIDAC are supported by future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023.Judgement: classification of financial assets
Classification of financial assets between amortised cost and
fair value through other comprehensive income requires a
degree of judgement in respect of business models and
contractual cashflows.
\ue001
The business model criteria is assessed at a portfolio level
to determine whether assets are classified as held to
collect or held to collect and sell. Information that is
considered in determining the applicable business model
includes: the portfolio\u2019s policies and objectives; how the
performance and risks of the portfolio are managed,
evaluated and reported to management; and the
frequency, volume and timing of sales in prior periods,
sales expectation for future periods, and the reasons for
sales.
\ue001
The contractual cash flow characteristics of financial
assets are assessed with reference to whether the cash
flows represent solely payments of principal and interest
(SPPI). A level of judgement is made in assessing terms
that could change the contractual cash flows so that it
would not meet the condition for SPPI, including contingent
and leverage features,
non-recourse arrangements and
features that could modify the time value of money.
For accounting policy information refer to Accounting policies
3.8, 3.9 and 3.11.Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.Key areas of judgement
Over the years the business has simplified, with most products classified as level 1 or 2 of
the fair value hierarchy. However, the diverse range of products historically traded by
NatWest Group means some products remain classified as level 3. Level 3 indicates a
significant level of pricing uncertainty, where expert judgement is used. As such, extra
disclosures are required in respect of level 3 instruments.
In general, the degree of expert judgement used and hence valuation uncertainty
depends on the degree of liquidity of an instrument or input.
Where markets are liquid, little judgement is required. However, when the information
regarding the liquidity in a particular market is not clear, a judgement may need to be
made. For example, for an equity traded on an exchange, daily volumes of trading can
be seen, but for an OTC derivative, assessing the liquidity of the market with no central
exchange is more challenging.
A key related matter is where a market moves from liquid to illiquid or vice versa. Where
this movement is considered temporary, the fair value level is not changed. For example,
if there is little market trading in a product on a reporting date but at the previous
reporting date and during the intervening period the market has been liquid. In this case,
the instrument will continue to be classified at the same level in the hierarchy. This is to
provide consistency so that transfers between levels are driven by genuine changes in
market liquidity and do not reflect short term or seasonal effects. Material movements
between levels are reviewed quarterly by the business and IPV.
The breadth and depth of the IPV data allows for a rules-based quality assessment to be
made of market activity, liquidity, and pricing uncertainty, which assists with the process
of allocation to an appropriate level. Where suitable independent pricing information is
not readily available, the quality assessment will result in the instrument being assessed
as level 3.Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2023, customer loan impairment provisions amounted to \u00a33,645 million (2022 - \u00a33,434
million). A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan was advanced. Such evidence includes, changes in
the credit rating of a borrower, the failure to make payments in accordance with the loan agreement, significant reduction in the value of any security, breach of limits or covenants,
and observable data about relevant macroeconomic measures.
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management\u2019s assessment of any potential deterioration in the creditworthiness of the
borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of
impairment losses. For further information and sensitivity analysis, refer to Risk and capital management \u2013 Measurement uncertainty and ECL sensitivity analysis section.Critical accounting policy: Provisions for liabilities
The key judgement is involved in determining whether a present obligation exists. There
is often a high degree of uncertainty and judgement is based on the specific facts and
circumstances relating to individual events in determining whether there is a present
obligation. Judgement is also involved in estimation of the probability, timing and amount
of any outflows. Where NatWest Group can look to another party such as an insurer to
pay some or all of the expenditure required to settle a provision, any reimbursement is
recognised when, and only when, it is virtually certain that it will be received.
E
E
stimates
-
Provisions are liabilities of uncertain timing or amount and are recognised
when there is a present obligation as a result of a past event, the outflow of economic
benefit is probable and the outflow can be estimated reliably.
Any difference between the final outcome and the amounts provided will affect the
reported results in the period when the matter is resolved.
\ue001
Customer redress: Provisions reflect the estimated cost of redress attributable to
claims where it is determined that a present obligation exists.
\ue001
Litigation and other regulatory: NatWest Group is engaged in various legal
proceedings, both in the UK and in overseas jurisdictions, including the US. For
further information in relation to legal proceedings and discussion of the associated
uncertainties, refer to Note 26.
\ue001
Property: This includes provision for contractual costs associated with vacant
properties.
\ue001
Other provisions: These materially comprise provisions for onerous contracts and
restructuring costs. Onerous contract provisions comprise an estimate of the costs
involved in fulfilling the terms and conditions of contracts net of any expected
benefits to be received. This includes provision for contractual costs associated with
vacant properties. Redundancy and restructuring provisions comprise the estimated
cost of restructuring, including redundancy costs where an obligation exists.
Background information for all material provisions is given in Note 26.", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80958": { "value": "2.1. Deferred tax
Deferred tax is the estimated tax expected to be payable or recoverable in respect of
temporary differences between the carrying amount of an asset or liability for accounting
purposes and the carrying amount for tax purposes in the future. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent their recovery is probable.
Deferred tax is calculated using tax rates expected to apply in the periods when the
assets will be realised or the liabilities settled, based on tax rates and laws enacted, or
substantively enacted, at the balance sheet date.
Deferred tax asset recoverability is based on the level of supporting offsetable deferred
tax liabilities we have and of our future taxable profits. These future taxable profits are
based on our five-year revenue and cost forecasts and the expectation of long term
economic growth beyond this period. The five-year forecast takes account of
management\u2019s current expectations on competitiveness and profitability. The long term
growth rate reflects external indicators which will include market expectations on climate
risk. We do not consider any additional adjustments to this indicator.3.7. Tax
Tax encompassing current tax and deferred tax is recognised in the income statement
except when taxable items are recognised in other comprehensive income or equity. Tax
consequences arising from servicing financial instruments classified as equity are
recognised in the income statement.
Accounting for taxes is judgemental and carries a degree of uncertainty because tax law
is subject to interpretation, which might be questioned by the relevant tax authority. We
recognise the most likely current and deferred tax liability or asset, assessed for
uncertainty using consistent judgements and estimates. Current and deferred tax assets
are only recognised where their recovery is deemed probable, and current and deferred
tax liabilities are recognised at the amount that represents the best estimate of the
probable outcome having regard to their acceptance by the tax authorities.Critical accounting policy: Deferred tax
NatWest Group has recognised a deferred tax asset of \u00a31,894 million (2022 - \u00a32,178
million) and a deferred tax liability of \u00a3141 million (2022 - \u00a3227 million). These include
amounts recognised in respect of UK and overseas tax losses of \u00a31,019 million (2022 -
\u00a3952 million).
The main UK corporation tax increased from 19% to 25%, and the UK banking surcharge
decreased from 8% to 3%, from 1 April 2023. NatWest Group\u2019s closing deferred tax
assets and liabilities are therefore recognised based on these rates.
Judgement
\u2013
NatWest Group has considered the carrying value of deferred tax assets
and concluded that, based on management\u2019s estimates, sufficient sustainable taxable
profits will be generated in future years to recover recognised deferred tax assets.
Estimates
\u2013
These estimates are partly based on forecast performance beyond the
horizon for management\u2019s detailed plans. They have regard to inherent uncertainties.
The deferred tax assets in NWM Plc and UBIDAC are supported by future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023.
UK tax losses
Under UK tax rules, tax losses can be carried forward indefinitely. As the recognised tax
losses in NatWest Group arose prior to 1 April 2015, credit in future periods is given
against 25% of profits at the main rate of UK corporation tax, excluding the Banking
Surcharge rate introduced by The Finance (No. 2) Act 2015.
NWM Plc
\u2013
A deferred tax asset of nil (2022 - \u00a33 million) has been recognised at 31
December 2023. The basis of recognition in NWM plc is by way of future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023. Losses of \u00a35,558 million have not been recognised in the deferred tax
balance at 31 December 2023.
N
N
WB Plc
\u2013
A deferred tax asset of \u00a3362 million (2022 - \u00a3445 million) has been
recognised in respect of losses of \u00a31,448 million of total losses of \u00a32,308 million carried
forward at 31 December 2023. The losses arose principally as a result of significant
impairment and conduct charges between 2009 and 2012 during challenging economic
conditions in the UK banking sector. NWB Plc returned to tax profitability during 2015,
and based on a 5 year recovery period, expects the deferred tax asset to be utilised
against future taxable profits by the end of 2028.
RBS plc
\u2013
A deferred tax asset of \u00a3597 million (2022 - \u00a3452 million) has been recognised
in respect of losses of \u00a32,388 million of total losses of \u00a33,297 million carried forward at
31 December 2023. The losses were transferred from NatWest Markets Plc as a
consequence of the ring fencing regulations. Based on a 7 year recovery period, RBS plc
expects the deferred tax asset to be utilised against future taxable profits by the end of
2030.
Overseas tax losses
UBIDAC
\u2013
A deferred tax asset of \u00a35 million (2022 - \u00a36 million) has been recognised in
respect of losses of \u00a340 million, and is now entirely supported by way of future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023.
NatWest Markets N.V. (NWM N.V.)
\u2013
A deferred tax asset of \u00a355 million (2022 - \u00a346
million) has been recognised in respect of losses of \u00a3213 million of total losses of \u00a32,496
million carried forward at 31 December 2023. NWM N.V. Group considers it to be
probable, based on its 5-year budget forecast, that future taxable profits will be available
against which the tax losses and tax credits can be partially utilised. The tax losses and
the tax credits have no expiry date.
Unrecognised deferred tax
Deferred tax assets of \u00a35,168 million (2022 - \u00a35,534 million; 2021 - \u00a35,437 million) have
not been recognised in respect of tax losses and other deductible temporary differences
carried forward of \u00a324,438 million (2022 - \u00a325,742 million; 2021 - \u00a324,699 million) in
jurisdictions where doubt exists over the availability of future taxable profits. Of these
losses and other deductible temporary differences, \u00a334 million expire within five years
and \u00a34,488 million thereafter. The balance of tax losses and other deductible temporary
differences carried forward has no expiry date.
Deferred tax liabilities of \u00a3256 million (2022 - \u00a3257 million; 2021 - \u00a3302 million) on
aggregate underlying temporary differences of \u00a31,005 million (2022 - \u00a31,010 million;
2021 - \u00a31,032 million) have not been recognised in respect of retained earnings of
overseas subsidiaries and held-over gains on the incorporation of certain overseas
branches. Retained earnings of overseas subsidiaries are expected to be reinvested
indefinitely or remitted to the UK free from further taxation. No taxation is expected to
arise in the foreseeable future in respect of held-over gains on which deferred tax is not
recognised. Changes to UK tax legislation largely exempts from UK tax overseas
dividends received on or after 1 July 2009.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80959": { "value": "2.1. Deferred tax
Deferred tax is the estimated tax expected to be payable or recoverable in respect of
temporary differences between the carrying amount of an asset or liability for accounting
purposes and the carrying amount for tax purposes in the future. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent their recovery is probable.
Deferred tax is calculated using tax rates expected to apply in the periods when the
assets will be realised or the liabilities settled, based on tax rates and laws enacted, or
substantively enacted, at the balance sheet date.
Deferred tax asset recoverability is based on the level of supporting offsetable deferred
tax liabilities we have and of our future taxable profits. These future taxable profits are
based on our five-year revenue and cost forecasts and the expectation of long term
economic growth beyond this period. The five-year forecast takes account of
management\u2019s current expectations on competitiveness and profitability. The long term
growth rate reflects external indicators which will include market expectations on climate
risk. We do not consider any additional adjustments to this indicator.3.7. Tax
Tax encompassing current tax and deferred tax is recognised in the income statement
except when taxable items are recognised in other comprehensive income or equity. Tax
consequences arising from servicing financial instruments classified as equity are
recognised in the income statement.
Accounting for taxes is judgemental and carries a degree of uncertainty because tax law
is subject to interpretation, which might be questioned by the relevant tax authority. We
recognise the most likely current and deferred tax liability or asset, assessed for
uncertainty using consistent judgements and estimates. Current and deferred tax assets
are only recognised where their recovery is deemed probable, and current and deferred
tax liabilities are recognised at the amount that represents the best estimate of the
probable outcome having regard to their acceptance by the tax authorities.Critical accounting policy: Deferred tax
NatWest Group has recognised a deferred tax asset of \u00a31,894 million (2022 - \u00a32,178
million) and a deferred tax liability of \u00a3141 million (2022 - \u00a3227 million). These include
amounts recognised in respect of UK and overseas tax losses of \u00a31,019 million (2022 -
\u00a3952 million).
The main UK corporation tax increased from 19% to 25%, and the UK banking surcharge
decreased from 8% to 3%, from 1 April 2023. NatWest Group\u2019s closing deferred tax
assets and liabilities are therefore recognised based on these rates.
Judgement
\u2013
NatWest Group has considered the carrying value of deferred tax assets
and concluded that, based on management\u2019s estimates, sufficient sustainable taxable
profits will be generated in future years to recover recognised deferred tax assets.
Estimates
\u2013
These estimates are partly based on forecast performance beyond the
horizon for management\u2019s detailed plans. They have regard to inherent uncertainties.
The deferred tax assets in NWM Plc and UBIDAC are supported by future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023.
UK tax losses
Under UK tax rules, tax losses can be carried forward indefinitely. As the recognised tax
losses in NatWest Group arose prior to 1 April 2015, credit in future periods is given
against 25% of profits at the main rate of UK corporation tax, excluding the Banking
Surcharge rate introduced by The Finance (No. 2) Act 2015.
NWM Plc
\u2013
A deferred tax asset of nil (2022 - \u00a33 million) has been recognised at 31
December 2023. The basis of recognition in NWM plc is by way of future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023. Losses of \u00a35,558 million have not been recognised in the deferred tax
balance at 31 December 2023.
N
N
WB Plc
\u2013
A deferred tax asset of \u00a3362 million (2022 - \u00a3445 million) has been
recognised in respect of losses of \u00a31,448 million of total losses of \u00a32,308 million carried
forward at 31 December 2023. The losses arose principally as a result of significant
impairment and conduct charges between 2009 and 2012 during challenging economic
conditions in the UK banking sector. NWB Plc returned to tax profitability during 2015,
and based on a 5 year recovery period, expects the deferred tax asset to be utilised
against future taxable profits by the end of 2028.
RBS plc
\u2013
A deferred tax asset of \u00a3597 million (2022 - \u00a3452 million) has been recognised
in respect of losses of \u00a32,388 million of total losses of \u00a33,297 million carried forward at
31 December 2023. The losses were transferred from NatWest Markets Plc as a
consequence of the ring fencing regulations. Based on a 7 year recovery period, RBS plc
expects the deferred tax asset to be utilised against future taxable profits by the end of
2030.
Overseas tax losses
UBIDAC
\u2013
A deferred tax asset of \u00a35 million (2022 - \u00a36 million) has been recognised in
respect of losses of \u00a340 million, and is now entirely supported by way of future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023.
NatWest Markets N.V. (NWM N.V.)
\u2013
A deferred tax asset of \u00a355 million (2022 - \u00a346
million) has been recognised in respect of losses of \u00a3213 million of total losses of \u00a32,496
million carried forward at 31 December 2023. NWM N.V. Group considers it to be
probable, based on its 5-year budget forecast, that future taxable profits will be available
against which the tax losses and tax credits can be partially utilised. The tax losses and
the tax credits have no expiry date.
Unrecognised deferred tax
Deferred tax assets of \u00a35,168 million (2022 - \u00a35,534 million; 2021 - \u00a35,437 million) have
not been recognised in respect of tax losses and other deductible temporary differences
carried forward of \u00a324,438 million (2022 - \u00a325,742 million; 2021 - \u00a324,699 million) in
jurisdictions where doubt exists over the availability of future taxable profits. Of these
losses and other deductible temporary differences, \u00a334 million expire within five years
and \u00a34,488 million thereafter. The balance of tax losses and other deductible temporary
differences carried forward has no expiry date.
Deferred tax liabilities of \u00a3256 million (2022 - \u00a3257 million; 2021 - \u00a3302 million) on
aggregate underlying temporary differences of \u00a31,005 million (2022 - \u00a31,010 million;
2021 - \u00a31,032 million) have not been recognised in respect of retained earnings of
overseas subsidiaries and held-over gains on the incorporation of certain overseas
branches. Retained earnings of overseas subsidiaries are expected to be reinvested
indefinitely or remitted to the UK free from further taxation. No taxation is expected to
arise in the foreseeable future in respect of held-over gains on which deferred tax is not
recognised. Changes to UK tax legislation largely exempts from UK tax overseas
dividends received on or after 1 July 2009.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80960": { "value": "2.1. Deferred tax
Deferred tax is the estimated tax expected to be payable or recoverable in respect of
temporary differences between the carrying amount of an asset or liability for accounting
purposes and the carrying amount for tax purposes in the future. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent their recovery is probable.
Deferred tax is calculated using tax rates expected to apply in the periods when the
assets will be realised or the liabilities settled, based on tax rates and laws enacted, or
substantively enacted, at the balance sheet date.
Deferred tax asset recoverability is based on the level of supporting offsetable deferred
tax liabilities we have and of our future taxable profits. These future taxable profits are
based on our five-year revenue and cost forecasts and the expectation of long term
economic growth beyond this period. The five-year forecast takes account of
management\u2019s current expectations on competitiveness and profitability. The long term
growth rate reflects external indicators which will include market expectations on climate
risk. We do not consider any additional adjustments to this indicator.3.7. Tax
Tax encompassing current tax and deferred tax is recognised in the income statement
except when taxable items are recognised in other comprehensive income or equity. Tax
consequences arising from servicing financial instruments classified as equity are
recognised in the income statement.
Accounting for taxes is judgemental and carries a degree of uncertainty because tax law
is subject to interpretation, which might be questioned by the relevant tax authority. We
recognise the most likely current and deferred tax liability or asset, assessed for
uncertainty using consistent judgements and estimates. Current and deferred tax assets
are only recognised where their recovery is deemed probable, and current and deferred
tax liabilities are recognised at the amount that represents the best estimate of the
probable outcome having regard to their acceptance by the tax authorities.7 Tax
NatWest Group\u2019s corporate income tax charge for the period is set out below, together with a reconciliation to the expected tax charge calculated using the UK standard corporation
tax rate and details of the NatWest Group\u2019s deferred tax balances.
For accounting policy information refer to Accounting policies 2.1 and 3.7.
Analysis of the tax charge for the year
The tax charge comprises current and deferred tax in respect of profits and losses recognised or originating in the income statement. Tax on items originating
outside the income statement is charged to other comprehensive income or direct to equity (as appropriate) and is therefore not reflected in the table below.
Current tax is tax payable or recoverable in respect of the taxable profit or loss for the year and any adjustments to tax payable in prior years. Deferred tax is
explained on page 333.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Current tax
\u00a0\u00a0\u00a0
Charge for the year
(1,373)
(1,611)
(1,036)
(Under)/over provision in respect of prior years
(123)
100
31
\u00a0
(1,496)
(1,511)
(1,005)
Deferred tax
\u00a0\u00a0\u00a0
(Charge)/credit for the year
(281)
47
(185)
UK tax rate change impact
-
(10)
165
Net increase in the carrying value of deferred tax assets in respect of UK, RoI and Netherlands losses
385
267
12
(Under)/over provision in respect of prior years
(42)
(68)
17
Tax charge for the year
(1,434)
(1,275)
(996)
\n
Factors affecting the tax charge for the year
Taxable profits differ from profits reported in the income statement as certain amounts of income and expense may not be taxable or deductible. In addition, taxable profits may reflect
items that have been included outside the income statement (for instance, in other comprehensive income) or adjustments that are made for tax purposes only.
Current tax for the year ended 31 December 2023 is based on blended rates of 23.5% for the standard rate of UK corporation tax and 4.25% for the UK banking surcharge.
The expected tax charge for the year is calculated by applying the standard UK corporation tax rate of 23.5% (2022 and 2021 \u2013 19%) to the Operating profit or loss before tax in the
income statement.
\n
\n
The actual tax charge differs from the expected tax charge as follows:
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Expected tax charge
(1,452)
(975)
(766)
Losses and temporary differences in year where no deferred tax asset recognised
(56)
(118)
(51)
Foreign profits taxed at other rates
10
(62)
(11)
Non deductible goodwill impairment
-
-
(16)
Items not allowed for tax:
\u00a0\u00a0\u00a0
- losses on disposals and write-downs
(63)
(10)
(55)
- UK bank levy
(27)
(20)
(18)
- regulatory and legal actions
(1)
(7)
(74)
- other disallowable items
(57)
(51)
(28)
Non-taxable items:
\u00a0\u00a0\u00a0
-
Foreign exchange recycling on UBIDAC capital reduction
114
-
-
-
RPI-related uplift on index linked gilts
6
67
-
-
other non-taxable items
20
29
73
Taxable foreign exchange movements
9
(19)
8
Unrecognised losses brought forward and utilised
27
6
10
Net increase/(decrease) in the carrying value of deferred tax assets in respect of:
\u00a0\u00a0\u00a0
- UK losses
(2)
371
272
(9)
- RoI losses
(1)
(5)
(27)
- Netherlands losses
15
-
48
Banking surcharge
(236)
(447)
(341)
Tax on paid-in equity dividends
52
43
48
UK tax rate change impact
-
(10)
165
Adjustments in respect of prior years
(1, 2)
(165)
32
48
Actual tax charge
(1,434)
(1,275)
(996)
\n
(1)
Prior year tax adjustments incorporate refinements to tax computations made on submission and agreement with the tax authorities and adjustments to provisions in respect of uncertain tax positions.
(2)
Includes a net \u00a369 million benefit from UK group relief and loss relief claims at higher tax rates (refer to the Deferred Tax section below for details of the recent changes in UK tax rates).
On 11 July 2023, the UK government enacted the Pillar 2 income taxes legislation effective for the financial year beginning 1 January 2024. Under the legislation, NatWest Group plc
will be required to pay, in the UK, top-up tax on profits of its subsidiaries and permanent establishments that are taxed at a Pillar 2 effective tax rate of less than 15%. The assessment
of the potential exposure to Pillar 2 income taxes is based on the most recent tax filings, country-by-country reporting, and financial statements for the constituent entities in the
NatWest Group. The main jurisdictions in which exposure to this top-up tax may exist include Jersey, Guernsey, Isle of Man and Gibraltar. This legislation is expected to have no
material impact for NatWest Group plc.
In future periods, part of this top-up tax may be payable instead in the relevant jurisdiction, if that jurisdiction implements a Qualifying Domestic Minimum Top Up Tax (QDMTT). This is
expected in most jurisdictions in which we operate.
Judgement: tax contingencies
NatWest Group\u2019s corporate income tax charge and its provisions for corporate income taxes necessarily involve a degree of estimation and judgement. The tax treatment of some
transactions is uncertain and tax computations are yet to be agreed with the relevant tax authorities. NatWest Group recognises anticipated tax liabilities based on all available
evidence and, where appropriate, in the light of external advice. Any difference between the final outcome and the amounts provided will affect current and deferred income tax
charges in the period when the matter is resolved.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Deferred tax
\n
Deferred tax is the tax expected to be payable or recoverable in respect of temporary differences where the carrying amount of an asset or liability differs for
\n
accounting and tax purposes. Deferred tax liabilities reflect the expected amount of tax payable in the future on these temporary differences. Deferred tax assets
\n
reflect the expected amount of tax recoverable in the future on these differences.
\n
The net deferred tax asset recognised by the NatWest Group is shown below, together with details of the accounting judgements and tax rates that have been used
\n
to calculate the deferred tax. Details are also provided of any deferred tax assets or liabilities that have not been recognised on the balance sheet.
d
\n
Analysis of deferred tax
\n\n \n
2023
2022
\u00a3m
\u00a3m
Deferred tax asset
(1,894)
(2,178)
Deferred tax liability
141
227
Net deferred tax asset
(1,753)
(1,951)
\n\n \n
Accelerated
capital
Expense
Financial
Tax losses
Pension
allowances
provisions
instruments (1)
carried forward
Other
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2022
24
(42)
(97)
248
(899)
(70)
(836)
Charge/(credit) to income statement:
- continuing operations
1
(43)
14
(171)
(51)
14
(236)
- discontinued operations
-
-
-
-
-
-
-
(Credit)/charge to other comprehensive income
(2)
-
1
(913)
-
(2)
(916)
Currency translation and other adjustments
-
10
-
31
(2)
(2)
37
At 1 January 2023
23
(75)
(82)
(805)
(952)
(60)
(1,951)
Charge/(credit) to income statement:
-
- continuing operations
1
(1)
21
16
(67)
(32)
(62)
- discontinued operations
-
-
-
-
-
-
-
(Credit)/charge to other comprehensive income
(8)
-
-
249
-
17
258
Currency translation and other adjustments
-
-
-
2
-
-
2
At 31 December 2023
16
(76)
(61)
(538)
(1,019)
(75)
(1,753)
\n
(1)
The in-year movement predominantly relates to cash flow hedges.
Deferred tax assets in respect of carried forward tax losses are recognised if the losses
can be used to offset probable future taxable profits after taking into account the
expected reversal of other temporary differences. Recognised deferred tax assets in
respect of tax losses are analysed further below.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
UK tax losses carried forward
\u00a0 \u00a0
- NWM Plc
-
3
- NWB Plc
362
445
- RBS plc
597
452
Total
959
900
Overseas tax losses carried forward
\u00a0 \u00a0
- UBIDAC
5
6
- NWM N.V.
55
46
\u00a0
1,019
952
\n
Critical accounting policy: Deferred tax
NatWest Group has recognised a deferred tax asset of \u00a31,894 million (2022 - \u00a32,178
million) and a deferred tax liability of \u00a3141 million (2022 - \u00a3227 million). These include
amounts recognised in respect of UK and overseas tax losses of \u00a31,019 million (2022 -
\u00a3952 million).
The main UK corporation tax increased from 19% to 25%, and the UK banking surcharge
decreased from 8% to 3%, from 1 April 2023. NatWest Group\u2019s closing deferred tax
assets and liabilities are therefore recognised based on these rates.
Judgement
\u2013
NatWest Group has considered the carrying value of deferred tax assets
and concluded that, based on management\u2019s estimates, sufficient sustainable taxable
profits will be generated in future years to recover recognised deferred tax assets.
Estimates
\u2013
These estimates are partly based on forecast performance beyond the
horizon for management\u2019s detailed plans. They have regard to inherent uncertainties.
The deferred tax assets in NWM Plc and UBIDAC are supported by future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023.
UK tax losses
Under UK tax rules, tax losses can be carried forward indefinitely. As the recognised tax
losses in NatWest Group arose prior to 1 April 2015, credit in future periods is given
against 25% of profits at the main rate of UK corporation tax, excluding the Banking
Surcharge rate introduced by The Finance (No. 2) Act 2015.
NWM Plc
\u2013
A deferred tax asset of nil (2022 - \u00a33 million) has been recognised at 31
December 2023. The basis of recognition in NWM plc is by way of future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023. Losses of \u00a35,558 million have not been recognised in the deferred tax
balance at 31 December 2023.
N
N
WB Plc
\u2013
A deferred tax asset of \u00a3362 million (2022 - \u00a3445 million) has been
recognised in respect of losses of \u00a31,448 million of total losses of \u00a32,308 million carried
forward at 31 December 2023. The losses arose principally as a result of significant
impairment and conduct charges between 2009 and 2012 during challenging economic
conditions in the UK banking sector. NWB Plc returned to tax profitability during 2015,
and based on a 5 year recovery period, expects the deferred tax asset to be utilised
against future taxable profits by the end of 2028.
RBS plc
\u2013
A deferred tax asset of \u00a3597 million (2022 - \u00a3452 million) has been recognised
in respect of losses of \u00a32,388 million of total losses of \u00a33,297 million carried forward at
31 December 2023. The losses were transferred from NatWest Markets Plc as a
consequence of the ring fencing regulations. Based on a 7 year recovery period, RBS plc
expects the deferred tax asset to be utilised against future taxable profits by the end of
2030.
Overseas tax losses
UBIDAC
\u2013
A deferred tax asset of \u00a35 million (2022 - \u00a36 million) has been recognised in
respect of losses of \u00a340 million, and is now entirely supported by way of future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023.
NatWest Markets N.V. (NWM N.V.)
\u2013
A deferred tax asset of \u00a355 million (2022 - \u00a346
million) has been recognised in respect of losses of \u00a3213 million of total losses of \u00a32,496
million carried forward at 31 December 2023. NWM N.V. Group considers it to be
probable, based on its 5-year budget forecast, that future taxable profits will be available
against which the tax losses and tax credits can be partially utilised. The tax losses and
the tax credits have no expiry date.
Unrecognised deferred tax
Deferred tax assets of \u00a35,168 million (2022 - \u00a35,534 million; 2021 - \u00a35,437 million) have
not been recognised in respect of tax losses and other deductible temporary differences
carried forward of \u00a324,438 million (2022 - \u00a325,742 million; 2021 - \u00a324,699 million) in
jurisdictions where doubt exists over the availability of future taxable profits. Of these
losses and other deductible temporary differences, \u00a334 million expire within five years
and \u00a34,488 million thereafter. The balance of tax losses and other deductible temporary
differences carried forward has no expiry date.
Deferred tax liabilities of \u00a3256 million (2022 - \u00a3257 million; 2021 - \u00a3302 million) on
aggregate underlying temporary differences of \u00a31,005 million (2022 - \u00a31,010 million;
2021 - \u00a31,032 million) have not been recognised in respect of retained earnings of
overseas subsidiaries and held-over gains on the incorporation of certain overseas
branches. Retained earnings of overseas subsidiaries are expected to be reinvested
indefinitely or remitted to the UK free from further taxation. No taxation is expected to
arise in the foreseeable future in respect of held-over gains on which deferred tax is not
recognised. Changes to UK tax legislation largely exempts from UK tax overseas
dividends received on or after 1 July 2009.", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80961": { "value": "2.1. Deferred tax
Deferred tax is the estimated tax expected to be payable or recoverable in respect of
temporary differences between the carrying amount of an asset or liability for accounting
purposes and the carrying amount for tax purposes in the future. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent their recovery is probable.
Deferred tax is calculated using tax rates expected to apply in the periods when the
assets will be realised or the liabilities settled, based on tax rates and laws enacted, or
substantively enacted, at the balance sheet date.
Deferred tax asset recoverability is based on the level of supporting offsetable deferred
tax liabilities we have and of our future taxable profits. These future taxable profits are
based on our five-year revenue and cost forecasts and the expectation of long term
economic growth beyond this period. The five-year forecast takes account of
management\u2019s current expectations on competitiveness and profitability. The long term
growth rate reflects external indicators which will include market expectations on climate
risk. We do not consider any additional adjustments to this indicator. 3.7. Tax
Tax encompassing current tax and deferred tax is recognised in the income statement
except when taxable items are recognised in other comprehensive income or equity. Tax
consequences arising from servicing financial instruments classified as equity are
recognised in the income statement.
Accounting for taxes is judgemental and carries a degree of uncertainty because tax law
is subject to interpretation, which might be questioned by the relevant tax authority. We
recognise the most likely current and deferred tax liability or asset, assessed for
uncertainty using consistent judgements and estimates. Current and deferred tax assets
are only recognised where their recovery is deemed probable, and current and deferred
tax liabilities are recognised at the amount that represents the best estimate of the
probable outcome having regard to their acceptance by the tax authorities.7 Tax
NatWest Group\u2019s corporate income tax charge for the period is set out below, together with a reconciliation to the expected tax charge calculated using the UK standard corporation
tax rate and details of the NatWest Group\u2019s deferred tax balances.
For accounting policy information refer to Accounting policies 2.1 and 3.7.
Analysis of the tax charge for the year
The tax charge comprises current and deferred tax in respect of profits and losses recognised or originating in the income statement. Tax on items originating
outside the income statement is charged to other comprehensive income or direct to equity (as appropriate) and is therefore not reflected in the table below.
Current tax is tax payable or recoverable in respect of the taxable profit or loss for the year and any adjustments to tax payable in prior years. Deferred tax is
explained on page 333.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Current tax
\u00a0\u00a0\u00a0
Charge for the year
(1,373)
(1,611)
(1,036)
(Under)/over provision in respect of prior years
(123)
100
31
\u00a0
(1,496)
(1,511)
(1,005)
Deferred tax
\u00a0\u00a0\u00a0
(Charge)/credit for the year
(281)
47
(185)
UK tax rate change impact
-
(10)
165
Net increase in the carrying value of deferred tax assets in respect of UK, RoI and Netherlands losses
385
267
12
(Under)/over provision in respect of prior years
(42)
(68)
17
Tax charge for the year
(1,434)
(1,275)
(996)
\nFactors affecting the tax charge for the year
Taxable profits differ from profits reported in the income statement as certain amounts of income and expense may not be taxable or deductible. In addition, taxable profits may reflect
items that have been included outside the income statement (for instance, in other comprehensive income) or adjustments that are made for tax purposes only.
Current tax for the year ended 31 December 2023 is based on blended rates of 23.5% for the standard rate of UK corporation tax and 4.25% for the UK banking surcharge.
The expected tax charge for the year is calculated by applying the standard UK corporation tax rate of 23.5% (2022 and 2021 \u2013 19%) to the Operating profit or loss before tax in the
income statement.
\n
\n
The actual tax charge differs from the expected tax charge as follows:
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Expected tax charge
(1,452)
(975)
(766)
Losses and temporary differences in year where no deferred tax asset recognised
(56)
(118)
(51)
Foreign profits taxed at other rates
10
(62)
(11)
Non deductible goodwill impairment
-
-
(16)
Items not allowed for tax:
\u00a0\u00a0\u00a0
- losses on disposals and write-downs
(63)
(10)
(55)
- UK bank levy
(27)
(20)
(18)
- regulatory and legal actions
(1)
(7)
(74)
- other disallowable items
(57)
(51)
(28)
Non-taxable items:
\u00a0\u00a0\u00a0
-
Foreign exchange recycling on UBIDAC capital reduction
114
-
-
-
RPI-related uplift on index linked gilts
6
67
-
-
other non-taxable items
20
29
73
Taxable foreign exchange movements
9
(19)
8
Unrecognised losses brought forward and utilised
27
6
10
Net increase/(decrease) in the carrying value of deferred tax assets in respect of:
\u00a0\u00a0\u00a0
- UK losses
(2)
371
272
(9)
- RoI losses
(1)
(5)
(27)
- Netherlands losses
15
-
48
Banking surcharge
(236)
(447)
(341)
Tax on paid-in equity dividends
52
43
48
UK tax rate change impact
-
(10)
165
Adjustments in respect of prior years
(1, 2)
(165)
32
48
Actual tax charge
(1,434)
(1,275)
(996)
\n
(1)
Prior year tax adjustments incorporate refinements to tax computations made on submission and agreement with the tax authorities and adjustments to provisions in respect of uncertain tax positions.
(2)
Includes a net \u00a369 million benefit from UK group relief and loss relief claims at higher tax rates (refer to the Deferred Tax section below for details of the recent changes in UK tax rates).
On 11 July 2023, the UK government enacted the Pillar 2 income taxes legislation effective for the financial year beginning 1 January 2024. Under the legislation, NatWest Group plc
will be required to pay, in the UK, top-up tax on profits of its subsidiaries and permanent establishments that are taxed at a Pillar 2 effective tax rate of less than 15%. The assessment
of the potential exposure to Pillar 2 income taxes is based on the most recent tax filings, country-by-country reporting, and financial statements for the constituent entities in the
NatWest Group. The main jurisdictions in which exposure to this top-up tax may exist include Jersey, Guernsey, Isle of Man and Gibraltar. This legislation is expected to have no
material impact for NatWest Group plc.
In future periods, part of this top-up tax may be payable instead in the relevant jurisdiction, if that jurisdiction implements a Qualifying Domestic Minimum Top Up Tax (QDMTT). This is
expected in most jurisdictions in which we operate.
Judgement: tax contingencies
NatWest Group\u2019s corporate income tax charge and its provisions for corporate income taxes necessarily involve a degree of estimation and judgement. The tax treatment of some
transactions is uncertain and tax computations are yet to be agreed with the relevant tax authorities. NatWest Group recognises anticipated tax liabilities based on all available
evidence and, where appropriate, in the light of external advice. Any difference between the final outcome and the amounts provided will affect current and deferred income tax
charges in the period when the matter is resolved.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Deferred tax
\n
Deferred tax is the tax expected to be payable or recoverable in respect of temporary differences where the carrying amount of an asset or liability differs for
\n
accounting and tax purposes. Deferred tax liabilities reflect the expected amount of tax payable in the future on these temporary differences. Deferred tax assets
\n
reflect the expected amount of tax recoverable in the future on these differences.
\n
The net deferred tax asset recognised by the NatWest Group is shown below, together with details of the accounting judgements and tax rates that have been used
\n
to calculate the deferred tax. Details are also provided of any deferred tax assets or liabilities that have not been recognised on the balance sheet.
d
\n
Analysis of deferred tax
\n\n \n
2023
2022
\u00a3m
\u00a3m
Deferred tax asset
(1,894)
(2,178)
Deferred tax liability
141
227
Net deferred tax asset
(1,753)
(1,951)
\n\n \n
Accelerated
capital
Expense
Financial
Tax losses
Pension
allowances
provisions
instruments (1)
carried forward
Other
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2022
24
(42)
(97)
248
(899)
(70)
(836)
Charge/(credit) to income statement:
- continuing operations
1
(43)
14
(171)
(51)
14
(236)
- discontinued operations
-
-
-
-
-
-
-
(Credit)/charge to other comprehensive income
(2)
-
1
(913)
-
(2)
(916)
Currency translation and other adjustments
-
10
-
31
(2)
(2)
37
At 1 January 2023
23
(75)
(82)
(805)
(952)
(60)
(1,951)
Charge/(credit) to income statement:
-
- continuing operations
1
(1)
21
16
(67)
(32)
(62)
- discontinued operations
-
-
-
-
-
-
-
(Credit)/charge to other comprehensive income
(8)
-
-
249
-
17
258
Currency translation and other adjustments
-
-
-
2
-
-
2
At 31 December 2023
16
(76)
(61)
(538)
(1,019)
(75)
(1,753)
\n
(1)
The in-year movement predominantly relates to cash flow hedges.
Deferred tax assets in respect of carried forward tax losses are recognised if the losses
can be used to offset probable future taxable profits after taking into account the
expected reversal of other temporary differences. Recognised deferred tax assets in
respect of tax losses are analysed further below.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
UK tax losses carried forward
\u00a0 \u00a0
- NWM Plc
-
3
- NWB Plc
362
445
- RBS plc
597
452
Total
959
900
Overseas tax losses carried forward
\u00a0 \u00a0
- UBIDAC
5
6
- NWM N.V.
55
46
\u00a0
1,019
952
\n
Critical accounting policy: Deferred tax
NatWest Group has recognised a deferred tax asset of \u00a31,894 million (2022 - \u00a32,178
million) and a deferred tax liability of \u00a3141 million (2022 - \u00a3227 million). These include
amounts recognised in respect of UK and overseas tax losses of \u00a31,019 million (2022 -
\u00a3952 million).
The main UK corporation tax increased from 19% to 25%, and the UK banking surcharge
decreased from 8% to 3%, from 1 April 2023. NatWest Group\u2019s closing deferred tax
assets and liabilities are therefore recognised based on these rates.
Judgement
\u2013
NatWest Group has considered the carrying value of deferred tax assets
and concluded that, based on management\u2019s estimates, sufficient sustainable taxable
profits will be generated in future years to recover recognised deferred tax assets.
Estimates
\u2013
These estimates are partly based on forecast performance beyond the
horizon for management\u2019s detailed plans. They have regard to inherent uncertainties.
The deferred tax assets in NWM Plc and UBIDAC are supported by future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023.
UK tax losses
Under UK tax rules, tax losses can be carried forward indefinitely. As the recognised tax
losses in NatWest Group arose prior to 1 April 2015, credit in future periods is given
against 25% of profits at the main rate of UK corporation tax, excluding the Banking
Surcharge rate introduced by The Finance (No. 2) Act 2015.
NWM Plc
\u2013
A deferred tax asset of nil (2022 - \u00a33 million) has been recognised at 31
December 2023. The basis of recognition in NWM plc is by way of future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023. Losses of \u00a35,558 million have not been recognised in the deferred tax
balance at 31 December 2023.
N
N
WB Plc
\u2013
A deferred tax asset of \u00a3362 million (2022 - \u00a3445 million) has been
recognised in respect of losses of \u00a31,448 million of total losses of \u00a32,308 million carried
forward at 31 December 2023. The losses arose principally as a result of significant
impairment and conduct charges between 2009 and 2012 during challenging economic
conditions in the UK banking sector. NWB Plc returned to tax profitability during 2015,
and based on a 5 year recovery period, expects the deferred tax asset to be utilised
against future taxable profits by the end of 2028.
RBS plc
\u2013
A deferred tax asset of \u00a3597 million (2022 - \u00a3452 million) has been recognised
in respect of losses of \u00a32,388 million of total losses of \u00a33,297 million carried forward at
31 December 2023. The losses were transferred from NatWest Markets Plc as a
consequence of the ring fencing regulations. Based on a 7 year recovery period, RBS plc
expects the deferred tax asset to be utilised against future taxable profits by the end of
2030.
Overseas tax losses
UBIDAC
\u2013
A deferred tax asset of \u00a35 million (2022 - \u00a36 million) has been recognised in
respect of losses of \u00a340 million, and is now entirely supported by way of future reversing
taxable temporary differences on which deferred tax liabilities are recognised at 31
December 2023.
NatWest Markets N.V. (NWM N.V.)
\u2013
A deferred tax asset of \u00a355 million (2022 - \u00a346
million) has been recognised in respect of losses of \u00a3213 million of total losses of \u00a32,496
million carried forward at 31 December 2023. NWM N.V. Group considers it to be
probable, based on its 5-year budget forecast, that future taxable profits will be available
against which the tax losses and tax credits can be partially utilised. The tax losses and
the tax credits have no expiry date.
Unrecognised deferred tax
Deferred tax assets of \u00a35,168 million (2022 - \u00a35,534 million; 2021 - \u00a35,437 million) have
not been recognised in respect of tax losses and other deductible temporary differences
carried forward of \u00a324,438 million (2022 - \u00a325,742 million; 2021 - \u00a324,699 million) in
jurisdictions where doubt exists over the availability of future taxable profits. Of these
losses and other deductible temporary differences, \u00a334 million expire within five years
and \u00a34,488 million thereafter. The balance of tax losses and other deductible temporary
differences carried forward has no expiry date.
Deferred tax liabilities of \u00a3256 million (2022 - \u00a3257 million; 2021 - \u00a3302 million) on
aggregate underlying temporary differences of \u00a31,005 million (2022 - \u00a31,010 million;
2021 - \u00a31,032 million) have not been recognised in respect of retained earnings of
overseas subsidiaries and held-over gains on the incorporation of certain overseas
branches. Retained earnings of overseas subsidiaries are expected to be reinvested
indefinitely or remitted to the UK free from further taxation. No taxation is expected to
arise in the foreseeable future in respect of held-over gains on which deferred tax is not
recognised. Changes to UK tax legislation largely exempts from UK tax overseas
dividends received on or after 1 July 2009.", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80986": { "value": "2.2. Fair value \u2013 financial instruments
We measure financial instruments at fair value when they are classified as mandatory
fair value through profit or loss; held-for-trading; designated fair value through profit or
loss and fair value through other comprehensive income and they are recognised in the
financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net
exposure to either market or credit risk. In these cases, the fair value is derived from the
net risk exposure of that portfolio with portfolio level adjustments applied to incorporate
bid-offer spreads, counterparty credit risk, and funding costs (refer to \u2018Valuation
Adjustments\u2019).
Where the market for a financial instrument is not active, fair value is established using a
valuation technique. These valuation techniques involve a degree of estimation, the
extent of which depends on the instrument\u2019s complexity and the availability of market-
based data. The complexity and uncertainty in the financial instrument\u2019s fair value is
categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.10 Financial instruments - classification
Financial instruments are contracts that give rise to a financial asset of one entity and a corresponding financial liability or equity instrument of a counterparty entity,
such as cash, derivatives, loans, deposits and settlement balances. This note presents financial instruments classified in accordance with IFRS 9 \u2013 Financial
Instruments.
Judgement: classification of financial assets
Classification of financial assets between amortised cost and
fair value through other comprehensive income requires a
degree of judgement in respect of business models and
contractual cashflows.
\ue001
The business model criteria is assessed at a portfolio level
to determine whether assets are classified as held to
collect or held to collect and sell. Information that is
considered in determining the applicable business model
includes: the portfolio\u2019s policies and objectives; how the
performance and risks of the portfolio are managed,
evaluated and reported to management; and the
frequency, volume and timing of sales in prior periods,
sales expectation for future periods, and the reasons for
sales.
\ue001
The contractual cash flow characteristics of financial
assets are assessed with reference to whether the cash
flows represent solely payments of principal and interest
(SPPI). A level of judgement is made in assessing terms
that could change the contractual cash flows so that it
would not meet the condition for SPPI, including contingent
and leverage features,
non-recourse arrangements and
features that could modify the time value of money.
For accounting policy information refer to Accounting policies
3.8, 3.9 and 3.11.
The following tables analyse financial assets and liabilities in accordance with the categories of financial instruments
in IFRS 9.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0\u00a0\u00a0\u00a0
Amortised
Other
\u00a0
\u00a0
MFVTPL
DFV
FVOCI
cost
assets
Total
Assets
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
\u00a0\u00a0\u00a0
104,262
\u00a0
104,262
Trading assets
45,551
\u00a0\u00a0\u00a0\u00a0
45,551
Derivatives
(1)
78,904
\u00a0\u00a0\u00a0\u00a0
78,904
Settlement balances
\u00a0\u00a0\u00a0
7,231
\u00a0
7,231
Loans to bank - amortised cost
(2)
\u00a0\u00a0\u00a0
6,914
\u00a0
6,914
Loans to customers - amortised cost (
3
)
\u00a0\u00a0\u00a0
381,433
\u00a0
381,433
Other financial assets
703
5
28,699
21,695
\u00a0
51,102
Intangible assets
\u00a0\u00a0\u00a0\u00a0
7,614
7,614
Other assets
\u00a0\u00a0\u00a0\u00a0
8,760
8,760
Assets of disposal groups
(4)
\u00a0\u00a0\u00a0\u00a0
902
902
31 December 2023
125,158
5
28,699
521,535
17,276
692,673
Cash and balances at central banks
\u00a0\u00a0\u00a0
144,832
\u00a0
144,832
Trading assets
45,577
\u00a0\u00a0\u00a0\u00a0
45,577
Derivatives
(1)
99,545
\u00a0\u00a0\u00a0\u00a0
99,545
Settlement balances
\u00a0\u00a0\u00a0
2,572
\u00a0
2,572
Loans to bank - amortised cost
(2)
\u00a0\u00a0\u00a0
7,139
\u00a0
7,139
Loans to customers - amortised cost (
3
)
\u00a0\u00a0\u00a0
366,340
\u00a0
366,340
Other financial assets
787
-
16,973
13,135
\u00a0
30,895
Intangible assets
\u00a0\u00a0\u00a0\u00a0
7,116
7,116
Other assets
\u00a0\u00a0\u00a0\u00a0
9,176
9,176
Assets of disposal groups
(4)
\u00a0\u00a0\u00a0\u00a0
6,861
6,861
31 December 2022
145,909
-
16,973
534,018
23,153
720,053
\n
\n
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0
Amortised
Other
\u00a0
\u00a0
Held-for-trading
DFV
cost
liabilities
Total
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bank deposits
(5)
\u00a0 \u00a0
22,190
\u00a0
22,190
Customer deposits
\u00a0 \u00a0
431,377
\u00a0
431,377
Settlement balances
\u00a0 \u00a0
6,645
\u00a0
6,645
Trading liabilities
53,636
\u00a0 \u00a0 \u00a0
53,636
Derivatives
(1)
72,395
\u00a0 \u00a0 \u00a0
72,395
Other financial liabilities
(6)
\u00a0
2,888
52,201
\u00a0
55,089
Subordinated liabilities
\u00a0
237
5,477
\u00a0
5,714
Notes in circulation
\u00a0 \u00a0
3,237
\u00a0
3,237
Other liabilities
(7)
\u00a0 \u00a0
748
4,454
5,202
31 December 2023
126,031
3,125
521,875
4,454
655,485
Bank deposits
(5)
\u00a0 \u00a0
20,441
\u00a0
20,441
Customer deposits
\u00a0 \u00a0
450,318
\u00a0
450,318
Settlement balances
\u00a0 \u00a0
2,012
\u00a0
2,012
Trading liabilities
52,808
\u00a0 \u00a0 \u00a0
52,808
Derivatives
(1)
94,047
\u00a0 \u00a0 \u00a0
94,047
Other financial liabilities
(6)
\u00a0
2,377
46,730
\u00a0
49,107
Subordinated liabilities
\u00a0
345
5,915
\u00a0
6,260
Notes in circulation
\u00a0 \u00a0
3,218
\u00a0
3,218
Other liabilities
(7)
\u00a0 \u00a0
1,205
4,141
5,346
31 December 2022
146,855
2,722
529,839
4,141
683,557
\n
(1)
Includes net hedging derivatives assets of \u00a3114 million (2022 - \u00a3143 million) and net
hedging derivatives liabilities of \u00a3270 million (2022 - \u00a3132 million).
(2)
Includes items in the course of collection from other banks of \u00a3255 million (2022 -
\u00a3229 million).
(3)
Includes finance lease receivables of \u00a38,731 million (2022 - \u00a38,402 million).
(4)
Includes assets of disposal groups held at FVTPL of \u00a3841 million (2022 - \u00a35,397
million). The portfolio is classified as level 3 in the fair value hierarchy.
(5)
Includes items in the course of transmission to other banks of \u00a392 million (2022 -
\u00a3242 million).
(6)
The carrying amount of customer deposits designated at fair value through profit
or loss is the same as the principal amount for both periods. No amounts have
been recognised in the profit or loss for changes in credit risk associated with these
liabilities as the changes are immaterial both during the period and cumulatively.
(7)
Includes lease liabilities of \u00a3670 million (2022 - \u00a31,118 million), held at amortised
cost.
Reclassification of mortgages from amortised cost to fair value through profit or loss
In June 2022 UBIDAC announced the cessation of new mortgage business to its customers. On 1 July 2022 UBIDAC mortgages in both its continuing and discontinued businesses were
reclassified from amortised cost to fair value through profit or loss, reflecting the change in business model. We fair value these assets using a discounted cash flow method. Key inputs
include assumptions about cash flows from legally binding sales agreements for those mortgage assets that form part of the assets of disposal groups. For details on material
developments in assets and liabilities of disposals groups during the year, refer to Note 8.
The effect of the reclassification as at 1 July 2022 is shown below.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Amortised cost
MFVTPL
Change in value
\u00a0
\u00a3m
\u00a3m
\u00a3m
Amounts reclassified on balance sheet
\u00a0 \u00a0 \u00a0
Loans to customers
(1)
587
606
19
Assets of disposal groups
(2)
10,676
10,383
(293)
\u00a0
11,263
10,989
(274)
\n
(1)
Change in value recognised in continuing operations.
(2)
Change in value recognised in discontinued operations.
We originate loans that include features that change the contractual cash flows based on the borrower meeting certain contractually specified environmental, social and governance
(ESG) targets. These are known as ESG-linked (or sustainability-linked) loans. As part of the terms of these loans, the contractual interest rate is reduced or increased if the borrower
meets (or fails to meet) specific targets linked to the activity of the borrower, for example reducing carbon emissions, increasing the level of diversity at Board level, or achieving a
sustainable supply chain. ESG features are first assessed to ascertain whether the adjustment to the contractual cash flows results in a de minimis exposure to risks or volatility in
those contractual cash flows. If this is the case the classification of the loan is not affected. If the effect of the ESG feature is assessed as being more than de minimis, we apply
judgement to ensure that the ESG features do not generate compensation for risks that are not in line with a basic lending arrangement. This includes, amongst other aspects, a
review of the consistency of the ESG targets with the asset or activity of the borrower, and consideration of the targets within our risk appetite. Some of these loans are an integral
part of our climate and sustainable funding and financing target disclosed on page 16.
The table below analyses financial assets forming a component of ESG-linked loans and other products with contractual terms that could change the timing or amount of cash flows.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0 \u00a0
Positive impact on
Negative impact on
Reduction in
\u00a0
\u00a0
Carrying value
product margin
product margin
cash flows
Carrying value
\u00a0
\u00a3bn
bps
bps
\u00a3m
\u00a3bn
Sustainability-linked loans
6.5
3.2
3.9
2.5
5.0
Other products
16.1
-
-
-
8.9
Lending subject to performance triggers
22.6
\u00a0 \u00a0
2.5
13.9
\n
Additional information on finance lease receivables
The following table shows the reconciliation of undiscounted finance lease receivables to net investment in finance leases which are presented under Loans to customers-amortised
cost on the balance sheet.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Amount receivable under finance leases
\u00a0 \u00a0
Within 1 year
3,340
3,235
1 to 2 years
2,358
2,254
2 to 3 years
1,625
1,388
3 to 4 years
900
833
4 to 5 years
388
411
After 5 years
1,079
1,130
Total lease payments
9,690
9,251
Unguaranteed residual values
169
171
Future drawdowns
(12)
(13)
Unearned income
(1,025)
(889)
Present value of lease payments
8,822
8,520
Impairments
(91)
(118)
Net investment in finance leases
8,731
8,402
\n
Financial instruments \u2013 financial assets and liabilities that can be offset
The tables below present information on financial assets and financial liabilities that are offset on the balance sheet under IFRS or subject to enforceable master netting agreements
together with financial collateral received or given.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Instruments which can be offset
Potential for offset not recognised by IFRS
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0 \u00a0
Effect of master
\u00a0 \u00a0
Net amount after
Instruments
\u00a0
\u00a0 \u00a0 \u00a0 \u00a0
netting and similar
Cash
Securities
netting agreements and
outside netting
Balance sheet
\u00a0
Gross
IFRS offset
Balance sheet
agreements
collateral
collateral
effect of related collateral
agreements
total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets
99,023
(20,597)
78,426
(60,355)
(12,284)
(3,408)
2,379
478
78,904
Derivative liabilities
95,734
(23,869)
71,865
(60,355)
(6,788)
(1,663)
3,059
530
72,395
Net position
(1)
3,289
3,272
6,561
-
(5,496)
(1,745)
(680)
(52)
6,509
Trading reverse repos
39,573
(16,257)
23,316
(664)
-
(22,461)
191
378
23,694
Trading repos
42,442
(16,257)
26,185
(664)
-
(25,520)
1
717
26,902
Net position
(2,869)
-
(2,869)
-
-
3,059
190
(339)
(3,208)
Non trading reverse repos
37,477
(9,646)
27,831
(5)
-
(27,826)
-
80
27,911
Non trading repos
23,605
(9,646)
13,959
(5)
-
(13,954)
-
3
13,962
Net position
13,872
-
13,872
-
-
(13,872)
-
77
13,949
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Derivative assets
117,606
(18,730)
98,876
(77,365)
(14,079)
(4,571)
2,861
669
99,545
Derivative liabilities
115,177
(22,111)
93,066
(77,365)
(9,761)
(1,185)
4,755
981
94,047
Net position
(1)
2,429
3,381
5,810
-
(4,318)
(3,386)
(1,894)
(312)
5,498
Trading reverse repos
35,612
(14,510)
21,102
(2,445)
-
(18,458)
199
435
21,537
Trading repos
33,767
(14,510)
19,257
(2,445)
-
(16,812)
-
4,483
23,740
Net position
1,845
-
1,845
-
-
(1,646)
199
(4,048)
(2,203)
Non trading reverse repos
25,630
(5,702)
19,928
-
-
(19,928)
-
98
20,026
Non trading repos
16,977
(5,702)
11,275
-
-
(11,275)
-
-
11,275
Net position
8,653
-
8,653
-
-
(8,653)
-
98
8,751
\n
(1)
Net IFRS offset balance of \u00a33,272 million (2022 - \u00a33,381 million) relates to variation margin netting reflected on other balance sheet lines.
11 Financial instruments - valuation
Financial instruments recognised at fair value are revalued using techniques that can include observable inputs (pricing information that is readily available in the
market, for example UK Government securities), and unobservable inputs (pricing information that is not readily available, for example unlisted securities). Gains and
losses are recognised in the income statement and statement of comprehensive income as appropriate.
This note presents information on the valuation of financial
instruments.
The table below provides an overview of the various sections contained within the note.
Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.
Valuation
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Page
Financial instruments
\u00a0
Critical accounting policy: Fair value
341
Valuation
\u00a0
Fair value hierarchy
(D)
342
Valuation techniques
(D)
342
Inputs to valuation models
(D)
342
Valuation control
(D)
343
Key areas of judgement
(D)
343
Assets and liabilities split by fair value hierarchy level
(T)
344
Valuation adjustments
\u00a0
Fair value adjustments made
(T)
345
Funding valuation adjustments (FVA)
(D)
345
Credit valuation adjustments (CVA)
(D)
345
Bid-offer
(D)
345
Product and deal specific
(D)
345
Own credit
(D)
345
Level 3 additional information
\u00a0
Level 3 ranges of unobservable inputs
(D)
346
Level 3 instruments, valuation techniques and inputs
(T)
346
Level 3 sensitivities
(D)
347
Alternative assumptions
(D)
347
Other considerations
(D)
347
High and low range of fair value of level 3 assets and liabilities
(T)
347
Movement in level 3 assets and liabilities over the reporting period
(D)
348
Movement in level 3 assets and liabilities
(T)
348
Fair value of financial instruments measured at amortised cost
\u00a0
Fair value of financial instruments measured at amortised cost on the balance sheet
\u00a0
balance sheet
349
(D) = Descriptive; (T) = Table
\u00a0
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Fair value hierarchy
\n
Financial instruments carried at fair value have been classified under the fair value
\n
hierarchy. The classification ranges from level 1 to level 3, with more expert judgement
\n
and price uncertainty for those classified at level 3.
\n
The determination of an instrument\u2019s level cannot be made at a global product level as a
\n
single product type can be in more than one level. For example, a single name corporate
\n
credit default swap could be in level 2 or level 3 depending on the level of market activity
\n
for the referenced entity.
\n
Level 1
\u2013 instruments valued using unadjusted quoted prices in active and liquid markets,
\n
for identical financial instruments. Examples include government bonds, listed equity
\n
shares and certain exchange-traded derivatives.
\n
L
L
evel 2
- instruments valued using valuation techniques that have observable inputs.
\n
Observable inputs are those that are readily available with limited adjustments required.
\n
Examples include most government agency securities, investment-grade corporate
\n
bonds, certain mortgage products - including collateralised loan obligations (CLOs), most
\n
bank loans, repos and reverse repos, state and municipal obligations, most notes issued,
\n
certain money market securities, loan commitments and most over the counter (OTC)
\n
derivatives.
\n
L
L
evel 3
- instruments valued using a valuation technique where at least one input which
\n
could have a significant effect on the instrument\u2019s valuation, is not based on observable
\n
market data. Examples include non-derivative instrument\u2019s which trade infrequently,
\n
certain syndicated and commercial mortgage loans, private equity, and derivatives with
\n
unobservable model inputs.
\n
Valuation techniques
\n
NatWest Group derives the fair value of its instruments differently depending on whether
\n
the instrument is a non-modelled or a modelled product.
\n
Non-modelled products
are valued directly from a price input, typically on a position-by-
\n
position basis. Examples include equities and most debt securities.
\n
Non-modelled products can fall into any fair value levelling hierarchy depending on the
\n
observable market activity, liquidity, and assessment of valuation uncertainty of the
\n
instruments. The assessment of fair value and the classification of the instrument to a fair
\n
value level is subject to the valuation controls discussed in the Valuation control section.
\n
Modelled products
valued using a pricing model range in complexity from comparatively
\n
vanilla products such as interest rate swaps and options (e.g., interest rate caps and
\n
floors) through to more complex derivatives (e.g., balance guarantee swaps).
\n
For modelled products the fair value is derived using the model and the appropriate
\n
model inputs or parameters, as opposed to a cash price equivalent. Model inputs are
\n
taken either directly or indirectly from available data, where some inputs are also
\n
modelled.
\n
Fair value classification of modelled instruments is either level 2 or level 3, depending on
\n
the product/model combination, the observability and quality of input parameters and
\n
other factors. All these must be assessed to classify a position. The modelled product is
\n
assigned to the lowest fair value hierarchy level of any significant input used in that
\n
valuation.
\n
Most derivative instruments, for example vanilla interest rate swaps, foreign exchange
\n
swaps and liquid single name credit derivatives, are classified as level 2. This is because
\n
they are vanilla products valued using standard market models and with observable
\n
inputs. Level 2 products range from vanilla to more complex products, where more
\n
complex products remain classified as level 2 due to the low materiality of any
\n
unobservable inputs.
\n
Inputs to valuation models
\n
When using valuation techniques, the fair value can be significantly affected by the
\n
choice of
valuation model
and underlying assumptions. Factors considered include the
\n
cashflow amounts and timing of those cash flows, and application of appropriate discount
\n
rates, incorporating both funding and credit risk. Values between and beyond available
\n
data points are obtained by interpolation and extrapolation. The principal inputs to these
\n
valuation techniques are as follows:
\n
Bond prices
- quoted prices are generally available for government bonds, certain
\n
corporate securities, and some mortgage-related products.
\n
Credit spreads/margins
- these reflect credit default swap levels or the return required
\n
over a benchmark rate or index to compensate for the referenced credit risk. Where
\n
available, these are derived from the price of credit default swaps or other credit-based
\n
instruments, such as debt securities. When direct prices are not available; credit
\n
spreads/margins are determined with reference to available prices of entities with similar
\n
characteristics.
\n
Interest rates
- these are principally based on interest rate swap prices referencing
\n
benchmark interest rates. Interest rates, include SONIA (Sterling Overnight Interbank
\n
Average Rate) and other overnight rates. Other quoted interest rates may also be used
\n
from both the bond, and futures markets.
\n
F
F
oreign currency exchange rates
- there are observable prices both for spot and
\n
forward contracts and futures in the world's major currencies.
\n
E
E
quity and equity index prices
- quoted prices are generally readily available for equity
\n
shares listed on the world's major stock exchanges and for major indices on such shares.
Price volatilities and correlations
- volatility is a measure of the tendency of a price to
change with time. Correlation measures the degree which two or more prices or
variables are observed to move together. Variables that move in the same direction
show positive correlation; those that move in opposite directions are negatively
correlated.
P
P
repayment rates
- are used to reflect how fast a pool of assets prepay. The fair value of
a financial instrument that can be prepaid by the issuer or borrower differs from that of
an instrument that cannot be prepaid. When valuing prepayable instruments, the value of
this prepayment option is considered.
R
R
ecovery rates/loss given default
- are used as an input to valuation models and
reserves for asset-backed securities and other credit products as an indicator of severity
of losses on default. Recovery rates are primarily sourced from market data providers,
the value of the underlying collateral or inferred from observable credit spreads.
Valuation control
NatWest Group's control environment for the determination of the fair value of financial
instruments includes formalised procedures for the review and validation of fair values.
The review of market prices and inputs is performed by an independent price verification
(IPV) team
IPV is a key element of the control environment. Valuations are first performed by the
business which entered into the transaction. These valuations are then reviewed by the
IPV team, independent of those trading the financial instruments, in light of available
pricing evidence.
Independent pricing data is collated from a range of sources. Each source is reviewed for
quality and the independent data applied in the IPV processes using a formalised input
quality hierarchy. Consensus services are one source of independent data and
encompass interest rate, currency, credit, and bond markets, providing comprehensive
coverage of vanilla products and a wide selection of exotic products.
Where measurement differences are identified through the IPV process these are
grouped by the quality hierarchy of the independent data. If the size of the difference
exceeds defined thresholds, an adjustment is made to bring the valuation to within the
independently calculated fair value range.
IPV takes place at least monthly, for all fair value financial instruments. The IPV control
includes formalised reporting and escalation of any valuation differences in breach of
established thresholds.
The quality and completeness of the information gathered in the IPV process gives an
indication as to the liquidity and valuation uncertainty of an instrument and forms part of
the information considered when determining fair value hierarchy classifications.
Initial fair value level classification of a financial instrument is carried out by the IPV team.
These initial classifications are subject to senior management review. Particular attention
is paid to instruments transferring from one level to another, new instrument classes or
products, instruments where the transaction price is significantly different from the fair
value and instruments where valuation uncertainty is high.
Valuation Committees are made up of valuation specialists and senior business
representatives from various functions and oversees pricing, reserving and valuations
issues. These committees meet monthly to review and ratify any methodology changes.
The Executive Valuation Committee meets quarterly to address key material and
subjective valuation issues, to review items escalated by Valuation Committees and to
discuss other relevant industry matters.
The Group model risk policy sets the policy for model documentation, testing and review.
Governance of the model risk policy is carried out by the Group model risk oversight
committee, which comprises model risk owners and independent model experts. All
models are required to be independently validated in accordance with the Model Risk
Policy.
Key areas of judgement
Over the years the business has simplified, with most products classified as level 1 or 2 of
the fair value hierarchy. However, the diverse range of products historically traded by
NatWest Group means some products remain classified as level 3. Level 3 indicates a
significant level of pricing uncertainty, where expert judgement is used. As such, extra
disclosures are required in respect of level 3 instruments.
In general, the degree of expert judgement used and hence valuation uncertainty
depends on the degree of liquidity of an instrument or input.
Where markets are liquid, little judgement is required. However, when the information
regarding the liquidity in a particular market is not clear, a judgement may need to be
made. For example, for an equity traded on an exchange, daily volumes of trading can
be seen, but for an OTC derivative, assessing the liquidity of the market with no central
exchange is more challenging.
A key related matter is where a market moves from liquid to illiquid or vice versa. Where
this movement is considered temporary, the fair value level is not changed. For example,
if there is little market trading in a product on a reporting date but at the previous
reporting date and during the intervening period the market has been liquid. In this case,
the instrument will continue to be classified at the same level in the hierarchy. This is to
provide consistency so that transfers between levels are driven by genuine changes in
market liquidity and do not reflect short term or seasonal effects. Material movements
between levels are reviewed quarterly by the business and IPV.
The breadth and depth of the IPV data allows for a rules-based quality assessment to be
made of market activity, liquidity, and pricing uncertainty, which assists with the process
of allocation to an appropriate level. Where suitable independent pricing information is
not readily available, the quality assessment will result in the instrument being assessed
as level 3.
The table below shows the assets and liabilities held by NatWest Group split by fair value hierarchy level. Level 1 are considered the most liquid instruments, and level 3 the most
illiquid, valued using expert judgement and so carry the most significant price uncertainty.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Loans
-
33,388
209
33,597
-
35,260
395
35,655
Securities
8,447
3,493
14
11,954
7,463
2,458
1
9,922
Derivatives
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
1
43,912
650
44,563
5
52,764
711
53,480
Foreign exchange
-
34,096
65
34,161
-
45,715
114
45,829
Other
-
72
108
180
-
54
182
236
Other financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Loans
-
108
657
765
-
172
727
899
Securities
17,848
10,536
258
28,642
10,380
6,278
203
16,861
Total financial assets held at fair value
26,296
125,605
1,961
153,862
17,848
142,701
2,333
162,882
As a % of total fair value assets
17%
82%
1%
\u00a0
11%
88%
1%
\u00a0
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Deposits
-
43,126
1
43,127
-
42,486
1
42,487
Debt securities in issue
-
706
-
706
-
797
-
797
Short positions
7,936
1,865
2
9,803
7,462
2,062
-
9,524
Derivatives
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
-
38,044
439
38,483
2
47,855
678
48,535
Foreign exchange
-
33,528
58
33,586
-
45,139
98
45,237
Other
-
138
188
326
-
76
199
275
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Debt securities in issue
-
1,605
3
1,608
-
1,327
-
1,327
Other deposits
-
1,280
-
1,280
-
1,050
-
1,050
Subordinated liabilities
-
237
-
237
-
345
-
345
Total financial liabilities held at fair value
7,936
120,529
691
129,156
7,464
141,137
976
149,577
As a % of total fair value liabilities
6%
93%
1%
\u00a0
5%
94%
1%
\u00a0
\n
(1)
Transfers between levels are deemed to have occurred at the beginning of the quarter in which the instrument was transferred.
(2)
For an analysis of debt securities held at mandatory fair value through profit or loss by issuer as well as ratings and derivatives, by type and contract, refer to Risk and capital management \u2013 Credit risk.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Valuation adjustments
\n
When valuing financial instruments in the trading book, adjustments are made to mid-
\n
market valuations to cover bid-offer spread, funding and credit risk. These adjustments
\n
are presented in the table below:
\n\n \n
2023
2022
Adjustment
\u00a3m
\u00a3m
Funding valuation adjustments
132
173
Credit valuation adjustments
236
300
Bid-offer
86
130
Product and deal specific
103
141
Total
557
744
\n
Funding valuation adjustments decreased during the year, primarily driven by changes in
\n
GBP interest rates and funding spreads tightening.
\n
The decrease in credit value adjustments was driven by credit spreads tightening and a
\n
reduction in exposures, primarily due to portfolio ageing, partially offset by new trade
\n
activity. Interest rates tightening, trade restructuring and trade specific valuation
\n
adjustments were the drivers of the decrease in product and deal specific. The decrease
\n
in bid-offer was driven by risk reduction.
\n
Funding valuation adjustments (FVA)
\n
FVA represents an estimate of the adjustment that a market participant would make to
\n
incorporate funding costs and benefits that arise in relation to derivative exposures. FVA
\n
is calculated as a portfolio level adjustment and can result in either a funding charge
\n
(positive) or funding benefit (negative).
\n
Funding levels are applied to estimated potential future exposures. For uncollateralised
\n
derivatives, the exposure reflects the future valuation of the derivative. For collateralised
\n
derivatives, the exposure reflects the difference between the future valuation of the
\n
derivative and the level of collateral posted.
\n
Credit valuation adjustments (CVA)
\n
CVA represents an estimate of the adjustment to fair value that is made to incorporate
\n
the counterparty credit risk inherent in derivative exposures. CVA is calculated on a
\n
portfolio basis reflecting an estimate of the amount a third party would charge to assume
\n
the credit risk.
\n
Collateral held under a credit support agreement is factored into the CVA calculation. In
\n
such cases where NatWest Group holds collateral against counterparty exposures, CVA
\n
is held to the extent that residual risk remains.
\n
FVA and CVA are actively managed by a credit and market risk hedging process, and
\n
therefore movements in CVA and FVA are partially offset by trading revenue on the
\n
hedges.
\n
Bid-offer
\n
Fair value positions are required to be marked to exit levels, represented by bid (long
\n
positions) or offer (short positions) levels. Non-derivative positions are typically marked
\n
directly to bid or offer prices. However derivative exposures are adjusted to exit levels by
\n
taking bid-offer reserves calculated on a portfolio basis. The reserving approach is based
\n
on current market bid-offer spreads and standard market bucketing of risk.
\n
Bid-offer spreads vary by maturity and risk type to reflect different spreads in the
\n
market. For positions where there is no observable quote, the bid-offer spreads are
\n
widened in comparison to proxies to reflect reduced liquidity or observability.
\n
Netting is applied on a portfolio basis to reflect the value at which NatWest Group
\n
believes it could exit the net risk of the portfolio, rather than the sum of exit costs for
\n
each of the portfolio\u2019s individual trades. This is applied where the asset and liability
\n
positions are managed as a portfolio for risk and reporting purposes.
\n
Product and deal specific
\n
On initial recognition of financial assets and liabilities valued using valuation techniques
\n
which have a significant dependence on information other than observable market data,
\n
any difference between the transaction price and that derived from the valuation
\n
technique is deferred. Such amounts are recognised in the income statement over the
\n
life of the transaction, when market data becomes observable, or when the transaction
\n
matures or is closed out as appropriate. On 31 December 2023, net gains of \u00a378 million
\n
(2022 - \u00a374 million) were carried forward. During the year, net gains of \u00a3119 million
\n
(2022 - \u00a397 million) were deferred and \u00a3115 million (2022 - \u00a394 million) were recognised
\n
in the income statement.
\n
Where system-generated valuations do not accurately reflect market prices, manual
\n
valuation adjustments are applied either at a position or portfolio level. Manual
\n
adjustments are subject to the scrutiny of independent control teams and are subject to
\n
monthly review by senior management.
\n
Own credit
\n
NatWest Group considers the effect of its own credit standing when valuing financial
\n
liabilities recorded at fair value. Own credit spread adjustments are made when valuing
\n
issued debt held at fair value, including issued structured notes. An own credit
\n
adjustment is applied to positions where it is believed that counterparties would consider
\n
NatWest Group\u2019s creditworthiness when pricing trades.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Level 3 additional information
\n
For illiquid assets and liabilities, classified as level 3, additional information is provided on the valuation techniques used and price sensitivity of the products to those inputs. This is to
\n
enable the reader to gauge the level of uncertainty that arises from positions with significant unobservable inputs or modelling parameters.
\n
Level 3 ranges of unobservable inputs
\n
The table below provides additional information on level 3 instruments and inputs. This shows the valuation technique used for the fair value calculation, the unobservable input and
\n
input range.
\n \n \n
2023
20
22
Financial instrument
Valuation technique
Unobservable inputs
Units
Low
High
Low
High
Trading assets and Other financial assets
Loans
Price-based
Price
%
-
123
-
113
Discount cash flow
Credit spreads
bps
49
119
56
114
Discount cash flow
Discount margin
bps
174
228
174
222
Debt securities
Price-based
Price
%
-
119
-
255
Equity Shares
Price-based
Price
GBP
-
32,142
-
34,027
Price-based
Price
%
-
30
-
30
Discount cash flow
Discount margin
%
7
9
6
8
Net asset valuation
Fund NAV
%
80
120
80
120
Derivative assets and liabilities
Credit derivatives
Credit derivative pricing
Credit spreads
bps
13
600
7
530
Option pricing
Correlation
%
(15)
95
(15)
95
Volatility
%
30
80
30
80
Upfront points
%
-
99
-
99
Recovery rate
%
-
60
-
60
Interest rate & FX
Option pricing
Correlation
%
(50)
99
(50)
100
derivatives
Volatility
%
30
111
30
127
Constant Prepayment Rate
%
2
22
2
21
Mean Reversion
%
-
20
-
92
Inflation volatility
%
2
2
1
2
Inflation rate
%
2
3
2
3
\n
(1)
Valuation for private equity investments may be estimated by looking at past prices of similar stocks and from valuation statements where valuations are usually derived from earnings measures such as EBITDA or net asset value (NAV). Similarly, for
\n
equity or bond fund investments, prices may be estimated from valuation or credit statements using NAV or similar measures.
\n
(2)
NatWest Group does not have any material liabilities measured at fair value that are issued with an inseparable third-party credit enhancement.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Level 3 sensitivities
\n
The level 3 sensitivities presented below are calculated at a trade or low-level portfolio
\n
basis rather than an overall portfolio basis. As individual sensitivities are aggregated with
\n
no reflection of the correlated nature between instruments, the overall portfolio
\n
sensitivity may not be accurately reflected. For example, some portfolios may be
\n
negatively correlated to others, where a downwards movement in one asset would
\n
produce an upwards movement in another. However, due to the additive presentation of
\n
the above figures this correlation impact cannot be displayed. As such, the actual
\n
potential downside sensitivity of the total portfolio may be less than the non-correlated
\n
sum of the additive figures as shown in the below table.
\n
Alternative assumptions
\n
Reasonably plausible alternative assumptions of unobservable inputs are determined
\n
based on a specified target level of certainty of 90%.
\n
Alternative assumptions are determined with reference to all available evidence including
\n
consideration of the following: quality of independent pricing information considering
\n
consistency between different sources, variation over time, perceived tradability or
\n
otherwise of available quotes; consensus service dispersion ranges; volume of trading
\n
activity and market bias (e.g. one-way inventory); day 1 profit or loss arising on new
\n
trades; number and nature of market participants; market conditions; modelling
\n
consistency in the market; size and nature of risk; length of holding of position; and
\n
market intelligence.
\n
Other considerations
\n
Whilst certain inputs used to calculate CVA, FVA and own credit adjustments are not
\n
based on observable market data, the uncertainty of these inputs is not considered to
\n
have a significant effect on the net valuation of the related derivative portfolios and
\n
issued debt.
\n
As such, the fair value levelling of the derivative portfolios and issued debt is not
\n
determined by CVA, FVA or own credit inputs. In addition, any fair value sensitivity
\n
driven by these inputs is not included in the level 3 sensitivities presented.
\n
The table below shows the high and low range of fair value of the level 3 assets and liabilities. This range incorporates the range of fair value inputs as described in the previous table.
\n\n \n
2023
2022
Level 3
Favourable
Unfavourable
Level 3
Favourable
Unfavourable
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Trading assets
Loans
209
-
-
395
10
(10)
Securities
14
-
-
1
-
-
Derivatives
Interest rate
650
20
(20)
711
30
(30)
Foreign exchange
65
-
-
114
10
(10)
Other
108
10
(10)
182
10
(10)
Other financial assets
Loans
657
-
(40)
727
-
(10)
Securities
258
20
(50)
203
20
(30)
Total financial assets held at fair value
1,961
50
(120)
2,333
80
(100)
Liabilities
Trading liabilities
Deposits
1
-
-
1
-
-
Short positions
2
-
-
-
-
-
Derivatives
Interest rate
439
10
(10)
678
30
(30)
Foreign exchange
58
-
-
98
-
-
Other
188
10
(10)
199
-
-
Other financial liabilities - debt securities in issue
3
-
-
-
-
-
Total financial liabilities held at fair value
691
20
(20)
976
30
(30)
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Movement in level 3 assets and liabilities
\n
The following table shows the movement in level 3 assets and liabilities in the year.
\n\n \n
Other
Other
Other
Other
Derivatives
trading
financial
Total
Derivatives
trading
financial
Total
assets
assets (2)
assets (3)
assets
liabilities
liabilities (2)
liabilities
liabilities
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
1,007
396
930
2,333
975
1
-
976
Amounts recorded in the income statement
(1)
(156)
(88)
1
(243)
(313)
-
-
(313)
Amount recorded in the statement of
comprehensive income
-
-
32
32
-
-
-
-
Level 3 transfers in
6
15
16
37
7
2
-
9
Level 3 transfers out
(5)
(32)
(190)
(227)
(9)
(2)
-
(11)
Purchases/originations
180
8
275
463
195
2
3
200
Settlements/other decreases
(70)
(8)
(86)
(164)
(51)
-
-
(51)
Sales
(137)
(65)
(52)
(254)
(116)
-
-
(116)
Foreign exchange and other adjustments
(2)
(3)
(11)
(16)
(3)
-
-
(3)
At 31 December
823
223
915
1,961
685
3
3
691
Amounts recorded in the income statement
in respect of balances held at period end
- unrealised
67
(39)
1
29
(121)
-
-
(121)
2022
At 1 January
918
740
394
2,052
606
3
-
609
Amounts recorded in the income statement
(1)
126
31
(14)
143
382
(1)
-
381
Amount recorded in the statement of
comprehensive income
-
-
(20)
(20)
-
-
-
-
Level 3 transfers in
193
1
532
726
78
3
-
81
Level 3 transfers out
(122)
(147)
(68)
(337)
(61)
(3)
-
(64)
Purchases/originations
355
274
185
814
382
-
-
382
Settlements/other decreases
(40)
(75)
-
(115)
(41)
-
-
(41)
Sales
(423)
(434)
(101)
(958)
(376)
(2)
-
(378)
Foreign exchange and other adjustments
-
6
22
28
5
1
-
6
At 31 December
1,007
396
930
2,333
975
1
-
976
Amounts recorded in the income statement
in respect of balances held at period end
- unrealised
126
31
(16)
141
382
(1)
-
381
\n
(1)
There were \u00a369 million net gains on trading assets and liabilities (2022 \u2013 \u00a3224 million net losses) recorded in income from trading activities. Net gains on other instruments of \u00a31 million (2022 \u2013 \u00a314 million net losses) were recorded in other operating
\n
income and interest income as appropriate.
\n
(2)
Other trading assets and other trading liabilities comprise assets and liabilities held at fair value in trading portfolios.
\n
(3)
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.
Fair value of financial instruments measured at amortised cost on the balance sheet
The following table shows the carrying value and fair value of financial instruments measured at amortised cost on the balance sheet.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Items where
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
fair value
\u00a0
Carrying
\u00a0
Fair value hierarchy level
approximates
\u00a0
value
Fair value
Level 1
Level 2
Level 3
carrying value
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104.3
104.3
-
-
-
104.3
Settlement balances
7.2
7.2
-
-
-
7.2
Loans to banks
6.9
7.0
-
2.2
0.6
4.2
Loans to customers
381.4
373.2
-
27.5
345.7
-
Other financial assets - securities
21.7
21.6
4.0
6.6
11.0
-
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
144.8
144.8
-
-
-
144.8
Settlement balances
2.6
2.6
-
-
-
2.6
Loans to banks
7.1
7.1
-
4.2
2.8
0.1
Loans to customers
366.3
354.5
-
20.3
334.2
-
Other financial assets - securities
13.1
12.8
3.6
3.2
6.0
-
2023
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
22.2
22.3
-
15.4
2.7
4.2
Customer deposits
431.4
431.0
-
30.7
48.8
351.5
Settlement balances
6.6
6.6
-
-
-
6.6
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
- debt securities in issue
52.2
52.2
-
41.7
10.5
-
Subordinated liabilities
5.5
5.4
-
5.4
-
-
Notes in circulation
3.2
3.2
-
-
-
3.2
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
20.4
20.0
-
13.1
2.2
4.7
Customer deposits
450.3
450.3
-
12.7
30.6
407.0
Settlement balances
2.0
2.0
-
-
-
2.0
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
- debt securities in issue
46.7
46.1
-
40.7
5.4
-
Subordinated liabilities
5.9
5.6
-
5.5
0.1
-
Notes in circulation
3.2
3.2
-
-
-
3.2
\n
The assumptions and methodologies underlying the
calculation of fair values of financial instruments at the
balance sheet date are as follows:
Short-term financial instruments
For certain short-term financial instruments, including but
not limited to, cash and balances at central banks,
settlement balances, loans with short-term maturities, notes
in circulation and customer demand deposits, carrying
value is deemed a reasonable approximation of fair value.
Loans to banks and customers
In estimating the fair value of net loans to customers and
banks measured at amortised cost, NatWest Group\u2019s loans
are segregated into appropriate portfolios reflecting the
characteristics of the constituent loans. Two principal
methods are used to estimate fair value:
(a)
(b)
Contractual cashflows that are discounted using a
market discount rate that incorporates the current
spread for the borrower or where this is not observable,
the spread for borrowers of a similar credit standing.
Expected cash flows (unadjusted for credit losses) are
discounted at the current offer rate for the same or
similar products. The current methodology caps all loan
values at par rather than modelling clients\u2019 option to
repay loans early. This approach is adopted for lending
portfolios in Retail Banking, Ulster Bank RoI, Commercial
& Institutional (SME loans) and Private Banking in order
to reflect the homogeneous nature of these portfolios.
Debt securities and subordinated liabilities
Most debt securities are valued using quoted prices in
active markets or from quoted prices of similar financial
instruments. The remaining population is valued using
discounted cashflows at current offer rates.
Bank and customer deposits
Fair values of deposits are estimated using discounted cash
flow valuation techniques. Where required, methodologies
can be revised as additional information and valuation
inputs become available.13 Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities held at fair value and classified as held-for-trading. Financial instruments are classified as held-for-trading
if they are held for the purpose of selling or repurchasing them in the short term, to make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
For accounting policy information refer to Accounting policy 3.8.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Assets
\u00a3m
\u00a3m
Loans
\u00a0 \u00a0
Reverse repos
23,694
21,537
Collateral given
9,141
13,005
Other loans
762
1,113
Total loans
33,597
35,655
Securities
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
2,729
2,205
- US
2,600
2,345
- Other
3,062
2,799
Financial institutions and corporate
3,563
2,573
Total securities
11,954
9,922
Total
45,551
45,577
Liabilities
\u00a0 \u00a0
Deposits
\u00a0 \u00a0
Repos
26,902
23,740
Collateral received
15,075
17,680
Other deposits
1,150
1,067
Total deposits
43,127
42,487
Debt securities in issue
706
797
Short positions
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
1,893
2,313
- US
2,071
1,293
- Other
4,049
3,936
Financial institutions and Corporate
1,790
1,982
Total short positions
9,803
9,524
Total
53,636
52,808
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80987": { "value": "2.2. Fair value \u2013 financial instruments
We measure financial instruments at fair value when they are classified as mandatory
fair value through profit or loss; held-for-trading; designated fair value through profit or
loss and fair value through other comprehensive income and they are recognised in the
financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net
exposure to either market or credit risk. In these cases, the fair value is derived from the
net risk exposure of that portfolio with portfolio level adjustments applied to incorporate
bid-offer spreads, counterparty credit risk, and funding costs (refer to \u2018Valuation
Adjustments\u2019).
Where the market for a financial instrument is not active, fair value is established using a
valuation technique. These valuation techniques involve a degree of estimation, the
extent of which depends on the instrument\u2019s complexity and the availability of market-
based data. The complexity and uncertainty in the financial instrument\u2019s fair value is
categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.
3.9. Netting
Financial assets and financial liabilities are offset, and the net amount presented on the
balance sheet when, and only when, we currently have a legally enforceable right to set
off the recognised amounts and we intend either to settle on a net basis or to realise the
asset and settle the liability simultaneously. We are party to a number of arrangements,
including master netting agreements, that give us the right to offset financial assets and
financial liabilities, but where we do not intend to settle the amounts net or
simultaneously, the assets and liabilities concerned are presented separately on the
balance sheet.
3.10. Capital instruments
We classify a financial instrument that we issue as a liability if it is a contractual obligation
to deliver cash or another financial asset, or to exchange financial assets or financial
liabilities on potentially unfavourable terms and as equity if we evidence a residual
interest in our assets after the deduction of liabilities. Incremental costs and related tax
that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known
as treasury shares or own shares held) is deducted from retained earnings. On the
cancellation of treasury shares their nominal value is removed from retained earnings
and a consequential amount recognised in capital redemption in compliance with the
Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are
credited to equity, net of any directly attributable incremental costs.
3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.10 Financial instruments - classification
Financial instruments are contracts that give rise to a financial asset of one entity and a corresponding financial liability or equity instrument of a counterparty entity,
such as cash, derivatives, loans, deposits and settlement balances. This note presents financial instruments classified in accordance with IFRS 9 \u2013 Financial
Instruments.
Judgement: classification of financial assets
Classification of financial assets between amortised cost and
fair value through other comprehensive income requires a
degree of judgement in respect of business models and
contractual cashflows.
\ue001
The business model criteria is assessed at a portfolio level
to determine whether assets are classified as held to
collect or held to collect and sell. Information that is
considered in determining the applicable business model
includes: the portfolio\u2019s policies and objectives; how the
performance and risks of the portfolio are managed,
evaluated and reported to management; and the
frequency, volume and timing of sales in prior periods,
sales expectation for future periods, and the reasons for
sales.
\ue001
The contractual cash flow characteristics of financial
assets are assessed with reference to whether the cash
flows represent solely payments of principal and interest
(SPPI). A level of judgement is made in assessing terms
that could change the contractual cash flows so that it
would not meet the condition for SPPI, including contingent
and leverage features,
non-recourse arrangements and
features that could modify the time value of money.
For accounting policy information refer to Accounting policies
3.8, 3.9 and 3.11.
The following tables analyse financial assets and liabilities in accordance with the categories of financial instruments
in IFRS 9.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0\u00a0\u00a0\u00a0
Amortised
Other
\u00a0
\u00a0
MFVTPL
DFV
FVOCI
cost
assets
Total
Assets
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
\u00a0\u00a0\u00a0
104,262
\u00a0
104,262
Trading assets
45,551
\u00a0\u00a0\u00a0\u00a0
45,551
Derivatives
(1)
78,904
\u00a0\u00a0\u00a0\u00a0
78,904
Settlement balances
\u00a0\u00a0\u00a0
7,231
\u00a0
7,231
Loans to bank - amortised cost
(2)
\u00a0\u00a0\u00a0
6,914
\u00a0
6,914
Loans to customers - amortised cost (
3
)
\u00a0\u00a0\u00a0
381,433
\u00a0
381,433
Other financial assets
703
5
28,699
21,695
\u00a0
51,102
Intangible assets
\u00a0\u00a0\u00a0\u00a0
7,614
7,614
Other assets
\u00a0\u00a0\u00a0\u00a0
8,760
8,760
Assets of disposal groups
(4)
\u00a0\u00a0\u00a0\u00a0
902
902
31 December 2023
125,158
5
28,699
521,535
17,276
692,673
Cash and balances at central banks
\u00a0\u00a0\u00a0
144,832
\u00a0
144,832
Trading assets
45,577
\u00a0\u00a0\u00a0\u00a0
45,577
Derivatives
(1)
99,545
\u00a0\u00a0\u00a0\u00a0
99,545
Settlement balances
\u00a0\u00a0\u00a0
2,572
\u00a0
2,572
Loans to bank - amortised cost
(2)
\u00a0\u00a0\u00a0
7,139
\u00a0
7,139
Loans to customers - amortised cost (
3
)
\u00a0\u00a0\u00a0
366,340
\u00a0
366,340
Other financial assets
787
-
16,973
13,135
\u00a0
30,895
Intangible assets
\u00a0\u00a0\u00a0\u00a0
7,116
7,116
Other assets
\u00a0\u00a0\u00a0\u00a0
9,176
9,176
Assets of disposal groups
(4)
\u00a0\u00a0\u00a0\u00a0
6,861
6,861
31 December 2022
145,909
-
16,973
534,018
23,153
720,053
\n
\n
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0
Amortised
Other
\u00a0
\u00a0
Held-for-trading
DFV
cost
liabilities
Total
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bank deposits
(5)
\u00a0 \u00a0
22,190
\u00a0
22,190
Customer deposits
\u00a0 \u00a0
431,377
\u00a0
431,377
Settlement balances
\u00a0 \u00a0
6,645
\u00a0
6,645
Trading liabilities
53,636
\u00a0 \u00a0 \u00a0
53,636
Derivatives
(1)
72,395
\u00a0 \u00a0 \u00a0
72,395
Other financial liabilities
(6)
\u00a0
2,888
52,201
\u00a0
55,089
Subordinated liabilities
\u00a0
237
5,477
\u00a0
5,714
Notes in circulation
\u00a0 \u00a0
3,237
\u00a0
3,237
Other liabilities
(7)
\u00a0 \u00a0
748
4,454
5,202
31 December 2023
126,031
3,125
521,875
4,454
655,485
Bank deposits
(5)
\u00a0 \u00a0
20,441
\u00a0
20,441
Customer deposits
\u00a0 \u00a0
450,318
\u00a0
450,318
Settlement balances
\u00a0 \u00a0
2,012
\u00a0
2,012
Trading liabilities
52,808
\u00a0 \u00a0 \u00a0
52,808
Derivatives
(1)
94,047
\u00a0 \u00a0 \u00a0
94,047
Other financial liabilities
(6)
\u00a0
2,377
46,730
\u00a0
49,107
Subordinated liabilities
\u00a0
345
5,915
\u00a0
6,260
Notes in circulation
\u00a0 \u00a0
3,218
\u00a0
3,218
Other liabilities
(7)
\u00a0 \u00a0
1,205
4,141
5,346
31 December 2022
146,855
2,722
529,839
4,141
683,557
\n
(1)
Includes net hedging derivatives assets of \u00a3114 million (2022 - \u00a3143 million) and net
hedging derivatives liabilities of \u00a3270 million (2022 - \u00a3132 million).
(2)
Includes items in the course of collection from other banks of \u00a3255 million (2022 -
\u00a3229 million).
(3)
Includes finance lease receivables of \u00a38,731 million (2022 - \u00a38,402 million).
(4)
Includes assets of disposal groups held at FVTPL of \u00a3841 million (2022 - \u00a35,397
million). The portfolio is classified as level 3 in the fair value hierarchy.
(5)
Includes items in the course of transmission to other banks of \u00a392 million (2022 -
\u00a3242 million).
(6)
The carrying amount of customer deposits designated at fair value through profit
or loss is the same as the principal amount for both periods. No amounts have
been recognised in the profit or loss for changes in credit risk associated with these
liabilities as the changes are immaterial both during the period and cumulatively.
(7)
Includes lease liabilities of \u00a3670 million (2022 - \u00a31,118 million), held at amortised
cost.
Reclassification of mortgages from amortised cost to fair value through profit or loss
In June 2022 UBIDAC announced the cessation of new mortgage business to its customers. On 1 July 2022 UBIDAC mortgages in both its continuing and discontinued businesses were
reclassified from amortised cost to fair value through profit or loss, reflecting the change in business model. We fair value these assets using a discounted cash flow method. Key inputs
include assumptions about cash flows from legally binding sales agreements for those mortgage assets that form part of the assets of disposal groups. For details on material
developments in assets and liabilities of disposals groups during the year, refer to Note 8.
The effect of the reclassification as at 1 July 2022 is shown below.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Amortised cost
MFVTPL
Change in value
\u00a0
\u00a3m
\u00a3m
\u00a3m
Amounts reclassified on balance sheet
\u00a0 \u00a0 \u00a0
Loans to customers
(1)
587
606
19
Assets of disposal groups
(2)
10,676
10,383
(293)
\u00a0
11,263
10,989
(274)
\n
(1)
Change in value recognised in continuing operations.
(2)
Change in value recognised in discontinued operations.
We originate loans that include features that change the contractual cash flows based on the borrower meeting certain contractually specified environmental, social and governance
(ESG) targets. These are known as ESG-linked (or sustainability-linked) loans. As part of the terms of these loans, the contractual interest rate is reduced or increased if the borrower
meets (or fails to meet) specific targets linked to the activity of the borrower, for example reducing carbon emissions, increasing the level of diversity at Board level, or achieving a
sustainable supply chain. ESG features are first assessed to ascertain whether the adjustment to the contractual cash flows results in a de minimis exposure to risks or volatility in
those contractual cash flows. If this is the case the classification of the loan is not affected. If the effect of the ESG feature is assessed as being more than de minimis, we apply
judgement to ensure that the ESG features do not generate compensation for risks that are not in line with a basic lending arrangement. This includes, amongst other aspects, a
review of the consistency of the ESG targets with the asset or activity of the borrower, and consideration of the targets within our risk appetite. Some of these loans are an integral
part of our climate and sustainable funding and financing target disclosed on page 16.
The table below analyses financial assets forming a component of ESG-linked loans and other products with contractual terms that could change the timing or amount of cash flows.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0 \u00a0
Positive impact on
Negative impact on
Reduction in
\u00a0
\u00a0
Carrying value
product margin
product margin
cash flows
Carrying value
\u00a0
\u00a3bn
bps
bps
\u00a3m
\u00a3bn
Sustainability-linked loans
6.5
3.2
3.9
2.5
5.0
Other products
16.1
-
-
-
8.9
Lending subject to performance triggers
22.6
\u00a0 \u00a0
2.5
13.9
\n
Additional information on finance lease receivables
The following table shows the reconciliation of undiscounted finance lease receivables to net investment in finance leases which are presented under Loans to customers-amortised
cost on the balance sheet.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Amount receivable under finance leases
\u00a0 \u00a0
Within 1 year
3,340
3,235
1 to 2 years
2,358
2,254
2 to 3 years
1,625
1,388
3 to 4 years
900
833
4 to 5 years
388
411
After 5 years
1,079
1,130
Total lease payments
9,690
9,251
Unguaranteed residual values
169
171
Future drawdowns
(12)
(13)
Unearned income
(1,025)
(889)
Present value of lease payments
8,822
8,520
Impairments
(91)
(118)
Net investment in finance leases
8,731
8,402
\n
Financial instruments \u2013 financial assets and liabilities that can be offset
The tables below present information on financial assets and financial liabilities that are offset on the balance sheet under IFRS or subject to enforceable master netting agreements
together with financial collateral received or given.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Instruments which can be offset
Potential for offset not recognised by IFRS
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0 \u00a0
Effect of master
\u00a0 \u00a0
Net amount after
Instruments
\u00a0
\u00a0 \u00a0 \u00a0 \u00a0
netting and similar
Cash
Securities
netting agreements and
outside netting
Balance sheet
\u00a0
Gross
IFRS offset
Balance sheet
agreements
collateral
collateral
effect of related collateral
agreements
total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets
99,023
(20,597)
78,426
(60,355)
(12,284)
(3,408)
2,379
478
78,904
Derivative liabilities
95,734
(23,869)
71,865
(60,355)
(6,788)
(1,663)
3,059
530
72,395
Net position
(1)
3,289
3,272
6,561
-
(5,496)
(1,745)
(680)
(52)
6,509
Trading reverse repos
39,573
(16,257)
23,316
(664)
-
(22,461)
191
378
23,694
Trading repos
42,442
(16,257)
26,185
(664)
-
(25,520)
1
717
26,902
Net position
(2,869)
-
(2,869)
-
-
3,059
190
(339)
(3,208)
Non trading reverse repos
37,477
(9,646)
27,831
(5)
-
(27,826)
-
80
27,911
Non trading repos
23,605
(9,646)
13,959
(5)
-
(13,954)
-
3
13,962
Net position
13,872
-
13,872
-
-
(13,872)
-
77
13,949
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Derivative assets
117,606
(18,730)
98,876
(77,365)
(14,079)
(4,571)
2,861
669
99,545
Derivative liabilities
115,177
(22,111)
93,066
(77,365)
(9,761)
(1,185)
4,755
981
94,047
Net position
(1)
2,429
3,381
5,810
-
(4,318)
(3,386)
(1,894)
(312)
5,498
Trading reverse repos
35,612
(14,510)
21,102
(2,445)
-
(18,458)
199
435
21,537
Trading repos
33,767
(14,510)
19,257
(2,445)
-
(16,812)
-
4,483
23,740
Net position
1,845
-
1,845
-
-
(1,646)
199
(4,048)
(2,203)
Non trading reverse repos
25,630
(5,702)
19,928
-
-
(19,928)
-
98
20,026
Non trading repos
16,977
(5,702)
11,275
-
-
(11,275)
-
-
11,275
Net position
8,653
-
8,653
-
-
(8,653)
-
98
8,751
\n
(1)
Net IFRS offset balance of \u00a33,272 million (2022 - \u00a33,381 million) relates to variation margin netting reflected on other balance sheet lines.
11 Financial instruments - valuation
Financial instruments recognised at fair value are revalued using techniques that can include observable inputs (pricing information that is readily available in the
market, for example UK Government securities), and unobservable inputs (pricing information that is not readily available, for example unlisted securities). Gains and
losses are recognised in the income statement and statement of comprehensive income as appropriate.
This note presents information on the valuation of financial
instruments.
The table below provides an overview of the various sections contained within the note.
Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.
Valuation
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Page
Financial instruments
\u00a0
Critical accounting policy: Fair value
341
Valuation
\u00a0
Fair value hierarchy
(D)
342
Valuation techniques
(D)
342
Inputs to valuation models
(D)
342
Valuation control
(D)
343
Key areas of judgement
(D)
343
Assets and liabilities split by fair value hierarchy level
(T)
344
Valuation adjustments
\u00a0
Fair value adjustments made
(T)
345
Funding valuation adjustments (FVA)
(D)
345
Credit valuation adjustments (CVA)
(D)
345
Bid-offer
(D)
345
Product and deal specific
(D)
345
Own credit
(D)
345
Level 3 additional information
\u00a0
Level 3 ranges of unobservable inputs
(D)
346
Level 3 instruments, valuation techniques and inputs
(T)
346
Level 3 sensitivities
(D)
347
Alternative assumptions
(D)
347
Other considerations
(D)
347
High and low range of fair value of level 3 assets and liabilities
(T)
347
Movement in level 3 assets and liabilities over the reporting period
(D)
348
Movement in level 3 assets and liabilities
(T)
348
Fair value of financial instruments measured at amortised cost
\u00a0
Fair value of financial instruments measured at amortised cost on the balance sheet
\u00a0
balance sheet
349
(D) = Descriptive; (T) = Table
\u00a0
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Fair value hierarchy
\n
Financial instruments carried at fair value have been classified under the fair value
\n
hierarchy. The classification ranges from level 1 to level 3, with more expert judgement
\n
and price uncertainty for those classified at level 3.
\n
The determination of an instrument\u2019s level cannot be made at a global product level as a
\n
single product type can be in more than one level. For example, a single name corporate
\n
credit default swap could be in level 2 or level 3 depending on the level of market activity
\n
for the referenced entity.
\n
Level 1
\u2013 instruments valued using unadjusted quoted prices in active and liquid markets,
\n
for identical financial instruments. Examples include government bonds, listed equity
\n
shares and certain exchange-traded derivatives.
\n
L
L
evel 2
- instruments valued using valuation techniques that have observable inputs.
\n
Observable inputs are those that are readily available with limited adjustments required.
\n
Examples include most government agency securities, investment-grade corporate
\n
bonds, certain mortgage products - including collateralised loan obligations (CLOs), most
\n
bank loans, repos and reverse repos, state and municipal obligations, most notes issued,
\n
certain money market securities, loan commitments and most over the counter (OTC)
\n
derivatives.
\n
L
L
evel 3
- instruments valued using a valuation technique where at least one input which
\n
could have a significant effect on the instrument\u2019s valuation, is not based on observable
\n
market data. Examples include non-derivative instrument\u2019s which trade infrequently,
\n
certain syndicated and commercial mortgage loans, private equity, and derivatives with
\n
unobservable model inputs.
\n
Valuation techniques
\n
NatWest Group derives the fair value of its instruments differently depending on whether
\n
the instrument is a non-modelled or a modelled product.
\n
Non-modelled products
are valued directly from a price input, typically on a position-by-
\n
position basis. Examples include equities and most debt securities.
\n
Non-modelled products can fall into any fair value levelling hierarchy depending on the
\n
observable market activity, liquidity, and assessment of valuation uncertainty of the
\n
instruments. The assessment of fair value and the classification of the instrument to a fair
\n
value level is subject to the valuation controls discussed in the Valuation control section.
\n
Modelled products
valued using a pricing model range in complexity from comparatively
\n
vanilla products such as interest rate swaps and options (e.g., interest rate caps and
\n
floors) through to more complex derivatives (e.g., balance guarantee swaps).
\n
For modelled products the fair value is derived using the model and the appropriate
\n
model inputs or parameters, as opposed to a cash price equivalent. Model inputs are
\n
taken either directly or indirectly from available data, where some inputs are also
\n
modelled.
\n
Fair value classification of modelled instruments is either level 2 or level 3, depending on
\n
the product/model combination, the observability and quality of input parameters and
\n
other factors. All these must be assessed to classify a position. The modelled product is
\n
assigned to the lowest fair value hierarchy level of any significant input used in that
\n
valuation.
\n
Most derivative instruments, for example vanilla interest rate swaps, foreign exchange
\n
swaps and liquid single name credit derivatives, are classified as level 2. This is because
\n
they are vanilla products valued using standard market models and with observable
\n
inputs. Level 2 products range from vanilla to more complex products, where more
\n
complex products remain classified as level 2 due to the low materiality of any
\n
unobservable inputs.
\n
Inputs to valuation models
\n
When using valuation techniques, the fair value can be significantly affected by the
\n
choice of
valuation model
and underlying assumptions. Factors considered include the
\n
cashflow amounts and timing of those cash flows, and application of appropriate discount
\n
rates, incorporating both funding and credit risk. Values between and beyond available
\n
data points are obtained by interpolation and extrapolation. The principal inputs to these
\n
valuation techniques are as follows:
\n
Bond prices
- quoted prices are generally available for government bonds, certain
\n
corporate securities, and some mortgage-related products.
\n
Credit spreads/margins
- these reflect credit default swap levels or the return required
\n
over a benchmark rate or index to compensate for the referenced credit risk. Where
\n
available, these are derived from the price of credit default swaps or other credit-based
\n
instruments, such as debt securities. When direct prices are not available; credit
\n
spreads/margins are determined with reference to available prices of entities with similar
\n
characteristics.
\n
Interest rates
- these are principally based on interest rate swap prices referencing
\n
benchmark interest rates. Interest rates, include SONIA (Sterling Overnight Interbank
\n
Average Rate) and other overnight rates. Other quoted interest rates may also be used
\n
from both the bond, and futures markets.
\n
F
F
oreign currency exchange rates
- there are observable prices both for spot and
\n
forward contracts and futures in the world's major currencies.
\n
E
E
quity and equity index prices
- quoted prices are generally readily available for equity
\n
shares listed on the world's major stock exchanges and for major indices on such shares.
Price volatilities and correlations
- volatility is a measure of the tendency of a price to
change with time. Correlation measures the degree which two or more prices or
variables are observed to move together. Variables that move in the same direction
show positive correlation; those that move in opposite directions are negatively
correlated.
P
P
repayment rates
- are used to reflect how fast a pool of assets prepay. The fair value of
a financial instrument that can be prepaid by the issuer or borrower differs from that of
an instrument that cannot be prepaid. When valuing prepayable instruments, the value of
this prepayment option is considered.
R
R
ecovery rates/loss given default
- are used as an input to valuation models and
reserves for asset-backed securities and other credit products as an indicator of severity
of losses on default. Recovery rates are primarily sourced from market data providers,
the value of the underlying collateral or inferred from observable credit spreads.
Valuation control
NatWest Group's control environment for the determination of the fair value of financial
instruments includes formalised procedures for the review and validation of fair values.
The review of market prices and inputs is performed by an independent price verification
(IPV) team
IPV is a key element of the control environment. Valuations are first performed by the
business which entered into the transaction. These valuations are then reviewed by the
IPV team, independent of those trading the financial instruments, in light of available
pricing evidence.
Independent pricing data is collated from a range of sources. Each source is reviewed for
quality and the independent data applied in the IPV processes using a formalised input
quality hierarchy. Consensus services are one source of independent data and
encompass interest rate, currency, credit, and bond markets, providing comprehensive
coverage of vanilla products and a wide selection of exotic products.
Where measurement differences are identified through the IPV process these are
grouped by the quality hierarchy of the independent data. If the size of the difference
exceeds defined thresholds, an adjustment is made to bring the valuation to within the
independently calculated fair value range.
IPV takes place at least monthly, for all fair value financial instruments. The IPV control
includes formalised reporting and escalation of any valuation differences in breach of
established thresholds.
The quality and completeness of the information gathered in the IPV process gives an
indication as to the liquidity and valuation uncertainty of an instrument and forms part of
the information considered when determining fair value hierarchy classifications.
Initial fair value level classification of a financial instrument is carried out by the IPV team.
These initial classifications are subject to senior management review. Particular attention
is paid to instruments transferring from one level to another, new instrument classes or
products, instruments where the transaction price is significantly different from the fair
value and instruments where valuation uncertainty is high.
Valuation Committees are made up of valuation specialists and senior business
representatives from various functions and oversees pricing, reserving and valuations
issues. These committees meet monthly to review and ratify any methodology changes.
The Executive Valuation Committee meets quarterly to address key material and
subjective valuation issues, to review items escalated by Valuation Committees and to
discuss other relevant industry matters.
The Group model risk policy sets the policy for model documentation, testing and review.
Governance of the model risk policy is carried out by the Group model risk oversight
committee, which comprises model risk owners and independent model experts. All
models are required to be independently validated in accordance with the Model Risk
Policy.
Key areas of judgement
Over the years the business has simplified, with most products classified as level 1 or 2 of
the fair value hierarchy. However, the diverse range of products historically traded by
NatWest Group means some products remain classified as level 3. Level 3 indicates a
significant level of pricing uncertainty, where expert judgement is used. As such, extra
disclosures are required in respect of level 3 instruments.
In general, the degree of expert judgement used and hence valuation uncertainty
depends on the degree of liquidity of an instrument or input.
Where markets are liquid, little judgement is required. However, when the information
regarding the liquidity in a particular market is not clear, a judgement may need to be
made. For example, for an equity traded on an exchange, daily volumes of trading can
be seen, but for an OTC derivative, assessing the liquidity of the market with no central
exchange is more challenging.
A key related matter is where a market moves from liquid to illiquid or vice versa. Where
this movement is considered temporary, the fair value level is not changed. For example,
if there is little market trading in a product on a reporting date but at the previous
reporting date and during the intervening period the market has been liquid. In this case,
the instrument will continue to be classified at the same level in the hierarchy. This is to
provide consistency so that transfers between levels are driven by genuine changes in
market liquidity and do not reflect short term or seasonal effects. Material movements
between levels are reviewed quarterly by the business and IPV.
The breadth and depth of the IPV data allows for a rules-based quality assessment to be
made of market activity, liquidity, and pricing uncertainty, which assists with the process
of allocation to an appropriate level. Where suitable independent pricing information is
not readily available, the quality assessment will result in the instrument being assessed
as level 3.
The table below shows the assets and liabilities held by NatWest Group split by fair value hierarchy level. Level 1 are considered the most liquid instruments, and level 3 the most
illiquid, valued using expert judgement and so carry the most significant price uncertainty.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Loans
-
33,388
209
33,597
-
35,260
395
35,655
Securities
8,447
3,493
14
11,954
7,463
2,458
1
9,922
Derivatives
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
1
43,912
650
44,563
5
52,764
711
53,480
Foreign exchange
-
34,096
65
34,161
-
45,715
114
45,829
Other
-
72
108
180
-
54
182
236
Other financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Loans
-
108
657
765
-
172
727
899
Securities
17,848
10,536
258
28,642
10,380
6,278
203
16,861
Total financial assets held at fair value
26,296
125,605
1,961
153,862
17,848
142,701
2,333
162,882
As a % of total fair value assets
17%
82%
1%
\u00a0
11%
88%
1%
\u00a0
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Deposits
-
43,126
1
43,127
-
42,486
1
42,487
Debt securities in issue
-
706
-
706
-
797
-
797
Short positions
7,936
1,865
2
9,803
7,462
2,062
-
9,524
Derivatives
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
-
38,044
439
38,483
2
47,855
678
48,535
Foreign exchange
-
33,528
58
33,586
-
45,139
98
45,237
Other
-
138
188
326
-
76
199
275
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Debt securities in issue
-
1,605
3
1,608
-
1,327
-
1,327
Other deposits
-
1,280
-
1,280
-
1,050
-
1,050
Subordinated liabilities
-
237
-
237
-
345
-
345
Total financial liabilities held at fair value
7,936
120,529
691
129,156
7,464
141,137
976
149,577
As a % of total fair value liabilities
6%
93%
1%
\u00a0
5%
94%
1%
\u00a0
\n
(1)
Transfers between levels are deemed to have occurred at the beginning of the quarter in which the instrument was transferred.
(2)
For an analysis of debt securities held at mandatory fair value through profit or loss by issuer as well as ratings and derivatives, by type and contract, refer to Risk and capital management \u2013 Credit risk.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Valuation adjustments
\n
When valuing financial instruments in the trading book, adjustments are made to mid-
\n
market valuations to cover bid-offer spread, funding and credit risk. These adjustments
\n
are presented in the table below:
\n\n \n
2023
2022
Adjustment
\u00a3m
\u00a3m
Funding valuation adjustments
132
173
Credit valuation adjustments
236
300
Bid-offer
86
130
Product and deal specific
103
141
Total
557
744
\n
Funding valuation adjustments decreased during the year, primarily driven by changes in
\n
GBP interest rates and funding spreads tightening.
\n
The decrease in credit value adjustments was driven by credit spreads tightening and a
\n
reduction in exposures, primarily due to portfolio ageing, partially offset by new trade
\n
activity. Interest rates tightening, trade restructuring and trade specific valuation
\n
adjustments were the drivers of the decrease in product and deal specific. The decrease
\n
in bid-offer was driven by risk reduction.
\n
Funding valuation adjustments (FVA)
\n
FVA represents an estimate of the adjustment that a market participant would make to
\n
incorporate funding costs and benefits that arise in relation to derivative exposures. FVA
\n
is calculated as a portfolio level adjustment and can result in either a funding charge
\n
(positive) or funding benefit (negative).
\n
Funding levels are applied to estimated potential future exposures. For uncollateralised
\n
derivatives, the exposure reflects the future valuation of the derivative. For collateralised
\n
derivatives, the exposure reflects the difference between the future valuation of the
\n
derivative and the level of collateral posted.
\n
Credit valuation adjustments (CVA)
\n
CVA represents an estimate of the adjustment to fair value that is made to incorporate
\n
the counterparty credit risk inherent in derivative exposures. CVA is calculated on a
\n
portfolio basis reflecting an estimate of the amount a third party would charge to assume
\n
the credit risk.
\n
Collateral held under a credit support agreement is factored into the CVA calculation. In
\n
such cases where NatWest Group holds collateral against counterparty exposures, CVA
\n
is held to the extent that residual risk remains.
\n
FVA and CVA are actively managed by a credit and market risk hedging process, and
\n
therefore movements in CVA and FVA are partially offset by trading revenue on the
\n
hedges.
\n
Bid-offer
\n
Fair value positions are required to be marked to exit levels, represented by bid (long
\n
positions) or offer (short positions) levels. Non-derivative positions are typically marked
\n
directly to bid or offer prices. However derivative exposures are adjusted to exit levels by
\n
taking bid-offer reserves calculated on a portfolio basis. The reserving approach is based
\n
on current market bid-offer spreads and standard market bucketing of risk.
\n
Bid-offer spreads vary by maturity and risk type to reflect different spreads in the
\n
market. For positions where there is no observable quote, the bid-offer spreads are
\n
widened in comparison to proxies to reflect reduced liquidity or observability.
\n
Netting is applied on a portfolio basis to reflect the value at which NatWest Group
\n
believes it could exit the net risk of the portfolio, rather than the sum of exit costs for
\n
each of the portfolio\u2019s individual trades. This is applied where the asset and liability
\n
positions are managed as a portfolio for risk and reporting purposes.
\n
Product and deal specific
\n
On initial recognition of financial assets and liabilities valued using valuation techniques
\n
which have a significant dependence on information other than observable market data,
\n
any difference between the transaction price and that derived from the valuation
\n
technique is deferred. Such amounts are recognised in the income statement over the
\n
life of the transaction, when market data becomes observable, or when the transaction
\n
matures or is closed out as appropriate. On 31 December 2023, net gains of \u00a378 million
\n
(2022 - \u00a374 million) were carried forward. During the year, net gains of \u00a3119 million
\n
(2022 - \u00a397 million) were deferred and \u00a3115 million (2022 - \u00a394 million) were recognised
\n
in the income statement.
\n
Where system-generated valuations do not accurately reflect market prices, manual
\n
valuation adjustments are applied either at a position or portfolio level. Manual
\n
adjustments are subject to the scrutiny of independent control teams and are subject to
\n
monthly review by senior management.
\n
Own credit
\n
NatWest Group considers the effect of its own credit standing when valuing financial
\n
liabilities recorded at fair value. Own credit spread adjustments are made when valuing
\n
issued debt held at fair value, including issued structured notes. An own credit
\n
adjustment is applied to positions where it is believed that counterparties would consider
\n
NatWest Group\u2019s creditworthiness when pricing trades.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Level 3 additional information
\n
For illiquid assets and liabilities, classified as level 3, additional information is provided on the valuation techniques used and price sensitivity of the products to those inputs. This is to
\n
enable the reader to gauge the level of uncertainty that arises from positions with significant unobservable inputs or modelling parameters.
\n
Level 3 ranges of unobservable inputs
\n
The table below provides additional information on level 3 instruments and inputs. This shows the valuation technique used for the fair value calculation, the unobservable input and
\n
input range.
\n \n \n
2023
20
22
Financial instrument
Valuation technique
Unobservable inputs
Units
Low
High
Low
High
Trading assets and Other financial assets
Loans
Price-based
Price
%
-
123
-
113
Discount cash flow
Credit spreads
bps
49
119
56
114
Discount cash flow
Discount margin
bps
174
228
174
222
Debt securities
Price-based
Price
%
-
119
-
255
Equity Shares
Price-based
Price
GBP
-
32,142
-
34,027
Price-based
Price
%
-
30
-
30
Discount cash flow
Discount margin
%
7
9
6
8
Net asset valuation
Fund NAV
%
80
120
80
120
Derivative assets and liabilities
Credit derivatives
Credit derivative pricing
Credit spreads
bps
13
600
7
530
Option pricing
Correlation
%
(15)
95
(15)
95
Volatility
%
30
80
30
80
Upfront points
%
-
99
-
99
Recovery rate
%
-
60
-
60
Interest rate & FX
Option pricing
Correlation
%
(50)
99
(50)
100
derivatives
Volatility
%
30
111
30
127
Constant Prepayment Rate
%
2
22
2
21
Mean Reversion
%
-
20
-
92
Inflation volatility
%
2
2
1
2
Inflation rate
%
2
3
2
3
\n
(1)
Valuation for private equity investments may be estimated by looking at past prices of similar stocks and from valuation statements where valuations are usually derived from earnings measures such as EBITDA or net asset value (NAV). Similarly, for
\n
equity or bond fund investments, prices may be estimated from valuation or credit statements using NAV or similar measures.
\n
(2)
NatWest Group does not have any material liabilities measured at fair value that are issued with an inseparable third-party credit enhancement.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Level 3 sensitivities
\n
The level 3 sensitivities presented below are calculated at a trade or low-level portfolio
\n
basis rather than an overall portfolio basis. As individual sensitivities are aggregated with
\n
no reflection of the correlated nature between instruments, the overall portfolio
\n
sensitivity may not be accurately reflected. For example, some portfolios may be
\n
negatively correlated to others, where a downwards movement in one asset would
\n
produce an upwards movement in another. However, due to the additive presentation of
\n
the above figures this correlation impact cannot be displayed. As such, the actual
\n
potential downside sensitivity of the total portfolio may be less than the non-correlated
\n
sum of the additive figures as shown in the below table.
\n
Alternative assumptions
\n
Reasonably plausible alternative assumptions of unobservable inputs are determined
\n
based on a specified target level of certainty of 90%.
\n
Alternative assumptions are determined with reference to all available evidence including
\n
consideration of the following: quality of independent pricing information considering
\n
consistency between different sources, variation over time, perceived tradability or
\n
otherwise of available quotes; consensus service dispersion ranges; volume of trading
\n
activity and market bias (e.g. one-way inventory); day 1 profit or loss arising on new
\n
trades; number and nature of market participants; market conditions; modelling
\n
consistency in the market; size and nature of risk; length of holding of position; and
\n
market intelligence.
\n
Other considerations
\n
Whilst certain inputs used to calculate CVA, FVA and own credit adjustments are not
\n
based on observable market data, the uncertainty of these inputs is not considered to
\n
have a significant effect on the net valuation of the related derivative portfolios and
\n
issued debt.
\n
As such, the fair value levelling of the derivative portfolios and issued debt is not
\n
determined by CVA, FVA or own credit inputs. In addition, any fair value sensitivity
\n
driven by these inputs is not included in the level 3 sensitivities presented.
\n
The table below shows the high and low range of fair value of the level 3 assets and liabilities. This range incorporates the range of fair value inputs as described in the previous table.
\n\n \n
2023
2022
Level 3
Favourable
Unfavourable
Level 3
Favourable
Unfavourable
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Trading assets
Loans
209
-
-
395
10
(10)
Securities
14
-
-
1
-
-
Derivatives
Interest rate
650
20
(20)
711
30
(30)
Foreign exchange
65
-
-
114
10
(10)
Other
108
10
(10)
182
10
(10)
Other financial assets
Loans
657
-
(40)
727
-
(10)
Securities
258
20
(50)
203
20
(30)
Total financial assets held at fair value
1,961
50
(120)
2,333
80
(100)
Liabilities
Trading liabilities
Deposits
1
-
-
1
-
-
Short positions
2
-
-
-
-
-
Derivatives
Interest rate
439
10
(10)
678
30
(30)
Foreign exchange
58
-
-
98
-
-
Other
188
10
(10)
199
-
-
Other financial liabilities - debt securities in issue
3
-
-
-
-
-
Total financial liabilities held at fair value
691
20
(20)
976
30
(30)
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Movement in level 3 assets and liabilities
\n
The following table shows the movement in level 3 assets and liabilities in the year.
\n\n \n
Other
Other
Other
Other
Derivatives
trading
financial
Total
Derivatives
trading
financial
Total
assets
assets (2)
assets (3)
assets
liabilities
liabilities (2)
liabilities
liabilities
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
1,007
396
930
2,333
975
1
-
976
Amounts recorded in the income statement
(1)
(156)
(88)
1
(243)
(313)
-
-
(313)
Amount recorded in the statement of
comprehensive income
-
-
32
32
-
-
-
-
Level 3 transfers in
6
15
16
37
7
2
-
9
Level 3 transfers out
(5)
(32)
(190)
(227)
(9)
(2)
-
(11)
Purchases/originations
180
8
275
463
195
2
3
200
Settlements/other decreases
(70)
(8)
(86)
(164)
(51)
-
-
(51)
Sales
(137)
(65)
(52)
(254)
(116)
-
-
(116)
Foreign exchange and other adjustments
(2)
(3)
(11)
(16)
(3)
-
-
(3)
At 31 December
823
223
915
1,961
685
3
3
691
Amounts recorded in the income statement
in respect of balances held at period end
- unrealised
67
(39)
1
29
(121)
-
-
(121)
2022
At 1 January
918
740
394
2,052
606
3
-
609
Amounts recorded in the income statement
(1)
126
31
(14)
143
382
(1)
-
381
Amount recorded in the statement of
comprehensive income
-
-
(20)
(20)
-
-
-
-
Level 3 transfers in
193
1
532
726
78
3
-
81
Level 3 transfers out
(122)
(147)
(68)
(337)
(61)
(3)
-
(64)
Purchases/originations
355
274
185
814
382
-
-
382
Settlements/other decreases
(40)
(75)
-
(115)
(41)
-
-
(41)
Sales
(423)
(434)
(101)
(958)
(376)
(2)
-
(378)
Foreign exchange and other adjustments
-
6
22
28
5
1
-
6
At 31 December
1,007
396
930
2,333
975
1
-
976
Amounts recorded in the income statement
in respect of balances held at period end
- unrealised
126
31
(16)
141
382
(1)
-
381
\n
(1)
There were \u00a369 million net gains on trading assets and liabilities (2022 \u2013 \u00a3224 million net losses) recorded in income from trading activities. Net gains on other instruments of \u00a31 million (2022 \u2013 \u00a314 million net losses) were recorded in other operating
\n
income and interest income as appropriate.
\n
(2)
Other trading assets and other trading liabilities comprise assets and liabilities held at fair value in trading portfolios.
\n
(3)
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.
Fair value of financial instruments measured at amortised cost on the balance sheet
The following table shows the carrying value and fair value of financial instruments measured at amortised cost on the balance sheet.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Items where
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
fair value
\u00a0
Carrying
\u00a0
Fair value hierarchy level
approximates
\u00a0
value
Fair value
Level 1
Level 2
Level 3
carrying value
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104.3
104.3
-
-
-
104.3
Settlement balances
7.2
7.2
-
-
-
7.2
Loans to banks
6.9
7.0
-
2.2
0.6
4.2
Loans to customers
381.4
373.2
-
27.5
345.7
-
Other financial assets - securities
21.7
21.6
4.0
6.6
11.0
-
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
144.8
144.8
-
-
-
144.8
Settlement balances
2.6
2.6
-
-
-
2.6
Loans to banks
7.1
7.1
-
4.2
2.8
0.1
Loans to customers
366.3
354.5
-
20.3
334.2
-
Other financial assets - securities
13.1
12.8
3.6
3.2
6.0
-
2023
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
22.2
22.3
-
15.4
2.7
4.2
Customer deposits
431.4
431.0
-
30.7
48.8
351.5
Settlement balances
6.6
6.6
-
-
-
6.6
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
- debt securities in issue
52.2
52.2
-
41.7
10.5
-
Subordinated liabilities
5.5
5.4
-
5.4
-
-
Notes in circulation
3.2
3.2
-
-
-
3.2
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
20.4
20.0
-
13.1
2.2
4.7
Customer deposits
450.3
450.3
-
12.7
30.6
407.0
Settlement balances
2.0
2.0
-
-
-
2.0
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
- debt securities in issue
46.7
46.1
-
40.7
5.4
-
Subordinated liabilities
5.9
5.6
-
5.5
0.1
-
Notes in circulation
3.2
3.2
-
-
-
3.2
\n
The assumptions and methodologies underlying the
calculation of fair values of financial instruments at the
balance sheet date are as follows:
Short-term financial instruments
For certain short-term financial instruments, including but
not limited to, cash and balances at central banks,
settlement balances, loans with short-term maturities, notes
in circulation and customer demand deposits, carrying
value is deemed a reasonable approximation of fair value.
Loans to banks and customers
In estimating the fair value of net loans to customers and
banks measured at amortised cost, NatWest Group\u2019s loans
are segregated into appropriate portfolios reflecting the
characteristics of the constituent loans. Two principal
methods are used to estimate fair value:
(a)
(b)
Contractual cashflows that are discounted using a
market discount rate that incorporates the current
spread for the borrower or where this is not observable,
the spread for borrowers of a similar credit standing.
Expected cash flows (unadjusted for credit losses) are
discounted at the current offer rate for the same or
similar products. The current methodology caps all loan
values at par rather than modelling clients\u2019 option to
repay loans early. This approach is adopted for lending
portfolios in Retail Banking, Ulster Bank RoI, Commercial
& Institutional (SME loans) and Private Banking in order
to reflect the homogeneous nature of these portfolios.
Debt securities and subordinated liabilities
Most debt securities are valued using quoted prices in
active markets or from quoted prices of similar financial
instruments. The remaining population is valued using
discounted cashflows at current offer rates.
Bank and customer deposits
Fair values of deposits are estimated using discounted cash
flow valuation techniques. Where required, methodologies
can be revised as additional information and valuation
inputs become available.13 Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities held at fair value and classified as held-for-trading. Financial instruments are classified as held-for-trading
if they are held for the purpose of selling or repurchasing them in the short term, to make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
For accounting policy information refer to Accounting policy 3.8.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Assets
\u00a3m
\u00a3m
Loans
\u00a0 \u00a0
Reverse repos
23,694
21,537
Collateral given
9,141
13,005
Other loans
762
1,113
Total loans
33,597
35,655
Securities
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
2,729
2,205
- US
2,600
2,345
- Other
3,062
2,799
Financial institutions and corporate
3,563
2,573
Total securities
11,954
9,922
Total
45,551
45,577
Liabilities
\u00a0 \u00a0
Deposits
\u00a0 \u00a0
Repos
26,902
23,740
Collateral received
15,075
17,680
Other deposits
1,150
1,067
Total deposits
43,127
42,487
Debt securities in issue
706
797
Short positions
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
1,893
2,313
- US
2,071
1,293
- Other
4,049
3,936
Financial institutions and Corporate
1,790
1,982
Total short positions
9,803
9,524
Total
53,636
52,808
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsDesignatedAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80988": { "value": "2.2. Fair value \u2013 financial instruments
We measure financial instruments at fair value when they are classified as mandatory
fair value through profit or loss; held-for-trading; designated fair value through profit or
loss and fair value through other comprehensive income and they are recognised in the
financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net
exposure to either market or credit risk. In these cases, the fair value is derived from the
net risk exposure of that portfolio with portfolio level adjustments applied to incorporate
bid-offer spreads, counterparty credit risk, and funding costs (refer to \u2018Valuation
Adjustments\u2019).
Where the market for a financial instrument is not active, fair value is established using a
valuation technique. These valuation techniques involve a degree of estimation, the
extent of which depends on the instrument\u2019s complexity and the availability of market-
based data. The complexity and uncertainty in the financial instrument\u2019s fair value is
categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80989": { "value": "2.2. Fair value \u2013 financial instruments
We measure financial instruments at fair value when they are classified as mandatory
fair value through profit or loss; held-for-trading; designated fair value through profit or
loss and fair value through other comprehensive income and they are recognised in the
financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net
exposure to either market or credit risk. In these cases, the fair value is derived from the
net risk exposure of that portfolio with portfolio level adjustments applied to incorporate
bid-offer spreads, counterparty credit risk, and funding costs (refer to \u2018Valuation
Adjustments\u2019).
Where the market for a financial instrument is not active, fair value is established using a
valuation technique. These valuation techniques involve a degree of estimation, the
extent of which depends on the instrument\u2019s complexity and the availability of market-
based data. The complexity and uncertainty in the financial instrument\u2019s fair value is
categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.
2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured
at amortised cost or at fair value through other comprehensive income, issued financial
guarantee and loan commitment (other than those classified as held for trading) is
assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.
ECL are a probability-weighted estimate of credit losses. The probability is determined by
the risk of default which is applied to the cash flow estimates. In the absence of a change
in credit rating, allowances are recognised when there is a reduction in the net present
value of expected cash flows. Following a significant increase in credit risk, ECL are
adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make
payments as they fall due. Future cashflows are discounted, so long-dated cashflows are
less likely to affect current expectations on credit loss. Our assessment of sector specific
risks, and whether additional adjustments are required, include expectations of the ability
of those sectors to meet their financing needs in the market. Changes in credit risk
appetite and how we manage credit positions that stem from climate considerations,
such as oil and gas, will directly affect our positions.
Judgement is exercised as follows:
\ue001
Models
\u2013 in certain low default portfolios, Basel parameter estimates are also applied
for IFRS 9.
\ue001
Non-modelled portfolios
\u2013 use a standardised capital requirement under Basel II.
Under IFRS 9, they have bespoke treatments for the identification of significant
increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for
appropriateness. The ECL calculation is based on expected future cash flows, which
is typically applied at a portfolio level.
\ue001
Multiple economic scenarios (MES)
\u2013 the central, or base, scenario is most critical to
the ECL calculation, independent of the method used to generate a range of
alternative outcomes and their probabilities.
\ue001
Significant increase in credit risk
\u2013
IFRS 9 requires that at each reporting date, an
entity shall assess whether the credit risk on an account has increased significantly
since initial recognition. Part of this assessment requires a comparison to be made
between the current lifetime PD (i.e. the current probability of default over the
remaining lifetime) with the equivalent lifetime PD as determined at the date of initial
recognition.
.
On restructuring where a financial asset is not derecognised, the revised cash flows are
used in re-estimating the credit loss. Where restructuring causes derecognition of the
original financial asset, the fair value of the replacement asset is used as the closing cash
flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares
or property, the exchange is accounted for as the sale of the loan and the acquisition of
equity securities or investment property. Where our acquired interest is in equity shares,
relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance
sheet when we conclude that there is no longer any realistic prospect of recovery of
part, or all, of the loan. For financial assets that are individually assessed for impairment,
the timing of the write-off is determined on a case-by-case basis. Such financial assets
are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-
negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed
portfolios are:
\ue001
Retail mortgages: write-off usually occurs within five years, or earlier, when an
account is closed, but can be longer where the customer engages constructively;
\ue001
Credit cards: the irrecoverable amount is typically written off after twelve arrears
cycles or at four years post default any remaining amounts outstanding are written
off;
\ue001
Overdrafts and other unsecured loans: write-off occurs within six years;
\ue001
Commercial loans: write-offs are determined in the light of individual circumstances;
and Business loans are generally written off within five years.3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.
3.9. Netting
Financial assets and financial liabilities are offset, and the net amount presented on the
balance sheet when, and only when, we currently have a legally enforceable right to set
off the recognised amounts and we intend either to settle on a net basis or to realise the
asset and settle the liability simultaneously. We are party to a number of arrangements,
including master netting agreements, that give us the right to offset financial assets and
financial liabilities, but where we do not intend to settle the amounts net or
simultaneously, the assets and liabilities concerned are presented separately on the
balance sheet.3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.10 Financial instruments - classification
Financial instruments are contracts that give rise to a financial asset of one entity and a corresponding financial liability or equity instrument of a counterparty entity,
such as cash, derivatives, loans, deposits and settlement balances. This note presents financial instruments classified in accordance with IFRS 9 \u2013 Financial
Instruments.
Judgement: classification of financial assets
Classification of financial assets between amortised cost and
fair value through other comprehensive income requires a
degree of judgement in respect of business models and
contractual cashflows.
\ue001
The business model criteria is assessed at a portfolio level
to determine whether assets are classified as held to
collect or held to collect and sell. Information that is
considered in determining the applicable business model
includes: the portfolio\u2019s policies and objectives; how the
performance and risks of the portfolio are managed,
evaluated and reported to management; and the
frequency, volume and timing of sales in prior periods,
sales expectation for future periods, and the reasons for
sales.
\ue001
The contractual cash flow characteristics of financial
assets are assessed with reference to whether the cash
flows represent solely payments of principal and interest
(SPPI). A level of judgement is made in assessing terms
that could change the contractual cash flows so that it
would not meet the condition for SPPI, including contingent
and leverage features,
non-recourse arrangements and
features that could modify the time value of money.
For accounting policy information refer to Accounting policies
3.8, 3.9 and 3.11.Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2023, customer loan impairment provisions amounted to \u00a33,645 million (2022 - \u00a33,434
million). A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan was advanced. Such evidence includes, changes in
the credit rating of a borrower, the failure to make payments in accordance with the loan agreement, significant reduction in the value of any security, breach of limits or covenants,
and observable data about relevant macroeconomic measures.
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management\u2019s assessment of any potential deterioration in the creditworthiness of the
borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of
impairment losses. For further information and sensitivity analysis, refer to Risk and capital management \u2013 Measurement uncertainty and ECL sensitivity analysis section.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80990": { "value": "2.2. Fair value \u2013 financial instruments
We measure financial instruments at fair value when they are classified as mandatory
fair value through profit or loss; held-for-trading; designated fair value through profit or
loss and fair value through other comprehensive income and they are recognised in the
financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net
exposure to either market or credit risk. In these cases, the fair value is derived from the
net risk exposure of that portfolio with portfolio level adjustments applied to incorporate
bid-offer spreads, counterparty credit risk, and funding costs (refer to \u2018Valuation
Adjustments\u2019).
Where the market for a financial instrument is not active, fair value is established using a
valuation technique. These valuation techniques involve a degree of estimation, the
extent of which depends on the instrument\u2019s complexity and the availability of market-
based data. The complexity and uncertainty in the financial instrument\u2019s fair value is
categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.
2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured
at amortised cost or at fair value through other comprehensive income, issued financial
guarantee and loan commitment (other than those classified as held for trading) is
assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.
ECL are a probability-weighted estimate of credit losses. The probability is determined by
the risk of default which is applied to the cash flow estimates. In the absence of a change
in credit rating, allowances are recognised when there is a reduction in the net present
value of expected cash flows. Following a significant increase in credit risk, ECL are
adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make
payments as they fall due. Future cashflows are discounted, so long-dated cashflows are
less likely to affect current expectations on credit loss. Our assessment of sector specific
risks, and whether additional adjustments are required, include expectations of the ability
of those sectors to meet their financing needs in the market. Changes in credit risk
appetite and how we manage credit positions that stem from climate considerations,
such as oil and gas, will directly affect our positions.
Judgement is exercised as follows:
\ue001
Models
\u2013 in certain low default portfolios, Basel parameter estimates are also applied
for IFRS 9.
\ue001
Non-modelled portfolios
\u2013 use a standardised capital requirement under Basel II.
Under IFRS 9, they have bespoke treatments for the identification of significant
increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for
appropriateness. The ECL calculation is based on expected future cash flows, which
is typically applied at a portfolio level.
\ue001
Multiple economic scenarios (MES)
\u2013 the central, or base, scenario is most critical to
the ECL calculation, independent of the method used to generate a range of
alternative outcomes and their probabilities.
\ue001
Significant increase in credit risk
\u2013
IFRS 9 requires that at each reporting date, an
entity shall assess whether the credit risk on an account has increased significantly
since initial recognition. Part of this assessment requires a comparison to be made
between the current lifetime PD (i.e. the current probability of default over the
remaining lifetime) with the equivalent lifetime PD as determined at the date of initial
recognition.
.
On restructuring where a financial asset is not derecognised, the revised cash flows are
used in re-estimating the credit loss. Where restructuring causes derecognition of the
original financial asset, the fair value of the replacement asset is used as the closing cash
flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares
or property, the exchange is accounted for as the sale of the loan and the acquisition of
equity securities or investment property. Where our acquired interest is in equity shares,
relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance
sheet when we conclude that there is no longer any realistic prospect of recovery of
part, or all, of the loan. For financial assets that are individually assessed for impairment,
the timing of the write-off is determined on a case-by-case basis. Such financial assets
are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-
negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed
portfolios are:
\ue001
Retail mortgages: write-off usually occurs within five years, or earlier, when an
account is closed, but can be longer where the customer engages constructively;
\ue001
Credit cards: the irrecoverable amount is typically written off after twelve arrears
cycles or at four years post default any remaining amounts outstanding are written
off;
\ue001
Overdrafts and other unsecured loans: write-off occurs within six years;
\ue001
Commercial loans: write-offs are determined in the light of individual circumstances;
and Business loans are generally written off within five years.3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.
3.9. Netting
Financial assets and financial liabilities are offset, and the net amount presented on the
balance sheet when, and only when, we currently have a legally enforceable right to set
off the recognised amounts and we intend either to settle on a net basis or to realise the
asset and settle the liability simultaneously. We are party to a number of arrangements,
including master netting agreements, that give us the right to offset financial assets and
financial liabilities, but where we do not intend to settle the amounts net or
simultaneously, the assets and liabilities concerned are presented separately on the
balance sheet.
3.10. Capital instruments
We classify a financial instrument that we issue as a liability if it is a contractual obligation
to deliver cash or another financial asset, or to exchange financial assets or financial
liabilities on potentially unfavourable terms and as equity if we evidence a residual
interest in our assets after the deduction of liabilities. Incremental costs and related tax
that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known
as treasury shares or own shares held) is deducted from retained earnings. On the
cancellation of treasury shares their nominal value is removed from retained earnings
and a consequential amount recognised in capital redemption in compliance with the
Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are
credited to equity, net of any directly attributable incremental costs.
3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2023, customer loan impairment provisions amounted to \u00a33,645 million (2022 - \u00a33,434
million). A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan was advanced. Such evidence includes, changes in
the credit rating of a borrower, the failure to make payments in accordance with the loan agreement, significant reduction in the value of any security, breach of limits or covenants,
and observable data about relevant macroeconomic measures.
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management\u2019s assessment of any potential deterioration in the creditworthiness of the
borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of
impairment losses. For further information and sensitivity analysis, refer to Risk and capital management \u2013 Measurement uncertainty and ECL sensitivity analysis section.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80991": { "value": "2.2. Fair value \u2013 financial instruments
We measure financial instruments at fair value when they are classified as mandatory
fair value through profit or loss; held-for-trading; designated fair value through profit or
loss and fair value through other comprehensive income and they are recognised in the
financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net
exposure to either market or credit risk. In these cases, the fair value is derived from the
net risk exposure of that portfolio with portfolio level adjustments applied to incorporate
bid-offer spreads, counterparty credit risk, and funding costs (refer to \u2018Valuation
Adjustments\u2019).
Where the market for a financial instrument is not active, fair value is established using a
valuation technique. These valuation techniques involve a degree of estimation, the
extent of which depends on the instrument\u2019s complexity and the availability of market-
based data. The complexity and uncertainty in the financial instrument\u2019s fair value is
categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.
2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured
at amortised cost or at fair value through other comprehensive income, issued financial
guarantee and loan commitment (other than those classified as held for trading) is
assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.
ECL are a probability-weighted estimate of credit losses. The probability is determined by
the risk of default which is applied to the cash flow estimates. In the absence of a change
in credit rating, allowances are recognised when there is a reduction in the net present
value of expected cash flows. Following a significant increase in credit risk, ECL are
adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make
payments as they fall due. Future cashflows are discounted, so long-dated cashflows are
less likely to affect current expectations on credit loss. Our assessment of sector specific
risks, and whether additional adjustments are required, include expectations of the ability
of those sectors to meet their financing needs in the market. Changes in credit risk
appetite and how we manage credit positions that stem from climate considerations,
such as oil and gas, will directly affect our positions.
Judgement is exercised as follows:
\ue001
Models
\u2013 in certain low default portfolios, Basel parameter estimates are also applied
for IFRS 9.
\ue001
Non-modelled portfolios
\u2013 use a standardised capital requirement under Basel II.
Under IFRS 9, they have bespoke treatments for the identification of significant
increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for
appropriateness. The ECL calculation is based on expected future cash flows, which
is typically applied at a portfolio level.
\ue001
Multiple economic scenarios (MES)
\u2013 the central, or base, scenario is most critical to
the ECL calculation, independent of the method used to generate a range of
alternative outcomes and their probabilities.
\ue001
Significant increase in credit risk
\u2013
IFRS 9 requires that at each reporting date, an
entity shall assess whether the credit risk on an account has increased significantly
since initial recognition. Part of this assessment requires a comparison to be made
between the current lifetime PD (i.e. the current probability of default over the
remaining lifetime) with the equivalent lifetime PD as determined at the date of initial
recognition.
.
On restructuring where a financial asset is not derecognised, the revised cash flows are
used in re-estimating the credit loss. Where restructuring causes derecognition of the
original financial asset, the fair value of the replacement asset is used as the closing cash
flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares
or property, the exchange is accounted for as the sale of the loan and the acquisition of
equity securities or investment property. Where our acquired interest is in equity shares,
relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance
sheet when we conclude that there is no longer any realistic prospect of recovery of
part, or all, of the loan. For financial assets that are individually assessed for impairment,
the timing of the write-off is determined on a case-by-case basis. Such financial assets
are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-
negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed
portfolios are:
\ue001
Retail mortgages: write-off usually occurs within five years, or earlier, when an
account is closed, but can be longer where the customer engages constructively;
\ue001
Credit cards: the irrecoverable amount is typically written off after twelve arrears
cycles or at four years post default any remaining amounts outstanding are written
off;
\ue001
Overdrafts and other unsecured loans: write-off occurs within six years;
\ue001
Commercial loans: write-offs are determined in the light of individual circumstances;
and Business loans are generally written off within five years.3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.10 Financial instruments - classification
Financial instruments are contracts that give rise to a financial asset of one entity and a corresponding financial liability or equity instrument of a counterparty entity,
such as cash, derivatives, loans, deposits and settlement balances. This note presents financial instruments classified in accordance with IFRS 9 \u2013 Financial
Instruments.
Judgement: classification of financial assets
Classification of financial assets between amortised cost and
fair value through other comprehensive income requires a
degree of judgement in respect of business models and
contractual cashflows.
\ue001
The business model criteria is assessed at a portfolio level
to determine whether assets are classified as held to
collect or held to collect and sell. Information that is
considered in determining the applicable business model
includes: the portfolio\u2019s policies and objectives; how the
performance and risks of the portfolio are managed,
evaluated and reported to management; and the
frequency, volume and timing of sales in prior periods,
sales expectation for future periods, and the reasons for
sales.
\ue001
The contractual cash flow characteristics of financial
assets are assessed with reference to whether the cash
flows represent solely payments of principal and interest
(SPPI). A level of judgement is made in assessing terms
that could change the contractual cash flows so that it
would not meet the condition for SPPI, including contingent
and leverage features,
non-recourse arrangements and
features that could modify the time value of money.
For accounting policy information refer to Accounting policies
3.8, 3.9 and 3.11.
The following tables analyse financial assets and liabilities in accordance with the categories of financial instruments
in IFRS 9.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0\u00a0\u00a0\u00a0
Amortised
Other
\u00a0
\u00a0
MFVTPL
DFV
FVOCI
cost
assets
Total
Assets
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
\u00a0\u00a0\u00a0
104,262
\u00a0
104,262
Trading assets
45,551
\u00a0\u00a0\u00a0\u00a0
45,551
Derivatives
(1)
78,904
\u00a0\u00a0\u00a0\u00a0
78,904
Settlement balances
\u00a0\u00a0\u00a0
7,231
\u00a0
7,231
Loans to bank - amortised cost
(2)
\u00a0\u00a0\u00a0
6,914
\u00a0
6,914
Loans to customers - amortised cost (
3
)
\u00a0\u00a0\u00a0
381,433
\u00a0
381,433
Other financial assets
703
5
28,699
21,695
\u00a0
51,102
Intangible assets
\u00a0\u00a0\u00a0\u00a0
7,614
7,614
Other assets
\u00a0\u00a0\u00a0\u00a0
8,760
8,760
Assets of disposal groups
(4)
\u00a0\u00a0\u00a0\u00a0
902
902
31 December 2023
125,158
5
28,699
521,535
17,276
692,673
Cash and balances at central banks
\u00a0\u00a0\u00a0
144,832
\u00a0
144,832
Trading assets
45,577
\u00a0\u00a0\u00a0\u00a0
45,577
Derivatives
(1)
99,545
\u00a0\u00a0\u00a0\u00a0
99,545
Settlement balances
\u00a0\u00a0\u00a0
2,572
\u00a0
2,572
Loans to bank - amortised cost
(2)
\u00a0\u00a0\u00a0
7,139
\u00a0
7,139
Loans to customers - amortised cost (
3
)
\u00a0\u00a0\u00a0
366,340
\u00a0
366,340
Other financial assets
787
-
16,973
13,135
\u00a0
30,895
Intangible assets
\u00a0\u00a0\u00a0\u00a0
7,116
7,116
Other assets
\u00a0\u00a0\u00a0\u00a0
9,176
9,176
Assets of disposal groups
(4)
\u00a0\u00a0\u00a0\u00a0
6,861
6,861
31 December 2022
145,909
-
16,973
534,018
23,153
720,053
\n
\n
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0
Amortised
Other
\u00a0
\u00a0
Held-for-trading
DFV
cost
liabilities
Total
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bank deposits
(5)
\u00a0 \u00a0
22,190
\u00a0
22,190
Customer deposits
\u00a0 \u00a0
431,377
\u00a0
431,377
Settlement balances
\u00a0 \u00a0
6,645
\u00a0
6,645
Trading liabilities
53,636
\u00a0 \u00a0 \u00a0
53,636
Derivatives
(1)
72,395
\u00a0 \u00a0 \u00a0
72,395
Other financial liabilities
(6)
\u00a0
2,888
52,201
\u00a0
55,089
Subordinated liabilities
\u00a0
237
5,477
\u00a0
5,714
Notes in circulation
\u00a0 \u00a0
3,237
\u00a0
3,237
Other liabilities
(7)
\u00a0 \u00a0
748
4,454
5,202
31 December 2023
126,031
3,125
521,875
4,454
655,485
Bank deposits
(5)
\u00a0 \u00a0
20,441
\u00a0
20,441
Customer deposits
\u00a0 \u00a0
450,318
\u00a0
450,318
Settlement balances
\u00a0 \u00a0
2,012
\u00a0
2,012
Trading liabilities
52,808
\u00a0 \u00a0 \u00a0
52,808
Derivatives
(1)
94,047
\u00a0 \u00a0 \u00a0
94,047
Other financial liabilities
(6)
\u00a0
2,377
46,730
\u00a0
49,107
Subordinated liabilities
\u00a0
345
5,915
\u00a0
6,260
Notes in circulation
\u00a0 \u00a0
3,218
\u00a0
3,218
Other liabilities
(7)
\u00a0 \u00a0
1,205
4,141
5,346
31 December 2022
146,855
2,722
529,839
4,141
683,557
\n
(1)
Includes net hedging derivatives assets of \u00a3114 million (2022 - \u00a3143 million) and net
hedging derivatives liabilities of \u00a3270 million (2022 - \u00a3132 million).
(2)
Includes items in the course of collection from other banks of \u00a3255 million (2022 -
\u00a3229 million).
(3)
Includes finance lease receivables of \u00a38,731 million (2022 - \u00a38,402 million).
(4)
Includes assets of disposal groups held at FVTPL of \u00a3841 million (2022 - \u00a35,397
million). The portfolio is classified as level 3 in the fair value hierarchy.
(5)
Includes items in the course of transmission to other banks of \u00a392 million (2022 -
\u00a3242 million).
(6)
The carrying amount of customer deposits designated at fair value through profit
or loss is the same as the principal amount for both periods. No amounts have
been recognised in the profit or loss for changes in credit risk associated with these
liabilities as the changes are immaterial both during the period and cumulatively.
(7)
Includes lease liabilities of \u00a3670 million (2022 - \u00a31,118 million), held at amortised
cost.
Reclassification of mortgages from amortised cost to fair value through profit or loss
In June 2022 UBIDAC announced the cessation of new mortgage business to its customers. On 1 July 2022 UBIDAC mortgages in both its continuing and discontinued businesses were
reclassified from amortised cost to fair value through profit or loss, reflecting the change in business model. We fair value these assets using a discounted cash flow method. Key inputs
include assumptions about cash flows from legally binding sales agreements for those mortgage assets that form part of the assets of disposal groups. For details on material
developments in assets and liabilities of disposals groups during the year, refer to Note 8.
The effect of the reclassification as at 1 July 2022 is shown below.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Amortised cost
MFVTPL
Change in value
\u00a0
\u00a3m
\u00a3m
\u00a3m
Amounts reclassified on balance sheet
\u00a0 \u00a0 \u00a0
Loans to customers
(1)
587
606
19
Assets of disposal groups
(2)
10,676
10,383
(293)
\u00a0
11,263
10,989
(274)
\n
(1)
Change in value recognised in continuing operations.
(2)
Change in value recognised in discontinued operations.
We originate loans that include features that change the contractual cash flows based on the borrower meeting certain contractually specified environmental, social and governance
(ESG) targets. These are known as ESG-linked (or sustainability-linked) loans. As part of the terms of these loans, the contractual interest rate is reduced or increased if the borrower
meets (or fails to meet) specific targets linked to the activity of the borrower, for example reducing carbon emissions, increasing the level of diversity at Board level, or achieving a
sustainable supply chain. ESG features are first assessed to ascertain whether the adjustment to the contractual cash flows results in a de minimis exposure to risks or volatility in
those contractual cash flows. If this is the case the classification of the loan is not affected. If the effect of the ESG feature is assessed as being more than de minimis, we apply
judgement to ensure that the ESG features do not generate compensation for risks that are not in line with a basic lending arrangement. This includes, amongst other aspects, a
review of the consistency of the ESG targets with the asset or activity of the borrower, and consideration of the targets within our risk appetite. Some of these loans are an integral
part of our climate and sustainable funding and financing target disclosed on page 16.
The table below analyses financial assets forming a component of ESG-linked loans and other products with contractual terms that could change the timing or amount of cash flows.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0 \u00a0
Positive impact on
Negative impact on
Reduction in
\u00a0
\u00a0
Carrying value
product margin
product margin
cash flows
Carrying value
\u00a0
\u00a3bn
bps
bps
\u00a3m
\u00a3bn
Sustainability-linked loans
6.5
3.2
3.9
2.5
5.0
Other products
16.1
-
-
-
8.9
Lending subject to performance triggers
22.6
\u00a0 \u00a0
2.5
13.9
\n
Additional information on finance lease receivables
The following table shows the reconciliation of undiscounted finance lease receivables to net investment in finance leases which are presented under Loans to customers-amortised
cost on the balance sheet.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Amount receivable under finance leases
\u00a0 \u00a0
Within 1 year
3,340
3,235
1 to 2 years
2,358
2,254
2 to 3 years
1,625
1,388
3 to 4 years
900
833
4 to 5 years
388
411
After 5 years
1,079
1,130
Total lease payments
9,690
9,251
Unguaranteed residual values
169
171
Future drawdowns
(12)
(13)
Unearned income
(1,025)
(889)
Present value of lease payments
8,822
8,520
Impairments
(91)
(118)
Net investment in finance leases
8,731
8,402
\n
Financial instruments \u2013 financial assets and liabilities that can be offset
The tables below present information on financial assets and financial liabilities that are offset on the balance sheet under IFRS or subject to enforceable master netting agreements
together with financial collateral received or given.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Instruments which can be offset
Potential for offset not recognised by IFRS
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0 \u00a0
Effect of master
\u00a0 \u00a0
Net amount after
Instruments
\u00a0
\u00a0 \u00a0 \u00a0 \u00a0
netting and similar
Cash
Securities
netting agreements and
outside netting
Balance sheet
\u00a0
Gross
IFRS offset
Balance sheet
agreements
collateral
collateral
effect of related collateral
agreements
total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets
99,023
(20,597)
78,426
(60,355)
(12,284)
(3,408)
2,379
478
78,904
Derivative liabilities
95,734
(23,869)
71,865
(60,355)
(6,788)
(1,663)
3,059
530
72,395
Net position
(1)
3,289
3,272
6,561
-
(5,496)
(1,745)
(680)
(52)
6,509
Trading reverse repos
39,573
(16,257)
23,316
(664)
-
(22,461)
191
378
23,694
Trading repos
42,442
(16,257)
26,185
(664)
-
(25,520)
1
717
26,902
Net position
(2,869)
-
(2,869)
-
-
3,059
190
(339)
(3,208)
Non trading reverse repos
37,477
(9,646)
27,831
(5)
-
(27,826)
-
80
27,911
Non trading repos
23,605
(9,646)
13,959
(5)
-
(13,954)
-
3
13,962
Net position
13,872
-
13,872
-
-
(13,872)
-
77
13,949
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Derivative assets
117,606
(18,730)
98,876
(77,365)
(14,079)
(4,571)
2,861
669
99,545
Derivative liabilities
115,177
(22,111)
93,066
(77,365)
(9,761)
(1,185)
4,755
981
94,047
Net position
(1)
2,429
3,381
5,810
-
(4,318)
(3,386)
(1,894)
(312)
5,498
Trading reverse repos
35,612
(14,510)
21,102
(2,445)
-
(18,458)
199
435
21,537
Trading repos
33,767
(14,510)
19,257
(2,445)
-
(16,812)
-
4,483
23,740
Net position
1,845
-
1,845
-
-
(1,646)
199
(4,048)
(2,203)
Non trading reverse repos
25,630
(5,702)
19,928
-
-
(19,928)
-
98
20,026
Non trading repos
16,977
(5,702)
11,275
-
-
(11,275)
-
-
11,275
Net position
8,653
-
8,653
-
-
(8,653)
-
98
8,751
\n
(1)
Net IFRS offset balance of \u00a33,272 million (2022 - \u00a33,381 million) relates to variation margin netting reflected on other balance sheet lines.
11 Financial instruments - valuation
Financial instruments recognised at fair value are revalued using techniques that can include observable inputs (pricing information that is readily available in the
market, for example UK Government securities), and unobservable inputs (pricing information that is not readily available, for example unlisted securities). Gains and
losses are recognised in the income statement and statement of comprehensive income as appropriate.
This note presents information on the valuation of financial
instruments.
The table below provides an overview of the various sections contained within the note.
Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.
Valuation
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Page
Financial instruments
\u00a0
Critical accounting policy: Fair value
341
Valuation
\u00a0
Fair value hierarchy
(D)
342
Valuation techniques
(D)
342
Inputs to valuation models
(D)
342
Valuation control
(D)
343
Key areas of judgement
(D)
343
Assets and liabilities split by fair value hierarchy level
(T)
344
Valuation adjustments
\u00a0
Fair value adjustments made
(T)
345
Funding valuation adjustments (FVA)
(D)
345
Credit valuation adjustments (CVA)
(D)
345
Bid-offer
(D)
345
Product and deal specific
(D)
345
Own credit
(D)
345
Level 3 additional information
\u00a0
Level 3 ranges of unobservable inputs
(D)
346
Level 3 instruments, valuation techniques and inputs
(T)
346
Level 3 sensitivities
(D)
347
Alternative assumptions
(D)
347
Other considerations
(D)
347
High and low range of fair value of level 3 assets and liabilities
(T)
347
Movement in level 3 assets and liabilities over the reporting period
(D)
348
Movement in level 3 assets and liabilities
(T)
348
Fair value of financial instruments measured at amortised cost
\u00a0
Fair value of financial instruments measured at amortised cost on the balance sheet
\u00a0
balance sheet
349
(D) = Descriptive; (T) = Table
\u00a0
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Fair value hierarchy
\n
Financial instruments carried at fair value have been classified under the fair value
\n
hierarchy. The classification ranges from level 1 to level 3, with more expert judgement
\n
and price uncertainty for those classified at level 3.
\n
The determination of an instrument\u2019s level cannot be made at a global product level as a
\n
single product type can be in more than one level. For example, a single name corporate
\n
credit default swap could be in level 2 or level 3 depending on the level of market activity
\n
for the referenced entity.
\n
Level 1
\u2013 instruments valued using unadjusted quoted prices in active and liquid markets,
\n
for identical financial instruments. Examples include government bonds, listed equity
\n
shares and certain exchange-traded derivatives.
\n
L
L
evel 2
- instruments valued using valuation techniques that have observable inputs.
\n
Observable inputs are those that are readily available with limited adjustments required.
\n
Examples include most government agency securities, investment-grade corporate
\n
bonds, certain mortgage products - including collateralised loan obligations (CLOs), most
\n
bank loans, repos and reverse repos, state and municipal obligations, most notes issued,
\n
certain money market securities, loan commitments and most over the counter (OTC)
\n
derivatives.
\n
L
L
evel 3
- instruments valued using a valuation technique where at least one input which
\n
could have a significant effect on the instrument\u2019s valuation, is not based on observable
\n
market data. Examples include non-derivative instrument\u2019s which trade infrequently,
\n
certain syndicated and commercial mortgage loans, private equity, and derivatives with
\n
unobservable model inputs.
\n
Valuation techniques
\n
NatWest Group derives the fair value of its instruments differently depending on whether
\n
the instrument is a non-modelled or a modelled product.
\n
Non-modelled products
are valued directly from a price input, typically on a position-by-
\n
position basis. Examples include equities and most debt securities.
\n
Non-modelled products can fall into any fair value levelling hierarchy depending on the
\n
observable market activity, liquidity, and assessment of valuation uncertainty of the
\n
instruments. The assessment of fair value and the classification of the instrument to a fair
\n
value level is subject to the valuation controls discussed in the Valuation control section.
\n
Modelled products
valued using a pricing model range in complexity from comparatively
\n
vanilla products such as interest rate swaps and options (e.g., interest rate caps and
\n
floors) through to more complex derivatives (e.g., balance guarantee swaps).
\n
For modelled products the fair value is derived using the model and the appropriate
\n
model inputs or parameters, as opposed to a cash price equivalent. Model inputs are
\n
taken either directly or indirectly from available data, where some inputs are also
\n
modelled.
\n
Fair value classification of modelled instruments is either level 2 or level 3, depending on
\n
the product/model combination, the observability and quality of input parameters and
\n
other factors. All these must be assessed to classify a position. The modelled product is
\n
assigned to the lowest fair value hierarchy level of any significant input used in that
\n
valuation.
\n
Most derivative instruments, for example vanilla interest rate swaps, foreign exchange
\n
swaps and liquid single name credit derivatives, are classified as level 2. This is because
\n
they are vanilla products valued using standard market models and with observable
\n
inputs. Level 2 products range from vanilla to more complex products, where more
\n
complex products remain classified as level 2 due to the low materiality of any
\n
unobservable inputs.
\n
Inputs to valuation models
\n
When using valuation techniques, the fair value can be significantly affected by the
\n
choice of
valuation model
and underlying assumptions. Factors considered include the
\n
cashflow amounts and timing of those cash flows, and application of appropriate discount
\n
rates, incorporating both funding and credit risk. Values between and beyond available
\n
data points are obtained by interpolation and extrapolation. The principal inputs to these
\n
valuation techniques are as follows:
\n
Bond prices
- quoted prices are generally available for government bonds, certain
\n
corporate securities, and some mortgage-related products.
\n
Credit spreads/margins
- these reflect credit default swap levels or the return required
\n
over a benchmark rate or index to compensate for the referenced credit risk. Where
\n
available, these are derived from the price of credit default swaps or other credit-based
\n
instruments, such as debt securities. When direct prices are not available; credit
\n
spreads/margins are determined with reference to available prices of entities with similar
\n
characteristics.
\n
Interest rates
- these are principally based on interest rate swap prices referencing
\n
benchmark interest rates. Interest rates, include SONIA (Sterling Overnight Interbank
\n
Average Rate) and other overnight rates. Other quoted interest rates may also be used
\n
from both the bond, and futures markets.
\n
F
F
oreign currency exchange rates
- there are observable prices both for spot and
\n
forward contracts and futures in the world's major currencies.
\n
E
E
quity and equity index prices
- quoted prices are generally readily available for equity
\n
shares listed on the world's major stock exchanges and for major indices on such shares.
Price volatilities and correlations
- volatility is a measure of the tendency of a price to
change with time. Correlation measures the degree which two or more prices or
variables are observed to move together. Variables that move in the same direction
show positive correlation; those that move in opposite directions are negatively
correlated.
P
P
repayment rates
- are used to reflect how fast a pool of assets prepay. The fair value of
a financial instrument that can be prepaid by the issuer or borrower differs from that of
an instrument that cannot be prepaid. When valuing prepayable instruments, the value of
this prepayment option is considered.
R
R
ecovery rates/loss given default
- are used as an input to valuation models and
reserves for asset-backed securities and other credit products as an indicator of severity
of losses on default. Recovery rates are primarily sourced from market data providers,
the value of the underlying collateral or inferred from observable credit spreads.
Valuation control
NatWest Group's control environment for the determination of the fair value of financial
instruments includes formalised procedures for the review and validation of fair values.
The review of market prices and inputs is performed by an independent price verification
(IPV) team
IPV is a key element of the control environment. Valuations are first performed by the
business which entered into the transaction. These valuations are then reviewed by the
IPV team, independent of those trading the financial instruments, in light of available
pricing evidence.
Independent pricing data is collated from a range of sources. Each source is reviewed for
quality and the independent data applied in the IPV processes using a formalised input
quality hierarchy. Consensus services are one source of independent data and
encompass interest rate, currency, credit, and bond markets, providing comprehensive
coverage of vanilla products and a wide selection of exotic products.
Where measurement differences are identified through the IPV process these are
grouped by the quality hierarchy of the independent data. If the size of the difference
exceeds defined thresholds, an adjustment is made to bring the valuation to within the
independently calculated fair value range.
IPV takes place at least monthly, for all fair value financial instruments. The IPV control
includes formalised reporting and escalation of any valuation differences in breach of
established thresholds.
The quality and completeness of the information gathered in the IPV process gives an
indication as to the liquidity and valuation uncertainty of an instrument and forms part of
the information considered when determining fair value hierarchy classifications.
Initial fair value level classification of a financial instrument is carried out by the IPV team.
These initial classifications are subject to senior management review. Particular attention
is paid to instruments transferring from one level to another, new instrument classes or
products, instruments where the transaction price is significantly different from the fair
value and instruments where valuation uncertainty is high.
Valuation Committees are made up of valuation specialists and senior business
representatives from various functions and oversees pricing, reserving and valuations
issues. These committees meet monthly to review and ratify any methodology changes.
The Executive Valuation Committee meets quarterly to address key material and
subjective valuation issues, to review items escalated by Valuation Committees and to
discuss other relevant industry matters.
The Group model risk policy sets the policy for model documentation, testing and review.
Governance of the model risk policy is carried out by the Group model risk oversight
committee, which comprises model risk owners and independent model experts. All
models are required to be independently validated in accordance with the Model Risk
Policy.
Key areas of judgement
Over the years the business has simplified, with most products classified as level 1 or 2 of
the fair value hierarchy. However, the diverse range of products historically traded by
NatWest Group means some products remain classified as level 3. Level 3 indicates a
significant level of pricing uncertainty, where expert judgement is used. As such, extra
disclosures are required in respect of level 3 instruments.
In general, the degree of expert judgement used and hence valuation uncertainty
depends on the degree of liquidity of an instrument or input.
Where markets are liquid, little judgement is required. However, when the information
regarding the liquidity in a particular market is not clear, a judgement may need to be
made. For example, for an equity traded on an exchange, daily volumes of trading can
be seen, but for an OTC derivative, assessing the liquidity of the market with no central
exchange is more challenging.
A key related matter is where a market moves from liquid to illiquid or vice versa. Where
this movement is considered temporary, the fair value level is not changed. For example,
if there is little market trading in a product on a reporting date but at the previous
reporting date and during the intervening period the market has been liquid. In this case,
the instrument will continue to be classified at the same level in the hierarchy. This is to
provide consistency so that transfers between levels are driven by genuine changes in
market liquidity and do not reflect short term or seasonal effects. Material movements
between levels are reviewed quarterly by the business and IPV.
The breadth and depth of the IPV data allows for a rules-based quality assessment to be
made of market activity, liquidity, and pricing uncertainty, which assists with the process
of allocation to an appropriate level. Where suitable independent pricing information is
not readily available, the quality assessment will result in the instrument being assessed
as level 3.
The table below shows the assets and liabilities held by NatWest Group split by fair value hierarchy level. Level 1 are considered the most liquid instruments, and level 3 the most
illiquid, valued using expert judgement and so carry the most significant price uncertainty.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Loans
-
33,388
209
33,597
-
35,260
395
35,655
Securities
8,447
3,493
14
11,954
7,463
2,458
1
9,922
Derivatives
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
1
43,912
650
44,563
5
52,764
711
53,480
Foreign exchange
-
34,096
65
34,161
-
45,715
114
45,829
Other
-
72
108
180
-
54
182
236
Other financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Loans
-
108
657
765
-
172
727
899
Securities
17,848
10,536
258
28,642
10,380
6,278
203
16,861
Total financial assets held at fair value
26,296
125,605
1,961
153,862
17,848
142,701
2,333
162,882
As a % of total fair value assets
17%
82%
1%
\u00a0
11%
88%
1%
\u00a0
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Deposits
-
43,126
1
43,127
-
42,486
1
42,487
Debt securities in issue
-
706
-
706
-
797
-
797
Short positions
7,936
1,865
2
9,803
7,462
2,062
-
9,524
Derivatives
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
-
38,044
439
38,483
2
47,855
678
48,535
Foreign exchange
-
33,528
58
33,586
-
45,139
98
45,237
Other
-
138
188
326
-
76
199
275
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Debt securities in issue
-
1,605
3
1,608
-
1,327
-
1,327
Other deposits
-
1,280
-
1,280
-
1,050
-
1,050
Subordinated liabilities
-
237
-
237
-
345
-
345
Total financial liabilities held at fair value
7,936
120,529
691
129,156
7,464
141,137
976
149,577
As a % of total fair value liabilities
6%
93%
1%
\u00a0
5%
94%
1%
\u00a0
\n
(1)
Transfers between levels are deemed to have occurred at the beginning of the quarter in which the instrument was transferred.
(2)
For an analysis of debt securities held at mandatory fair value through profit or loss by issuer as well as ratings and derivatives, by type and contract, refer to Risk and capital management \u2013 Credit risk.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Valuation adjustments
\n
When valuing financial instruments in the trading book, adjustments are made to mid-
\n
market valuations to cover bid-offer spread, funding and credit risk. These adjustments
\n
are presented in the table below:
\n\n \n
2023
2022
Adjustment
\u00a3m
\u00a3m
Funding valuation adjustments
132
173
Credit valuation adjustments
236
300
Bid-offer
86
130
Product and deal specific
103
141
Total
557
744
\n
Funding valuation adjustments decreased during the year, primarily driven by changes in
\n
GBP interest rates and funding spreads tightening.
\n
The decrease in credit value adjustments was driven by credit spreads tightening and a
\n
reduction in exposures, primarily due to portfolio ageing, partially offset by new trade
\n
activity. Interest rates tightening, trade restructuring and trade specific valuation
\n
adjustments were the drivers of the decrease in product and deal specific. The decrease
\n
in bid-offer was driven by risk reduction.
\n
Funding valuation adjustments (FVA)
\n
FVA represents an estimate of the adjustment that a market participant would make to
\n
incorporate funding costs and benefits that arise in relation to derivative exposures. FVA
\n
is calculated as a portfolio level adjustment and can result in either a funding charge
\n
(positive) or funding benefit (negative).
\n
Funding levels are applied to estimated potential future exposures. For uncollateralised
\n
derivatives, the exposure reflects the future valuation of the derivative. For collateralised
\n
derivatives, the exposure reflects the difference between the future valuation of the
\n
derivative and the level of collateral posted.
\n
Credit valuation adjustments (CVA)
\n
CVA represents an estimate of the adjustment to fair value that is made to incorporate
\n
the counterparty credit risk inherent in derivative exposures. CVA is calculated on a
\n
portfolio basis reflecting an estimate of the amount a third party would charge to assume
\n
the credit risk.
\n
Collateral held under a credit support agreement is factored into the CVA calculation. In
\n
such cases where NatWest Group holds collateral against counterparty exposures, CVA
\n
is held to the extent that residual risk remains.
\n
FVA and CVA are actively managed by a credit and market risk hedging process, and
\n
therefore movements in CVA and FVA are partially offset by trading revenue on the
\n
hedges.
\n
Bid-offer
\n
Fair value positions are required to be marked to exit levels, represented by bid (long
\n
positions) or offer (short positions) levels. Non-derivative positions are typically marked
\n
directly to bid or offer prices. However derivative exposures are adjusted to exit levels by
\n
taking bid-offer reserves calculated on a portfolio basis. The reserving approach is based
\n
on current market bid-offer spreads and standard market bucketing of risk.
\n
Bid-offer spreads vary by maturity and risk type to reflect different spreads in the
\n
market. For positions where there is no observable quote, the bid-offer spreads are
\n
widened in comparison to proxies to reflect reduced liquidity or observability.
\n
Netting is applied on a portfolio basis to reflect the value at which NatWest Group
\n
believes it could exit the net risk of the portfolio, rather than the sum of exit costs for
\n
each of the portfolio\u2019s individual trades. This is applied where the asset and liability
\n
positions are managed as a portfolio for risk and reporting purposes.
\n
Product and deal specific
\n
On initial recognition of financial assets and liabilities valued using valuation techniques
\n
which have a significant dependence on information other than observable market data,
\n
any difference between the transaction price and that derived from the valuation
\n
technique is deferred. Such amounts are recognised in the income statement over the
\n
life of the transaction, when market data becomes observable, or when the transaction
\n
matures or is closed out as appropriate. On 31 December 2023, net gains of \u00a378 million
\n
(2022 - \u00a374 million) were carried forward. During the year, net gains of \u00a3119 million
\n
(2022 - \u00a397 million) were deferred and \u00a3115 million (2022 - \u00a394 million) were recognised
\n
in the income statement.
\n
Where system-generated valuations do not accurately reflect market prices, manual
\n
valuation adjustments are applied either at a position or portfolio level. Manual
\n
adjustments are subject to the scrutiny of independent control teams and are subject to
\n
monthly review by senior management.
\n
Own credit
\n
NatWest Group considers the effect of its own credit standing when valuing financial
\n
liabilities recorded at fair value. Own credit spread adjustments are made when valuing
\n
issued debt held at fair value, including issued structured notes. An own credit
\n
adjustment is applied to positions where it is believed that counterparties would consider
\n
NatWest Group\u2019s creditworthiness when pricing trades.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Level 3 additional information
\n
For illiquid assets and liabilities, classified as level 3, additional information is provided on the valuation techniques used and price sensitivity of the products to those inputs. This is to
\n
enable the reader to gauge the level of uncertainty that arises from positions with significant unobservable inputs or modelling parameters.
\n
Level 3 ranges of unobservable inputs
\n
The table below provides additional information on level 3 instruments and inputs. This shows the valuation technique used for the fair value calculation, the unobservable input and
\n
input range.
\n \n \n
2023
20
22
Financial instrument
Valuation technique
Unobservable inputs
Units
Low
High
Low
High
Trading assets and Other financial assets
Loans
Price-based
Price
%
-
123
-
113
Discount cash flow
Credit spreads
bps
49
119
56
114
Discount cash flow
Discount margin
bps
174
228
174
222
Debt securities
Price-based
Price
%
-
119
-
255
Equity Shares
Price-based
Price
GBP
-
32,142
-
34,027
Price-based
Price
%
-
30
-
30
Discount cash flow
Discount margin
%
7
9
6
8
Net asset valuation
Fund NAV
%
80
120
80
120
Derivative assets and liabilities
Credit derivatives
Credit derivative pricing
Credit spreads
bps
13
600
7
530
Option pricing
Correlation
%
(15)
95
(15)
95
Volatility
%
30
80
30
80
Upfront points
%
-
99
-
99
Recovery rate
%
-
60
-
60
Interest rate & FX
Option pricing
Correlation
%
(50)
99
(50)
100
derivatives
Volatility
%
30
111
30
127
Constant Prepayment Rate
%
2
22
2
21
Mean Reversion
%
-
20
-
92
Inflation volatility
%
2
2
1
2
Inflation rate
%
2
3
2
3
\n
(1)
Valuation for private equity investments may be estimated by looking at past prices of similar stocks and from valuation statements where valuations are usually derived from earnings measures such as EBITDA or net asset value (NAV). Similarly, for
\n
equity or bond fund investments, prices may be estimated from valuation or credit statements using NAV or similar measures.
\n
(2)
NatWest Group does not have any material liabilities measured at fair value that are issued with an inseparable third-party credit enhancement.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Level 3 sensitivities
\n
The level 3 sensitivities presented below are calculated at a trade or low-level portfolio
\n
basis rather than an overall portfolio basis. As individual sensitivities are aggregated with
\n
no reflection of the correlated nature between instruments, the overall portfolio
\n
sensitivity may not be accurately reflected. For example, some portfolios may be
\n
negatively correlated to others, where a downwards movement in one asset would
\n
produce an upwards movement in another. However, due to the additive presentation of
\n
the above figures this correlation impact cannot be displayed. As such, the actual
\n
potential downside sensitivity of the total portfolio may be less than the non-correlated
\n
sum of the additive figures as shown in the below table.
\n
Alternative assumptions
\n
Reasonably plausible alternative assumptions of unobservable inputs are determined
\n
based on a specified target level of certainty of 90%.
\n
Alternative assumptions are determined with reference to all available evidence including
\n
consideration of the following: quality of independent pricing information considering
\n
consistency between different sources, variation over time, perceived tradability or
\n
otherwise of available quotes; consensus service dispersion ranges; volume of trading
\n
activity and market bias (e.g. one-way inventory); day 1 profit or loss arising on new
\n
trades; number and nature of market participants; market conditions; modelling
\n
consistency in the market; size and nature of risk; length of holding of position; and
\n
market intelligence.
\n
Other considerations
\n
Whilst certain inputs used to calculate CVA, FVA and own credit adjustments are not
\n
based on observable market data, the uncertainty of these inputs is not considered to
\n
have a significant effect on the net valuation of the related derivative portfolios and
\n
issued debt.
\n
As such, the fair value levelling of the derivative portfolios and issued debt is not
\n
determined by CVA, FVA or own credit inputs. In addition, any fair value sensitivity
\n
driven by these inputs is not included in the level 3 sensitivities presented.
\n
The table below shows the high and low range of fair value of the level 3 assets and liabilities. This range incorporates the range of fair value inputs as described in the previous table.
\n\n \n
2023
2022
Level 3
Favourable
Unfavourable
Level 3
Favourable
Unfavourable
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Trading assets
Loans
209
-
-
395
10
(10)
Securities
14
-
-
1
-
-
Derivatives
Interest rate
650
20
(20)
711
30
(30)
Foreign exchange
65
-
-
114
10
(10)
Other
108
10
(10)
182
10
(10)
Other financial assets
Loans
657
-
(40)
727
-
(10)
Securities
258
20
(50)
203
20
(30)
Total financial assets held at fair value
1,961
50
(120)
2,333
80
(100)
Liabilities
Trading liabilities
Deposits
1
-
-
1
-
-
Short positions
2
-
-
-
-
-
Derivatives
Interest rate
439
10
(10)
678
30
(30)
Foreign exchange
58
-
-
98
-
-
Other
188
10
(10)
199
-
-
Other financial liabilities - debt securities in issue
3
-
-
-
-
-
Total financial liabilities held at fair value
691
20
(20)
976
30
(30)
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Movement in level 3 assets and liabilities
\n
The following table shows the movement in level 3 assets and liabilities in the year.
\n\n \n
Other
Other
Other
Other
Derivatives
trading
financial
Total
Derivatives
trading
financial
Total
assets
assets (2)
assets (3)
assets
liabilities
liabilities (2)
liabilities
liabilities
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
1,007
396
930
2,333
975
1
-
976
Amounts recorded in the income statement
(1)
(156)
(88)
1
(243)
(313)
-
-
(313)
Amount recorded in the statement of
comprehensive income
-
-
32
32
-
-
-
-
Level 3 transfers in
6
15
16
37
7
2
-
9
Level 3 transfers out
(5)
(32)
(190)
(227)
(9)
(2)
-
(11)
Purchases/originations
180
8
275
463
195
2
3
200
Settlements/other decreases
(70)
(8)
(86)
(164)
(51)
-
-
(51)
Sales
(137)
(65)
(52)
(254)
(116)
-
-
(116)
Foreign exchange and other adjustments
(2)
(3)
(11)
(16)
(3)
-
-
(3)
At 31 December
823
223
915
1,961
685
3
3
691
Amounts recorded in the income statement
in respect of balances held at period end
- unrealised
67
(39)
1
29
(121)
-
-
(121)
2022
At 1 January
918
740
394
2,052
606
3
-
609
Amounts recorded in the income statement
(1)
126
31
(14)
143
382
(1)
-
381
Amount recorded in the statement of
comprehensive income
-
-
(20)
(20)
-
-
-
-
Level 3 transfers in
193
1
532
726
78
3
-
81
Level 3 transfers out
(122)
(147)
(68)
(337)
(61)
(3)
-
(64)
Purchases/originations
355
274
185
814
382
-
-
382
Settlements/other decreases
(40)
(75)
-
(115)
(41)
-
-
(41)
Sales
(423)
(434)
(101)
(958)
(376)
(2)
-
(378)
Foreign exchange and other adjustments
-
6
22
28
5
1
-
6
At 31 December
1,007
396
930
2,333
975
1
-
976
Amounts recorded in the income statement
in respect of balances held at period end
- unrealised
126
31
(16)
141
382
(1)
-
381
\n
(1)
There were \u00a369 million net gains on trading assets and liabilities (2022 \u2013 \u00a3224 million net losses) recorded in income from trading activities. Net gains on other instruments of \u00a31 million (2022 \u2013 \u00a314 million net losses) were recorded in other operating
\n
income and interest income as appropriate.
\n
(2)
Other trading assets and other trading liabilities comprise assets and liabilities held at fair value in trading portfolios.
\n
(3)
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.
Fair value of financial instruments measured at amortised cost on the balance sheet
The following table shows the carrying value and fair value of financial instruments measured at amortised cost on the balance sheet.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Items where
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
fair value
\u00a0
Carrying
\u00a0
Fair value hierarchy level
approximates
\u00a0
value
Fair value
Level 1
Level 2
Level 3
carrying value
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104.3
104.3
-
-
-
104.3
Settlement balances
7.2
7.2
-
-
-
7.2
Loans to banks
6.9
7.0
-
2.2
0.6
4.2
Loans to customers
381.4
373.2
-
27.5
345.7
-
Other financial assets - securities
21.7
21.6
4.0
6.6
11.0
-
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
144.8
144.8
-
-
-
144.8
Settlement balances
2.6
2.6
-
-
-
2.6
Loans to banks
7.1
7.1
-
4.2
2.8
0.1
Loans to customers
366.3
354.5
-
20.3
334.2
-
Other financial assets - securities
13.1
12.8
3.6
3.2
6.0
-
2023
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
22.2
22.3
-
15.4
2.7
4.2
Customer deposits
431.4
431.0
-
30.7
48.8
351.5
Settlement balances
6.6
6.6
-
-
-
6.6
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
- debt securities in issue
52.2
52.2
-
41.7
10.5
-
Subordinated liabilities
5.5
5.4
-
5.4
-
-
Notes in circulation
3.2
3.2
-
-
-
3.2
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
20.4
20.0
-
13.1
2.2
4.7
Customer deposits
450.3
450.3
-
12.7
30.6
407.0
Settlement balances
2.0
2.0
-
-
-
2.0
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
- debt securities in issue
46.7
46.1
-
40.7
5.4
-
Subordinated liabilities
5.9
5.6
-
5.5
0.1
-
Notes in circulation
3.2
3.2
-
-
-
3.2
\n
The assumptions and methodologies underlying the
calculation of fair values of financial instruments at the
balance sheet date are as follows:
Short-term financial instruments
For certain short-term financial instruments, including but
not limited to, cash and balances at central banks,
settlement balances, loans with short-term maturities, notes
in circulation and customer demand deposits, carrying
value is deemed a reasonable approximation of fair value.
Loans to banks and customers
In estimating the fair value of net loans to customers and
banks measured at amortised cost, NatWest Group\u2019s loans
are segregated into appropriate portfolios reflecting the
characteristics of the constituent loans. Two principal
methods are used to estimate fair value:
(a)
(b)
Contractual cashflows that are discounted using a
market discount rate that incorporates the current
spread for the borrower or where this is not observable,
the spread for borrowers of a similar credit standing.
Expected cash flows (unadjusted for credit losses) are
discounted at the current offer rate for the same or
similar products. The current methodology caps all loan
values at par rather than modelling clients\u2019 option to
repay loans early. This approach is adopted for lending
portfolios in Retail Banking, Ulster Bank RoI, Commercial
& Institutional (SME loans) and Private Banking in order
to reflect the homogeneous nature of these portfolios.
Debt securities and subordinated liabilities
Most debt securities are valued using quoted prices in
active markets or from quoted prices of similar financial
instruments. The remaining population is valued using
discounted cashflows at current offer rates.
Bank and customer deposits
Fair values of deposits are estimated using discounted cash
flow valuation techniques. Where required, methodologies
can be revised as additional information and valuation
inputs become available.13 Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities held at fair value and classified as held-for-trading. Financial instruments are classified as held-for-trading
if they are held for the purpose of selling or repurchasing them in the short term, to make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
For accounting policy information refer to Accounting policy 3.8.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Assets
\u00a3m
\u00a3m
Loans
\u00a0 \u00a0
Reverse repos
23,694
21,537
Collateral given
9,141
13,005
Other loans
762
1,113
Total loans
33,597
35,655
Securities
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
2,729
2,205
- US
2,600
2,345
- Other
3,062
2,799
Financial institutions and corporate
3,563
2,573
Total securities
11,954
9,922
Total
45,551
45,577
Liabilities
\u00a0 \u00a0
Deposits
\u00a0 \u00a0
Repos
26,902
23,740
Collateral received
15,075
17,680
Other deposits
1,150
1,067
Total deposits
43,127
42,487
Debt securities in issue
706
797
Short positions
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
1,893
2,313
- US
2,071
1,293
- Other
4,049
3,936
Financial institutions and Corporate
1,790
1,982
Total short positions
9,803
9,524
Total
53,636
52,808
\n
\n
\n
14 Derivatives
Derivative is a term covering a wide range of financial instruments that derive their
fair value from an underlying rate or price, for example interest rates or exchange
rates (the underlying). NatWest Group uses derivatives as a part of its trading activities, to manage its own risks such as interest rate, foreign exchange, or credit risk
and in certain customer transactions. This note
shows contracted volumes of derivatives, how they are used for hedging purposes and more specifically the effects of
the application of hedge accounting.
For accounting policy information refer to Accounting policies 3.8 and 3.11.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Notional
Asset
Liability
\u00a0
Traded on
\u00a0 \u00a0
Traded on
\u00a0 \u00a0
Traded on
\u00a0 \u00a0
\u00a0
recognised
Traded over
\u00a0
recognised
Traded over
\u00a0
recognised
Traded over
\u00a0
\u00a0
exchanges
the counter
Total
exchanges
the counter
Total
exchanges
the counter
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest rate
819
9,449
10,268
48
44,515
44,563
34
38,449
38,483
- Swaps
-
6,533
6,533
-
33,807
33,807
-
27,424
27,424
- Options
510
1,674
2,184
48
10,708
10,756
34
11,025
11,059
- Forwards and futures
309
1,242
1,551
-
-
-
-
-
-
Exchange rate
1
3,119
3,120
-
34,161
34,161
-
33,586
33,586
- Swaps
-
449
449
-
8,173
8,173
-
7,370
7,370
- Options
1
674
675
-
4,181
4,181
-
4,197
4,197
- Spot, forwards and futures
-
1,996
1,996
-
21,807
21,807
-
22,019
22,019
Credit
-
15
15
-
180
180
-
326
326
Equity and commodity
-
-
-
-
-
-
-
-
-
Total
820
12,583
13,403
48
78,856
78,904
34
72,361
72,395
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
707
10,035
10,742
113
53,367
53,480
33
48,502
48,535
- Swaps
-
7,201
7,201
-
39,039
39,039
-
32,992
32,992
- Options
296
1,418
1,714
113
14,328
14,441
33
15,510
15,543
- Forwards and futures
411
1,416
1,827
-
-
-
-
-
-
Exchange rate
2
3,166
3,168
-
45,829
45,829
-
45,237
45,237
- Swaps
-
438
438
-
11,840
11,840
-
10,430
10,430
- Options
2
835
837
-
6,375
6,375
-
6,647
6,647
- Spot, forwards and futures
-
1,893
1,893
-
27,614
27,614
-
28,160
28,160
Credit
-
15
15
-
236
236
-
275
275
Equity and commodity
-
-
-
-
-
-
-
-
-
Total
709
13,216
13,925
113
99,432
99,545
33
94,014
94,047
\n
Included in the table above is the notional amount of \u00a37,280 billion (2022 - \u00a38,065 billion) of interest rate derivatives that are traded over the counter and settled through central
clearing counterparties. NatWest Group has no other type of derivatives that are settled through central counterparties.
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
NatWest Group applies hedge accounting to reduce the accounting mismatch caused in
\n
the income statement by using derivatives to hedge the following risks: interest rate,
\n
foreign exchange and the foreign exchange risk associated with net investment in
\n
foreign operations.
\n
NatWest Group\u2019s interest rate hedging relates to the management of NatWest Group\u2019s
\n
non-trading structural interest rate risk, caused by the mismatch between fixed interest
\n
rates and floating interest rates on its financial instruments. NatWest Group manages
\n
this risk within approved limits. Residual risk positions are hedged with derivatives,
\n
principally interest rate swaps.
\n
Cash flow hedges of interest rate risk relate to exposures to the variability in future
\n
interest payments and receipts due to the movement of interest rates on forecast
\n
transactions and on financial assets and financial liabilities. This variability in cash flows is
\n
hedged by interest rate swaps, which convert variable cash flows into fixed. For these
\n
cash flow hedge relationships, the hedged items are actual and forecast variable interest
\n
rate cash flows arising from financial assets and financial liabilities with interest rates
\n
linked to the relevant interest rates, most notably SOFR, EURIBOR, the European Central
\n
Bank deposit rate, SONIA and the Bank of England Official Bank Rate. The variability in
\n
cash flows due to movements in the relevant interest rate is hedged; this risk component
\n
is identified using the risk management systems of NatWest Group and encompasses the
\n
majority of cash flow variability risk.
\n
Suitable larger fixed rate financial instruments are subject to fair value hedging in line
\n
with documented risk management strategies.
\n
Fair value hedges of interest rate risk involve interest rate swaps transforming the fixed
\n
interest rate risk in financial assets and financial liabilities to floating. The hedged risk is
\n
the risk of changes in the hedged item\u2019s fair value attributable to changes in the interest
\n
rate risk component of the hedged item. The significant interest rates identified as risk
\n
components are SOFR, EURIBOR, ESTR and SONIA. These risk components are
\n
identified using the risk management systems of NatWest Group and encompass the
\n
majority of the hedged item\u2019s fair value risk.
\n
Hedge accounting using derivatives
\n
NatWest Group hedges the exchange rate risk of its net investment in foreign currency
\n
denominated operations with currency borrowings and forward foreign exchange
\n
contracts.
\n
NatWest Group reviews the value of the investments\u2019 net assets, executing hedges
\n
where appropriate to reduce the sensitivity of capital ratios to foreign exchange rate
\n
movement. Hedge accounting relationships will be designated where required.
\n
Exchange rate risk also arises in NatWest Group where payments are denominated in
\n
currencies other than the functional currency. Residual risk positions are hedged with
\n
foreign exchange derivatives, fixing the exchange rate the payments will be settled in.
\n
The derivatives are documented as cash flow hedges.
\n
For all cash flow hedging, fair value hedge relationships and net investment hedging,
\n
NatWest Group determines that there is an economic relationship between the hedged
\n
item and hedging instrument via assessing the initial and ongoing effectiveness by
\n
comparing movements in the fair value of the expected highly probable forecast interest
\n
cash flows/ fair value of the hedged item attributable to the hedged risk with movements
\n
in the fair value of the expected changes in cash flows from the hedging instrument. The
\n
method used for comparing movements is either regression testing, or the dollar offset
\n
method. The method for testing effectiveness and the period over which the test is
\n
performed depends on the applicable risk management strategy and is applied
\n
consistently to each risk management strategy. Hedge effectiveness is assessed on a
\n
cumulative basis and the determination of effectiveness is in line with the requirements of
\n
IAS 39.
\n
NatWest Group uses either the actual ratio between the hedged item and hedging
\n
instrument(s) or one that minimises hedge ineffectiveness to establish the hedge ratio for
\n
hedge accounting. Hedge ineffectiveness is measured in line with the requirements of IAS
\n
39 and recognised in the income statement as it arises.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Derivatives in hedge accounting relationships
\n
Included in the table below are derivatives held for hedging purposes as follows.
2023
2022
Changes in fair value used for
Changes in fair value used for
Notional
Assets
Liabilities
hedge ineffectiveness (1)
Notional
Assets
Liabilities
hedge ineffectiveness (1)
\u00a3bn
\u00a3m
\u00a3m
\u00a3m
\u00a3bn
\u00a3m
\u00a3m
\u00a3m
Fair value hedging
Interest rate contracts
(2)
67.6
1,139
2,607
406
58.7
1,554
3,009
482
Cash flow hedging
Interest rate contracts
140.0
1,924
4,970
1,211
167.6
2,681
6,207
(3,342)
Exchange rate contracts
16.9
112
254
(12)
6.3
142
112
(3)
Net investment hedging
Exchange rate contracts
0.3
2
7
(3)
0.5
1
9
4
224.8
3,177
7,838
1,602
233.1
4,378
9,337
(2,859)
IFRS netting and clearing house settlements
(3,063)
(7,568)
(4,235)
(9,205)
114
270
143
132
\n
(1)
The change in fair value used for hedge ineffectiveness includes instruments that were derecognised in the year.
\n
(2)
The hedged risk includes inflation risk.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Hedge ineffectiveness
\n
Hedge ineffectiveness recognised in other operating income comprises.
2023
2022
2021
\u00a3m
\u00a3m
\u00a3m
Fair value hedging
Loss on hedged items attributable to the hedged risk
(364)
(442)
(846)
Gain on the hedging instruments
406
482
897
Fair value hedging ineffectiveness
42
40
51
Cash flow hedging
Interest rate risk
10
(60)
(26)
Cash flow hedging ineffectiveness
10
(60)
(26)
Total
52
(20)
25
\n
The main sources of ineffectiveness for interest rate risk hedge accounting relationships are:
\n
\ue001
The effect of the counterparty credit risk on the fair value of the interest rate swap which is not reflected in the fair value of the hedged item attributable to the change in interest
\n
rate (fair value hedge).
\n
\ue001
Differences in the repricing basis between the hedging instrument and hedged cash flows (cash flow hedge); and
\n
\ue001
Upfront present values on the hedging derivatives where hedge accounting relationships have been designated after the trade date (cash flow hedge and fair value hedge).
Maturity of notional hedging contracts
The following table shows the period in which the notional of hedging contract ends.
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
Over 10 years
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Fair value hedging
Interest rate risk
(1)
Hedging assets
0.1
1.7
7.1
9.0
5.9
4.7
28.5
Hedging liabilities
2.7
3.3
13.4
11.3
7.7
0.7
39.1
2022
Fair value hedging
Interest rate risk
(1)
Hedging assets
0.5
1.9
4.7
4.9
4.2
3.6
19.8
Hedging liabilities
1.0
2.9
14.6
10.3
9.6
0.5
38.9
2023
Cash flow hedging
Interest rate risk
Hedging assets
3.9
14.5
33.9
22.8
10.1
-
85.2
Hedging liabilities
0.8
3.9
39.1
10.1
0.3
0.6
54.8
Exchange rate risk
Hedging assets
0.3
0.7
1.6
-
-
-
2.6
Hedging liabilities
8.4
0.8
2.4
2.5
0.2
-
14.3
2022
Cash flow hedging
Interest rate risk
Hedging assets
6.6
9.4
46.5
21.9
10.1
-
94.5
Hedging liabilities
17.3
26.8
15.7
5.1
7.5
0.7
73.1
Exchange rate risk
Hedging assets
0.1
-
-
-
-
-
0.1
Hedging liabilities
-
1.1
2.8
2.1
0.2
-
6.2
\n
(1)
The hedged risk includes inflation risk.
\n\n\n\n\n\n\n\n\n\n\n\n\n \n
Average fixed interest rates
The following table shows average fixed rate for cash flow hedges, interest rate risk.
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
Over 10 years
Total
2023
%
%
%
%
%
%
%
Average fixed interest rate
Hedging assets
1.16
2.46
1.19
3.30
1.77
3.12
2.04
Hedging liabilities
0.93
2.54
4.36
2.28
2.36
4.50
3.79
2022
Average fixed interest rate
Hedging assets
1.36
1.98
1.71
2.04
1.02
3.12
1.72
Hedging liabilities
1.27
0.95
2.75
1.03
2.68
4.55
1.63
\n
Average foreign exchange rates
\n
For cash flow hedging of exchange rate risk, the average foreign exchange rates applicable across the relationships were as below for the main currencies hedged.
\n\n \n
2023
2022
INR/GBP
105.03
100.54
USD/GBP
1.28
1.29
CHF/GBP
1.08
1.15
JPY/GBP
170.54
132.89
JPY/USD
129.75
128.29
NOK/USD
9.21
9.21
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Analysis of hedged items and related hedging instruments
\n
The table below analyses assets and liabilities subject to hedging derivatives.
\n\n \n
Changes in fair value
Carrying value of
Impact on hedged items
used as a basis to
hedged assets and liabilities
included in carrying value
determine ineffectiveness (1)
2023
\u00a3m
\u00a3m
\u00a3m
Fair value hedging - interest rate
(2)
Loans to banks and customers - amortised cost
5,663
(316)
167
Other financial assets - securities
22,896
174
636
Total
(3)
28,559
(142)
803
Bank and customer deposits
745
(3)
(6)
Other financial liabilities - debt securities in issue
36,305
(1,151)
(1,023)
Subordinated liabilities
5,346
(320)
(138)
Total
42,396
(1,474)
(1,167)
2022
Fair value hedging - interest rate
(2)
Loans to banks and customers - amortised cost
5,764
(526)
(1,236)
Other financial assets - securities
12,897
(922)
(2,525)
Total
(3)
18,661
(1,448)
(3,761)
Bank and customer deposits
565
(3)
3
Other financial liabilities - debt securities in issue
35,856
(2,222)
2,790
Subordinated liabilities
5,504
(547)
526
Total
41,925
(2,772)
3,319
\n
For the notes to this table refer to the following page.
Changes in fair value
Carrying value of
used as a basis to
hedged assets and liabilities
determine ineffectiveness (1)
2023
\u00a3m
\u00a3m
Cash flow hedging - interest rate
Loans to banks and customers - amortised cost
(4)
84,583
(2,796)
Other financial assets - securities
623
(22)
Total
85,206
(2,818)
Bank and customer deposits
54,675
1,610
Other financial liabilities - debt securities in issue
156
7
Total
54,831
1,617
Cash flow hedging - exchange rate
Loans to banks and customers - amortised cost
(4)
583
-
Other financial assets - securities
1,839
-
Total
2,422
-
Other financial liabilities - debt securities in issue
11,460
9
Subordinated liabilities
-
-
Other
201
3
Total
11,661
12
2022
Cash flow hedging - interest rate
Loans to banks and customers - amortised cost
(4)
93,212
5,263
Other financial assets - securities
1,176
73
Total
94,388
5,336
Bank and customer deposits
72,610
(2,008)
Other financial liabilities - debt securities in issue
571
(46)
Total
73,181
(2,054)
Cash flow hedging - exchange rate
Loans to banks and customer - amortised cost
(4)
-
-
Other financial assets - securities
-
-
Total
-
-
Other financial liabilities - debt securities in issue
4,141
(2)
Subordinated liabilities
-
-
Other
204
5
Total
4,345
3
\n
(1)
The change in fair value used for hedge ineffectiveness includes instruments that were derecognised in the year.
\n
(2)
The hedged risk includes inflation risk.
\n
(3)
Carrying values include \u00a357 million (2022 - \u00a361 million) adjustment for discontinued fair value hedges.
\n
(4)
Includes cash and balances at central banks.
Analysis of cash flow and foreign exchange hedge reserve
The following table shows an analysis of the pre-tax cash flow hedge reserve and foreign exchange hedge reserve.
\u00a0
2023
2022
\u00a0\u00a0
Foreign
\u00a0
Foreign
\u00a0
Cash flow
exchange
Cash flow
exchange
\u00a0
hedge reserve
hedge reserve
hedge reserve
hedge reserve
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing
\u00a0\u00a0\u00a0\u00a0
Interest rate risk
(2,330)
-
(3,576)
-
Foreign exchange risk
1
(18)
16
(85)
De-designated
\u00a0\u00a0\u00a0\u00a0
Interest rate risk
(304)
-
(297)
-
Foreign exchange risk
4
(771)
20
(880)
Total
(2,629)
(789)
(3,837)
(965)
\u00a0
2023
2022
\u00a0\u00a0
Foreign
\u00a0
Foreign
\u00a0
Cash flow
exchange
Cash flow
exchange
\u00a0
hedge reserve
hedge reserve
hedge reserve
hedge reserve
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Amount recognised in equity
\u00a0\u00a0\u00a0\u00a0
Interest rate risk
137
-
(2,997)
(64)
Foreign exchange risk
50
107
24
(202)
Total
187
107
(2,973)
(266)
Amount transferred from equity to earnings
\u00a0\u00a0\u00a0\u00a0
Interest rate risk to net interest income
1,112
-
(252)
-
Interest rate risk to non interest income
(1)
(10)
-
(21)
-
Interest rate risk to operating expenses
-
-
(14)
-
Foreign exchange risk to net interest income
(74)
-
(29)
-
Foreign exchange risk to non interest income
(9)
69
15
7
Foreign exchange risk to operating expenses
2
-
(3)
-
Total
1,021
69
(304)
7
\n
(1)
There was \u00a310 million (2022 - \u00a321 million) reclassified with the cash flow reserve to earnings due to forecasted cash flows that are no longer expected to occur.Amounts included in the NatWest Group financial statements, in aggregate, by category
of related party are as follows:
\u00a0
Associates and Joint
Equity
\u00a0
\u00a0
Ventures
Shares (1)
Total
31 December 2023
\u00a3m
\u00a3m
\u00a3m
Investments
668
145
813
Loans to customers - amortised cost
-
13
13
Customer deposits
2
10
12
Settlement balances
-
-
-
Other comprehensive income
-
(8)
(8)
Other operating income
(11)
-
(11)
31 December 2022
\u00a0\u00a0\u00a0
Investments
688
149
837
Loans to customers - amortised cost
-
-
-
Customer deposits
1
4
5
Settlement balances
-
34
34
Other comprehensive income
-
11
11
Other operating income
(30)
-
(30)
\n
(1)
Represents investments in entities where ownership is more than 10%", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f80992": { "value": "2.2. Fair value \u2013 financial instruments
We measure financial instruments at fair value when they are classified as mandatory
fair value through profit or loss; held-for-trading; designated fair value through profit or
loss and fair value through other comprehensive income and they are recognised in the
financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net
exposure to either market or credit risk. In these cases, the fair value is derived from the
net risk exposure of that portfolio with portfolio level adjustments applied to incorporate
bid-offer spreads, counterparty credit risk, and funding costs (refer to \u2018Valuation
Adjustments\u2019).
Where the market for a financial instrument is not active, fair value is established using a
valuation technique. These valuation techniques involve a degree of estimation, the
extent of which depends on the instrument\u2019s complexity and the availability of market-
based data. The complexity and uncertainty in the financial instrument\u2019s fair value is
categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current
information and knowledge regarding the effect of climate risk.3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.11 Financial instruments - valuation
Financial instruments recognised at fair value are revalued using techniques that can include observable inputs (pricing information that is readily available in the
market, for example UK Government securities), and unobservable inputs (pricing information that is not readily available, for example unlisted securities). Gains and
losses are recognised in the income statement and statement of comprehensive income as appropriate.
This note presents information on the valuation of financial
instruments.
The table below provides an overview of the various sections contained within the note.
Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.
Valuation
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Page
Financial instruments
\u00a0
Critical accounting policy: Fair value
341
Valuation
\u00a0
Fair value hierarchy
(D)
342
Valuation techniques
(D)
342
Inputs to valuation models
(D)
342
Valuation control
(D)
343
Key areas of judgement
(D)
343
Assets and liabilities split by fair value hierarchy level
(T)
344
Valuation adjustments
\u00a0
Fair value adjustments made
(T)
345
Funding valuation adjustments (FVA)
(D)
345
Credit valuation adjustments (CVA)
(D)
345
Bid-offer
(D)
345
Product and deal specific
(D)
345
Own credit
(D)
345
Level 3 additional information
\u00a0
Level 3 ranges of unobservable inputs
(D)
346
Level 3 instruments, valuation techniques and inputs
(T)
346
Level 3 sensitivities
(D)
347
Alternative assumptions
(D)
347
Other considerations
(D)
347
High and low range of fair value of level 3 assets and liabilities
(T)
347
Movement in level 3 assets and liabilities over the reporting period
(D)
348
Movement in level 3 assets and liabilities
(T)
348
Fair value of financial instruments measured at amortised cost
\u00a0
Fair value of financial instruments measured at amortised cost on the balance sheet
\u00a0
balance sheet
349
(D) = Descriptive; (T) = Table
\u00a0
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Fair value hierarchy
\n
Financial instruments carried at fair value have been classified under the fair value
\n
hierarchy. The classification ranges from level 1 to level 3, with more expert judgement
\n
and price uncertainty for those classified at level 3.
\n
The determination of an instrument\u2019s level cannot be made at a global product level as a
\n
single product type can be in more than one level. For example, a single name corporate
\n
credit default swap could be in level 2 or level 3 depending on the level of market activity
\n
for the referenced entity.
\n
Level 1
\u2013 instruments valued using unadjusted quoted prices in active and liquid markets,
\n
for identical financial instruments. Examples include government bonds, listed equity
\n
shares and certain exchange-traded derivatives.
\n
L
L
evel 2
- instruments valued using valuation techniques that have observable inputs.
\n
Observable inputs are those that are readily available with limited adjustments required.
\n
Examples include most government agency securities, investment-grade corporate
\n
bonds, certain mortgage products - including collateralised loan obligations (CLOs), most
\n
bank loans, repos and reverse repos, state and municipal obligations, most notes issued,
\n
certain money market securities, loan commitments and most over the counter (OTC)
\n
derivatives.
\n
L
L
evel 3
- instruments valued using a valuation technique where at least one input which
\n
could have a significant effect on the instrument\u2019s valuation, is not based on observable
\n
market data. Examples include non-derivative instrument\u2019s which trade infrequently,
\n
certain syndicated and commercial mortgage loans, private equity, and derivatives with
\n
unobservable model inputs.
\n
Valuation techniques
\n
NatWest Group derives the fair value of its instruments differently depending on whether
\n
the instrument is a non-modelled or a modelled product.
\n
Non-modelled products
are valued directly from a price input, typically on a position-by-
\n
position basis. Examples include equities and most debt securities.
\n
Non-modelled products can fall into any fair value levelling hierarchy depending on the
\n
observable market activity, liquidity, and assessment of valuation uncertainty of the
\n
instruments. The assessment of fair value and the classification of the instrument to a fair
\n
value level is subject to the valuation controls discussed in the Valuation control section.
\n
Modelled products
valued using a pricing model range in complexity from comparatively
\n
vanilla products such as interest rate swaps and options (e.g., interest rate caps and
\n
floors) through to more complex derivatives (e.g., balance guarantee swaps).
\n
For modelled products the fair value is derived using the model and the appropriate
\n
model inputs or parameters, as opposed to a cash price equivalent. Model inputs are
\n
taken either directly or indirectly from available data, where some inputs are also
\n
modelled.
\n
Fair value classification of modelled instruments is either level 2 or level 3, depending on
\n
the product/model combination, the observability and quality of input parameters and
\n
other factors. All these must be assessed to classify a position. The modelled product is
\n
assigned to the lowest fair value hierarchy level of any significant input used in that
\n
valuation.
\n
Most derivative instruments, for example vanilla interest rate swaps, foreign exchange
\n
swaps and liquid single name credit derivatives, are classified as level 2. This is because
\n
they are vanilla products valued using standard market models and with observable
\n
inputs. Level 2 products range from vanilla to more complex products, where more
\n
complex products remain classified as level 2 due to the low materiality of any
\n
unobservable inputs.
\n
Inputs to valuation models
\n
When using valuation techniques, the fair value can be significantly affected by the
\n
choice of
valuation model
and underlying assumptions. Factors considered include the
\n
cashflow amounts and timing of those cash flows, and application of appropriate discount
\n
rates, incorporating both funding and credit risk. Values between and beyond available
\n
data points are obtained by interpolation and extrapolation. The principal inputs to these
\n
valuation techniques are as follows:
\n
Bond prices
- quoted prices are generally available for government bonds, certain
\n
corporate securities, and some mortgage-related products.
\n
Credit spreads/margins
- these reflect credit default swap levels or the return required
\n
over a benchmark rate or index to compensate for the referenced credit risk. Where
\n
available, these are derived from the price of credit default swaps or other credit-based
\n
instruments, such as debt securities. When direct prices are not available; credit
\n
spreads/margins are determined with reference to available prices of entities with similar
\n
characteristics.
\n
Interest rates
- these are principally based on interest rate swap prices referencing
\n
benchmark interest rates. Interest rates, include SONIA (Sterling Overnight Interbank
\n
Average Rate) and other overnight rates. Other quoted interest rates may also be used
\n
from both the bond, and futures markets.
\n
F
F
oreign currency exchange rates
- there are observable prices both for spot and
\n
forward contracts and futures in the world's major currencies.
\n
E
E
quity and equity index prices
- quoted prices are generally readily available for equity
\n
shares listed on the world's major stock exchanges and for major indices on such shares.
Price volatilities and correlations
- volatility is a measure of the tendency of a price to
change with time. Correlation measures the degree which two or more prices or
variables are observed to move together. Variables that move in the same direction
show positive correlation; those that move in opposite directions are negatively
correlated.
P
P
repayment rates
- are used to reflect how fast a pool of assets prepay. The fair value of
a financial instrument that can be prepaid by the issuer or borrower differs from that of
an instrument that cannot be prepaid. When valuing prepayable instruments, the value of
this prepayment option is considered.
R
R
ecovery rates/loss given default
- are used as an input to valuation models and
reserves for asset-backed securities and other credit products as an indicator of severity
of losses on default. Recovery rates are primarily sourced from market data providers,
the value of the underlying collateral or inferred from observable credit spreads.
Valuation control
NatWest Group's control environment for the determination of the fair value of financial
instruments includes formalised procedures for the review and validation of fair values.
The review of market prices and inputs is performed by an independent price verification
(IPV) team
IPV is a key element of the control environment. Valuations are first performed by the
business which entered into the transaction. These valuations are then reviewed by the
IPV team, independent of those trading the financial instruments, in light of available
pricing evidence.
Independent pricing data is collated from a range of sources. Each source is reviewed for
quality and the independent data applied in the IPV processes using a formalised input
quality hierarchy. Consensus services are one source of independent data and
encompass interest rate, currency, credit, and bond markets, providing comprehensive
coverage of vanilla products and a wide selection of exotic products.
Where measurement differences are identified through the IPV process these are
grouped by the quality hierarchy of the independent data. If the size of the difference
exceeds defined thresholds, an adjustment is made to bring the valuation to within the
independently calculated fair value range.
IPV takes place at least monthly, for all fair value financial instruments. The IPV control
includes formalised reporting and escalation of any valuation differences in breach of
established thresholds.
The quality and completeness of the information gathered in the IPV process gives an
indication as to the liquidity and valuation uncertainty of an instrument and forms part of
the information considered when determining fair value hierarchy classifications.
Initial fair value level classification of a financial instrument is carried out by the IPV team.
These initial classifications are subject to senior management review. Particular attention
is paid to instruments transferring from one level to another, new instrument classes or
products, instruments where the transaction price is significantly different from the fair
value and instruments where valuation uncertainty is high.
Valuation Committees are made up of valuation specialists and senior business
representatives from various functions and oversees pricing, reserving and valuations
issues. These committees meet monthly to review and ratify any methodology changes.
The Executive Valuation Committee meets quarterly to address key material and
subjective valuation issues, to review items escalated by Valuation Committees and to
discuss other relevant industry matters.
The Group model risk policy sets the policy for model documentation, testing and review.
Governance of the model risk policy is carried out by the Group model risk oversight
committee, which comprises model risk owners and independent model experts. All
models are required to be independently validated in accordance with the Model Risk
Policy.
Key areas of judgement
Over the years the business has simplified, with most products classified as level 1 or 2 of
the fair value hierarchy. However, the diverse range of products historically traded by
NatWest Group means some products remain classified as level 3. Level 3 indicates a
significant level of pricing uncertainty, where expert judgement is used. As such, extra
disclosures are required in respect of level 3 instruments.
In general, the degree of expert judgement used and hence valuation uncertainty
depends on the degree of liquidity of an instrument or input.
Where markets are liquid, little judgement is required. However, when the information
regarding the liquidity in a particular market is not clear, a judgement may need to be
made. For example, for an equity traded on an exchange, daily volumes of trading can
be seen, but for an OTC derivative, assessing the liquidity of the market with no central
exchange is more challenging.
A key related matter is where a market moves from liquid to illiquid or vice versa. Where
this movement is considered temporary, the fair value level is not changed. For example,
if there is little market trading in a product on a reporting date but at the previous
reporting date and during the intervening period the market has been liquid. In this case,
the instrument will continue to be classified at the same level in the hierarchy. This is to
provide consistency so that transfers between levels are driven by genuine changes in
market liquidity and do not reflect short term or seasonal effects. Material movements
between levels are reviewed quarterly by the business and IPV.
The breadth and depth of the IPV data allows for a rules-based quality assessment to be
made of market activity, liquidity, and pricing uncertainty, which assists with the process
of allocation to an appropriate level. Where suitable independent pricing information is
not readily available, the quality assessment will result in the instrument being assessed
as level 3.
The table below shows the assets and liabilities held by NatWest Group split by fair value hierarchy level. Level 1 are considered the most liquid instruments, and level 3 the most
illiquid, valued using expert judgement and so carry the most significant price uncertainty.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Loans
-
33,388
209
33,597
-
35,260
395
35,655
Securities
8,447
3,493
14
11,954
7,463
2,458
1
9,922
Derivatives
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
1
43,912
650
44,563
5
52,764
711
53,480
Foreign exchange
-
34,096
65
34,161
-
45,715
114
45,829
Other
-
72
108
180
-
54
182
236
Other financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Loans
-
108
657
765
-
172
727
899
Securities
17,848
10,536
258
28,642
10,380
6,278
203
16,861
Total financial assets held at fair value
26,296
125,605
1,961
153,862
17,848
142,701
2,333
162,882
As a % of total fair value assets
17%
82%
1%
\u00a0
11%
88%
1%
\u00a0
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Deposits
-
43,126
1
43,127
-
42,486
1
42,487
Debt securities in issue
-
706
-
706
-
797
-
797
Short positions
7,936
1,865
2
9,803
7,462
2,062
-
9,524
Derivatives
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
-
38,044
439
38,483
2
47,855
678
48,535
Foreign exchange
-
33,528
58
33,586
-
45,139
98
45,237
Other
-
138
188
326
-
76
199
275
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Debt securities in issue
-
1,605
3
1,608
-
1,327
-
1,327
Other deposits
-
1,280
-
1,280
-
1,050
-
1,050
Subordinated liabilities
-
237
-
237
-
345
-
345
Total financial liabilities held at fair value
7,936
120,529
691
129,156
7,464
141,137
976
149,577
As a % of total fair value liabilities
6%
93%
1%
\u00a0
5%
94%
1%
\u00a0
\n
(1)
Transfers between levels are deemed to have occurred at the beginning of the quarter in which the instrument was transferred.
(2)
For an analysis of debt securities held at mandatory fair value through profit or loss by issuer as well as ratings and derivatives, by type and contract, refer to Risk and capital management \u2013 Credit risk.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Valuation adjustments
\n
When valuing financial instruments in the trading book, adjustments are made to mid-
\n
market valuations to cover bid-offer spread, funding and credit risk. These adjustments
\n
are presented in the table below:
\n\n \n
2023
2022
Adjustment
\u00a3m
\u00a3m
Funding valuation adjustments
132
173
Credit valuation adjustments
236
300
Bid-offer
86
130
Product and deal specific
103
141
Total
557
744
\n
Funding valuation adjustments decreased during the year, primarily driven by changes in
\n
GBP interest rates and funding spreads tightening.
\n
The decrease in credit value adjustments was driven by credit spreads tightening and a
\n
reduction in exposures, primarily due to portfolio ageing, partially offset by new trade
\n
activity. Interest rates tightening, trade restructuring and trade specific valuation
\n
adjustments were the drivers of the decrease in product and deal specific. The decrease
\n
in bid-offer was driven by risk reduction.
\n
Funding valuation adjustments (FVA)
\n
FVA represents an estimate of the adjustment that a market participant would make to
\n
incorporate funding costs and benefits that arise in relation to derivative exposures. FVA
\n
is calculated as a portfolio level adjustment and can result in either a funding charge
\n
(positive) or funding benefit (negative).
\n
Funding levels are applied to estimated potential future exposures. For uncollateralised
\n
derivatives, the exposure reflects the future valuation of the derivative. For collateralised
\n
derivatives, the exposure reflects the difference between the future valuation of the
\n
derivative and the level of collateral posted.
\n
Credit valuation adjustments (CVA)
\n
CVA represents an estimate of the adjustment to fair value that is made to incorporate
\n
the counterparty credit risk inherent in derivative exposures. CVA is calculated on a
\n
portfolio basis reflecting an estimate of the amount a third party would charge to assume
\n
the credit risk.
\n
Collateral held under a credit support agreement is factored into the CVA calculation. In
\n
such cases where NatWest Group holds collateral against counterparty exposures, CVA
\n
is held to the extent that residual risk remains.
\n
FVA and CVA are actively managed by a credit and market risk hedging process, and
\n
therefore movements in CVA and FVA are partially offset by trading revenue on the
\n
hedges.
\n
Bid-offer
\n
Fair value positions are required to be marked to exit levels, represented by bid (long
\n
positions) or offer (short positions) levels. Non-derivative positions are typically marked
\n
directly to bid or offer prices. However derivative exposures are adjusted to exit levels by
\n
taking bid-offer reserves calculated on a portfolio basis. The reserving approach is based
\n
on current market bid-offer spreads and standard market bucketing of risk.
\n
Bid-offer spreads vary by maturity and risk type to reflect different spreads in the
\n
market. For positions where there is no observable quote, the bid-offer spreads are
\n
widened in comparison to proxies to reflect reduced liquidity or observability.
\n
Netting is applied on a portfolio basis to reflect the value at which NatWest Group
\n
believes it could exit the net risk of the portfolio, rather than the sum of exit costs for
\n
each of the portfolio\u2019s individual trades. This is applied where the asset and liability
\n
positions are managed as a portfolio for risk and reporting purposes.
\n
Product and deal specific
\n
On initial recognition of financial assets and liabilities valued using valuation techniques
\n
which have a significant dependence on information other than observable market data,
\n
any difference between the transaction price and that derived from the valuation
\n
technique is deferred. Such amounts are recognised in the income statement over the
\n
life of the transaction, when market data becomes observable, or when the transaction
\n
matures or is closed out as appropriate. On 31 December 2023, net gains of \u00a378 million
\n
(2022 - \u00a374 million) were carried forward. During the year, net gains of \u00a3119 million
\n
(2022 - \u00a397 million) were deferred and \u00a3115 million (2022 - \u00a394 million) were recognised
\n
in the income statement.
\n
Where system-generated valuations do not accurately reflect market prices, manual
\n
valuation adjustments are applied either at a position or portfolio level. Manual
\n
adjustments are subject to the scrutiny of independent control teams and are subject to
\n
monthly review by senior management.
\n
Own credit
\n
NatWest Group considers the effect of its own credit standing when valuing financial
\n
liabilities recorded at fair value. Own credit spread adjustments are made when valuing
\n
issued debt held at fair value, including issued structured notes. An own credit
\n
adjustment is applied to positions where it is believed that counterparties would consider
\n
NatWest Group\u2019s creditworthiness when pricing trades.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Level 3 additional information
\n
For illiquid assets and liabilities, classified as level 3, additional information is provided on the valuation techniques used and price sensitivity of the products to those inputs. This is to
\n
enable the reader to gauge the level of uncertainty that arises from positions with significant unobservable inputs or modelling parameters.
\n
Level 3 ranges of unobservable inputs
\n
The table below provides additional information on level 3 instruments and inputs. This shows the valuation technique used for the fair value calculation, the unobservable input and
\n
input range.
\n \n \n
2023
20
22
Financial instrument
Valuation technique
Unobservable inputs
Units
Low
High
Low
High
Trading assets and Other financial assets
Loans
Price-based
Price
%
-
123
-
113
Discount cash flow
Credit spreads
bps
49
119
56
114
Discount cash flow
Discount margin
bps
174
228
174
222
Debt securities
Price-based
Price
%
-
119
-
255
Equity Shares
Price-based
Price
GBP
-
32,142
-
34,027
Price-based
Price
%
-
30
-
30
Discount cash flow
Discount margin
%
7
9
6
8
Net asset valuation
Fund NAV
%
80
120
80
120
Derivative assets and liabilities
Credit derivatives
Credit derivative pricing
Credit spreads
bps
13
600
7
530
Option pricing
Correlation
%
(15)
95
(15)
95
Volatility
%
30
80
30
80
Upfront points
%
-
99
-
99
Recovery rate
%
-
60
-
60
Interest rate & FX
Option pricing
Correlation
%
(50)
99
(50)
100
derivatives
Volatility
%
30
111
30
127
Constant Prepayment Rate
%
2
22
2
21
Mean Reversion
%
-
20
-
92
Inflation volatility
%
2
2
1
2
Inflation rate
%
2
3
2
3
\n
(1)
Valuation for private equity investments may be estimated by looking at past prices of similar stocks and from valuation statements where valuations are usually derived from earnings measures such as EBITDA or net asset value (NAV). Similarly, for
\n
equity or bond fund investments, prices may be estimated from valuation or credit statements using NAV or similar measures.
\n
(2)
NatWest Group does not have any material liabilities measured at fair value that are issued with an inseparable third-party credit enhancement.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Level 3 sensitivities
\n
The level 3 sensitivities presented below are calculated at a trade or low-level portfolio
\n
basis rather than an overall portfolio basis. As individual sensitivities are aggregated with
\n
no reflection of the correlated nature between instruments, the overall portfolio
\n
sensitivity may not be accurately reflected. For example, some portfolios may be
\n
negatively correlated to others, where a downwards movement in one asset would
\n
produce an upwards movement in another. However, due to the additive presentation of
\n
the above figures this correlation impact cannot be displayed. As such, the actual
\n
potential downside sensitivity of the total portfolio may be less than the non-correlated
\n
sum of the additive figures as shown in the below table.
\n
Alternative assumptions
\n
Reasonably plausible alternative assumptions of unobservable inputs are determined
\n
based on a specified target level of certainty of 90%.
\n
Alternative assumptions are determined with reference to all available evidence including
\n
consideration of the following: quality of independent pricing information considering
\n
consistency between different sources, variation over time, perceived tradability or
\n
otherwise of available quotes; consensus service dispersion ranges; volume of trading
\n
activity and market bias (e.g. one-way inventory); day 1 profit or loss arising on new
\n
trades; number and nature of market participants; market conditions; modelling
\n
consistency in the market; size and nature of risk; length of holding of position; and
\n
market intelligence.
\n
Other considerations
\n
Whilst certain inputs used to calculate CVA, FVA and own credit adjustments are not
\n
based on observable market data, the uncertainty of these inputs is not considered to
\n
have a significant effect on the net valuation of the related derivative portfolios and
\n
issued debt.
\n
As such, the fair value levelling of the derivative portfolios and issued debt is not
\n
determined by CVA, FVA or own credit inputs. In addition, any fair value sensitivity
\n
driven by these inputs is not included in the level 3 sensitivities presented.
\n
The table below shows the high and low range of fair value of the level 3 assets and liabilities. This range incorporates the range of fair value inputs as described in the previous table.
\n\n \n
2023
2022
Level 3
Favourable
Unfavourable
Level 3
Favourable
Unfavourable
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Trading assets
Loans
209
-
-
395
10
(10)
Securities
14
-
-
1
-
-
Derivatives
Interest rate
650
20
(20)
711
30
(30)
Foreign exchange
65
-
-
114
10
(10)
Other
108
10
(10)
182
10
(10)
Other financial assets
Loans
657
-
(40)
727
-
(10)
Securities
258
20
(50)
203
20
(30)
Total financial assets held at fair value
1,961
50
(120)
2,333
80
(100)
Liabilities
Trading liabilities
Deposits
1
-
-
1
-
-
Short positions
2
-
-
-
-
-
Derivatives
Interest rate
439
10
(10)
678
30
(30)
Foreign exchange
58
-
-
98
-
-
Other
188
10
(10)
199
-
-
Other financial liabilities - debt securities in issue
3
-
-
-
-
-
Total financial liabilities held at fair value
691
20
(20)
976
30
(30)
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Movement in level 3 assets and liabilities
\n
The following table shows the movement in level 3 assets and liabilities in the year.
\n\n \n
Other
Other
Other
Other
Derivatives
trading
financial
Total
Derivatives
trading
financial
Total
assets
assets (2)
assets (3)
assets
liabilities
liabilities (2)
liabilities
liabilities
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
1,007
396
930
2,333
975
1
-
976
Amounts recorded in the income statement
(1)
(156)
(88)
1
(243)
(313)
-
-
(313)
Amount recorded in the statement of
comprehensive income
-
-
32
32
-
-
-
-
Level 3 transfers in
6
15
16
37
7
2
-
9
Level 3 transfers out
(5)
(32)
(190)
(227)
(9)
(2)
-
(11)
Purchases/originations
180
8
275
463
195
2
3
200
Settlements/other decreases
(70)
(8)
(86)
(164)
(51)
-
-
(51)
Sales
(137)
(65)
(52)
(254)
(116)
-
-
(116)
Foreign exchange and other adjustments
(2)
(3)
(11)
(16)
(3)
-
-
(3)
At 31 December
823
223
915
1,961
685
3
3
691
Amounts recorded in the income statement
in respect of balances held at period end
- unrealised
67
(39)
1
29
(121)
-
-
(121)
2022
At 1 January
918
740
394
2,052
606
3
-
609
Amounts recorded in the income statement
(1)
126
31
(14)
143
382
(1)
-
381
Amount recorded in the statement of
comprehensive income
-
-
(20)
(20)
-
-
-
-
Level 3 transfers in
193
1
532
726
78
3
-
81
Level 3 transfers out
(122)
(147)
(68)
(337)
(61)
(3)
-
(64)
Purchases/originations
355
274
185
814
382
-
-
382
Settlements/other decreases
(40)
(75)
-
(115)
(41)
-
-
(41)
Sales
(423)
(434)
(101)
(958)
(376)
(2)
-
(378)
Foreign exchange and other adjustments
-
6
22
28
5
1
-
6
At 31 December
1,007
396
930
2,333
975
1
-
976
Amounts recorded in the income statement
in respect of balances held at period end
- unrealised
126
31
(16)
141
382
(1)
-
381
\n
(1)
There were \u00a369 million net gains on trading assets and liabilities (2022 \u2013 \u00a3224 million net losses) recorded in income from trading activities. Net gains on other instruments of \u00a31 million (2022 \u2013 \u00a314 million net losses) were recorded in other operating
\n
income and interest income as appropriate.
\n
(2)
Other trading assets and other trading liabilities comprise assets and liabilities held at fair value in trading portfolios.
\n
(3)
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.
Fair value of financial instruments measured at amortised cost on the balance sheet
The following table shows the carrying value and fair value of financial instruments measured at amortised cost on the balance sheet.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Items where
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
fair value
\u00a0
Carrying
\u00a0
Fair value hierarchy level
approximates
\u00a0
value
Fair value
Level 1
Level 2
Level 3
carrying value
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104.3
104.3
-
-
-
104.3
Settlement balances
7.2
7.2
-
-
-
7.2
Loans to banks
6.9
7.0
-
2.2
0.6
4.2
Loans to customers
381.4
373.2
-
27.5
345.7
-
Other financial assets - securities
21.7
21.6
4.0
6.6
11.0
-
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
144.8
144.8
-
-
-
144.8
Settlement balances
2.6
2.6
-
-
-
2.6
Loans to banks
7.1
7.1
-
4.2
2.8
0.1
Loans to customers
366.3
354.5
-
20.3
334.2
-
Other financial assets - securities
13.1
12.8
3.6
3.2
6.0
-
2023
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
22.2
22.3
-
15.4
2.7
4.2
Customer deposits
431.4
431.0
-
30.7
48.8
351.5
Settlement balances
6.6
6.6
-
-
-
6.6
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
- debt securities in issue
52.2
52.2
-
41.7
10.5
-
Subordinated liabilities
5.5
5.4
-
5.4
-
-
Notes in circulation
3.2
3.2
-
-
-
3.2
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
20.4
20.0
-
13.1
2.2
4.7
Customer deposits
450.3
450.3
-
12.7
30.6
407.0
Settlement balances
2.0
2.0
-
-
-
2.0
Other financial liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
- debt securities in issue
46.7
46.1
-
40.7
5.4
-
Subordinated liabilities
5.9
5.6
-
5.5
0.1
-
Notes in circulation
3.2
3.2
-
-
-
3.2
\n
The assumptions and methodologies underlying the
calculation of fair values of financial instruments at the
balance sheet date are as follows:
Short-term financial instruments
For certain short-term financial instruments, including but
not limited to, cash and balances at central banks,
settlement balances, loans with short-term maturities, notes
in circulation and customer demand deposits, carrying
value is deemed a reasonable approximation of fair value.
Loans to banks and customers
In estimating the fair value of net loans to customers and
banks measured at amortised cost, NatWest Group\u2019s loans
are segregated into appropriate portfolios reflecting the
characteristics of the constituent loans. Two principal
methods are used to estimate fair value:
(a)
(b)
Contractual cashflows that are discounted using a
market discount rate that incorporates the current
spread for the borrower or where this is not observable,
the spread for borrowers of a similar credit standing.
Expected cash flows (unadjusted for credit losses) are
discounted at the current offer rate for the same or
similar products. The current methodology caps all loan
values at par rather than modelling clients\u2019 option to
repay loans early. This approach is adopted for lending
portfolios in Retail Banking, Ulster Bank RoI, Commercial
& Institutional (SME loans) and Private Banking in order
to reflect the homogeneous nature of these portfolios.
Debt securities and subordinated liabilities
Most debt securities are valued using quoted prices in
active markets or from quoted prices of similar financial
instruments. The remaining population is valued using
discounted cashflows at current offer rates.
Bank and customer deposits
Fair values of deposits are estimated using discounted cash
flow valuation techniques. Where required, methodologies
can be revised as additional information and valuation
inputs become available.", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81023": { "value": "2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured
at amortised cost or at fair value through other comprehensive income, issued financial
guarantee and loan commitment (other than those classified as held for trading) is
assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.
ECL are a probability-weighted estimate of credit losses. The probability is determined by
the risk of default which is applied to the cash flow estimates. In the absence of a change
in credit rating, allowances are recognised when there is a reduction in the net present
value of expected cash flows. Following a significant increase in credit risk, ECL are
adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make
payments as they fall due. Future cashflows are discounted, so long-dated cashflows are
less likely to affect current expectations on credit loss. Our assessment of sector specific
risks, and whether additional adjustments are required, include expectations of the ability
of those sectors to meet their financing needs in the market. Changes in credit risk
appetite and how we manage credit positions that stem from climate considerations,
such as oil and gas, will directly affect our positions.
Judgement is exercised as follows:
\ue001
Models
\u2013 in certain low default portfolios, Basel parameter estimates are also applied
for IFRS 9.
\ue001
Non-modelled portfolios
\u2013 use a standardised capital requirement under Basel II.
Under IFRS 9, they have bespoke treatments for the identification of significant
increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for
appropriateness. The ECL calculation is based on expected future cash flows, which
is typically applied at a portfolio level.
\ue001
Multiple economic scenarios (MES)
\u2013 the central, or base, scenario is most critical to
the ECL calculation, independent of the method used to generate a range of
alternative outcomes and their probabilities.
\ue001
Significant increase in credit risk
\u2013
IFRS 9 requires that at each reporting date, an
entity shall assess whether the credit risk on an account has increased significantly
since initial recognition. Part of this assessment requires a comparison to be made
between the current lifetime PD (i.e. the current probability of default over the
remaining lifetime) with the equivalent lifetime PD as determined at the date of initial
recognition.
.
On restructuring where a financial asset is not derecognised, the revised cash flows are
used in re-estimating the credit loss. Where restructuring causes derecognition of the
original financial asset, the fair value of the replacement asset is used as the closing cash
flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares
or property, the exchange is accounted for as the sale of the loan and the acquisition of
equity securities or investment property. Where our acquired interest is in equity shares,
relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance
sheet when we conclude that there is no longer any realistic prospect of recovery of
part, or all, of the loan. For financial assets that are individually assessed for impairment,
the timing of the write-off is determined on a case-by-case basis. Such financial assets
are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-
negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed
portfolios are:
\ue001
Retail mortgages: write-off usually occurs within five years, or earlier, when an
account is closed, but can be longer where the customer engages constructively;
\ue001
Credit cards: the irrecoverable amount is typically written off after twelve arrears
cycles or at four years post default any remaining amounts outstanding are written
off;
\ue001
Overdrafts and other unsecured loans: write-off occurs within six years;
\ue001
Commercial loans: write-offs are determined in the light of individual circumstances;
and Business loans are generally written off within five years.Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2023, customer loan impairment provisions amounted to \u00a33,645 million (2022 - \u00a33,434
million). A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan was advanced. Such evidence includes, changes in
the credit rating of a borrower, the failure to make payments in accordance with the loan agreement, significant reduction in the value of any security, breach of limits or covenants,
and observable data about relevant macroeconomic measures.
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management\u2019s assessment of any potential deterioration in the creditworthiness of the
borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of
impairment losses. For further information and sensitivity analysis, refer to Risk and capital management \u2013 Measurement uncertainty and ECL sensitivity analysis section.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81024": { "value": "2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured
at amortised cost or at fair value through other comprehensive income, issued financial
guarantee and loan commitment (other than those classified as held for trading) is
assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.
ECL are a probability-weighted estimate of credit losses. The probability is determined by
the risk of default which is applied to the cash flow estimates. In the absence of a change
in credit rating, allowances are recognised when there is a reduction in the net present
value of expected cash flows. Following a significant increase in credit risk, ECL are
adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make
payments as they fall due. Future cashflows are discounted, so long-dated cashflows are
less likely to affect current expectations on credit loss. Our assessment of sector specific
risks, and whether additional adjustments are required, include expectations of the ability
of those sectors to meet their financing needs in the market. Changes in credit risk
appetite and how we manage credit positions that stem from climate considerations,
such as oil and gas, will directly affect our positions.
Judgement is exercised as follows:
\ue001
Models
\u2013 in certain low default portfolios, Basel parameter estimates are also applied
for IFRS 9.
\ue001
Non-modelled portfolios
\u2013 use a standardised capital requirement under Basel II.
Under IFRS 9, they have bespoke treatments for the identification of significant
increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for
appropriateness. The ECL calculation is based on expected future cash flows, which
is typically applied at a portfolio level.
\ue001
Multiple economic scenarios (MES)
\u2013 the central, or base, scenario is most critical to
the ECL calculation, independent of the method used to generate a range of
alternative outcomes and their probabilities.
\ue001
Significant increase in credit risk
\u2013
IFRS 9 requires that at each reporting date, an
entity shall assess whether the credit risk on an account has increased significantly
since initial recognition. Part of this assessment requires a comparison to be made
between the current lifetime PD (i.e. the current probability of default over the
remaining lifetime) with the equivalent lifetime PD as determined at the date of initial
recognition.
.
On restructuring where a financial asset is not derecognised, the revised cash flows are
used in re-estimating the credit loss. Where restructuring causes derecognition of the
original financial asset, the fair value of the replacement asset is used as the closing cash
flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares
or property, the exchange is accounted for as the sale of the loan and the acquisition of
equity securities or investment property. Where our acquired interest is in equity shares,
relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance
sheet when we conclude that there is no longer any realistic prospect of recovery of
part, or all, of the loan. For financial assets that are individually assessed for impairment,
the timing of the write-off is determined on a case-by-case basis. Such financial assets
are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-
negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed
portfolios are:
\ue001
Retail mortgages: write-off usually occurs within five years, or earlier, when an
account is closed, but can be longer where the customer engages constructively;
\ue001
Credit cards: the irrecoverable amount is typically written off after twelve arrears
cycles or at four years post default any remaining amounts outstanding are written
off;
\ue001
Overdrafts and other unsecured loans: write-off occurs within six years;
\ue001
Commercial loans: write-offs are determined in the light of individual circumstances;
and Business loans are generally written off within five years.Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2023, customer loan impairment provisions amounted to \u00a33,645 million (2022 - \u00a33,434
million). A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan was advanced. Such evidence includes, changes in
the credit rating of a borrower, the failure to make payments in accordance with the loan agreement, significant reduction in the value of any security, breach of limits or covenants,
and observable data about relevant macroeconomic measures.
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management\u2019s assessment of any potential deterioration in the creditworthiness of the
borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of
impairment losses. For further information and sensitivity analysis, refer to Risk and capital management \u2013 Measurement uncertainty and ECL sensitivity analysis section.
IFRS 9 ECL model design principles
Refer to Credit risk \u2013 IFRS 9 ECL model design principles section for further details.
Approach for multiple economic scenarios (MES)
The base scenario plays a greater part in the calculation of ECL than the approach to MES. Refer to Credit risk \u2013 Economic loss drivers - Probability weightings of scenarios section for
further details.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81025": { "value": "2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured
at amortised cost or at fair value through other comprehensive income, issued financial
guarantee and loan commitment (other than those classified as held for trading) is
assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.
ECL are a probability-weighted estimate of credit losses. The probability is determined by
the risk of default which is applied to the cash flow estimates. In the absence of a change
in credit rating, allowances are recognised when there is a reduction in the net present
value of expected cash flows. Following a significant increase in credit risk, ECL are
adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make
payments as they fall due. Future cashflows are discounted, so long-dated cashflows are
less likely to affect current expectations on credit loss. Our assessment of sector specific
risks, and whether additional adjustments are required, include expectations of the ability
of those sectors to meet their financing needs in the market. Changes in credit risk
appetite and how we manage credit positions that stem from climate considerations,
such as oil and gas, will directly affect our positions.
Judgement is exercised as follows:
\ue001
Models
\u2013 in certain low default portfolios, Basel parameter estimates are also applied
for IFRS 9.
\ue001
Non-modelled portfolios
\u2013 use a standardised capital requirement under Basel II.
Under IFRS 9, they have bespoke treatments for the identification of significant
increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for
appropriateness. The ECL calculation is based on expected future cash flows, which
is typically applied at a portfolio level.
\ue001
Multiple economic scenarios (MES)
\u2013 the central, or base, scenario is most critical to
the ECL calculation, independent of the method used to generate a range of
alternative outcomes and their probabilities.
\ue001
Significant increase in credit risk
\u2013
IFRS 9 requires that at each reporting date, an
entity shall assess whether the credit risk on an account has increased significantly
since initial recognition. Part of this assessment requires a comparison to be made
between the current lifetime PD (i.e. the current probability of default over the
remaining lifetime) with the equivalent lifetime PD as determined at the date of initial
recognition.
.
On restructuring where a financial asset is not derecognised, the revised cash flows are
used in re-estimating the credit loss. Where restructuring causes derecognition of the
original financial asset, the fair value of the replacement asset is used as the closing cash
flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares
or property, the exchange is accounted for as the sale of the loan and the acquisition of
equity securities or investment property. Where our acquired interest is in equity shares,
relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance
sheet when we conclude that there is no longer any realistic prospect of recovery of
part, or all, of the loan. For financial assets that are individually assessed for impairment,
the timing of the write-off is determined on a case-by-case basis. Such financial assets
are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-
negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed
portfolios are:
\ue001
Retail mortgages: write-off usually occurs within five years, or earlier, when an
account is closed, but can be longer where the customer engages constructively;
\ue001
Credit cards: the irrecoverable amount is typically written off after twelve arrears
cycles or at four years post default any remaining amounts outstanding are written
off;
\ue001
Overdrafts and other unsecured loans: write-off occurs within six years;
\ue001
Commercial loans: write-offs are determined in the light of individual circumstances;
and Business loans are generally written off within five years.3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.
3.9. Netting
Financial assets and financial liabilities are offset, and the net amount presented on the
balance sheet when, and only when, we currently have a legally enforceable right to set
off the recognised amounts and we intend either to settle on a net basis or to realise the
asset and settle the liability simultaneously. We are party to a number of arrangements,
including master netting agreements, that give us the right to offset financial assets and
financial liabilities, but where we do not intend to settle the amounts net or
simultaneously, the assets and liabilities concerned are presented separately on the
balance sheet.
3.10. Capital instruments
We classify a financial instrument that we issue as a liability if it is a contractual obligation
to deliver cash or another financial asset, or to exchange financial assets or financial
liabilities on potentially unfavourable terms and as equity if we evidence a residual
interest in our assets after the deduction of liabilities. Incremental costs and related tax
that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known
as treasury shares or own shares held) is deducted from retained earnings. On the
cancellation of treasury shares their nominal value is removed from retained earnings
and a consequential amount recognised in capital redemption in compliance with the
Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are
credited to equity, net of any directly attributable incremental costs.
3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81027": { "value": "2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured
at amortised cost or at fair value through other comprehensive income, issued financial
guarantee and loan commitment (other than those classified as held for trading) is
assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.
ECL are a probability-weighted estimate of credit losses. The probability is determined by
the risk of default which is applied to the cash flow estimates. In the absence of a change
in credit rating, allowances are recognised when there is a reduction in the net present
value of expected cash flows. Following a significant increase in credit risk, ECL are
adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make
payments as they fall due. Future cashflows are discounted, so long-dated cashflows are
less likely to affect current expectations on credit loss. Our assessment of sector specific
risks, and whether additional adjustments are required, include expectations of the ability
of those sectors to meet their financing needs in the market. Changes in credit risk
appetite and how we manage credit positions that stem from climate considerations,
such as oil and gas, will directly affect our positions.
Judgement is exercised as follows:
\ue001
Models
\u2013 in certain low default portfolios, Basel parameter estimates are also applied
for IFRS 9.
\ue001
Non-modelled portfolios
\u2013 use a standardised capital requirement under Basel II.
Under IFRS 9, they have bespoke treatments for the identification of significant
increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for
appropriateness. The ECL calculation is based on expected future cash flows, which
is typically applied at a portfolio level.
\ue001
Multiple economic scenarios (MES)
\u2013 the central, or base, scenario is most critical to
the ECL calculation, independent of the method used to generate a range of
alternative outcomes and their probabilities.
\ue001
Significant increase in credit risk
\u2013
IFRS 9 requires that at each reporting date, an
entity shall assess whether the credit risk on an account has increased significantly
since initial recognition. Part of this assessment requires a comparison to be made
between the current lifetime PD (i.e. the current probability of default over the
remaining lifetime) with the equivalent lifetime PD as determined at the date of initial
recognition.
.
On restructuring where a financial asset is not derecognised, the revised cash flows are
used in re-estimating the credit loss. Where restructuring causes derecognition of the
original financial asset, the fair value of the replacement asset is used as the closing cash
flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares
or property, the exchange is accounted for as the sale of the loan and the acquisition of
equity securities or investment property. Where our acquired interest is in equity shares,
relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance
sheet when we conclude that there is no longer any realistic prospect of recovery of
part, or all, of the loan. For financial assets that are individually assessed for impairment,
the timing of the write-off is determined on a case-by-case basis. Such financial assets
are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-
negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed
portfolios are:
\ue001
Retail mortgages: write-off usually occurs within five years, or earlier, when an
account is closed, but can be longer where the customer engages constructively;
\ue001
Credit cards: the irrecoverable amount is typically written off after twelve arrears
cycles or at four years post default any remaining amounts outstanding are written
off;
\ue001
Overdrafts and other unsecured loans: write-off occurs within six years;
\ue001
Commercial loans: write-offs are determined in the light of individual circumstances;
and Business loans are generally written off within five years.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81201": { "value": "2.4. Provisions
We recognise a provision for a present obligation resulting from a past event when it is
more likely than not that we will be required to pay to settle the obligation and the
amount of the obligation can be estimated reliably.
Provision is made for restructuring costs, including the costs of redundancy, when we
have a constructive obligation. An obligation exists when we have a detailed formal plan
for the restructuring and have raised a valid expectation in those affected either by
starting to implement the plan or by announcing its main features.
We recognise any onerous cost of the present obligation under a contract as a provision.
An onerous cost is the unavoidable cost of meeting our contractual obligations that
exceed the expected economic benefits. When we intend to vacate a leasehold property
or right of use asset, the asset would be tested for impairment and a provision may be
recognised for the ancillary contractual occupancy costs.21 Other liabilities
Other liabilities are amounts due to third parties that are not financial liabilities including lease liabilities, amounts due for goods and services that have been received
but not invoiced,
tax due to HMRC, and retirement benefit liabilities. Liabilities which have a level of uncertainty regarding their timing or the future cost to settle them
are included in other liabilities as provisions for liabilities and charges.
\u00a0
2023
2022
Other liabilities
\u00a3m
\u00a3m
Lease liabilities
670
1,118
Provisions for liabilities and charges
990
1,138
Retirement benefit liabilities (Note 5)
99
98
Accruals
1,411
1,407
Deferred income
402
355
Current tax
332
55
Deferred tax (Note 7)
141
227
Acceptances
575
237
Other liabilities
(1)
582
711
Total
5,202
5,346
\n
(1)
Other liabilities include liabilities of disposal groups of \u00a33 million (2022 - \u00a315 million). Refer to Note 8 for further information.
Provisions for liabilities and charges
\u00a0 \u00a0
Litigation and
\u00a0
Commitments
\u00a0 \u00a0
\u00a0
Customer redress
other regulatory
Property
and guarantees
Other (1)
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
431
240
154
87
226
1,138
Expected credit loss impairment release
-
-
-
(9)
-
(9)
Currency translation and other movements
(5)
(9)
-
-
(6)
(20)
Charge to income statement
276
21
41
-
136
474
Release to income statement
(36)
(33)
(64)
-
(28)
(161)
Provisions utilised
(180)
(63)
(32)
-
(157)
(432)
At 31 December 2023
486
156
99
78
171
990
\n
(1)
Other materially comprises provisions relating to restructuring costs.
Provisions are liabilities of uncertain timing or amount and are recognised when there is
a present obligation as a result of a past event, the outflow of economic benefit is
probable and the outflow can be estimated reliably. Any difference between the final
outcome and the amounts provided will affect the reported results in the period when
the matter is resolved.
For accounting policy information refer to Accounting policy 2.4.
Critical accounting policy: Provisions for liabilities
The key judgement is involved in determining whether a present obligation exists. There
is often a high degree of uncertainty and judgement is based on the specific facts and
circumstances relating to individual events in determining whether there is a present
obligation. Judgement is also involved in estimation of the probability, timing and amount
of any outflows. Where NatWest Group can look to another party such as an insurer to
pay some or all of the expenditure required to settle a provision, any reimbursement is
recognised when, and only when, it is virtually certain that it will be received.
E
E
stimates
-
Provisions are liabilities of uncertain timing or amount and are recognised
when there is a present obligation as a result of a past event, the outflow of economic
benefit is probable and the outflow can be estimated reliably.
Any difference between the final outcome and the amounts provided will affect the
reported results in the period when the matter is resolved.
\ue001
Customer redress: Provisions reflect the estimated cost of redress attributable to
claims where it is determined that a present obligation exists.
\ue001
Litigation and other regulatory: NatWest Group is engaged in various legal
proceedings, both in the UK and in overseas jurisdictions, including the US. For
further information in relation to legal proceedings and discussion of the associated
uncertainties, refer to Note 26.
\ue001
Property: This includes provision for contractual costs associated with vacant
properties.
\ue001
Other provisions: These materially comprise provisions for onerous contracts and
restructuring costs. Onerous contract provisions comprise an estimate of the costs
involved in fulfilling the terms and conditions of contracts net of any expected
benefits to be received. This includes provision for contractual costs associated with
vacant properties. Redundancy and restructuring provisions comprise the estimated
cost of restructuring, including redundancy costs where an obligation exists.
Background information for all material provisions is given in Note 26.26 Memorandum items
Contingent liabilities and commitments
NatWest Group provides its customers with a variety of services to support
their businesses, such as guarantees. These are reported as
commitments.
Contingent liabilities are possible obligations dependent on a
future event or present obligations which are either not probable or cannot
be measured reliably.
For accounting policy information refer to Accounting policy 2.4.
The amounts shown in the table below are intended only to provide an indication of the
volume of business outstanding at 31 December 2023. Although NatWest Group is
exposed to credit risk in the event of a customer\u2019s failure to meet its obligations, the
amounts shown do not, and are not intended to, provide any indication of NatWest
Group's expectation of future losses.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Contingent liabilities and commitments
\u00a0 \u00a0
Guarantees
2,810
3,150
Other contingent liabilities
1,380
1,855
Standby facilities, credit lines and other commitments
115,441
121,576
Total
119,631
126,581
\n
Banking commitments and contingent obligations, which have been entered into on
behalf of customers and for which there are corresponding obligations from customers,
are not included in assets and liabilities. NatWest Group's maximum exposure to credit
loss, in the event of its obligation crystallising and all counterclaims, collateral or security
proving valueless, is represented by the contractual nominal amount of these
instruments included in the table above. These commitments and contingent obligations
are subject to NatWest Group's normal credit approval processes.
Guarantees
\u2013
NatWest Group gives guarantees on behalf of customers. A financial
guarantee represents an irrevocable undertaking that NatWest Group will meet a
customer's specified obligations to a third party if the customer fails to do so. The
maximum amount that NatWest Group could be required to pay under a guarantee is its
principal amount as disclosed in the table above. NatWest Group expects most
guarantees it provides to expire unused.
O
O
ther contingent liabilities
- these include standby letters of credit, supporting customer
debt issues and contingent liabilities relating to customer trading activities such as those
arising from performance and customs bonds, warranties and indemnities.
Standby facilities and credit lines
- under a loan commitment, NatWest Group agrees to
make funds available to a customer in the future. Loan commitments, which are usually
for a specified term, may be unconditionally cancellable or may persist, provided all
conditions in the loan facility are satisfied or waived. Commitments to lend include
commercial standby facilities and credit lines, liquidity facilities to commercial paper
conduits and unutilised overdraft facilities.
O
O
ther commitments
- these include documentary credits, which are commercial letters
of credit providing for payment by NatWest Group to a named beneficiary against
presentation of specified documents, forward asset purchases, forward deposits placed
and undrawn note issuance and revolving underwriting facilities, and other short-term
trade related transactions.
Contractual obligations for future expenditure not provided for in the accounts
The following table shows contractual obligations for future expenditure not provided for
in the accounts at the year end.
\u00a0
2023
2022
\u00a0
\u00a0
\u00a3m
\u00a3m
Capital expenditure on property, plant and equipment
38
8
Contracts to purchase goods or services
(1)
1,121
677
\u00a0
1,159
685
\n
(1)
Of which due within 1 year: \u00a3379 million (2022 \u2013 \u00a3321 million).
Trustee and other fiduciary activities
In its capacity as trustee or other fiduciary role, NatWest Group may hold or place assets
on behalf of individuals, trusts, companies, pension schemes and others. The assets and
their income are not included in NatWest Group's financial statements. NatWest Group
earned fee income of \u00a3264 million (2022 - \u00a3266 million; 2021 - \u00a3280 million) from these
activities.
The Financial Services Compensation Scheme
The Financial Services Compensation Scheme (FSCS), the UK's statutory fund of last
resort for customers of authorised financial services firms, pays compensation if a firm is
unable to meet its obligations. The FSCS funds compensation for customers by raising
management expenses levies and compensation levies on the industry. In relation to
protected deposits, each deposit-taking institution contributes towards these levies in
proportion to their share of total protected deposits on 31 December of the year
preceding the scheme year (which runs from 1 April to 31 March), subject to annual
maxima set by the Prudential Regulation Authority. In addition, the FSCS has the power
to raise levies on a firm that has ceased to participate in the scheme and is in the
process of ceasing to be authorised for the costs that it would have been liable to pay
had the FSCS made a levy in the financial year it ceased to be a participant in the
scheme.
\n
\n\n
Litigation and regulatory matters
\n
NatWest Group plc and certain members of NatWest Group are party to various legal
\n
proceedings and are involved in, or subject to, various regulatory matters, including as
\n
the subject of investigations and other regulatory and governmental action (Matters) in
\n
the United Kingdom (UK), the United States (US), the European Union (EU) and other
\n
jurisdictions.
\n
NatWest Group recognises a provision for a liability in relation to these Matters when it is
\n
probable that an outflow of economic benefits will be required to settle an obligation
\n
resulting from past events, and a reliable estimate can be made of the amount of the
\n
obligation.
\n
In many of the Matters, it is not possible to determine whether any loss is probable, or to
\n
estimate reliably the amount of any loss, either as a direct consequence of the relevant
\n
proceedings and regulatory matters or as a result of adverse impacts or restrictions on
\n
NatWest Group\u2019s reputation, businesses and operations. Numerous legal and factual
\n
issues may need to be resolved, including through potentially lengthy discovery and
\n
document production exercises and determination of important factual matters, and by
\n
addressing novel or unsettled legal questions relevant to the proceedings in question,
\n
before the probability of a liability, if any, arising can reasonably be estimated in respect
\n
of any Matter. NatWest Group cannot predict if, how, or when such claims will be
\n
resolved or what the eventual settlement, damages, fine, penalty or other relief, if any,
\n
may be, particularly for Matters that are at an early stage in their development or where
\n
claimants seek substantial or indeterminate damages.
\n
There are situations where NatWest Group may pursue an approach that in some
\n
instances leads to a settlement agreement. This may occur in order to avoid the
\n
expense, management distraction or reputational implications of continuing to contest
\n
liability, or in order to take account of the risks inherent in defending or contesting
\n
Matters, even for those for which NatWest Group believes it has credible defences and
\n
should prevail on the merits. The uncertainties inherent in all Matters affect the amount
\n
and timing of any potential economic outflows for both Matters with respect to which
\n
provisions have been established and other contingent liabilities in respect of any such
\n
Matter.
\n
It is not practicable to provide an aggregate estimate of potential liability for our Matters
\n
as a class of contingent liabilities.
\n
The future economic outflow in respect of any Matter may ultimately prove to be
\n
substantially greater than, or less than, the aggregate provision, if any, that NatWest
\n
Group has recognised in respect of such Matter. Where a reliable estimate of the
\n
economic outflow cannot be reasonably made, no provision has been recognised.
\n
NatWest Group expects that in future periods, additional provisions and economic
\n
outflows relating to Matters that may or may not be currently known by NatWest Group
\n
will be necessary, in amounts that are expected to be substantial in some instances.
\n
Refer to Note 21 for information on material provisions.
\n
Matters which are, or could be, material, either individually or in aggregate, having
\n
regard to NatWest Group, considered as a whole, in which NatWest Group is currently
\n
involved are set out below. We have provided information on the procedural history of
\n
certain Matters, where we believe appropriate, to aid the understanding of the Matter.
\n
For a discussion of certain risks associated with NatWest Group\u2019s litigation and
\n
regulatory matters (including the Matters), refer to the Risk Factor relating to legal,
\n
regulatory and governmental actions and investigations set out on pages 4
39
to 4
41
.
\n
Litigation
\n
London Interbank Offered Rate (LIBOR) and other rates litigation
\n
NWM Plc and certain other members of NatWest Group, including NatWest Group plc,
\n
are defendants in a number of class actions and individual claims pending in the United
\n
States District Court for the Southern District of New York (SDNY) with respect to the
\n
setting of LIBOR and certain other benchmark interest rates. The complainants allege
\n
that certain members of NatWest Group and other panel banks violated various federal
\n
laws, including the US commodities and antitrust laws, and state statutory and common
\n
law, as well as contracts, by manipulating LIBOR and prices of LIBOR-based derivatives
\n
in various markets through various means.
\n
Several purported class actions relating to USD LIBOR, as well as more than two dozen
\n
non-class actions concerning USD LIBOR and involving NatWest Group companies, are
\n
part of a co-ordinated proceeding in the SDNY. The class actions include claims on
\n
behalf of persons who purchased LIBOR-linked instruments from defendants, bonds
\n
issued by defendants, persons who transacted futures and options on exchanges, and
\n
lenders who made LIBOR-based loans. The coordinated proceeding is currently in the
\n
discovery phase. NatWest Group companies\u2019 previously disclosed settlement of a class
\n
action on behalf of bondholder plaintiffs has received final court approval. The amount of
\n
the settlement was covered by an existing provision.
\n
The non-class claims filed in the SDNY include claims that the FDIC is asserting on behalf
\n
of certain failed US banks. In July 2017, the FDIC, on behalf of 39 of those failed US
\n
banks, commenced substantially similar claims against NatWest Group companies and
\n
others in the High Court of Justice of England and Wales. The action alleges collusion
\n
with regard to the setting of USD LIBOR and that the defendants breached UK and
\n
European competition law, as well as asserting common law claims of fraud under US
\n
law. The defendant banks consented to a request by the FDIC for discontinuance of the
\n
claim in respect of 20 failed US banks, leaving 19 failed US banks as claimants. The trial
\n
is currently anticipated to commence in Q1 2026.
\n
In addition to the USD LIBOR cases described above, there is a class action relating to
\n
derivatives allegedly tied to JPY LIBOR and Euroyen TIBOR, which was dismissed by the
\n
SDNY in relation to NWM Plc and other NatWest Group companies in September 2021.
\n
That dismissal may be the subject of a future appeal. The SDNY\u2019s dismissal of another
\n
class action, which related to Euroyen TIBOR futures contracts, was affirmed by the
\n
United States Court of Appeals for the Second Circuit (US Court of Appeals) in October
\n
2022. The plaintiffs filed a petition with the United States Supreme Court seeking review
\n
of the dismissal, but that petition was denied in October 2023.
\n
Two other IBOR-related class actions involving NWM Plc, concerning alleged
\n
manipulation of Euribor and Pound Sterling LIBOR, were previously dismissed by the
\n
SDNY for various reasons. The plaintiffs\u2019 appeals in those two cases remain pending.
\n
\n\n
\n
NWM Plc\u2019s previously disclosed settlement of a class action relating to Swiss Franc
\n
LIBOR has received final court approval. The settlement amount has been paid by NWM
\n
Plc and was covered in full by an existing provision.
\n
In August 2020, a complaint was filed in the United States District Court for the Northern
\n
District of California by several United States retail borrowers against the USD ICE
\n
LIBOR panel banks and their affiliates (including NatWest Group plc, NWM Plc, NWMSI
\n
and NWB Plc), alleging (i) that the very process of setting USD ICE LIBOR amounts to
\n
illegal price-fixing; and (ii) that banks in the United States have illegally agreed to use
\n
LIBOR as a component of price in variable retail loans. In September 2022, the district
\n
court dismissed the complaint. The plaintiffs filed an amended complaint but in October
\n
2023, the district court dismissed that complaint as well, and indicated that further
\n
amendment would not be permitted. The plaintiffs have commenced an appeal to the
\n
United States Court of Appeals for the Ninth Circuit which is currently pending.
\n
NWM Plc is also named as a defendant in a motion to certify a class action relating to
\n
LIBOR in the Tel Aviv District Court in Israel. NWM Plc filed a motion for cancellation of
\n
service outside the jurisdiction, which was granted in July 2020. The claimants appealed
\n
that decision and in November 2020 the appeal was refused and the claim dismissed by
\n
the Appellate Court. The claim could in future be recommenced depending on the
\n
outcome of an appeal to Israel\u2019s Supreme Court in respect of the dismissal of the
\n
substantive case against banks that had a presence in Israel.
\n
Foreign exchange litigation
\n
NWM Plc, NWMSI and/or NatWest Group plc are defendants in several cases relating to
\n
NWM Plc\u2019s foreign exchange (FX) business.
\n
An FX-related class action, on behalf of \u2018consumers and end-user businesses\u2019, was
\n
proceeding in the SDNY against NWM Plc and others. In March 2023, the court granted
\n
summary judgment in favour of the defendants, dismissing the plaintiffs\u2019 claims. The
\n
plaintiffs have commenced an appeal of that decision as well as a prior decision denying
\n
class certification in the case.
\n
In May 2019, a cartel class action was filed in the Federal Court of Australia against
\n
NWM Plc and four other banks on behalf of persons who bought or sold currency
\n
through FX spots or forwards between 1 January 2008 and 15 October 2013 with a
\n
total transaction value exceeding AUD $0.5 million. The claimant has alleged that the
\n
banks, including NWM Plc, contravened Australian competition law by sharing
\n
information, coordinating conduct, widening spreads and manipulating FX rates for
\n
certain currency pairs during this period. NatWest Group plc and NWMSI have been
\n
named in the action as \u2018other cartel participants\u2019, but are not respondents. The claim
\n
was served in June 2019 and NWM Plc filed its defence in March 2022.
\n
In July and December 2019, two separate applications seeking opt-out collective
\n
proceedings orders were filed in the UK Competition Appeal Tribunal (CAT) against
\n
NatWest Group plc, NWM Plc and other banks. Both applications were brought on behalf
\n
of persons who, between 18 December 2007 and 31 January 2013, entered into a
\n
relevant FX spot or outright forward transaction in the EEA with a relevant financial
\n
institution or on an electronic communications network. In March 2022, the CAT declined
\n
to certify as collective proceedings either of the applications, which was appealed by the
\n
applicants, and the subject of an application for judicial review.
\n
In its amended judgment in November 2023, the Court of Appeal allowed the appeal and
\n
decided that the claims should proceed on an opt-out basis. Separately, the court
\n
determined which of the two competing applicants can proceed as class representative,
\n
and dismissed the application for judicial review of the CAT\u2019s decision. The case has been
\n
remitted to the CAT for further case management and the banks have sought
\n
permission to appeal directly to the UK Supreme Court.
\n
Two motions to certify FX-related class actions were filed in the Tel Aviv District Court in
\n
Israel in September and October 2018, and were subsequently consolidated into one
\n
motion. The consolidated motion to certify, which names The Royal Bank of Scotland plc
\n
(now NWM Plc) and several other banks as defendants, was served on NWM Plc in May
\n
2020. The applicants have sought the court\u2019s permission to amend their motions to
\n
certify the class actions. NWM Plc has filed a motion challenging the permission granted
\n
by the court for the applicants to serve the consolidated motion outside the Israeli
\n
jurisdiction. That NWM Plc motion remains pending.
\n
In December 2021, a summons was served in the Netherlands against NatWest Group
\n
plc, NWM Plc and NWM N.V. by Stichting FX Claims on behalf of a number of parties,
\n
seeking declarations from the court concerning liability for anti-competitive FX market
\n
conduct described in decisions of the European Commission (EC) of 16 May 2019, along
\n
with unspecified damages. The claimant amended its claim to also refer to a 2 December
\n
2021 decision by the EC, which described anti-competitive FX market conduct. NatWest
\n
Group plc, NWM Plc and other defendants contested the jurisdiction of the Dutch court.
\n
In March 2023, the district court in Amsterdam accepted that it has jurisdiction to hear
\n
claims against NWM N.V. but refused jurisdiction to hear any claims against the other
\n
defendant banks (including NatWest Group plc and NWM Plc) brought on behalf of the
\n
parties represented by the claimant that are domiciled outside of the Netherlands. The
\n
claimant is appealing that decision and the defendant banks have brought cross-appeals
\n
which seek a ruling that the Dutch court has no jurisdiction to hear any claims against
\n
the defendant banks domiciled outside of the Netherlands, including claims brought on
\n
behalf of the parties represented by the claimant that are domiciled in the Netherlands.
\n
In September 2023, second summonses were served by Stichting FX Claims on NWM
\n
N.V., NatWest Group plc and NWM Plc, for claims on behalf of a new group of parties
\n
that have now been brought before the district court in Amsterdam. The summonses
\n
seek declarations from the Dutch court concerning liability for anti-competitive FX
\n
market conduct described in the above referenced decisions of the EC of 16 May 2019
\n
and 2 December 2021, along with unspecified damages.
\n
Certain other foreign exchange transaction related claims have been or may be
\n
threatened. NatWest Group cannot predict whether all or any of these claims will be
\n
pursued.
\n
\n\n
\n
Government securities antitrust litigation
\n
NWMSI and certain other US broker-dealers are defendants in a consolidated antitrust
\n
class action in the SDNY on behalf of persons who transacted in US Treasury securities
\n
or derivatives based on such instruments, including futures and options. The plaintiffs
\n
allege that the defendants rigged the US Treasury securities auction bidding process to
\n
deflate prices at which they bought such securities and colluded to increase the prices at
\n
which they sold such securities to the plaintiffs. In March 2022, the SDNY dismissed the
\n
complaint, without leave to re-plead. In February 2024, the US Court of Appeals affirmed
\n
the SDNY\u2019s decision dismissing the complaint.
\n
Class action antitrust claims commenced in March 2019 are pending in the SDNY
\n
against NWM Plc, NWMSI and other banks in respect of Euro-denominated bonds issued
\n
by various European central banks (European government bonds or EGBs). The
\n
complaint alleges a conspiracy among dealers of EGBs to widen the bid-ask spreads they
\n
quoted to customers, thereby increasing the prices customers paid for the EGBs or
\n
decreasing the prices at which customers sold EGBs. The class consists of those who
\n
purchased or sold EGBs in the US between 2007 and 2012. Previously, in March 2022,
\n
the SDNY dismissed the claims against NWM Plc and NWMSI on the ground that the
\n
complaint\u2019s conspiracy allegations were insufficient. However, in September 2023, the
\n
SDNY ruled that new allegations which plaintiffs have included in an amended complaint
\n
are sufficient to bring those NatWest entities back into the case as defendants.
\n
Swaps antitrust litigation
\n
NWM Plc and other members of NatWest Group, including NatWest Group plc, as well as
\n
a number of other interest rate swap dealers, are defendants in several cases pending in
\n
the SDNY alleging violations of the US antitrust laws in the market for interest rate
\n
swaps. There is a consolidated class action complaint on behalf of persons who entered
\n
into interest rate swaps with the defendants, as well as non-class action claims by three
\n
swap execution facilities (TeraExchange, Javelin, and trueEx). The plaintiffs allege that
\n
the swap execution facilities would have successfully established exchange-like trading of
\n
interest rate swaps if the defendants had not unlawfully conspired to prevent that from
\n
happening through boycotts and other means. Discovery in these cases is complete. In
\n
December 2023, the SDNY denied the plaintiffs\u2019 motion for class certification. The
\n
plaintiffs have filed a petition requesting that the US Court of Appeals review the denial
\n
of class certification.
\n
In June 2021, a class action antitrust complaint was filed against a number of credit
\n
default swap dealers, in New Mexico federal court on behalf of persons who, from 2005
\n
onwards, settled credit default swaps in the United States by reference to the ISDA
\n
credit default swap auction protocol. The complaint alleges that the defendants
\n
conspired to manipulate that benchmark through various means in violation of the
\n
antitrust laws and the Commodity Exchange Act. The defendants filed a motion to
\n
dismiss the complaint and, in June 2023, such motion was denied as regards NWMSI and
\n
other financial institutions, but granted as regards to NWM Plc on the ground that the
\n
court lacks jurisdiction over that entity. As a result, the case entered the discovery phase
\n
as against the non-dismissed defendants. In January 2024, the SDNY issued an order
\n
barring the plaintiffs in the New Mexico case from pursuing claims based on conduct
\n
occurring before 30 June 2014 on the ground that such claims were extinguished by a
\n
2015 settlement agreement that resolved a prior class action relating to credit default
\n
swaps.
\n
O
O
dd lot corporate bond trading antitrust litigation
\n
In October 2021, the SDNY granted the defendants\u2019 motion to dismiss the class action
\n
antitrust complaint alleging that from August 2006 onwards various securities dealers,
\n
including NWMSI, conspired artificially to widen spreads for odd lots of corporate bonds
\n
bought or sold in the United States secondary market and to boycott electronic trading
\n
platforms that would have allegedly promoted pricing competition in the market for such
\n
bonds. The plaintiffs have filed an appeal.
\n
Spoofing litigation
\n
In December 2021, three substantially similar class actions complaints were filed in
\n
federal court in the United States against NWM Plc and NWMSI alleging Commodity
\n
Exchange Act and common law unjust enrichment claims arising from manipulative
\n
trading known as spoofing. The complaints refer to NWM Plc\u2019s December 2021 spoofing-
\n
related guilty plea (described below under \u201cUS investigations relating to fixed-income
\n
securities\u201d) and purport to assert claims on behalf of those who transacted in US
\n
Treasury securities and futures and options on US Treasury securities between 2008 and
\n
2018. In July 2022, defendants filed a motion to dismiss these claims, which have been
\n
consolidated into one matter in the United States District Court for the Northern District
\n
of Illinois.
\n
Madoff
\n
NWM N.V. was named as a defendant in two actions filed by the trustee for the bankrupt
\n
estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, in
\n
bankruptcy court in New York, which together seek to clawback more than US$298
\n
million that NWM N.V. allegedly received from certain Madoff feeder funds and certain
\n
swap counterparties. The claims were previously dismissed, but as a result of an August
\n
2021 decision by the US Court of Appeals, they will now proceed in the bankruptcy
\n
court, where they have been consolidated into one action, subject to NWM N.V.\u2019s legal
\n
and factual defences. In May 2022, NWM N.V. filed a motion to dismiss the amended
\n
complaint in the consolidated action and such motion was denied in March 2023. As a
\n
result, the case has now entered the discovery phase.
\n
EUA trading litigation
\n
NWM Plc was a named defendant in civil proceedings before the High Court of Justice of
\n
England and Wales brought in 2015 by ten
companies (all in liquidation) (the \u2018Liquidated
\n
Companies\u2019) and their respective liquidators (together, \u2018the Claimants\u2019). The Liquidated
\n
Companies previously traded in European Union Allowances (EUAs) in 2009 and were
\n
alleged to be VAT defaulting traders within (or otherwise connected to) EUA supply
\n
chains of which NWM Plc was a party. In March 2020, the court held that NWM Plc and
\n
Mercuria Energy Europe Trading Limited (\u2018Mercuria\u2019) were liable for dishonestly assisting
\n
and knowingly being a party to fraudulent trading during a seven business day period in
\n
2009.
\n
\n\n
\n
In October 2020, the High Court quantified total damages against NWM Plc and
\n
Mercuria at \u00a345 million plus interest and costs, and permitted the defendants to appeal
\n
to the Court of Appeal. In May 2021 the Court of Appeal set aside the High Court\u2019s
\n
judgment and ordered that a retrial take place before a different High Court judge. In
\n
January 2024, NWM Plc entered into an agreement to resolve the claim against it. The
\n
settlement amount paid by NWM Plc was covered in full by an existing provision.
\n
Offshoring VAT assessments
\n
HMRC issued protective tax assessments in 2018 against NatWest Group plc totalling
\n
\u00a3143 million relating to unpaid VAT in respect of the UK branches of two NatWest Group
\n
companies registered in India. NatWest Group formally requested reconsideration by
\n
HMRC of their assessments, and this process was completed in November 2020. HMRC
\n
upheld their original decision and, as a result, NatWest Group plc lodged an appeal with
\n
the Tax Tribunal and an application for judicial review with the High Court of Justice of
\n
England and Wales, both in December 2020. In order to lodge the appeal with the Tax
\n
Tribunal, NatWest Group plc was required to pay \u00a3143 million to HMRC, and payment
\n
was made in December 2020. The appeal and the application for judicial review have
\n
both been stayed pending resolution of separate cases involving other banks.
\n
US Anti-Terrorism Act litigation
\n
NWM N.V. and certain other financial institutions are defendants in several actions filed
\n
by a number of US nationals (or their estates, survivors, or heirs), most of whom are or
\n
were US military personnel, who were killed or injured in attacks in Iraq between 2003
\n
and 2011. NWM Plc is also a defendant in some of these cases.
\n
According to the plaintiffs\u2019 allegations, the defendants are liable for damages arising from
\n
the attacks because they allegedly conspired with and/or aided and abetted Iran and
\n
certain Iranian banks to assist Iran in transferring money to Hezbollah and the Iraqi
\n
terror cells that committed the attacks, in violation of the US Anti-Terrorism Act, by
\n
agreeing to engage in \u2018stripping\u2019 of transactions initiated by the Iranian banks so that the
\n
Iranian nexus to the transactions would not be detected.
\n
The first of these actions, alleging conspiracy claims but not aiding and abetting claims,
\n
was filed in the United States District Court for the Eastern District of New York in
\n
November 2014. In September 2019, the district court dismissed the case, finding that
\n
the claims were deficient for several reasons, including lack of sufficient allegations as to
\n
the alleged conspiracy and causation. In January 2023, the US Court of Appeals affirmed
\n
the district court\u2019s dismissal of this case. The plaintiffs filed a petition with the United
\n
States Supreme Court seeking review of the dismissal of their claims and that petition
\n
was denied in October 2023. It is anticipated that the plaintiffs will file a motion to re-
\n
open the case to assert aiding and abetting claims that they previously did not assert.
\n
Another action, filed in the SDNY in 2017, which asserted both conspiracy and aiding
\n
and abetting claims, was dismissed by the SDNY in March 2019 on similar grounds as
\n
the first case, but remains subject to appeal to the US Court of Appeals. Other follow-on
\n
actions that are substantially similar to those described above are pending in the same
\n
courts.
\n
1
1
MDB litigation
\n
A Malaysian court claim was served in Switzerland in November 2022 by 1MDB, a
\n
Sovereign Wealth Fund, in which Coutts & Co Ltd was named, along with six others, as a
\n
defendant in respect of losses allegedly incurred by 1MDB. It is claimed that Coutts & Co
\n
Ltd is liable as a constructive trustee for having dishonestly assisted the directors of
\n
1MDB in the breach of their fiduciary duties by failing (amongst other alleged claims) to
\n
undertake due diligence in relation to a customer of Coutts & Co Ltd, through which
\n
funds totalling c.US$1 billion were received and paid out between 2009 and 2011. The
\n
claimant seeks the return of that amount plus interest. Coutts & Co Ltd filed an
\n
application in January 2023 challenging the validity of service and the Malaysian court\u2019s
\n
jurisdiction to hear the claim. Before that application was heard, in April 2023, the
\n
claimant filed a notice of discontinuance of its claim against certain defendants including
\n
Coutts & Co Ltd. The claimant subsequently indicated that it intended to issue further
\n
replacement proceedings. Coutts & Co Ltd challenged the claimant\u2019s ability to take that
\n
step. In August 2023, the court disallowed the discontinuation of the claim by the
\n
claimant (a decision that the claimant has appealed) and directed that the application by
\n
Coutts & Co Ltd challenging the validity of the proceedings should proceed to a hearing,
\n
which took place in February 2024. Judgment is awaited.
\n
Coutts & Co Ltd (a subsidiary of RBS Netherlands Holdings B.V., which in turn is a
\n
subsidiary of NWM Plc) is a company registered in Switzerland and is in wind-down
\n
following the announced sale of its business assets in 2015.
\n
Regulatory matters (including investigations and customer redress programmes)
\n
NatWest Group\u2019s businesses and financial condition can be affected by the actions of
\n
various governmental and regulatory authorities in the UK, the US, the EU and
\n
elsewhere. NatWest Group has engaged, and will continue to engage, in discussions with
\n
relevant governmental and regulatory authorities, including in the UK, the US, the EU
\n
and elsewhere, on an ongoing and regular basis, and in response to informal and formal
\n
inquiries or investigations, regarding operational, systems and control evaluations and
\n
issues including those related to compliance with applicable laws and regulations,
\n
including consumer protection, investment advice, business conduct, competition/anti-
\n
trust, VAT recovery, anti-bribery, anti-money laundering and sanctions regimes.
\n
NatWest Group expects government and regulatory intervention in financial services to
\n
be high for the foreseeable future, including increased scrutiny from competition and
\n
other regulators in the retail and SME business sectors.
\n
Any matters discussed or identified during such discussions and inquiries may result in,
\n
among other things, further inquiry or investigation, other action being taken by
\n
governmental and regulatory authorities, increased costs being incurred by NatWest
\n
Group, remediation of systems and controls, public or private censure, restriction of
\n
NatWest Group\u2019s business activities and/or fines. Any of the events or circumstances
\n
mentioned in this paragraph or below could have a material adverse effect on NatWest
\n
Group, its business, authorisations and licences, reputation, results of operations or the
\n
price of securities issued by it, or lead to material additional provisions being taken.
\n
NatWest Group is co-operating fully with the matters described below.
\n
\n\n
\n
US investigations relating to fixed-income securities
\n
In December 2021, NWM Plc pled guilty in the United States District Court for the District
\n
of Connecticut to one count of wire fraud and one count of securities fraud in connection
\n
with historical spoofing conduct by former employees in US Treasuries markets between
\n
January 2008 and May 2014 and, separately, during approximately three months in
\n
2018. The 2018 trading occurred during the term of a non-prosecution agreement (NPA)
\n
between NWMSI and the United States Attorney's Office for the District of Connecticut
\n
(USAO CT), under which non-prosecution was conditioned on NWMSI and affiliated
\n
companies not engaging in criminal conduct during the term of the NPA. The relevant
\n
trading in 2018 was conducted by two NWM traders in Singapore and breached that
\n
NPA. The plea agreement reached with the US Department of Justice and the USAO CT
\n
resolved both the spoofing conduct and the breach of the NPA.
\n
As required by the resolution and sentence imposed by the court, NWM Plc is subject to
\n
a three-year period of probation scheduled to end in December 2024. The plea
\n
agreement also imposes an independent corporate monitor. In addition, NWM Plc has
\n
committed to compliance programme reviews and improvements and agreed to
\n
reporting and co-operation obligations.
\n
Other material adverse collateral consequences may occur as a result of this matter, as
\n
further described in the Risk Factor relating to legal, regulatory and governmental
\n
actions and investigations set out on pages 43
9
to 44
1
.
\n
RBSI inspection report and referral to enforcement
\n
Following an inspection by the Isle of Man Financial Services Authority (IOMFSA) in 2021
\n
into The Royal Bank of Scotland International Limited\u2019s (RBSI\u2019s) compliance with the
\n
Financial Services Rule Book 2016, the Anti-Money Laundering and Countering the
\n
Financing of Terrorism Code 2015 (the \u201c2015 Code\u201d) and the Anti-Money Laundering
\n
and Countering the Financing of Terrorism Code 2019, RBSI and the IOMFSA entered
\n
into a settlement agreement in February 2024 with an agreed public statement that RBSI
\n
had contravened paragraph 7 of the 2015 Code. RBSI did not complete its updated
\n
Customer Risk Assessment process following the introduction of the 2015 Code until
\n
2018, resulting in 2,239 non-personal customers (on-boarded to its Isle of Man branches
\n
between 2015 and 2018, and not rated as high risk) being on-boarded using Customer
\n
Risk Assessments in line with earlier legislation. This constituted less than 3% of the total
\n
customer population of the Isle of Man branches. RBSI was fined \u00a31.0 million (after a
\n
discount for co-operation), which was covered in full by an existing provision.
\n
RBSI reliance regime and referral to enforcement
\n
In January 2023, the Jersey Financial Services Commission notified RBSI that it had been
\n
referred to its Enforcement Division in relation to RBSI\u2019s operation of the reliance regime.
\n
The reliance regime is specific to certain Crown Dependencies and enables the bank to
\n
rely on regulated third parties for specific due diligence information.
\n
I
I
nvestment advice review
\n
In October 2019, the FCA notified NatWest Group of its intention to appoint a Skilled
\n
Person under section 166 of the Financial Services and Markets Act 2000 to conduct a
\n
review of whether NatWest Group\u2019s past business review of investment advice provided
\n
during 2010 to 2015 was subject to appropriate governance and accountability and led
\n
to appropriate customer outcomes. The Skilled Person\u2019s review has concluded and, after
\n
discussion with the FCA, NatWest Group is undertaking additional review / remediation
\n
work.
\n
Reviews into customer account closures
\n
In July 2023, NatWest Group plc commissioned an independent review by the law firm
\n
Travers Smith LLP into issues that had arisen from treatment of a customer in
\n
connection with an account closure decision that attracted significant public attention
\n
and certain related interactions with the media. NatWest Group plc has received reports
\n
in connection with that review (and in October and December 2023 published summaries
\n
of the key findings and recommendations).
\n
In addition, NatWest Group plc is conducting internal reviews with respect to certain
\n
governance processes, policies, systems and controls of NatWest Group entities,
\n
including with respect to customer account closures.
\n
The FCA is conducting supervisory work into how the governance, systems and controls
\n
of NatWest Group and Coutts & Company are working, to identify and address any
\n
significant shortcomings.
\n
Review and investigation of treatment of tracker mortgage customers in Ulster Bank
\n
Ireland DAC
\n
In December 2015, correspondence was received from the Central Bank of Ireland
\n
setting out an industry examination framework in respect of the sale of tracker
\n
mortgages from approximately 2001 until the end of 2015. The redress and
\n
compensation process has now largely concluded, although certain cases remain
\n
outstanding.
\n
UBIDAC customers have lodged tracker mortgage complaints with the Financial Services
\n
and Pensions Ombudsman (FSPO). UBIDAC challenged three FSPO adjudications in the
\n
Irish High Court. In June 2023, the High Court found in favour of the FSPO in all matters
\n
and a provision was recognised. UBIDAC was granted leave to appeal that decision and
\n
an appeal hearing has been scheduled to take place in the Court of Appeal.
\n
Other customer remediation in Ulster Bank Ireland DAC
\n
UBIDAC has identified other legacy issues leading to the establishment of remediation
\nrequirements and progress is ongoing to conclude activities.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81202": { "value": "2.4. Provisions
We recognise a provision for a present obligation resulting from a past event when it is
more likely than not that we will be required to pay to settle the obligation and the
amount of the obligation can be estimated reliably.
Provision is made for restructuring costs, including the costs of redundancy, when we
have a constructive obligation. An obligation exists when we have a detailed formal plan
for the restructuring and have raised a valid expectation in those affected either by
starting to implement the plan or by announcing its main features.
We recognise any onerous cost of the present obligation under a contract as a provision.
An onerous cost is the unavoidable cost of meeting our contractual obligations that
exceed the expected economic benefits. When we intend to vacate a leasehold property
or right of use asset, the asset would be tested for impairment and a provision may be
recognised for the ancillary contractual occupancy costs.Critical accounting policy: Provisions for liabilities
The key judgement is involved in determining whether a present obligation exists. There
is often a high degree of uncertainty and judgement is based on the specific facts and
circumstances relating to individual events in determining whether there is a present
obligation. Judgement is also involved in estimation of the probability, timing and amount
of any outflows. Where NatWest Group can look to another party such as an insurer to
pay some or all of the expenditure required to settle a provision, any reimbursement is
recognised when, and only when, it is virtually certain that it will be received.
E
E
stimates
-
Provisions are liabilities of uncertain timing or amount and are recognised
when there is a present obligation as a result of a past event, the outflow of economic
benefit is probable and the outflow can be estimated reliably.
Any difference between the final outcome and the amounts provided will affect the
reported results in the period when the matter is resolved.
\ue001
Customer redress: Provisions reflect the estimated cost of redress attributable to
claims where it is determined that a present obligation exists.
\ue001
Litigation and other regulatory: NatWest Group is engaged in various legal
proceedings, both in the UK and in overseas jurisdictions, including the US. For
further information in relation to legal proceedings and discussion of the associated
uncertainties, refer to Note 26.
\ue001
Property: This includes provision for contractual costs associated with vacant
properties.
\ue001
Other provisions: These materially comprise provisions for onerous contracts and
restructuring costs. Onerous contract provisions comprise an estimate of the costs
involved in fulfilling the terms and conditions of contracts net of any expected
benefits to be received. This includes provision for contractual costs associated with
vacant properties. Redundancy and restructuring provisions comprise the estimated
cost of restructuring, including redundancy costs where an obligation exists.
Background information for all material provisions is given in Note 26.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81203": { "value": "2.4. Provisions
We recognise a provision for a present obligation resulting from a past event when it is
more likely than not that we will be required to pay to settle the obligation and the
amount of the obligation can be estimated reliably.
Provision is made for restructuring costs, including the costs of redundancy, when we
have a constructive obligation. An obligation exists when we have a detailed formal plan
for the restructuring and have raised a valid expectation in those affected either by
starting to implement the plan or by announcing its main features.
We recognise any onerous cost of the present obligation under a contract as a provision.
An onerous cost is the unavoidable cost of meeting our contractual obligations that
exceed the expected economic benefits. When we intend to vacate a leasehold property
or right of use asset, the asset would be tested for impairment and a provision may be
recognised for the ancillary contractual occupancy costs.3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.3.10. Capital instruments
We classify a financial instrument that we issue as a liability if it is a contractual obligation
to deliver cash or another financial asset, or to exchange financial assets or financial
liabilities on potentially unfavourable terms and as equity if we evidence a residual
interest in our assets after the deduction of liabilities. Incremental costs and related tax
that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known
as treasury shares or own shares held) is deducted from retained earnings. On the
cancellation of treasury shares their nominal value is removed from retained earnings
and a consequential amount recognised in capital redemption in compliance with the
Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are
credited to equity, net of any directly attributable incremental costs.19 Other financial liabilities
Other financial liabilities consist of customer deposits designated at fair value and debt securities in issue.
For accounting policy information refer to Accounting policies 3.8 and 3.10.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Customer deposits - designated as at fair value through profit or loss
1,280
1,050
Debt securities in issue
\u00a0 \u00a0
- MRELs
21,660
22,265
- Other medium term notes
17,843
16,419
- Commercial paper and certificates of deposit
11,321
5,672
- Covered bonds
2,122
2,842
- Securitisation
863
859
Total
55,089
49,107
\n21 Other liabilities
Other liabilities are amounts due to third parties that are not financial liabilities including lease liabilities, amounts due for goods and services that have been received
but not invoiced,
tax due to HMRC, and retirement benefit liabilities. Liabilities which have a level of uncertainty regarding their timing or the future cost to settle them
are included in other liabilities as provisions for liabilities and charges.
\u00a0
2023
2022
Other liabilities
\u00a3m
\u00a3m
Lease liabilities
670
1,118
Provisions for liabilities and charges
990
1,138
Retirement benefit liabilities (Note 5)
99
98
Accruals
1,411
1,407
Deferred income
402
355
Current tax
332
55
Deferred tax (Note 7)
141
227
Acceptances
575
237
Other liabilities
(1)
582
711
Total
5,202
5,346
\n
(1)
Other liabilities include liabilities of disposal groups of \u00a33 million (2022 - \u00a315 million). Refer to Note 8 for further information.
Provisions for liabilities and charges
\u00a0 \u00a0
Litigation and
\u00a0
Commitments
\u00a0 \u00a0
\u00a0
Customer redress
other regulatory
Property
and guarantees
Other (1)
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
431
240
154
87
226
1,138
Expected credit loss impairment release
-
-
-
(9)
-
(9)
Currency translation and other movements
(5)
(9)
-
-
(6)
(20)
Charge to income statement
276
21
41
-
136
474
Release to income statement
(36)
(33)
(64)
-
(28)
(161)
Provisions utilised
(180)
(63)
(32)
-
(157)
(432)
At 31 December 2023
486
156
99
78
171
990
\n
(1)
Other materially comprises provisions relating to restructuring costs.
Provisions are liabilities of uncertain timing or amount and are recognised when there is
a present obligation as a result of a past event, the outflow of economic benefit is
probable and the outflow can be estimated reliably. Any difference between the final
outcome and the amounts provided will affect the reported results in the period when
the matter is resolved.
For accounting policy information refer to Accounting policy 2.4.
Critical accounting policy: Provisions for liabilities
The key judgement is involved in determining whether a present obligation exists. There
is often a high degree of uncertainty and judgement is based on the specific facts and
circumstances relating to individual events in determining whether there is a present
obligation. Judgement is also involved in estimation of the probability, timing and amount
of any outflows. Where NatWest Group can look to another party such as an insurer to
pay some or all of the expenditure required to settle a provision, any reimbursement is
recognised when, and only when, it is virtually certain that it will be received.
E
E
stimates
-
Provisions are liabilities of uncertain timing or amount and are recognised
when there is a present obligation as a result of a past event, the outflow of economic
benefit is probable and the outflow can be estimated reliably.
Any difference between the final outcome and the amounts provided will affect the
reported results in the period when the matter is resolved.
\ue001
Customer redress: Provisions reflect the estimated cost of redress attributable to
claims where it is determined that a present obligation exists.
\ue001
Litigation and other regulatory: NatWest Group is engaged in various legal
proceedings, both in the UK and in overseas jurisdictions, including the US. For
further information in relation to legal proceedings and discussion of the associated
uncertainties, refer to Note 26.
\ue001
Property: This includes provision for contractual costs associated with vacant
properties.
\ue001
Other provisions: These materially comprise provisions for onerous contracts and
restructuring costs. Onerous contract provisions comprise an estimate of the costs
involved in fulfilling the terms and conditions of contracts net of any expected
benefits to be received. This includes provision for contractual costs associated with
vacant properties. Redundancy and restructuring provisions comprise the estimated
cost of restructuring, including redundancy costs where an obligation exists.
Background information for all material provisions is given in Note 26.26 Memorandum items
Contingent liabilities and commitments
NatWest Group provides its customers with a variety of services to support
their businesses, such as guarantees. These are reported as
commitments.
Contingent liabilities are possible obligations dependent on a
future event or present obligations which are either not probable or cannot
be measured reliably.
For accounting policy information refer to Accounting policy 2.4.
The amounts shown in the table below are intended only to provide an indication of the
volume of business outstanding at 31 December 2023. Although NatWest Group is
exposed to credit risk in the event of a customer\u2019s failure to meet its obligations, the
amounts shown do not, and are not intended to, provide any indication of NatWest
Group's expectation of future losses.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Contingent liabilities and commitments
\u00a0 \u00a0
Guarantees
2,810
3,150
Other contingent liabilities
1,380
1,855
Standby facilities, credit lines and other commitments
115,441
121,576
Total
119,631
126,581
\n
Banking commitments and contingent obligations, which have been entered into on
behalf of customers and for which there are corresponding obligations from customers,
are not included in assets and liabilities. NatWest Group's maximum exposure to credit
loss, in the event of its obligation crystallising and all counterclaims, collateral or security
proving valueless, is represented by the contractual nominal amount of these
instruments included in the table above. These commitments and contingent obligations
are subject to NatWest Group's normal credit approval processes.
Guarantees
\u2013
NatWest Group gives guarantees on behalf of customers. A financial
guarantee represents an irrevocable undertaking that NatWest Group will meet a
customer's specified obligations to a third party if the customer fails to do so. The
maximum amount that NatWest Group could be required to pay under a guarantee is its
principal amount as disclosed in the table above. NatWest Group expects most
guarantees it provides to expire unused.
O
O
ther contingent liabilities
- these include standby letters of credit, supporting customer
debt issues and contingent liabilities relating to customer trading activities such as those
arising from performance and customs bonds, warranties and indemnities.
Standby facilities and credit lines
- under a loan commitment, NatWest Group agrees to
make funds available to a customer in the future. Loan commitments, which are usually
for a specified term, may be unconditionally cancellable or may persist, provided all
conditions in the loan facility are satisfied or waived. Commitments to lend include
commercial standby facilities and credit lines, liquidity facilities to commercial paper
conduits and unutilised overdraft facilities.
O
O
ther commitments
- these include documentary credits, which are commercial letters
of credit providing for payment by NatWest Group to a named beneficiary against
presentation of specified documents, forward asset purchases, forward deposits placed
and undrawn note issuance and revolving underwriting facilities, and other short-term
trade related transactions.
Contractual obligations for future expenditure not provided for in the accounts
The following table shows contractual obligations for future expenditure not provided for
in the accounts at the year end.
\u00a0
2023
2022
\u00a0
\u00a0
\u00a3m
\u00a3m
Capital expenditure on property, plant and equipment
38
8
Contracts to purchase goods or services
(1)
1,121
677
\u00a0
1,159
685
\n
(1)
Of which due within 1 year: \u00a3379 million (2022 \u2013 \u00a3321 million).
Trustee and other fiduciary activities
In its capacity as trustee or other fiduciary role, NatWest Group may hold or place assets
on behalf of individuals, trusts, companies, pension schemes and others. The assets and
their income are not included in NatWest Group's financial statements. NatWest Group
earned fee income of \u00a3264 million (2022 - \u00a3266 million; 2021 - \u00a3280 million) from these
activities.
The Financial Services Compensation Scheme
The Financial Services Compensation Scheme (FSCS), the UK's statutory fund of last
resort for customers of authorised financial services firms, pays compensation if a firm is
unable to meet its obligations. The FSCS funds compensation for customers by raising
management expenses levies and compensation levies on the industry. In relation to
protected deposits, each deposit-taking institution contributes towards these levies in
proportion to their share of total protected deposits on 31 December of the year
preceding the scheme year (which runs from 1 April to 31 March), subject to annual
maxima set by the Prudential Regulation Authority. In addition, the FSCS has the power
to raise levies on a firm that has ceased to participate in the scheme and is in the
process of ceasing to be authorised for the costs that it would have been liable to pay
had the FSCS made a levy in the financial year it ceased to be a participant in the
scheme.
\n
\n\n\n\n
\n\n
Litigation and regulatory matters
\n
NatWest Group plc and certain members of NatWest Group are party to various legal
\n
proceedings and are involved in, or subject to, various regulatory matters, including as
\n
the subject of investigations and other regulatory and governmental action (Matters) in
\n
the United Kingdom (UK), the United States (US), the European Union (EU) and other
\n
jurisdictions.
\n
NatWest Group recognises a provision for a liability in relation to these Matters when it is
\n
probable that an outflow of economic benefits will be required to settle an obligation
\n
resulting from past events, and a reliable estimate can be made of the amount of the
\n
obligation.
\n
In many of the Matters, it is not possible to determine whether any loss is probable, or to
\n
estimate reliably the amount of any loss, either as a direct consequence of the relevant
\n
proceedings and regulatory matters or as a result of adverse impacts or restrictions on
\n
NatWest Group\u2019s reputation, businesses and operations. Numerous legal and factual
\n
issues may need to be resolved, including through potentially lengthy discovery and
\n
document production exercises and determination of important factual matters, and by
\n
addressing novel or unsettled legal questions relevant to the proceedings in question,
\n
before the probability of a liability, if any, arising can reasonably be estimated in respect
\n
of any Matter. NatWest Group cannot predict if, how, or when such claims will be
\n
resolved or what the eventual settlement, damages, fine, penalty or other relief, if any,
\n
may be, particularly for Matters that are at an early stage in their development or where
\n
claimants seek substantial or indeterminate damages.
\n
There are situations where NatWest Group may pursue an approach that in some
\n
instances leads to a settlement agreement. This may occur in order to avoid the
\n
expense, management distraction or reputational implications of continuing to contest
\n
liability, or in order to take account of the risks inherent in defending or contesting
\n
Matters, even for those for which NatWest Group believes it has credible defences and
\n
should prevail on the merits. The uncertainties inherent in all Matters affect the amount
\n
and timing of any potential economic outflows for both Matters with respect to which
\n
provisions have been established and other contingent liabilities in respect of any such
\n
Matter.
\n
It is not practicable to provide an aggregate estimate of potential liability for our Matters
\n
as a class of contingent liabilities.
\n
The future economic outflow in respect of any Matter may ultimately prove to be
\n
substantially greater than, or less than, the aggregate provision, if any, that NatWest
\n
Group has recognised in respect of such Matter. Where a reliable estimate of the
\n
economic outflow cannot be reasonably made, no provision has been recognised.
\n
NatWest Group expects that in future periods, additional provisions and economic
\n
outflows relating to Matters that may or may not be currently known by NatWest Group
\n
will be necessary, in amounts that are expected to be substantial in some instances.
\n
Refer to Note 21 for information on material provisions.
\n
Matters which are, or could be, material, either individually or in aggregate, having
\n
regard to NatWest Group, considered as a whole, in which NatWest Group is currently
\n
involved are set out below. We have provided information on the procedural history of
\n
certain Matters, where we believe appropriate, to aid the understanding of the Matter.
\n
For a discussion of certain risks associated with NatWest Group\u2019s litigation and
\n
regulatory matters (including the Matters), refer to the Risk Factor relating to legal,
\n
regulatory and governmental actions and investigations set out on pages 4
39
to 4
41
.
\n
Litigation
\n
London Interbank Offered Rate (LIBOR) and other rates litigation
\n
NWM Plc and certain other members of NatWest Group, including NatWest Group plc,
\n
are defendants in a number of class actions and individual claims pending in the United
\n
States District Court for the Southern District of New York (SDNY) with respect to the
\n
setting of LIBOR and certain other benchmark interest rates. The complainants allege
\n
that certain members of NatWest Group and other panel banks violated various federal
\n
laws, including the US commodities and antitrust laws, and state statutory and common
\n
law, as well as contracts, by manipulating LIBOR and prices of LIBOR-based derivatives
\n
in various markets through various means.
\n
Several purported class actions relating to USD LIBOR, as well as more than two dozen
\n
non-class actions concerning USD LIBOR and involving NatWest Group companies, are
\n
part of a co-ordinated proceeding in the SDNY. The class actions include claims on
\n
behalf of persons who purchased LIBOR-linked instruments from defendants, bonds
\n
issued by defendants, persons who transacted futures and options on exchanges, and
\n
lenders who made LIBOR-based loans. The coordinated proceeding is currently in the
\n
discovery phase. NatWest Group companies\u2019 previously disclosed settlement of a class
\n
action on behalf of bondholder plaintiffs has received final court approval. The amount of
\n
the settlement was covered by an existing provision.
\n
The non-class claims filed in the SDNY include claims that the FDIC is asserting on behalf
\n
of certain failed US banks. In July 2017, the FDIC, on behalf of 39 of those failed US
\n
banks, commenced substantially similar claims against NatWest Group companies and
\n
others in the High Court of Justice of England and Wales. The action alleges collusion
\n
with regard to the setting of USD LIBOR and that the defendants breached UK and
\n
European competition law, as well as asserting common law claims of fraud under US
\n
law. The defendant banks consented to a request by the FDIC for discontinuance of the
\n
claim in respect of 20 failed US banks, leaving 19 failed US banks as claimants. The trial
\n
is currently anticipated to commence in Q1 2026.
\n
In addition to the USD LIBOR cases described above, there is a class action relating to
\n
derivatives allegedly tied to JPY LIBOR and Euroyen TIBOR, which was dismissed by the
\n
SDNY in relation to NWM Plc and other NatWest Group companies in September 2021.
\n
That dismissal may be the subject of a future appeal. The SDNY\u2019s dismissal of another
\n
class action, which related to Euroyen TIBOR futures contracts, was affirmed by the
\n
United States Court of Appeals for the Second Circuit (US Court of Appeals) in October
\n
2022. The plaintiffs filed a petition with the United States Supreme Court seeking review
\n
of the dismissal, but that petition was denied in October 2023.
\n
Two other IBOR-related class actions involving NWM Plc, concerning alleged
\n
manipulation of Euribor and Pound Sterling LIBOR, were previously dismissed by the
\n
SDNY for various reasons. The plaintiffs\u2019 appeals in those two cases remain pending.
\n
\n\n\n\n
\n\n
\n
NWM Plc\u2019s previously disclosed settlement of a class action relating to Swiss Franc
\n
LIBOR has received final court approval. The settlement amount has been paid by NWM
\n
Plc and was covered in full by an existing provision.
\n
In August 2020, a complaint was filed in the United States District Court for the Northern
\n
District of California by several United States retail borrowers against the USD ICE
\n
LIBOR panel banks and their affiliates (including NatWest Group plc, NWM Plc, NWMSI
\n
and NWB Plc), alleging (i) that the very process of setting USD ICE LIBOR amounts to
\n
illegal price-fixing; and (ii) that banks in the United States have illegally agreed to use
\n
LIBOR as a component of price in variable retail loans. In September 2022, the district
\n
court dismissed the complaint. The plaintiffs filed an amended complaint but in October
\n
2023, the district court dismissed that complaint as well, and indicated that further
\n
amendment would not be permitted. The plaintiffs have commenced an appeal to the
\n
United States Court of Appeals for the Ninth Circuit which is currently pending.
\n
NWM Plc is also named as a defendant in a motion to certify a class action relating to
\n
LIBOR in the Tel Aviv District Court in Israel. NWM Plc filed a motion for cancellation of
\n
service outside the jurisdiction, which was granted in July 2020. The claimants appealed
\n
that decision and in November 2020 the appeal was refused and the claim dismissed by
\n
the Appellate Court. The claim could in future be recommenced depending on the
\n
outcome of an appeal to Israel\u2019s Supreme Court in respect of the dismissal of the
\n
substantive case against banks that had a presence in Israel.
\n
Foreign exchange litigation
\n
NWM Plc, NWMSI and/or NatWest Group plc are defendants in several cases relating to
\n
NWM Plc\u2019s foreign exchange (FX) business.
\n
An FX-related class action, on behalf of \u2018consumers and end-user businesses\u2019, was
\n
proceeding in the SDNY against NWM Plc and others. In March 2023, the court granted
\n
summary judgment in favour of the defendants, dismissing the plaintiffs\u2019 claims. The
\n
plaintiffs have commenced an appeal of that decision as well as a prior decision denying
\n
class certification in the case.
\n
In May 2019, a cartel class action was filed in the Federal Court of Australia against
\n
NWM Plc and four other banks on behalf of persons who bought or sold currency
\n
through FX spots or forwards between 1 January 2008 and 15 October 2013 with a
\n
total transaction value exceeding AUD $0.5 million. The claimant has alleged that the
\n
banks, including NWM Plc, contravened Australian competition law by sharing
\n
information, coordinating conduct, widening spreads and manipulating FX rates for
\n
certain currency pairs during this period. NatWest Group plc and NWMSI have been
\n
named in the action as \u2018other cartel participants\u2019, but are not respondents. The claim
\n
was served in June 2019 and NWM Plc filed its defence in March 2022.
\n
In July and December 2019, two separate applications seeking opt-out collective
\n
proceedings orders were filed in the UK Competition Appeal Tribunal (CAT) against
\n
NatWest Group plc, NWM Plc and other banks. Both applications were brought on behalf
\n
of persons who, between 18 December 2007 and 31 January 2013, entered into a
\n
relevant FX spot or outright forward transaction in the EEA with a relevant financial
\n
institution or on an electronic communications network. In March 2022, the CAT declined
\n
to certify as collective proceedings either of the applications, which was appealed by the
\n
applicants, and the subject of an application for judicial review.
\n
In its amended judgment in November 2023, the Court of Appeal allowed the appeal and
\n
decided that the claims should proceed on an opt-out basis. Separately, the court
\n
determined which of the two competing applicants can proceed as class representative,
\n
and dismissed the application for judicial review of the CAT\u2019s decision. The case has been
\n
remitted to the CAT for further case management and the banks have sought
\n
permission to appeal directly to the UK Supreme Court.
\n
Two motions to certify FX-related class actions were filed in the Tel Aviv District Court in
\n
Israel in September and October 2018, and were subsequently consolidated into one
\n
motion. The consolidated motion to certify, which names The Royal Bank of Scotland plc
\n
(now NWM Plc) and several other banks as defendants, was served on NWM Plc in May
\n
2020. The applicants have sought the court\u2019s permission to amend their motions to
\n
certify the class actions. NWM Plc has filed a motion challenging the permission granted
\n
by the court for the applicants to serve the consolidated motion outside the Israeli
\n
jurisdiction. That NWM Plc motion remains pending.
\n
In December 2021, a summons was served in the Netherlands against NatWest Group
\n
plc, NWM Plc and NWM N.V. by Stichting FX Claims on behalf of a number of parties,
\n
seeking declarations from the court concerning liability for anti-competitive FX market
\n
conduct described in decisions of the European Commission (EC) of 16 May 2019, along
\n
with unspecified damages. The claimant amended its claim to also refer to a 2 December
\n
2021 decision by the EC, which described anti-competitive FX market conduct. NatWest
\n
Group plc, NWM Plc and other defendants contested the jurisdiction of the Dutch court.
\n
In March 2023, the district court in Amsterdam accepted that it has jurisdiction to hear
\n
claims against NWM N.V. but refused jurisdiction to hear any claims against the other
\n
defendant banks (including NatWest Group plc and NWM Plc) brought on behalf of the
\n
parties represented by the claimant that are domiciled outside of the Netherlands. The
\n
claimant is appealing that decision and the defendant banks have brought cross-appeals
\n
which seek a ruling that the Dutch court has no jurisdiction to hear any claims against
\n
the defendant banks domiciled outside of the Netherlands, including claims brought on
\n
behalf of the parties represented by the claimant that are domiciled in the Netherlands.
\n
In September 2023, second summonses were served by Stichting FX Claims on NWM
\n
N.V., NatWest Group plc and NWM Plc, for claims on behalf of a new group of parties
\n
that have now been brought before the district court in Amsterdam. The summonses
\n
seek declarations from the Dutch court concerning liability for anti-competitive FX
\n
market conduct described in the above referenced decisions of the EC of 16 May 2019
\n
and 2 December 2021, along with unspecified damages.
\n
Certain other foreign exchange transaction related claims have been or may be
\n
threatened. NatWest Group cannot predict whether all or any of these claims will be
\n
pursued.
\n
\n\n\n\n
\n\n
\n
Government securities antitrust litigation
\n
NWMSI and certain other US broker-dealers are defendants in a consolidated antitrust
\n
class action in the SDNY on behalf of persons who transacted in US Treasury securities
\n
or derivatives based on such instruments, including futures and options. The plaintiffs
\n
allege that the defendants rigged the US Treasury securities auction bidding process to
\n
deflate prices at which they bought such securities and colluded to increase the prices at
\n
which they sold such securities to the plaintiffs. In March 2022, the SDNY dismissed the
\n
complaint, without leave to re-plead. In February 2024, the US Court of Appeals affirmed
\n
the SDNY\u2019s decision dismissing the complaint.
\n
Class action antitrust claims commenced in March 2019 are pending in the SDNY
\n
against NWM Plc, NWMSI and other banks in respect of Euro-denominated bonds issued
\n
by various European central banks (European government bonds or EGBs). The
\n
complaint alleges a conspiracy among dealers of EGBs to widen the bid-ask spreads they
\n
quoted to customers, thereby increasing the prices customers paid for the EGBs or
\n
decreasing the prices at which customers sold EGBs. The class consists of those who
\n
purchased or sold EGBs in the US between 2007 and 2012. Previously, in March 2022,
\n
the SDNY dismissed the claims against NWM Plc and NWMSI on the ground that the
\n
complaint\u2019s conspiracy allegations were insufficient. However, in September 2023, the
\n
SDNY ruled that new allegations which plaintiffs have included in an amended complaint
\n
are sufficient to bring those NatWest entities back into the case as defendants.
\n
Swaps antitrust litigation
\n
NWM Plc and other members of NatWest Group, including NatWest Group plc, as well as
\n
a number of other interest rate swap dealers, are defendants in several cases pending in
\n
the SDNY alleging violations of the US antitrust laws in the market for interest rate
\n
swaps. There is a consolidated class action complaint on behalf of persons who entered
\n
into interest rate swaps with the defendants, as well as non-class action claims by three
\n
swap execution facilities (TeraExchange, Javelin, and trueEx). The plaintiffs allege that
\n
the swap execution facilities would have successfully established exchange-like trading of
\n
interest rate swaps if the defendants had not unlawfully conspired to prevent that from
\n
happening through boycotts and other means. Discovery in these cases is complete. In
\n
December 2023, the SDNY denied the plaintiffs\u2019 motion for class certification. The
\n
plaintiffs have filed a petition requesting that the US Court of Appeals review the denial
\n
of class certification.
\n
In June 2021, a class action antitrust complaint was filed against a number of credit
\n
default swap dealers, in New Mexico federal court on behalf of persons who, from 2005
\n
onwards, settled credit default swaps in the United States by reference to the ISDA
\n
credit default swap auction protocol. The complaint alleges that the defendants
\n
conspired to manipulate that benchmark through various means in violation of the
\n
antitrust laws and the Commodity Exchange Act. The defendants filed a motion to
\n
dismiss the complaint and, in June 2023, such motion was denied as regards NWMSI and
\n
other financial institutions, but granted as regards to NWM Plc on the ground that the
\n
court lacks jurisdiction over that entity. As a result, the case entered the discovery phase
\n
as against the non-dismissed defendants. In January 2024, the SDNY issued an order
\n
barring the plaintiffs in the New Mexico case from pursuing claims based on conduct
\n
occurring before 30 June 2014 on the ground that such claims were extinguished by a
\n
2015 settlement agreement that resolved a prior class action relating to credit default
\n
swaps.
\n
O
O
dd lot corporate bond trading antitrust litigation
\n
In October 2021, the SDNY granted the defendants\u2019 motion to dismiss the class action
\n
antitrust complaint alleging that from August 2006 onwards various securities dealers,
\n
including NWMSI, conspired artificially to widen spreads for odd lots of corporate bonds
\n
bought or sold in the United States secondary market and to boycott electronic trading
\n
platforms that would have allegedly promoted pricing competition in the market for such
\n
bonds. The plaintiffs have filed an appeal.
\n
Spoofing litigation
\n
In December 2021, three substantially similar class actions complaints were filed in
\n
federal court in the United States against NWM Plc and NWMSI alleging Commodity
\n
Exchange Act and common law unjust enrichment claims arising from manipulative
\n
trading known as spoofing. The complaints refer to NWM Plc\u2019s December 2021 spoofing-
\n
related guilty plea (described below under \u201cUS investigations relating to fixed-income
\n
securities\u201d) and purport to assert claims on behalf of those who transacted in US
\n
Treasury securities and futures and options on US Treasury securities between 2008 and
\n
2018. In July 2022, defendants filed a motion to dismiss these claims, which have been
\n
consolidated into one matter in the United States District Court for the Northern District
\n
of Illinois.
\n
Madoff
\n
NWM N.V. was named as a defendant in two actions filed by the trustee for the bankrupt
\n
estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, in
\n
bankruptcy court in New York, which together seek to clawback more than US$298
\n
million that NWM N.V. allegedly received from certain Madoff feeder funds and certain
\n
swap counterparties. The claims were previously dismissed, but as a result of an August
\n
2021 decision by the US Court of Appeals, they will now proceed in the bankruptcy
\n
court, where they have been consolidated into one action, subject to NWM N.V.\u2019s legal
\n
and factual defences. In May 2022, NWM N.V. filed a motion to dismiss the amended
\n
complaint in the consolidated action and such motion was denied in March 2023. As a
\n
result, the case has now entered the discovery phase.
\n
EUA trading litigation
\n
NWM Plc was a named defendant in civil proceedings before the High Court of Justice of
\n
England and Wales brought in 2015 by ten
companies (all in liquidation) (the \u2018Liquidated
\n
Companies\u2019) and their respective liquidators (together, \u2018the Claimants\u2019). The Liquidated
\n
Companies previously traded in European Union Allowances (EUAs) in 2009 and were
\n
alleged to be VAT defaulting traders within (or otherwise connected to) EUA supply
\n
chains of which NWM Plc was a party. In March 2020, the court held that NWM Plc and
\n
Mercuria Energy Europe Trading Limited (\u2018Mercuria\u2019) were liable for dishonestly assisting
\n
and knowingly being a party to fraudulent trading during a seven business day period in
\n
2009.
\n
\n\n\n\n
\n\n
\n
In October 2020, the High Court quantified total damages against NWM Plc and
\n
Mercuria at \u00a345 million plus interest and costs, and permitted the defendants to appeal
\n
to the Court of Appeal. In May 2021 the Court of Appeal set aside the High Court\u2019s
\n
judgment and ordered that a retrial take place before a different High Court judge. In
\n
January 2024, NWM Plc entered into an agreement to resolve the claim against it. The
\n
settlement amount paid by NWM Plc was covered in full by an existing provision.
\n
Offshoring VAT assessments
\n
HMRC issued protective tax assessments in 2018 against NatWest Group plc totalling
\n
\u00a3143 million relating to unpaid VAT in respect of the UK branches of two NatWest Group
\n
companies registered in India. NatWest Group formally requested reconsideration by
\n
HMRC of their assessments, and this process was completed in November 2020. HMRC
\n
upheld their original decision and, as a result, NatWest Group plc lodged an appeal with
\n
the Tax Tribunal and an application for judicial review with the High Court of Justice of
\n
England and Wales, both in December 2020. In order to lodge the appeal with the Tax
\n
Tribunal, NatWest Group plc was required to pay \u00a3143 million to HMRC, and payment
\n
was made in December 2020. The appeal and the application for judicial review have
\n
both been stayed pending resolution of separate cases involving other banks.
\n
US Anti-Terrorism Act litigation
\n
NWM N.V. and certain other financial institutions are defendants in several actions filed
\n
by a number of US nationals (or their estates, survivors, or heirs), most of whom are or
\n
were US military personnel, who were killed or injured in attacks in Iraq between 2003
\n
and 2011. NWM Plc is also a defendant in some of these cases.
\n
According to the plaintiffs\u2019 allegations, the defendants are liable for damages arising from
\n
the attacks because they allegedly conspired with and/or aided and abetted Iran and
\n
certain Iranian banks to assist Iran in transferring money to Hezbollah and the Iraqi
\n
terror cells that committed the attacks, in violation of the US Anti-Terrorism Act, by
\n
agreeing to engage in \u2018stripping\u2019 of transactions initiated by the Iranian banks so that the
\n
Iranian nexus to the transactions would not be detected.
\n
The first of these actions, alleging conspiracy claims but not aiding and abetting claims,
\n
was filed in the United States District Court for the Eastern District of New York in
\n
November 2014. In September 2019, the district court dismissed the case, finding that
\n
the claims were deficient for several reasons, including lack of sufficient allegations as to
\n
the alleged conspiracy and causation. In January 2023, the US Court of Appeals affirmed
\n
the district court\u2019s dismissal of this case. The plaintiffs filed a petition with the United
\n
States Supreme Court seeking review of the dismissal of their claims and that petition
\n
was denied in October 2023. It is anticipated that the plaintiffs will file a motion to re-
\n
open the case to assert aiding and abetting claims that they previously did not assert.
\n
Another action, filed in the SDNY in 2017, which asserted both conspiracy and aiding
\n
and abetting claims, was dismissed by the SDNY in March 2019 on similar grounds as
\n
the first case, but remains subject to appeal to the US Court of Appeals. Other follow-on
\n
actions that are substantially similar to those described above are pending in the same
\n
courts.
\n
1
1
MDB litigation
\n
A Malaysian court claim was served in Switzerland in November 2022 by 1MDB, a
\n
Sovereign Wealth Fund, in which Coutts & Co Ltd was named, along with six others, as a
\n
defendant in respect of losses allegedly incurred by 1MDB. It is claimed that Coutts & Co
\n
Ltd is liable as a constructive trustee for having dishonestly assisted the directors of
\n
1MDB in the breach of their fiduciary duties by failing (amongst other alleged claims) to
\n
undertake due diligence in relation to a customer of Coutts & Co Ltd, through which
\n
funds totalling c.US$1 billion were received and paid out between 2009 and 2011. The
\n
claimant seeks the return of that amount plus interest. Coutts & Co Ltd filed an
\n
application in January 2023 challenging the validity of service and the Malaysian court\u2019s
\n
jurisdiction to hear the claim. Before that application was heard, in April 2023, the
\n
claimant filed a notice of discontinuance of its claim against certain defendants including
\n
Coutts & Co Ltd. The claimant subsequently indicated that it intended to issue further
\n
replacement proceedings. Coutts & Co Ltd challenged the claimant\u2019s ability to take that
\n
step. In August 2023, the court disallowed the discontinuation of the claim by the
\n
claimant (a decision that the claimant has appealed) and directed that the application by
\n
Coutts & Co Ltd challenging the validity of the proceedings should proceed to a hearing,
\n
which took place in February 2024. Judgment is awaited.
\n
Coutts & Co Ltd (a subsidiary of RBS Netherlands Holdings B.V., which in turn is a
\n
subsidiary of NWM Plc) is a company registered in Switzerland and is in wind-down
\n
following the announced sale of its business assets in 2015.
\n
Regulatory matters (including investigations and customer redress programmes)
\n
NatWest Group\u2019s businesses and financial condition can be affected by the actions of
\n
various governmental and regulatory authorities in the UK, the US, the EU and
\n
elsewhere. NatWest Group has engaged, and will continue to engage, in discussions with
\n
relevant governmental and regulatory authorities, including in the UK, the US, the EU
\n
and elsewhere, on an ongoing and regular basis, and in response to informal and formal
\n
inquiries or investigations, regarding operational, systems and control evaluations and
\n
issues including those related to compliance with applicable laws and regulations,
\n
including consumer protection, investment advice, business conduct, competition/anti-
\n
trust, VAT recovery, anti-bribery, anti-money laundering and sanctions regimes.
\n
NatWest Group expects government and regulatory intervention in financial services to
\n
be high for the foreseeable future, including increased scrutiny from competition and
\n
other regulators in the retail and SME business sectors.
\n
Any matters discussed or identified during such discussions and inquiries may result in,
\n
among other things, further inquiry or investigation, other action being taken by
\n
governmental and regulatory authorities, increased costs being incurred by NatWest
\n
Group, remediation of systems and controls, public or private censure, restriction of
\n
NatWest Group\u2019s business activities and/or fines. Any of the events or circumstances
\n
mentioned in this paragraph or below could have a material adverse effect on NatWest
\n
Group, its business, authorisations and licences, reputation, results of operations or the
\n
price of securities issued by it, or lead to material additional provisions being taken.
\n
NatWest Group is co-operating fully with the matters described below.
\n
\n\n\n\n
\n\n
\n
US investigations relating to fixed-income securities
\n
In December 2021, NWM Plc pled guilty in the United States District Court for the District
\n
of Connecticut to one count of wire fraud and one count of securities fraud in connection
\n
with historical spoofing conduct by former employees in US Treasuries markets between
\n
January 2008 and May 2014 and, separately, during approximately three months in
\n
2018. The 2018 trading occurred during the term of a non-prosecution agreement (NPA)
\n
between NWMSI and the United States Attorney's Office for the District of Connecticut
\n
(USAO CT), under which non-prosecution was conditioned on NWMSI and affiliated
\n
companies not engaging in criminal conduct during the term of the NPA. The relevant
\n
trading in 2018 was conducted by two NWM traders in Singapore and breached that
\n
NPA. The plea agreement reached with the US Department of Justice and the USAO CT
\n
resolved both the spoofing conduct and the breach of the NPA.
\n
As required by the resolution and sentence imposed by the court, NWM Plc is subject to
\n
a three-year period of probation scheduled to end in December 2024. The plea
\n
agreement also imposes an independent corporate monitor. In addition, NWM Plc has
\n
committed to compliance programme reviews and improvements and agreed to
\n
reporting and co-operation obligations.
\n
Other material adverse collateral consequences may occur as a result of this matter, as
\n
further described in the Risk Factor relating to legal, regulatory and governmental
\n
actions and investigations set out on pages 43
9
to 44
1
.
\n
RBSI inspection report and referral to enforcement
\n
Following an inspection by the Isle of Man Financial Services Authority (IOMFSA) in 2021
\n
into The Royal Bank of Scotland International Limited\u2019s (RBSI\u2019s) compliance with the
\n
Financial Services Rule Book 2016, the Anti-Money Laundering and Countering the
\n
Financing of Terrorism Code 2015 (the \u201c2015 Code\u201d) and the Anti-Money Laundering
\n
and Countering the Financing of Terrorism Code 2019, RBSI and the IOMFSA entered
\n
into a settlement agreement in February 2024 with an agreed public statement that RBSI
\n
had contravened paragraph 7 of the 2015 Code. RBSI did not complete its updated
\n
Customer Risk Assessment process following the introduction of the 2015 Code until
\n
2018, resulting in 2,239 non-personal customers (on-boarded to its Isle of Man branches
\n
between 2015 and 2018, and not rated as high risk) being on-boarded using Customer
\n
Risk Assessments in line with earlier legislation. This constituted less than 3% of the total
\n
customer population of the Isle of Man branches. RBSI was fined \u00a31.0 million (after a
\n
discount for co-operation), which was covered in full by an existing provision.
\n
RBSI reliance regime and referral to enforcement
\n
In January 2023, the Jersey Financial Services Commission notified RBSI that it had been
\n
referred to its Enforcement Division in relation to RBSI\u2019s operation of the reliance regime.
\n
The reliance regime is specific to certain Crown Dependencies and enables the bank to
\n
rely on regulated third parties for specific due diligence information.
\n
I
I
nvestment advice review
\n
In October 2019, the FCA notified NatWest Group of its intention to appoint a Skilled
\n
Person under section 166 of the Financial Services and Markets Act 2000 to conduct a
\n
review of whether NatWest Group\u2019s past business review of investment advice provided
\n
during 2010 to 2015 was subject to appropriate governance and accountability and led
\n
to appropriate customer outcomes. The Skilled Person\u2019s review has concluded and, after
\n
discussion with the FCA, NatWest Group is undertaking additional review / remediation
\n
work.
\n
Reviews into customer account closures
\n
In July 2023, NatWest Group plc commissioned an independent review by the law firm
\n
Travers Smith LLP into issues that had arisen from treatment of a customer in
\n
connection with an account closure decision that attracted significant public attention
\n
and certain related interactions with the media. NatWest Group plc has received reports
\n
in connection with that review (and in October and December 2023 published summaries
\n
of the key findings and recommendations).
\n
In addition, NatWest Group plc is conducting internal reviews with respect to certain
\n
governance processes, policies, systems and controls of NatWest Group entities,
\n
including with respect to customer account closures.
\n
The FCA is conducting supervisory work into how the governance, systems and controls
\n
of NatWest Group and Coutts & Company are working, to identify and address any
\n
significant shortcomings.
\n
Review and investigation of treatment of tracker mortgage customers in Ulster Bank
\n
Ireland DAC
\n
In December 2015, correspondence was received from the Central Bank of Ireland
\n
setting out an industry examination framework in respect of the sale of tracker
\n
mortgages from approximately 2001 until the end of 2015. The redress and
\n
compensation process has now largely concluded, although certain cases remain
\n
outstanding.
\n
UBIDAC customers have lodged tracker mortgage complaints with the Financial Services
\n
and Pensions Ombudsman (FSPO). UBIDAC challenged three FSPO adjudications in the
\n
Irish High Court. In June 2023, the High Court found in favour of the FSPO in all matters
\n
and a provision was recognised. UBIDAC was granted leave to appeal that decision and
\n
an appeal hearing has been scheduled to take place in the Court of Appeal.
\n
Other customer remediation in Ulster Bank Ireland DAC
\n
UBIDAC has identified other legacy issues leading to the establishment of remediation
\nrequirements and progress is ongoing to conclude activities.", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81204": { "value": "2.4. Provisions
We recognise a provision for a present obligation resulting from a past event when it is
more likely than not that we will be required to pay to settle the obligation and the
amount of the obligation can be estimated reliably.
Provision is made for restructuring costs, including the costs of redundancy, when we
have a constructive obligation. An obligation exists when we have a detailed formal plan
for the restructuring and have raised a valid expectation in those affected either by
starting to implement the plan or by announcing its main features.
We recognise any onerous cost of the present obligation under a contract as a provision.
An onerous cost is the unavoidable cost of meeting our contractual obligations that
exceed the expected economic benefits. When we intend to vacate a leasehold property
or right of use asset, the asset would be tested for impairment and a provision may be
recognised for the ancillary contractual occupancy costs.21 Other liabilities
Other liabilities are amounts due to third parties that are not financial liabilities including lease liabilities, amounts due for goods and services that have been received
but not invoiced,
tax due to HMRC, and retirement benefit liabilities. Liabilities which have a level of uncertainty regarding their timing or the future cost to settle them
are included in other liabilities as provisions for liabilities and charges.
\u00a0
2023
2022
Other liabilities
\u00a3m
\u00a3m
Lease liabilities
670
1,118
Provisions for liabilities and charges
990
1,138
Retirement benefit liabilities (Note 5)
99
98
Accruals
1,411
1,407
Deferred income
402
355
Current tax
332
55
Deferred tax (Note 7)
141
227
Acceptances
575
237
Other liabilities
(1)
582
711
Total
5,202
5,346
\n
(1)
Other liabilities include liabilities of disposal groups of \u00a33 million (2022 - \u00a315 million). Refer to Note 8 for further information.
Provisions for liabilities and charges
\u00a0 \u00a0
Litigation and
\u00a0
Commitments
\u00a0 \u00a0
\u00a0
Customer redress
other regulatory
Property
and guarantees
Other (1)
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
431
240
154
87
226
1,138
Expected credit loss impairment release
-
-
-
(9)
-
(9)
Currency translation and other movements
(5)
(9)
-
-
(6)
(20)
Charge to income statement
276
21
41
-
136
474
Release to income statement
(36)
(33)
(64)
-
(28)
(161)
Provisions utilised
(180)
(63)
(32)
-
(157)
(432)
At 31 December 2023
486
156
99
78
171
990
\n
(1)
Other materially comprises provisions relating to restructuring costs.
Provisions are liabilities of uncertain timing or amount and are recognised when there is
a present obligation as a result of a past event, the outflow of economic benefit is
probable and the outflow can be estimated reliably. Any difference between the final
outcome and the amounts provided will affect the reported results in the period when
the matter is resolved.
For accounting policy information refer to Accounting policy 2.4.
Critical accounting policy: Provisions for liabilities
The key judgement is involved in determining whether a present obligation exists. There
is often a high degree of uncertainty and judgement is based on the specific facts and
circumstances relating to individual events in determining whether there is a present
obligation. Judgement is also involved in estimation of the probability, timing and amount
of any outflows. Where NatWest Group can look to another party such as an insurer to
pay some or all of the expenditure required to settle a provision, any reimbursement is
recognised when, and only when, it is virtually certain that it will be received.
E
E
stimates
-
Provisions are liabilities of uncertain timing or amount and are recognised
when there is a present obligation as a result of a past event, the outflow of economic
benefit is probable and the outflow can be estimated reliably.
Any difference between the final outcome and the amounts provided will affect the
reported results in the period when the matter is resolved.
\ue001
Customer redress: Provisions reflect the estimated cost of redress attributable to
claims where it is determined that a present obligation exists.
\ue001
Litigation and other regulatory: NatWest Group is engaged in various legal
proceedings, both in the UK and in overseas jurisdictions, including the US. For
further information in relation to legal proceedings and discussion of the associated
uncertainties, refer to Note 26.
\ue001
Property: This includes provision for contractual costs associated with vacant
properties.
\ue001
Other provisions: These materially comprise provisions for onerous contracts and
restructuring costs. Onerous contract provisions comprise an estimate of the costs
involved in fulfilling the terms and conditions of contracts net of any expected
benefits to be received. This includes provision for contractual costs associated with
vacant properties. Redundancy and restructuring provisions comprise the estimated
cost of restructuring, including redundancy costs where an obligation exists.
Background information for all material provisions is given in Note 26.26 Memorandum items
Contingent liabilities and commitments
NatWest Group provides its customers with a variety of services to support
their businesses, such as guarantees. These are reported as
commitments.
Contingent liabilities are possible obligations dependent on a
future event or present obligations which are either not probable or cannot
be measured reliably.
For accounting policy information refer to Accounting policy 2.4.
The amounts shown in the table below are intended only to provide an indication of the
volume of business outstanding at 31 December 2023. Although NatWest Group is
exposed to credit risk in the event of a customer\u2019s failure to meet its obligations, the
amounts shown do not, and are not intended to, provide any indication of NatWest
Group's expectation of future losses.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Contingent liabilities and commitments
\u00a0 \u00a0
Guarantees
2,810
3,150
Other contingent liabilities
1,380
1,855
Standby facilities, credit lines and other commitments
115,441
121,576
Total
119,631
126,581
\n
Banking commitments and contingent obligations, which have been entered into on
behalf of customers and for which there are corresponding obligations from customers,
are not included in assets and liabilities. NatWest Group's maximum exposure to credit
loss, in the event of its obligation crystallising and all counterclaims, collateral or security
proving valueless, is represented by the contractual nominal amount of these
instruments included in the table above. These commitments and contingent obligations
are subject to NatWest Group's normal credit approval processes.
Guarantees
\u2013
NatWest Group gives guarantees on behalf of customers. A financial
guarantee represents an irrevocable undertaking that NatWest Group will meet a
customer's specified obligations to a third party if the customer fails to do so. The
maximum amount that NatWest Group could be required to pay under a guarantee is its
principal amount as disclosed in the table above. NatWest Group expects most
guarantees it provides to expire unused.
O
O
ther contingent liabilities
- these include standby letters of credit, supporting customer
debt issues and contingent liabilities relating to customer trading activities such as those
arising from performance and customs bonds, warranties and indemnities.
Standby facilities and credit lines
- under a loan commitment, NatWest Group agrees to
make funds available to a customer in the future. Loan commitments, which are usually
for a specified term, may be unconditionally cancellable or may persist, provided all
conditions in the loan facility are satisfied or waived. Commitments to lend include
commercial standby facilities and credit lines, liquidity facilities to commercial paper
conduits and unutilised overdraft facilities.
O
O
ther commitments
- these include documentary credits, which are commercial letters
of credit providing for payment by NatWest Group to a named beneficiary against
presentation of specified documents, forward asset purchases, forward deposits placed
and undrawn note issuance and revolving underwriting facilities, and other short-term
trade related transactions.
Contractual obligations for future expenditure not provided for in the accounts
The following table shows contractual obligations for future expenditure not provided for
in the accounts at the year end.
\u00a0
2023
2022
\u00a0
\u00a0
\u00a3m
\u00a3m
Capital expenditure on property, plant and equipment
38
8
Contracts to purchase goods or services
(1)
1,121
677
\u00a0
1,159
685
\n
(1)
Of which due within 1 year: \u00a3379 million (2022 \u2013 \u00a3321 million).
Trustee and other fiduciary activities
In its capacity as trustee or other fiduciary role, NatWest Group may hold or place assets
on behalf of individuals, trusts, companies, pension schemes and others. The assets and
their income are not included in NatWest Group's financial statements. NatWest Group
earned fee income of \u00a3264 million (2022 - \u00a3266 million; 2021 - \u00a3280 million) from these
activities.
The Financial Services Compensation Scheme
The Financial Services Compensation Scheme (FSCS), the UK's statutory fund of last
resort for customers of authorised financial services firms, pays compensation if a firm is
unable to meet its obligations. The FSCS funds compensation for customers by raising
management expenses levies and compensation levies on the industry. In relation to
protected deposits, each deposit-taking institution contributes towards these levies in
proportion to their share of total protected deposits on 31 December of the year
preceding the scheme year (which runs from 1 April to 31 March), subject to annual
maxima set by the Prudential Regulation Authority. In addition, the FSCS has the power
to raise levies on a firm that has ceased to participate in the scheme and is in the
process of ceasing to be authorised for the costs that it would have been liable to pay
had the FSCS made a levy in the financial year it ceased to be a participant in the
scheme.
\n
\n\n\n\n
\n\n
Litigation and regulatory matters
\n
NatWest Group plc and certain members of NatWest Group are party to various legal
\n
proceedings and are involved in, or subject to, various regulatory matters, including as
\n
the subject of investigations and other regulatory and governmental action (Matters) in
\n
the United Kingdom (UK), the United States (US), the European Union (EU) and other
\n
jurisdictions.
\n
NatWest Group recognises a provision for a liability in relation to these Matters when it is
\n
probable that an outflow of economic benefits will be required to settle an obligation
\n
resulting from past events, and a reliable estimate can be made of the amount of the
\n
obligation.
\n
In many of the Matters, it is not possible to determine whether any loss is probable, or to
\n
estimate reliably the amount of any loss, either as a direct consequence of the relevant
\n
proceedings and regulatory matters or as a result of adverse impacts or restrictions on
\n
NatWest Group\u2019s reputation, businesses and operations. Numerous legal and factual
\n
issues may need to be resolved, including through potentially lengthy discovery and
\n
document production exercises and determination of important factual matters, and by
\n
addressing novel or unsettled legal questions relevant to the proceedings in question,
\n
before the probability of a liability, if any, arising can reasonably be estimated in respect
\n
of any Matter. NatWest Group cannot predict if, how, or when such claims will be
\n
resolved or what the eventual settlement, damages, fine, penalty or other relief, if any,
\n
may be, particularly for Matters that are at an early stage in their development or where
\n
claimants seek substantial or indeterminate damages.
\n
There are situations where NatWest Group may pursue an approach that in some
\n
instances leads to a settlement agreement. This may occur in order to avoid the
\n
expense, management distraction or reputational implications of continuing to contest
\n
liability, or in order to take account of the risks inherent in defending or contesting
\n
Matters, even for those for which NatWest Group believes it has credible defences and
\n
should prevail on the merits. The uncertainties inherent in all Matters affect the amount
\n
and timing of any potential economic outflows for both Matters with respect to which
\n
provisions have been established and other contingent liabilities in respect of any such
\n
Matter.
\n
It is not practicable to provide an aggregate estimate of potential liability for our Matters
\n
as a class of contingent liabilities.
\n
The future economic outflow in respect of any Matter may ultimately prove to be
\n
substantially greater than, or less than, the aggregate provision, if any, that NatWest
\n
Group has recognised in respect of such Matter. Where a reliable estimate of the
\n
economic outflow cannot be reasonably made, no provision has been recognised.
\n
NatWest Group expects that in future periods, additional provisions and economic
\n
outflows relating to Matters that may or may not be currently known by NatWest Group
\n
will be necessary, in amounts that are expected to be substantial in some instances.
\n
Refer to Note 21 for information on material provisions.
\n
Matters which are, or could be, material, either individually or in aggregate, having
\n
regard to NatWest Group, considered as a whole, in which NatWest Group is currently
\n
involved are set out below. We have provided information on the procedural history of
\n
certain Matters, where we believe appropriate, to aid the understanding of the Matter.
\n
For a discussion of certain risks associated with NatWest Group\u2019s litigation and
\n
regulatory matters (including the Matters), refer to the Risk Factor relating to legal,
\n
regulatory and governmental actions and investigations set out on pages 4
39
to 4
41
.
\n
Litigation
\n
London Interbank Offered Rate (LIBOR) and other rates litigation
\n
NWM Plc and certain other members of NatWest Group, including NatWest Group plc,
\n
are defendants in a number of class actions and individual claims pending in the United
\n
States District Court for the Southern District of New York (SDNY) with respect to the
\n
setting of LIBOR and certain other benchmark interest rates. The complainants allege
\n
that certain members of NatWest Group and other panel banks violated various federal
\n
laws, including the US commodities and antitrust laws, and state statutory and common
\n
law, as well as contracts, by manipulating LIBOR and prices of LIBOR-based derivatives
\n
in various markets through various means.
\n
Several purported class actions relating to USD LIBOR, as well as more than two dozen
\n
non-class actions concerning USD LIBOR and involving NatWest Group companies, are
\n
part of a co-ordinated proceeding in the SDNY. The class actions include claims on
\n
behalf of persons who purchased LIBOR-linked instruments from defendants, bonds
\n
issued by defendants, persons who transacted futures and options on exchanges, and
\n
lenders who made LIBOR-based loans. The coordinated proceeding is currently in the
\n
discovery phase. NatWest Group companies\u2019 previously disclosed settlement of a class
\n
action on behalf of bondholder plaintiffs has received final court approval. The amount of
\n
the settlement was covered by an existing provision.
\n
The non-class claims filed in the SDNY include claims that the FDIC is asserting on behalf
\n
of certain failed US banks. In July 2017, the FDIC, on behalf of 39 of those failed US
\n
banks, commenced substantially similar claims against NatWest Group companies and
\n
others in the High Court of Justice of England and Wales. The action alleges collusion
\n
with regard to the setting of USD LIBOR and that the defendants breached UK and
\n
European competition law, as well as asserting common law claims of fraud under US
\n
law. The defendant banks consented to a request by the FDIC for discontinuance of the
\n
claim in respect of 20 failed US banks, leaving 19 failed US banks as claimants. The trial
\n
is currently anticipated to commence in Q1 2026.
\n
In addition to the USD LIBOR cases described above, there is a class action relating to
\n
derivatives allegedly tied to JPY LIBOR and Euroyen TIBOR, which was dismissed by the
\n
SDNY in relation to NWM Plc and other NatWest Group companies in September 2021.
\n
That dismissal may be the subject of a future appeal. The SDNY\u2019s dismissal of another
\n
class action, which related to Euroyen TIBOR futures contracts, was affirmed by the
\n
United States Court of Appeals for the Second Circuit (US Court of Appeals) in October
\n
2022. The plaintiffs filed a petition with the United States Supreme Court seeking review
\n
of the dismissal, but that petition was denied in October 2023.
\n
Two other IBOR-related class actions involving NWM Plc, concerning alleged
\n
manipulation of Euribor and Pound Sterling LIBOR, were previously dismissed by the
\n
SDNY for various reasons. The plaintiffs\u2019 appeals in those two cases remain pending.
\n
\n\n\n\n
\n\n
\n
NWM Plc\u2019s previously disclosed settlement of a class action relating to Swiss Franc
\n
LIBOR has received final court approval. The settlement amount has been paid by NWM
\n
Plc and was covered in full by an existing provision.
\n
In August 2020, a complaint was filed in the United States District Court for the Northern
\n
District of California by several United States retail borrowers against the USD ICE
\n
LIBOR panel banks and their affiliates (including NatWest Group plc, NWM Plc, NWMSI
\n
and NWB Plc), alleging (i) that the very process of setting USD ICE LIBOR amounts to
\n
illegal price-fixing; and (ii) that banks in the United States have illegally agreed to use
\n
LIBOR as a component of price in variable retail loans. In September 2022, the district
\n
court dismissed the complaint. The plaintiffs filed an amended complaint but in October
\n
2023, the district court dismissed that complaint as well, and indicated that further
\n
amendment would not be permitted. The plaintiffs have commenced an appeal to the
\n
United States Court of Appeals for the Ninth Circuit which is currently pending.
\n
NWM Plc is also named as a defendant in a motion to certify a class action relating to
\n
LIBOR in the Tel Aviv District Court in Israel. NWM Plc filed a motion for cancellation of
\n
service outside the jurisdiction, which was granted in July 2020. The claimants appealed
\n
that decision and in November 2020 the appeal was refused and the claim dismissed by
\n
the Appellate Court. The claim could in future be recommenced depending on the
\n
outcome of an appeal to Israel\u2019s Supreme Court in respect of the dismissal of the
\n
substantive case against banks that had a presence in Israel.
\n
Foreign exchange litigation
\n
NWM Plc, NWMSI and/or NatWest Group plc are defendants in several cases relating to
\n
NWM Plc\u2019s foreign exchange (FX) business.
\n
An FX-related class action, on behalf of \u2018consumers and end-user businesses\u2019, was
\n
proceeding in the SDNY against NWM Plc and others. In March 2023, the court granted
\n
summary judgment in favour of the defendants, dismissing the plaintiffs\u2019 claims. The
\n
plaintiffs have commenced an appeal of that decision as well as a prior decision denying
\n
class certification in the case.
\n
In May 2019, a cartel class action was filed in the Federal Court of Australia against
\n
NWM Plc and four other banks on behalf of persons who bought or sold currency
\n
through FX spots or forwards between 1 January 2008 and 15 October 2013 with a
\n
total transaction value exceeding AUD $0.5 million. The claimant has alleged that the
\n
banks, including NWM Plc, contravened Australian competition law by sharing
\n
information, coordinating conduct, widening spreads and manipulating FX rates for
\n
certain currency pairs during this period. NatWest Group plc and NWMSI have been
\n
named in the action as \u2018other cartel participants\u2019, but are not respondents. The claim
\n
was served in June 2019 and NWM Plc filed its defence in March 2022.
\n
In July and December 2019, two separate applications seeking opt-out collective
\n
proceedings orders were filed in the UK Competition Appeal Tribunal (CAT) against
\n
NatWest Group plc, NWM Plc and other banks. Both applications were brought on behalf
\n
of persons who, between 18 December 2007 and 31 January 2013, entered into a
\n
relevant FX spot or outright forward transaction in the EEA with a relevant financial
\n
institution or on an electronic communications network. In March 2022, the CAT declined
\n
to certify as collective proceedings either of the applications, which was appealed by the
\n
applicants, and the subject of an application for judicial review.
\n
In its amended judgment in November 2023, the Court of Appeal allowed the appeal and
\n
decided that the claims should proceed on an opt-out basis. Separately, the court
\n
determined which of the two competing applicants can proceed as class representative,
\n
and dismissed the application for judicial review of the CAT\u2019s decision. The case has been
\n
remitted to the CAT for further case management and the banks have sought
\n
permission to appeal directly to the UK Supreme Court.
\n
Two motions to certify FX-related class actions were filed in the Tel Aviv District Court in
\n
Israel in September and October 2018, and were subsequently consolidated into one
\n
motion. The consolidated motion to certify, which names The Royal Bank of Scotland plc
\n
(now NWM Plc) and several other banks as defendants, was served on NWM Plc in May
\n
2020. The applicants have sought the court\u2019s permission to amend their motions to
\n
certify the class actions. NWM Plc has filed a motion challenging the permission granted
\n
by the court for the applicants to serve the consolidated motion outside the Israeli
\n
jurisdiction. That NWM Plc motion remains pending.
\n
In December 2021, a summons was served in the Netherlands against NatWest Group
\n
plc, NWM Plc and NWM N.V. by Stichting FX Claims on behalf of a number of parties,
\n
seeking declarations from the court concerning liability for anti-competitive FX market
\n
conduct described in decisions of the European Commission (EC) of 16 May 2019, along
\n
with unspecified damages. The claimant amended its claim to also refer to a 2 December
\n
2021 decision by the EC, which described anti-competitive FX market conduct. NatWest
\n
Group plc, NWM Plc and other defendants contested the jurisdiction of the Dutch court.
\n
In March 2023, the district court in Amsterdam accepted that it has jurisdiction to hear
\n
claims against NWM N.V. but refused jurisdiction to hear any claims against the other
\n
defendant banks (including NatWest Group plc and NWM Plc) brought on behalf of the
\n
parties represented by the claimant that are domiciled outside of the Netherlands. The
\n
claimant is appealing that decision and the defendant banks have brought cross-appeals
\n
which seek a ruling that the Dutch court has no jurisdiction to hear any claims against
\n
the defendant banks domiciled outside of the Netherlands, including claims brought on
\n
behalf of the parties represented by the claimant that are domiciled in the Netherlands.
\n
In September 2023, second summonses were served by Stichting FX Claims on NWM
\n
N.V., NatWest Group plc and NWM Plc, for claims on behalf of a new group of parties
\n
that have now been brought before the district court in Amsterdam. The summonses
\n
seek declarations from the Dutch court concerning liability for anti-competitive FX
\n
market conduct described in the above referenced decisions of the EC of 16 May 2019
\n
and 2 December 2021, along with unspecified damages.
\n
Certain other foreign exchange transaction related claims have been or may be
\n
threatened. NatWest Group cannot predict whether all or any of these claims will be
\n
pursued.
\n
\n\n\n\n
\n\n
\n
Government securities antitrust litigation
\n
NWMSI and certain other US broker-dealers are defendants in a consolidated antitrust
\n
class action in the SDNY on behalf of persons who transacted in US Treasury securities
\n
or derivatives based on such instruments, including futures and options. The plaintiffs
\n
allege that the defendants rigged the US Treasury securities auction bidding process to
\n
deflate prices at which they bought such securities and colluded to increase the prices at
\n
which they sold such securities to the plaintiffs. In March 2022, the SDNY dismissed the
\n
complaint, without leave to re-plead. In February 2024, the US Court of Appeals affirmed
\n
the SDNY\u2019s decision dismissing the complaint.
\n
Class action antitrust claims commenced in March 2019 are pending in the SDNY
\n
against NWM Plc, NWMSI and other banks in respect of Euro-denominated bonds issued
\n
by various European central banks (European government bonds or EGBs). The
\n
complaint alleges a conspiracy among dealers of EGBs to widen the bid-ask spreads they
\n
quoted to customers, thereby increasing the prices customers paid for the EGBs or
\n
decreasing the prices at which customers sold EGBs. The class consists of those who
\n
purchased or sold EGBs in the US between 2007 and 2012. Previously, in March 2022,
\n
the SDNY dismissed the claims against NWM Plc and NWMSI on the ground that the
\n
complaint\u2019s conspiracy allegations were insufficient. However, in September 2023, the
\n
SDNY ruled that new allegations which plaintiffs have included in an amended complaint
\n
are sufficient to bring those NatWest entities back into the case as defendants.
\n
Swaps antitrust litigation
\n
NWM Plc and other members of NatWest Group, including NatWest Group plc, as well as
\n
a number of other interest rate swap dealers, are defendants in several cases pending in
\n
the SDNY alleging violations of the US antitrust laws in the market for interest rate
\n
swaps. There is a consolidated class action complaint on behalf of persons who entered
\n
into interest rate swaps with the defendants, as well as non-class action claims by three
\n
swap execution facilities (TeraExchange, Javelin, and trueEx). The plaintiffs allege that
\n
the swap execution facilities would have successfully established exchange-like trading of
\n
interest rate swaps if the defendants had not unlawfully conspired to prevent that from
\n
happening through boycotts and other means. Discovery in these cases is complete. In
\n
December 2023, the SDNY denied the plaintiffs\u2019 motion for class certification. The
\n
plaintiffs have filed a petition requesting that the US Court of Appeals review the denial
\n
of class certification.
\n
In June 2021, a class action antitrust complaint was filed against a number of credit
\n
default swap dealers, in New Mexico federal court on behalf of persons who, from 2005
\n
onwards, settled credit default swaps in the United States by reference to the ISDA
\n
credit default swap auction protocol. The complaint alleges that the defendants
\n
conspired to manipulate that benchmark through various means in violation of the
\n
antitrust laws and the Commodity Exchange Act. The defendants filed a motion to
\n
dismiss the complaint and, in June 2023, such motion was denied as regards NWMSI and
\n
other financial institutions, but granted as regards to NWM Plc on the ground that the
\n
court lacks jurisdiction over that entity. As a result, the case entered the discovery phase
\n
as against the non-dismissed defendants. In January 2024, the SDNY issued an order
\n
barring the plaintiffs in the New Mexico case from pursuing claims based on conduct
\n
occurring before 30 June 2014 on the ground that such claims were extinguished by a
\n
2015 settlement agreement that resolved a prior class action relating to credit default
\n
swaps.
\n
O
O
dd lot corporate bond trading antitrust litigation
\n
In October 2021, the SDNY granted the defendants\u2019 motion to dismiss the class action
\n
antitrust complaint alleging that from August 2006 onwards various securities dealers,
\n
including NWMSI, conspired artificially to widen spreads for odd lots of corporate bonds
\n
bought or sold in the United States secondary market and to boycott electronic trading
\n
platforms that would have allegedly promoted pricing competition in the market for such
\n
bonds. The plaintiffs have filed an appeal.
\n
Spoofing litigation
\n
In December 2021, three substantially similar class actions complaints were filed in
\n
federal court in the United States against NWM Plc and NWMSI alleging Commodity
\n
Exchange Act and common law unjust enrichment claims arising from manipulative
\n
trading known as spoofing. The complaints refer to NWM Plc\u2019s December 2021 spoofing-
\n
related guilty plea (described below under \u201cUS investigations relating to fixed-income
\n
securities\u201d) and purport to assert claims on behalf of those who transacted in US
\n
Treasury securities and futures and options on US Treasury securities between 2008 and
\n
2018. In July 2022, defendants filed a motion to dismiss these claims, which have been
\n
consolidated into one matter in the United States District Court for the Northern District
\n
of Illinois.
\n
Madoff
\n
NWM N.V. was named as a defendant in two actions filed by the trustee for the bankrupt
\n
estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, in
\n
bankruptcy court in New York, which together seek to clawback more than US$298
\n
million that NWM N.V. allegedly received from certain Madoff feeder funds and certain
\n
swap counterparties. The claims were previously dismissed, but as a result of an August
\n
2021 decision by the US Court of Appeals, they will now proceed in the bankruptcy
\n
court, where they have been consolidated into one action, subject to NWM N.V.\u2019s legal
\n
and factual defences. In May 2022, NWM N.V. filed a motion to dismiss the amended
\n
complaint in the consolidated action and such motion was denied in March 2023. As a
\n
result, the case has now entered the discovery phase.
\n
EUA trading litigation
\n
NWM Plc was a named defendant in civil proceedings before the High Court of Justice of
\n
England and Wales brought in 2015 by ten
companies (all in liquidation) (the \u2018Liquidated
\n
Companies\u2019) and their respective liquidators (together, \u2018the Claimants\u2019). The Liquidated
\n
Companies previously traded in European Union Allowances (EUAs) in 2009 and were
\n
alleged to be VAT defaulting traders within (or otherwise connected to) EUA supply
\n
chains of which NWM Plc was a party. In March 2020, the court held that NWM Plc and
\n
Mercuria Energy Europe Trading Limited (\u2018Mercuria\u2019) were liable for dishonestly assisting
\n
and knowingly being a party to fraudulent trading during a seven business day period in
\n
2009.
\n
\n\n\n\n
\n\n
\n
In October 2020, the High Court quantified total damages against NWM Plc and
\n
Mercuria at \u00a345 million plus interest and costs, and permitted the defendants to appeal
\n
to the Court of Appeal. In May 2021 the Court of Appeal set aside the High Court\u2019s
\n
judgment and ordered that a retrial take place before a different High Court judge. In
\n
January 2024, NWM Plc entered into an agreement to resolve the claim against it. The
\n
settlement amount paid by NWM Plc was covered in full by an existing provision.
\n
Offshoring VAT assessments
\n
HMRC issued protective tax assessments in 2018 against NatWest Group plc totalling
\n
\u00a3143 million relating to unpaid VAT in respect of the UK branches of two NatWest Group
\n
companies registered in India. NatWest Group formally requested reconsideration by
\n
HMRC of their assessments, and this process was completed in November 2020. HMRC
\n
upheld their original decision and, as a result, NatWest Group plc lodged an appeal with
\n
the Tax Tribunal and an application for judicial review with the High Court of Justice of
\n
England and Wales, both in December 2020. In order to lodge the appeal with the Tax
\n
Tribunal, NatWest Group plc was required to pay \u00a3143 million to HMRC, and payment
\n
was made in December 2020. The appeal and the application for judicial review have
\n
both been stayed pending resolution of separate cases involving other banks.
\n
US Anti-Terrorism Act litigation
\n
NWM N.V. and certain other financial institutions are defendants in several actions filed
\n
by a number of US nationals (or their estates, survivors, or heirs), most of whom are or
\n
were US military personnel, who were killed or injured in attacks in Iraq between 2003
\n
and 2011. NWM Plc is also a defendant in some of these cases.
\n
According to the plaintiffs\u2019 allegations, the defendants are liable for damages arising from
\n
the attacks because they allegedly conspired with and/or aided and abetted Iran and
\n
certain Iranian banks to assist Iran in transferring money to Hezbollah and the Iraqi
\n
terror cells that committed the attacks, in violation of the US Anti-Terrorism Act, by
\n
agreeing to engage in \u2018stripping\u2019 of transactions initiated by the Iranian banks so that the
\n
Iranian nexus to the transactions would not be detected.
\n
The first of these actions, alleging conspiracy claims but not aiding and abetting claims,
\n
was filed in the United States District Court for the Eastern District of New York in
\n
November 2014. In September 2019, the district court dismissed the case, finding that
\n
the claims were deficient for several reasons, including lack of sufficient allegations as to
\n
the alleged conspiracy and causation. In January 2023, the US Court of Appeals affirmed
\n
the district court\u2019s dismissal of this case. The plaintiffs filed a petition with the United
\n
States Supreme Court seeking review of the dismissal of their claims and that petition
\n
was denied in October 2023. It is anticipated that the plaintiffs will file a motion to re-
\n
open the case to assert aiding and abetting claims that they previously did not assert.
\n
Another action, filed in the SDNY in 2017, which asserted both conspiracy and aiding
\n
and abetting claims, was dismissed by the SDNY in March 2019 on similar grounds as
\n
the first case, but remains subject to appeal to the US Court of Appeals. Other follow-on
\n
actions that are substantially similar to those described above are pending in the same
\n
courts.
\n
1
1
MDB litigation
\n
A Malaysian court claim was served in Switzerland in November 2022 by 1MDB, a
\n
Sovereign Wealth Fund, in which Coutts & Co Ltd was named, along with six others, as a
\n
defendant in respect of losses allegedly incurred by 1MDB. It is claimed that Coutts & Co
\n
Ltd is liable as a constructive trustee for having dishonestly assisted the directors of
\n
1MDB in the breach of their fiduciary duties by failing (amongst other alleged claims) to
\n
undertake due diligence in relation to a customer of Coutts & Co Ltd, through which
\n
funds totalling c.US$1 billion were received and paid out between 2009 and 2011. The
\n
claimant seeks the return of that amount plus interest. Coutts & Co Ltd filed an
\n
application in January 2023 challenging the validity of service and the Malaysian court\u2019s
\n
jurisdiction to hear the claim. Before that application was heard, in April 2023, the
\n
claimant filed a notice of discontinuance of its claim against certain defendants including
\n
Coutts & Co Ltd. The claimant subsequently indicated that it intended to issue further
\n
replacement proceedings. Coutts & Co Ltd challenged the claimant\u2019s ability to take that
\n
step. In August 2023, the court disallowed the discontinuation of the claim by the
\n
claimant (a decision that the claimant has appealed) and directed that the application by
\n
Coutts & Co Ltd challenging the validity of the proceedings should proceed to a hearing,
\n
which took place in February 2024. Judgment is awaited.
\n
Coutts & Co Ltd (a subsidiary of RBS Netherlands Holdings B.V., which in turn is a
\n
subsidiary of NWM Plc) is a company registered in Switzerland and is in wind-down
\n
following the announced sale of its business assets in 2015.
\n
Regulatory matters (including investigations and customer redress programmes)
\n
NatWest Group\u2019s businesses and financial condition can be affected by the actions of
\n
various governmental and regulatory authorities in the UK, the US, the EU and
\n
elsewhere. NatWest Group has engaged, and will continue to engage, in discussions with
\n
relevant governmental and regulatory authorities, including in the UK, the US, the EU
\n
and elsewhere, on an ongoing and regular basis, and in response to informal and formal
\n
inquiries or investigations, regarding operational, systems and control evaluations and
\n
issues including those related to compliance with applicable laws and regulations,
\n
including consumer protection, investment advice, business conduct, competition/anti-
\n
trust, VAT recovery, anti-bribery, anti-money laundering and sanctions regimes.
\n
NatWest Group expects government and regulatory intervention in financial services to
\n
be high for the foreseeable future, including increased scrutiny from competition and
\n
other regulators in the retail and SME business sectors.
\n
Any matters discussed or identified during such discussions and inquiries may result in,
\n
among other things, further inquiry or investigation, other action being taken by
\n
governmental and regulatory authorities, increased costs being incurred by NatWest
\n
Group, remediation of systems and controls, public or private censure, restriction of
\n
NatWest Group\u2019s business activities and/or fines. Any of the events or circumstances
\n
mentioned in this paragraph or below could have a material adverse effect on NatWest
\n
Group, its business, authorisations and licences, reputation, results of operations or the
\n
price of securities issued by it, or lead to material additional provisions being taken.
\n
NatWest Group is co-operating fully with the matters described below.
\n
\n\n\n\n
\n\n
\n
US investigations relating to fixed-income securities
\n
In December 2021, NWM Plc pled guilty in the United States District Court for the District
\n
of Connecticut to one count of wire fraud and one count of securities fraud in connection
\n
with historical spoofing conduct by former employees in US Treasuries markets between
\n
January 2008 and May 2014 and, separately, during approximately three months in
\n
2018. The 2018 trading occurred during the term of a non-prosecution agreement (NPA)
\n
between NWMSI and the United States Attorney's Office for the District of Connecticut
\n
(USAO CT), under which non-prosecution was conditioned on NWMSI and affiliated
\n
companies not engaging in criminal conduct during the term of the NPA. The relevant
\n
trading in 2018 was conducted by two NWM traders in Singapore and breached that
\n
NPA. The plea agreement reached with the US Department of Justice and the USAO CT
\n
resolved both the spoofing conduct and the breach of the NPA.
\n
As required by the resolution and sentence imposed by the court, NWM Plc is subject to
\n
a three-year period of probation scheduled to end in December 2024. The plea
\n
agreement also imposes an independent corporate monitor. In addition, NWM Plc has
\n
committed to compliance programme reviews and improvements and agreed to
\n
reporting and co-operation obligations.
\n
Other material adverse collateral consequences may occur as a result of this matter, as
\n
further described in the Risk Factor relating to legal, regulatory and governmental
\n
actions and investigations set out on pages 43
9
to 44
1
.
\n
RBSI inspection report and referral to enforcement
\n
Following an inspection by the Isle of Man Financial Services Authority (IOMFSA) in 2021
\n
into The Royal Bank of Scotland International Limited\u2019s (RBSI\u2019s) compliance with the
\n
Financial Services Rule Book 2016, the Anti-Money Laundering and Countering the
\n
Financing of Terrorism Code 2015 (the \u201c2015 Code\u201d) and the Anti-Money Laundering
\n
and Countering the Financing of Terrorism Code 2019, RBSI and the IOMFSA entered
\n
into a settlement agreement in February 2024 with an agreed public statement that RBSI
\n
had contravened paragraph 7 of the 2015 Code. RBSI did not complete its updated
\n
Customer Risk Assessment process following the introduction of the 2015 Code until
\n
2018, resulting in 2,239 non-personal customers (on-boarded to its Isle of Man branches
\n
between 2015 and 2018, and not rated as high risk) being on-boarded using Customer
\n
Risk Assessments in line with earlier legislation. This constituted less than 3% of the total
\n
customer population of the Isle of Man branches. RBSI was fined \u00a31.0 million (after a
\n
discount for co-operation), which was covered in full by an existing provision.
\n
RBSI reliance regime and referral to enforcement
\n
In January 2023, the Jersey Financial Services Commission notified RBSI that it had been
\n
referred to its Enforcement Division in relation to RBSI\u2019s operation of the reliance regime.
\n
The reliance regime is specific to certain Crown Dependencies and enables the bank to
\n
rely on regulated third parties for specific due diligence information.
\n
I
I
nvestment advice review
\n
In October 2019, the FCA notified NatWest Group of its intention to appoint a Skilled
\n
Person under section 166 of the Financial Services and Markets Act 2000 to conduct a
\n
review of whether NatWest Group\u2019s past business review of investment advice provided
\n
during 2010 to 2015 was subject to appropriate governance and accountability and led
\n
to appropriate customer outcomes. The Skilled Person\u2019s review has concluded and, after
\n
discussion with the FCA, NatWest Group is undertaking additional review / remediation
\n
work.
\n
Reviews into customer account closures
\n
In July 2023, NatWest Group plc commissioned an independent review by the law firm
\n
Travers Smith LLP into issues that had arisen from treatment of a customer in
\n
connection with an account closure decision that attracted significant public attention
\n
and certain related interactions with the media. NatWest Group plc has received reports
\n
in connection with that review (and in October and December 2023 published summaries
\n
of the key findings and recommendations).
\n
In addition, NatWest Group plc is conducting internal reviews with respect to certain
\n
governance processes, policies, systems and controls of NatWest Group entities,
\n
including with respect to customer account closures.
\n
The FCA is conducting supervisory work into how the governance, systems and controls
\n
of NatWest Group and Coutts & Company are working, to identify and address any
\n
significant shortcomings.
\n
Review and investigation of treatment of tracker mortgage customers in Ulster Bank
\n
Ireland DAC
\n
In December 2015, correspondence was received from the Central Bank of Ireland
\n
setting out an industry examination framework in respect of the sale of tracker
\n
mortgages from approximately 2001 until the end of 2015. The redress and
\n
compensation process has now largely concluded, although certain cases remain
\n
outstanding.
\n
UBIDAC customers have lodged tracker mortgage complaints with the Financial Services
\n
and Pensions Ombudsman (FSPO). UBIDAC challenged three FSPO adjudications in the
\n
Irish High Court. In June 2023, the High Court found in favour of the FSPO in all matters
\n
and a provision was recognised. UBIDAC was granted leave to appeal that decision and
\n
an appeal hearing has been scheduled to take place in the Court of Appeal.
\n
Other customer remediation in Ulster Bank Ireland DAC
\n
UBIDAC has identified other legacy issues leading to the establishment of remediation
\nrequirements and progress is ongoing to conclude activities.", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81205": { "value": "2.4. Provisions
We recognise a provision for a present obligation resulting from a past event when it is
more likely than not that we will be required to pay to settle the obligation and the
amount of the obligation can be estimated reliably.
Provision is made for restructuring costs, including the costs of redundancy, when we
have a constructive obligation. An obligation exists when we have a detailed formal plan
for the restructuring and have raised a valid expectation in those affected either by
starting to implement the plan or by announcing its main features.
We recognise any onerous cost of the present obligation under a contract as a provision.
An onerous cost is the unavoidable cost of meeting our contractual obligations that
exceed the expected economic benefits. When we intend to vacate a leasehold property
or right of use asset, the asset would be tested for impairment and a provision may be
recognised for the ancillary contractual occupancy costs.21 Other liabilities
Other liabilities are amounts due to third parties that are not financial liabilities including lease liabilities, amounts due for goods and services that have been received
but not invoiced,
tax due to HMRC, and retirement benefit liabilities. Liabilities which have a level of uncertainty regarding their timing or the future cost to settle them
are included in other liabilities as provisions for liabilities and charges.
\u00a0
2023
2022
Other liabilities
\u00a3m
\u00a3m
Lease liabilities
670
1,118
Provisions for liabilities and charges
990
1,138
Retirement benefit liabilities (Note 5)
99
98
Accruals
1,411
1,407
Deferred income
402
355
Current tax
332
55
Deferred tax (Note 7)
141
227
Acceptances
575
237
Other liabilities
(1)
582
711
Total
5,202
5,346
\n
(1)
Other liabilities include liabilities of disposal groups of \u00a33 million (2022 - \u00a315 million). Refer to Note 8 for further information.
Provisions for liabilities and charges
\u00a0 \u00a0
Litigation and
\u00a0
Commitments
\u00a0 \u00a0
\u00a0
Customer redress
other regulatory
Property
and guarantees
Other (1)
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
431
240
154
87
226
1,138
Expected credit loss impairment release
-
-
-
(9)
-
(9)
Currency translation and other movements
(5)
(9)
-
-
(6)
(20)
Charge to income statement
276
21
41
-
136
474
Release to income statement
(36)
(33)
(64)
-
(28)
(161)
Provisions utilised
(180)
(63)
(32)
-
(157)
(432)
At 31 December 2023
486
156
99
78
171
990
\n
(1)
Other materially comprises provisions relating to restructuring costs.
Provisions are liabilities of uncertain timing or amount and are recognised when there is
a present obligation as a result of a past event, the outflow of economic benefit is
probable and the outflow can be estimated reliably. Any difference between the final
outcome and the amounts provided will affect the reported results in the period when
the matter is resolved.
For accounting policy information refer to Accounting policy 2.4.
Critical accounting policy: Provisions for liabilities
The key judgement is involved in determining whether a present obligation exists. There
is often a high degree of uncertainty and judgement is based on the specific facts and
circumstances relating to individual events in determining whether there is a present
obligation. Judgement is also involved in estimation of the probability, timing and amount
of any outflows. Where NatWest Group can look to another party such as an insurer to
pay some or all of the expenditure required to settle a provision, any reimbursement is
recognised when, and only when, it is virtually certain that it will be received.
E
E
stimates
-
Provisions are liabilities of uncertain timing or amount and are recognised
when there is a present obligation as a result of a past event, the outflow of economic
benefit is probable and the outflow can be estimated reliably.
Any difference between the final outcome and the amounts provided will affect the
reported results in the period when the matter is resolved.
\ue001
Customer redress: Provisions reflect the estimated cost of redress attributable to
claims where it is determined that a present obligation exists.
\ue001
Litigation and other regulatory: NatWest Group is engaged in various legal
proceedings, both in the UK and in overseas jurisdictions, including the US. For
further information in relation to legal proceedings and discussion of the associated
uncertainties, refer to Note 26.
\ue001
Property: This includes provision for contractual costs associated with vacant
properties.
\ue001
Other provisions: These materially comprise provisions for onerous contracts and
restructuring costs. Onerous contract provisions comprise an estimate of the costs
involved in fulfilling the terms and conditions of contracts net of any expected
benefits to be received. This includes provision for contractual costs associated with
vacant properties. Redundancy and restructuring provisions comprise the estimated
cost of restructuring, including redundancy costs where an obligation exists.
Background information for all material provisions is given in Note 26.26 Memorandum items
Contingent liabilities and commitments
NatWest Group provides its customers with a variety of services to support
their businesses, such as guarantees. These are reported as
commitments.
Contingent liabilities are possible obligations dependent on a
future event or present obligations which are either not probable or cannot
be measured reliably.
For accounting policy information refer to Accounting policy 2.4.
The amounts shown in the table below are intended only to provide an indication of the
volume of business outstanding at 31 December 2023. Although NatWest Group is
exposed to credit risk in the event of a customer\u2019s failure to meet its obligations, the
amounts shown do not, and are not intended to, provide any indication of NatWest
Group's expectation of future losses.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Contingent liabilities and commitments
\u00a0 \u00a0
Guarantees
2,810
3,150
Other contingent liabilities
1,380
1,855
Standby facilities, credit lines and other commitments
115,441
121,576
Total
119,631
126,581
\n
Banking commitments and contingent obligations, which have been entered into on
behalf of customers and for which there are corresponding obligations from customers,
are not included in assets and liabilities. NatWest Group's maximum exposure to credit
loss, in the event of its obligation crystallising and all counterclaims, collateral or security
proving valueless, is represented by the contractual nominal amount of these
instruments included in the table above. These commitments and contingent obligations
are subject to NatWest Group's normal credit approval processes.
Guarantees
\u2013
NatWest Group gives guarantees on behalf of customers. A financial
guarantee represents an irrevocable undertaking that NatWest Group will meet a
customer's specified obligations to a third party if the customer fails to do so. The
maximum amount that NatWest Group could be required to pay under a guarantee is its
principal amount as disclosed in the table above. NatWest Group expects most
guarantees it provides to expire unused.
O
O
ther contingent liabilities
- these include standby letters of credit, supporting customer
debt issues and contingent liabilities relating to customer trading activities such as those
arising from performance and customs bonds, warranties and indemnities.
Standby facilities and credit lines
- under a loan commitment, NatWest Group agrees to
make funds available to a customer in the future. Loan commitments, which are usually
for a specified term, may be unconditionally cancellable or may persist, provided all
conditions in the loan facility are satisfied or waived. Commitments to lend include
commercial standby facilities and credit lines, liquidity facilities to commercial paper
conduits and unutilised overdraft facilities.
O
O
ther commitments
- these include documentary credits, which are commercial letters
of credit providing for payment by NatWest Group to a named beneficiary against
presentation of specified documents, forward asset purchases, forward deposits placed
and undrawn note issuance and revolving underwriting facilities, and other short-term
trade related transactions.
Contractual obligations for future expenditure not provided for in the accounts
The following table shows contractual obligations for future expenditure not provided for
in the accounts at the year end.
\u00a0
2023
2022
\u00a0
\u00a0
\u00a3m
\u00a3m
Capital expenditure on property, plant and equipment
38
8
Contracts to purchase goods or services
(1)
1,121
677
\u00a0
1,159
685
\n
(1)
Of which due within 1 year: \u00a3379 million (2022 \u2013 \u00a3321 million).
Trustee and other fiduciary activities
In its capacity as trustee or other fiduciary role, NatWest Group may hold or place assets
on behalf of individuals, trusts, companies, pension schemes and others. The assets and
their income are not included in NatWest Group's financial statements. NatWest Group
earned fee income of \u00a3264 million (2022 - \u00a3266 million; 2021 - \u00a3280 million) from these
activities.
The Financial Services Compensation Scheme
The Financial Services Compensation Scheme (FSCS), the UK's statutory fund of last
resort for customers of authorised financial services firms, pays compensation if a firm is
unable to meet its obligations. The FSCS funds compensation for customers by raising
management expenses levies and compensation levies on the industry. In relation to
protected deposits, each deposit-taking institution contributes towards these levies in
proportion to their share of total protected deposits on 31 December of the year
preceding the scheme year (which runs from 1 April to 31 March), subject to annual
maxima set by the Prudential Regulation Authority. In addition, the FSCS has the power
to raise levies on a firm that has ceased to participate in the scheme and is in the
process of ceasing to be authorised for the costs that it would have been liable to pay
had the FSCS made a levy in the financial year it ceased to be a participant in the
scheme.
\n
\n\n\n\n
\n\n
Litigation and regulatory matters
\n
NatWest Group plc and certain members of NatWest Group are party to various legal
\n
proceedings and are involved in, or subject to, various regulatory matters, including as
\n
the subject of investigations and other regulatory and governmental action (Matters) in
\n
the United Kingdom (UK), the United States (US), the European Union (EU) and other
\n
jurisdictions.
\n
NatWest Group recognises a provision for a liability in relation to these Matters when it is
\n
probable that an outflow of economic benefits will be required to settle an obligation
\n
resulting from past events, and a reliable estimate can be made of the amount of the
\n
obligation.
\n
In many of the Matters, it is not possible to determine whether any loss is probable, or to
\n
estimate reliably the amount of any loss, either as a direct consequence of the relevant
\n
proceedings and regulatory matters or as a result of adverse impacts or restrictions on
\n
NatWest Group\u2019s reputation, businesses and operations. Numerous legal and factual
\n
issues may need to be resolved, including through potentially lengthy discovery and
\n
document production exercises and determination of important factual matters, and by
\n
addressing novel or unsettled legal questions relevant to the proceedings in question,
\n
before the probability of a liability, if any, arising can reasonably be estimated in respect
\n
of any Matter. NatWest Group cannot predict if, how, or when such claims will be
\n
resolved or what the eventual settlement, damages, fine, penalty or other relief, if any,
\n
may be, particularly for Matters that are at an early stage in their development or where
\n
claimants seek substantial or indeterminate damages.
\n
There are situations where NatWest Group may pursue an approach that in some
\n
instances leads to a settlement agreement. This may occur in order to avoid the
\n
expense, management distraction or reputational implications of continuing to contest
\n
liability, or in order to take account of the risks inherent in defending or contesting
\n
Matters, even for those for which NatWest Group believes it has credible defences and
\n
should prevail on the merits. The uncertainties inherent in all Matters affect the amount
\n
and timing of any potential economic outflows for both Matters with respect to which
\n
provisions have been established and other contingent liabilities in respect of any such
\n
Matter.
\n
It is not practicable to provide an aggregate estimate of potential liability for our Matters
\n
as a class of contingent liabilities.
\n
The future economic outflow in respect of any Matter may ultimately prove to be
\n
substantially greater than, or less than, the aggregate provision, if any, that NatWest
\n
Group has recognised in respect of such Matter. Where a reliable estimate of the
\n
economic outflow cannot be reasonably made, no provision has been recognised.
\n
NatWest Group expects that in future periods, additional provisions and economic
\n
outflows relating to Matters that may or may not be currently known by NatWest Group
\n
will be necessary, in amounts that are expected to be substantial in some instances.
\n
Refer to Note 21 for information on material provisions.
\n
Matters which are, or could be, material, either individually or in aggregate, having
\n
regard to NatWest Group, considered as a whole, in which NatWest Group is currently
\n
involved are set out below. We have provided information on the procedural history of
\n
certain Matters, where we believe appropriate, to aid the understanding of the Matter.
\n
For a discussion of certain risks associated with NatWest Group\u2019s litigation and
\n
regulatory matters (including the Matters), refer to the Risk Factor relating to legal,
\n
regulatory and governmental actions and investigations set out on pages 4
39
to 4
41
.
\n
Litigation
\n
London Interbank Offered Rate (LIBOR) and other rates litigation
\n
NWM Plc and certain other members of NatWest Group, including NatWest Group plc,
\n
are defendants in a number of class actions and individual claims pending in the United
\n
States District Court for the Southern District of New York (SDNY) with respect to the
\n
setting of LIBOR and certain other benchmark interest rates. The complainants allege
\n
that certain members of NatWest Group and other panel banks violated various federal
\n
laws, including the US commodities and antitrust laws, and state statutory and common
\n
law, as well as contracts, by manipulating LIBOR and prices of LIBOR-based derivatives
\n
in various markets through various means.
\n
Several purported class actions relating to USD LIBOR, as well as more than two dozen
\n
non-class actions concerning USD LIBOR and involving NatWest Group companies, are
\n
part of a co-ordinated proceeding in the SDNY. The class actions include claims on
\n
behalf of persons who purchased LIBOR-linked instruments from defendants, bonds
\n
issued by defendants, persons who transacted futures and options on exchanges, and
\n
lenders who made LIBOR-based loans. The coordinated proceeding is currently in the
\n
discovery phase. NatWest Group companies\u2019 previously disclosed settlement of a class
\n
action on behalf of bondholder plaintiffs has received final court approval. The amount of
\n
the settlement was covered by an existing provision.
\n
The non-class claims filed in the SDNY include claims that the FDIC is asserting on behalf
\n
of certain failed US banks. In July 2017, the FDIC, on behalf of 39 of those failed US
\n
banks, commenced substantially similar claims against NatWest Group companies and
\n
others in the High Court of Justice of England and Wales. The action alleges collusion
\n
with regard to the setting of USD LIBOR and that the defendants breached UK and
\n
European competition law, as well as asserting common law claims of fraud under US
\n
law. The defendant banks consented to a request by the FDIC for discontinuance of the
\n
claim in respect of 20 failed US banks, leaving 19 failed US banks as claimants. The trial
\n
is currently anticipated to commence in Q1 2026.
\n
In addition to the USD LIBOR cases described above, there is a class action relating to
\n
derivatives allegedly tied to JPY LIBOR and Euroyen TIBOR, which was dismissed by the
\n
SDNY in relation to NWM Plc and other NatWest Group companies in September 2021.
\n
That dismissal may be the subject of a future appeal. The SDNY\u2019s dismissal of another
\n
class action, which related to Euroyen TIBOR futures contracts, was affirmed by the
\n
United States Court of Appeals for the Second Circuit (US Court of Appeals) in October
\n
2022. The plaintiffs filed a petition with the United States Supreme Court seeking review
\n
of the dismissal, but that petition was denied in October 2023.
\n
Two other IBOR-related class actions involving NWM Plc, concerning alleged
\n
manipulation of Euribor and Pound Sterling LIBOR, were previously dismissed by the
\n
SDNY for various reasons. The plaintiffs\u2019 appeals in those two cases remain pending.
\n
\n\n\n\n
\n\n
\n
NWM Plc\u2019s previously disclosed settlement of a class action relating to Swiss Franc
\n
LIBOR has received final court approval. The settlement amount has been paid by NWM
\n
Plc and was covered in full by an existing provision.
\n
In August 2020, a complaint was filed in the United States District Court for the Northern
\n
District of California by several United States retail borrowers against the USD ICE
\n
LIBOR panel banks and their affiliates (including NatWest Group plc, NWM Plc, NWMSI
\n
and NWB Plc), alleging (i) that the very process of setting USD ICE LIBOR amounts to
\n
illegal price-fixing; and (ii) that banks in the United States have illegally agreed to use
\n
LIBOR as a component of price in variable retail loans. In September 2022, the district
\n
court dismissed the complaint. The plaintiffs filed an amended complaint but in October
\n
2023, the district court dismissed that complaint as well, and indicated that further
\n
amendment would not be permitted. The plaintiffs have commenced an appeal to the
\n
United States Court of Appeals for the Ninth Circuit which is currently pending.
\n
NWM Plc is also named as a defendant in a motion to certify a class action relating to
\n
LIBOR in the Tel Aviv District Court in Israel. NWM Plc filed a motion for cancellation of
\n
service outside the jurisdiction, which was granted in July 2020. The claimants appealed
\n
that decision and in November 2020 the appeal was refused and the claim dismissed by
\n
the Appellate Court. The claim could in future be recommenced depending on the
\n
outcome of an appeal to Israel\u2019s Supreme Court in respect of the dismissal of the
\n
substantive case against banks that had a presence in Israel.
\n
Foreign exchange litigation
\n
NWM Plc, NWMSI and/or NatWest Group plc are defendants in several cases relating to
\n
NWM Plc\u2019s foreign exchange (FX) business.
\n
An FX-related class action, on behalf of \u2018consumers and end-user businesses\u2019, was
\n
proceeding in the SDNY against NWM Plc and others. In March 2023, the court granted
\n
summary judgment in favour of the defendants, dismissing the plaintiffs\u2019 claims. The
\n
plaintiffs have commenced an appeal of that decision as well as a prior decision denying
\n
class certification in the case.
\n
In May 2019, a cartel class action was filed in the Federal Court of Australia against
\n
NWM Plc and four other banks on behalf of persons who bought or sold currency
\n
through FX spots or forwards between 1 January 2008 and 15 October 2013 with a
\n
total transaction value exceeding AUD $0.5 million. The claimant has alleged that the
\n
banks, including NWM Plc, contravened Australian competition law by sharing
\n
information, coordinating conduct, widening spreads and manipulating FX rates for
\n
certain currency pairs during this period. NatWest Group plc and NWMSI have been
\n
named in the action as \u2018other cartel participants\u2019, but are not respondents. The claim
\n
was served in June 2019 and NWM Plc filed its defence in March 2022.
\n
In July and December 2019, two separate applications seeking opt-out collective
\n
proceedings orders were filed in the UK Competition Appeal Tribunal (CAT) against
\n
NatWest Group plc, NWM Plc and other banks. Both applications were brought on behalf
\n
of persons who, between 18 December 2007 and 31 January 2013, entered into a
\n
relevant FX spot or outright forward transaction in the EEA with a relevant financial
\n
institution or on an electronic communications network. In March 2022, the CAT declined
\n
to certify as collective proceedings either of the applications, which was appealed by the
\n
applicants, and the subject of an application for judicial review.
\n
In its amended judgment in November 2023, the Court of Appeal allowed the appeal and
\n
decided that the claims should proceed on an opt-out basis. Separately, the court
\n
determined which of the two competing applicants can proceed as class representative,
\n
and dismissed the application for judicial review of the CAT\u2019s decision. The case has been
\n
remitted to the CAT for further case management and the banks have sought
\n
permission to appeal directly to the UK Supreme Court.
\n
Two motions to certify FX-related class actions were filed in the Tel Aviv District Court in
\n
Israel in September and October 2018, and were subsequently consolidated into one
\n
motion. The consolidated motion to certify, which names The Royal Bank of Scotland plc
\n
(now NWM Plc) and several other banks as defendants, was served on NWM Plc in May
\n
2020. The applicants have sought the court\u2019s permission to amend their motions to
\n
certify the class actions. NWM Plc has filed a motion challenging the permission granted
\n
by the court for the applicants to serve the consolidated motion outside the Israeli
\n
jurisdiction. That NWM Plc motion remains pending.
\n
In December 2021, a summons was served in the Netherlands against NatWest Group
\n
plc, NWM Plc and NWM N.V. by Stichting FX Claims on behalf of a number of parties,
\n
seeking declarations from the court concerning liability for anti-competitive FX market
\n
conduct described in decisions of the European Commission (EC) of 16 May 2019, along
\n
with unspecified damages. The claimant amended its claim to also refer to a 2 December
\n
2021 decision by the EC, which described anti-competitive FX market conduct. NatWest
\n
Group plc, NWM Plc and other defendants contested the jurisdiction of the Dutch court.
\n
In March 2023, the district court in Amsterdam accepted that it has jurisdiction to hear
\n
claims against NWM N.V. but refused jurisdiction to hear any claims against the other
\n
defendant banks (including NatWest Group plc and NWM Plc) brought on behalf of the
\n
parties represented by the claimant that are domiciled outside of the Netherlands. The
\n
claimant is appealing that decision and the defendant banks have brought cross-appeals
\n
which seek a ruling that the Dutch court has no jurisdiction to hear any claims against
\n
the defendant banks domiciled outside of the Netherlands, including claims brought on
\n
behalf of the parties represented by the claimant that are domiciled in the Netherlands.
\n
In September 2023, second summonses were served by Stichting FX Claims on NWM
\n
N.V., NatWest Group plc and NWM Plc, for claims on behalf of a new group of parties
\n
that have now been brought before the district court in Amsterdam. The summonses
\n
seek declarations from the Dutch court concerning liability for anti-competitive FX
\n
market conduct described in the above referenced decisions of the EC of 16 May 2019
\n
and 2 December 2021, along with unspecified damages.
\n
Certain other foreign exchange transaction related claims have been or may be
\n
threatened. NatWest Group cannot predict whether all or any of these claims will be
\n
pursued.
\n
\n\n\n\n
\n\n
\n
Government securities antitrust litigation
\n
NWMSI and certain other US broker-dealers are defendants in a consolidated antitrust
\n
class action in the SDNY on behalf of persons who transacted in US Treasury securities
\n
or derivatives based on such instruments, including futures and options. The plaintiffs
\n
allege that the defendants rigged the US Treasury securities auction bidding process to
\n
deflate prices at which they bought such securities and colluded to increase the prices at
\n
which they sold such securities to the plaintiffs. In March 2022, the SDNY dismissed the
\n
complaint, without leave to re-plead. In February 2024, the US Court of Appeals affirmed
\n
the SDNY\u2019s decision dismissing the complaint.
\n
Class action antitrust claims commenced in March 2019 are pending in the SDNY
\n
against NWM Plc, NWMSI and other banks in respect of Euro-denominated bonds issued
\n
by various European central banks (European government bonds or EGBs). The
\n
complaint alleges a conspiracy among dealers of EGBs to widen the bid-ask spreads they
\n
quoted to customers, thereby increasing the prices customers paid for the EGBs or
\n
decreasing the prices at which customers sold EGBs. The class consists of those who
\n
purchased or sold EGBs in the US between 2007 and 2012. Previously, in March 2022,
\n
the SDNY dismissed the claims against NWM Plc and NWMSI on the ground that the
\n
complaint\u2019s conspiracy allegations were insufficient. However, in September 2023, the
\n
SDNY ruled that new allegations which plaintiffs have included in an amended complaint
\n
are sufficient to bring those NatWest entities back into the case as defendants.
\n
Swaps antitrust litigation
\n
NWM Plc and other members of NatWest Group, including NatWest Group plc, as well as
\n
a number of other interest rate swap dealers, are defendants in several cases pending in
\n
the SDNY alleging violations of the US antitrust laws in the market for interest rate
\n
swaps. There is a consolidated class action complaint on behalf of persons who entered
\n
into interest rate swaps with the defendants, as well as non-class action claims by three
\n
swap execution facilities (TeraExchange, Javelin, and trueEx). The plaintiffs allege that
\n
the swap execution facilities would have successfully established exchange-like trading of
\n
interest rate swaps if the defendants had not unlawfully conspired to prevent that from
\n
happening through boycotts and other means. Discovery in these cases is complete. In
\n
December 2023, the SDNY denied the plaintiffs\u2019 motion for class certification. The
\n
plaintiffs have filed a petition requesting that the US Court of Appeals review the denial
\n
of class certification.
\n
In June 2021, a class action antitrust complaint was filed against a number of credit
\n
default swap dealers, in New Mexico federal court on behalf of persons who, from 2005
\n
onwards, settled credit default swaps in the United States by reference to the ISDA
\n
credit default swap auction protocol. The complaint alleges that the defendants
\n
conspired to manipulate that benchmark through various means in violation of the
\n
antitrust laws and the Commodity Exchange Act. The defendants filed a motion to
\n
dismiss the complaint and, in June 2023, such motion was denied as regards NWMSI and
\n
other financial institutions, but granted as regards to NWM Plc on the ground that the
\n
court lacks jurisdiction over that entity. As a result, the case entered the discovery phase
\n
as against the non-dismissed defendants. In January 2024, the SDNY issued an order
\n
barring the plaintiffs in the New Mexico case from pursuing claims based on conduct
\n
occurring before 30 June 2014 on the ground that such claims were extinguished by a
\n
2015 settlement agreement that resolved a prior class action relating to credit default
\n
swaps.
\n
O
O
dd lot corporate bond trading antitrust litigation
\n
In October 2021, the SDNY granted the defendants\u2019 motion to dismiss the class action
\n
antitrust complaint alleging that from August 2006 onwards various securities dealers,
\n
including NWMSI, conspired artificially to widen spreads for odd lots of corporate bonds
\n
bought or sold in the United States secondary market and to boycott electronic trading
\n
platforms that would have allegedly promoted pricing competition in the market for such
\n
bonds. The plaintiffs have filed an appeal.
\n
Spoofing litigation
\n
In December 2021, three substantially similar class actions complaints were filed in
\n
federal court in the United States against NWM Plc and NWMSI alleging Commodity
\n
Exchange Act and common law unjust enrichment claims arising from manipulative
\n
trading known as spoofing. The complaints refer to NWM Plc\u2019s December 2021 spoofing-
\n
related guilty plea (described below under \u201cUS investigations relating to fixed-income
\n
securities\u201d) and purport to assert claims on behalf of those who transacted in US
\n
Treasury securities and futures and options on US Treasury securities between 2008 and
\n
2018. In July 2022, defendants filed a motion to dismiss these claims, which have been
\n
consolidated into one matter in the United States District Court for the Northern District
\n
of Illinois.
\n
Madoff
\n
NWM N.V. was named as a defendant in two actions filed by the trustee for the bankrupt
\n
estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, in
\n
bankruptcy court in New York, which together seek to clawback more than US$298
\n
million that NWM N.V. allegedly received from certain Madoff feeder funds and certain
\n
swap counterparties. The claims were previously dismissed, but as a result of an August
\n
2021 decision by the US Court of Appeals, they will now proceed in the bankruptcy
\n
court, where they have been consolidated into one action, subject to NWM N.V.\u2019s legal
\n
and factual defences. In May 2022, NWM N.V. filed a motion to dismiss the amended
\n
complaint in the consolidated action and such motion was denied in March 2023. As a
\n
result, the case has now entered the discovery phase.
\n
EUA trading litigation
\n
NWM Plc was a named defendant in civil proceedings before the High Court of Justice of
\n
England and Wales brought in 2015 by ten
companies (all in liquidation) (the \u2018Liquidated
\n
Companies\u2019) and their respective liquidators (together, \u2018the Claimants\u2019). The Liquidated
\n
Companies previously traded in European Union Allowances (EUAs) in 2009 and were
\n
alleged to be VAT defaulting traders within (or otherwise connected to) EUA supply
\n
chains of which NWM Plc was a party. In March 2020, the court held that NWM Plc and
\n
Mercuria Energy Europe Trading Limited (\u2018Mercuria\u2019) were liable for dishonestly assisting
\n
and knowingly being a party to fraudulent trading during a seven business day period in
\n
2009.
\n
\n\n\n\n
\n\n
\n
In October 2020, the High Court quantified total damages against NWM Plc and
\n
Mercuria at \u00a345 million plus interest and costs, and permitted the defendants to appeal
\n
to the Court of Appeal. In May 2021 the Court of Appeal set aside the High Court\u2019s
\n
judgment and ordered that a retrial take place before a different High Court judge. In
\n
January 2024, NWM Plc entered into an agreement to resolve the claim against it. The
\n
settlement amount paid by NWM Plc was covered in full by an existing provision.
\n
Offshoring VAT assessments
\n
HMRC issued protective tax assessments in 2018 against NatWest Group plc totalling
\n
\u00a3143 million relating to unpaid VAT in respect of the UK branches of two NatWest Group
\n
companies registered in India. NatWest Group formally requested reconsideration by
\n
HMRC of their assessments, and this process was completed in November 2020. HMRC
\n
upheld their original decision and, as a result, NatWest Group plc lodged an appeal with
\n
the Tax Tribunal and an application for judicial review with the High Court of Justice of
\n
England and Wales, both in December 2020. In order to lodge the appeal with the Tax
\n
Tribunal, NatWest Group plc was required to pay \u00a3143 million to HMRC, and payment
\n
was made in December 2020. The appeal and the application for judicial review have
\n
both been stayed pending resolution of separate cases involving other banks.
\n
US Anti-Terrorism Act litigation
\n
NWM N.V. and certain other financial institutions are defendants in several actions filed
\n
by a number of US nationals (or their estates, survivors, or heirs), most of whom are or
\n
were US military personnel, who were killed or injured in attacks in Iraq between 2003
\n
and 2011. NWM Plc is also a defendant in some of these cases.
\n
According to the plaintiffs\u2019 allegations, the defendants are liable for damages arising from
\n
the attacks because they allegedly conspired with and/or aided and abetted Iran and
\n
certain Iranian banks to assist Iran in transferring money to Hezbollah and the Iraqi
\n
terror cells that committed the attacks, in violation of the US Anti-Terrorism Act, by
\n
agreeing to engage in \u2018stripping\u2019 of transactions initiated by the Iranian banks so that the
\n
Iranian nexus to the transactions would not be detected.
\n
The first of these actions, alleging conspiracy claims but not aiding and abetting claims,
\n
was filed in the United States District Court for the Eastern District of New York in
\n
November 2014. In September 2019, the district court dismissed the case, finding that
\n
the claims were deficient for several reasons, including lack of sufficient allegations as to
\n
the alleged conspiracy and causation. In January 2023, the US Court of Appeals affirmed
\n
the district court\u2019s dismissal of this case. The plaintiffs filed a petition with the United
\n
States Supreme Court seeking review of the dismissal of their claims and that petition
\n
was denied in October 2023. It is anticipated that the plaintiffs will file a motion to re-
\n
open the case to assert aiding and abetting claims that they previously did not assert.
\n
Another action, filed in the SDNY in 2017, which asserted both conspiracy and aiding
\n
and abetting claims, was dismissed by the SDNY in March 2019 on similar grounds as
\n
the first case, but remains subject to appeal to the US Court of Appeals. Other follow-on
\n
actions that are substantially similar to those described above are pending in the same
\n
courts.
\n
1
1
MDB litigation
\n
A Malaysian court claim was served in Switzerland in November 2022 by 1MDB, a
\n
Sovereign Wealth Fund, in which Coutts & Co Ltd was named, along with six others, as a
\n
defendant in respect of losses allegedly incurred by 1MDB. It is claimed that Coutts & Co
\n
Ltd is liable as a constructive trustee for having dishonestly assisted the directors of
\n
1MDB in the breach of their fiduciary duties by failing (amongst other alleged claims) to
\n
undertake due diligence in relation to a customer of Coutts & Co Ltd, through which
\n
funds totalling c.US$1 billion were received and paid out between 2009 and 2011. The
\n
claimant seeks the return of that amount plus interest. Coutts & Co Ltd filed an
\n
application in January 2023 challenging the validity of service and the Malaysian court\u2019s
\n
jurisdiction to hear the claim. Before that application was heard, in April 2023, the
\n
claimant filed a notice of discontinuance of its claim against certain defendants including
\n
Coutts & Co Ltd. The claimant subsequently indicated that it intended to issue further
\n
replacement proceedings. Coutts & Co Ltd challenged the claimant\u2019s ability to take that
\n
step. In August 2023, the court disallowed the discontinuation of the claim by the
\n
claimant (a decision that the claimant has appealed) and directed that the application by
\n
Coutts & Co Ltd challenging the validity of the proceedings should proceed to a hearing,
\n
which took place in February 2024. Judgment is awaited.
\n
Coutts & Co Ltd (a subsidiary of RBS Netherlands Holdings B.V., which in turn is a
\n
subsidiary of NWM Plc) is a company registered in Switzerland and is in wind-down
\n
following the announced sale of its business assets in 2015.
\n
Regulatory matters (including investigations and customer redress programmes)
\n
NatWest Group\u2019s businesses and financial condition can be affected by the actions of
\n
various governmental and regulatory authorities in the UK, the US, the EU and
\n
elsewhere. NatWest Group has engaged, and will continue to engage, in discussions with
\n
relevant governmental and regulatory authorities, including in the UK, the US, the EU
\n
and elsewhere, on an ongoing and regular basis, and in response to informal and formal
\n
inquiries or investigations, regarding operational, systems and control evaluations and
\n
issues including those related to compliance with applicable laws and regulations,
\n
including consumer protection, investment advice, business conduct, competition/anti-
\n
trust, VAT recovery, anti-bribery, anti-money laundering and sanctions regimes.
\n
NatWest Group expects government and regulatory intervention in financial services to
\n
be high for the foreseeable future, including increased scrutiny from competition and
\n
other regulators in the retail and SME business sectors.
\n
Any matters discussed or identified during such discussions and inquiries may result in,
\n
among other things, further inquiry or investigation, other action being taken by
\n
governmental and regulatory authorities, increased costs being incurred by NatWest
\n
Group, remediation of systems and controls, public or private censure, restriction of
\n
NatWest Group\u2019s business activities and/or fines. Any of the events or circumstances
\n
mentioned in this paragraph or below could have a material adverse effect on NatWest
\n
Group, its business, authorisations and licences, reputation, results of operations or the
\n
price of securities issued by it, or lead to material additional provisions being taken.
\n
NatWest Group is co-operating fully with the matters described below.
\n
\n\n\n\n
\n\n
\n
US investigations relating to fixed-income securities
\n
In December 2021, NWM Plc pled guilty in the United States District Court for the District
\n
of Connecticut to one count of wire fraud and one count of securities fraud in connection
\n
with historical spoofing conduct by former employees in US Treasuries markets between
\n
January 2008 and May 2014 and, separately, during approximately three months in
\n
2018. The 2018 trading occurred during the term of a non-prosecution agreement (NPA)
\n
between NWMSI and the United States Attorney's Office for the District of Connecticut
\n
(USAO CT), under which non-prosecution was conditioned on NWMSI and affiliated
\n
companies not engaging in criminal conduct during the term of the NPA. The relevant
\n
trading in 2018 was conducted by two NWM traders in Singapore and breached that
\n
NPA. The plea agreement reached with the US Department of Justice and the USAO CT
\n
resolved both the spoofing conduct and the breach of the NPA.
\n
As required by the resolution and sentence imposed by the court, NWM Plc is subject to
\n
a three-year period of probation scheduled to end in December 2024. The plea
\n
agreement also imposes an independent corporate monitor. In addition, NWM Plc has
\n
committed to compliance programme reviews and improvements and agreed to
\n
reporting and co-operation obligations.
\n
Other material adverse collateral consequences may occur as a result of this matter, as
\n
further described in the Risk Factor relating to legal, regulatory and governmental
\n
actions and investigations set out on pages 43
9
to 44
1
.
\n
RBSI inspection report and referral to enforcement
\n
Following an inspection by the Isle of Man Financial Services Authority (IOMFSA) in 2021
\n
into The Royal Bank of Scotland International Limited\u2019s (RBSI\u2019s) compliance with the
\n
Financial Services Rule Book 2016, the Anti-Money Laundering and Countering the
\n
Financing of Terrorism Code 2015 (the \u201c2015 Code\u201d) and the Anti-Money Laundering
\n
and Countering the Financing of Terrorism Code 2019, RBSI and the IOMFSA entered
\n
into a settlement agreement in February 2024 with an agreed public statement that RBSI
\n
had contravened paragraph 7 of the 2015 Code. RBSI did not complete its updated
\n
Customer Risk Assessment process following the introduction of the 2015 Code until
\n
2018, resulting in 2,239 non-personal customers (on-boarded to its Isle of Man branches
\n
between 2015 and 2018, and not rated as high risk) being on-boarded using Customer
\n
Risk Assessments in line with earlier legislation. This constituted less than 3% of the total
\n
customer population of the Isle of Man branches. RBSI was fined \u00a31.0 million (after a
\n
discount for co-operation), which was covered in full by an existing provision.
\n
RBSI reliance regime and referral to enforcement
\n
In January 2023, the Jersey Financial Services Commission notified RBSI that it had been
\n
referred to its Enforcement Division in relation to RBSI\u2019s operation of the reliance regime.
\n
The reliance regime is specific to certain Crown Dependencies and enables the bank to
\n
rely on regulated third parties for specific due diligence information.
\n
I
I
nvestment advice review
\n
In October 2019, the FCA notified NatWest Group of its intention to appoint a Skilled
\n
Person under section 166 of the Financial Services and Markets Act 2000 to conduct a
\n
review of whether NatWest Group\u2019s past business review of investment advice provided
\n
during 2010 to 2015 was subject to appropriate governance and accountability and led
\n
to appropriate customer outcomes. The Skilled Person\u2019s review has concluded and, after
\n
discussion with the FCA, NatWest Group is undertaking additional review / remediation
\n
work.
\n
Reviews into customer account closures
\n
In July 2023, NatWest Group plc commissioned an independent review by the law firm
\n
Travers Smith LLP into issues that had arisen from treatment of a customer in
\n
connection with an account closure decision that attracted significant public attention
\n
and certain related interactions with the media. NatWest Group plc has received reports
\n
in connection with that review (and in October and December 2023 published summaries
\n
of the key findings and recommendations).
\n
In addition, NatWest Group plc is conducting internal reviews with respect to certain
\n
governance processes, policies, systems and controls of NatWest Group entities,
\n
including with respect to customer account closures.
\n
The FCA is conducting supervisory work into how the governance, systems and controls
\n
of NatWest Group and Coutts & Company are working, to identify and address any
\n
significant shortcomings.
\n
Review and investigation of treatment of tracker mortgage customers in Ulster Bank
\n
Ireland DAC
\n
In December 2015, correspondence was received from the Central Bank of Ireland
\n
setting out an industry examination framework in respect of the sale of tracker
\n
mortgages from approximately 2001 until the end of 2015. The redress and
\n
compensation process has now largely concluded, although certain cases remain
\n
outstanding.
\n
UBIDAC customers have lodged tracker mortgage complaints with the Financial Services
\n
and Pensions Ombudsman (FSPO). UBIDAC challenged three FSPO adjudications in the
\n
Irish High Court. In June 2023, the High Court found in favour of the FSPO in all matters
\n
and a provision was recognised. UBIDAC was granted leave to appeal that decision and
\n
an appeal hearing has been scheduled to take place in the Court of Appeal.
\n
Other customer remediation in Ulster Bank Ireland DAC
\n
UBIDAC has identified other legacy issues leading to the establishment of remediation
\nrequirements and progress is ongoing to conclude activities.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81231": { "value": "3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the
effective interest rate method for: all financial instruments measured at amortised cost;
debt instruments measured as fair value through other comprehensive income; and the
effective part of any related accounting hedging instruments. Finance lease income is
recognised at a constant periodic rate of return before tax on the net investment on the
lease.
Other interest relating to financial instruments measured at fair value is recognised as
part of the movement in fair value and is reported in income from trading activities or
other operating income as relevant. Fees in respect of services are recognised as the
right to consideration accrues through the performance of each distinct service
obligation to the customer. The arrangements are generally contractual and the cost of
providing the service is incurred as the service is rendered. The price is usually fixed and
always determinable.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81232": { "value": "3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the
effective interest rate method for: all financial instruments measured at amortised cost;
debt instruments measured as fair value through other comprehensive income; and the
effective part of any related accounting hedging instruments. Finance lease income is
recognised at a constant periodic rate of return before tax on the net investment on the
lease.
Other interest relating to financial instruments measured at fair value is recognised as
part of the movement in fair value and is reported in income from trading activities or
other operating income as relevant. Fees in respect of services are recognised as the
right to consideration accrues through the performance of each distinct service
obligation to the customer. The arrangements are generally contractual and the cost of
providing the service is incurred as the service is rendered. The price is usually fixed and
always determinable.
3.2. Discontinued operations, Held for sale and Disposal group
The results of discontinued operations are excluded from the results of continuing
operations and are presented as a single amount as profit/(loss) from discontinued
operations, net of tax in the income statement. Comparatives are represented for the
income statement, cash flow statement, statement of changes in equity and related
notes.
An asset or disposal group (assets and liabilities) is classified as held for sale if we will
recover its carrying amount principally through a sale transaction rather than through
continuing use. These are measured at the lower of its carrying amount or fair value less
cost to sell unless the existing measurement provisions of IFRS apply. These are
presented as single amounts; comparatives are not represented.
3.3. Staff costs
Employee costs, such as salaries, paid absences, and other benefits are recognised over
the period in which the employees provide the related services to us. Employees may
receive variable compensation in cash, in deferred cash or debt instruments of NatWest
Group or in ordinary shares of NatWest Group plc subject to deferral, clawback and
forfeiture criteria. We operate a number of share-based compensation schemes under
which we grant awards of NatWest Group plc shares and share options to our
employees. Such awards are subject to vesting conditions.
Variable compensation that is settled in cash or debt instruments is charged to the
income statement on a straight-line basis over the period during which services are
provided, taking account of forfeiture and clawback criteria. The value of employee
services received in exchange for NatWest Group plc shares and share options is
recognised as an expense over the vesting period, subject to deferral, clawback,
cancelation and forfeiture criteria with a corresponding increase in equity. The fair value
of shares granted is the market price adjusted for the expected effect of dividends as
employees are not entitled to dividends until shares are vested.
The fair value of options granted is determined using option pricing models to estimate
the numbers of shares likely to vest. These consider the exercise price of the option, the
current share price, the risk-free interest rate, the expected volatility of the share price
over the life of the option and other relevant factors such as the dividend yield.
Defined contribution pension scheme
A scheme where we pay fixed contributions and there is no legal or constructive
obligation to pay further contributions or benefits. Contributions are recognised in the
income statement as employee service costs accrue.
Defined benefit pension scheme
A scheme that defines the benefit an employee will receive on retirement and is
dependent on one or more factors such as age, salary, and years of service. The net of
the recognisable scheme assets and obligations is reported on the balance sheet in other
assets or other liabilities. The defined benefit obligation is measured on an actuarial basis.
The charge to the income statement for pension costs (mainly the service cost and the
net interest on the net defined benefit asset or liability) is recognised in operating
expenses.
Actuarial gains and losses (i.e. gains and/or losses on re-measuring the net defined
benefit asset or liability due to changes in actuarial measurement assumptions) are
recognised in other comprehensive income in full in the period in which they arise, and
not subject to recycling to the income statement.
The difference between scheme assets and scheme liabilities, the net defined benefit
asset or liability, is recognised on the balance sheet if the criteria of the asset ceiling test
are met. This requires the net defined benefit surplus to be limited to the present value of
any economic benefits available to us in the form of refunds from the plan or reduced
contributions to it.
We will recognise a liability where a minimum funding requirement exists for any of our
defined benefit pension schemes. This reflects agreed minimum funding and the
availability of a net surplus as determined as described above. When estimating the
liability for minimum funding requirements we only include contributions that are
substantively or contractually agreed and do not include contingent and discretionary
features, including dividend-linked contributions or contributions subject to contingent
events requiring future verification.
We will recognise a net defined benefit asset when the net defined benefit surplus can
generate a benefit in the form of a refund or reduction in future contributions to the plan.
The net benefit pension asset is recognised at the present value of the benefits that will
be available to us excluding interest and the effect of the asset ceiling (if any, excluding
interest). Changes in the present value of the net benefit pension asset are recognised
immediately in other comprehensive income.
In instances where Trustees have the ability to declare augmented benefits to
participants, we do not recognise a defined benefit pension asset and write-off the
surplus immediately in other comprehensive income.3.6. Foreign currencies
Foreign exchange differences arising on the settlement of foreign currency transactions
and from the translation of monetary assets and liabilities are reported in income from
trading activities except for differences arising on cash flow hedges and hedges of net
investments in foreign operations.
Non-monetary items denominated in foreign currencies that are stated at fair value are
translated into the functional currency at the foreign exchange rates ruling at the dates
the values are determined. Translation differences are recognised in the income
statement except for differences arising on non-monetary financial assets classified as
fair value through other comprehensive income.
Income and expenses of foreign subsidiaries and branches are translated into sterling at
average exchange rates unless these do not approximate the foreign exchange rates
ruling at the dates of the transactions. Foreign exchange differences arising on the
translation of a foreign operation are recognised in other comprehensive income. The
amount accumulated in equity is reclassified from equity to the income statement on
disposal of a foreign operation.2 Non-interest income
There are three main categories of non-interest income: net fees and commissions, trading income, and other operating income.
Net fees and commissions is the difference between fees received from customers for services provided by NatWest Group, such as credit card annual fees, underwriting
fees, payment services, brokerage fees, trade finance, investment management fees, trustee and fiduciary services, and fees incurred in the provision of those services,
such as credit card interchange fees, customer incentives, loan administration, foreign currency transaction charges, and brokerage fees.
Trading income is earned from short-term financial assets and financial liabilities to either make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
Other operating income includes revenue from other operating activities which are not related to the principal activities of the company, such as: share of profit or loss
from associates; operating lease income; the profit or loss on the sale of a subsidiary; or property, plant and equipment; profit or loss on own debt; and changes in the fair
value of financial assets and liabilities designated at fair value through profit or loss.
For accounting policy information refer to Accounting policies 3.1 and 3.6
.
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Net fees and commissions
(2)
2,330
2,292
2,120
Trading income
\u00a0 \u00a0 \u00a0
Foreign exchange
270
305
364
Interest rate
(3)
595
752
(130)
Credit
(72)
17
83
Changes in fair value of own debt and derivative liabilities
\u00a0 \u00a0 \u00a0
attributable to own credit risk - debt securities in issue
(2)
42
6
Equities, commodities and other
3
17
-
\u00a0
794
1,133
323
Other operating income
\u00a0 \u00a0 \u00a0
Gain/(loss) on redemption of own debt
3
(161)
(145)
Rental income on operating lease assets and investment property
234
230
225
Changes in fair value of financial assets and liabilities designated at fair value
\u00a0 \u00a0 \u00a0
through profit or loss
(4)
(150)
17
(8)
Changes in fair value of other financial assets at fair value through profit or loss
(5)
50
(45)
5
Hedge ineffectiveness
52
(20)
25
Loss on disposal of amortised cost assets and liabilities
(5)
(15)
(15)
(Loss)/profit on disposal of fair value through other comprehensive income assets
(43)
(168)
117
Loss on sale of property, plant and equipment
(21)
(5)
(30)
Share of (losses)/profits of associated entities
(9)
(30)
216
Profit on disposal of subsidiaries and associates
-
-
48
Foreign exchange recycling gains/(losses)
484
5
(10)
Other income
(6)
(16)
81
23
\u00a0
579
(111)
451
\u00a0
3,703
3,314
2,894
\n
(1)
Comparative results have been re-presented from those previously published
to reclassify certain items as discontinued operations as described in Note 8 to
the consolidated financial statements.
(2)
Refer to Note 4 for further analysis.
(3)
Includes fair value changes on derivatives which have not been designated in
a hedge accounting relationship and gains and losses from the management
of the NatWest Group\u2019s funding requirements involving the use of derivatives
including foreign exchange. These are aimed at managing the interest rate
and foreign exchange risk that NatWest Group is exposed to.
(4)
Includes related derivatives.
(5)
Includes instruments that have failed solely payments of principal and interest
testing under IFRS 9.
(6)
2022 includes \u00a392 million profit from insurance liabilities.
3 Operating expenses
Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and
social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other
administrative expenses.
For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5.
\n\n\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Salaries
2,483
2,250
2,295
Bonus awards
353
334
267
Temporary and contract costs
199
234
240
Social security costs
352
328
300
Pension costs
313
363
354
- defined benefit schemes (Note 5)
122
205
215
- defined contribution schemes
191
158
139
Other
201
207
220
Staff costs
3,901
3,716
3,676
Premises and equipment
1,153
1,112
1,133
UK bank levy
109
101
99
Depreciation and amortisation
(1,2)
934
833
923
Other administrative expenses
(3)
1,899
1,925
1,927
Administrative expenses
4,095
3,971
4,082
\u00a0
7,996
7,687
7,758
\n
(1)
Includes depreciation of right of use assets of \u00a3104 million (2022 - \u00a3119 million; 2021 - \u00a3167 million).
(2)
2021 includes impairment of goodwill of \u00a385 million.
(3)
Includes litigation and conduct costs, net of amounts recovered. Refer to Note 21 for further details.
The average number of persons employed, rounded to the nearest hundred, during the
year, excluding temporary staff, was 61,500 (2022 - 60,000; 2021 \u2013 59,200). The
average number of temporary employees during 2023 was 2,100 (2022 \u2013 2,500; 2021 \u2013
2,500).
The number of persons employed at 31 December, excluding temporary staff, by
reportable segment, was as follows:
\n \n
Continuing operations
2023
2022 (1)
2021 (1)
Retail Banking
14,300
15,100
16,000
Private Banking
2,400
2,300
2,000
Commercial & Institutional
12,400
12,200
11,700
Central items & other
(2)
32,500
31,400
28,100
Total
61,600
61,000
57,800
UK
41,500
41,200
40,600
USA
300
300
300
India
16,900
15,700
13,500
Poland
1,500
1,500
1,400
Republic of Ireland
400
1,400
1,200
Rest of the World
1,000
900
800
Total
61,600
61,000
57,800
(1)
Comparatives have been re-presented to reflect the movement of headcount across segments due to segment
reorganisation.
(2)
Central items & other includes Ulster Bank RoI. The total number of persons employed in Ulster Bank RoI of 500 (2022 \u2013
2,200; 2021 \u2013 2,400) includes nil people employed in discontinued operations at 31 December 2023 (2022 \u2013 400; 2021 \u2013
700).
\n
\n
Share-based payments
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
Award plan
Eligible employees
Nature of award
Vesting conditions (1)
Settlement
Sharesave
UK, Channel Islands, Gibraltar, Isle
Option to buy shares under
Continuing employment or leavers in certain circumstances
2024 to 2028
\u00a0
of Man, Poland and India.
employee savings plan
\u00a0 \u00a0
Deferred performance
All
Awards of ordinary shares
Continuing employment or leavers in certain circumstances
2024 to 2031
awards
\u00a0
and conditional shares
\u00a0 \u00a0
Long-term incentives
(2,3)
Senior employees
Awards of ordinary shares
Continuing employment or leavers in certain circumstances and/or
2024 to 2030
\u00a0 \u00a0
and conditional shares
satisfaction of the pre-vesting assessment and underpins
\u00a0
\n
(1)
All awards have vesting conditions which may not be met.
(2)
Long-term incentives include buy-out awards offered to compensate certain new hires for the loss of forfeited awards from their previous employment.
All awards are granted under the Employee Share Plan.
(3)
The existing Long-term incentive scheme has been closed for new awards and members as at 31 December 2022. The scheme has been replaced by
a new Restricted share plan scheme with similar granting and vesting conditions.
Sharesave
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Average
Shares
Average
Shares
Average
Shares
\u00a0
exercise
under
exercise
under
exercise
under
\u00a0
price
option
price
option
price
option
\u00a0
\u00a3
(million)
\u00a3
(million)
\u00a3
(million)
At 1 January
1.63
99
1.61
95
1.64
96
Granted
1.42
43
1.86
25
1.80
24
Exercised
1.44
(23)
1.88
(15)
1.76
(10)
Cancelled
1.72
(5)
1.60
(6)
2.02
(15)
At 31 December
1.59
114
1.63
99
1.61
95
\n
The fair value of Sharesave options granted in 2023 was determined using a pricing
model that included: expected volatility of share price determined at the grant date
based on historical share price volatility over a period of up to five years; expected option
lives that equal the vesting period; estimated dividend yield on equity shares; and risk-
free interest rates determined from UK gilts with terms matching the expected lives of
the options.
The exercise price of options and the fair value on granting awards of fully paid shares is
the average market price over the five trading days (three trading days for Sharesave)
preceding grant date. When estimating the fair value of the award, the number of shares
granted and the prevailing market price as defined on page 148 are used.
The fair value
of the award is recognised as services are provided by employees over the vesting
period.
Options are exercisable within six months of vesting; 19.0 million options were
exercisable at 31 December 2023 (2022 \u2013 5.1 million; 2021 \u2013 6.0 million). The weighted
average share price at the date of exercise of options was \u00a32.20 (2022 - \u00a32.59; 2021 -
\u00a32.19). At 31 December 2023, exercise prices ranged from \u00a31.12 to \u00a31.89 (2022 - \u00a31.12
to \u00a32.27; 2021 - \u00a31.12 to \u00a32.27) and the remaining average contractual life was 2.25
years (2022 \u2013 2 years; 2021 \u2013 2.1 years). The fair value of options granted in 2023 was
\u00a327.3 million (2022 - \u00a322.1 million; 2021 - \u00a317 million).
Deferred performance awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
93
46
132
65
169
77
Granted
52
20
46
20
61
32
Forfeited
(2)
(1)
(4)
(2)
(10)
(5)
Vested
(67)
(30)
(81)
(37)
(88)
(39)
At 31 December
76
35
93
46
132
65
\n
The awards granted in 2023 vest in equal tranches on the anniversary of the award,
predominantly over three years.
Long-term incentives
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
49
23
44
21
50
24
Granted
11
5
16
7
6
3
Vested/exercised
(10)
(4)
(10)
(4)
(12)
(6)
Lapsed
(1)
(1)
(1)
(1)
-
-
At 31 December
49
23
49
23
44
21
\n
The market value of awards vested/exercised in 2023 was \u00a39.5 million (2022 - \u00a311.7
million; 2021 - \u00a313 million).
Bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Change
\u00a0
\u00a3m
\u00a3m
%
Non-deferred cash awards
(1)
43
40
8%
Deferred cash awards
262
270
(3%)
Deferred share awards
51
60
(15%)
Total deferred bonus awards
313
330
(5%)
Total bonus awards
(2)
356
370
(4%)
Bonus awards as a % of operating profit before tax
(3)
5%
7%
\u00a0
Proportion of bonus awards that are deferred
88%
89%
\u00a0
- deferred cash awards
84%
82%
\u00a0
- deferred share awards
16%
18%
\u00a0
\n
(1)
Non-deferred cash awards are limited to \u00a32,000 for all employees.
(2)
Excludes other performance-related compensation.
(3)
Operating profit before tax and income statement charge for bonus awards.
Reconciliation of bonus awards to income statement charge
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Bonus awarded
356
370
301
Less: deferral of charge for amounts awarded for current year
(114)
(127)
(99)
Income statement charge for amounts awarded in current year
242
243
202
Add: current year charge for amounts deferred from
prior years
115
94
80
Less: forfeiture of amounts deferred from prior years
(4)
(3)
(15)
Income statement charge for amounts deferred from prior years
111
91
65
Income statement charge for bonus awards
(2)
353
334
267
\n
Year in which income statement charge is expected to be taken for deferred bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Actual
Expected
\u00a0
2021
2022
2023
2024
2025 and beyond
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bonus awards deferred from 2021 and earlier
80
94
16
7
5
Bonus awards deferred from 2022
-
-
99
9
9
Less: forfeiture of amounts deferred from prior years
(15)
(3)
(4)
-
-
Bonus awards for 2023 deferred
-
-
-
98
16
\u00a0
65
91
111
114
30
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81233": { "value": "3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the
effective interest rate method for: all financial instruments measured at amortised cost;
debt instruments measured as fair value through other comprehensive income; and the
effective part of any related accounting hedging instruments. Finance lease income is
recognised at a constant periodic rate of return before tax on the net investment on the
lease.
Other interest relating to financial instruments measured at fair value is recognised as
part of the movement in fair value and is reported in income from trading activities or
other operating income as relevant. Fees in respect of services are recognised as the
right to consideration accrues through the performance of each distinct service
obligation to the customer. The arrangements are generally contractual and the cost of
providing the service is incurred as the service is rendered. The price is usually fixed and
always determinable.3.6. Foreign currencies
Foreign exchange differences arising on the settlement of foreign currency transactions
and from the translation of monetary assets and liabilities are reported in income from
trading activities except for differences arising on cash flow hedges and hedges of net
investments in foreign operations.
Non-monetary items denominated in foreign currencies that are stated at fair value are
translated into the functional currency at the foreign exchange rates ruling at the dates
the values are determined. Translation differences are recognised in the income
statement except for differences arising on non-monetary financial assets classified as
fair value through other comprehensive income.
Income and expenses of foreign subsidiaries and branches are translated into sterling at
average exchange rates unless these do not approximate the foreign exchange rates
ruling at the dates of the transactions. Foreign exchange differences arising on the
translation of a foreign operation are recognised in other comprehensive income. The
amount accumulated in equity is reclassified from equity to the income statement on
disposal of a foreign operation.2 Non-interest income
There are three main categories of non-interest income: net fees and commissions, trading income, and other operating income.
Net fees and commissions is the difference between fees received from customers for services provided by NatWest Group, such as credit card annual fees, underwriting
fees, payment services, brokerage fees, trade finance, investment management fees, trustee and fiduciary services, and fees incurred in the provision of those services,
such as credit card interchange fees, customer incentives, loan administration, foreign currency transaction charges, and brokerage fees.
Trading income is earned from short-term financial assets and financial liabilities to either make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
Other operating income includes revenue from other operating activities which are not related to the principal activities of the company, such as: share of profit or loss
from associates; operating lease income; the profit or loss on the sale of a subsidiary; or property, plant and equipment; profit or loss on own debt; and changes in the fair
value of financial assets and liabilities designated at fair value through profit or loss.
For accounting policy information refer to Accounting policies 3.1 and 3.6
.
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Net fees and commissions
(2)
2,330
2,292
2,120
Trading income
\u00a0 \u00a0 \u00a0
Foreign exchange
270
305
364
Interest rate
(3)
595
752
(130)
Credit
(72)
17
83
Changes in fair value of own debt and derivative liabilities
\u00a0 \u00a0 \u00a0
attributable to own credit risk - debt securities in issue
(2)
42
6
Equities, commodities and other
3
17
-
\u00a0
794
1,133
323
Other operating income
\u00a0 \u00a0 \u00a0
Gain/(loss) on redemption of own debt
3
(161)
(145)
Rental income on operating lease assets and investment property
234
230
225
Changes in fair value of financial assets and liabilities designated at fair value
\u00a0 \u00a0 \u00a0
through profit or loss
(4)
(150)
17
(8)
Changes in fair value of other financial assets at fair value through profit or loss
(5)
50
(45)
5
Hedge ineffectiveness
52
(20)
25
Loss on disposal of amortised cost assets and liabilities
(5)
(15)
(15)
(Loss)/profit on disposal of fair value through other comprehensive income assets
(43)
(168)
117
Loss on sale of property, plant and equipment
(21)
(5)
(30)
Share of (losses)/profits of associated entities
(9)
(30)
216
Profit on disposal of subsidiaries and associates
-
-
48
Foreign exchange recycling gains/(losses)
484
5
(10)
Other income
(6)
(16)
81
23
\u00a0
579
(111)
451
\u00a0
3,703
3,314
2,894
\n
(1)
Comparative results have been re-presented from those previously published
to reclassify certain items as discontinued operations as described in Note 8 to
the consolidated financial statements.
(2)
Refer to Note 4 for further analysis.
(3)
Includes fair value changes on derivatives which have not been designated in
a hedge accounting relationship and gains and losses from the management
of the NatWest Group\u2019s funding requirements involving the use of derivatives
including foreign exchange. These are aimed at managing the interest rate
and foreign exchange risk that NatWest Group is exposed to.
(4)
Includes related derivatives.
(5)
Includes instruments that have failed solely payments of principal and interest
testing under IFRS 9.
(6)
2022 includes \u00a392 million profit from insurance liabilities.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81234": { "value": "3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the
effective interest rate method for: all financial instruments measured at amortised cost;
debt instruments measured as fair value through other comprehensive income; and the
effective part of any related accounting hedging instruments. Finance lease income is
recognised at a constant periodic rate of return before tax on the net investment on the
lease.
Other interest relating to financial instruments measured at fair value is recognised as
part of the movement in fair value and is reported in income from trading activities or
other operating income as relevant. Fees in respect of services are recognised as the
right to consideration accrues through the performance of each distinct service
obligation to the customer. The arrangements are generally contractual and the cost of
providing the service is incurred as the service is rendered. The price is usually fixed and
always determinable.3.6. Foreign currencies
Foreign exchange differences arising on the settlement of foreign currency transactions
and from the translation of monetary assets and liabilities are reported in income from
trading activities except for differences arising on cash flow hedges and hedges of net
investments in foreign operations.
Non-monetary items denominated in foreign currencies that are stated at fair value are
translated into the functional currency at the foreign exchange rates ruling at the dates
the values are determined. Translation differences are recognised in the income
statement except for differences arising on non-monetary financial assets classified as
fair value through other comprehensive income.
Income and expenses of foreign subsidiaries and branches are translated into sterling at
average exchange rates unless these do not approximate the foreign exchange rates
ruling at the dates of the transactions. Foreign exchange differences arising on the
translation of a foreign operation are recognised in other comprehensive income. The
amount accumulated in equity is reclassified from equity to the income statement on
disposal of a foreign operation.2 Non-interest income
There are three main categories of non-interest income: net fees and commissions, trading income, and other operating income.
Net fees and commissions is the difference between fees received from customers for services provided by NatWest Group, such as credit card annual fees, underwriting
fees, payment services, brokerage fees, trade finance, investment management fees, trustee and fiduciary services, and fees incurred in the provision of those services,
such as credit card interchange fees, customer incentives, loan administration, foreign currency transaction charges, and brokerage fees.
Trading income is earned from short-term financial assets and financial liabilities to either make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
Other operating income includes revenue from other operating activities which are not related to the principal activities of the company, such as: share of profit or loss
from associates; operating lease income; the profit or loss on the sale of a subsidiary; or property, plant and equipment; profit or loss on own debt; and changes in the fair
value of financial assets and liabilities designated at fair value through profit or loss.
For accounting policy information refer to Accounting policies 3.1 and 3.6
.
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Net fees and commissions
(2)
2,330
2,292
2,120
Trading income
\u00a0 \u00a0 \u00a0
Foreign exchange
270
305
364
Interest rate
(3)
595
752
(130)
Credit
(72)
17
83
Changes in fair value of own debt and derivative liabilities
\u00a0 \u00a0 \u00a0
attributable to own credit risk - debt securities in issue
(2)
42
6
Equities, commodities and other
3
17
-
\u00a0
794
1,133
323
Other operating income
\u00a0 \u00a0 \u00a0
Gain/(loss) on redemption of own debt
3
(161)
(145)
Rental income on operating lease assets and investment property
234
230
225
Changes in fair value of financial assets and liabilities designated at fair value
\u00a0 \u00a0 \u00a0
through profit or loss
(4)
(150)
17
(8)
Changes in fair value of other financial assets at fair value through profit or loss
(5)
50
(45)
5
Hedge ineffectiveness
52
(20)
25
Loss on disposal of amortised cost assets and liabilities
(5)
(15)
(15)
(Loss)/profit on disposal of fair value through other comprehensive income assets
(43)
(168)
117
Loss on sale of property, plant and equipment
(21)
(5)
(30)
Share of (losses)/profits of associated entities
(9)
(30)
216
Profit on disposal of subsidiaries and associates
-
-
48
Foreign exchange recycling gains/(losses)
484
5
(10)
Other income
(6)
(16)
81
23
\u00a0
579
(111)
451
\u00a0
3,703
3,314
2,894
\n
(1)
Comparative results have been re-presented from those previously published
to reclassify certain items as discontinued operations as described in Note 8 to
the consolidated financial statements.
(2)
Refer to Note 4 for further analysis.
(3)
Includes fair value changes on derivatives which have not been designated in
a hedge accounting relationship and gains and losses from the management
of the NatWest Group\u2019s funding requirements involving the use of derivatives
including foreign exchange. These are aimed at managing the interest rate
and foreign exchange risk that NatWest Group is exposed to.
(4)
Includes related derivatives.
(5)
Includes instruments that have failed solely payments of principal and interest
testing under IFRS 9.
(6)
2022 includes \u00a392 million profit from insurance liabilities.", "dimensions": { "concept": "ifrs-full:DisclosureOfTradingIncomeExpenseExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81235": { "value": "3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the
effective interest rate method for: all financial instruments measured at amortised cost;
debt instruments measured as fair value through other comprehensive income; and the
effective part of any related accounting hedging instruments. Finance lease income is
recognised at a constant periodic rate of return before tax on the net investment on the
lease.
Other interest relating to financial instruments measured at fair value is recognised as
part of the movement in fair value and is reported in income from trading activities or
other operating income as relevant. Fees in respect of services are recognised as the
right to consideration accrues through the performance of each distinct service
obligation to the customer. The arrangements are generally contractual and the cost of
providing the service is incurred as the service is rendered. The price is usually fixed and
always determinable.3.6. Foreign currencies
Foreign exchange differences arising on the settlement of foreign currency transactions
and from the translation of monetary assets and liabilities are reported in income from
trading activities except for differences arising on cash flow hedges and hedges of net
investments in foreign operations.
Non-monetary items denominated in foreign currencies that are stated at fair value are
translated into the functional currency at the foreign exchange rates ruling at the dates
the values are determined. Translation differences are recognised in the income
statement except for differences arising on non-monetary financial assets classified as
fair value through other comprehensive income.
Income and expenses of foreign subsidiaries and branches are translated into sterling at
average exchange rates unless these do not approximate the foreign exchange rates
ruling at the dates of the transactions. Foreign exchange differences arising on the
translation of a foreign operation are recognised in other comprehensive income. The
amount accumulated in equity is reclassified from equity to the income statement on
disposal of a foreign operation.2 Non-interest income
There are three main categories of non-interest income: net fees and commissions, trading income, and other operating income.
Net fees and commissions is the difference between fees received from customers for services provided by NatWest Group, such as credit card annual fees, underwriting
fees, payment services, brokerage fees, trade finance, investment management fees, trustee and fiduciary services, and fees incurred in the provision of those services,
such as credit card interchange fees, customer incentives, loan administration, foreign currency transaction charges, and brokerage fees.
Trading income is earned from short-term financial assets and financial liabilities to either make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
Other operating income includes revenue from other operating activities which are not related to the principal activities of the company, such as: share of profit or loss
from associates; operating lease income; the profit or loss on the sale of a subsidiary; or property, plant and equipment; profit or loss on own debt; and changes in the fair
value of financial assets and liabilities designated at fair value through profit or loss.
For accounting policy information refer to Accounting policies 3.1 and 3.6
.
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Net fees and commissions
(2)
2,330
2,292
2,120
Trading income
\u00a0 \u00a0 \u00a0
Foreign exchange
270
305
364
Interest rate
(3)
595
752
(130)
Credit
(72)
17
83
Changes in fair value of own debt and derivative liabilities
\u00a0 \u00a0 \u00a0
attributable to own credit risk - debt securities in issue
(2)
42
6
Equities, commodities and other
3
17
-
\u00a0
794
1,133
323
Other operating income
\u00a0 \u00a0 \u00a0
Gain/(loss) on redemption of own debt
3
(161)
(145)
Rental income on operating lease assets and investment property
234
230
225
Changes in fair value of financial assets and liabilities designated at fair value
\u00a0 \u00a0 \u00a0
through profit or loss
(4)
(150)
17
(8)
Changes in fair value of other financial assets at fair value through profit or loss
(5)
50
(45)
5
Hedge ineffectiveness
52
(20)
25
Loss on disposal of amortised cost assets and liabilities
(5)
(15)
(15)
(Loss)/profit on disposal of fair value through other comprehensive income assets
(43)
(168)
117
Loss on sale of property, plant and equipment
(21)
(5)
(30)
Share of (losses)/profits of associated entities
(9)
(30)
216
Profit on disposal of subsidiaries and associates
-
-
48
Foreign exchange recycling gains/(losses)
484
5
(10)
Other income
(6)
(16)
81
23
\u00a0
579
(111)
451
\u00a0
3,703
3,314
2,894
\n
(1)
Comparative results have been re-presented from those previously published
to reclassify certain items as discontinued operations as described in Note 8 to
the consolidated financial statements.
(2)
Refer to Note 4 for further analysis.
(3)
Includes fair value changes on derivatives which have not been designated in
a hedge accounting relationship and gains and losses from the management
of the NatWest Group\u2019s funding requirements involving the use of derivatives
including foreign exchange. These are aimed at managing the interest rate
and foreign exchange risk that NatWest Group is exposed to.
(4)
Includes related derivatives.
(5)
Includes instruments that have failed solely payments of principal and interest
testing under IFRS 9.
(6)
2022 includes \u00a392 million profit from insurance liabilities.", "dimensions": { "concept": "ifrs-full:DisclosureOfFeeAndCommissionIncomeExpenseExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81236": { "value": "3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the
effective interest rate method for: all financial instruments measured at amortised cost;
debt instruments measured as fair value through other comprehensive income; and the
effective part of any related accounting hedging instruments. Finance lease income is
recognised at a constant periodic rate of return before tax on the net investment on the
lease.
Other interest relating to financial instruments measured at fair value is recognised as
part of the movement in fair value and is reported in income from trading activities or
other operating income as relevant. Fees in respect of services are recognised as the
right to consideration accrues through the performance of each distinct service
obligation to the customer. The arrangements are generally contractual and the cost of
providing the service is incurred as the service is rendered. The price is usually fixed and
always determinable.1 Net interest income
Net interest income is the difference between the interest NatWest Group earns from its interest-bearing assets, such as loans, balances with central banks and other
financial assets, and the interest paid on its interest-bearing liabilities, such as deposits and subordinated liabilities.
Interest receivable on financial instruments classified as amortised cost, debt instruments classified as FVOCI and the interest element of the effective portion of any designated hedging
relationships are measured using the effective interest rate, which allocates the interest receivable or interest payable over the expected life of the financial instrument at the rate that
exactly discounts all estimated future cash flows to equal the financial instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable or
receivable that are an integral part of the financial instrument\u2019s yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs. All contractual terms
of a financial instrument are considered when estimating future cash flows. Negative interest on financial
assets is presented in interest payable and negative interest on
financial
liabilities is presented in interest receivable.
Included in interest receivable is finance lease income of \u00a3484 million (2022 - \u00a3314 million; 2021 - \u00a3298 million) which is recognised at a
constant periodic rate of return before tax on the net investment.
For accounting policy information refer to Accounting policy 3.1.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Balances at central banks and loans to banks - amortised cost
3,737
1,987
445
Loans to customers - amortised cost
15,553
10,085
8,536
Other financial assets
1,736
565
253
Interest receivable
21,026
12,637
9,234
Balances with banks
1,039
379
204
Customer deposits
5,276
785
556
Other financial liabilities
2,977
1,196
670
Subordinated liabilities
464
370
267
Internal funding of trading businesses
221
65
2
Interest payable
9,977
2,795
1,699
Net interest income
11,049
9,842
7,535
\n
(1)
Comparative results have been re-presented from those previously published to reclassify certain items as discontinued operations as described in Note 8 to the consolidated financial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81237": { "value": "3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the
effective interest rate method for: all financial instruments measured at amortised cost;
debt instruments measured as fair value through other comprehensive income; and the
effective part of any related accounting hedging instruments. Finance lease income is
recognised at a constant periodic rate of return before tax on the net investment on the
lease.
Other interest relating to financial instruments measured at fair value is recognised as
part of the movement in fair value and is reported in income from trading activities or
other operating income as relevant. Fees in respect of services are recognised as the
right to consideration accrues through the performance of each distinct service
obligation to the customer. The arrangements are generally contractual and the cost of
providing the service is incurred as the service is rendered. The price is usually fixed and
always determinable.1 Net interest income
Net interest income is the difference between the interest NatWest Group earns from its interest-bearing assets, such as loans, balances with central banks and other
financial assets, and the interest paid on its interest-bearing liabilities, such as deposits and subordinated liabilities.
Interest receivable on financial instruments classified as amortised cost, debt instruments classified as FVOCI and the interest element of the effective portion of any designated hedging
relationships are measured using the effective interest rate, which allocates the interest receivable or interest payable over the expected life of the financial instrument at the rate that
exactly discounts all estimated future cash flows to equal the financial instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable or
receivable that are an integral part of the financial instrument\u2019s yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs. All contractual terms
of a financial instrument are considered when estimating future cash flows. Negative interest on financial
assets is presented in interest payable and negative interest on
financial
liabilities is presented in interest receivable.
Included in interest receivable is finance lease income of \u00a3484 million (2022 - \u00a3314 million; 2021 - \u00a3298 million) which is recognised at a
constant periodic rate of return before tax on the net investment.
For accounting policy information refer to Accounting policy 3.1.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Balances at central banks and loans to banks - amortised cost
3,737
1,987
445
Loans to customers - amortised cost
15,553
10,085
8,536
Other financial assets
1,736
565
253
Interest receivable
21,026
12,637
9,234
Balances with banks
1,039
379
204
Customer deposits
5,276
785
556
Other financial liabilities
2,977
1,196
670
Subordinated liabilities
464
370
267
Internal funding of trading businesses
221
65
2
Interest payable
9,977
2,795
1,699
Net interest income
11,049
9,842
7,535
\n
(1)
Comparative results have been re-presented from those previously published to reclassify certain items as discontinued operations as described in Note 8 to the consolidated financial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81238": { "value": "3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the
effective interest rate method for: all financial instruments measured at amortised cost;
debt instruments measured as fair value through other comprehensive income; and the
effective part of any related accounting hedging instruments. Finance lease income is
recognised at a constant periodic rate of return before tax on the net investment on the
lease.
Other interest relating to financial instruments measured at fair value is recognised as
part of the movement in fair value and is reported in income from trading activities or
other operating income as relevant. Fees in respect of services are recognised as the
right to consideration accrues through the performance of each distinct service
obligation to the customer. The arrangements are generally contractual and the cost of
providing the service is incurred as the service is rendered. The price is usually fixed and
always determinable.1 Net interest income
Net interest income is the difference between the interest NatWest Group earns from its interest-bearing assets, such as loans, balances with central banks and other
financial assets, and the interest paid on its interest-bearing liabilities, such as deposits and subordinated liabilities.
Interest receivable on financial instruments classified as amortised cost, debt instruments classified as FVOCI and the interest element of the effective portion of any designated hedging
relationships are measured using the effective interest rate, which allocates the interest receivable or interest payable over the expected life of the financial instrument at the rate that
exactly discounts all estimated future cash flows to equal the financial instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable or
receivable that are an integral part of the financial instrument\u2019s yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs. All contractual terms
of a financial instrument are considered when estimating future cash flows. Negative interest on financial
assets is presented in interest payable and negative interest on
financial
liabilities is presented in interest receivable.
Included in interest receivable is finance lease income of \u00a3484 million (2022 - \u00a3314 million; 2021 - \u00a3298 million) which is recognised at a
constant periodic rate of return before tax on the net investment.
For accounting policy information refer to Accounting policy 3.1.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Balances at central banks and loans to banks - amortised cost
3,737
1,987
445
Loans to customers - amortised cost
15,553
10,085
8,536
Other financial assets
1,736
565
253
Interest receivable
21,026
12,637
9,234
Balances with banks
1,039
379
204
Customer deposits
5,276
785
556
Other financial liabilities
2,977
1,196
670
Subordinated liabilities
464
370
267
Internal funding of trading businesses
221
65
2
Interest payable
9,977
2,795
1,699
Net interest income
11,049
9,842
7,535
\n
(1)
Comparative results have been re-presented from those previously published to reclassify certain items as discontinued operations as described in Note 8 to the consolidated financial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81239": { "value": "3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the
effective interest rate method for: all financial instruments measured at amortised cost;
debt instruments measured as fair value through other comprehensive income; and the
effective part of any related accounting hedging instruments. Finance lease income is
recognised at a constant periodic rate of return before tax on the net investment on the
lease.
Other interest relating to financial instruments measured at fair value is recognised as
part of the movement in fair value and is reported in income from trading activities or
other operating income as relevant. Fees in respect of services are recognised as the
right to consideration accrues through the performance of each distinct service
obligation to the customer. The arrangements are generally contractual and the cost of
providing the service is incurred as the service is rendered. The price is usually fixed and
always determinable.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81253": { "value": "Finance lease income is
recognised at a constant periodic rate of return before tax on the net investment on the
lease.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81274": { "value": "3.2. Discontinued operations, Held for sale and Disposal group
The results of discontinued operations are excluded from the results of continuing
operations and are presented as a single amount as profit/(loss) from discontinued
operations, net of tax in the income statement. Comparatives are represented for the
income statement, cash flow statement, statement of changes in equity and related
notes.
An asset or disposal group (assets and liabilities) is classified as held for sale if we will
recover its carrying amount principally through a sale transaction rather than through
continuing use. These are measured at the lower of its carrying amount or fair value less
cost to sell unless the existing measurement provisions of IFRS apply. These are
presented as single amounts; comparatives are not represented.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81275": { "value": "3.2. Discontinued operations, Held for sale and Disposal group
The results of discontinued operations are excluded from the results of continuing
operations and are presented as a single amount as profit/(loss) from discontinued
operations, net of tax in the income statement. Comparatives are represented for the
income statement, cash flow statement, statement of changes in equity and related
notes.
An asset or disposal group (assets and liabilities) is classified as held for sale if we will
recover its carrying amount principally through a sale transaction rather than through
continuing use. These are measured at the lower of its carrying amount or fair value less
cost to sell unless the existing measurement provisions of IFRS apply. These are
presented as single amounts; comparatives are not represented.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81276": { "value": "3.2. Discontinued operations, Held for sale and Disposal group
The results of discontinued operations are excluded from the results of continuing
operations and are presented as a single amount as profit/(loss) from discontinued
operations, net of tax in the income statement. Comparatives are represented for the
income statement, cash flow statement, statement of changes in equity and related
notes.
An asset or disposal group (assets and liabilities) is classified as held for sale if we will
recover its carrying amount principally through a sale transaction rather than through
continuing use. These are measured at the lower of its carrying amount or fair value less
cost to sell unless the existing measurement provisions of IFRS apply. These are
presented as single amounts; comparatives are not represented.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleAndDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81294": { "value": "3.3. Staff costs
Employee costs, such as salaries, paid absences, and other benefits are recognised over
the period in which the employees provide the related services to us. Employees may
receive variable compensation in cash, in deferred cash or debt instruments of NatWest
Group or in ordinary shares of NatWest Group plc subject to deferral, clawback and
forfeiture criteria. We operate a number of share-based compensation schemes under
which we grant awards of NatWest Group plc shares and share options to our
employees. Such awards are subject to vesting conditions.
Variable compensation that is settled in cash or debt instruments is charged to the
income statement on a straight-line basis over the period during which services are
provided, taking account of forfeiture and clawback criteria. The value of employee
services received in exchange for NatWest Group plc shares and share options is
recognised as an expense over the vesting period, subject to deferral, clawback,
cancelation and forfeiture criteria with a corresponding increase in equity. The fair value
of shares granted is the market price adjusted for the expected effect of dividends as
employees are not entitled to dividends until shares are vested.
The fair value of options granted is determined using option pricing models to estimate
the numbers of shares likely to vest. These consider the exercise price of the option, the
current share price, the risk-free interest rate, the expected volatility of the share price
over the life of the option and other relevant factors such as the dividend yield.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81295": { "value": "3.3. Staff costs
Employee costs, such as salaries, paid absences, and other benefits are recognised over
the period in which the employees provide the related services to us. Employees may
receive variable compensation in cash, in deferred cash or debt instruments of NatWest
Group or in ordinary shares of NatWest Group plc subject to deferral, clawback and
forfeiture criteria. We operate a number of share-based compensation schemes under
which we grant awards of NatWest Group plc shares and share options to our
employees. Such awards are subject to vesting conditions.
Variable compensation that is settled in cash or debt instruments is charged to the
income statement on a straight-line basis over the period during which services are
provided, taking account of forfeiture and clawback criteria. The value of employee
services received in exchange for NatWest Group plc shares and share options is
recognised as an expense over the vesting period, subject to deferral, clawback,
cancelation and forfeiture criteria with a corresponding increase in equity. The fair value
of shares granted is the market price adjusted for the expected effect of dividends as
employees are not entitled to dividends until shares are vested.
The fair value of options granted is determined using option pricing models to estimate
the numbers of shares likely to vest. These consider the exercise price of the option, the
current share price, the risk-free interest rate, the expected volatility of the share price
over the life of the option and other relevant factors such as the dividend yield.
Defined contribution pension scheme
A scheme where we pay fixed contributions and there is no legal or constructive
obligation to pay further contributions or benefits. Contributions are recognised in the
income statement as employee service costs accrue.
Defined benefit pension scheme
A scheme that defines the benefit an employee will receive on retirement and is
dependent on one or more factors such as age, salary, and years of service. The net of
the recognisable scheme assets and obligations is reported on the balance sheet in other
assets or other liabilities. The defined benefit obligation is measured on an actuarial basis.
The charge to the income statement for pension costs (mainly the service cost and the
net interest on the net defined benefit asset or liability) is recognised in operating
expenses.
Actuarial gains and losses (i.e. gains and/or losses on re-measuring the net defined
benefit asset or liability due to changes in actuarial measurement assumptions) are
recognised in other comprehensive income in full in the period in which they arise, and
not subject to recycling to the income statement.
The difference between scheme assets and scheme liabilities, the net defined benefit
asset or liability, is recognised on the balance sheet if the criteria of the asset ceiling test
are met. This requires the net defined benefit surplus to be limited to the present value of
any economic benefits available to us in the form of refunds from the plan or reduced
contributions to it.
We will recognise a liability where a minimum funding requirement exists for any of our
defined benefit pension schemes. This reflects agreed minimum funding and the
availability of a net surplus as determined as described above. When estimating the
liability for minimum funding requirements we only include contributions that are
substantively or contractually agreed and do not include contingent and discretionary
features, including dividend-linked contributions or contributions subject to contingent
events requiring future verification.
We will recognise a net defined benefit asset when the net defined benefit surplus can
generate a benefit in the form of a refund or reduction in future contributions to the plan.
The net benefit pension asset is recognised at the present value of the benefits that will
be available to us excluding interest and the effect of the asset ceiling (if any, excluding
interest). Changes in the present value of the net benefit pension asset are recognised
immediately in other comprehensive income.
In instances where Trustees have the ability to declare augmented benefits to
participants, we do not recognise a defined benefit pension asset and write-off the
surplus immediately in other comprehensive income.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81296": { "value": "3.3. Staff costs
Employee costs, such as salaries, paid absences, and other benefits are recognised over
the period in which the employees provide the related services to us. Employees may
receive variable compensation in cash, in deferred cash or debt instruments of NatWest
Group or in ordinary shares of NatWest Group plc subject to deferral, clawback and
forfeiture criteria. We operate a number of share-based compensation schemes under
which we grant awards of NatWest Group plc shares and share options to our
employees. Such awards are subject to vesting conditions.
Variable compensation that is settled in cash or debt instruments is charged to the
income statement on a straight-line basis over the period during which services are
provided, taking account of forfeiture and clawback criteria. The value of employee
services received in exchange for NatWest Group plc shares and share options is
recognised as an expense over the vesting period, subject to deferral, clawback,
cancelation and forfeiture criteria with a corresponding increase in equity. The fair value
of shares granted is the market price adjusted for the expected effect of dividends as
employees are not entitled to dividends until shares are vested.
The fair value of options granted is determined using option pricing models to estimate
the numbers of shares likely to vest. These consider the exercise price of the option, the
current share price, the risk-free interest rate, the expected volatility of the share price
over the life of the option and other relevant factors such as the dividend yield.
Defined contribution pension scheme
A scheme where we pay fixed contributions and there is no legal or constructive
obligation to pay further contributions or benefits. Contributions are recognised in the
income statement as employee service costs accrue.
Defined benefit pension scheme
A scheme that defines the benefit an employee will receive on retirement and is
dependent on one or more factors such as age, salary, and years of service. The net of
the recognisable scheme assets and obligations is reported on the balance sheet in other
assets or other liabilities. The defined benefit obligation is measured on an actuarial basis.
The charge to the income statement for pension costs (mainly the service cost and the
net interest on the net defined benefit asset or liability) is recognised in operating
expenses.
Actuarial gains and losses (i.e. gains and/or losses on re-measuring the net defined
benefit asset or liability due to changes in actuarial measurement assumptions) are
recognised in other comprehensive income in full in the period in which they arise, and
not subject to recycling to the income statement.
The difference between scheme assets and scheme liabilities, the net defined benefit
asset or liability, is recognised on the balance sheet if the criteria of the asset ceiling test
are met. This requires the net defined benefit surplus to be limited to the present value of
any economic benefits available to us in the form of refunds from the plan or reduced
contributions to it.
We will recognise a liability where a minimum funding requirement exists for any of our
defined benefit pension schemes. This reflects agreed minimum funding and the
availability of a net surplus as determined as described above. When estimating the
liability for minimum funding requirements we only include contributions that are
substantively or contractually agreed and do not include contingent and discretionary
features, including dividend-linked contributions or contributions subject to contingent
events requiring future verification.
We will recognise a net defined benefit asset when the net defined benefit surplus can
generate a benefit in the form of a refund or reduction in future contributions to the plan.
The net benefit pension asset is recognised at the present value of the benefits that will
be available to us excluding interest and the effect of the asset ceiling (if any, excluding
interest). Changes in the present value of the net benefit pension asset are recognised
immediately in other comprehensive income.
In instances where Trustees have the ability to declare augmented benefits to
participants, we do not recognise a defined benefit pension asset and write-off the
surplus immediately in other comprehensive income.3 Operating expenses
Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and
social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other
administrative expenses.
For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5.
\n\n\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Salaries
2,483
2,250
2,295
Bonus awards
353
334
267
Temporary and contract costs
199
234
240
Social security costs
352
328
300
Pension costs
313
363
354
- defined benefit schemes (Note 5)
122
205
215
- defined contribution schemes
191
158
139
Other
201
207
220
Staff costs
3,901
3,716
3,676
Premises and equipment
1,153
1,112
1,133
UK bank levy
109
101
99
Depreciation and amortisation
(1,2)
934
833
923
Other administrative expenses
(3)
1,899
1,925
1,927
Administrative expenses
4,095
3,971
4,082
\u00a0
7,996
7,687
7,758
\n
(1)
Includes depreciation of right of use assets of \u00a3104 million (2022 - \u00a3119 million; 2021 - \u00a3167 million).
(2)
2021 includes impairment of goodwill of \u00a385 million.
(3)
Includes litigation and conduct costs, net of amounts recovered. Refer to Note 21 for further details.
The average number of persons employed, rounded to the nearest hundred, during the
year, excluding temporary staff, was 61,500 (2022 - 60,000; 2021 \u2013 59,200). The
average number of temporary employees during 2023 was 2,100 (2022 \u2013 2,500; 2021 \u2013
2,500).
The number of persons employed at 31 December, excluding temporary staff, by
reportable segment, was as follows:
\n \n
Continuing operations
2023
2022 (1)
2021 (1)
Retail Banking
14,300
15,100
16,000
Private Banking
2,400
2,300
2,000
Commercial & Institutional
12,400
12,200
11,700
Central items & other
(2)
32,500
31,400
28,100
Total
61,600
61,000
57,800
UK
41,500
41,200
40,600
USA
300
300
300
India
16,900
15,700
13,500
Poland
1,500
1,500
1,400
Republic of Ireland
400
1,400
1,200
Rest of the World
1,000
900
800
Total
61,600
61,000
57,800
(1)
Comparatives have been re-presented to reflect the movement of headcount across segments due to segment
reorganisation.
(2)
Central items & other includes Ulster Bank RoI. The total number of persons employed in Ulster Bank RoI of 500 (2022 \u2013
2,200; 2021 \u2013 2,400) includes nil people employed in discontinued operations at 31 December 2023 (2022 \u2013 400; 2021 \u2013
700).
\n
\n
Share-based payments
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
Award plan
Eligible employees
Nature of award
Vesting conditions (1)
Settlement
Sharesave
UK, Channel Islands, Gibraltar, Isle
Option to buy shares under
Continuing employment or leavers in certain circumstances
2024 to 2028
\u00a0
of Man, Poland and India.
employee savings plan
\u00a0 \u00a0
Deferred performance
All
Awards of ordinary shares
Continuing employment or leavers in certain circumstances
2024 to 2031
awards
\u00a0
and conditional shares
\u00a0 \u00a0
Long-term incentives
(2,3)
Senior employees
Awards of ordinary shares
Continuing employment or leavers in certain circumstances and/or
2024 to 2030
\u00a0 \u00a0
and conditional shares
satisfaction of the pre-vesting assessment and underpins
\u00a0
\n
(1)
All awards have vesting conditions which may not be met.
(2)
Long-term incentives include buy-out awards offered to compensate certain new hires for the loss of forfeited awards from their previous employment.
All awards are granted under the Employee Share Plan.
(3)
The existing Long-term incentive scheme has been closed for new awards and members as at 31 December 2022. The scheme has been replaced by
a new Restricted share plan scheme with similar granting and vesting conditions.
Sharesave
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Average
Shares
Average
Shares
Average
Shares
\u00a0
exercise
under
exercise
under
exercise
under
\u00a0
price
option
price
option
price
option
\u00a0
\u00a3
(million)
\u00a3
(million)
\u00a3
(million)
At 1 January
1.63
99
1.61
95
1.64
96
Granted
1.42
43
1.86
25
1.80
24
Exercised
1.44
(23)
1.88
(15)
1.76
(10)
Cancelled
1.72
(5)
1.60
(6)
2.02
(15)
At 31 December
1.59
114
1.63
99
1.61
95
\n
The fair value of Sharesave options granted in 2023 was determined using a pricing
model that included: expected volatility of share price determined at the grant date
based on historical share price volatility over a period of up to five years; expected option
lives that equal the vesting period; estimated dividend yield on equity shares; and risk-
free interest rates determined from UK gilts with terms matching the expected lives of
the options.
The exercise price of options and the fair value on granting awards of fully paid shares is
the average market price over the five trading days (three trading days for Sharesave)
preceding grant date. When estimating the fair value of the award, the number of shares
granted and the prevailing market price as defined on page 148 are used.
The fair value
of the award is recognised as services are provided by employees over the vesting
period.
Options are exercisable within six months of vesting; 19.0 million options were
exercisable at 31 December 2023 (2022 \u2013 5.1 million; 2021 \u2013 6.0 million). The weighted
average share price at the date of exercise of options was \u00a32.20 (2022 - \u00a32.59; 2021 -
\u00a32.19). At 31 December 2023, exercise prices ranged from \u00a31.12 to \u00a31.89 (2022 - \u00a31.12
to \u00a32.27; 2021 - \u00a31.12 to \u00a32.27) and the remaining average contractual life was 2.25
years (2022 \u2013 2 years; 2021 \u2013 2.1 years). The fair value of options granted in 2023 was
\u00a327.3 million (2022 - \u00a322.1 million; 2021 - \u00a317 million).
Deferred performance awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
93
46
132
65
169
77
Granted
52
20
46
20
61
32
Forfeited
(2)
(1)
(4)
(2)
(10)
(5)
Vested
(67)
(30)
(81)
(37)
(88)
(39)
At 31 December
76
35
93
46
132
65
\n
The awards granted in 2023 vest in equal tranches on the anniversary of the award,
predominantly over three years.
Long-term incentives
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
49
23
44
21
50
24
Granted
11
5
16
7
6
3
Vested/exercised
(10)
(4)
(10)
(4)
(12)
(6)
Lapsed
(1)
(1)
(1)
(1)
-
-
At 31 December
49
23
49
23
44
21
\n
The market value of awards vested/exercised in 2023 was \u00a39.5 million (2022 - \u00a311.7
million; 2021 - \u00a313 million).
Bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Change
\u00a0
\u00a3m
\u00a3m
%
Non-deferred cash awards
(1)
43
40
8%
Deferred cash awards
262
270
(3%)
Deferred share awards
51
60
(15%)
Total deferred bonus awards
313
330
(5%)
Total bonus awards
(2)
356
370
(4%)
Bonus awards as a % of operating profit before tax
(3)
5%
7%
\u00a0
Proportion of bonus awards that are deferred
88%
89%
\u00a0
- deferred cash awards
84%
82%
\u00a0
- deferred share awards
16%
18%
\u00a0
\n
(1)
Non-deferred cash awards are limited to \u00a32,000 for all employees.
(2)
Excludes other performance-related compensation.
(3)
Operating profit before tax and income statement charge for bonus awards.
Reconciliation of bonus awards to income statement charge
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Bonus awarded
356
370
301
Less: deferral of charge for amounts awarded for current year
(114)
(127)
(99)
Income statement charge for amounts awarded in current year
242
243
202
Add: current year charge for amounts deferred from
prior years
115
94
80
Less: forfeiture of amounts deferred from prior years
(4)
(3)
(15)
Income statement charge for amounts deferred from prior years
111
91
65
Income statement charge for bonus awards
(2)
353
334
267
\n
Year in which income statement charge is expected to be taken for deferred bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Actual
Expected
\u00a0
2021
2022
2023
2024
2025 and beyond
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bonus awards deferred from 2021 and earlier
80
94
16
7
5
Bonus awards deferred from 2022
-
-
99
9
9
Less: forfeiture of amounts deferred from prior years
(15)
(3)
(4)
-
-
Bonus awards for 2023 deferred
-
-
-
98
16
\u00a0
65
91
111
114
30
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81297": { "value": "3.3. Staff costs
Employee costs, such as salaries, paid absences, and other benefits are recognised over
the period in which the employees provide the related services to us. Employees may
receive variable compensation in cash, in deferred cash or debt instruments of NatWest
Group or in ordinary shares of NatWest Group plc subject to deferral, clawback and
forfeiture criteria. We operate a number of share-based compensation schemes under
which we grant awards of NatWest Group plc shares and share options to our
employees. Such awards are subject to vesting conditions.
Variable compensation that is settled in cash or debt instruments is charged to the
income statement on a straight-line basis over the period during which services are
provided, taking account of forfeiture and clawback criteria. The value of employee
services received in exchange for NatWest Group plc shares and share options is
recognised as an expense over the vesting period, subject to deferral, clawback,
cancelation and forfeiture criteria with a corresponding increase in equity. The fair value
of shares granted is the market price adjusted for the expected effect of dividends as
employees are not entitled to dividends until shares are vested.
The fair value of options granted is determined using option pricing models to estimate
the numbers of shares likely to vest. These consider the exercise price of the option, the
current share price, the risk-free interest rate, the expected volatility of the share price
over the life of the option and other relevant factors such as the dividend yield.
Defined contribution pension scheme
A scheme where we pay fixed contributions and there is no legal or constructive
obligation to pay further contributions or benefits. Contributions are recognised in the
income statement as employee service costs accrue.
Defined benefit pension scheme
A scheme that defines the benefit an employee will receive on retirement and is
dependent on one or more factors such as age, salary, and years of service. The net of
the recognisable scheme assets and obligations is reported on the balance sheet in other
assets or other liabilities. The defined benefit obligation is measured on an actuarial basis.
The charge to the income statement for pension costs (mainly the service cost and the
net interest on the net defined benefit asset or liability) is recognised in operating
expenses.
Actuarial gains and losses (i.e. gains and/or losses on re-measuring the net defined
benefit asset or liability due to changes in actuarial measurement assumptions) are
recognised in other comprehensive income in full in the period in which they arise, and
not subject to recycling to the income statement.
The difference between scheme assets and scheme liabilities, the net defined benefit
asset or liability, is recognised on the balance sheet if the criteria of the asset ceiling test
are met. This requires the net defined benefit surplus to be limited to the present value of
any economic benefits available to us in the form of refunds from the plan or reduced
contributions to it.
We will recognise a liability where a minimum funding requirement exists for any of our
defined benefit pension schemes. This reflects agreed minimum funding and the
availability of a net surplus as determined as described above. When estimating the
liability for minimum funding requirements we only include contributions that are
substantively or contractually agreed and do not include contingent and discretionary
features, including dividend-linked contributions or contributions subject to contingent
events requiring future verification.
We will recognise a net defined benefit asset when the net defined benefit surplus can
generate a benefit in the form of a refund or reduction in future contributions to the plan.
The net benefit pension asset is recognised at the present value of the benefits that will
be available to us excluding interest and the effect of the asset ceiling (if any, excluding
interest). Changes in the present value of the net benefit pension asset are recognised
immediately in other comprehensive income.
In instances where Trustees have the ability to declare augmented benefits to
participants, we do not recognise a defined benefit pension asset and write-off the
surplus immediately in other comprehensive income.3 Operating expenses
Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and
social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other
administrative expenses.
For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5.
\n\n\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Salaries
2,483
2,250
2,295
Bonus awards
353
334
267
Temporary and contract costs
199
234
240
Social security costs
352
328
300
Pension costs
313
363
354
- defined benefit schemes (Note 5)
122
205
215
- defined contribution schemes
191
158
139
Other
201
207
220
Staff costs
3,901
3,716
3,676
Premises and equipment
1,153
1,112
1,133
UK bank levy
109
101
99
Depreciation and amortisation
(1,2)
934
833
923
Other administrative expenses
(3)
1,899
1,925
1,927
Administrative expenses
4,095
3,971
4,082
\u00a0
7,996
7,687
7,758
\n
(1)
Includes depreciation of right of use assets of \u00a3104 million (2022 - \u00a3119 million; 2021 - \u00a3167 million).
(2)
2021 includes impairment of goodwill of \u00a385 million.
(3)
Includes litigation and conduct costs, net of amounts recovered. Refer to Note 21 for further details.
The average number of persons employed, rounded to the nearest hundred, during the
year, excluding temporary staff, was 61,500 (2022 - 60,000; 2021 \u2013 59,200). The
average number of temporary employees during 2023 was 2,100 (2022 \u2013 2,500; 2021 \u2013
2,500).
The number of persons employed at 31 December, excluding temporary staff, by
reportable segment, was as follows:
\n \n
Continuing operations
2023
2022 (1)
2021 (1)
Retail Banking
14,300
15,100
16,000
Private Banking
2,400
2,300
2,000
Commercial & Institutional
12,400
12,200
11,700
Central items & other
(2)
32,500
31,400
28,100
Total
61,600
61,000
57,800
UK
41,500
41,200
40,600
USA
300
300
300
India
16,900
15,700
13,500
Poland
1,500
1,500
1,400
Republic of Ireland
400
1,400
1,200
Rest of the World
1,000
900
800
Total
61,600
61,000
57,800
(1)
Comparatives have been re-presented to reflect the movement of headcount across segments due to segment
reorganisation.
(2)
Central items & other includes Ulster Bank RoI. The total number of persons employed in Ulster Bank RoI of 500 (2022 \u2013
2,200; 2021 \u2013 2,400) includes nil people employed in discontinued operations at 31 December 2023 (2022 \u2013 400; 2021 \u2013
700).
\n
\n
Share-based payments
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
Award plan
Eligible employees
Nature of award
Vesting conditions (1)
Settlement
Sharesave
UK, Channel Islands, Gibraltar, Isle
Option to buy shares under
Continuing employment or leavers in certain circumstances
2024 to 2028
\u00a0
of Man, Poland and India.
employee savings plan
\u00a0 \u00a0
Deferred performance
All
Awards of ordinary shares
Continuing employment or leavers in certain circumstances
2024 to 2031
awards
\u00a0
and conditional shares
\u00a0 \u00a0
Long-term incentives
(2,3)
Senior employees
Awards of ordinary shares
Continuing employment or leavers in certain circumstances and/or
2024 to 2030
\u00a0 \u00a0
and conditional shares
satisfaction of the pre-vesting assessment and underpins
\u00a0
\n
(1)
All awards have vesting conditions which may not be met.
(2)
Long-term incentives include buy-out awards offered to compensate certain new hires for the loss of forfeited awards from their previous employment.
All awards are granted under the Employee Share Plan.
(3)
The existing Long-term incentive scheme has been closed for new awards and members as at 31 December 2022. The scheme has been replaced by
a new Restricted share plan scheme with similar granting and vesting conditions.
Sharesave
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Average
Shares
Average
Shares
Average
Shares
\u00a0
exercise
under
exercise
under
exercise
under
\u00a0
price
option
price
option
price
option
\u00a0
\u00a3
(million)
\u00a3
(million)
\u00a3
(million)
At 1 January
1.63
99
1.61
95
1.64
96
Granted
1.42
43
1.86
25
1.80
24
Exercised
1.44
(23)
1.88
(15)
1.76
(10)
Cancelled
1.72
(5)
1.60
(6)
2.02
(15)
At 31 December
1.59
114
1.63
99
1.61
95
\n
The fair value of Sharesave options granted in 2023 was determined using a pricing
model that included: expected volatility of share price determined at the grant date
based on historical share price volatility over a period of up to five years; expected option
lives that equal the vesting period; estimated dividend yield on equity shares; and risk-
free interest rates determined from UK gilts with terms matching the expected lives of
the options.
The exercise price of options and the fair value on granting awards of fully paid shares is
the average market price over the five trading days (three trading days for Sharesave)
preceding grant date. When estimating the fair value of the award, the number of shares
granted and the prevailing market price as defined on page 148 are used.
The fair value
of the award is recognised as services are provided by employees over the vesting
period.
Options are exercisable within six months of vesting; 19.0 million options were
exercisable at 31 December 2023 (2022 \u2013 5.1 million; 2021 \u2013 6.0 million). The weighted
average share price at the date of exercise of options was \u00a32.20 (2022 - \u00a32.59; 2021 -
\u00a32.19). At 31 December 2023, exercise prices ranged from \u00a31.12 to \u00a31.89 (2022 - \u00a31.12
to \u00a32.27; 2021 - \u00a31.12 to \u00a32.27) and the remaining average contractual life was 2.25
years (2022 \u2013 2 years; 2021 \u2013 2.1 years). The fair value of options granted in 2023 was
\u00a327.3 million (2022 - \u00a322.1 million; 2021 - \u00a317 million).
Deferred performance awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
93
46
132
65
169
77
Granted
52
20
46
20
61
32
Forfeited
(2)
(1)
(4)
(2)
(10)
(5)
Vested
(67)
(30)
(81)
(37)
(88)
(39)
At 31 December
76
35
93
46
132
65
\n
The awards granted in 2023 vest in equal tranches on the anniversary of the award,
predominantly over three years.
Long-term incentives
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
49
23
44
21
50
24
Granted
11
5
16
7
6
3
Vested/exercised
(10)
(4)
(10)
(4)
(12)
(6)
Lapsed
(1)
(1)
(1)
(1)
-
-
At 31 December
49
23
49
23
44
21
\n
The market value of awards vested/exercised in 2023 was \u00a39.5 million (2022 - \u00a311.7
million; 2021 - \u00a313 million).
Bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Change
\u00a0
\u00a3m
\u00a3m
%
Non-deferred cash awards
(1)
43
40
8%
Deferred cash awards
262
270
(3%)
Deferred share awards
51
60
(15%)
Total deferred bonus awards
313
330
(5%)
Total bonus awards
(2)
356
370
(4%)
Bonus awards as a % of operating profit before tax
(3)
5%
7%
\u00a0
Proportion of bonus awards that are deferred
88%
89%
\u00a0
- deferred cash awards
84%
82%
\u00a0
- deferred share awards
16%
18%
\u00a0
\n
(1)
Non-deferred cash awards are limited to \u00a32,000 for all employees.
(2)
Excludes other performance-related compensation.
(3)
Operating profit before tax and income statement charge for bonus awards.
Reconciliation of bonus awards to income statement charge
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Bonus awarded
356
370
301
Less: deferral of charge for amounts awarded for current year
(114)
(127)
(99)
Income statement charge for amounts awarded in current year
242
243
202
Add: current year charge for amounts deferred from
prior years
115
94
80
Less: forfeiture of amounts deferred from prior years
(4)
(3)
(15)
Income statement charge for amounts deferred from prior years
111
91
65
Income statement charge for bonus awards
(2)
353
334
267
\n
Year in which income statement charge is expected to be taken for deferred bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Actual
Expected
\u00a0
2021
2022
2023
2024
2025 and beyond
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bonus awards deferred from 2021 and earlier
80
94
16
7
5
Bonus awards deferred from 2022
-
-
99
9
9
Less: forfeiture of amounts deferred from prior years
(15)
(3)
(4)
-
-
Bonus awards for 2023 deferred
-
-
-
98
16
\u00a0
65
91
111
114
30
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81298": { "value": "3.3. Staff costs
Employee costs, such as salaries, paid absences, and other benefits are recognised over
the period in which the employees provide the related services to us. Employees may
receive variable compensation in cash, in deferred cash or debt instruments of NatWest
Group or in ordinary shares of NatWest Group plc subject to deferral, clawback and
forfeiture criteria. We operate a number of share-based compensation schemes under
which we grant awards of NatWest Group plc shares and share options to our
employees. Such awards are subject to vesting conditions.
Variable compensation that is settled in cash or debt instruments is charged to the
income statement on a straight-line basis over the period during which services are
provided, taking account of forfeiture and clawback criteria. The value of employee
services received in exchange for NatWest Group plc shares and share options is
recognised as an expense over the vesting period, subject to deferral, clawback,
cancelation and forfeiture criteria with a corresponding increase in equity. The fair value
of shares granted is the market price adjusted for the expected effect of dividends as
employees are not entitled to dividends until shares are vested.
The fair value of options granted is determined using option pricing models to estimate
the numbers of shares likely to vest. These consider the exercise price of the option, the
current share price, the risk-free interest rate, the expected volatility of the share price
over the life of the option and other relevant factors such as the dividend yield.
Defined contribution pension scheme
A scheme where we pay fixed contributions and there is no legal or constructive
obligation to pay further contributions or benefits. Contributions are recognised in the
income statement as employee service costs accrue.
Defined benefit pension scheme
A scheme that defines the benefit an employee will receive on retirement and is
dependent on one or more factors such as age, salary, and years of service. The net of
the recognisable scheme assets and obligations is reported on the balance sheet in other
assets or other liabilities. The defined benefit obligation is measured on an actuarial basis.
The charge to the income statement for pension costs (mainly the service cost and the
net interest on the net defined benefit asset or liability) is recognised in operating
expenses.
Actuarial gains and losses (i.e. gains and/or losses on re-measuring the net defined
benefit asset or liability due to changes in actuarial measurement assumptions) are
recognised in other comprehensive income in full in the period in which they arise, and
not subject to recycling to the income statement.
The difference between scheme assets and scheme liabilities, the net defined benefit
asset or liability, is recognised on the balance sheet if the criteria of the asset ceiling test
are met. This requires the net defined benefit surplus to be limited to the present value of
any economic benefits available to us in the form of refunds from the plan or reduced
contributions to it.
We will recognise a liability where a minimum funding requirement exists for any of our
defined benefit pension schemes. This reflects agreed minimum funding and the
availability of a net surplus as determined as described above. When estimating the
liability for minimum funding requirements we only include contributions that are
substantively or contractually agreed and do not include contingent and discretionary
features, including dividend-linked contributions or contributions subject to contingent
events requiring future verification.
We will recognise a net defined benefit asset when the net defined benefit surplus can
generate a benefit in the form of a refund or reduction in future contributions to the plan.
The net benefit pension asset is recognised at the present value of the benefits that will
be available to us excluding interest and the effect of the asset ceiling (if any, excluding
interest). Changes in the present value of the net benefit pension asset are recognised
immediately in other comprehensive income.
In instances where Trustees have the ability to declare augmented benefits to
participants, we do not recognise a defined benefit pension asset and write-off the
surplus immediately in other comprehensive income.3 Operating expenses
Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and
social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other
administrative expenses.
For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5.
\n\n\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Salaries
2,483
2,250
2,295
Bonus awards
353
334
267
Temporary and contract costs
199
234
240
Social security costs
352
328
300
Pension costs
313
363
354
- defined benefit schemes (Note 5)
122
205
215
- defined contribution schemes
191
158
139
Other
201
207
220
Staff costs
3,901
3,716
3,676
Premises and equipment
1,153
1,112
1,133
UK bank levy
109
101
99
Depreciation and amortisation
(1,2)
934
833
923
Other administrative expenses
(3)
1,899
1,925
1,927
Administrative expenses
4,095
3,971
4,082
\u00a0
7,996
7,687
7,758
\n
(1)
Includes depreciation of right of use assets of \u00a3104 million (2022 - \u00a3119 million; 2021 - \u00a3167 million).
(2)
2021 includes impairment of goodwill of \u00a385 million.
(3)
Includes litigation and conduct costs, net of amounts recovered. Refer to Note 21 for further details.
The average number of persons employed, rounded to the nearest hundred, during the
year, excluding temporary staff, was 61,500 (2022 - 60,000; 2021 \u2013 59,200). The
average number of temporary employees during 2023 was 2,100 (2022 \u2013 2,500; 2021 \u2013
2,500).
The number of persons employed at 31 December, excluding temporary staff, by
reportable segment, was as follows:
\n \n
Continuing operations
2023
2022 (1)
2021 (1)
Retail Banking
14,300
15,100
16,000
Private Banking
2,400
2,300
2,000
Commercial & Institutional
12,400
12,200
11,700
Central items & other
(2)
32,500
31,400
28,100
Total
61,600
61,000
57,800
UK
41,500
41,200
40,600
USA
300
300
300
India
16,900
15,700
13,500
Poland
1,500
1,500
1,400
Republic of Ireland
400
1,400
1,200
Rest of the World
1,000
900
800
Total
61,600
61,000
57,800
(1)
Comparatives have been re-presented to reflect the movement of headcount across segments due to segment
reorganisation.
(2)
Central items & other includes Ulster Bank RoI. The total number of persons employed in Ulster Bank RoI of 500 (2022 \u2013
2,200; 2021 \u2013 2,400) includes nil people employed in discontinued operations at 31 December 2023 (2022 \u2013 400; 2021 \u2013
700).
\n
\n
Share-based payments
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
Award plan
Eligible employees
Nature of award
Vesting conditions (1)
Settlement
Sharesave
UK, Channel Islands, Gibraltar, Isle
Option to buy shares under
Continuing employment or leavers in certain circumstances
2024 to 2028
\u00a0
of Man, Poland and India.
employee savings plan
\u00a0 \u00a0
Deferred performance
All
Awards of ordinary shares
Continuing employment or leavers in certain circumstances
2024 to 2031
awards
\u00a0
and conditional shares
\u00a0 \u00a0
Long-term incentives
(2,3)
Senior employees
Awards of ordinary shares
Continuing employment or leavers in certain circumstances and/or
2024 to 2030
\u00a0 \u00a0
and conditional shares
satisfaction of the pre-vesting assessment and underpins
\u00a0
\n
(1)
All awards have vesting conditions which may not be met.
(2)
Long-term incentives include buy-out awards offered to compensate certain new hires for the loss of forfeited awards from their previous employment.
All awards are granted under the Employee Share Plan.
(3)
The existing Long-term incentive scheme has been closed for new awards and members as at 31 December 2022. The scheme has been replaced by
a new Restricted share plan scheme with similar granting and vesting conditions.
Sharesave
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Average
Shares
Average
Shares
Average
Shares
\u00a0
exercise
under
exercise
under
exercise
under
\u00a0
price
option
price
option
price
option
\u00a0
\u00a3
(million)
\u00a3
(million)
\u00a3
(million)
At 1 January
1.63
99
1.61
95
1.64
96
Granted
1.42
43
1.86
25
1.80
24
Exercised
1.44
(23)
1.88
(15)
1.76
(10)
Cancelled
1.72
(5)
1.60
(6)
2.02
(15)
At 31 December
1.59
114
1.63
99
1.61
95
\n
The fair value of Sharesave options granted in 2023 was determined using a pricing
model that included: expected volatility of share price determined at the grant date
based on historical share price volatility over a period of up to five years; expected option
lives that equal the vesting period; estimated dividend yield on equity shares; and risk-
free interest rates determined from UK gilts with terms matching the expected lives of
the options.
The exercise price of options and the fair value on granting awards of fully paid shares is
the average market price over the five trading days (three trading days for Sharesave)
preceding grant date. When estimating the fair value of the award, the number of shares
granted and the prevailing market price as defined on page 148 are used.
The fair value
of the award is recognised as services are provided by employees over the vesting
period.
Options are exercisable within six months of vesting; 19.0 million options were
exercisable at 31 December 2023 (2022 \u2013 5.1 million; 2021 \u2013 6.0 million). The weighted
average share price at the date of exercise of options was \u00a32.20 (2022 - \u00a32.59; 2021 -
\u00a32.19). At 31 December 2023, exercise prices ranged from \u00a31.12 to \u00a31.89 (2022 - \u00a31.12
to \u00a32.27; 2021 - \u00a31.12 to \u00a32.27) and the remaining average contractual life was 2.25
years (2022 \u2013 2 years; 2021 \u2013 2.1 years). The fair value of options granted in 2023 was
\u00a327.3 million (2022 - \u00a322.1 million; 2021 - \u00a317 million).
Deferred performance awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
93
46
132
65
169
77
Granted
52
20
46
20
61
32
Forfeited
(2)
(1)
(4)
(2)
(10)
(5)
Vested
(67)
(30)
(81)
(37)
(88)
(39)
At 31 December
76
35
93
46
132
65
\n
The awards granted in 2023 vest in equal tranches on the anniversary of the award,
predominantly over three years.
Long-term incentives
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
49
23
44
21
50
24
Granted
11
5
16
7
6
3
Vested/exercised
(10)
(4)
(10)
(4)
(12)
(6)
Lapsed
(1)
(1)
(1)
(1)
-
-
At 31 December
49
23
49
23
44
21
\n
The market value of awards vested/exercised in 2023 was \u00a39.5 million (2022 - \u00a311.7
million; 2021 - \u00a313 million).
Bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Change
\u00a0
\u00a3m
\u00a3m
%
Non-deferred cash awards
(1)
43
40
8%
Deferred cash awards
262
270
(3%)
Deferred share awards
51
60
(15%)
Total deferred bonus awards
313
330
(5%)
Total bonus awards
(2)
356
370
(4%)
Bonus awards as a % of operating profit before tax
(3)
5%
7%
\u00a0
Proportion of bonus awards that are deferred
88%
89%
\u00a0
- deferred cash awards
84%
82%
\u00a0
- deferred share awards
16%
18%
\u00a0
\n
(1)
Non-deferred cash awards are limited to \u00a32,000 for all employees.
(2)
Excludes other performance-related compensation.
(3)
Operating profit before tax and income statement charge for bonus awards.
Reconciliation of bonus awards to income statement charge
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Bonus awarded
356
370
301
Less: deferral of charge for amounts awarded for current year
(114)
(127)
(99)
Income statement charge for amounts awarded in current year
242
243
202
Add: current year charge for amounts deferred from
prior years
115
94
80
Less: forfeiture of amounts deferred from prior years
(4)
(3)
(15)
Income statement charge for amounts deferred from prior years
111
91
65
Income statement charge for bonus awards
(2)
353
334
267
\n
Year in which income statement charge is expected to be taken for deferred bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Actual
Expected
\u00a0
2021
2022
2023
2024
2025 and beyond
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bonus awards deferred from 2021 and earlier
80
94
16
7
5
Bonus awards deferred from 2022
-
-
99
9
9
Less: forfeiture of amounts deferred from prior years
(15)
(3)
(4)
-
-
Bonus awards for 2023 deferred
-
-
-
98
16
\u00a0
65
91
111
114
30
\n5 Pensions
NatWest Group operates two types of pension scheme: defined benefit and defined contribution. The defined contribution schemes invest contributions in a choice of
funds and the accumulated contributions and investment returns are used by the employee to provide benefits on retirement. There is no legal or constructive
obligation for NatWest Group to pay any further contributions or benefits. The defined benefit schemes provide pensions in retirement based on employees\u2019
pensionable salary and service.
NatWest Group\u2019s balance sheet includes any defined benefit pension scheme surplus or
deficit as a retirement benefit asset or liability reported in other assets and other
liabilities. The surplus or deficit is the difference between the liabilities to be paid from the
defined benefit scheme and the assets held by the scheme to meet these liabilities. The
liabilities are calculated by external actuaries using a number of financial and
demographic assumptions.
For some NatWest Group defined benefit schemes where there is a net defined benefit
surplus in excess of the present value of any economic benefits that can be obtained
from that surplus, the application of accounting standards means we do not recognise
that surplus on the balance sheet.
For accounting policy information refer to Accounting policy 3.3.
Defined contribution schemes
NatWest Group sponsors several defined contribution schemes in different territories,
which new employees are entitled to join. NatWest Group pays specific contributions into
individual investment funds on employees\u2019 behalf. Once those contributions are paid,
there is no further liability on the NatWest Group balance sheet relating to the defined
contribution schemes.
Defined benefit schemes
NatWest Group sponsors a number of pension schemes in the UK and overseas,
including the Main section of the NatWest Group Pension Fund (the Main section) which
operates under UK trust law and is managed and administered on behalf of its members
in accordance with the terms of the trust deed, the scheme rules and UK legislation.
Pension fund trustees are appointed to operate each fund and ensure benefits are paid
in accordance with the scheme rules and national law. The trustees are the legal owner
of a scheme\u2019s assets, and have a duty to act in the best interests of all scheme
members.
The schemes generally provide a pension of one-sixtieth of final pensionable salary for
each year of service prior to retirement up to a maximum of 40 years and are
contributory for current members.
These have been closed to new entrants for over ten years, although active members
continue to build up additional pension benefits, currently subject to 2% maximum annual
salary inflation, while they remain employed by NatWest Group.
The Main section corporate trustee is NatWest Pension Trustee Limited (the Trustee), a
wholly owned subsidiary of NWB Plc, Principal Employer of the Main section. The Board
of the Trustee includes member trustee directors selected from eligible active staff,
deferred and pensioner members who apply and trustee directors appointed by NatWest
Group.
Under UK legislation, a defined benefit pension scheme is required to meet the statutory
funding objective of having sufficient and appropriate assets to cover its liabilities (the
pensions that have been promised to members).
Similar governance principles apply to NatWest Group\u2019s other defined benefit pension
schemes.
Investment strategy
The assets of the Main section, which is typical of other group schemes (aside from AA
section), represent 91% of all plan assets at 31 December 2023 (2022 - 91%) and are
invested as shown below.
The Main section employs physical, derivative and non-derivative instruments to achieve
a desired asset class exposure and to reduce the section\u2019s interest rate, inflation, and
currency risk. This means that the net funding position is considerably less sensitive to
changes in market conditions than the value of the assets or liabilities in isolation. In
particular, movements in interest rate and inflation are substantially hedged by the
Trustee.
During 2023, the Trustee completed a buy-in transaction for the AA section of the Group
Pension Fund, passing all material longevity and investment risk for the section to an
insurer. At 31 December 2023, the assets of this section comprised mainly of the buy-in
asset (a bulk annuity policy valued at \u00a3546 million under IAS 19, covering 99% of the
defined benefit obligation attributable to this section),
together with residual assets of c.
\u00a3145 million. In exchange for an upfront premium paid to the insurer, the buy-in asset
provides a stream of cashflows to the Trustee replicating payments due to members.
The premium was determined by the insurer using its pricing basis. Under IAS 19, the
value placed on this asset mirrors the valuation of the defined benefit obligations
covered, incorporating an assessment of credit risk. Since the insurer\u2019s pricing basis is
more conservative than the best-estimate valuation under IAS 19, an asset loss arises at
the outset, which is recognised through OCI along with the impact of other movements
in asset values over the year. In future, the buy-in asset value will move in line with
movements in the defined benefit obligations covered, meaning that the scheme is
protected against longevity and market risk.
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Major classes of plan assets as a percentage of total plan assets of the Main section
\n\n \n
2023
2022
Quoted
Unquoted
Total
Quoted
Unquoted
Total
%
%
%
%
%
%
Equities
0.1
6.7
6.8
0.1
7.7
7.8
Index linked bonds
36.7
-
36.7
37.7
-
37.7
Government bonds
13.3
-
13.3
18.4
-
18.4
Corporate and other bonds
19.2
6.4
25.6
15.3
6.7
22.0
Real estate
-
4.5
4.5
-
6.0
6.0
Derivatives
-
2.7
2.7
-
8.2
8.2
Cash and other assets
-
10.4
10.4
-
(0.1)
(0.1)
69.3
30.7
100.0
71.5
28.5
100.0
\n
The Main section\u2019s holdings of derivative instruments are summarised in the table below
:
\n\n \n
2023
2022
Notional
Fair value
Notional
Fair value
amounts
Assets
Liabilities
amounts
Assets
Liabilities
\u00a3bn
\u00a3m
\u00a3m
\u00a3bn
\u00a3m
\u00a3m
Inflation rate swaps
29
1,929
940
21
1,873
990
Interest rate swaps
52
3,121
3,394
103
14,317
12,546
Currency forwards
13
235
34
12
310
113
Equity and bond call options
-
-
-
-
-
-
Equity and bond put options
-
-
4
-
2
70
Other
1
8
20
1
14
19
\n
Swaps have been executed at prevailing market rates and within standard market bid/offer spreads with a number of counterparties, including NWB Plc.
\n
At 31 December 2023, the gross notional value of the swaps was \u00a381 billion (2022 - \u00a3124 billion) and had a net positive fair value of \u00a3714 million (2022 - \u00a32,642 million) against which
\n
the counterparties had posted approximately 128% collateral.
\n
The schemes do not invest directly in NatWest Group but may have exposure to NatWest Group through indirect holdings. The trustees of the respective UK schemes are responsible
\n
for ensuring that indirect investments in NatWest Group do not exceed the regulatory limit of 5% of plan assets.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Changes in value of net pension assets/(liability)
\n\n \n
Main section
All schemes
Fair value
Present value of
Asset ceiling/
Net pension
Fair value
Present value
Asset ceiling/
Net
of plan
defined benefit
minimum
assets/
of plan
of defined
minimum
pension
assets
obligation (1)
funding
liability
assets
benefit (2)
funding
assets (2)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2022
52,021
(42,020)
(10,001)
-
57,787
(46,808)
(10,491)
488
Currency translation and other adjustments
-
-
-
-
78
(65)
(11)
2
Income statement - operating expenses
932
(892)
(180)
(140)
1,041
(1,055)
(191)
(205)
Other comprehensive income
(18,180)
16,714
898
(568)
(20,326)
18,570
916
(840)
Contributions by employer
708
-
-
708
775
-
-
775
Contributions by plan participants and other scheme members
7
(7)
-
-
13
(13)
-
-
Assets/liabilities extinguished upon settlement
-
-
-
-
(113)
113
-
-
Benefits paid
(1,472)
1,472
-
-
(1,657)
1,657
-
-
At 1 January 2023
34,016
(24,733)
(9,283)
-
37,598
(27,601)
(9,777)
220
Currency translation and other adjustments
-
-
-
-
(21)
21
4
4
Income statement - operating expenses
Net interest expense
1,677
(1,208)
(464)
5
1,841
(1,341)
(485)
15
Current service cost
-
(76)
-
(76)
-
(105)
-
(105)
Past service cost
-
(2)
-
(2)
-
(8)
-
(8)
Loss on curtailments and settlements
-
-
-
-
-
(24)
-
(24)
1,677
(1,286)
(464)
(73)
1,841
(1,478)
(485)
(122)
Other comprehensive income
Return on plan assets excluding recognised interest income
(1,042)
-
-
(1,042)
(1,182)
-
-
(1,182)
Experience gains and losses
-
(1,531)
-
(1,531)
-
(1,599)
-
(1,599)
Effect of changes in actuarial financial assumptions
-
(585)
-
(585)
-
(776)
-
(776)
Effect of changes in actuarial demographic assumptions
-
379
-
379
-
436
-
436
Asset ceiling adjustments
-
-
2,643
2,643
-
-
2,841
2,841
(1,042)
(1,737)
2,643
(136)
(1,182)
(1,939)
2,841
(280)
Contributions by employer
(3)
209
-
-
209
278
2
-
280
Contributions by plan participants and other scheme members
7
(7)
-
-
12
(12)
-
-
Assets/liabilities extinguished upon settlement
-
-
-
-
(50)
50
-
-
Benefits paid
(1,229)
1,229
-
-
(1,365)
1,365
-
-
At 31 December 2023
(4)
33,638
(26,534)
(7,104)
-
37,111
(29,592)
(7,417)
102
\n
(1)
Defined benefit obligations are subject to annual valuation by independent actuaries.
\n
(2)
NatWest Group recognises the net pension scheme surplus or deficit as a net asset or liability. In doing so, the funded status is adjusted to reflect any schemes with a surplus that NatWest Group may not be able to access, as well as any minimum funding
\n
requirement to pay in additional contributions. This is most relevant to the Main section, where the surplus is not recognised as the trustees may have control over the use of the surplus. Other NatWest Group schemes that this applies to include the Ulster
\n
Bank Pension Scheme (NI) and the NatWest Markets section.
\n
(3)
NatWest Group expects to make contributions to the Main section of \u00a3207 million in 2024.
\n
(4)
On 16 June 2023 the High Court issued a ruling in respect of Virgin Media v NTL Pension Trustees II Limited (and others), which has the potential to affect the defined benefit obligation (DBO) values. Reasonable due diligence has concluded that DBO
\n
values above require no adjustment for the impact of this case. Further details included under the Pension Risk section of this report.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Amounts recognised on the balance sheet
\n\n \n
All schemes
2023
2022
\u00a3m
\u00a3m
Fund asset at fair value
37,111
37,598
Present value of fund liabilities
(29,592)
(27,601)
Funded status
7,519
9,997
Assets ceiling/minimum funding
(7,417)
(9,777)
102
220
\n
Net pension asset/(liability) comprises
\n\n \n
2023
2022
\u00a3m
\u00a3m
Net assets of schemes in surplus (refer to Note 18)
201
318
Net liabilities of schemes in deficit (refer to Note 21)
(99)
(98)
102
220
\n
Funding and contributions by NatWest Group
\n
In the UK, the trustees of defined benefit pension schemes are required to perform
\n
funding valuations every three years. The trustees and the sponsor, with the support of
\n
the Scheme Actuary, agree the assumptions used to value the liabilities and to determine
\n
future contribution requirements. The funding assumptions incorporate a margin for
\n
prudence over and above the expected cost of providing the benefits promised to
\n
members, taking into account the sponsor\u2019s covenant and the investment strategy of the
\n
scheme. Similar arrangements apply in the other territories where NatWest Group
\n
sponsors defined benefit pension schemes.
\n
A full triennial funding valuation of the Main section, effective 31 December 2020, was
\n
completed during financial year 2021.
\n
This triennial funding valuation determined the funding level to be 104%, pension liabilities
\n
to be \u00a349 billion and the surplus to be \u00a32 billion, all assessed on the agreed funding basis.
\n
The average cost of the future service of current members is 49% of salary before
\n
contributions from those members. In addition, the sponsor has agreed to meet
\n
administrative expenses.
Following the ring-fencing agreement with the Trustee reached
\n
in 2018, additional contributions of up to \u00a3500 million p.a. were payable to the Main
\n
section should the Group make distributions to shareholders of an equal amount. These
\n
contributions were capped at \u00a31.5 billion in total, of which \u00a31.0 billion was paid over 2021
\n
and 2022.
\n
During 2023, NatWest Bank entered a new contractual agreement with the Trustee,
\n
such that assets to the value of the remaining contributions falling due under the
\n
previous agreement would instead be paid to a Reservoir Trust. These assets have been
\n
restricted and are reserved to ensure they are available should they be needed by the
\n
Trustee in the future, according to agreed criteria. They are included in the encumbered
\n
balance sheet in the Risk section of this report. The assets under this arrangement will
\n
be available to the Group in future, to the extent that they are not needed under the
\n
defined trigger events.
\n
The key assumptions used to determine the funding liabilities were the discount rate,
\n
which is determined based on fixed interest swap and gilt yields plus 0.64% per annum,
\n
and mortality assumptions, which result in life expectancies of 27.7/29.4 years for
\n
males/females who are currently age 60 and 28.9/30.7 years from age 60 for
\n
males/females who are currently aged 40.
\n
Accounting Assumptions
\n
Placing a value on NatWest Group\u2019s defined benefit pension schemes\u2019 liabilities requires
\n
NatWest Group\u2019s management to make a number of assumptions, with the support of
\n
independent actuaries. The ultimate cost of the defined benefit obligations depends upon
\n
actual future events and the assumptions made are unlikely to be exactly borne out in
\n
practice, meaning the final cost may be higher or lower than expected.
\n
The most significant assumptions used for the Main section are shown below:
\n\n \n
Principal IAS 19 actuarial assumptions
(1)
2023
2022
%
%
Discount rate
4.8
5.0
Inflation assumption (RPI)
3.1
3.2
Rate of increase in salaries
1.8
1.8
Rate of increase in deferred pensions
3.2
3.2
Rate of increase in pensions in payment
2.4
2.5
Lump sum conversion rate at retirement
18
18
Longevity at age 60:
years
years
Current pensioners
Males
26.8
27.3
Females
28.6
29.1
Future pensioners, currently aged 40
Males
27.7
28.3
Females
29.5
30.1
\n
(1)
The above financial assumptions are long-term assumptions set with reference to the period over which the obligations
\n
are expected to be settled.
Discount rate
The IAS 19 valuation uses a single discount rate set by reference to the yield on a basket of \u2018high quality\u2019 sterling corporate bonds.
Significant judgement is required when setting the criteria for bonds to be included in the basket of bonds that is used to determine the discount rate used in the IAS 19 valuations. The
criteria include issue size, quality of pricing and the exclusion of outliers. Judgement is also required in determining the shape of the yield curve at long durations; a constant credit
spread relative to gilts is assumed. Sensitivity to the main assumptions is presented below.
The weighted average duration of the Main section\u2019s defined benefit obligation at 31 December 2023 is 14.0 years (2022 \u2013 15.3 years). The chart below shows the projected benefit
payment pattern for the Main section in nominal terms. These cashflows are based on the most recent formal actuarial valuation, effective 31 December 2020.
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
2052
2054
2056
2058
2060
2062
2064
2066
2068
2070
2072
2074
2076
2078
2080
2082
2084
2086
2088
2090
2092
2094
Pensioner
Non pensioner
Expected Cashflows (\u00a3m)
Year
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
The table below shows how the net pension asset of the Main section would change if the key assumptions used were changed independently. In practice the variables have a degree
\n
of correlation and do not move completely in isolation.
\n\n \n
(Decrease)/
(Decrease)/
Increase in net
increase in value
increase in value
pension
of assets
of liabilities
(obligations)/assets
2023
\u00a3m
\u00a3m
\u00a3m
0.5% increase in interest rates/discount rate
(2,292)
(1,746)
(546)
0.25% increase in inflation
811
578
233
0.5% increase in credit spreads
(12)
(1,746)
1,734
Longevity increase of one year
-
902
(902)
0.25% additional rate of increase in pensions in payment
-
706
(706)
Increase in equity values of 10%
(1)
229
-
229
2022
0.5% increase in interest rates/discount rate
(2,689)
(1,766)
(923)
0.25% increase in inflation
963
632
331
0.5% increase in credit spreads
(6)
(1,766)
1,760
Longevity increase of one year
-
767
(767)
0.25% additional rate of increase in pensions in payment
-
679
(679)
Increase in equity values of 10%
(1)
267
-
267
\n
(1)
Includes both quoted and private equity.
\n
The table below shows the combined change in defined benefit obligation from larger movements in these assumptions, assuming no changes in other assumptions.
\n\n \n
Change in life expectancies
- 2 years
- 1 year
No change
+ 1 year
+ 2 years
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Change in credit spreads
+50 bps
(3.5)
(2.6)
(1.7)
(0.9)
(0.1)
No change
(1.9)
(0.9)
-
0.9
1.8
-50 bps
-
1.0
2.0
2.9
3.9
2022
Change in credit spreads
+50 bps
(3.7)
(2.8)
(1.8)
(0.8)
0.2
No change
(2.1)
(1.1)
-
1.1
2.1
-50 bps
(0.3)
0.9
2.0
3.2
4.3
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
The defined benefit obligation of the Main section is attributable to the different classes of scheme members in the following proportions:
2023
2022
Membership category
%
%
Active members
7.5
8.4
Deferred members
41.9
41.0
Pensioners and dependants
50.6
50.6
100.0
100.0
\n
The experience history of NatWest Group schemes is shown below:
Main section
All schemes
2023
2022
2021
2020
2019
2023
2022
2021
2020
2019
History of defined benefit schemes
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value of plan assets
33,638
34,016
52,021
51,323
46,555
37,111
37,598
57,787
57,249
51,925
Present value of plan obligations
(26,534)
(24,733)
(42,020)
(43,870)
(39,669)
(29,592)
(27,601)
(46,808)
(48,864)
(44,115)
Net surplus
7,104
9,283
10,001
7,453
6,886
7,519
9,997
10,979
8,385
7,810
Experience (losses)/gains on plan liabilities
(1,531)
(2,053)
241
427
275
(1,599)
(2,137)
237
455
279
Experience (losses)/gains on plan assets
(1,042)
(18,180)
841
5,486
3,021
(1,182)
(20,326)
872
6,027
3,556
Actual return on plan assets
634
(17,248)
1,554
6,422
4,266
659
(19,285)
1,667
7,064
4,930
Actual return on plan assets
1.9%
(33.2%)
3.0%
13.8%
9.7%
1.8%
(33.4%)
2.9%
13.6%
10.1%
", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81299": { "value": "3.3. Staff costs
Employee costs, such as salaries, paid absences, and other benefits are recognised over
the period in which the employees provide the related services to us. Employees may
receive variable compensation in cash, in deferred cash or debt instruments of NatWest
Group or in ordinary shares of NatWest Group plc subject to deferral, clawback and
forfeiture criteria. We operate a number of share-based compensation schemes under
which we grant awards of NatWest Group plc shares and share options to our
employees. Such awards are subject to vesting conditions.
Variable compensation that is settled in cash or debt instruments is charged to the
income statement on a straight-line basis over the period during which services are
provided, taking account of forfeiture and clawback criteria. The value of employee
services received in exchange for NatWest Group plc shares and share options is
recognised as an expense over the vesting period, subject to deferral, clawback,
cancelation and forfeiture criteria with a corresponding increase in equity. The fair value
of shares granted is the market price adjusted for the expected effect of dividends as
employees are not entitled to dividends until shares are vested.
The fair value of options granted is determined using option pricing models to estimate
the numbers of shares likely to vest. These consider the exercise price of the option, the
current share price, the risk-free interest rate, the expected volatility of the share price
over the life of the option and other relevant factors such as the dividend yield.
Defined contribution pension scheme
A scheme where we pay fixed contributions and there is no legal or constructive
obligation to pay further contributions or benefits. Contributions are recognised in the
income statement as employee service costs accrue.
Defined benefit pension scheme
A scheme that defines the benefit an employee will receive on retirement and is
dependent on one or more factors such as age, salary, and years of service. The net of
the recognisable scheme assets and obligations is reported on the balance sheet in other
assets or other liabilities. The defined benefit obligation is measured on an actuarial basis.
The charge to the income statement for pension costs (mainly the service cost and the
net interest on the net defined benefit asset or liability) is recognised in operating
expenses.
Actuarial gains and losses (i.e. gains and/or losses on re-measuring the net defined
benefit asset or liability due to changes in actuarial measurement assumptions) are
recognised in other comprehensive income in full in the period in which they arise, and
not subject to recycling to the income statement.
The difference between scheme assets and scheme liabilities, the net defined benefit
asset or liability, is recognised on the balance sheet if the criteria of the asset ceiling test
are met. This requires the net defined benefit surplus to be limited to the present value of
any economic benefits available to us in the form of refunds from the plan or reduced
contributions to it.
We will recognise a liability where a minimum funding requirement exists for any of our
defined benefit pension schemes. This reflects agreed minimum funding and the
availability of a net surplus as determined as described above. When estimating the
liability for minimum funding requirements we only include contributions that are
substantively or contractually agreed and do not include contingent and discretionary
features, including dividend-linked contributions or contributions subject to contingent
events requiring future verification.
We will recognise a net defined benefit asset when the net defined benefit surplus can
generate a benefit in the form of a refund or reduction in future contributions to the plan.
The net benefit pension asset is recognised at the present value of the benefits that will
be available to us excluding interest and the effect of the asset ceiling (if any, excluding
interest). Changes in the present value of the net benefit pension asset are recognised
immediately in other comprehensive income.
In instances where Trustees have the ability to declare augmented benefits to
participants, we do not recognise a defined benefit pension asset and write-off the
surplus immediately in other comprehensive income.3 Operating expenses
Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and
social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other
administrative expenses.
For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5.
\n\n\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Salaries
2,483
2,250
2,295
Bonus awards
353
334
267
Temporary and contract costs
199
234
240
Social security costs
352
328
300
Pension costs
313
363
354
- defined benefit schemes (Note 5)
122
205
215
- defined contribution schemes
191
158
139
Other
201
207
220
Staff costs
3,901
3,716
3,676
Premises and equipment
1,153
1,112
1,133
UK bank levy
109
101
99
Depreciation and amortisation
(1,2)
934
833
923
Other administrative expenses
(3)
1,899
1,925
1,927
Administrative expenses
4,095
3,971
4,082
\u00a0
7,996
7,687
7,758
\n
(1)
Includes depreciation of right of use assets of \u00a3104 million (2022 - \u00a3119 million; 2021 - \u00a3167 million).
(2)
2021 includes impairment of goodwill of \u00a385 million.
(3)
Includes litigation and conduct costs, net of amounts recovered. Refer to Note 21 for further details.
The average number of persons employed, rounded to the nearest hundred, during the
year, excluding temporary staff, was 61,500 (2022 - 60,000; 2021 \u2013 59,200). The
average number of temporary employees during 2023 was 2,100 (2022 \u2013 2,500; 2021 \u2013
2,500).
The number of persons employed at 31 December, excluding temporary staff, by
reportable segment, was as follows:
\n \n
Continuing operations
2023
2022 (1)
2021 (1)
Retail Banking
14,300
15,100
16,000
Private Banking
2,400
2,300
2,000
Commercial & Institutional
12,400
12,200
11,700
Central items & other
(2)
32,500
31,400
28,100
Total
61,600
61,000
57,800
UK
41,500
41,200
40,600
USA
300
300
300
India
16,900
15,700
13,500
Poland
1,500
1,500
1,400
Republic of Ireland
400
1,400
1,200
Rest of the World
1,000
900
800
Total
61,600
61,000
57,800
(1)
Comparatives have been re-presented to reflect the movement of headcount across segments due to segment
reorganisation.
(2)
Central items & other includes Ulster Bank RoI. The total number of persons employed in Ulster Bank RoI of 500 (2022 \u2013
2,200; 2021 \u2013 2,400) includes nil people employed in discontinued operations at 31 December 2023 (2022 \u2013 400; 2021 \u2013
700).
\n
\n
Share-based payments
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
Award plan
Eligible employees
Nature of award
Vesting conditions (1)
Settlement
Sharesave
UK, Channel Islands, Gibraltar, Isle
Option to buy shares under
Continuing employment or leavers in certain circumstances
2024 to 2028
\u00a0
of Man, Poland and India.
employee savings plan
\u00a0 \u00a0
Deferred performance
All
Awards of ordinary shares
Continuing employment or leavers in certain circumstances
2024 to 2031
awards
\u00a0
and conditional shares
\u00a0 \u00a0
Long-term incentives
(2,3)
Senior employees
Awards of ordinary shares
Continuing employment or leavers in certain circumstances and/or
2024 to 2030
\u00a0 \u00a0
and conditional shares
satisfaction of the pre-vesting assessment and underpins
\u00a0
\n
(1)
All awards have vesting conditions which may not be met.
(2)
Long-term incentives include buy-out awards offered to compensate certain new hires for the loss of forfeited awards from their previous employment.
All awards are granted under the Employee Share Plan.
(3)
The existing Long-term incentive scheme has been closed for new awards and members as at 31 December 2022. The scheme has been replaced by
a new Restricted share plan scheme with similar granting and vesting conditions.
Sharesave
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Average
Shares
Average
Shares
Average
Shares
\u00a0
exercise
under
exercise
under
exercise
under
\u00a0
price
option
price
option
price
option
\u00a0
\u00a3
(million)
\u00a3
(million)
\u00a3
(million)
At 1 January
1.63
99
1.61
95
1.64
96
Granted
1.42
43
1.86
25
1.80
24
Exercised
1.44
(23)
1.88
(15)
1.76
(10)
Cancelled
1.72
(5)
1.60
(6)
2.02
(15)
At 31 December
1.59
114
1.63
99
1.61
95
\n
The fair value of Sharesave options granted in 2023 was determined using a pricing
model that included: expected volatility of share price determined at the grant date
based on historical share price volatility over a period of up to five years; expected option
lives that equal the vesting period; estimated dividend yield on equity shares; and risk-
free interest rates determined from UK gilts with terms matching the expected lives of
the options.
The exercise price of options and the fair value on granting awards of fully paid shares is
the average market price over the five trading days (three trading days for Sharesave)
preceding grant date. When estimating the fair value of the award, the number of shares
granted and the prevailing market price as defined on page 148 are used.
The fair value
of the award is recognised as services are provided by employees over the vesting
period.
Options are exercisable within six months of vesting; 19.0 million options were
exercisable at 31 December 2023 (2022 \u2013 5.1 million; 2021 \u2013 6.0 million). The weighted
average share price at the date of exercise of options was \u00a32.20 (2022 - \u00a32.59; 2021 -
\u00a32.19). At 31 December 2023, exercise prices ranged from \u00a31.12 to \u00a31.89 (2022 - \u00a31.12
to \u00a32.27; 2021 - \u00a31.12 to \u00a32.27) and the remaining average contractual life was 2.25
years (2022 \u2013 2 years; 2021 \u2013 2.1 years). The fair value of options granted in 2023 was
\u00a327.3 million (2022 - \u00a322.1 million; 2021 - \u00a317 million).
Deferred performance awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
93
46
132
65
169
77
Granted
52
20
46
20
61
32
Forfeited
(2)
(1)
(4)
(2)
(10)
(5)
Vested
(67)
(30)
(81)
(37)
(88)
(39)
At 31 December
76
35
93
46
132
65
\n
The awards granted in 2023 vest in equal tranches on the anniversary of the award,
predominantly over three years.
Long-term incentives
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
49
23
44
21
50
24
Granted
11
5
16
7
6
3
Vested/exercised
(10)
(4)
(10)
(4)
(12)
(6)
Lapsed
(1)
(1)
(1)
(1)
-
-
At 31 December
49
23
49
23
44
21
\n
The market value of awards vested/exercised in 2023 was \u00a39.5 million (2022 - \u00a311.7
million; 2021 - \u00a313 million).
Bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Change
\u00a0
\u00a3m
\u00a3m
%
Non-deferred cash awards
(1)
43
40
8%
Deferred cash awards
262
270
(3%)
Deferred share awards
51
60
(15%)
Total deferred bonus awards
313
330
(5%)
Total bonus awards
(2)
356
370
(4%)
Bonus awards as a % of operating profit before tax
(3)
5%
7%
\u00a0
Proportion of bonus awards that are deferred
88%
89%
\u00a0
- deferred cash awards
84%
82%
\u00a0
- deferred share awards
16%
18%
\u00a0
\n
(1)
Non-deferred cash awards are limited to \u00a32,000 for all employees.
(2)
Excludes other performance-related compensation.
(3)
Operating profit before tax and income statement charge for bonus awards.
Reconciliation of bonus awards to income statement charge
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Bonus awarded
356
370
301
Less: deferral of charge for amounts awarded for current year
(114)
(127)
(99)
Income statement charge for amounts awarded in current year
242
243
202
Add: current year charge for amounts deferred from
prior years
115
94
80
Less: forfeiture of amounts deferred from prior years
(4)
(3)
(15)
Income statement charge for amounts deferred from prior years
111
91
65
Income statement charge for bonus awards
(2)
353
334
267
\n
Year in which income statement charge is expected to be taken for deferred bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Actual
Expected
\u00a0
2021
2022
2023
2024
2025 and beyond
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bonus awards deferred from 2021 and earlier
80
94
16
7
5
Bonus awards deferred from 2022
-
-
99
9
9
Less: forfeiture of amounts deferred from prior years
(15)
(3)
(4)
-
-
Bonus awards for 2023 deferred
-
-
-
98
16
\u00a0
65
91
111
114
30
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81300": { "value": "3.3. Staff costs
Employee costs, such as salaries, paid absences, and other benefits are recognised over
the period in which the employees provide the related services to us. Employees may
receive variable compensation in cash, in deferred cash or debt instruments of NatWest
Group or in ordinary shares of NatWest Group plc subject to deferral, clawback and
forfeiture criteria. We operate a number of share-based compensation schemes under
which we grant awards of NatWest Group plc shares and share options to our
employees. Such awards are subject to vesting conditions.
Variable compensation that is settled in cash or debt instruments is charged to the
income statement on a straight-line basis over the period during which services are
provided, taking account of forfeiture and clawback criteria. The value of employee
services received in exchange for NatWest Group plc shares and share options is
recognised as an expense over the vesting period, subject to deferral, clawback,
cancelation and forfeiture criteria with a corresponding increase in equity. The fair value
of shares granted is the market price adjusted for the expected effect of dividends as
employees are not entitled to dividends until shares are vested.
The fair value of options granted is determined using option pricing models to estimate
the numbers of shares likely to vest. These consider the exercise price of the option, the
current share price, the risk-free interest rate, the expected volatility of the share price
over the life of the option and other relevant factors such as the dividend yield.
Defined contribution pension scheme
A scheme where we pay fixed contributions and there is no legal or constructive
obligation to pay further contributions or benefits. Contributions are recognised in the
income statement as employee service costs accrue.
Defined benefit pension scheme
A scheme that defines the benefit an employee will receive on retirement and is
dependent on one or more factors such as age, salary, and years of service. The net of
the recognisable scheme assets and obligations is reported on the balance sheet in other
assets or other liabilities. The defined benefit obligation is measured on an actuarial basis.
The charge to the income statement for pension costs (mainly the service cost and the
net interest on the net defined benefit asset or liability) is recognised in operating
expenses.
Actuarial gains and losses (i.e. gains and/or losses on re-measuring the net defined
benefit asset or liability due to changes in actuarial measurement assumptions) are
recognised in other comprehensive income in full in the period in which they arise, and
not subject to recycling to the income statement.
The difference between scheme assets and scheme liabilities, the net defined benefit
asset or liability, is recognised on the balance sheet if the criteria of the asset ceiling test
are met. This requires the net defined benefit surplus to be limited to the present value of
any economic benefits available to us in the form of refunds from the plan or reduced
contributions to it.
We will recognise a liability where a minimum funding requirement exists for any of our
defined benefit pension schemes. This reflects agreed minimum funding and the
availability of a net surplus as determined as described above. When estimating the
liability for minimum funding requirements we only include contributions that are
substantively or contractually agreed and do not include contingent and discretionary
features, including dividend-linked contributions or contributions subject to contingent
events requiring future verification.
We will recognise a net defined benefit asset when the net defined benefit surplus can
generate a benefit in the form of a refund or reduction in future contributions to the plan.
The net benefit pension asset is recognised at the present value of the benefits that will
be available to us excluding interest and the effect of the asset ceiling (if any, excluding
interest). Changes in the present value of the net benefit pension asset are recognised
immediately in other comprehensive income.
In instances where Trustees have the ability to declare augmented benefits to
participants, we do not recognise a defined benefit pension asset and write-off the
surplus immediately in other comprehensive income.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForExpensesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81451": { "value": "3.4. Intangible assets and goodwill
Intangible assets are identifiable non-monetary assets without physical substance
acquired or developed by us, and are stated at cost less accumulated amortisation and
impairment losses. Amortisation is a method to spread the cost of such assets over time
in the income statement.
This is charged to the income statement over the assets' estimated useful economic lives
using methods that best reflect the pattern of economic benefits.
The estimated useful economic lives are:
Computer software
3 to 10 years
Other acquired intangibles
3 to 5 years
Direct costs relating to the development of internal-use computer software are reported
on the balance sheet after technical feasibility and economic viability have been
established.
These direct costs include payroll, the costs of materials and services, and directly
attributable overheads. Capitalisation of costs ceases when the software can operate as
intended.
During and after development, accumulated costs are reviewed for impairment against
the benefits that the software is expected to generate. Costs incurred prior to the
establishment of technical feasibility and economic viability are expensed to the income
statement as incurred, as are all training costs and general overheads. The costs of
licences to use computer software that are expected to generate economic benefits
beyond three years are also reported on the balance sheet.
Goodwill on the acquisition of a subsidiary is the excess of the fair value of the
consideration paid, the fair value of any existing interest in the subsidiary and the
amount of any non-controlling interest measured either at fair value or at its share of the
subsidiary\u2019s net assets over the net fair value of the subsidiary\u2019s identifiable assets,
liabilities, and contingent liabilities.
Goodwill is measured at initial cost less any subsequent impairment losses. The gain or
loss on the disposal of a subsidiary includes the carrying value of any related goodwill
when such transactions occur.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81452": { "value": "3.4. Intangible assets and goodwill
Intangible assets are identifiable non-monetary assets without physical substance
acquired or developed by us, and are stated at cost less accumulated amortisation and
impairment losses. Amortisation is a method to spread the cost of such assets over time
in the income statement.
This is charged to the income statement over the assets' estimated useful economic lives
using methods that best reflect the pattern of economic benefits.
The estimated useful economic lives are:
Computer software
3 to 10 years
Other acquired intangibles
3 to 5 years
Direct costs relating to the development of internal-use computer software are reported
on the balance sheet after technical feasibility and economic viability have been
established.
These direct costs include payroll, the costs of materials and services, and directly
attributable overheads. Capitalisation of costs ceases when the software can operate as
intended.
During and after development, accumulated costs are reviewed for impairment against
the benefits that the software is expected to generate. Costs incurred prior to the
establishment of technical feasibility and economic viability are expensed to the income
statement as incurred, as are all training costs and general overheads. The costs of
licences to use computer software that are expected to generate economic benefits
beyond three years are also reported on the balance sheet.
Goodwill on the acquisition of a subsidiary is the excess of the fair value of the
consideration paid, the fair value of any existing interest in the subsidiary and the
amount of any non-controlling interest measured either at fair value or at its share of the
subsidiary\u2019s net assets over the net fair value of the subsidiary\u2019s identifiable assets,
liabilities, and contingent liabilities.
Goodwill is measured at initial cost less any subsequent impairment losses. The gain or
loss on the disposal of a subsidiary includes the carrying value of any related goodwill
when such transactions occur.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81453": { "value": "3.4. Intangible assets and goodwill
Intangible assets are identifiable non-monetary assets without physical substance
acquired or developed by us, and are stated at cost less accumulated amortisation and
impairment losses. Amortisation is a method to spread the cost of such assets over time
in the income statement.
This is charged to the income statement over the assets' estimated useful economic lives
using methods that best reflect the pattern of economic benefits.
The estimated useful economic lives are:
Computer software
3 to 10 years
Other acquired intangibles
3 to 5 years
Direct costs relating to the development of internal-use computer software are reported
on the balance sheet after technical feasibility and economic viability have been
established.
These direct costs include payroll, the costs of materials and services, and directly
attributable overheads. Capitalisation of costs ceases when the software can operate as
intended.
During and after development, accumulated costs are reviewed for impairment against
the benefits that the software is expected to generate. Costs incurred prior to the
establishment of technical feasibility and economic viability are expensed to the income
statement as incurred, as are all training costs and general overheads. The costs of
licences to use computer software that are expected to generate economic benefits
beyond three years are also reported on the balance sheet.
Goodwill on the acquisition of a subsidiary is the excess of the fair value of the
consideration paid, the fair value of any existing interest in the subsidiary and the
amount of any non-controlling interest measured either at fair value or at its share of the
subsidiary\u2019s net assets over the net fair value of the subsidiary\u2019s identifiable assets,
liabilities, and contingent liabilities.
Goodwill is measured at initial cost less any subsequent impairment losses. The gain or
loss on the disposal of a subsidiary includes the carrying value of any related goodwill
when such transactions occur.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81488": { "value": "Goodwill on the acquisition of a subsidiary is the excess of the fair value of the
consideration paid, the fair value of any existing interest in the subsidiary and the
amount of any non-controlling interest measured either at fair value or at its share of the
subsidiary\u2019s net assets over the net fair value of the subsidiary\u2019s identifiable assets,
liabilities, and contingent liabilities.
Goodwill is measured at initial cost less any subsequent impairment losses. The gain or
loss on the disposal of a subsidiary includes the carrying value of any related goodwill
when such transactions occur.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81556": { "value": "3.5. Impairment of non-financial assets
Goodwill is tested for impairment annually or more frequently if events or changes in
circumstances indicate that it might be impaired.
At each balance sheet date, we assess whether there is any indication that other
intangible assets or property, plant and equipment are impaired. If any such indication
exists, we estimate the recoverable amount of the asset and compare it to its balance
sheet value to calculate if an impairment loss should be recognised in the income
statement. A reversal of an impairment loss on other intangible assets or property, plant
and equipment is recognised in the income statement provided the increased carrying
value is not greater than it would have been had no impairment loss been recognised.
The recoverable amount of an asset that does not generate cash flows that are
independent from those of other assets or groups of assets, is determined as part of the
cash-generating unit to which the asset belongs. A cash-generating unit is the smallest
identifiable group of assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets. For the purposes of impairment
testing, goodwill acquired in a business combination is allocated to our cash-generating
units or groups of cash-generating units expected to benefit from the combination.
The recoverable amount of an asset or cash-generating unit is the higher of its fair value
less cost to sell or its value in use. Value in use is the present value of future cash flows
from the asset or cash-generating unit discounted at a rate that reflects market interest
rates adjusted for risks specific to the asset or cash-generating unit that have not been
considered in estimating future cash flows.
The assessment of asset impairment is based upon value in use. This represents the
value of future cashflows and uses our five-year revenue and cost forecasts and the
expectation of long term economic growth beyond this period. The five-year forecast
takes account of management\u2019s current expectations on competitiveness and
profitability, including near term effects of climate transition risk. The long term growth
rate reflects external indicators which will include market expectations on climate risk.
We do not consider any additional adjustments to this indicator.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81588": { "value": "3.6. Foreign currencies
Foreign exchange differences arising on the settlement of foreign currency transactions
and from the translation of monetary assets and liabilities are reported in income from
trading activities except for differences arising on cash flow hedges and hedges of net
investments in foreign operations.
Non-monetary items denominated in foreign currencies that are stated at fair value are
translated into the functional currency at the foreign exchange rates ruling at the dates
the values are determined. Translation differences are recognised in the income
statement except for differences arising on non-monetary financial assets classified as
fair value through other comprehensive income.
Income and expenses of foreign subsidiaries and branches are translated into sterling at
average exchange rates unless these do not approximate the foreign exchange rates
ruling at the dates of the transactions. Foreign exchange differences arising on the
translation of a foreign operation are recognised in other comprehensive income. The
amount accumulated in equity is reclassified from equity to the income statement on
disposal of a foreign operation.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81593": { "value": "3.6. Foreign currencies
Foreign exchange differences arising on the settlement of foreign currency transactions
and from the translation of monetary assets and liabilities are reported in income from
trading activities except for differences arising on cash flow hedges and hedges of net
investments in foreign operations.
Non-monetary items denominated in foreign currencies that are stated at fair value are
translated into the functional currency at the foreign exchange rates ruling at the dates
the values are determined. Translation differences are recognised in the income
statement except for differences arising on non-monetary financial assets classified as
fair value through other comprehensive income.
Income and expenses of foreign subsidiaries and branches are translated into sterling at
average exchange rates unless these do not approximate the foreign exchange rates
ruling at the dates of the transactions. Foreign exchange differences arising on the
translation of a foreign operation are recognised in other comprehensive income. The
amount accumulated in equity is reclassified from equity to the income statement on
disposal of a foreign operation.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81654": { "value": "3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.Critical accounting policy: Fair value \u2013 financial
instruments
Financial instruments classified as mandatory fair value through
profit or loss; held-for-trading; designated fair value through profit
or loss; and fair value through other comprehensive income are
recognised in the financial statements at fair value. All derivatives
are measured at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A fair value measurement
considers the characteristics of the asset or liability and the
assumptions that a market participant would consider when pricing
the asset or liability.
NatWest Group manages some portfolios of financial assets and
financial liabilities based on its net exposure to either market or
credit risk. In these cases, the fair value is derived from the net risk
exposure of that portfolio with portfolio level adjustments applied to
incorporate bid-offer spreads, counterparty credit risk, and funding
costs (refer to \u2018Valuation Adjustments\u2019).
Where the market for a financial instrument is not active, fair value
is established using a valuation technique. These valuation
techniques involve a degree of estimation, the extent of which
depends on the instrument\u2019s complexity and the availability of
market-based data. The complexity and uncertainty in the financial
instrument\u2019s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2,
3.8 and 3.11.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81655": { "value": "3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.10 Financial instruments - classification
Financial instruments are contracts that give rise to a financial asset of one entity and a corresponding financial liability or equity instrument of a counterparty entity,
such as cash, derivatives, loans, deposits and settlement balances. This note presents financial instruments classified in accordance with IFRS 9 \u2013 Financial
Instruments.
Judgement: classification of financial assets
Classification of financial assets between amortised cost and
fair value through other comprehensive income requires a
degree of judgement in respect of business models and
contractual cashflows.
\ue001
The business model criteria is assessed at a portfolio level
to determine whether assets are classified as held to
collect or held to collect and sell. Information that is
considered in determining the applicable business model
includes: the portfolio\u2019s policies and objectives; how the
performance and risks of the portfolio are managed,
evaluated and reported to management; and the
frequency, volume and timing of sales in prior periods,
sales expectation for future periods, and the reasons for
sales.
\ue001
The contractual cash flow characteristics of financial
assets are assessed with reference to whether the cash
flows represent solely payments of principal and interest
(SPPI). A level of judgement is made in assessing terms
that could change the contractual cash flows so that it
would not meet the condition for SPPI, including contingent
and leverage features,
non-recourse arrangements and
features that could modify the time value of money.
For accounting policy information refer to Accounting policies
3.8, 3.9 and 3.11.
The following tables analyse financial assets and liabilities in accordance with the categories of financial instruments
in IFRS 9.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0\u00a0\u00a0\u00a0
Amortised
Other
\u00a0
\u00a0
MFVTPL
DFV
FVOCI
cost
assets
Total
Assets
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
\u00a0\u00a0\u00a0
104,262
\u00a0
104,262
Trading assets
45,551
\u00a0\u00a0\u00a0\u00a0
45,551
Derivatives
(1)
78,904
\u00a0\u00a0\u00a0\u00a0
78,904
Settlement balances
\u00a0\u00a0\u00a0
7,231
\u00a0
7,231
Loans to bank - amortised cost
(2)
\u00a0\u00a0\u00a0
6,914
\u00a0
6,914
Loans to customers - amortised cost (
3
)
\u00a0\u00a0\u00a0
381,433
\u00a0
381,433
Other financial assets
703
5
28,699
21,695
\u00a0
51,102
Intangible assets
\u00a0\u00a0\u00a0\u00a0
7,614
7,614
Other assets
\u00a0\u00a0\u00a0\u00a0
8,760
8,760
Assets of disposal groups
(4)
\u00a0\u00a0\u00a0\u00a0
902
902
31 December 2023
125,158
5
28,699
521,535
17,276
692,673
Cash and balances at central banks
\u00a0\u00a0\u00a0
144,832
\u00a0
144,832
Trading assets
45,577
\u00a0\u00a0\u00a0\u00a0
45,577
Derivatives
(1)
99,545
\u00a0\u00a0\u00a0\u00a0
99,545
Settlement balances
\u00a0\u00a0\u00a0
2,572
\u00a0
2,572
Loans to bank - amortised cost
(2)
\u00a0\u00a0\u00a0
7,139
\u00a0
7,139
Loans to customers - amortised cost (
3
)
\u00a0\u00a0\u00a0
366,340
\u00a0
366,340
Other financial assets
787
-
16,973
13,135
\u00a0
30,895
Intangible assets
\u00a0\u00a0\u00a0\u00a0
7,116
7,116
Other assets
\u00a0\u00a0\u00a0\u00a0
9,176
9,176
Assets of disposal groups
(4)
\u00a0\u00a0\u00a0\u00a0
6,861
6,861
31 December 2022
145,909
-
16,973
534,018
23,153
720,053
\n
\n
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0
Amortised
Other
\u00a0
\u00a0
Held-for-trading
DFV
cost
liabilities
Total
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bank deposits
(5)
\u00a0 \u00a0
22,190
\u00a0
22,190
Customer deposits
\u00a0 \u00a0
431,377
\u00a0
431,377
Settlement balances
\u00a0 \u00a0
6,645
\u00a0
6,645
Trading liabilities
53,636
\u00a0 \u00a0 \u00a0
53,636
Derivatives
(1)
72,395
\u00a0 \u00a0 \u00a0
72,395
Other financial liabilities
(6)
\u00a0
2,888
52,201
\u00a0
55,089
Subordinated liabilities
\u00a0
237
5,477
\u00a0
5,714
Notes in circulation
\u00a0 \u00a0
3,237
\u00a0
3,237
Other liabilities
(7)
\u00a0 \u00a0
748
4,454
5,202
31 December 2023
126,031
3,125
521,875
4,454
655,485
Bank deposits
(5)
\u00a0 \u00a0
20,441
\u00a0
20,441
Customer deposits
\u00a0 \u00a0
450,318
\u00a0
450,318
Settlement balances
\u00a0 \u00a0
2,012
\u00a0
2,012
Trading liabilities
52,808
\u00a0 \u00a0 \u00a0
52,808
Derivatives
(1)
94,047
\u00a0 \u00a0 \u00a0
94,047
Other financial liabilities
(6)
\u00a0
2,377
46,730
\u00a0
49,107
Subordinated liabilities
\u00a0
345
5,915
\u00a0
6,260
Notes in circulation
\u00a0 \u00a0
3,218
\u00a0
3,218
Other liabilities
(7)
\u00a0 \u00a0
1,205
4,141
5,346
31 December 2022
146,855
2,722
529,839
4,141
683,557
\n
(1)
Includes net hedging derivatives assets of \u00a3114 million (2022 - \u00a3143 million) and net
hedging derivatives liabilities of \u00a3270 million (2022 - \u00a3132 million).
(2)
Includes items in the course of collection from other banks of \u00a3255 million (2022 -
\u00a3229 million).
(3)
Includes finance lease receivables of \u00a38,731 million (2022 - \u00a38,402 million).
(4)
Includes assets of disposal groups held at FVTPL of \u00a3841 million (2022 - \u00a35,397
million). The portfolio is classified as level 3 in the fair value hierarchy.
(5)
Includes items in the course of transmission to other banks of \u00a392 million (2022 -
\u00a3242 million).
(6)
The carrying amount of customer deposits designated at fair value through profit
or loss is the same as the principal amount for both periods. No amounts have
been recognised in the profit or loss for changes in credit risk associated with these
liabilities as the changes are immaterial both during the period and cumulatively.
(7)
Includes lease liabilities of \u00a3670 million (2022 - \u00a31,118 million), held at amortised
cost.
Reclassification of mortgages from amortised cost to fair value through profit or loss
In June 2022 UBIDAC announced the cessation of new mortgage business to its customers. On 1 July 2022 UBIDAC mortgages in both its continuing and discontinued businesses were
reclassified from amortised cost to fair value through profit or loss, reflecting the change in business model. We fair value these assets using a discounted cash flow method. Key inputs
include assumptions about cash flows from legally binding sales agreements for those mortgage assets that form part of the assets of disposal groups. For details on material
developments in assets and liabilities of disposals groups during the year, refer to Note 8.
The effect of the reclassification as at 1 July 2022 is shown below.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Amortised cost
MFVTPL
Change in value
\u00a0
\u00a3m
\u00a3m
\u00a3m
Amounts reclassified on balance sheet
\u00a0 \u00a0 \u00a0
Loans to customers
(1)
587
606
19
Assets of disposal groups
(2)
10,676
10,383
(293)
\u00a0
11,263
10,989
(274)
\n
(1)
Change in value recognised in continuing operations.
(2)
Change in value recognised in discontinued operations.
We originate loans that include features that change the contractual cash flows based on the borrower meeting certain contractually specified environmental, social and governance
(ESG) targets. These are known as ESG-linked (or sustainability-linked) loans. As part of the terms of these loans, the contractual interest rate is reduced or increased if the borrower
meets (or fails to meet) specific targets linked to the activity of the borrower, for example reducing carbon emissions, increasing the level of diversity at Board level, or achieving a
sustainable supply chain. ESG features are first assessed to ascertain whether the adjustment to the contractual cash flows results in a de minimis exposure to risks or volatility in
those contractual cash flows. If this is the case the classification of the loan is not affected. If the effect of the ESG feature is assessed as being more than de minimis, we apply
judgement to ensure that the ESG features do not generate compensation for risks that are not in line with a basic lending arrangement. This includes, amongst other aspects, a
review of the consistency of the ESG targets with the asset or activity of the borrower, and consideration of the targets within our risk appetite. Some of these loans are an integral
part of our climate and sustainable funding and financing target disclosed on page 16.
The table below analyses financial assets forming a component of ESG-linked loans and other products with contractual terms that could change the timing or amount of cash flows.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0 \u00a0
Positive impact on
Negative impact on
Reduction in
\u00a0
\u00a0
Carrying value
product margin
product margin
cash flows
Carrying value
\u00a0
\u00a3bn
bps
bps
\u00a3m
\u00a3bn
Sustainability-linked loans
6.5
3.2
3.9
2.5
5.0
Other products
16.1
-
-
-
8.9
Lending subject to performance triggers
22.6
\u00a0 \u00a0
2.5
13.9
\n
Additional information on finance lease receivables
The following table shows the reconciliation of undiscounted finance lease receivables to net investment in finance leases which are presented under Loans to customers-amortised
cost on the balance sheet.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Amount receivable under finance leases
\u00a0 \u00a0
Within 1 year
3,340
3,235
1 to 2 years
2,358
2,254
2 to 3 years
1,625
1,388
3 to 4 years
900
833
4 to 5 years
388
411
After 5 years
1,079
1,130
Total lease payments
9,690
9,251
Unguaranteed residual values
169
171
Future drawdowns
(12)
(13)
Unearned income
(1,025)
(889)
Present value of lease payments
8,822
8,520
Impairments
(91)
(118)
Net investment in finance leases
8,731
8,402
\n
Financial instruments \u2013 financial assets and liabilities that can be offset
The tables below present information on financial assets and financial liabilities that are offset on the balance sheet under IFRS or subject to enforceable master netting agreements
together with financial collateral received or given.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Instruments which can be offset
Potential for offset not recognised by IFRS
\u00a0 \u00a0
\u00a0 \u00a0 \u00a0 \u00a0
Effect of master
\u00a0 \u00a0
Net amount after
Instruments
\u00a0
\u00a0 \u00a0 \u00a0 \u00a0
netting and similar
Cash
Securities
netting agreements and
outside netting
Balance sheet
\u00a0
Gross
IFRS offset
Balance sheet
agreements
collateral
collateral
effect of related collateral
agreements
total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets
99,023
(20,597)
78,426
(60,355)
(12,284)
(3,408)
2,379
478
78,904
Derivative liabilities
95,734
(23,869)
71,865
(60,355)
(6,788)
(1,663)
3,059
530
72,395
Net position
(1)
3,289
3,272
6,561
-
(5,496)
(1,745)
(680)
(52)
6,509
Trading reverse repos
39,573
(16,257)
23,316
(664)
-
(22,461)
191
378
23,694
Trading repos
42,442
(16,257)
26,185
(664)
-
(25,520)
1
717
26,902
Net position
(2,869)
-
(2,869)
-
-
3,059
190
(339)
(3,208)
Non trading reverse repos
37,477
(9,646)
27,831
(5)
-
(27,826)
-
80
27,911
Non trading repos
23,605
(9,646)
13,959
(5)
-
(13,954)
-
3
13,962
Net position
13,872
-
13,872
-
-
(13,872)
-
77
13,949
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Derivative assets
117,606
(18,730)
98,876
(77,365)
(14,079)
(4,571)
2,861
669
99,545
Derivative liabilities
115,177
(22,111)
93,066
(77,365)
(9,761)
(1,185)
4,755
981
94,047
Net position
(1)
2,429
3,381
5,810
-
(4,318)
(3,386)
(1,894)
(312)
5,498
Trading reverse repos
35,612
(14,510)
21,102
(2,445)
-
(18,458)
199
435
21,537
Trading repos
33,767
(14,510)
19,257
(2,445)
-
(16,812)
-
4,483
23,740
Net position
1,845
-
1,845
-
-
(1,646)
199
(4,048)
(2,203)
Non trading reverse repos
25,630
(5,702)
19,928
-
-
(19,928)
-
98
20,026
Non trading repos
16,977
(5,702)
11,275
-
-
(11,275)
-
-
11,275
Net position
8,653
-
8,653
-
-
(8,653)
-
98
8,751
\n
(1)
Net IFRS offset balance of \u00a33,272 million (2022 - \u00a33,381 million) relates to variation margin netting reflected on other balance sheet lines.14 Derivatives
Derivative is a term covering a wide range of financial instruments that derive their
fair value from an underlying rate or price, for example interest rates or exchange
rates (the underlying). NatWest Group uses derivatives as a part of its trading activities, to manage its own risks such as interest rate, foreign exchange, or credit risk
and in certain customer transactions. This note
shows contracted volumes of derivatives, how they are used for hedging purposes and more specifically the effects of
the application of hedge accounting.
For accounting policy information refer to Accounting policies 3.8 and 3.11.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Notional
Asset
Liability
\u00a0
Traded on
\u00a0 \u00a0
Traded on
\u00a0 \u00a0
Traded on
\u00a0 \u00a0
\u00a0
recognised
Traded over
\u00a0
recognised
Traded over
\u00a0
recognised
Traded over
\u00a0
\u00a0
exchanges
the counter
Total
exchanges
the counter
Total
exchanges
the counter
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest rate
819
9,449
10,268
48
44,515
44,563
34
38,449
38,483
- Swaps
-
6,533
6,533
-
33,807
33,807
-
27,424
27,424
- Options
510
1,674
2,184
48
10,708
10,756
34
11,025
11,059
- Forwards and futures
309
1,242
1,551
-
-
-
-
-
-
Exchange rate
1
3,119
3,120
-
34,161
34,161
-
33,586
33,586
- Swaps
-
449
449
-
8,173
8,173
-
7,370
7,370
- Options
1
674
675
-
4,181
4,181
-
4,197
4,197
- Spot, forwards and futures
-
1,996
1,996
-
21,807
21,807
-
22,019
22,019
Credit
-
15
15
-
180
180
-
326
326
Equity and commodity
-
-
-
-
-
-
-
-
-
Total
820
12,583
13,403
48
78,856
78,904
34
72,361
72,395
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Interest rate
707
10,035
10,742
113
53,367
53,480
33
48,502
48,535
- Swaps
-
7,201
7,201
-
39,039
39,039
-
32,992
32,992
- Options
296
1,418
1,714
113
14,328
14,441
33
15,510
15,543
- Forwards and futures
411
1,416
1,827
-
-
-
-
-
-
Exchange rate
2
3,166
3,168
-
45,829
45,829
-
45,237
45,237
- Swaps
-
438
438
-
11,840
11,840
-
10,430
10,430
- Options
2
835
837
-
6,375
6,375
-
6,647
6,647
- Spot, forwards and futures
-
1,893
1,893
-
27,614
27,614
-
28,160
28,160
Credit
-
15
15
-
236
236
-
275
275
Equity and commodity
-
-
-
-
-
-
-
-
-
Total
709
13,216
13,925
113
99,432
99,545
33
94,014
94,047
\n
Included in the table above is the notional amount of \u00a37,280 billion (2022 - \u00a38,065 billion) of interest rate derivatives that are traded over the counter and settled through central
clearing counterparties. NatWest Group has no other type of derivatives that are settled through central counterparties.
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
NatWest Group applies hedge accounting to reduce the accounting mismatch caused in
\n
the income statement by using derivatives to hedge the following risks: interest rate,
\n
foreign exchange and the foreign exchange risk associated with net investment in
\n
foreign operations.
\n
NatWest Group\u2019s interest rate hedging relates to the management of NatWest Group\u2019s
\n
non-trading structural interest rate risk, caused by the mismatch between fixed interest
\n
rates and floating interest rates on its financial instruments. NatWest Group manages
\n
this risk within approved limits. Residual risk positions are hedged with derivatives,
\n
principally interest rate swaps.
\n
Cash flow hedges of interest rate risk relate to exposures to the variability in future
\n
interest payments and receipts due to the movement of interest rates on forecast
\n
transactions and on financial assets and financial liabilities. This variability in cash flows is
\n
hedged by interest rate swaps, which convert variable cash flows into fixed. For these
\n
cash flow hedge relationships, the hedged items are actual and forecast variable interest
\n
rate cash flows arising from financial assets and financial liabilities with interest rates
\n
linked to the relevant interest rates, most notably SOFR, EURIBOR, the European Central
\n
Bank deposit rate, SONIA and the Bank of England Official Bank Rate. The variability in
\n
cash flows due to movements in the relevant interest rate is hedged; this risk component
\n
is identified using the risk management systems of NatWest Group and encompasses the
\n
majority of cash flow variability risk.
\n
Suitable larger fixed rate financial instruments are subject to fair value hedging in line
\n
with documented risk management strategies.
\n
Fair value hedges of interest rate risk involve interest rate swaps transforming the fixed
\n
interest rate risk in financial assets and financial liabilities to floating. The hedged risk is
\n
the risk of changes in the hedged item\u2019s fair value attributable to changes in the interest
\n
rate risk component of the hedged item. The significant interest rates identified as risk
\n
components are SOFR, EURIBOR, ESTR and SONIA. These risk components are
\n
identified using the risk management systems of NatWest Group and encompass the
\n
majority of the hedged item\u2019s fair value risk.
\n
Hedge accounting using derivatives
\n
NatWest Group hedges the exchange rate risk of its net investment in foreign currency
\n
denominated operations with currency borrowings and forward foreign exchange
\n
contracts.
\n
NatWest Group reviews the value of the investments\u2019 net assets, executing hedges
\n
where appropriate to reduce the sensitivity of capital ratios to foreign exchange rate
\n
movement. Hedge accounting relationships will be designated where required.
\n
Exchange rate risk also arises in NatWest Group where payments are denominated in
\n
currencies other than the functional currency. Residual risk positions are hedged with
\n
foreign exchange derivatives, fixing the exchange rate the payments will be settled in.
\n
The derivatives are documented as cash flow hedges.
\n
For all cash flow hedging, fair value hedge relationships and net investment hedging,
\n
NatWest Group determines that there is an economic relationship between the hedged
\n
item and hedging instrument via assessing the initial and ongoing effectiveness by
\n
comparing movements in the fair value of the expected highly probable forecast interest
\n
cash flows/ fair value of the hedged item attributable to the hedged risk with movements
\n
in the fair value of the expected changes in cash flows from the hedging instrument. The
\n
method used for comparing movements is either regression testing, or the dollar offset
\n
method. The method for testing effectiveness and the period over which the test is
\n
performed depends on the applicable risk management strategy and is applied
\n
consistently to each risk management strategy. Hedge effectiveness is assessed on a
\n
cumulative basis and the determination of effectiveness is in line with the requirements of
\n
IAS 39.
\n
NatWest Group uses either the actual ratio between the hedged item and hedging
\n
instrument(s) or one that minimises hedge ineffectiveness to establish the hedge ratio for
\n
hedge accounting. Hedge ineffectiveness is measured in line with the requirements of IAS
\n
39 and recognised in the income statement as it arises.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Derivatives in hedge accounting relationships
\n
Included in the table below are derivatives held for hedging purposes as follows.
2023
2022
Changes in fair value used for
Changes in fair value used for
Notional
Assets
Liabilities
hedge ineffectiveness (1)
Notional
Assets
Liabilities
hedge ineffectiveness (1)
\u00a3bn
\u00a3m
\u00a3m
\u00a3m
\u00a3bn
\u00a3m
\u00a3m
\u00a3m
Fair value hedging
Interest rate contracts
(2)
67.6
1,139
2,607
406
58.7
1,554
3,009
482
Cash flow hedging
Interest rate contracts
140.0
1,924
4,970
1,211
167.6
2,681
6,207
(3,342)
Exchange rate contracts
16.9
112
254
(12)
6.3
142
112
(3)
Net investment hedging
Exchange rate contracts
0.3
2
7
(3)
0.5
1
9
4
224.8
3,177
7,838
1,602
233.1
4,378
9,337
(2,859)
IFRS netting and clearing house settlements
(3,063)
(7,568)
(4,235)
(9,205)
114
270
143
132
\n
(1)
The change in fair value used for hedge ineffectiveness includes instruments that were derecognised in the year.
\n
(2)
The hedged risk includes inflation risk.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Hedge ineffectiveness
\n
Hedge ineffectiveness recognised in other operating income comprises.
2023
2022
2021
\u00a3m
\u00a3m
\u00a3m
Fair value hedging
Loss on hedged items attributable to the hedged risk
(364)
(442)
(846)
Gain on the hedging instruments
406
482
897
Fair value hedging ineffectiveness
42
40
51
Cash flow hedging
Interest rate risk
10
(60)
(26)
Cash flow hedging ineffectiveness
10
(60)
(26)
Total
52
(20)
25
\n
The main sources of ineffectiveness for interest rate risk hedge accounting relationships are:
\n
\ue001
The effect of the counterparty credit risk on the fair value of the interest rate swap which is not reflected in the fair value of the hedged item attributable to the change in interest
\n
rate (fair value hedge).
\n
\ue001
Differences in the repricing basis between the hedging instrument and hedged cash flows (cash flow hedge); and
\n
\ue001
Upfront present values on the hedging derivatives where hedge accounting relationships have been designated after the trade date (cash flow hedge and fair value hedge).
Maturity of notional hedging contracts
The following table shows the period in which the notional of hedging contract ends.
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
Over 10 years
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Fair value hedging
Interest rate risk
(1)
Hedging assets
0.1
1.7
7.1
9.0
5.9
4.7
28.5
Hedging liabilities
2.7
3.3
13.4
11.3
7.7
0.7
39.1
2022
Fair value hedging
Interest rate risk
(1)
Hedging assets
0.5
1.9
4.7
4.9
4.2
3.6
19.8
Hedging liabilities
1.0
2.9
14.6
10.3
9.6
0.5
38.9
2023
Cash flow hedging
Interest rate risk
Hedging assets
3.9
14.5
33.9
22.8
10.1
-
85.2
Hedging liabilities
0.8
3.9
39.1
10.1
0.3
0.6
54.8
Exchange rate risk
Hedging assets
0.3
0.7
1.6
-
-
-
2.6
Hedging liabilities
8.4
0.8
2.4
2.5
0.2
-
14.3
2022
Cash flow hedging
Interest rate risk
Hedging assets
6.6
9.4
46.5
21.9
10.1
-
94.5
Hedging liabilities
17.3
26.8
15.7
5.1
7.5
0.7
73.1
Exchange rate risk
Hedging assets
0.1
-
-
-
-
-
0.1
Hedging liabilities
-
1.1
2.8
2.1
0.2
-
6.2
\n
(1)
The hedged risk includes inflation risk.
\n\n\n\n\n\n\n\n\n\n\n\n\n \n
Average fixed interest rates
The following table shows average fixed rate for cash flow hedges, interest rate risk.
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
Over 10 years
Total
2023
%
%
%
%
%
%
%
Average fixed interest rate
Hedging assets
1.16
2.46
1.19
3.30
1.77
3.12
2.04
Hedging liabilities
0.93
2.54
4.36
2.28
2.36
4.50
3.79
2022
Average fixed interest rate
Hedging assets
1.36
1.98
1.71
2.04
1.02
3.12
1.72
Hedging liabilities
1.27
0.95
2.75
1.03
2.68
4.55
1.63
\n
Average foreign exchange rates
\n
For cash flow hedging of exchange rate risk, the average foreign exchange rates applicable across the relationships were as below for the main currencies hedged.
\n\n \n
2023
2022
INR/GBP
105.03
100.54
USD/GBP
1.28
1.29
CHF/GBP
1.08
1.15
JPY/GBP
170.54
132.89
JPY/USD
129.75
128.29
NOK/USD
9.21
9.21
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Analysis of hedged items and related hedging instruments
\n
The table below analyses assets and liabilities subject to hedging derivatives.
\n\n \n
Changes in fair value
Carrying value of
Impact on hedged items
used as a basis to
hedged assets and liabilities
included in carrying value
determine ineffectiveness (1)
2023
\u00a3m
\u00a3m
\u00a3m
Fair value hedging - interest rate
(2)
Loans to banks and customers - amortised cost
5,663
(316)
167
Other financial assets - securities
22,896
174
636
Total
(3)
28,559
(142)
803
Bank and customer deposits
745
(3)
(6)
Other financial liabilities - debt securities in issue
36,305
(1,151)
(1,023)
Subordinated liabilities
5,346
(320)
(138)
Total
42,396
(1,474)
(1,167)
2022
Fair value hedging - interest rate
(2)
Loans to banks and customers - amortised cost
5,764
(526)
(1,236)
Other financial assets - securities
12,897
(922)
(2,525)
Total
(3)
18,661
(1,448)
(3,761)
Bank and customer deposits
565
(3)
3
Other financial liabilities - debt securities in issue
35,856
(2,222)
2,790
Subordinated liabilities
5,504
(547)
526
Total
41,925
(2,772)
3,319
\n
For the notes to this table refer to the following page.
Changes in fair value
Carrying value of
used as a basis to
hedged assets and liabilities
determine ineffectiveness (1)
2023
\u00a3m
\u00a3m
Cash flow hedging - interest rate
Loans to banks and customers - amortised cost
(4)
84,583
(2,796)
Other financial assets - securities
623
(22)
Total
85,206
(2,818)
Bank and customer deposits
54,675
1,610
Other financial liabilities - debt securities in issue
156
7
Total
54,831
1,617
Cash flow hedging - exchange rate
Loans to banks and customers - amortised cost
(4)
583
-
Other financial assets - securities
1,839
-
Total
2,422
-
Other financial liabilities - debt securities in issue
11,460
9
Subordinated liabilities
-
-
Other
201
3
Total
11,661
12
2022
Cash flow hedging - interest rate
Loans to banks and customers - amortised cost
(4)
93,212
5,263
Other financial assets - securities
1,176
73
Total
94,388
5,336
Bank and customer deposits
72,610
(2,008)
Other financial liabilities - debt securities in issue
571
(46)
Total
73,181
(2,054)
Cash flow hedging - exchange rate
Loans to banks and customer - amortised cost
(4)
-
-
Other financial assets - securities
-
-
Total
-
-
Other financial liabilities - debt securities in issue
4,141
(2)
Subordinated liabilities
-
-
Other
204
5
Total
4,345
3
\n
(1)
The change in fair value used for hedge ineffectiveness includes instruments that were derecognised in the year.
\n
(2)
The hedged risk includes inflation risk.
\n
(3)
Carrying values include \u00a357 million (2022 - \u00a361 million) adjustment for discontinued fair value hedges.
\n
(4)
Includes cash and balances at central banks.
Analysis of cash flow and foreign exchange hedge reserve
The following table shows an analysis of the pre-tax cash flow hedge reserve and foreign exchange hedge reserve.
\u00a0
2023
2022
\u00a0\u00a0
Foreign
\u00a0
Foreign
\u00a0
Cash flow
exchange
Cash flow
exchange
\u00a0
hedge reserve
hedge reserve
hedge reserve
hedge reserve
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing
\u00a0\u00a0\u00a0\u00a0
Interest rate risk
(2,330)
-
(3,576)
-
Foreign exchange risk
1
(18)
16
(85)
De-designated
\u00a0\u00a0\u00a0\u00a0
Interest rate risk
(304)
-
(297)
-
Foreign exchange risk
4
(771)
20
(880)
Total
(2,629)
(789)
(3,837)
(965)
\u00a0
2023
2022
\u00a0\u00a0
Foreign
\u00a0
Foreign
\u00a0
Cash flow
exchange
Cash flow
exchange
\u00a0
hedge reserve
hedge reserve
hedge reserve
hedge reserve
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Amount recognised in equity
\u00a0\u00a0\u00a0\u00a0
Interest rate risk
137
-
(2,997)
(64)
Foreign exchange risk
50
107
24
(202)
Total
187
107
(2,973)
(266)
Amount transferred from equity to earnings
\u00a0\u00a0\u00a0\u00a0
Interest rate risk to net interest income
1,112
-
(252)
-
Interest rate risk to non interest income
(1)
(10)
-
(21)
-
Interest rate risk to operating expenses
-
-
(14)
-
Foreign exchange risk to net interest income
(74)
-
(29)
-
Foreign exchange risk to non interest income
(9)
69
15
7
Foreign exchange risk to operating expenses
2
-
(3)
-
Total
1,021
69
(304)
7
\n
(1)
There was \u00a310 million (2022 - \u00a321 million) reclassified with the cash flow reserve to earnings due to forecasted cash flows that are no longer expected to occur.Amounts included in the NatWest Group financial statements, in aggregate, by category
of related party are as follows:
\u00a0
Associates and Joint
Equity
\u00a0
\u00a0
Ventures
Shares (1)
Total
31 December 2023
\u00a3m
\u00a3m
\u00a3m
Investments
668
145
813
Loans to customers - amortised cost
-
13
13
Customer deposits
2
10
12
Settlement balances
-
-
-
Other comprehensive income
-
(8)
(8)
Other operating income
(11)
-
(11)
31 December 2022
\u00a0\u00a0\u00a0
Investments
688
149
837
Loans to customers - amortised cost
-
-
-
Customer deposits
1
4
5
Settlement balances
-
34
34
Other comprehensive income
-
11
11
Other operating income
(30)
-
(30)
\n
(1)
Represents investments in entities where ownership is more than 10%", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81656": { "value": "3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.13 Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities held at fair value and classified as held-for-trading. Financial instruments are classified as held-for-trading
if they are held for the purpose of selling or repurchasing them in the short term, to make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
For accounting policy information refer to Accounting policy 3.8.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Assets
\u00a3m
\u00a3m
Loans
\u00a0 \u00a0
Reverse repos
23,694
21,537
Collateral given
9,141
13,005
Other loans
762
1,113
Total loans
33,597
35,655
Securities
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
2,729
2,205
- US
2,600
2,345
- Other
3,062
2,799
Financial institutions and corporate
3,563
2,573
Total securities
11,954
9,922
Total
45,551
45,577
Liabilities
\u00a0 \u00a0
Deposits
\u00a0 \u00a0
Repos
26,902
23,740
Collateral received
15,075
17,680
Other deposits
1,150
1,067
Total deposits
43,127
42,487
Debt securities in issue
706
797
Short positions
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
1,893
2,313
- US
2,071
1,293
- Other
4,049
3,936
Financial institutions and Corporate
1,790
1,982
Total short positions
9,803
9,524
Total
53,636
52,808
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialLiabilitiesHeldForTradingExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81657": { "value": "3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.13 Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities held at fair value and classified as held-for-trading. Financial instruments are classified as held-for-trading
if they are held for the purpose of selling or repurchasing them in the short term, to make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
For accounting policy information refer to Accounting policy 3.8.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Assets
\u00a3m
\u00a3m
Loans
\u00a0 \u00a0
Reverse repos
23,694
21,537
Collateral given
9,141
13,005
Other loans
762
1,113
Total loans
33,597
35,655
Securities
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
2,729
2,205
- US
2,600
2,345
- Other
3,062
2,799
Financial institutions and corporate
3,563
2,573
Total securities
11,954
9,922
Total
45,551
45,577
Liabilities
\u00a0 \u00a0
Deposits
\u00a0 \u00a0
Repos
26,902
23,740
Collateral received
15,075
17,680
Other deposits
1,150
1,067
Total deposits
43,127
42,487
Debt securities in issue
706
797
Short positions
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
1,893
2,313
- US
2,071
1,293
- Other
4,049
3,936
Financial institutions and Corporate
1,790
1,982
Total short positions
9,803
9,524
Total
53,636
52,808
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialAssetsHeldForTradingExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81658": { "value": "3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.13 Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities held at fair value and classified as held-for-trading. Financial instruments are classified as held-for-trading
if they are held for the purpose of selling or repurchasing them in the short term, to make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
For accounting policy information refer to Accounting policy 3.8.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Assets
\u00a3m
\u00a3m
Loans
\u00a0 \u00a0
Reverse repos
23,694
21,537
Collateral given
9,141
13,005
Other loans
762
1,113
Total loans
33,597
35,655
Securities
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
2,729
2,205
- US
2,600
2,345
- Other
3,062
2,799
Financial institutions and corporate
3,563
2,573
Total securities
11,954
9,922
Total
45,551
45,577
Liabilities
\u00a0 \u00a0
Deposits
\u00a0 \u00a0
Repos
26,902
23,740
Collateral received
15,075
17,680
Other deposits
1,150
1,067
Total deposits
43,127
42,487
Debt securities in issue
706
797
Short positions
\u00a0 \u00a0
Central and local government
\u00a0 \u00a0
- UK
1,893
2,313
- US
2,071
1,293
- Other
4,049
3,936
Financial institutions and Corporate
1,790
1,982
Total short positions
9,803
9,524
Total
53,636
52,808
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsHeldForTradingExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81659": { "value": "3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance
sheet.
Monetary financial assets are classified into one of the following subsequent
measurement categories (subject to business model assessment and review of
contractual cash flow for the purposes of sole payments of principal and interest where
applicable):
\ue001
amortised cost
measured at cost using the effective interest rate method, less any
impairment allowance;
\ue001
fair value through other comprehensive income (FVOCI)
measured at fair value, using
the effective interest rate method and changes in fair value through other
comprehensive income;
\ue001
mandatory fair value through profit or loss (MFVTPL)
measured at fair value and
changes in fair value reported in the income statement; or
\ue001
designated at fair value through profit or loss (DFV)
measured at fair value and
changes in fair value reported in the income statement.
Classification by business model reflects how we manage our financial assets to generate
cash flows. A business model assessment helps to ascertain the measurement approach
depending on whether cash flows result from holding financial assets to collect the
contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which
they are managed to achieve a predefined business objective. This is expected to result
in the most consistent classification of assets because it aligns with the stated objectives
for the portfolio, its risk management, manager\u2019s remuneration and the ability to monitor
sales of assets from a portfolio. When a significant change to our business is
communicated to external parties, we reassess our business model for managing those
financial assets. We reclassify financial assets if we have a significant change to the
business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and
extension terms; and discounts or penalties to interest rates that are part of meeting
environmental, social and governance targets as well as other contingent and leverage
features, non-recourse arrangements and features that could modify the timing and/or
amount of the contractual cash flows that might reset the effective rate of interest; are
considered in determining whether cash flows are solely payments of principal and
interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon
initial recognition if such designation eliminates, or significantly reduces, accounting
mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected
as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive
income reserve are recycled to the income statement for monetary assets and for non-
monetary assets (equity shares) the cumulative gains or losses are transferred directly to
retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are
recognised on the settlement date; all other regular way transactions in financial assets
are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
\ue001
amortised cost measured at cost using the effective interest rate method;
\ue001
held for trading measured at fair value and changes in fair value reported in income
statement; or
\ue001
designated at fair value through profit or loss measured at fair value and changes in
fair value reported in the income statement except changes in fair value attributable
to the credit risk component recognised in other comprehensive income when no
accounting mismatch occurs.3.10. Capital instruments
We classify a financial instrument that we issue as a liability if it is a contractual obligation
to deliver cash or another financial asset, or to exchange financial assets or financial
liabilities on potentially unfavourable terms and as equity if we evidence a residual
interest in our assets after the deduction of liabilities. Incremental costs and related tax
that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known
as treasury shares or own shares held) is deducted from retained earnings. On the
cancellation of treasury shares their nominal value is removed from retained earnings
and a consequential amount recognised in capital redemption in compliance with the
Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are
credited to equity, net of any directly attributable incremental costs.Debt securities and subordinated liabilities
Most debt securities are valued using quoted prices in
active markets or from quoted prices of similar financial
instruments. The remaining population is valued using
discounted cashflows at current offer rates.16 Other financial assets
Other financial assets consist of debt securities, equity shares and loans that are not held for trading. Balances consist of local and central government securities, a
component part of NatWest Group\u2019s liquidity portfolio.
For accounting policy information refer to Accounting policy 3.8.
\u00a0
Debt securities
\u00a0 \u00a0 \u00a0
\u00a0
Central and local government
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
\u00a0
UK
US
Other
Other debt
Total
Equity shares
Loans
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mandatory fair value through profit or loss
-
-
-
1
1
2
700
703
Designated at fair value
-
-
3
2
5
-
-
5
Fair value through other comprehensive income
(1)
6,441
5,517
5,738
10,627
28,323
311
65
28,699
Amortised cost
2,889
647
35
18,124
21,695
-
-
21,695
Total
9,330
6,164
5,776
28,754
50,024
313
765
51,102
2022
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Mandatory fair value through profit or loss
-
-
-
2
2
3
782
787
Designated at fair value
-
-
-
-
-
-
-
-
Fair value through other comprehensive income
(1)
802
7,175
1,757
6,765
16,499
357
117
16,973
Amortised cost
2,562
937
54
9,582
13,135
-
-
13,135
Total
3,364
8,112
1,811
16,349
29,636
360
899
30,895
\n
(1)
Upon initial recognition, NatWest Group occasionally irrevocably
designates some of its equity investments as equity instruments at FVOCI when they meet the definition of equity under IAS 32 Financial instruments: presentation, are not held for trading or
they are held for strategic purposes. Such classification is determined on an instrument-by-instrument basis. Gains and losses on these equity instruments are not recycled to the income statement and dividends are recognised in profit or loss except when
they represent a recovery of part of the cost of the instrument, in which case such gains are recorded in OCI. Equity instruments at FVOCI are not subject to an impairment assessment.
There were no significant acquisitions of equity shares in the year. In 2022, NatWest Group acquired \u00a3146 million of equity shares in Permanent TSB p.l.c as part consideration on the
sale of certain assets and \u00a326 million of equity shares in Vodeno Limited.
NatWest Group disposed of equity shares in Permanent TSB p.l.c of \u00a347 million and UBS Equity Funds of \u00a335 million in the year. In 2022, NatWest Group disposed of equity shares in
Visa Inc. of \u00a399 million and UBS Equity Funds of \u00a369 million. There were no significant dividends on equity shares held at FVOCI in either year.19 Other financial liabilities
Other financial liabilities consist of customer deposits designated at fair value and debt securities in issue.
For accounting policy information refer to Accounting policies 3.8 and 3.10.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Customer deposits - designated as at fair value through profit or loss
1,280
1,050
Debt securities in issue
\u00a0 \u00a0
- MRELs
21,660
22,265
- Other medium term notes
17,843
16,419
- Commercial paper and certificates of deposit
11,321
5,672
- Covered bonds
2,122
2,842
- Securitisation
863
859
Total
55,089
49,107
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfDebtSecuritiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81856": { "value": "3.9. Netting
Financial assets and financial liabilities are offset, and the net amount presented on the
balance sheet when, and only when, we currently have a legally enforceable right to set
off the recognised amounts and we intend either to settle on a net basis or to realise the
asset and settle the liability simultaneously. We are party to a number of arrangements,
including master netting agreements, that give us the right to offset financial assets and
financial liabilities, but where we do not intend to settle the amounts net or
simultaneously, the assets and liabilities concerned are presented separately on the
balance sheet.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81869": { "value": "3.10. Capital instruments
We classify a financial instrument that we issue as a liability if it is a contractual obligation
to deliver cash or another financial asset, or to exchange financial assets or financial
liabilities on potentially unfavourable terms and as equity if we evidence a residual
interest in our assets after the deduction of liabilities. Incremental costs and related tax
that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known
as treasury shares or own shares held) is deducted from retained earnings. On the
cancellation of treasury shares their nominal value is removed from retained earnings
and a consequential amount recognised in capital redemption in compliance with the
Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are
credited to equity, net of any directly attributable incremental costs.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIssuedCapitalExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81870": { "value": "3.10. Capital instruments
We classify a financial instrument that we issue as a liability if it is a contractual obligation
to deliver cash or another financial asset, or to exchange financial assets or financial
liabilities on potentially unfavourable terms and as equity if we evidence a residual
interest in our assets after the deduction of liabilities. Incremental costs and related tax
that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known
as treasury shares or own shares held) is deducted from retained earnings. On the
cancellation of treasury shares their nominal value is removed from retained earnings
and a consequential amount recognised in capital redemption in compliance with the
Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are
credited to equity, net of any directly attributable incremental costs.M
erger reserve
-
the merger reserve comprises the premium on shares issued to
acquire NatWest Bank Plc less goodwill amortisation charged under previous GAAP.
C
C
apital redemption reserve -
under UK companies legislation, when shares are
redeemed or purchased wholly or partly out of the company's profits, the amount by
which the company's issued share capital is diminished must be transferred to the capital
redemption reserve. The capital maintenance provisions of UK companies legislation
apply to the capital redemption reserve as if it were part of the company\u2019s paid up share
capital. The nominal value of the shares bought back from HMT in March 2023 and via
the Programme during 2023 have been transferred to the Capital redemption reserve.
Own shares held
-
at 31 December 2023, 12 million ordinary shares of \u00a31.0769 each of
the company (2022 - 13 million) were held by employee share trusts in respect of share
awards and options granted to employees. During 2023, the employee share trusts
purchased no ordinary shares and delivered 1 million ordinary shares in satisfaction of
the exercise of options and the vesting of share awards under the employee share plans.
The company retains the flexibility to use newly issued shares, shares purchased by the
NatWest Group Employee Share Ownership Trust and any available treasury shares to
satisfy obligations under its employee share plans.
The company does not use
performance conditions or targets based on earnings per share (EPS), total shareholder
return (TSR), and net asset value (NAV) in connection with its employee share plans.
As part of the shares bought back from HMT in March 2021 and May 2023, the
company transferred 200 million ordinary shares and 133 million ordinary shares,
respectively, to own shares held. The company has used a total of 146 million treasury
shares to satisfy the exercise of options and the vesting of share awards under the
employee share plans. The balance of ordinary shares held in treasury as at 31
December 2023 was 187 million.
NatWest Group plc optimises capital efficiency by maintaining reserves in subsidiaries,
including regulated entities. Certain preference shares and subordinated debt are also
included within regulatory capital. The remittance of reserves to the company or the
redemption of shares or subordinated capital by regulated entities may be subject to
maintaining the capital resources required by the relevant regulator.
UK law prescribes that only the reserves of the company are taken into account for the
purpose of making distributions and in determining permissible applications of the share
premium account.", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81871": { "value": "3.10. Capital instruments
We classify a financial instrument that we issue as a liability if it is a contractual obligation
to deliver cash or another financial asset, or to exchange financial assets or financial
liabilities on potentially unfavourable terms and as equity if we evidence a residual
interest in our assets after the deduction of liabilities. Incremental costs and related tax
that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known
as treasury shares or own shares held) is deducted from retained earnings. On the
cancellation of treasury shares their nominal value is removed from retained earnings
and a consequential amount recognised in capital redemption in compliance with the
Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are
credited to equity, net of any directly attributable incremental costs.22 Share capital and other equity
Share capital consists of ordinary shares and preference shares and is measured as the number of shares allotted and fully paid, multiplied by the nominal value of a
share. Other equity includes paid-in equity, merger reserve, capital redemption reserve and own shares held.
For accounting policy information refer to Accounting policy 3.10.
\u00a0 \u00a0 \u00a0
Number of shares
\u00a0
2023
2022
2023
2022
Allotted, called up and fully paid
\u00a3m
\u00a3m
000s
000s
Ordinary shares of \u00a31.0769
(1)
9,683
10,539
8,991,737
9,786,024
Cumulative preference shares of \u00a31
0.5
0.5
483.0
483.0
\n
(1)
The nominal value of ordinary shares without rounding is \u00a31.076923076923077 per share.
Movement in allotted, called up and fully paid
\u00a0
Number of shares
ordinary shares
\u00a3m
000s
At 1 January 2022
11,468
11,467,982
Share cancellation
(929)
(929,188)
Share consolidation
-
(752,770)
At 31 December 2022
10,539
9,786,024
Share cancellation
(856)
(794,287)
At 31 December 2023
9,683
8,991,737
\n
Ordinary shares
There is no authorised share capital under the company\u2019s constitution. At 31 December
2023, the directors had authority granted at the 2023 Annual General Meeting (AGM) to
issue up to \u00a3520,573,270 nominal of ordinary shares other than by pre-emption to
existing shareholders.
On-market purchases
At the AGM in 2022, shareholders authorised the company to make market purchases of
up to 1,122,905,024 ordinary shares. The authority was amended at the General
Meeting held on 25 August 2022 to preserve the position as if the August 2022 share
consolidation had not taken place.
The directors used the authority obtained at the 2022 AGM (2022 Authority) to carry out
a share buyback programme (Programme) of up to \u00a3800 million, as announced to the
market on 17 February 2023. The Programme\u2019s purpose is to reduce the ordinary share
capital of NatWest Group. The maximum number of ordinary shares that could be
purchased under the Programme was 966,284,391. This number reflects the impact on
the 2022 Authority of the reduction in issued share capital following the off-market
buyback announced on 28 March 2022.
The Programme commenced on 20 February 2023 and completed on 16 June 2023.
The company purchased 301,380,053 ordinary shares (nominal value \u00a3324,563,134) at
an average price of 265.4456 pence per ordinary share, for the total consideration of
\u00a3799,999,997.76. All of the purchased ordinary shares were cancelled, representing
3.16% of the company\u2019s issued ordinary share capital. At the AGM in 2023, shareholders
renewed the authority for the company to make market purchases of up to 966,778,930
ordinary shares.
The directors used the authority obtained at the 2023 AGM (2023 Authority) to carry out
a Programme of up to \u00a3500 million, as announced to the market on 28 July 2023. The
maximum number of ordinary shared that can be purchased under the Programme is
919,858,922. This number reflects the impact on the 2023 Authority of the reduction in
issued share capital following the off-market buyback announced on 22 May 2023.
The Programme commenced on 31 July 2023 and will end no later than 14 March 2024.
As at 31 December 2023 158,956,435 ordinary shares (nominal
value \u00a3171,183,853)
had been purchased by the company at an average price of 217.6375 pence per
ordinary share for the total consideration of \u00a3345,948,738. All of the purchased ordinary
shares were cancelled, representing 1.75% of the company\u2019s issued ordinary share
capital.
Shareholders will be asked to renew the authority for the company to make market
purchases of ordinary shares at the AGM in 2024.
Off-market purchases
At a General Meeting held on 6 February 2019, shareholders approved a special
resolution authorising the company to make off-market purchases of up to 4.99% of its
issued ordinary share capital in any 12-month period from HMT
(or its nominee). Full
details are set out
in the Circular and Notice of General Meeting available at
natwestgroup.com. Amendments to the Directed Buyback Contract were approved by
the shareholders at a General Meeting on 25 August 2022. The authority for the
company to make off-market purchases of its ordinary shares from HMT (or its nominee)
under the terms of the Directed Buyback Contract was renewed at the AGM in 2023.
The company used the authority obtained at the 2023 AGM
to make an off-market
purchase of 469,200,081 ordinary shares (nominal value \u00a3505,292,395) in the company
from HMT on 22 May 2023, at a price of 268.4 pence per ordinary share for the total
consideration of \u00a31,259,333,017, representing 4.95% of
the company\u2019s issued ordinary
share capital. The company cancelled 336,200,081 of the purchased ordinary shares and
transferred the remaining 133,000,000 ordinary shares to own shares held.
Shareholders will be asked to renew the authority for the company to make off-market
purchases of its ordinary shares from HMT
(or its nominee) at the AGM in 2024.
Dividends
In 2023 NatWest Group paid an interim dividend of \u00a3491 million, or 5.5 pence per
ordinary share (2022 \u2013 \u00a3364 million, or 3.5 pence per ordinary share).
The
company has announced that the directors have recommended a final dividend of
\u00a31.0 billion, or 11.5 pence per ordinary share
(2022 \u2013 \u00a31.0 billion, or 10.0 pence per
ordinary share). The final dividend recommended by directors is subject to shareholders\u2019
approval at the AGM on 23 April 2024. If approved, payment will be made on 29 April
2024 to shareholders on the register at the close of business on 15 March 2024. The ex-
dividend date will be 14 March 2024.
Cumulative preference shares
At the AGM in 2023, shareholders renewed the authority for the company to make an
off-market purchase of its preference shares. Shareholders will be asked to renew the
authority at the AGM in 2024.
Other equity
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Additional Tier 1 notes
\u00a0 \u00a0 \u00a0
US$1.15 billion 8.000% notes callable August 2025
(1)
735
735
735
US$1.50 billion 6.000% notes callable
\u00a0 \u00a0 \u00a0
December 2025 - June 2026
(2)
1,220
1,220
1,220
GBP\u00a31.00 billion 5.125% notes callable May - November 2027
(3)
998
998
998
GBP\u00a30.40 billion \u2013 March 2028 callable
(4)
399
399
399
US$0.75 billion \u2013 June 2031 callable
(5)
538
538
538
\u00a0
3,890
3,890
3,890
\n
(1)
Issued in August 2015. In the event of conversion, converted into ordinary shares at a price of $3.314 per share.
(2)
Issued in June 2020. In the event of conversion, converted into ordinary shares at a price of $2.191 (translated at
applicable exchange rate) per share.
(3)
Issued in November 2020. In the event of conversion, converted into ordinary shares at a price of \u00a31.764 per share.
(4)
Issued in March 2021. In the event of conversion, converted into ordinary shares at a price of \u00a31.764 per share.
(5)
Issued in June 2021. In the event of conversion, converted into ordinary shares at a price of $2.462 (translated at
applicable exchange rate) per share.
Paid-in equity
-
comprises equity instruments issued by the company other than those
legally constituted as shares.
Additional Tier 1 instruments issued by NatWest Group plc having the legal form of debt
are classified as equity under IFRS. The coupons on these instruments are non-
cumulative and payable at the company\u2019s discretion. In the event NatWest Group\u2019s CET1
ratio falls below 7% any outstanding instruments will be converted into ordinary shares at
a fixed price.
Capital recognised for regulatory purposes cannot be redeemed without Prudential
Regulation Authority consent. This includes ordinary shares, preference shares and
additional Tier 1
instruments.
M
M
erger reserve
-
the merger reserve comprises the premium on shares issued to
acquire NatWest Bank Plc less goodwill amortisation charged under previous GAAP.
C
C
apital redemption reserve -
under UK companies legislation, when shares are
redeemed or purchased wholly or partly out of the company's profits, the amount by
which the company's issued share capital is diminished must be transferred to the capital
redemption reserve. The capital maintenance provisions of UK companies legislation
apply to the capital redemption reserve as if it were part of the company\u2019s paid up share
capital. The nominal value of the shares bought back from HMT in March 2023 and via
the Programme during 2023 have been transferred to the Capital redemption reserve.
Own shares held
-
at 31 December 2023, 12 million ordinary shares of \u00a31.0769 each of
the company (2022 - 13 million) were held by employee share trusts in respect of share
awards and options granted to employees. During 2023, the employee share trusts
purchased no ordinary shares and delivered 1 million ordinary shares in satisfaction of
the exercise of options and the vesting of share awards under the employee share plans.
The company retains the flexibility to use newly issued shares, shares purchased by the
NatWest Group Employee Share Ownership Trust and any available treasury shares to
satisfy obligations under its employee share plans.
The company does not use
performance conditions or targets based on earnings per share (EPS), total shareholder
return (TSR), and net asset value (NAV) in connection with its employee share plans.
As part of the shares bought back from HMT in March 2021 and May 2023, the
company transferred 200 million ordinary shares and 133 million ordinary shares,
respectively, to own shares held. The company has used a total of 146 million treasury
shares to satisfy the exercise of options and the vesting of share awards under the
employee share plans. The balance of ordinary shares held in treasury as at 31
December 2023 was 187 million.
NatWest Group plc optimises capital efficiency by maintaining reserves in subsidiaries,
including regulated entities. Certain preference shares and subordinated debt are also
included within regulatory capital. The remittance of reserves to the company or the
redemption of shares or subordinated capital by regulated entities may be subject to
maintaining the capital resources required by the relevant regulator.
UK law prescribes that only the reserves of the company are taken into account for the
purpose of making distributions and in determining permissible applications of the share
premium account.", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81885": { "value": "The consideration for any ordinary shares of NatWest Group plc purchased by us (known
as treasury shares or own shares held) is deducted from retained earnings. On the
cancellation of treasury shares their nominal value is removed from retained earnings
and a consequential amount recognised in capital redemption in compliance with the
Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are
credited to equity, net of any directly attributable incremental costs.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81903": { "value": "3.11. Derivatives and hedgingHedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81904": { "value": "3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f81905": { "value": "3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as
interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all
derivatives used to manage risk are in hedge accounting relationships (an IFRS method
to reduce accounting mismatch from changes in the fair value of the derivatives reported
in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in
hedge relationships are recognised in Income from trading activities unless those
derivatives are managed together with financial instruments designated at fair value;
these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with
the requirements of IAS 39 Financial instruments \u2013 Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the
risk that is being hedged and the way in which effectiveness will be assessed at inception
and during the period of the hedge. When designating a hedging relationship, we
consider: the economic relationship between the hedged item (including the risk being
hedged) and the hedging instrument; the nature of the risk; the risk management
objective and strategy for undertaking the hedge; and the appropriateness of the
method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a
prospective and retrospective basis. This is assessed using regression techniques which
model the degree of offsetting between the changes in fair value or cash flows
attributable to the hedged risk and the changes in fair value of the designated hedging
derivatives. Ineffectiveness is measured based on actual levels of offsetting and
recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge
- the gain or loss on the hedging instrument and the hedged item
attributable to the hedged risk is recognised in the income statement. Where the hedged
item is measured at amortised cost, the balance sheet amount of the hedged item is also
adjusted.
Cash flow hedge
- the effective portion of the designated hedge relationship is
recognised in other comprehensive income and the ineffective portion in the income
statement. When the hedged item (forecasted cash flows) results in the recognition of a
financial asset or financial liability, the cumulative gain or loss is reclassified from equity to
the income statement in the same periods in which the hedged forecasted cash flows
affect the income statement.
H
H
edge of net investment in a foreign operation
-
in the hedge of a net investment in a
foreign operation, the effective portion of the designated hedge relationship is recognised
in other comprehensive income. Any ineffective portion is recognised in profit or loss.
Non-derivative financial liabilities as well as derivatives may be designated as a hedging
instrument in a net investment hedge.
D
D
iscontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge
accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash
flows attributable to the hedged risk, consistent with the documented risk management
strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge
designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement
over the life of the hedged item. Where the hedged item is no longer on the balance
sheet the adjustment to the hedged item is reported in the income statement. For cash
flow hedging the cumulative unrealised gain or loss is reclassified from equity to the
income statement when the hedged cash flows occur or, if the forecast transaction
results in the recognition of a financial asset or financial liability, when the hedged
forecast cash flows affect the income statement. Where a forecast transaction is no
longer expected to occur, the cumulative unrealised gain or loss is reclassified from
equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the
amount accumulated in equity is reclassified from equity to the income statement.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f82103": { "value": "4. Future accounting developments
International Financial Reporting Standards
Effective 1 January 2024
\ue001
Classification of Liabilities as Current or Non-current (Amendments to IAS 1);
\ue001
Non-current Liabilities with Covenants (Amendments to IAS 1)
\ue001
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
\ue001
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
Effective 1 January 2025
\ue001
Lack of Exchangeability (Amendments to IAS 21)
We are assessing the effect of adopting these amendments on our financial statements
but do not expect the effect to be material.", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f82104": { "value": "4. Future accounting developments
International Financial Reporting Standards
Effective 1 January 2024
\ue001
Classification of Liabilities as Current or Non-current (Amendments to IAS 1);
\ue001
Non-current Liabilities with Covenants (Amendments to IAS 1)
\ue001
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
\ue001
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
Effective 1 January 2025
\ue001
Lack of Exchangeability (Amendments to IAS 21)
We are assessing the effect of adopting these amendments on our financial statements
but do not expect the effect to be material.", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesAccountingEstimatesAndErrorsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f82158": { "value": "1 Net interest income
Net interest income is the difference between the interest NatWest Group earns from its interest-bearing assets, such as loans, balances with central banks and other
financial assets, and the interest paid on its interest-bearing liabilities, such as deposits and subordinated liabilities.
Interest receivable on financial instruments classified as amortised cost, debt instruments classified as FVOCI and the interest element of the effective portion of any designated hedging
relationships are measured using the effective interest rate, which allocates the interest receivable or interest payable over the expected life of the financial instrument at the rate that
exactly discounts all estimated future cash flows to equal the financial instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable or
receivable that are an integral part of the financial instrument\u2019s yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs. All contractual terms
of a financial instrument are considered when estimating future cash flows. Negative interest on financial
assets is presented in interest payable and negative interest on
financial
liabilities is presented in interest receivable.
Included in interest receivable is finance lease income of \u00a3484 million (2022 - \u00a3314 million; 2021 - \u00a3298 million) which is recognised at a
constant periodic rate of return before tax on the net investment.
For accounting policy information refer to Accounting policy 3.1.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Balances at central banks and loans to banks - amortised cost
3,737
1,987
445
Loans to customers - amortised cost
15,553
10,085
8,536
Other financial assets
1,736
565
253
Interest receivable
21,026
12,637
9,234
Balances with banks
1,039
379
204
Customer deposits
5,276
785
556
Other financial liabilities
2,977
1,196
670
Subordinated liabilities
464
370
267
Internal funding of trading businesses
221
65
2
Interest payable
9,977
2,795
1,699
Net interest income
11,049
9,842
7,535
\n
(1)
Comparative results have been re-presented from those previously published to reclassify certain items as discontinued operations as described in Note 8 to the consolidated financial statements.
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Net fees and commissions
(2)
2,330
2,292
2,120
Trading income
\u00a0 \u00a0 \u00a0
Foreign exchange
270
305
364
Interest rate
(3)
595
752
(130)
Credit
(72)
17
83
Changes in fair value of own debt and derivative liabilities
\u00a0 \u00a0 \u00a0
attributable to own credit risk - debt securities in issue
(2)
42
6
Equities, commodities and other
3
17
-
\u00a0
794
1,133
323
Other operating income
\u00a0 \u00a0 \u00a0
Gain/(loss) on redemption of own debt
3
(161)
(145)
Rental income on operating lease assets and investment property
234
230
225
Changes in fair value of financial assets and liabilities designated at fair value
\u00a0 \u00a0 \u00a0
through profit or loss
(4)
(150)
17
(8)
Changes in fair value of other financial assets at fair value through profit or loss
(5)
50
(45)
5
Hedge ineffectiveness
52
(20)
25
Loss on disposal of amortised cost assets and liabilities
(5)
(15)
(15)
(Loss)/profit on disposal of fair value through other comprehensive income assets
(43)
(168)
117
Loss on sale of property, plant and equipment
(21)
(5)
(30)
Share of (losses)/profits of associated entities
(9)
(30)
216
Profit on disposal of subsidiaries and associates
-
-
48
Foreign exchange recycling gains/(losses)
484
5
(10)
Other income
(6)
(16)
81
23
\u00a0
579
(111)
451
\u00a0
3,703
3,314
2,894
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f82159": { "value": "1 Net interest income
Net interest income is the difference between the interest NatWest Group earns from its interest-bearing assets, such as loans, balances with central banks and other
financial assets, and the interest paid on its interest-bearing liabilities, such as deposits and subordinated liabilities.
Interest receivable on financial instruments classified as amortised cost, debt instruments classified as FVOCI and the interest element of the effective portion of any designated hedging
relationships are measured using the effective interest rate, which allocates the interest receivable or interest payable over the expected life of the financial instrument at the rate that
exactly discounts all estimated future cash flows to equal the financial instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable or
receivable that are an integral part of the financial instrument\u2019s yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs. All contractual terms
of a financial instrument are considered when estimating future cash flows. Negative interest on financial
assets is presented in interest payable and negative interest on
financial
liabilities is presented in interest receivable.
Included in interest receivable is finance lease income of \u00a3484 million (2022 - \u00a3314 million; 2021 - \u00a3298 million) which is recognised at a
constant periodic rate of return before tax on the net investment.
For accounting policy information refer to Accounting policy 3.1.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Balances at central banks and loans to banks - amortised cost
3,737
1,987
445
Loans to customers - amortised cost
15,553
10,085
8,536
Other financial assets
1,736
565
253
Interest receivable
21,026
12,637
9,234
Balances with banks
1,039
379
204
Customer deposits
5,276
785
556
Other financial liabilities
2,977
1,196
670
Subordinated liabilities
464
370
267
Internal funding of trading businesses
221
65
2
Interest payable
9,977
2,795
1,699
Net interest income
11,049
9,842
7,535
\n
(1)
Comparative results have been re-presented from those previously published to reclassify certain items as discontinued operations as described in Note 8 to the consolidated financial statements.
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Net fees and commissions
(2)
2,330
2,292
2,120
Trading income
\u00a0 \u00a0 \u00a0
Foreign exchange
270
305
364
Interest rate
(3)
595
752
(130)
Credit
(72)
17
83
Changes in fair value of own debt and derivative liabilities
\u00a0 \u00a0 \u00a0
attributable to own credit risk - debt securities in issue
(2)
42
6
Equities, commodities and other
3
17
-
\u00a0
794
1,133
323
Other operating income
\u00a0 \u00a0 \u00a0
Gain/(loss) on redemption of own debt
3
(161)
(145)
Rental income on operating lease assets and investment property
234
230
225
Changes in fair value of financial assets and liabilities designated at fair value
\u00a0 \u00a0 \u00a0
through profit or loss
(4)
(150)
17
(8)
Changes in fair value of other financial assets at fair value through profit or loss
(5)
50
(45)
5
Hedge ineffectiveness
52
(20)
25
Loss on disposal of amortised cost assets and liabilities
(5)
(15)
(15)
(Loss)/profit on disposal of fair value through other comprehensive income assets
(43)
(168)
117
Loss on sale of property, plant and equipment
(21)
(5)
(30)
Share of (losses)/profits of associated entities
(9)
(30)
216
Profit on disposal of subsidiaries and associates
-
-
48
Foreign exchange recycling gains/(losses)
484
5
(10)
Other income
(6)
(16)
81
23
\u00a0
579
(111)
451
\u00a0
3,703
3,314
2,894
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f82160": { "value": "1 Net interest income
Net interest income is the difference between the interest NatWest Group earns from its interest-bearing assets, such as loans, balances with central banks and other
financial assets, and the interest paid on its interest-bearing liabilities, such as deposits and subordinated liabilities.
Interest receivable on financial instruments classified as amortised cost, debt instruments classified as FVOCI and the interest element of the effective portion of any designated hedging
relationships are measured using the effective interest rate, which allocates the interest receivable or interest payable over the expected life of the financial instrument at the rate that
exactly discounts all estimated future cash flows to equal the financial instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable or
receivable that are an integral part of the financial instrument\u2019s yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs. All contractual terms
of a financial instrument are considered when estimating future cash flows. Negative interest on financial
assets is presented in interest payable and negative interest on
financial
liabilities is presented in interest receivable.
Included in interest receivable is finance lease income of \u00a3484 million (2022 - \u00a3314 million; 2021 - \u00a3298 million) which is recognised at a
constant periodic rate of return before tax on the net investment.
For accounting policy information refer to Accounting policy 3.1.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Balances at central banks and loans to banks - amortised cost
3,737
1,987
445
Loans to customers - amortised cost
15,553
10,085
8,536
Other financial assets
1,736
565
253
Interest receivable
21,026
12,637
9,234
Balances with banks
1,039
379
204
Customer deposits
5,276
785
556
Other financial liabilities
2,977
1,196
670
Subordinated liabilities
464
370
267
Internal funding of trading businesses
221
65
2
Interest payable
9,977
2,795
1,699
Net interest income
11,049
9,842
7,535
\n
(1)
Comparative results have been re-presented from those previously published to reclassify certain items as discontinued operations as described in Note 8 to the consolidated financial statements.
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Net fees and commissions
(2)
2,330
2,292
2,120
Trading income
\u00a0 \u00a0 \u00a0
Foreign exchange
270
305
364
Interest rate
(3)
595
752
(130)
Credit
(72)
17
83
Changes in fair value of own debt and derivative liabilities
\u00a0 \u00a0 \u00a0
attributable to own credit risk - debt securities in issue
(2)
42
6
Equities, commodities and other
3
17
-
\u00a0
794
1,133
323
Other operating income
\u00a0 \u00a0 \u00a0
Gain/(loss) on redemption of own debt
3
(161)
(145)
Rental income on operating lease assets and investment property
234
230
225
Changes in fair value of financial assets and liabilities designated at fair value
\u00a0 \u00a0 \u00a0
through profit or loss
(4)
(150)
17
(8)
Changes in fair value of other financial assets at fair value through profit or loss
(5)
50
(45)
5
Hedge ineffectiveness
52
(20)
25
Loss on disposal of amortised cost assets and liabilities
(5)
(15)
(15)
(Loss)/profit on disposal of fair value through other comprehensive income assets
(43)
(168)
117
Loss on sale of property, plant and equipment
(21)
(5)
(30)
Share of (losses)/profits of associated entities
(9)
(30)
216
Profit on disposal of subsidiaries and associates
-
-
48
Foreign exchange recycling gains/(losses)
484
5
(10)
Other income
(6)
(16)
81
23
\u00a0
579
(111)
451
\u00a0
3,703
3,314
2,894
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f82161": { "value": "1 Net interest income
Net interest income is the difference between the interest NatWest Group earns from its interest-bearing assets, such as loans, balances with central banks and other
financial assets, and the interest paid on its interest-bearing liabilities, such as deposits and subordinated liabilities.
Interest receivable on financial instruments classified as amortised cost, debt instruments classified as FVOCI and the interest element of the effective portion of any designated hedging
relationships are measured using the effective interest rate, which allocates the interest receivable or interest payable over the expected life of the financial instrument at the rate that
exactly discounts all estimated future cash flows to equal the financial instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable or
receivable that are an integral part of the financial instrument\u2019s yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs. All contractual terms
of a financial instrument are considered when estimating future cash flows. Negative interest on financial
assets is presented in interest payable and negative interest on
financial
liabilities is presented in interest receivable.
Included in interest receivable is finance lease income of \u00a3484 million (2022 - \u00a3314 million; 2021 - \u00a3298 million) which is recognised at a
constant periodic rate of return before tax on the net investment.
For accounting policy information refer to Accounting policy 3.1.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Balances at central banks and loans to banks - amortised cost
3,737
1,987
445
Loans to customers - amortised cost
15,553
10,085
8,536
Other financial assets
1,736
565
253
Interest receivable
21,026
12,637
9,234
Balances with banks
1,039
379
204
Customer deposits
5,276
785
556
Other financial liabilities
2,977
1,196
670
Subordinated liabilities
464
370
267
Internal funding of trading businesses
221
65
2
Interest payable
9,977
2,795
1,699
Net interest income
11,049
9,842
7,535
\n
(1)
Comparative results have been re-presented from those previously published to reclassify certain items as discontinued operations as described in Note 8 to the consolidated financial statements.
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n
\n
\n
\n\n
\n
\n
2 Non-interest income
There are three main categories of non-interest income: net fees and commissions, trading income, and other operating income.
Net fees and commissions is the difference between fees received from customers for services provided by NatWest Group, such as credit card annual fees, underwriting
fees, payment services, brokerage fees, trade finance, investment management fees, trustee and fiduciary services, and fees incurred in the provision of those services,
such as credit card interchange fees, customer incentives, loan administration, foreign currency transaction charges, and brokerage fees.
Trading income is earned from short-term financial assets and financial liabilities to either make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
Other operating income includes revenue from other operating activities which are not related to the principal activities of the company, such as: share of profit or loss
from associates; operating lease income; the profit or loss on the sale of a subsidiary; or property, plant and equipment; profit or loss on own debt; and changes in the fair
value of financial assets and liabilities designated at fair value through profit or loss.
For accounting policy information refer to Accounting policies 3.1 and 3.6
.
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Net fees and commissions
(2)
2,330
2,292
2,120
Trading income
\u00a0 \u00a0 \u00a0
Foreign exchange
270
305
364
Interest rate
(3)
595
752
(130)
Credit
(72)
17
83
Changes in fair value of own debt and derivative liabilities
\u00a0 \u00a0 \u00a0
attributable to own credit risk - debt securities in issue
(2)
42
6
Equities, commodities and other
3
17
-
\u00a0
794
1,133
323
Other operating income
\u00a0 \u00a0 \u00a0
Gain/(loss) on redemption of own debt
3
(161)
(145)
Rental income on operating lease assets and investment property
234
230
225
Changes in fair value of financial assets and liabilities designated at fair value
\u00a0 \u00a0 \u00a0
through profit or loss
(4)
(150)
17
(8)
Changes in fair value of other financial assets at fair value through profit or loss
(5)
50
(45)
5
Hedge ineffectiveness
52
(20)
25
Loss on disposal of amortised cost assets and liabilities
(5)
(15)
(15)
(Loss)/profit on disposal of fair value through other comprehensive income assets
(43)
(168)
117
Loss on sale of property, plant and equipment
(21)
(5)
(30)
Share of (losses)/profits of associated entities
(9)
(30)
216
Profit on disposal of subsidiaries and associates
-
-
48
Foreign exchange recycling gains/(losses)
484
5
(10)
Other income
(6)
(16)
81
23
\u00a0
579
(111)
451
\u00a0
3,703
3,314
2,894
\n
(1)
Comparative results have been re-presented from those previously published
to reclassify certain items as discontinued operations as described in Note 8 to
the consolidated financial statements.
(2)
Refer to Note 4 for further analysis.
(3)
Includes fair value changes on derivatives which have not been designated in
a hedge accounting relationship and gains and losses from the management
of the NatWest Group\u2019s funding requirements involving the use of derivatives
including foreign exchange. These are aimed at managing the interest rate
and foreign exchange risk that NatWest Group is exposed to.
(4)
Includes related derivatives.
(5)
Includes instruments that have failed solely payments of principal and interest
testing under IFRS 9.
(6)
2022 includes \u00a392 million profit from insurance liabilities.4 Segmental analysis
NatWest Group analyses its performance between the different operating segments of the Group as required by IFRS 8, Operating segments. The presentation is
consistent with internal financial reporting and how senior management assesses the performance of each operating segment
Reportable operating segments:
The business is organised into the following reportable
segments: Retail Banking, Private Banking, Commercial &
Institutional, and Central items & other.
Retail Banking
serves personal customers in the UK, including
Ulster Bank customers in Northern Ireland.
Private Banking
serves UK-connected high-net-worth
individuals and their business interests.
Commercial & Institutional
consists of customer businesses
reported under Business Banking, Commercial Mid-market
and Corporate & Institutions, supporting our customers across
the full non-personal customer lifecycle, both domestically and
internationally. Our Markets offering helps our customers
manage financial risks across different geographies, while our
International offering provides full-service banking operations
in the Channel Islands, Isle of Man, Gibraltar and Luxembourg.
Central items & other
includes corporate functions, such as
treasury, finance, risk management, compliance, legal,
communications and human resources. Central functions
manage NatWest Group capital resources and NatWest
Group-wide regulatory projects and provide services to the
reportable segments.
Central items & other includes
businesses and amounts not directly related to any of the
other reportable segments. Ulster Bank RoI is no longer an
operating segment and its continuing operations now form
part of Central items & other.
Allocation of central balance sheet items
NatWest Group allocates all central costs relating to central
functions to the business using appropriate drivers; these are
reported as indirect costs in the segmental income
statements. Assets and risk-weighted assets held centrally,
mainly relating to NatWest Group Treasury, are allocated to
the business using appropriate drivers
.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Retail
Private
Commercial &
Central items
\u00a0
\u00a0
Banking
Banking
Institutional
& other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
\u00a0\u00a0\u00a0\u00a0\u00a0
Net interest income
5,496
710
5,044
(201)
11,049
Net fees and commissions
427
249
1,654
-
2,330
Other non-interest income
8
31
723
611
1,373
Total income
5,931
990
7,421
410
14,752
Depreciation and amortisation
(1)
(1)
(154)
(778)
(934)
Other operating expenses
(2,827)
(684)
(3,937)
386
(7,062)
Impairment losses
(465)
(14)
(94)
(5)
(578)
Operating profit
2,638
291
3,236
13
6,178
2022
\u00a0\u00a0\u00a0\u00a0\u00a0
Continuing operations
\u00a0\u00a0\u00a0\u00a0\u00a0
Net interest income
5,224
777
4,171
(330)
9,842
Net fees and commissions
422
250
1,580
40
2,292
Other non-interest income
-
29
662
331
1,022
Total income
5,646
1,056
6,413
41
13,156
Depreciation and amortisation
-
-
(161)
(672)
(833)
Other operating expenses
(2,593)
(622)
(3,583)
(56)
(6,854)
Impairment (losses)/releases
(229)
2
(122)
12
(337)
Operating profit/(loss)
2,824
436
2,547
(675)
5,132
2021
\u00a0\u00a0\u00a0\u00a0\u00a0
Continuing operations
\u00a0\u00a0\u00a0\u00a0\u00a0
Net interest income
4,074
480
2,974
7
7,535
Net fees and commissions
377
258
1,440
45
2,120
Other non-interest income
(6)
78
424
278
774
Total income
4,445
816
4,838
330
10,429
Depreciation and amortisation
(85)
-
(173)
(665)
(923)
Other operating expenses
(2,428)
(520)
(3,584)
(303)
(6,835)
Impairment releases/(losses)
36
54
1,160
(77)
1,173
Operating profit/(loss)
1,968
350
2,241
(715)
3,844
\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Total revenue
\n
(1)
\n\n \n
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
External
7,366
1,157
12,519
4,340
25,382
Inter-segmental
(4)
5
1,000
(1,602)
597
-
Total
7,371
2,157
10,917
4,937
25,382
2022
Continuing operations
External
5,773
874
7,258
2,669
16,574
Inter-segmental
(4)
-
389
(395)
6
-
Total
5,773
1,263
6,863
2,675
16,574
2021
Continuing operations
External
5,415
792
5,189
1,306
12,702
Inter-segmental
(4)
18
127
102
(247)
-
Total
5,433
919
5,291
1,059
12,702
\n
Total income
\n\n \n
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
External
4,170
327
7,730
2,525
14,752
Inter-segmental
(4)
1,761
663
(309)
(2,115)
-
Total
5,931
990
7,421
410
14,752
2022
Continuing operations
External
4,956
778
5,920
1,502
13,156
Inter-segmental
(4)
690
278
493
(1,461)
-
Total
5,646
1,056
6,413
41
13,156
2021
Continuing operations
External
4,933
801
4,634
61
10,429
Inter-segmental
(4)
(488)
15
204
269
-
Total
4,445
816
4,838
330
10,429
\n
For the notes to this table refer to page 321.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Analysis of net fees and commissions
\n\n \n
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
Fees and commissions receivable
- Payment services
324
32
671
3
1,030
- Credit and debit card fees
400
13
260
3
676
- Lending and financing
14
5
709
1
729
- Brokerage
35
6
42
-
83
- Investment management, trustee and fiduciary services
(2)
2
209
45
10
266
- Underwriting fees
-
-
123
-
123
- Other
4
5
73
(6)
76
Total
779
270
1,923
11
2,983
Fees and commissions payable
(352)
(21)
(269)
(11)
(653)
Net fees and commissions
427
249
1,654
-
2,330
2022
Continuing operations
Fees and commissions receivable
- Payment services
314
25
642
43
1,024
- Credit and debit card fees
401
15
227
18
661
- Lending and financing
17
8
673
3
701
- Brokerage
43
6
44
-
93
- Investment management, trustee and fiduciary services
(2)
4
219
46
-
269
- Underwriting fees
-
-
120
-
120
- Other
-
3
88
(44)
47
Total
779
276
1,840
20
2,915
Fees and commissions payable
(357)
(26)
(260)
20
(623)
Net fees and commissions
422
250
1,580
40
2,292
2021
Fees and commissions receivable
- Payment services
306
35
577
49
967
- Credit and debit card fees
344
10
149
19
522
- Lending and financing
13
10
643
4
670
- Brokerage
48
6
42
-
96
- Investment management, trustee and fiduciary services
(2)
3
230
45
2
280
- Underwriting fees
-
-
127
-
127
- Other
-
35
109
(112)
32
Total
714
326
1,692
(38)
2,694
Fees and commissions payable
(337)
(68)
(252)
83
(574)
Net fees and commissions
377
258
1,440
45
2,120
\n
For the notes to this table refer to page 321.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Retail Banking
228,684
191,936
226,375
192,282
209,973
192,715
Private Banking
26,894
37,806
29,867
41,491
29,854
39,388
Commercial & Institutional
384,958
359,766
404,817
383,768
425,718
411,757
Central items & other
52,137
65,977
58,994
66,016
116,447
96,329
Total
692,673
655,485
720,053
683,557
781,992
740,189
\n
Segmental analysis of goodwill
The total carrying value of goodwill at 31 December 2023 was \u00a35,680 million (2022 -
\u00a35,522 million) comprising: Retail Banking \u00a32,607 million (2022 - \u00a32,607 million);
Commercial & Institutional \u00a32,905 million (2022 - \u00a32,906 million); Private Banking \u00a39
million (2022 - \u00a39 million) and Central items & other \u00a3159 million (2022 - nil).
Geographical segments
The geographical analysis in the tables below has been compiled on the basis of location
of office where the transactions are recorded.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
UK
USA
Europe
RoW
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Total revenue
24,096
167
1,016
103
25,382
Interest receivable
20,192
39
774
21
21,026
Interest payable
(9,500)
(1)
(472)
(4)
(9,977)
Net fees and commissions
2,052
49
172
57
2,330
Trading income
704
66
1
23
794
Other operating income
556
(10)
30
3
579
Total income
(3)
14,004
143
505
100
14,752
Operating profit/(loss) before tax
6,196
45
(149)
86
6,178
Total assets
610,831
23,725
56,001
2,116
692,673
Total liabilities
594,250
22,106
37,506
1,623
655,485
Contingent liabilities and
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
commitments
112,199
-
7,411
21
119,631
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
UK
USA
Europe
RoW
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Total revenue
15,795
117
558
104
16,574
Interest receivable
12,242
37
344
14
12,637
Interest payable
(2,567)
(2)
(221)
(5)
(2,795)
Net fees and commissions
1,983
44
207
58
2,292
Trading income
1,208
1
(104)
28
1,133
Other operating income
(140)
14
12
3
(111)
Total income
(3)
12,726
94
238
98
13,156
Operating profit/(loss) before tax
5,716
(46)
(620)
82
5,132
Total assets
589,758
25,979
101,164
3,152
720,053
Total liabilities
579,476
27,039
75,092
1,950
683,557
Contingent liabilities and
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
commitments
117,915
-
8,649
17
126,581
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
2021
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Continuing operations
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Total revenue
12,100
87
482
33
12,702
Interest receivable
8,949
20
257
8
9,234
Interest payable
(1,483)
(2)
(211)
(3)
(1,699)
Net fees and commissions
1,820
27
231
42
2,120
Trading income
247
53
(1)
24
323
Other operating income
387
2
62
-
451
Total income
(3)
9,920
100
338
71
10,429
Operating (loss)/profit before tax
4,143
48
(387)
40
3,844
Total assets
693,221
21,776
64,415
2,580
781,992
Total liabilities
676,684
23,286
38,835
1,384
740,189
Contingent liabilities and
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
commitments
117,225
1
8,114
27
125,367
\n
(1)
Total revenue comprises interest receivable, fees and commissions receivable, income from trading activities and other
operating income.
(2)
Comparisons with prior periods are affected by the transfer of the Private Client Advice business to Private Banking from
1 January 2021.
(3)
Total income excludes internal service fee income which has been calculated on a cost plus mark-up basis.
(4)
Revenue and income from transactions between segments of the group are now reported as inter-segment in both the
current and comparative information.", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueFromContractsWithCustomersExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f82382": { "value": "2 Non-interest income
There are three main categories of non-interest income: net fees and commissions, trading income, and other operating income.
Net fees and commissions is the difference between fees received from customers for services provided by NatWest Group, such as credit card annual fees, underwriting
fees, payment services, brokerage fees, trade finance, investment management fees, trustee and fiduciary services, and fees incurred in the provision of those services,
such as credit card interchange fees, customer incentives, loan administration, foreign currency transaction charges, and brokerage fees.
Trading income is earned from short-term financial assets and financial liabilities to either make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
Other operating income includes revenue from other operating activities which are not related to the principal activities of the company, such as: share of profit or loss
from associates; operating lease income; the profit or loss on the sale of a subsidiary; or property, plant and equipment; profit or loss on own debt; and changes in the fair
value of financial assets and liabilities designated at fair value through profit or loss.
For accounting policy information refer to Accounting policies 3.1 and 3.6
.
\u00a0
2023
2022
2021 (1)
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Net fees and commissions
(2)
2,330
2,292
2,120
Trading income
\u00a0 \u00a0 \u00a0
Foreign exchange
270
305
364
Interest rate
(3)
595
752
(130)
Credit
(72)
17
83
Changes in fair value of own debt and derivative liabilities
\u00a0 \u00a0 \u00a0
attributable to own credit risk - debt securities in issue
(2)
42
6
Equities, commodities and other
3
17
-
\u00a0
794
1,133
323
Other operating income
\u00a0 \u00a0 \u00a0
Gain/(loss) on redemption of own debt
3
(161)
(145)
Rental income on operating lease assets and investment property
234
230
225
Changes in fair value of financial assets and liabilities designated at fair value
\u00a0 \u00a0 \u00a0
through profit or loss
(4)
(150)
17
(8)
Changes in fair value of other financial assets at fair value through profit or loss
(5)
50
(45)
5
Hedge ineffectiveness
52
(20)
25
Loss on disposal of amortised cost assets and liabilities
(5)
(15)
(15)
(Loss)/profit on disposal of fair value through other comprehensive income assets
(43)
(168)
117
Loss on sale of property, plant and equipment
(21)
(5)
(30)
Share of (losses)/profits of associated entities
(9)
(30)
216
Profit on disposal of subsidiaries and associates
-
-
48
Foreign exchange recycling gains/(losses)
484
5
(10)
Other income
(6)
(16)
81
23
\u00a0
579
(111)
451
\u00a0
3,703
3,314
2,894
\n
(1)
Comparative results have been re-presented from those previously published
to reclassify certain items as discontinued operations as described in Note 8 to
the consolidated financial statements.
(2)
Refer to Note 4 for further analysis.
(3)
Includes fair value changes on derivatives which have not been designated in
a hedge accounting relationship and gains and losses from the management
of the NatWest Group\u2019s funding requirements involving the use of derivatives
including foreign exchange. These are aimed at managing the interest rate
and foreign exchange risk that NatWest Group is exposed to.
(4)
Includes related derivatives.
(5)
Includes instruments that have failed solely payments of principal and interest
testing under IFRS 9.
(6)
2022 includes \u00a392 million profit from insurance liabilities.
3 Operating expenses
Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and
social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other
administrative expenses.
For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5.
\n\n\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Salaries
2,483
2,250
2,295
Bonus awards
353
334
267
Temporary and contract costs
199
234
240
Social security costs
352
328
300
Pension costs
313
363
354
- defined benefit schemes (Note 5)
122
205
215
- defined contribution schemes
191
158
139
Other
201
207
220
Staff costs
3,901
3,716
3,676
Premises and equipment
1,153
1,112
1,133
UK bank levy
109
101
99
Depreciation and amortisation
(1,2)
934
833
923
Other administrative expenses
(3)
1,899
1,925
1,927
Administrative expenses
4,095
3,971
4,082
\u00a0
7,996
7,687
7,758
\n
(1)
Includes depreciation of right of use assets of \u00a3104 million (2022 - \u00a3119 million; 2021 - \u00a3167 million).
(2)
2021 includes impairment of goodwill of \u00a385 million.
(3)
Includes litigation and conduct costs, net of amounts recovered. Refer to Note 21 for further details.
The average number of persons employed, rounded to the nearest hundred, during the
year, excluding temporary staff, was 61,500 (2022 - 60,000; 2021 \u2013 59,200). The
average number of temporary employees during 2023 was 2,100 (2022 \u2013 2,500; 2021 \u2013
2,500).
The number of persons employed at 31 December, excluding temporary staff, by
reportable segment, was as follows:
\n \n
Continuing operations
2023
2022 (1)
2021 (1)
Retail Banking
14,300
15,100
16,000
Private Banking
2,400
2,300
2,000
Commercial & Institutional
12,400
12,200
11,700
Central items & other
(2)
32,500
31,400
28,100
Total
61,600
61,000
57,800
UK
41,500
41,200
40,600
USA
300
300
300
India
16,900
15,700
13,500
Poland
1,500
1,500
1,400
Republic of Ireland
400
1,400
1,200
Rest of the World
1,000
900
800
Total
61,600
61,000
57,800
(1)
Comparatives have been re-presented to reflect the movement of headcount across segments due to segment
reorganisation.
(2)
Central items & other includes Ulster Bank RoI. The total number of persons employed in Ulster Bank RoI of 500 (2022 \u2013
2,200; 2021 \u2013 2,400) includes nil people employed in discontinued operations at 31 December 2023 (2022 \u2013 400; 2021 \u2013
700).
\n
\n
Share-based payments
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
Award plan
Eligible employees
Nature of award
Vesting conditions (1)
Settlement
Sharesave
UK, Channel Islands, Gibraltar, Isle
Option to buy shares under
Continuing employment or leavers in certain circumstances
2024 to 2028
\u00a0
of Man, Poland and India.
employee savings plan
\u00a0 \u00a0
Deferred performance
All
Awards of ordinary shares
Continuing employment or leavers in certain circumstances
2024 to 2031
awards
\u00a0
and conditional shares
\u00a0 \u00a0
Long-term incentives
(2,3)
Senior employees
Awards of ordinary shares
Continuing employment or leavers in certain circumstances and/or
2024 to 2030
\u00a0 \u00a0
and conditional shares
satisfaction of the pre-vesting assessment and underpins
\u00a0
\n
(1)
All awards have vesting conditions which may not be met.
(2)
Long-term incentives include buy-out awards offered to compensate certain new hires for the loss of forfeited awards from their previous employment.
All awards are granted under the Employee Share Plan.
(3)
The existing Long-term incentive scheme has been closed for new awards and members as at 31 December 2022. The scheme has been replaced by
a new Restricted share plan scheme with similar granting and vesting conditions.
Sharesave
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Average
Shares
Average
Shares
Average
Shares
\u00a0
exercise
under
exercise
under
exercise
under
\u00a0
price
option
price
option
price
option
\u00a0
\u00a3
(million)
\u00a3
(million)
\u00a3
(million)
At 1 January
1.63
99
1.61
95
1.64
96
Granted
1.42
43
1.86
25
1.80
24
Exercised
1.44
(23)
1.88
(15)
1.76
(10)
Cancelled
1.72
(5)
1.60
(6)
2.02
(15)
At 31 December
1.59
114
1.63
99
1.61
95
\n
The fair value of Sharesave options granted in 2023 was determined using a pricing
model that included: expected volatility of share price determined at the grant date
based on historical share price volatility over a period of up to five years; expected option
lives that equal the vesting period; estimated dividend yield on equity shares; and risk-
free interest rates determined from UK gilts with terms matching the expected lives of
the options.
The exercise price of options and the fair value on granting awards of fully paid shares is
the average market price over the five trading days (three trading days for Sharesave)
preceding grant date. When estimating the fair value of the award, the number of shares
granted and the prevailing market price as defined on page 148 are used.
The fair value
of the award is recognised as services are provided by employees over the vesting
period.
Options are exercisable within six months of vesting; 19.0 million options were
exercisable at 31 December 2023 (2022 \u2013 5.1 million; 2021 \u2013 6.0 million). The weighted
average share price at the date of exercise of options was \u00a32.20 (2022 - \u00a32.59; 2021 -
\u00a32.19). At 31 December 2023, exercise prices ranged from \u00a31.12 to \u00a31.89 (2022 - \u00a31.12
to \u00a32.27; 2021 - \u00a31.12 to \u00a32.27) and the remaining average contractual life was 2.25
years (2022 \u2013 2 years; 2021 \u2013 2.1 years). The fair value of options granted in 2023 was
\u00a327.3 million (2022 - \u00a322.1 million; 2021 - \u00a317 million).
Deferred performance awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
93
46
132
65
169
77
Granted
52
20
46
20
61
32
Forfeited
(2)
(1)
(4)
(2)
(10)
(5)
Vested
(67)
(30)
(81)
(37)
(88)
(39)
At 31 December
76
35
93
46
132
65
\n
The awards granted in 2023 vest in equal tranches on the anniversary of the award,
predominantly over three years.
Long-term incentives
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
49
23
44
21
50
24
Granted
11
5
16
7
6
3
Vested/exercised
(10)
(4)
(10)
(4)
(12)
(6)
Lapsed
(1)
(1)
(1)
(1)
-
-
At 31 December
49
23
49
23
44
21
\n
The market value of awards vested/exercised in 2023 was \u00a39.5 million (2022 - \u00a311.7
million; 2021 - \u00a313 million).
Bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Change
\u00a0
\u00a3m
\u00a3m
%
Non-deferred cash awards
(1)
43
40
8%
Deferred cash awards
262
270
(3%)
Deferred share awards
51
60
(15%)
Total deferred bonus awards
313
330
(5%)
Total bonus awards
(2)
356
370
(4%)
Bonus awards as a % of operating profit before tax
(3)
5%
7%
\u00a0
Proportion of bonus awards that are deferred
88%
89%
\u00a0
- deferred cash awards
84%
82%
\u00a0
- deferred share awards
16%
18%
\u00a0
\n
(1)
Non-deferred cash awards are limited to \u00a32,000 for all employees.
(2)
Excludes other performance-related compensation.
(3)
Operating profit before tax and income statement charge for bonus awards.
Reconciliation of bonus awards to income statement charge
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Bonus awarded
356
370
301
Less: deferral of charge for amounts awarded for current year
(114)
(127)
(99)
Income statement charge for amounts awarded in current year
242
243
202
Add: current year charge for amounts deferred from
prior years
115
94
80
Less: forfeiture of amounts deferred from prior years
(4)
(3)
(15)
Income statement charge for amounts deferred from prior years
111
91
65
Income statement charge for bonus awards
(2)
353
334
267
\n
Year in which income statement charge is expected to be taken for deferred bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Actual
Expected
\u00a0
2021
2022
2023
2024
2025 and beyond
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bonus awards deferred from 2021 and earlier
80
94
16
7
5
Bonus awards deferred from 2022
-
-
99
9
9
Less: forfeiture of amounts deferred from prior years
(15)
(3)
(4)
-
-
Bonus awards for 2023 deferred
-
-
-
98
16
\u00a0
65
91
111
114
30
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesByNatureExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f82389": { "value": "There are three main categories of non-interest income: net fees and commissions, trading income, and other operating income.
Net fees and commissions is the difference between fees received from customers for services provided by NatWest Group, such as credit card annual fees, underwriting
fees, payment services, brokerage fees, trade finance, investment management fees, trustee and fiduciary services, and fees incurred in the provision of those services,
such as credit card interchange fees, customer incentives, loan administration, foreign currency transaction charges, and brokerage fees.
Trading income is earned from short-term financial assets and financial liabilities to either make a spread between purchase and sale price or held to take advantage of
movements in prices and yields.
Other operating income includes revenue from other operating activities which are not related to the principal activities of the company, such as: share of profit or loss
from associates; operating lease income; the profit or loss on the sale of a subsidiary; or property, plant and equipment; profit or loss on own debt; and changes in the fair
value of financial assets and liabilities designated at fair value through profit or loss.
For accounting policy information refer to Accounting policies 3.1 and 3.6", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFeeAndCommissionIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f82728": { "value": "3 Operating expenses
Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and
social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other
administrative expenses.
For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5.
\n\n\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Salaries
2,483
2,250
2,295
Bonus awards
353
334
267
Temporary and contract costs
199
234
240
Social security costs
352
328
300
Pension costs
313
363
354
- defined benefit schemes (Note 5)
122
205
215
- defined contribution schemes
191
158
139
Other
201
207
220
Staff costs
3,901
3,716
3,676
Premises and equipment
1,153
1,112
1,133
UK bank levy
109
101
99
Depreciation and amortisation
(1,2)
934
833
923
Other administrative expenses
(3)
1,899
1,925
1,927
Administrative expenses
4,095
3,971
4,082
\u00a0
7,996
7,687
7,758
\n
(1)
Includes depreciation of right of use assets of \u00a3104 million (2022 - \u00a3119 million; 2021 - \u00a3167 million).
(2)
2021 includes impairment of goodwill of \u00a385 million.
(3)
Includes litigation and conduct costs, net of amounts recovered. Refer to Note 21 for further details.", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f82730": { "value": "3 Operating expenses
Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and
social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other
administrative expenses.
For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5.
\n\n\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Salaries
2,483
2,250
2,295
Bonus awards
353
334
267
Temporary and contract costs
199
234
240
Social security costs
352
328
300
Pension costs
313
363
354
- defined benefit schemes (Note 5)
122
205
215
- defined contribution schemes
191
158
139
Other
201
207
220
Staff costs
3,901
3,716
3,676
Premises and equipment
1,153
1,112
1,133
UK bank levy
109
101
99
Depreciation and amortisation
(1,2)
934
833
923
Other administrative expenses
(3)
1,899
1,925
1,927
Administrative expenses
4,095
3,971
4,082
\u00a0
7,996
7,687
7,758
\n
(1)
Includes depreciation of right of use assets of \u00a3104 million (2022 - \u00a3119 million; 2021 - \u00a3167 million).
(2)
2021 includes impairment of goodwill of \u00a385 million.
(3)
Includes litigation and conduct costs, net of amounts recovered. Refer to Note 21 for further details.
The average number of persons employed, rounded to the nearest hundred, during the
year, excluding temporary staff, was 61,500 (2022 - 60,000; 2021 \u2013 59,200). The
average number of temporary employees during 2023 was 2,100 (2022 \u2013 2,500; 2021 \u2013
2,500).
The number of persons employed at 31 December, excluding temporary staff, by
reportable segment, was as follows:
\n \n
Continuing operations
2023
2022 (1)
2021 (1)
Retail Banking
14,300
15,100
16,000
Private Banking
2,400
2,300
2,000
Commercial & Institutional
12,400
12,200
11,700
Central items & other
(2)
32,500
31,400
28,100
Total
61,600
61,000
57,800
UK
41,500
41,200
40,600
USA
300
300
300
India
16,900
15,700
13,500
Poland
1,500
1,500
1,400
Republic of Ireland
400
1,400
1,200
Rest of the World
1,000
900
800
Total
61,600
61,000
57,800
(1)
Comparatives have been re-presented to reflect the movement of headcount across segments due to segment
reorganisation.
(2)
Central items & other includes Ulster Bank RoI. The total number of persons employed in Ulster Bank RoI of 500 (2022 \u2013
2,200; 2021 \u2013 2,400) includes nil people employed in discontinued operations at 31 December 2023 (2022 \u2013 400; 2021 \u2013
700).", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f82732": { "value": "3 Operating expenses
Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and
social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other
administrative expenses.
For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5.
\n\n\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0
2023
2022
2021
Continuing operations
\u00a3m
\u00a3m
\u00a3m
Salaries
2,483
2,250
2,295
Bonus awards
353
334
267
Temporary and contract costs
199
234
240
Social security costs
352
328
300
Pension costs
313
363
354
- defined benefit schemes (Note 5)
122
205
215
- defined contribution schemes
191
158
139
Other
201
207
220
Staff costs
3,901
3,716
3,676
Premises and equipment
1,153
1,112
1,133
UK bank levy
109
101
99
Depreciation and amortisation
(1,2)
934
833
923
Other administrative expenses
(3)
1,899
1,925
1,927
Administrative expenses
4,095
3,971
4,082
\u00a0
7,996
7,687
7,758
\n
(1)
Includes depreciation of right of use assets of \u00a3104 million (2022 - \u00a3119 million; 2021 - \u00a3167 million).
(2)
2021 includes impairment of goodwill of \u00a385 million.
(3)
Includes litigation and conduct costs, net of amounts recovered. Refer to Note 21 for further details.
The average number of persons employed, rounded to the nearest hundred, during the
year, excluding temporary staff, was 61,500 (2022 - 60,000; 2021 \u2013 59,200). The
average number of temporary employees during 2023 was 2,100 (2022 \u2013 2,500; 2021 \u2013
2,500).
The number of persons employed at 31 December, excluding temporary staff, by
reportable segment, was as follows:
\n \n
Continuing operations
2023
2022 (1)
2021 (1)
Retail Banking
14,300
15,100
16,000
Private Banking
2,400
2,300
2,000
Commercial & Institutional
12,400
12,200
11,700
Central items & other
(2)
32,500
31,400
28,100
Total
61,600
61,000
57,800
UK
41,500
41,200
40,600
USA
300
300
300
India
16,900
15,700
13,500
Poland
1,500
1,500
1,400
Republic of Ireland
400
1,400
1,200
Rest of the World
1,000
900
800
Total
61,600
61,000
57,800
(1)
Comparatives have been re-presented to reflect the movement of headcount across segments due to segment
reorganisation.
(2)
Central items & other includes Ulster Bank RoI. The total number of persons employed in Ulster Bank RoI of 500 (2022 \u2013
2,200; 2021 \u2013 2,400) includes nil people employed in discontinued operations at 31 December 2023 (2022 \u2013 400; 2021 \u2013
700).
\n
\n
Share-based payments
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
Award plan
Eligible employees
Nature of award
Vesting conditions (1)
Settlement
Sharesave
UK, Channel Islands, Gibraltar, Isle
Option to buy shares under
Continuing employment or leavers in certain circumstances
2024 to 2028
\u00a0
of Man, Poland and India.
employee savings plan
\u00a0 \u00a0
Deferred performance
All
Awards of ordinary shares
Continuing employment or leavers in certain circumstances
2024 to 2031
awards
\u00a0
and conditional shares
\u00a0 \u00a0
Long-term incentives
(2,3)
Senior employees
Awards of ordinary shares
Continuing employment or leavers in certain circumstances and/or
2024 to 2030
\u00a0 \u00a0
and conditional shares
satisfaction of the pre-vesting assessment and underpins
\u00a0
\n
(1)
All awards have vesting conditions which may not be met.
(2)
Long-term incentives include buy-out awards offered to compensate certain new hires for the loss of forfeited awards from their previous employment.
All awards are granted under the Employee Share Plan.
(3)
The existing Long-term incentive scheme has been closed for new awards and members as at 31 December 2022. The scheme has been replaced by
a new Restricted share plan scheme with similar granting and vesting conditions.
Sharesave
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Average
Shares
Average
Shares
Average
Shares
\u00a0
exercise
under
exercise
under
exercise
under
\u00a0
price
option
price
option
price
option
\u00a0
\u00a3
(million)
\u00a3
(million)
\u00a3
(million)
At 1 January
1.63
99
1.61
95
1.64
96
Granted
1.42
43
1.86
25
1.80
24
Exercised
1.44
(23)
1.88
(15)
1.76
(10)
Cancelled
1.72
(5)
1.60
(6)
2.02
(15)
At 31 December
1.59
114
1.63
99
1.61
95
\n
The fair value of Sharesave options granted in 2023 was determined using a pricing
model that included: expected volatility of share price determined at the grant date
based on historical share price volatility over a period of up to five years; expected option
lives that equal the vesting period; estimated dividend yield on equity shares; and risk-
free interest rates determined from UK gilts with terms matching the expected lives of
the options.
The exercise price of options and the fair value on granting awards of fully paid shares is
the average market price over the five trading days (three trading days for Sharesave)
preceding grant date. When estimating the fair value of the award, the number of shares
granted and the prevailing market price as defined on page 148 are used.
The fair value
of the award is recognised as services are provided by employees over the vesting
period.
Options are exercisable within six months of vesting; 19.0 million options were
exercisable at 31 December 2023 (2022 \u2013 5.1 million; 2021 \u2013 6.0 million). The weighted
average share price at the date of exercise of options was \u00a32.20 (2022 - \u00a32.59; 2021 -
\u00a32.19). At 31 December 2023, exercise prices ranged from \u00a31.12 to \u00a31.89 (2022 - \u00a31.12
to \u00a32.27; 2021 - \u00a31.12 to \u00a32.27) and the remaining average contractual life was 2.25
years (2022 \u2013 2 years; 2021 \u2013 2.1 years). The fair value of options granted in 2023 was
\u00a327.3 million (2022 - \u00a322.1 million; 2021 - \u00a317 million).
Deferred performance awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
93
46
132
65
169
77
Granted
52
20
46
20
61
32
Forfeited
(2)
(1)
(4)
(2)
(10)
(5)
Vested
(67)
(30)
(81)
(37)
(88)
(39)
At 31 December
76
35
93
46
132
65
\n
The awards granted in 2023 vest in equal tranches on the anniversary of the award,
predominantly over three years.
Long-term incentives
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
49
23
44
21
50
24
Granted
11
5
16
7
6
3
Vested/exercised
(10)
(4)
(10)
(4)
(12)
(6)
Lapsed
(1)
(1)
(1)
(1)
-
-
At 31 December
49
23
49
23
44
21
\n
The market value of awards vested/exercised in 2023 was \u00a39.5 million (2022 - \u00a311.7
million; 2021 - \u00a313 million).
Bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Change
\u00a0
\u00a3m
\u00a3m
%
Non-deferred cash awards
(1)
43
40
8%
Deferred cash awards
262
270
(3%)
Deferred share awards
51
60
(15%)
Total deferred bonus awards
313
330
(5%)
Total bonus awards
(2)
356
370
(4%)
Bonus awards as a % of operating profit before tax
(3)
5%
7%
\u00a0
Proportion of bonus awards that are deferred
88%
89%
\u00a0
- deferred cash awards
84%
82%
\u00a0
- deferred share awards
16%
18%
\u00a0
\n
(1)
Non-deferred cash awards are limited to \u00a32,000 for all employees.
(2)
Excludes other performance-related compensation.
(3)
Operating profit before tax and income statement charge for bonus awards.
Reconciliation of bonus awards to income statement charge
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Bonus awarded
356
370
301
Less: deferral of charge for amounts awarded for current year
(114)
(127)
(99)
Income statement charge for amounts awarded in current year
242
243
202
Add: current year charge for amounts deferred from
prior years
115
94
80
Less: forfeiture of amounts deferred from prior years
(4)
(3)
(15)
Income statement charge for amounts deferred from prior years
111
91
65
Income statement charge for bonus awards
(2)
353
334
267
\n
Year in which income statement charge is expected to be taken for deferred bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Actual
Expected
\u00a0
2021
2022
2023
2024
2025 and beyond
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bonus awards deferred from 2021 and earlier
80
94
16
7
5
Bonus awards deferred from 2022
-
-
99
9
9
Less: forfeiture of amounts deferred from prior years
(15)
(3)
(4)
-
-
Bonus awards for 2023 deferred
-
-
-
98
16
\u00a0
65
91
111
114
30
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f83117": { "value": "Share-based payments \n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
Award plan
Eligible employees
Nature of award
Vesting conditions (1)
Settlement
Sharesave
UK, Channel Islands, Gibraltar, Isle
Option to buy shares under
Continuing employment or leavers in certain circumstances
2024 to 2028
\u00a0
of Man, Poland and India.
employee savings plan
\u00a0 \u00a0
Deferred performance
All
Awards of ordinary shares
Continuing employment or leavers in certain circumstances
2024 to 2031
awards
\u00a0
and conditional shares
\u00a0 \u00a0
Long-term incentives
(2,3)
Senior employees
Awards of ordinary shares
Continuing employment or leavers in certain circumstances and/or
2024 to 2030
\u00a0 \u00a0
and conditional shares
satisfaction of the pre-vesting assessment and underpins
\u00a0
\n
(1)
All awards have vesting conditions which may not be met.
(2)
Long-term incentives include buy-out awards offered to compensate certain new hires for the loss of forfeited awards from their previous employment.
All awards are granted under the Employee Share Plan.
(3)
The existing Long-term incentive scheme has been closed for new awards and members as at 31 December 2022. The scheme has been replaced by
a new Restricted share plan scheme with similar granting and vesting conditions.
Sharesave
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Average
Shares
Average
Shares
Average
Shares
\u00a0
exercise
under
exercise
under
exercise
under
\u00a0
price
option
price
option
price
option
\u00a0
\u00a3
(million)
\u00a3
(million)
\u00a3
(million)
At 1 January
1.63
99
1.61
95
1.64
96
Granted
1.42
43
1.86
25
1.80
24
Exercised
1.44
(23)
1.88
(15)
1.76
(10)
Cancelled
1.72
(5)
1.60
(6)
2.02
(15)
At 31 December
1.59
114
1.63
99
1.61
95
\n
The fair value of Sharesave options granted in 2023 was determined using a pricing
model that included: expected volatility of share price determined at the grant date
based on historical share price volatility over a period of up to five years; expected option
lives that equal the vesting period; estimated dividend yield on equity shares; and risk-
free interest rates determined from UK gilts with terms matching the expected lives of
the options.
The exercise price of options and the fair value on granting awards of fully paid shares is
the average market price over the five trading days (three trading days for Sharesave)
preceding grant date. When estimating the fair value of the award, the number of shares
granted and the prevailing market price as defined on page 148 are used.
The fair value
of the award is recognised as services are provided by employees over the vesting
period.
Options are exercisable within six months of vesting; 19.0 million options were
exercisable at 31 December 2023 (2022 \u2013 5.1 million; 2021 \u2013 6.0 million). The weighted
average share price at the date of exercise of options was \u00a32.20 (2022 - \u00a32.59; 2021 -
\u00a32.19). At 31 December 2023, exercise prices ranged from \u00a31.12 to \u00a31.89 (2022 - \u00a31.12
to \u00a32.27; 2021 - \u00a31.12 to \u00a32.27) and the remaining average contractual life was 2.25
years (2022 \u2013 2 years; 2021 \u2013 2.1 years). The fair value of options granted in 2023 was
\u00a327.3 million (2022 - \u00a322.1 million; 2021 - \u00a317 million).
Deferred performance awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
93
46
132
65
169
77
Granted
52
20
46
20
61
32
Forfeited
(2)
(1)
(4)
(2)
(10)
(5)
Vested
(67)
(30)
(81)
(37)
(88)
(39)
At 31 December
76
35
93
46
132
65
\n
The awards granted in 2023 vest in equal tranches on the anniversary of the award,
predominantly over three years.
Long-term incentives
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Value at
Shares
Value at
Shares
Value at
Shares
\u00a0
grant
awarded
grant
awarded
grant
awarded
\u00a0
\u00a3m
(million)
\u00a3m
(million)
\u00a3m
(million)
At 1 January
49
23
44
21
50
24
Granted
11
5
16
7
6
3
Vested/exercised
(10)
(4)
(10)
(4)
(12)
(6)
Lapsed
(1)
(1)
(1)
(1)
-
-
At 31 December
49
23
49
23
44
21
\n
The market value of awards vested/exercised in 2023 was \u00a39.5 million (2022 - \u00a311.7
million; 2021 - \u00a313 million).
Bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
Change
\u00a0
\u00a3m
\u00a3m
%
Non-deferred cash awards
(1)
43
40
8%
Deferred cash awards
262
270
(3%)
Deferred share awards
51
60
(15%)
Total deferred bonus awards
313
330
(5%)
Total bonus awards
(2)
356
370
(4%)
Bonus awards as a % of operating profit before tax
(3)
5%
7%
\u00a0
Proportion of bonus awards that are deferred
88%
89%
\u00a0
- deferred cash awards
84%
82%
\u00a0
- deferred share awards
16%
18%
\u00a0
\n
(1)
Non-deferred cash awards are limited to \u00a32,000 for all employees.
(2)
Excludes other performance-related compensation.
(3)
Operating profit before tax and income statement charge for bonus awards.
Reconciliation of bonus awards to income statement charge
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Bonus awarded
356
370
301
Less: deferral of charge for amounts awarded for current year
(114)
(127)
(99)
Income statement charge for amounts awarded in current year
242
243
202
Add: current year charge for amounts deferred from
prior years
115
94
80
Less: forfeiture of amounts deferred from prior years
(4)
(3)
(15)
Income statement charge for amounts deferred from prior years
111
91
65
Income statement charge for bonus awards
(2)
353
334
267
\n
Year in which income statement charge is expected to be taken for deferred bonus awards
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Actual
Expected
\u00a0
2021
2022
2023
2024
2025 and beyond
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Bonus awards deferred from 2021 and earlier
80
94
16
7
5
Bonus awards deferred from 2022
-
-
99
9
9
Less: forfeiture of amounts deferred from prior years
(15)
(3)
(4)
-
-
Bonus awards for 2023 deferred
-
-
-
98
16
\u00a0
65
91
111
114
30
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f84021": { "value": "4 Segmental analysis
NatWest Group analyses its performance between the different operating segments of the Group as required by IFRS 8, Operating segments. The presentation is
consistent with internal financial reporting and how senior management assesses the performance of each operating segment
Reportable operating segments:
The business is organised into the following reportable
segments: Retail Banking, Private Banking, Commercial &
Institutional, and Central items & other.
Retail Banking
serves personal customers in the UK, including
Ulster Bank customers in Northern Ireland.
Private Banking
serves UK-connected high-net-worth
individuals and their business interests.
Commercial & Institutional
consists of customer businesses
reported under Business Banking, Commercial Mid-market
and Corporate & Institutions, supporting our customers across
the full non-personal customer lifecycle, both domestically and
internationally. Our Markets offering helps our customers
manage financial risks across different geographies, while our
International offering provides full-service banking operations
in the Channel Islands, Isle of Man, Gibraltar and Luxembourg.
Central items & other
includes corporate functions, such as
treasury, finance, risk management, compliance, legal,
communications and human resources. Central functions
manage NatWest Group capital resources and NatWest
Group-wide regulatory projects and provide services to the
reportable segments.
Central items & other includes
businesses and amounts not directly related to any of the
other reportable segments. Ulster Bank RoI is no longer an
operating segment and its continuing operations now form
part of Central items & other.
Allocation of central balance sheet items
NatWest Group allocates all central costs relating to central
functions to the business using appropriate drivers; these are
reported as indirect costs in the segmental income
statements. Assets and risk-weighted assets held centrally,
mainly relating to NatWest Group Treasury, are allocated to
the business using appropriate drivers
.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Retail
Private
Commercial &
Central items
\u00a0
\u00a0
Banking
Banking
Institutional
& other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
\u00a0\u00a0\u00a0\u00a0\u00a0
Net interest income
5,496
710
5,044
(201)
11,049
Net fees and commissions
427
249
1,654
-
2,330
Other non-interest income
8
31
723
611
1,373
Total income
5,931
990
7,421
410
14,752
Depreciation and amortisation
(1)
(1)
(154)
(778)
(934)
Other operating expenses
(2,827)
(684)
(3,937)
386
(7,062)
Impairment losses
(465)
(14)
(94)
(5)
(578)
Operating profit
2,638
291
3,236
13
6,178
2022
\u00a0\u00a0\u00a0\u00a0\u00a0
Continuing operations
\u00a0\u00a0\u00a0\u00a0\u00a0
Net interest income
5,224
777
4,171
(330)
9,842
Net fees and commissions
422
250
1,580
40
2,292
Other non-interest income
-
29
662
331
1,022
Total income
5,646
1,056
6,413
41
13,156
Depreciation and amortisation
-
-
(161)
(672)
(833)
Other operating expenses
(2,593)
(622)
(3,583)
(56)
(6,854)
Impairment (losses)/releases
(229)
2
(122)
12
(337)
Operating profit/(loss)
2,824
436
2,547
(675)
5,132
2021
\u00a0\u00a0\u00a0\u00a0\u00a0
Continuing operations
\u00a0\u00a0\u00a0\u00a0\u00a0
Net interest income
4,074
480
2,974
7
7,535
Net fees and commissions
377
258
1,440
45
2,120
Other non-interest income
(6)
78
424
278
774
Total income
4,445
816
4,838
330
10,429
Depreciation and amortisation
(85)
-
(173)
(665)
(923)
Other operating expenses
(2,428)
(520)
(3,584)
(303)
(6,835)
Impairment releases/(losses)
36
54
1,160
(77)
1,173
Operating profit/(loss)
1,968
350
2,241
(715)
3,844
Total revenue
\n
(1)
\n\n \n
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
External
7,366
1,157
12,519
4,340
25,382
Inter-segmental
(4)
5
1,000
(1,602)
597
-
Total
7,371
2,157
10,917
4,937
25,382
2022
Continuing operations
External
5,773
874
7,258
2,669
16,574
Inter-segmental
(4)
-
389
(395)
6
-
Total
5,773
1,263
6,863
2,675
16,574
2021
Continuing operations
External
5,415
792
5,189
1,306
12,702
Inter-segmental
(4)
18
127
102
(247)
-
Total
5,433
919
5,291
1,059
12,702
\n
Total income
\n\n \n
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
External
4,170
327
7,730
2,525
14,752
Inter-segmental
(4)
1,761
663
(309)
(2,115)
-
Total
5,931
990
7,421
410
14,752
2022
Continuing operations
External
4,956
778
5,920
1,502
13,156
Inter-segmental
(4)
690
278
493
(1,461)
-
Total
5,646
1,056
6,413
41
13,156
2021
Continuing operations
External
4,933
801
4,634
61
10,429
Inter-segmental
(4)
(488)
15
204
269
-
Total
4,445
816
4,838
330
10,429
\n
For the notes to this table refer to page 321.
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Analysis of net fees and commissions
\n\n \n
Retail
Private
Commercial &
Central items
Banking
Banking
Institutional
& other
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
Fees and commissions receivable
- Payment services
324
32
671
3
1,030
- Credit and debit card fees
400
13
260
3
676
- Lending and financing
14
5
709
1
729
- Brokerage
35
6
42
-
83
- Investment management, trustee and fiduciary services
(2)
2
209
45
10
266
- Underwriting fees
-
-
123
-
123
- Other
4
5
73
(6)
76
Total
779
270
1,923
11
2,983
Fees and commissions payable
(352)
(21)
(269)
(11)
(653)
Net fees and commissions
427
249
1,654
-
2,330
2022
Continuing operations
Fees and commissions receivable
- Payment services
314
25
642
43
1,024
- Credit and debit card fees
401
15
227
18
661
- Lending and financing
17
8
673
3
701
- Brokerage
43
6
44
-
93
- Investment management, trustee and fiduciary services
(2)
4
219
46
-
269
- Underwriting fees
-
-
120
-
120
- Other
-
3
88
(44)
47
Total
779
276
1,840
20
2,915
Fees and commissions payable
(357)
(26)
(260)
20
(623)
Net fees and commissions
422
250
1,580
40
2,292
2021
Fees and commissions receivable
- Payment services
306
35
577
49
967
- Credit and debit card fees
344
10
149
19
522
- Lending and financing
13
10
643
4
670
- Brokerage
48
6
42
-
96
- Investment management, trustee and fiduciary services
(2)
3
230
45
2
280
- Underwriting fees
-
-
127
-
127
- Other
-
35
109
(112)
32
Total
714
326
1,692
(38)
2,694
Fees and commissions payable
(337)
(68)
(252)
83
(574)
Net fees and commissions
377
258
1,440
45
2,120
\n
For the notes to this table refer to page 321.
\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Retail Banking
228,684
191,936
226,375
192,282
209,973
192,715
Private Banking
26,894
37,806
29,867
41,491
29,854
39,388
Commercial & Institutional
384,958
359,766
404,817
383,768
425,718
411,757
Central items & other
52,137
65,977
58,994
66,016
116,447
96,329
Total
692,673
655,485
720,053
683,557
781,992
740,189
\n
Segmental analysis of goodwill
The total carrying value of goodwill at 31 December 2023 was \u00a35,680 million (2022 -
\u00a35,522 million) comprising: Retail Banking \u00a32,607 million (2022 - \u00a32,607 million);
Commercial & Institutional \u00a32,905 million (2022 - \u00a32,906 million); Private Banking \u00a39
million (2022 - \u00a39 million) and Central items & other \u00a3159 million (2022 - nil).
Geographical segments
The geographical analysis in the tables below has been compiled on the basis of location
of office where the transactions are recorded.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
UK
USA
Europe
RoW
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Total revenue
24,096
167
1,016
103
25,382
Interest receivable
20,192
39
774
21
21,026
Interest payable
(9,500)
(1)
(472)
(4)
(9,977)
Net fees and commissions
2,052
49
172
57
2,330
Trading income
704
66
1
23
794
Other operating income
556
(10)
30
3
579
Total income
(3)
14,004
143
505
100
14,752
Operating profit/(loss) before tax
6,196
45
(149)
86
6,178
Total assets
610,831
23,725
56,001
2,116
692,673
Total liabilities
594,250
22,106
37,506
1,623
655,485
Contingent liabilities and
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
commitments
112,199
-
7,411
21
119,631
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
UK
USA
Europe
RoW
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Continuing operations
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Total revenue
15,795
117
558
104
16,574
Interest receivable
12,242
37
344
14
12,637
Interest payable
(2,567)
(2)
(221)
(5)
(2,795)
Net fees and commissions
1,983
44
207
58
2,292
Trading income
1,208
1
(104)
28
1,133
Other operating income
(140)
14
12
3
(111)
Total income
(3)
12,726
94
238
98
13,156
Operating profit/(loss) before tax
5,716
(46)
(620)
82
5,132
Total assets
589,758
25,979
101,164
3,152
720,053
Total liabilities
579,476
27,039
75,092
1,950
683,557
Contingent liabilities and
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
commitments
117,915
-
8,649
17
126,581
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
2021
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Continuing operations
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Total revenue
12,100
87
482
33
12,702
Interest receivable
8,949
20
257
8
9,234
Interest payable
(1,483)
(2)
(211)
(3)
(1,699)
Net fees and commissions
1,820
27
231
42
2,120
Trading income
247
53
(1)
24
323
Other operating income
387
2
62
-
451
Total income
(3)
9,920
100
338
71
10,429
Operating (loss)/profit before tax
4,143
48
(387)
40
3,844
Total assets
693,221
21,776
64,415
2,580
781,992
Total liabilities
676,684
23,286
38,835
1,384
740,189
Contingent liabilities and
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
commitments
117,225
1
8,114
27
125,367
\n
(1)
Total revenue comprises interest receivable, fees and commissions receivable, income from trading activities and other
operating income.
(2)
Comparisons with prior periods are affected by the transfer of the Private Client Advice business to Private Banking from
1 January 2021.
(3)
Total income excludes internal service fee income which has been calculated on a cost plus mark-up basis.", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f84026": { "value": "NatWest Group analyses its performance between the different operating segments of the Group as required by IFRS 8, Operating segments. The presentation is consistent with internal financial reporting and how senior management assesses the performance of each operating segment", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f88452": { "value": "6 Auditor\u2019s remuneration
Amounts payable to NatWest Group's auditors for statutory audit and other services are set out below.
All audit-related and other services are approved by the Group Audit Committee and are subject to strict controls to ensure the external auditor\u2019s independence is unaffected by the
provision of other services. The Group Audit Committee recognises that for certain assignments, the auditors are best placed to perform the work economically; for other work,
NatWest Group selects the supplier best placed to meet its requirements. NatWest Group\u2019s auditors are permitted to tender for such work in competition with other firms where the
work is permissible under audit independence rules.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Fees payable for:
\u00a0 \u00a0 \u00a0
- the audit of NatWest Group\u2019s annual accounts
(1)
4.9
4.7
4.4
- the audit of NatWest Group plc\u2019s subsidiaries
(1)
32.3
31.9
29.6
- audit-related assurance services
(1,2)
4.5
3.9
5.3
Total audit and audit-related assurance services fees
41.7
40.5
39.3
Other assurance services
0.7
1.2
0.4
Corporate finance services
(3)
0.7
0.5
0.5
Total other services
1.4
1.7
0.9
\n
(1)
The 2023 audit fee was approved by the Group Audit Committee. At 31 December 2023, \u00a316 million has been billed and paid in respect of the 2023 NatWest Group audit fees.
(2)
Comprises fees of \u00a31.4 million (2022 - \u00a31.1 million) for reviews of interim financial information, \u00a32.8 million (2022 - \u00a32.3 million) for reports to NatWest Group\u2019s regulators in the UK and overseas, and \u00a30.3 million (2022 - \u00a30.4 million) for non-statutory audit
opinions.
(3)
Comprises fees of \u00a30.7 million (2022 - \u00a30.5 million) for work performed by the auditors as reporting accountants on debt and equity issuances undertaken by NatWest Group.", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f89662": { "value": "8 Discontinued operations and assets and liabilities of disposal groups
Discontinued operations are reported separately on the income statement to allow users to distinguish the profits and cash flows from continuing operations from
those activities that are subject to disposal. Assets and liabilities which we intend to dispose of in a single transaction are also presented separately on the balance
sheet.
For accounting policy information refer to Accounting policy 3.2.
This note sets out the profit/(loss) from the discontinued operations, the assets and liabilities of the disposal group and the operating cash flows attributable to the
discontinued operations.
Four legally binding agreements for the sale of the UBIDAC business have been
announced as part of the phased withdrawal from the Republic of Ireland. Material
developments since the beginning of 2023 are set out below.
Agreement with Allied Irish Banks p.l.c. (AIB) for the transfer of performing
commercial loans.
UBIDAC completed the sale of commercial loans to AIB, with a cumulative \u20ac3.1 billion of
gross performing loans being fully migrated. The transfer of the final cohort of colleagues
to AIB who were wholly or mainly assigned to supporting this part of the business under
Transfer of Undertakings, Protection of Employment (TUPE) arrangements has also
completed.
Agreement with Permanent TSB Group Holdings p.l.c. (PTSB).
Agreement for the sale of performing non-tracker mortgages, the performing loans in
the micro-SME business, the UBIDAC Asset Finance business, including its Lombard
digital platform, and 25 Ulster Bank branch locations in the Republic of Ireland. The
remaining performing non-tracker mortgages, all micro-SME loans and the Lombard
Asset Finance business migrated to PTSB during the year, totalling c. \u20ac6.3 billion of gross
loan balances. All remaining colleagues eligible under TUPE regulations also migrated to
PTSB, as well as 25 former Ulster Bank branches.
Agreement with AIB for the sale of performing tracker and linked
mortgages.
UBIDAC completed the migration of \u20ac4.0 billion of performing tracker and linked
mortgages to AIB. The remaining migrations are expected to complete in 2024.
Agreement with Elmscott Property Finance DAC / AB CarVal (CarVal)
Agreement for the sale of a portfolio which consists mostly of non-performing
mortgages, unsecured personal loans, and commercial facilities with a gross value of
c. \u20ac690 million. Pepper Finance Corporation (Ireland) DAC will become the legal owner
and servicer of the facilities. In November 2023, c.\u20ac400 million of exposures transferred
to Pepper Finance Corporation (Ireland) DAC, with the remainder of the portfolio
expected to transfer in 2024.
The business activities relating to these sales that meet the requirements of IFRS 5 are
presented as a discontinued operation and as a disposal group. Ulster Bank RoI
continuing operations are reported within Central items & other.
\n
\n
\n\n
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
(a) (Loss)/profit from discontinued operations, net of tax
2023
2022
2021
\u00a3m
\u00a3m
\u00a3m
Interest receivable
22
177
339
Net interest income
22
177
339
Non-interest income
(1)
(16)
(472)
13
Total income
6
(295)
352
Operating expenses
(124)
(38)
(47)
(Loss)/profit before impairment releases
(118)
(333)
305
Impairment releases
6
71
162
Operating (loss)/profit before tax
(112)
(262)
467
Tax charge
-
-
(3)
(Loss)/profit from discontinued operations, net of tax
(112)
(262)
464
\n
(1)
Excludes gain of \u00a320 million (\u20ac24 million) recognised by NatWest Group as a result of acquisition of PTSB shares in relation to disposal of UBIDAC assets to PTSB in 2022.
\n
(b) Assets and liabilities of disposal groups
2023
2022
\u00a3m
\u00a3m
Assets of disposal groups
Loans to customers - amortised cost
32
1,458
Other financial assets - loans to customers
841
5,397
Other assets
29
6
902
6,861
Liabilities of disposal groups
Other liabilities
3
15
3
15
Net assets of disposal groups
899
6,846
\n
(c) Operating cash flows attributable to discontinued operations
2023
2022
2021
\u00a3m
\u00a3m
\u00a3m
Net cash flows from operating activities
362
1,090
2,212
Net cash flows from investing activities
5,473
6,164
-
Net increase in cash and cash equivalents
5,835
7,254
2,212
", "dimensions": { "concept": "ifrs-full:DisclosureOfDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f89663": { "value": "8 Discontinued operations and assets and liabilities of disposal groups
Discontinued operations are reported separately on the income statement to allow users to distinguish the profits and cash flows from continuing operations from
those activities that are subject to disposal. Assets and liabilities which we intend to dispose of in a single transaction are also presented separately on the balance
sheet.
For accounting policy information refer to Accounting policy 3.2.
This note sets out the profit/(loss) from the discontinued operations, the assets and liabilities of the disposal group and the operating cash flows attributable to the
discontinued operations.
Four legally binding agreements for the sale of the UBIDAC business have been
announced as part of the phased withdrawal from the Republic of Ireland. Material
developments since the beginning of 2023 are set out below.
Agreement with Allied Irish Banks p.l.c. (AIB) for the transfer of performing
commercial loans.
UBIDAC completed the sale of commercial loans to AIB, with a cumulative \u20ac3.1 billion of
gross performing loans being fully migrated. The transfer of the final cohort of colleagues
to AIB who were wholly or mainly assigned to supporting this part of the business under
Transfer of Undertakings, Protection of Employment (TUPE) arrangements has also
completed.
Agreement with Permanent TSB Group Holdings p.l.c. (PTSB).
Agreement for the sale of performing non-tracker mortgages, the performing loans in
the micro-SME business, the UBIDAC Asset Finance business, including its Lombard
digital platform, and 25 Ulster Bank branch locations in the Republic of Ireland. The
remaining performing non-tracker mortgages, all micro-SME loans and the Lombard
Asset Finance business migrated to PTSB during the year, totalling c. \u20ac6.3 billion of gross
loan balances. All remaining colleagues eligible under TUPE regulations also migrated to
PTSB, as well as 25 former Ulster Bank branches.
Agreement with AIB for the sale of performing tracker and linked
mortgages.
UBIDAC completed the migration of \u20ac4.0 billion of performing tracker and linked
mortgages to AIB. The remaining migrations are expected to complete in 2024.
Agreement with Elmscott Property Finance DAC / AB CarVal (CarVal)
Agreement for the sale of a portfolio which consists mostly of non-performing
mortgages, unsecured personal loans, and commercial facilities with a gross value of
c. \u20ac690 million. Pepper Finance Corporation (Ireland) DAC will become the legal owner
and servicer of the facilities. In November 2023, c.\u20ac400 million of exposures transferred
to Pepper Finance Corporation (Ireland) DAC, with the remainder of the portfolio
expected to transfer in 2024.
The business activities relating to these sales that meet the requirements of IFRS 5 are
presented as a discontinued operation and as a disposal group. Ulster Bank RoI
continuing operations are reported within Central items & other.
\n
\n
\n\n
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
(a) (Loss)/profit from discontinued operations, net of tax
2023
2022
2021
\u00a3m
\u00a3m
\u00a3m
Interest receivable
22
177
339
Net interest income
22
177
339
Non-interest income
(1)
(16)
(472)
13
Total income
6
(295)
352
Operating expenses
(124)
(38)
(47)
(Loss)/profit before impairment releases
(118)
(333)
305
Impairment releases
6
71
162
Operating (loss)/profit before tax
(112)
(262)
467
Tax charge
-
-
(3)
(Loss)/profit from discontinued operations, net of tax
(112)
(262)
464
\n
(1)
Excludes gain of \u00a320 million (\u20ac24 million) recognised by NatWest Group as a result of acquisition of PTSB shares in relation to disposal of UBIDAC assets to PTSB in 2022.
\n
(b) Assets and liabilities of disposal groups
2023
2022
\u00a3m
\u00a3m
Assets of disposal groups
Loans to customers - amortised cost
32
1,458
Other financial assets - loans to customers
841
5,397
Other assets
29
6
902
6,861
Liabilities of disposal groups
Other liabilities
3
15
3
15
Net assets of disposal groups
899
6,846
\n
(c) Operating cash flows attributable to discontinued operations
2023
2022
2021
\u00a3m
\u00a3m
\u00a3m
Net cash flows from operating activities
362
1,090
2,212
Net cash flows from investing activities
5,473
6,164
-
Net increase in cash and cash equivalents
5,835
7,254
2,212
", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsHeldForSaleAndDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f89664": { "value": "8 Discontinued operations and assets and liabilities of disposal groups
Discontinued operations are reported separately on the income statement to allow users to distinguish the profits and cash flows from continuing operations from
those activities that are subject to disposal. Assets and liabilities which we intend to dispose of in a single transaction are also presented separately on the balance
sheet.
For accounting policy information refer to Accounting policy 3.2.
This note sets out the profit/(loss) from the discontinued operations, the assets and liabilities of the disposal group and the operating cash flows attributable to the
discontinued operations.
Four legally binding agreements for the sale of the UBIDAC business have been
announced as part of the phased withdrawal from the Republic of Ireland. Material
developments since the beginning of 2023 are set out below.
Agreement with Allied Irish Banks p.l.c. (AIB) for the transfer of performing
commercial loans.
UBIDAC completed the sale of commercial loans to AIB, with a cumulative \u20ac3.1 billion of
gross performing loans being fully migrated. The transfer of the final cohort of colleagues
to AIB who were wholly or mainly assigned to supporting this part of the business under
Transfer of Undertakings, Protection of Employment (TUPE) arrangements has also
completed.
Agreement with Permanent TSB Group Holdings p.l.c. (PTSB).
Agreement for the sale of performing non-tracker mortgages, the performing loans in
the micro-SME business, the UBIDAC Asset Finance business, including its Lombard
digital platform, and 25 Ulster Bank branch locations in the Republic of Ireland. The
remaining performing non-tracker mortgages, all micro-SME loans and the Lombard
Asset Finance business migrated to PTSB during the year, totalling c. \u20ac6.3 billion of gross
loan balances. All remaining colleagues eligible under TUPE regulations also migrated to
PTSB, as well as 25 former Ulster Bank branches.
Agreement with AIB for the sale of performing tracker and linked
mortgages.
UBIDAC completed the migration of \u20ac4.0 billion of performing tracker and linked
mortgages to AIB. The remaining migrations are expected to complete in 2024.
Agreement with Elmscott Property Finance DAC / AB CarVal (CarVal)
Agreement for the sale of a portfolio which consists mostly of non-performing
mortgages, unsecured personal loans, and commercial facilities with a gross value of
c. \u20ac690 million. Pepper Finance Corporation (Ireland) DAC will become the legal owner
and servicer of the facilities. In November 2023, c.\u20ac400 million of exposures transferred
to Pepper Finance Corporation (Ireland) DAC, with the remainder of the portfolio
expected to transfer in 2024.
The business activities relating to these sales that meet the requirements of IFRS 5 are
presented as a discontinued operation and as a disposal group. Ulster Bank RoI
continuing operations are reported within Central items & other.
\n
\n
\n\n
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
(a) (Loss)/profit from discontinued operations, net of tax
2023
2022
2021
\u00a3m
\u00a3m
\u00a3m
Interest receivable
22
177
339
Net interest income
22
177
339
Non-interest income
(1)
(16)
(472)
13
Total income
6
(295)
352
Operating expenses
(124)
(38)
(47)
(Loss)/profit before impairment releases
(118)
(333)
305
Impairment releases
6
71
162
Operating (loss)/profit before tax
(112)
(262)
467
Tax charge
-
-
(3)
(Loss)/profit from discontinued operations, net of tax
(112)
(262)
464
\n
(1)
Excludes gain of \u00a320 million (\u20ac24 million) recognised by NatWest Group as a result of acquisition of PTSB shares in relation to disposal of UBIDAC assets to PTSB in 2022.
\n
(b) Assets and liabilities of disposal groups
2023
2022
\u00a3m
\u00a3m
Assets of disposal groups
Loans to customers - amortised cost
32
1,458
Other financial assets - loans to customers
841
5,397
Other assets
29
6
902
6,861
Liabilities of disposal groups
Other liabilities
3
15
3
15
Net assets of disposal groups
899
6,846
\n
(c) Operating cash flows attributable to discontinued operations
2023
2022
2021
\u00a3m
\u00a3m
\u00a3m
Net cash flows from operating activities
362
1,090
2,212
Net cash flows from investing activities
5,473
6,164
-
Net increase in cash and cash equivalents
5,835
7,254
2,212
", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f90033": { "value": "9 Earnings per share
Earnings per share measures how much profit NatWest Group makes for each share in issue during the year.
Basic earnings per ordinary share is calculated by
dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding. Diluted earnings per ordinary share is
calculated by dividing the basic earnings by the weighted average number of ordinary shares outstanding plus the weighted average number of ordinary shares that
would be issued on conversion of dilutive share options and convertible securities. The assessment of whether the effect of share options and convertible securities is
dilutive or not, is based on the earnings from continuing operations.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Earnings
\u00a0 \u00a0 \u00a0
Profit from continuing operations attributable to ordinary shareholders
4,506
3,602
2,486
(Loss)/profit from discontinued operations attributable to ordinary shareholders
(112)
(262)
464
Profit attributable to ordinary shareholders
4,394
3,340
2,950
Weighted average number of shares (millions)
\u00a0 \u00a0 \u00a0
Weighted average number of ordinary shares outstanding during the year
9,164
9,872
10,792
Effect of dilutive share options and convertible securities
(1)
55
57
45
Diluted weighted average number of ordinary shares outstanding during the year
9,219
9,929
10,837
Earnings per ordinary share - continuing operations
49.2p
36.5p
23.0p
Earnings per ordinary share - discontinued operations
(1.2p)
(2.7p)
4.3p
Total earnings per share attributable to ordinary shareholders - basic
(2)
47.9p
33.8p
27.3p
Earnings per ordinary share - fully diluted continuing operations
48.9p
36.2p
22.9p
Earnings per ordinary share - fully diluted discontinued operations
(1.2p)
(2.6p)
4.3p
Total earnings per share attributable to ordinary shareholders - fully diluted
47.7p
33.6p
27.2p
\n
the General Meeting and Class Meeting on 25 August 2022, the shareholders approved the proposed special dividend and share
of
consolidation. On 30 August 2022 the issued ordinary share capital was consolidated in the ratio
14 existing shares for
retrospectively.
(1)
At
13 new shares. The average number of shares and earnings per share have been adjusted
(2)
In 2023, the unrounded Total earnings per share attributable to ordinary shareholders \u2013 basic is 47.948p. The unrounded Earnings per ordinary share \u2013 continuing operations was 49.170p. The unrounded Earnings per ordinary share \u2013 discontinued
operations was (1.222p).", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f90936": { "value": "Reclassification of mortgages from amortised cost to fair value through profit or loss
In June 2022 UBIDAC announced the cessation of new mortgage business to its customers. On 1 July 2022 UBIDAC mortgages in both its continuing and discontinued businesses were
reclassified from amortised cost to fair value through profit or loss, reflecting the change in business model. We fair value these assets using a discounted cash flow method. Key inputs
include assumptions about cash flows from legally binding sales agreements for those mortgage assets that form part of the assets of disposal groups. For details on material
developments in assets and liabilities of disposals groups during the year, refer to Note 8.
The effect of the reclassification as at 1 July 2022 is shown below.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
Amortised cost
MFVTPL
Change in value
\u00a0
\u00a3m
\u00a3m
\u00a3m
Amounts reclassified on balance sheet
\u00a0 \u00a0 \u00a0
Loans to customers
(1)
587
606
19
Assets of disposal groups
(2)
10,676
10,383
(293)
\u00a0
11,263
10,989
(274)
\n
(1)
Change in value recognised in continuing operations.
(2)
Change in value recognised in discontinued operations.", "dimensions": { "concept": "ifrs-full:DisclosureOfReclassificationOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f91158": { "value": "Additional information on finance lease receivables
The following table shows the reconciliation of undiscounted finance lease receivables to net investment in finance leases which are presented under Loans to customers-amortised
cost on the balance sheet.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Amount receivable under finance leases
\u00a0 \u00a0
Within 1 year
3,340
3,235
1 to 2 years
2,358
2,254
2 to 3 years
1,625
1,388
3 to 4 years
900
833
4 to 5 years
388
411
After 5 years
1,079
1,130
Total lease payments
9,690
9,251
Unguaranteed residual values
169
171
Future drawdowns
(12)
(13)
Unearned income
(1,025)
(889)
Present value of lease payments
8,822
8,520
Impairments
(91)
(118)
Net investment in finance leases
8,731
8,402
\n18 Other assets
Other assets are not financial assets and reflect a grouping of assets that are not large enough to present separately on the balance sheet.
.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Interests in associates
(1)
668
688
Property, plant and equipment
(2)
4,227
4,240
Pension schemes in net surplus (Note 5)
201
318
Prepayments
350
340
Accrued income
292
327
Tax recoverable
49
279
Deferred tax (Note 7)
1,894
2,178
Acceptances
575
237
Other
504
569
Other assets
8,760
9,176
\n
(1)
Includes interest in Business Growth Fund \u00a3658 million (2022 - \u00a3677 million).
(2)
The estimated useful lives of NatWest Group\u2019s property, plant and equipment are: freehold buildings and long leasehold 50 years, short leaseholds for unexpired period of lease, property adaptation costs 10 to 15 years, computer equipment up to 5 years
and other equipment 4 to 15 years.
\u00a0
2023
2022
Other liabilities
\u00a3m
\u00a3m
Lease liabilities
670
1,118
Provisions for liabilities and charges
990
1,138
Retirement benefit liabilities (Note 5)
99
98
Accruals
1,411
1,407
Deferred income
402
355
Current tax
332
55
Deferred tax (Note 7)
141
227
Acceptances
575
237
Other liabilities
(1)
582
711
Total
5,202
5,346
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f95259": { "value": "Loans to banks and customers
In estimating the fair value of net loans to customers and
banks measured at amortised cost, NatWest Group\u2019s loans
are segregated into appropriate portfolios reflecting the
characteristics of the constituent loans. Two principal
methods are used to estimate fair value:
(a)
(b)
Contractual cashflows that are discounted using a
market discount rate that incorporates the current
spread for the borrower or where this is not observable,
the spread for borrowers of a similar credit standing.
Expected cash flows (unadjusted for credit losses) are
discounted at the current offer rate for the same or
similar products. The current methodology caps all loan
values at par rather than modelling clients\u2019 option to
repay loans early. This approach is adopted for lending
portfolios in Retail Banking, Ulster Bank RoI, Commercial
& Institutional (SME loans) and Private Banking in order
to reflect the homogeneous nature of these portfolios.12 Financial instruments \u2013 maturity analysis
This note shows the maturity profile of NatWest Group\u2019s financial assets and liabilities by contractual date of maturity and contractual cash flows.
Remaining maturity
The following table shows the residual maturity of financial instruments, based on contractual date of maturity.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Less than
More than
\u00a0
Less than
More than
\u00a0
\u00a0
12 months
12 months
Total
12 months
12 months
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104,262
-
104,262
144,832
-
144,832
Trading assets
36,723
8,828
45,551
35,944
9,633
45,577
Derivatives
29,839
49,065
78,904
38,107
61,438
99,545
Settlement balances
7,231
-
7,231
2,572
-
2,572
Loans to banks - amortised cost
6,650
264
6,914
6,872
267
7,139
Loans to customers - amortised cost
87,663
293,770
381,433
84,289
282,051
366,340
Other financial assets
10,192
40,910
51,102
6,128
24,767
30,895
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
8,954
13,236
22,190
7,799
12,642
20,441
Customer deposits
424,893
6,484
431,377
448,821
1,497
450,318
Settlement balances
6,645
-
6,645
2,012
-
2,012
Trading liabilities
45,349
8,287
53,636
42,760
10,048
52,808
Derivatives
30,721
41,674
72,395
39,331
54,716
94,047
Other financial liabilities
20,310
34,779
55,089
13,796
35,311
49,107
Subordinated liabilities
1,047
4,667
5,714
973
5,287
6,260
Notes in circulation
3,237
-
3,237
3,218
-
3,218
Lease liabilities
102
568
670
137
981
1,118
\n
Assets and liabilities by contractual cash flows up to 20 years
The tables on the following page show the contractual undiscounted cash flows receivable and payable, up to a period of 20 years, including future receipts and payments of interest of
financial assets and liabilities by contractual maturity. The balances in the following tables do not agree directly with the consolidated balance sheet, as the tables include all cash flows
relating to principal and future coupon payments, presented on an undiscounted basis. The tables have been prepared on the following basis:
Financial assets have been reflected in the time band of the latest date on which they could be repaid, unless earlier repayment can be demanded by NatWest Group. Financial
liabilities are included at the earliest date on which the counterparty can require repayment, regardless of whether or not such early repayment results in a penalty. If the repayment of
a financial instrument is triggered by, or is subject to, specific criteria such as market price hurdles being reached, the asset is included in the time band that contains the latest date on
which it can be repaid, regardless of early repayment. The liability is included in the time band that contains the earliest possible date on which the conditions could be fulfilled, without
considering the probability of the conditions being met.
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
For example, if a structured note is automatically prepaid when an equity index exceeds a certain level, the cash outflow will be included in the less than three months period, whatever
\n
the level of the index at the year end. The settlement date of debt securities in issue, issued by certain securitisation vehicles consolidated by NatWest Group, depends on when cash
\n
flows are received from the securitised assets. Where these assets are prepayable, the timing of the cash outflow relating to securities assumes that each asset will be prepaid at the
\n
earliest possible date. As the repayments of assets and liabilities are linked, the repayment of assets in securitisations is shown on the earliest date that the asset can be prepaid, as
\n
this is the basis used for liabilities.
\n
The principal amounts of financial assets and liabilities that are repayable after 20 years or where the counterparty has no right to repayment of the principal are excluded from the
\n
table, as are interest payments after 20 years.
\n
The maturity of guarantees and commitments is based on the earliest possible date they would be drawn in order to evaluate NatWest Group\u2019s liquidity position.
\n
MFVTPL assets of \u00a3125.1 billion (2022 - \u00a3145.8 billion) and HFT liabilities of \u00a3125.8 billion (2022 - \u00a3146.7 billion) have been excluded from the following tables.
\n\n \n
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
Cash and balances at central banks
104,262
-
-
-
-
-
Derivatives held for hedging
31
29
128
104
49
49
Settlement balances
7,231
-
-
-
-
-
Loans to banks - amortised cost
5,234
1,437
23
302
-
-
Loans to customers - amortised cost
52,175
46,894
81,445
61,465
96,577
114,806
Other financial assets
(1)
4,897
6,756
12,304
11,183
10,019
8,063
Finance lease
61
242
735
401
656
359
173,891
55,358
94,635
73,455
107,301
123,277
Liabilities by contractual maturity up to 20 years
Bank deposits
8,334
1,279
6,069
8,307
-
-
Customer deposits
393,363
31,900
6,464
11
14
19
Settlement balances
6,645
-
-
-
-
-
Derivatives held for hedging
71
175
366
192
92
8
Other financial liabilities
9,094
12,319
18,843
13,818
4,769
346
Subordinated liabilities
72
1,167
2,301
1,512
1,406
342
Other liabilities - Notes in circulation
3,237
-
-
-
-
-
Lease liabilities
30
79
172
111
175
132
420,846
46,919
34,215
23,951
6,456
847
Guarantees and commitments - notional amount
Guarantees
(2)
2,820
-
-
-
-
-
Commitments
(3)
112,807
-
-
-
-
-
115,627
-
-
-
-
-
\n
For the notes to this table refer to the following page.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
144,832
-
-
-
-
-
Derivatives held for hedging
130
345
28
41
(44)
43
Settlement balances
2,572
-
-
-
-
-
Loans to banks - amortised cost
5,254
1,621
17
288
-
-
Loans to customers - amortised cost
50,923
43,417
76,278
55,128
85,038
100,085
Other financial assets
(1)
2,771
4,507
8,391
7,835
5,706
2,524
Finance lease
96
267
857
482
549
296
\u00a0
206,578
50,157
85,571
63,774
91,249
102,948
Liabilities by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
6,690
1,445
5,662
8,503
89
-
Customer deposits
437,830
11,389
1,252
2
14
20
Settlement balances
2,012
-
-
-
-
-
Derivatives held for hedging
280
(371)
586
306
116
85
Other financial liabilities
6,720
6,640
18,833
13,906
7,361
294
Subordinated liabilities
96
1,073
2,690
1,897
1,541
328
Other liabilities - Notes in circulation
3,218
-
-
-
-
-
Lease liabilities
41
113
260
203
318
254
\u00a0
456,887
20,289
29,283
24,817
9,439
981
Guarantees and commitments - notional amount
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Guarantees
(2)
3,150
-
-
-
-
-
Commitments
(3)
118,779
-
-
-
-
-
\u00a0
121,929
-
-
-
-
-
\n
(1)
Other financial assets exclude equity shares.
(2)
NatWest Group is only called upon to satisfy a guarantee when the guaranteed party fails to meet its obligations. NatWest Group expects most guarantees it provides to expire unused.
(3)
NatWest Group has given commitments to provide funds to customers under undrawn formal facilities, credit lines and other commitments to lend subject to certain conditions being met by the counterparty. NatWest Group does not expect all facilities to
be drawn, and some may lapse before drawdown.", "dimensions": { "concept": "ifrs-full:DisclosureOfLoansAndAdvancesToCustomersExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f95260": { "value": "Loans to banks and customers
In estimating the fair value of net loans to customers and
banks measured at amortised cost, NatWest Group\u2019s loans
are segregated into appropriate portfolios reflecting the
characteristics of the constituent loans. Two principal
methods are used to estimate fair value:
(a)
(b)
Contractual cashflows that are discounted using a
market discount rate that incorporates the current
spread for the borrower or where this is not observable,
the spread for borrowers of a similar credit standing.
Expected cash flows (unadjusted for credit losses) are
discounted at the current offer rate for the same or
similar products. The current methodology caps all loan
values at par rather than modelling clients\u2019 option to
repay loans early. This approach is adopted for lending
portfolios in Retail Banking, Ulster Bank RoI, Commercial
& Institutional (SME loans) and Private Banking in order
to reflect the homogeneous nature of these portfolios.12 Financial instruments \u2013 maturity analysis
This note shows the maturity profile of NatWest Group\u2019s financial assets and liabilities by contractual date of maturity and contractual cash flows.
Remaining maturity
The following table shows the residual maturity of financial instruments, based on contractual date of maturity.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Less than
More than
\u00a0
Less than
More than
\u00a0
\u00a0
12 months
12 months
Total
12 months
12 months
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104,262
-
104,262
144,832
-
144,832
Trading assets
36,723
8,828
45,551
35,944
9,633
45,577
Derivatives
29,839
49,065
78,904
38,107
61,438
99,545
Settlement balances
7,231
-
7,231
2,572
-
2,572
Loans to banks - amortised cost
6,650
264
6,914
6,872
267
7,139
Loans to customers - amortised cost
87,663
293,770
381,433
84,289
282,051
366,340
Other financial assets
10,192
40,910
51,102
6,128
24,767
30,895
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
8,954
13,236
22,190
7,799
12,642
20,441
Customer deposits
424,893
6,484
431,377
448,821
1,497
450,318
Settlement balances
6,645
-
6,645
2,012
-
2,012
Trading liabilities
45,349
8,287
53,636
42,760
10,048
52,808
Derivatives
30,721
41,674
72,395
39,331
54,716
94,047
Other financial liabilities
20,310
34,779
55,089
13,796
35,311
49,107
Subordinated liabilities
1,047
4,667
5,714
973
5,287
6,260
Notes in circulation
3,237
-
3,237
3,218
-
3,218
Lease liabilities
102
568
670
137
981
1,118
\n
Assets and liabilities by contractual cash flows up to 20 years
The tables on the following page show the contractual undiscounted cash flows receivable and payable, up to a period of 20 years, including future receipts and payments of interest of
financial assets and liabilities by contractual maturity. The balances in the following tables do not agree directly with the consolidated balance sheet, as the tables include all cash flows
relating to principal and future coupon payments, presented on an undiscounted basis. The tables have been prepared on the following basis:
Financial assets have been reflected in the time band of the latest date on which they could be repaid, unless earlier repayment can be demanded by NatWest Group. Financial
liabilities are included at the earliest date on which the counterparty can require repayment, regardless of whether or not such early repayment results in a penalty. If the repayment of
a financial instrument is triggered by, or is subject to, specific criteria such as market price hurdles being reached, the asset is included in the time band that contains the latest date on
which it can be repaid, regardless of early repayment. The liability is included in the time band that contains the earliest possible date on which the conditions could be fulfilled, without
considering the probability of the conditions being met.
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
For example, if a structured note is automatically prepaid when an equity index exceeds a certain level, the cash outflow will be included in the less than three months period, whatever
\n
the level of the index at the year end. The settlement date of debt securities in issue, issued by certain securitisation vehicles consolidated by NatWest Group, depends on when cash
\n
flows are received from the securitised assets. Where these assets are prepayable, the timing of the cash outflow relating to securities assumes that each asset will be prepaid at the
\n
earliest possible date. As the repayments of assets and liabilities are linked, the repayment of assets in securitisations is shown on the earliest date that the asset can be prepaid, as
\n
this is the basis used for liabilities.
\n
The principal amounts of financial assets and liabilities that are repayable after 20 years or where the counterparty has no right to repayment of the principal are excluded from the
\n
table, as are interest payments after 20 years.
\n
The maturity of guarantees and commitments is based on the earliest possible date they would be drawn in order to evaluate NatWest Group\u2019s liquidity position.
\n
MFVTPL assets of \u00a3125.1 billion (2022 - \u00a3145.8 billion) and HFT liabilities of \u00a3125.8 billion (2022 - \u00a3146.7 billion) have been excluded from the following tables.
\n\n \n
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
Cash and balances at central banks
104,262
-
-
-
-
-
Derivatives held for hedging
31
29
128
104
49
49
Settlement balances
7,231
-
-
-
-
-
Loans to banks - amortised cost
5,234
1,437
23
302
-
-
Loans to customers - amortised cost
52,175
46,894
81,445
61,465
96,577
114,806
Other financial assets
(1)
4,897
6,756
12,304
11,183
10,019
8,063
Finance lease
61
242
735
401
656
359
173,891
55,358
94,635
73,455
107,301
123,277
Liabilities by contractual maturity up to 20 years
Bank deposits
8,334
1,279
6,069
8,307
-
-
Customer deposits
393,363
31,900
6,464
11
14
19
Settlement balances
6,645
-
-
-
-
-
Derivatives held for hedging
71
175
366
192
92
8
Other financial liabilities
9,094
12,319
18,843
13,818
4,769
346
Subordinated liabilities
72
1,167
2,301
1,512
1,406
342
Other liabilities - Notes in circulation
3,237
-
-
-
-
-
Lease liabilities
30
79
172
111
175
132
420,846
46,919
34,215
23,951
6,456
847
Guarantees and commitments - notional amount
Guarantees
(2)
2,820
-
-
-
-
-
Commitments
(3)
112,807
-
-
-
-
-
115,627
-
-
-
-
-
\n
For the notes to this table refer to the following page.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
144,832
-
-
-
-
-
Derivatives held for hedging
130
345
28
41
(44)
43
Settlement balances
2,572
-
-
-
-
-
Loans to banks - amortised cost
5,254
1,621
17
288
-
-
Loans to customers - amortised cost
50,923
43,417
76,278
55,128
85,038
100,085
Other financial assets
(1)
2,771
4,507
8,391
7,835
5,706
2,524
Finance lease
96
267
857
482
549
296
\u00a0
206,578
50,157
85,571
63,774
91,249
102,948
Liabilities by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
6,690
1,445
5,662
8,503
89
-
Customer deposits
437,830
11,389
1,252
2
14
20
Settlement balances
2,012
-
-
-
-
-
Derivatives held for hedging
280
(371)
586
306
116
85
Other financial liabilities
6,720
6,640
18,833
13,906
7,361
294
Subordinated liabilities
96
1,073
2,690
1,897
1,541
328
Other liabilities - Notes in circulation
3,218
-
-
-
-
-
Lease liabilities
41
113
260
203
318
254
\u00a0
456,887
20,289
29,283
24,817
9,439
981
Guarantees and commitments - notional amount
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Guarantees
(2)
3,150
-
-
-
-
-
Commitments
(3)
118,779
-
-
-
-
-
\u00a0
121,929
-
-
-
-
-
\n
(1)
Other financial assets exclude equity shares.
(2)
NatWest Group is only called upon to satisfy a guarantee when the guaranteed party fails to meet its obligations. NatWest Group expects most guarantees it provides to expire unused.
(3)
NatWest Group has given commitments to provide funds to customers under undrawn formal facilities, credit lines and other commitments to lend subject to certain conditions being met by the counterparty. NatWest Group does not expect all facilities to
be drawn, and some may lapse before drawdown.", "dimensions": { "concept": "ifrs-full:DisclosureOfLoansAndAdvancesToBanksExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f95293": { "value": "Bank and customer deposits
Fair values of deposits are estimated using discounted cash
flow valuation techniques. Where required, methodologies
can be revised as additional information and valuation
inputs become available.
12 Financial instruments \u2013 maturity analysis
This note shows the maturity profile of NatWest Group\u2019s financial assets and liabilities by contractual date of maturity and contractual cash flows.
Remaining maturity
The following table shows the residual maturity of financial instruments, based on contractual date of maturity.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Less than
More than
\u00a0
Less than
More than
\u00a0
\u00a0
12 months
12 months
Total
12 months
12 months
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104,262
-
104,262
144,832
-
144,832
Trading assets
36,723
8,828
45,551
35,944
9,633
45,577
Derivatives
29,839
49,065
78,904
38,107
61,438
99,545
Settlement balances
7,231
-
7,231
2,572
-
2,572
Loans to banks - amortised cost
6,650
264
6,914
6,872
267
7,139
Loans to customers - amortised cost
87,663
293,770
381,433
84,289
282,051
366,340
Other financial assets
10,192
40,910
51,102
6,128
24,767
30,895
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
8,954
13,236
22,190
7,799
12,642
20,441
Customer deposits
424,893
6,484
431,377
448,821
1,497
450,318
Settlement balances
6,645
-
6,645
2,012
-
2,012
Trading liabilities
45,349
8,287
53,636
42,760
10,048
52,808
Derivatives
30,721
41,674
72,395
39,331
54,716
94,047
Other financial liabilities
20,310
34,779
55,089
13,796
35,311
49,107
Subordinated liabilities
1,047
4,667
5,714
973
5,287
6,260
Notes in circulation
3,237
-
3,237
3,218
-
3,218
Lease liabilities
102
568
670
137
981
1,118
\n
Assets and liabilities by contractual cash flows up to 20 years
The tables on the following page show the contractual undiscounted cash flows receivable and payable, up to a period of 20 years, including future receipts and payments of interest of
financial assets and liabilities by contractual maturity. The balances in the following tables do not agree directly with the consolidated balance sheet, as the tables include all cash flows
relating to principal and future coupon payments, presented on an undiscounted basis. The tables have been prepared on the following basis:
Financial assets have been reflected in the time band of the latest date on which they could be repaid, unless earlier repayment can be demanded by NatWest Group. Financial
liabilities are included at the earliest date on which the counterparty can require repayment, regardless of whether or not such early repayment results in a penalty. If the repayment of
a financial instrument is triggered by, or is subject to, specific criteria such as market price hurdles being reached, the asset is included in the time band that contains the latest date on
which it can be repaid, regardless of early repayment. The liability is included in the time band that contains the earliest possible date on which the conditions could be fulfilled, without
considering the probability of the conditions being met.
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
For example, if a structured note is automatically prepaid when an equity index exceeds a certain level, the cash outflow will be included in the less than three months period, whatever
\n
the level of the index at the year end. The settlement date of debt securities in issue, issued by certain securitisation vehicles consolidated by NatWest Group, depends on when cash
\n
flows are received from the securitised assets. Where these assets are prepayable, the timing of the cash outflow relating to securities assumes that each asset will be prepaid at the
\n
earliest possible date. As the repayments of assets and liabilities are linked, the repayment of assets in securitisations is shown on the earliest date that the asset can be prepaid, as
\n
this is the basis used for liabilities.
\n
The principal amounts of financial assets and liabilities that are repayable after 20 years or where the counterparty has no right to repayment of the principal are excluded from the
\n
table, as are interest payments after 20 years.
\n
The maturity of guarantees and commitments is based on the earliest possible date they would be drawn in order to evaluate NatWest Group\u2019s liquidity position.
\n
MFVTPL assets of \u00a3125.1 billion (2022 - \u00a3145.8 billion) and HFT liabilities of \u00a3125.8 billion (2022 - \u00a3146.7 billion) have been excluded from the following tables.
\n\n \n
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
Cash and balances at central banks
104,262
-
-
-
-
-
Derivatives held for hedging
31
29
128
104
49
49
Settlement balances
7,231
-
-
-
-
-
Loans to banks - amortised cost
5,234
1,437
23
302
-
-
Loans to customers - amortised cost
52,175
46,894
81,445
61,465
96,577
114,806
Other financial assets
(1)
4,897
6,756
12,304
11,183
10,019
8,063
Finance lease
61
242
735
401
656
359
173,891
55,358
94,635
73,455
107,301
123,277
Liabilities by contractual maturity up to 20 years
Bank deposits
8,334
1,279
6,069
8,307
-
-
Customer deposits
393,363
31,900
6,464
11
14
19
Settlement balances
6,645
-
-
-
-
-
Derivatives held for hedging
71
175
366
192
92
8
Other financial liabilities
9,094
12,319
18,843
13,818
4,769
346
Subordinated liabilities
72
1,167
2,301
1,512
1,406
342
Other liabilities - Notes in circulation
3,237
-
-
-
-
-
Lease liabilities
30
79
172
111
175
132
420,846
46,919
34,215
23,951
6,456
847
Guarantees and commitments - notional amount
Guarantees
(2)
2,820
-
-
-
-
-
Commitments
(3)
112,807
-
-
-
-
-
115,627
-
-
-
-
-
\n
For the notes to this table refer to the following page.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
144,832
-
-
-
-
-
Derivatives held for hedging
130
345
28
41
(44)
43
Settlement balances
2,572
-
-
-
-
-
Loans to banks - amortised cost
5,254
1,621
17
288
-
-
Loans to customers - amortised cost
50,923
43,417
76,278
55,128
85,038
100,085
Other financial assets
(1)
2,771
4,507
8,391
7,835
5,706
2,524
Finance lease
96
267
857
482
549
296
\u00a0
206,578
50,157
85,571
63,774
91,249
102,948
Liabilities by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
6,690
1,445
5,662
8,503
89
-
Customer deposits
437,830
11,389
1,252
2
14
20
Settlement balances
2,012
-
-
-
-
-
Derivatives held for hedging
280
(371)
586
306
116
85
Other financial liabilities
6,720
6,640
18,833
13,906
7,361
294
Subordinated liabilities
96
1,073
2,690
1,897
1,541
328
Other liabilities - Notes in circulation
3,218
-
-
-
-
-
Lease liabilities
41
113
260
203
318
254
\u00a0
456,887
20,289
29,283
24,817
9,439
981
Guarantees and commitments - notional amount
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Guarantees
(2)
3,150
-
-
-
-
-
Commitments
(3)
118,779
-
-
-
-
-
\u00a0
121,929
-
-
-
-
-
\n
(1)
Other financial assets exclude equity shares.
(2)
NatWest Group is only called upon to satisfy a guarantee when the guaranteed party fails to meet its obligations. NatWest Group expects most guarantees it provides to expire unused.
(3)
NatWest Group has given commitments to provide funds to customers under undrawn formal facilities, credit lines and other commitments to lend subject to certain conditions being met by the counterparty. NatWest Group does not expect all facilities to
be drawn, and some may lapse before drawdown.", "dimensions": { "concept": "ifrs-full:DisclosureOfDepositsFromCustomersExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f95294": { "value": "Bank and customer deposits
Fair values of deposits are estimated using discounted cash
flow valuation techniques. Where required, methodologies
can be revised as additional information and valuation
inputs become available.
12 Financial instruments \u2013 maturity analysis
This note shows the maturity profile of NatWest Group\u2019s financial assets and liabilities by contractual date of maturity and contractual cash flows.
Remaining maturity
The following table shows the residual maturity of financial instruments, based on contractual date of maturity.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Less than
More than
\u00a0
Less than
More than
\u00a0
\u00a0
12 months
12 months
Total
12 months
12 months
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104,262
-
104,262
144,832
-
144,832
Trading assets
36,723
8,828
45,551
35,944
9,633
45,577
Derivatives
29,839
49,065
78,904
38,107
61,438
99,545
Settlement balances
7,231
-
7,231
2,572
-
2,572
Loans to banks - amortised cost
6,650
264
6,914
6,872
267
7,139
Loans to customers - amortised cost
87,663
293,770
381,433
84,289
282,051
366,340
Other financial assets
10,192
40,910
51,102
6,128
24,767
30,895
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
8,954
13,236
22,190
7,799
12,642
20,441
Customer deposits
424,893
6,484
431,377
448,821
1,497
450,318
Settlement balances
6,645
-
6,645
2,012
-
2,012
Trading liabilities
45,349
8,287
53,636
42,760
10,048
52,808
Derivatives
30,721
41,674
72,395
39,331
54,716
94,047
Other financial liabilities
20,310
34,779
55,089
13,796
35,311
49,107
Subordinated liabilities
1,047
4,667
5,714
973
5,287
6,260
Notes in circulation
3,237
-
3,237
3,218
-
3,218
Lease liabilities
102
568
670
137
981
1,118
\n
Assets and liabilities by contractual cash flows up to 20 years
The tables on the following page show the contractual undiscounted cash flows receivable and payable, up to a period of 20 years, including future receipts and payments of interest of
financial assets and liabilities by contractual maturity. The balances in the following tables do not agree directly with the consolidated balance sheet, as the tables include all cash flows
relating to principal and future coupon payments, presented on an undiscounted basis. The tables have been prepared on the following basis:
Financial assets have been reflected in the time band of the latest date on which they could be repaid, unless earlier repayment can be demanded by NatWest Group. Financial
liabilities are included at the earliest date on which the counterparty can require repayment, regardless of whether or not such early repayment results in a penalty. If the repayment of
a financial instrument is triggered by, or is subject to, specific criteria such as market price hurdles being reached, the asset is included in the time band that contains the latest date on
which it can be repaid, regardless of early repayment. The liability is included in the time band that contains the earliest possible date on which the conditions could be fulfilled, without
considering the probability of the conditions being met.
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
For example, if a structured note is automatically prepaid when an equity index exceeds a certain level, the cash outflow will be included in the less than three months period, whatever
\n
the level of the index at the year end. The settlement date of debt securities in issue, issued by certain securitisation vehicles consolidated by NatWest Group, depends on when cash
\n
flows are received from the securitised assets. Where these assets are prepayable, the timing of the cash outflow relating to securities assumes that each asset will be prepaid at the
\n
earliest possible date. As the repayments of assets and liabilities are linked, the repayment of assets in securitisations is shown on the earliest date that the asset can be prepaid, as
\n
this is the basis used for liabilities.
\n
The principal amounts of financial assets and liabilities that are repayable after 20 years or where the counterparty has no right to repayment of the principal are excluded from the
\n
table, as are interest payments after 20 years.
\n
The maturity of guarantees and commitments is based on the earliest possible date they would be drawn in order to evaluate NatWest Group\u2019s liquidity position.
\n
MFVTPL assets of \u00a3125.1 billion (2022 - \u00a3145.8 billion) and HFT liabilities of \u00a3125.8 billion (2022 - \u00a3146.7 billion) have been excluded from the following tables.
\n\n \n
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
Cash and balances at central banks
104,262
-
-
-
-
-
Derivatives held for hedging
31
29
128
104
49
49
Settlement balances
7,231
-
-
-
-
-
Loans to banks - amortised cost
5,234
1,437
23
302
-
-
Loans to customers - amortised cost
52,175
46,894
81,445
61,465
96,577
114,806
Other financial assets
(1)
4,897
6,756
12,304
11,183
10,019
8,063
Finance lease
61
242
735
401
656
359
173,891
55,358
94,635
73,455
107,301
123,277
Liabilities by contractual maturity up to 20 years
Bank deposits
8,334
1,279
6,069
8,307
-
-
Customer deposits
393,363
31,900
6,464
11
14
19
Settlement balances
6,645
-
-
-
-
-
Derivatives held for hedging
71
175
366
192
92
8
Other financial liabilities
9,094
12,319
18,843
13,818
4,769
346
Subordinated liabilities
72
1,167
2,301
1,512
1,406
342
Other liabilities - Notes in circulation
3,237
-
-
-
-
-
Lease liabilities
30
79
172
111
175
132
420,846
46,919
34,215
23,951
6,456
847
Guarantees and commitments - notional amount
Guarantees
(2)
2,820
-
-
-
-
-
Commitments
(3)
112,807
-
-
-
-
-
115,627
-
-
-
-
-
\n
For the notes to this table refer to the following page.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
144,832
-
-
-
-
-
Derivatives held for hedging
130
345
28
41
(44)
43
Settlement balances
2,572
-
-
-
-
-
Loans to banks - amortised cost
5,254
1,621
17
288
-
-
Loans to customers - amortised cost
50,923
43,417
76,278
55,128
85,038
100,085
Other financial assets
(1)
2,771
4,507
8,391
7,835
5,706
2,524
Finance lease
96
267
857
482
549
296
\u00a0
206,578
50,157
85,571
63,774
91,249
102,948
Liabilities by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
6,690
1,445
5,662
8,503
89
-
Customer deposits
437,830
11,389
1,252
2
14
20
Settlement balances
2,012
-
-
-
-
-
Derivatives held for hedging
280
(371)
586
306
116
85
Other financial liabilities
6,720
6,640
18,833
13,906
7,361
294
Subordinated liabilities
96
1,073
2,690
1,897
1,541
328
Other liabilities - Notes in circulation
3,218
-
-
-
-
-
Lease liabilities
41
113
260
203
318
254
\u00a0
456,887
20,289
29,283
24,817
9,439
981
Guarantees and commitments - notional amount
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Guarantees
(2)
3,150
-
-
-
-
-
Commitments
(3)
118,779
-
-
-
-
-
\u00a0
121,929
-
-
-
-
-
\n
(1)
Other financial assets exclude equity shares.
(2)
NatWest Group is only called upon to satisfy a guarantee when the guaranteed party fails to meet its obligations. NatWest Group expects most guarantees it provides to expire unused.
(3)
NatWest Group has given commitments to provide funds to customers under undrawn formal facilities, credit lines and other commitments to lend subject to certain conditions being met by the counterparty. NatWest Group does not expect all facilities to
be drawn, and some may lapse before drawdown.", "dimensions": { "concept": "ifrs-full:DisclosureOfDepositsFromBanksExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f95370": { "value": "12 Financial instruments \u2013 maturity analysis
This note shows the maturity profile of NatWest Group\u2019s financial assets and liabilities by contractual date of maturity and contractual cash flows.
Remaining maturity
The following table shows the residual maturity of financial instruments, based on contractual date of maturity.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
2023
2022
\u00a0
Less than
More than
\u00a0
Less than
More than
\u00a0
\u00a0
12 months
12 months
Total
12 months
12 months
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
104,262
-
104,262
144,832
-
144,832
Trading assets
36,723
8,828
45,551
35,944
9,633
45,577
Derivatives
29,839
49,065
78,904
38,107
61,438
99,545
Settlement balances
7,231
-
7,231
2,572
-
2,572
Loans to banks - amortised cost
6,650
264
6,914
6,872
267
7,139
Loans to customers - amortised cost
87,663
293,770
381,433
84,289
282,051
366,340
Other financial assets
10,192
40,910
51,102
6,128
24,767
30,895
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
8,954
13,236
22,190
7,799
12,642
20,441
Customer deposits
424,893
6,484
431,377
448,821
1,497
450,318
Settlement balances
6,645
-
6,645
2,012
-
2,012
Trading liabilities
45,349
8,287
53,636
42,760
10,048
52,808
Derivatives
30,721
41,674
72,395
39,331
54,716
94,047
Other financial liabilities
20,310
34,779
55,089
13,796
35,311
49,107
Subordinated liabilities
1,047
4,667
5,714
973
5,287
6,260
Notes in circulation
3,237
-
3,237
3,218
-
3,218
Lease liabilities
102
568
670
137
981
1,118
\n
Assets and liabilities by contractual cash flows up to 20 years
The tables on the following page show the contractual undiscounted cash flows receivable and payable, up to a period of 20 years, including future receipts and payments of interest of
financial assets and liabilities by contractual maturity. The balances in the following tables do not agree directly with the consolidated balance sheet, as the tables include all cash flows
relating to principal and future coupon payments, presented on an undiscounted basis. The tables have been prepared on the following basis:
Financial assets have been reflected in the time band of the latest date on which they could be repaid, unless earlier repayment can be demanded by NatWest Group. Financial
liabilities are included at the earliest date on which the counterparty can require repayment, regardless of whether or not such early repayment results in a penalty. If the repayment of
a financial instrument is triggered by, or is subject to, specific criteria such as market price hurdles being reached, the asset is included in the time band that contains the latest date on
which it can be repaid, regardless of early repayment. The liability is included in the time band that contains the earliest possible date on which the conditions could be fulfilled, without
considering the probability of the conditions being met.
\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n
For example, if a structured note is automatically prepaid when an equity index exceeds a certain level, the cash outflow will be included in the less than three months period, whatever
\n
the level of the index at the year end. The settlement date of debt securities in issue, issued by certain securitisation vehicles consolidated by NatWest Group, depends on when cash
\n
flows are received from the securitised assets. Where these assets are prepayable, the timing of the cash outflow relating to securities assumes that each asset will be prepaid at the
\n
earliest possible date. As the repayments of assets and liabilities are linked, the repayment of assets in securitisations is shown on the earliest date that the asset can be prepaid, as
\n
this is the basis used for liabilities.
\n
The principal amounts of financial assets and liabilities that are repayable after 20 years or where the counterparty has no right to repayment of the principal are excluded from the
\n
table, as are interest payments after 20 years.
\n
The maturity of guarantees and commitments is based on the earliest possible date they would be drawn in order to evaluate NatWest Group\u2019s liquidity position.
\n
MFVTPL assets of \u00a3125.1 billion (2022 - \u00a3145.8 billion) and HFT liabilities of \u00a3125.8 billion (2022 - \u00a3146.7 billion) have been excluded from the following tables.
\n\n \n
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
Cash and balances at central banks
104,262
-
-
-
-
-
Derivatives held for hedging
31
29
128
104
49
49
Settlement balances
7,231
-
-
-
-
-
Loans to banks - amortised cost
5,234
1,437
23
302
-
-
Loans to customers - amortised cost
52,175
46,894
81,445
61,465
96,577
114,806
Other financial assets
(1)
4,897
6,756
12,304
11,183
10,019
8,063
Finance lease
61
242
735
401
656
359
173,891
55,358
94,635
73,455
107,301
123,277
Liabilities by contractual maturity up to 20 years
Bank deposits
8,334
1,279
6,069
8,307
-
-
Customer deposits
393,363
31,900
6,464
11
14
19
Settlement balances
6,645
-
-
-
-
-
Derivatives held for hedging
71
175
366
192
92
8
Other financial liabilities
9,094
12,319
18,843
13,818
4,769
346
Subordinated liabilities
72
1,167
2,301
1,512
1,406
342
Other liabilities - Notes in circulation
3,237
-
-
-
-
-
Lease liabilities
30
79
172
111
175
132
420,846
46,919
34,215
23,951
6,456
847
Guarantees and commitments - notional amount
Guarantees
(2)
2,820
-
-
-
-
-
Commitments
(3)
112,807
-
-
-
-
-
115,627
-
-
-
-
-
\n
For the notes to this table refer to the following page.
\n\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\n\t\n
\u00a0 \u00a0
\u00a0
0-3 months
3-12 months
1-3 years
3-5 years
5-10 years
10-20 years
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Cash and balances at central banks
144,832
-
-
-
-
-
Derivatives held for hedging
130
345
28
41
(44)
43
Settlement balances
2,572
-
-
-
-
-
Loans to banks - amortised cost
5,254
1,621
17
288
-
-
Loans to customers - amortised cost
50,923
43,417
76,278
55,128
85,038
100,085
Other financial assets
(1)
2,771
4,507
8,391
7,835
5,706
2,524
Finance lease
96
267
857
482
549
296
\u00a0
206,578
50,157
85,571
63,774
91,249
102,948
Liabilities by contractual maturity up to 20 years
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Bank deposits
6,690
1,445
5,662
8,503
89
-
Customer deposits
437,830
11,389
1,252
2
14
20
Settlement balances
2,012
-
-
-
-
-
Derivatives held for hedging
280
(371)
586
306
116
85
Other financial liabilities
6,720
6,640
18,833
13,906
7,361
294
Subordinated liabilities
96
1,073
2,690
1,897
1,541
328
Other liabilities - Notes in circulation
3,218
-
-
-
-
-
Lease liabilities
41
113
260
203
318
254
\u00a0
456,887
20,289
29,283
24,817
9,439
981
Guarantees and commitments - notional amount
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Guarantees
(2)
3,150
-
-
-
-
-
Commitments
(3)
118,779
-
-
-
-
-
\u00a0
121,929
-
-
-
-
-
\n
(1)
Other financial assets exclude equity shares.
(2)
NatWest Group is only called upon to satisfy a guarantee when the guaranteed party fails to meet its obligations. NatWest Group expects most guarantees it provides to expire unused.
(3)
NatWest Group has given commitments to provide funds to customers under undrawn formal facilities, credit lines and other commitments to lend subject to certain conditions being met by the counterparty. NatWest Group does not expect all facilities to
be drawn, and some may lapse before drawdown.31 Directors\u2019 and key management remuneration
Directors and key management are remunerated for services rendered in the
period. The executive directors may participate in the company's long-term
incentive plans, executive share option and sharesave schemes and details of
their interests in the company's shares arising from their participation are
given in the directors' remuneration report. Details of the remuneration
received by each director are also given in the directors' remuneration report.
Key management comprises members of the NatWest Group plc and NWH Ltd Boards,
members of the NatWest Group plc and NWH Ltd Executive Committees, and the Chief
Executives of NatWest Markets Plc and RBS International (Holdings) Limited. This is on
the basis that these individuals have been identified as Persons Discharging Managerial
Responsibilities of NatWest Group plc under the new governance structure.
\u00a0
2023
2022
Directors' remuneration
\u00a3000
\u00a3000
Non-executive directors emoluments
1,574
1,685
Chairman and executive directors emoluments
6,408
5,804
\u00a0
7,982
7,489
Amounts receivable under long-term incentive plans
\u00a0 \u00a0
and share option plans
2,708
542
Total
10,690
8,031
\n
Compensation of key management
The aggregate remuneration of directors and other members of key management during
the year was as follows:
\u00a0
2023
2022
\u00a0
\u00a3000
\u00a3000
Short-term benefits
21,098
22,175
Post-employment benefits
741
732
Share-based payments
7,264
2,547
\u00a0
29,103
25,454
\n
Short term benefits include benefits expected to be settled wholly within twelve months
of balance sheet date. Post-employment benefits include defined benefit contributions for
active members and pension funding to support contributions to the defined contribution
schemes. Share-based payments include awards vested under rewards schemes.
32 Transactions with directors and key management
This note presents information relating to any transactions with directors and
key management. Key management comprises directors of the company and
Persons Discharging Managerial Responsibilities (PDMRs) of NatWest Group
plc.
For the purposes of IAS 24 Related party disclosures, key management comprises
directors of the company and PDMRs of NatWest Group plc. Key management have
banking relationships with NatWest Group entities which are entered into in the normal
course of business and on substantially the same terms, including interest rates and
security, as for comparable transactions with other persons of a similar standing or,
where applicable, with other employees. These transactions did not involve more than
the normal risk of repayment or present other unfavourable features.
Amounts in the table below are attributed to each person at their highest level of
NatWest Group key management, and relate to those who were key management at
any time during the financial period.
\u00a0
At 31 December
\u00a0
2023
2022
\u00a0
\u00a3000
\u00a3000
Loans to customers - amortised cost
11,406
12,137
Customer deposits
55,254
47,866
\n
At 31 December 2023, amounts outstanding in relation to transactions, arrangements
and agreements entered into by authorised institutions in NatWest Group, as defined in
UK legislation, were \u00a38,397,763 in respect of loans to 9 persons who were directors of
the company at any time during the financial period.
33 Related parties
A related party is a person or entity that is related to the entity that is preparing its financial statements. This includes subsidiaries, associates, joint ventures, post-
employment benefits plans, Key management personnel and their close family members and entities controlled by them. Transactions between an entity and any
related party are disclosed in the financial statements in accordance with both accounting standards and relevant listing rules to ensure readers are aware of how
financial statements may be affected by these transactions.
UK Government
Group
through
NatWest
of
shareholder
controlling
the
is
Treasury
HM
Government
UK
Government\u2019s shareholding is managed by UK
UK
plc as per UK listing rules. The
Government. At
Government Investments Limited, a company wholly owned by the UK
31 December 2023 HM Treasury\u2019s holding in the company\u2019s ordinary shares was
37.97%. As a result the UK Government and UK Government-controlled bodies are
related parties of the Group.
NatWest Group enters into transactions with many of these bodies. Transactions include
the payment of: taxes \u2013 principally UK corporation tax (Note 7) and value added tax;
national insurance contributions; local authority rates; and regulatory fees and levies
(including the bank levy Note 3) and FSCS levy (Note 26) - together with banking
transactions such as loans and deposits undertaken in the normal course of banker-
customer relationships.
Bank of England facilities
NatWest Group may participate in a number of schemes operated by the Bank of
England in the normal course of business.
Members of NatWest Group that are UK authorised institutions are required to maintain
non-interest bearing (cash ratio) deposits with the Bank of England amounting to 0.382%
of their average eligible liabilities in excess of \u00a3600 million. They also have access to Bank
of England reserve accounts: sterling current accounts that earn interest at the Bank of
England Base rate.
NatWest Group provides guarantees for certain subsidiaries, liabilities to the Bank of
England.
Other Related Parties
In accordance with IAS 24, transactions or balances between NatWest Group entities
that have been eliminated on consolidation are not reported.
The primary financial statements of the parent company include transactions and
balances with its subsidiaries which have been further disclosed in the relevant notes.
Associates, joint ventures (JVs) and equity investments
In their roles as
of finance, NatWest Group companies provide
providers
development
capital support
investments
of
businesses.
types
other
to
are made in the
These
and
of
course
NatWest
normal
partnerships,
strategic
Group
further
To
may
business.
seek
in
to invest
hold
of
subsidiary
a
in
third
interest
minority
a
to
parties
third
allow
or
parties
disclose
We
Group.
NatWest
and
ventures
joint
and
associates
for
parties
related
as
where equity interest are over 10%. Ongoing business transactions with these entities
are on normal commercial terms.
Amounts included in the NatWest Group financial statements, in aggregate, by category
of related party are as follows:
\u00a0
Associates and Joint
Equity
\u00a0
\u00a0
Ventures
Shares (1)
Total
31 December 2023
\u00a3m
\u00a3m
\u00a3m
Investments
668
145
813
Loans to customers - amortised cost
-
13
13
Customer deposits
2
10
12
Settlement balances
-
-
-
Other comprehensive income
-
(8)
(8)
Other operating income
(11)
-
(11)
31 December 2022
\u00a0\u00a0\u00a0
Investments
688
149
837
Loans to customers - amortised cost
-
-
-
Customer deposits
1
4
5
Settlement balances
-
34
34
Other comprehensive income
-
11
11
Other operating income
(30)
-
(30)
\n
(1)
Represents investments in entities where ownership is more than 10%
Post employment benefits
NatWest Group recharges NatWest Group Pension Fund with the cost of pension
management services incurred by it. NatWest Group Pension Fund holds bank accounts
held with the NatWest Group plc. At 31 December 2023 these balances amounted to
\u00a336.2 million (2022 - \u00a361.7 million).
NatWest Group Pension fund also holds certain interest rate swaps, inflation swaps,
credit derivatives, cross currency swaps and forward exchange rate agreements where
subsidiaries of NatWest Group act as counterparties. These transactions are on
commercial terms and carried out on an arms-length basis.
During February 2023, NatWest Group has entered into an agreement to establish a
new legal structure to hold assets, consolidated on NatWest Group\u2019s balance sheet, to
meet potential future contributions required by the Main section of the Group\u2019 Pension
Fund. This transaction required transfer of \u00a3471 million to the Reservoir Trust after the
final dividend for 2022 approved by shareholders. This transaction does not create a
pension liability with the Main section of the Group Pension Fund. Refer to
details in Note
5 and in Material contracts information on page 444.", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f99807": { "value": "15 Loan impairment provisions
There is a risk that customers and counterparties fail to meet their contractual obligation to settle outstanding amounts, known as expected credit losses (ECL). The
calculation of ECL considers historic, current and forward-looking information to determine the amount we do not expect to recover. ECL is recognised on current and
potential exposures, and contingent liabilities.
For accounting policy information refer to Accounting policy 2.3. Further disclosures on credit risk and information on ECL methodology are shown from page 186.
Loan exposure and impairment metrics
The table below summarises loans and credit impairment measures within the scope of IFRS 9 Expected credit losses
framework.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Loans - amortised cost and FVOCI
\u00a0 \u00a0
Stage 1
348,586
325,224
Stage 2
37,891
46,833
Stage 3
5,563
5,096
Of which: individual
1,031
1,121
Of which: collective
4,532
3,975
\u00a0
392,040
377,153
ECL provisions
(1)
\u00a0 \u00a0
- Stage 1
709
632
- Stage 2
976
1,043
- Stage 3
1,960
1,759
Of which: individual
332
287
Of which: collective
1,628
1,472
\u00a0
3,645
3,434
ECL provision coverage
(2)
\u00a0 \u00a0
- Stage 1 (%)
0.20
0.19
- Stage 2 (%)
2.58
2.23
- Stage 3 (%)
35.23
34.52
\u00a0
0.93
0.91
Continuing operations
\u00a0 \u00a0
Impairment (releases)/losses
\u00a0 \u00a0
ECL (release)/charge
(3,4)
578
337
Stage 1
(397)
(290)
Stage 2
645
393
Stage 3
330
234
Of which: individual
89
54
Of which: collective
241
180
Amounts written off
319
482
Of which: individual
42
168
Of which: collective
277
314
\n
(1)
Includes loans to customers and banks.
(2)
Includes \u00a39 million (2022 - \u00a33 million) related to assets classified as FVOCI and
\u00a30.1 billion (2022 - \u00a30.1 billion) related to off-balance sheet exposures.
(3)
ECL provisions coverage is calculated as ECL provisions divided by loans \u2013
amortised cost and FVOCI. It is calculated on loans and total ECL provisions,
including ECL for other (non-loan) assets and unutilised exposure. Some
segments with a high proportion of debt securities or unutilised exposure may
result in a not meaningful coverage ratio.
(4)
Includes a \u00a316 million release (2022 - \u00a33 million charge) related to other
financial assets, of which \u00a36 million charge (2022 - nil) related to assets
classified as FVOCI; and \u00a39 million release (2022 - \u00a35 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 Financial instruments within the scope of
the IFRS 9 ECL framework for further details. Other financial assets within the
scope of the IFRS 9 ECL framework were cash and balances at central banks
totalling \u00a3103.1 billion (2022 \u2013 \u00a3143.3 billion) and debt securities of \u00a350.1 billion
(2022 \u2013 \u00a329.9 billion).
Credit risk enhancement and mitigation
For information on Credit risk enhancement and mitigation held as security, refer to Risk and capital management \u2013 Credit risk enhancement and mitigation section.
Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2023, customer loan impairment provisions amounted to \u00a33,645 million (2022 - \u00a33,434
million). A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan was advanced. Such evidence includes, changes in
the credit rating of a borrower, the failure to make payments in accordance with the loan agreement, significant reduction in the value of any security, breach of limits or covenants,
and observable data about relevant macroeconomic measures.
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management\u2019s assessment of any potential deterioration in the creditworthiness of the
borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of
impairment losses. For further information and sensitivity analysis, refer to Risk and capital management \u2013 Measurement uncertainty and ECL sensitivity analysis section.
IFRS 9 ECL model design principles
Refer to Credit risk \u2013 IFRS 9 ECL model design principles section for further details.
Approach for multiple economic scenarios (MES)
The base scenario plays a greater part in the calculation of ECL than the approach to MES. Refer to Credit risk \u2013 Economic loss drivers - Probability weightings of scenarios section for
further details.17 Intangible assets
Intangible assets, such as internally generated software and goodwill generated on business combinations, are not physical in nature. This note presents the cost of
the assets, which is the amount NatWest Group initially paid or incurred, additions and disposals during the year, and any amortisation or impairment. Amortisation is
a charge that reflects the usage of the asset and impairment is a reduction in value arising from specific events identified during the year.
For accounting policy information refer to Accounting policies 3.4 and 3.5.
\u00a0
2023
2022
\u00a0
Goodwill
Other (1)
Total
Goodwill
Other (1)
Total
Cost
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
9,931
3,763
13,694
9,939
3,050
12,989
Currency translation and other adjustments
-
-
-
(8)
(3)
(11)
Acquisitions of companies and businesses
159
37
196
-
-
-
Additions
-
762
762
-
743
743
Disposals and write-off of fully amortised assets
-
(115)
(115)
-
(27)
(27)
At 31 December
10,090
4,447
14,537
9,931
3,763
13,694
Accumulated amortisation and impairment
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
At 1 January
4,409
2,169
6,578
4,417
1,849
6,266
Currency translation and other adjustments
-
-
-
(8)
(4)
(12)
Disposals and write-off of fully amortised assets
-
(116)
(116)
-
(17)
(17)
Impairment of intangible assets
1
22
23
-
-
-
Amortisation charge for the year
-
438
438
-
341
341
At 31 December
4,410
2,513
6,923
4,409
2,169
6,578
Net book value at 31 December
5,680
1,934
7,614
5,522
1,594
7,116
\n
(1)
Principally consists of internally generated software.
Intangible assets and goodwill are reviewed for indicators of impairment. Intangible
assets were impaired by \u00a323 million in 2023 (2022 \u2013 nil).
NatWest Group\u2019s goodwill acquired in business combinations is reviewed for impairment
annually at 31 December by cash-generating unit (CGU): 2023 - Retail Banking \u00a32,607
million (2022 - \u00a32,607 million), Ring-Fenced Bank Commercial & Institutional \u00a32,605
million (2022 - \u00a32,606 million), Private Banking \u00a39 million (2022 - \u00a39 million), RBS
International \u00a3300 million (2022 - \u00a3300 million), and Cushon \u00a3159 million (2022 - nil). Our
CGUs represent the smallest group of assets to which we have allocated goodwill and
reflect the lowest level at which we monitor goodwill post acquisition. For Cushon and
RBS International this is at an entity level which represents the lowest level applicable to
the business combination and their cash flows are independent of other CGUs. Analysis
by reportable segment is in Note 4 Segmental analysis.
Impairment testing involves the comparison of the carrying value of each CGU with its
recoverable amount. The carrying values of the segments reflect the equity allocations
made by management, which are consistent with NatWest Group\u2019s capital targets.
Recoverable amount is the higher of fair value less costs of disposal and value in use. Fair
value is the price that would be received to sell an asset in an orderly transaction
between market participants. Value in use is the present value of expected future cash
flows from the CGU.
The recoverable amounts for all CGUs at 31 December 2023 were based on value in
use, using management's latest five-year revenue and cost forecasts. These are
discounted cash flow projections over five years. The forecast is then extrapolated in
perpetuity using a long-term growth rate to compute a terminal value, which comprises
the majority of the value in use. The long-term growth rates have been based on
expected growth of the CGUs (2022 and 2023 \u2013 1.4%). The 2023 pre-tax risk discount
rates are based on those observed to be applied to businesses regarded as peers of the
CGUs: Retail Banking \u2013 16% (2022 - 15.3%), Ring-Fenced Bank Commercial &
Institutional \u2013 16% (2022 - 15.3%), Private Banking \u2013 16% (2022 - 15.3%), Cushon \u2013
15.3% (2022 \u2013 nil), RBS International \u2013 14.6% (2022 \u2013 14%).", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f99808": { "value": "15 Loan impairment provisions
There is a risk that customers and counterparties fail to meet their contractual obligation to settle outstanding amounts, known as expected credit losses (ECL). The
calculation of ECL considers historic, current and forward-looking information to determine the amount we do not expect to recover. ECL is recognised on current and
potential exposures, and contingent liabilities.
For accounting policy information refer to Accounting policy 2.3. Further disclosures on credit risk and information on ECL methodology are shown from page 186.
Loan exposure and impairment metrics
The table below summarises loans and credit impairment measures within the scope of IFRS 9 Expected credit losses
framework.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Loans - amortised cost and FVOCI
\u00a0 \u00a0
Stage 1
348,586
325,224
Stage 2
37,891
46,833
Stage 3
5,563
5,096
Of which: individual
1,031
1,121
Of which: collective
4,532
3,975
\u00a0
392,040
377,153
ECL provisions
(1)
\u00a0 \u00a0
- Stage 1
709
632
- Stage 2
976
1,043
- Stage 3
1,960
1,759
Of which: individual
332
287
Of which: collective
1,628
1,472
\u00a0
3,645
3,434
ECL provision coverage
(2)
\u00a0 \u00a0
- Stage 1 (%)
0.20
0.19
- Stage 2 (%)
2.58
2.23
- Stage 3 (%)
35.23
34.52
\u00a0
0.93
0.91
Continuing operations
\u00a0 \u00a0
Impairment (releases)/losses
\u00a0 \u00a0
ECL (release)/charge
(3,4)
578
337
Stage 1
(397)
(290)
Stage 2
645
393
Stage 3
330
234
Of which: individual
89
54
Of which: collective
241
180
Amounts written off
319
482
Of which: individual
42
168
Of which: collective
277
314
\n
(1)
Includes loans to customers and banks.
(2)
Includes \u00a39 million (2022 - \u00a33 million) related to assets classified as FVOCI and
\u00a30.1 billion (2022 - \u00a30.1 billion) related to off-balance sheet exposures.
(3)
ECL provisions coverage is calculated as ECL provisions divided by loans \u2013
amortised cost and FVOCI. It is calculated on loans and total ECL provisions,
including ECL for other (non-loan) assets and unutilised exposure. Some
segments with a high proportion of debt securities or unutilised exposure may
result in a not meaningful coverage ratio.
(4)
Includes a \u00a316 million release (2022 - \u00a33 million charge) related to other
financial assets, of which \u00a36 million charge (2022 - nil) related to assets
classified as FVOCI; and \u00a39 million release (2022 - \u00a35 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 Financial instruments within the scope of
the IFRS 9 ECL framework for further details. Other financial assets within the
scope of the IFRS 9 ECL framework were cash and balances at central banks
totalling \u00a3103.1 billion (2022 \u2013 \u00a3143.3 billion) and debt securities of \u00a350.1 billion
(2022 \u2013 \u00a329.9 billion).
Credit risk enhancement and mitigation
For information on Credit risk enhancement and mitigation held as security, refer to Risk and capital management \u2013 Credit risk enhancement and mitigation section.
Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2023, customer loan impairment provisions amounted to \u00a33,645 million (2022 - \u00a33,434
million). A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan was advanced. Such evidence includes, changes in
the credit rating of a borrower, the failure to make payments in accordance with the loan agreement, significant reduction in the value of any security, breach of limits or covenants,
and observable data about relevant macroeconomic measures.
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management\u2019s assessment of any potential deterioration in the creditworthiness of the
borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of
impairment losses. For further information and sensitivity analysis, refer to Risk and capital management \u2013 Measurement uncertainty and ECL sensitivity analysis section.
IFRS 9 ECL model design principles
Refer to Credit risk \u2013 IFRS 9 ECL model design principles section for further details.
Approach for multiple economic scenarios (MES)
The base scenario plays a greater part in the calculation of ECL than the approach to MES. Refer to Credit risk \u2013 Economic loss drivers - Probability weightings of scenarios section for
further details.18 Other assets
Other assets are not financial assets and reflect a grouping of assets that are not large enough to present separately on the balance sheet.
.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Interests in associates
(1)
668
688
Property, plant and equipment
(2)
4,227
4,240
Pension schemes in net surplus (Note 5)
201
318
Prepayments
350
340
Accrued income
292
327
Tax recoverable
49
279
Deferred tax (Note 7)
1,894
2,178
Acceptances
575
237
Other
504
569
Other assets
8,760
9,176
\n
(1)
Includes interest in Business Growth Fund \u00a3658 million (2022 - \u00a3677 million).
(2)
The estimated useful lives of NatWest Group\u2019s property, plant and equipment are: freehold buildings and long leasehold 50 years, short leaseholds for unexpired period of lease, property adaptation costs 10 to 15 years, computer equipment up to 5 years
and other equipment 4 to 15 years.", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f100521": { "value": "17 Intangible assets
Intangible assets, such as internally generated software and goodwill generated on business combinations, are not physical in nature. This note presents the cost of
the assets, which is the amount NatWest Group initially paid or incurred, additions and disposals during the year, and any amortisation or impairment. Amortisation is
a charge that reflects the usage of the asset and impairment is a reduction in value arising from specific events identified during the year.
For accounting policy information refer to Accounting policies 3.4 and 3.5.
\u00a0
2023
2022
\u00a0
Goodwill
Other (1)
Total
Goodwill
Other (1)
Total
Cost
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
9,931
3,763
13,694
9,939
3,050
12,989
Currency translation and other adjustments
-
-
-
(8)
(3)
(11)
Acquisitions of companies and businesses
159
37
196
-
-
-
Additions
-
762
762
-
743
743
Disposals and write-off of fully amortised assets
-
(115)
(115)
-
(27)
(27)
At 31 December
10,090
4,447
14,537
9,931
3,763
13,694
Accumulated amortisation and impairment
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
At 1 January
4,409
2,169
6,578
4,417
1,849
6,266
Currency translation and other adjustments
-
-
-
(8)
(4)
(12)
Disposals and write-off of fully amortised assets
-
(116)
(116)
-
(17)
(17)
Impairment of intangible assets
1
22
23
-
-
-
Amortisation charge for the year
-
438
438
-
341
341
At 31 December
4,410
2,513
6,923
4,409
2,169
6,578
Net book value at 31 December
5,680
1,934
7,614
5,522
1,594
7,116
\n
(1)
Principally consists of internally generated software.
Intangible assets and goodwill are reviewed for indicators of impairment. Intangible
assets were impaired by \u00a323 million in 2023 (2022 \u2013 nil).
NatWest Group\u2019s goodwill acquired in business combinations is reviewed for impairment
annually at 31 December by cash-generating unit (CGU): 2023 - Retail Banking \u00a32,607
million (2022 - \u00a32,607 million), Ring-Fenced Bank Commercial & Institutional \u00a32,605
million (2022 - \u00a32,606 million), Private Banking \u00a39 million (2022 - \u00a39 million), RBS
International \u00a3300 million (2022 - \u00a3300 million), and Cushon \u00a3159 million (2022 - nil). Our
CGUs represent the smallest group of assets to which we have allocated goodwill and
reflect the lowest level at which we monitor goodwill post acquisition. For Cushon and
RBS International this is at an entity level which represents the lowest level applicable to
the business combination and their cash flows are independent of other CGUs. Analysis
by reportable segment is in Note 4 Segmental analysis.
Impairment testing involves the comparison of the carrying value of each CGU with its
recoverable amount. The carrying values of the segments reflect the equity allocations
made by management, which are consistent with NatWest Group\u2019s capital targets.
Recoverable amount is the higher of fair value less costs of disposal and value in use. Fair
value is the price that would be received to sell an asset in an orderly transaction
between market participants. Value in use is the present value of expected future cash
flows from the CGU.
The recoverable amounts for all CGUs at 31 December 2023 were based on value in
use, using management's latest five-year revenue and cost forecasts. These are
discounted cash flow projections over five years. The forecast is then extrapolated in
perpetuity using a long-term growth rate to compute a terminal value, which comprises
the majority of the value in use. The long-term growth rates have been based on
expected growth of the CGUs (2022 and 2023 \u2013 1.4%). The 2023 pre-tax risk discount
rates are based on those observed to be applied to businesses regarded as peers of the
CGUs: Retail Banking \u2013 16% (2022 - 15.3%), Ring-Fenced Bank Commercial &
Institutional \u2013 16% (2022 - 15.3%), Private Banking \u2013 16% (2022 - 15.3%), Cushon \u2013
15.3% (2022 \u2013 nil), RBS International \u2013 14.6% (2022 \u2013 14%).", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f100522": { "value": "17 Intangible assets
Intangible assets, such as internally generated software and goodwill generated on business combinations, are not physical in nature. This note presents the cost of
the assets, which is the amount NatWest Group initially paid or incurred, additions and disposals during the year, and any amortisation or impairment. Amortisation is
a charge that reflects the usage of the asset and impairment is a reduction in value arising from specific events identified during the year.
For accounting policy information refer to Accounting policies 3.4 and 3.5.
\u00a0
2023
2022
\u00a0
Goodwill
Other (1)
Total
Goodwill
Other (1)
Total
Cost
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
9,931
3,763
13,694
9,939
3,050
12,989
Currency translation and other adjustments
-
-
-
(8)
(3)
(11)
Acquisitions of companies and businesses
159
37
196
-
-
-
Additions
-
762
762
-
743
743
Disposals and write-off of fully amortised assets
-
(115)
(115)
-
(27)
(27)
At 31 December
10,090
4,447
14,537
9,931
3,763
13,694
Accumulated amortisation and impairment
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
At 1 January
4,409
2,169
6,578
4,417
1,849
6,266
Currency translation and other adjustments
-
-
-
(8)
(4)
(12)
Disposals and write-off of fully amortised assets
-
(116)
(116)
-
(17)
(17)
Impairment of intangible assets
1
22
23
-
-
-
Amortisation charge for the year
-
438
438
-
341
341
At 31 December
4,410
2,513
6,923
4,409
2,169
6,578
Net book value at 31 December
5,680
1,934
7,614
5,522
1,594
7,116
\n
(1)
Principally consists of internally generated software.
Intangible assets and goodwill are reviewed for indicators of impairment. Intangible
assets were impaired by \u00a323 million in 2023 (2022 \u2013 nil).
NatWest Group\u2019s goodwill acquired in business combinations is reviewed for impairment
annually at 31 December by cash-generating unit (CGU): 2023 - Retail Banking \u00a32,607
million (2022 - \u00a32,607 million), Ring-Fenced Bank Commercial & Institutional \u00a32,605
million (2022 - \u00a32,606 million), Private Banking \u00a39 million (2022 - \u00a39 million), RBS
International \u00a3300 million (2022 - \u00a3300 million), and Cushon \u00a3159 million (2022 - nil). Our
CGUs represent the smallest group of assets to which we have allocated goodwill and
reflect the lowest level at which we monitor goodwill post acquisition. For Cushon and
RBS International this is at an entity level which represents the lowest level applicable to
the business combination and their cash flows are independent of other CGUs. Analysis
by reportable segment is in Note 4 Segmental analysis.
Impairment testing involves the comparison of the carrying value of each CGU with its
recoverable amount. The carrying values of the segments reflect the equity allocations
made by management, which are consistent with NatWest Group\u2019s capital targets.
Recoverable amount is the higher of fair value less costs of disposal and value in use. Fair
value is the price that would be received to sell an asset in an orderly transaction
between market participants. Value in use is the present value of expected future cash
flows from the CGU.
The recoverable amounts for all CGUs at 31 December 2023 were based on value in
use, using management's latest five-year revenue and cost forecasts. These are
discounted cash flow projections over five years. The forecast is then extrapolated in
perpetuity using a long-term growth rate to compute a terminal value, which comprises
the majority of the value in use. The long-term growth rates have been based on
expected growth of the CGUs (2022 and 2023 \u2013 1.4%). The 2023 pre-tax risk discount
rates are based on those observed to be applied to businesses regarded as peers of the
CGUs: Retail Banking \u2013 16% (2022 - 15.3%), Ring-Fenced Bank Commercial &
Institutional \u2013 16% (2022 - 15.3%), Private Banking \u2013 16% (2022 - 15.3%), Cushon \u2013
15.3% (2022 \u2013 nil), RBS International \u2013 14.6% (2022 \u2013 14%).", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f100523": { "value": "17 Intangible assets
Intangible assets, such as internally generated software and goodwill generated on business combinations, are not physical in nature. This note presents the cost of
the assets, which is the amount NatWest Group initially paid or incurred, additions and disposals during the year, and any amortisation or impairment. Amortisation is
a charge that reflects the usage of the asset and impairment is a reduction in value arising from specific events identified during the year.
For accounting policy information refer to Accounting policies 3.4 and 3.5.
\u00a0
2023
2022
\u00a0
Goodwill
Other (1)
Total
Goodwill
Other (1)
Total
Cost
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
9,931
3,763
13,694
9,939
3,050
12,989
Currency translation and other adjustments
-
-
-
(8)
(3)
(11)
Acquisitions of companies and businesses
159
37
196
-
-
-
Additions
-
762
762
-
743
743
Disposals and write-off of fully amortised assets
-
(115)
(115)
-
(27)
(27)
At 31 December
10,090
4,447
14,537
9,931
3,763
13,694
Accumulated amortisation and impairment
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
At 1 January
4,409
2,169
6,578
4,417
1,849
6,266
Currency translation and other adjustments
-
-
-
(8)
(4)
(12)
Disposals and write-off of fully amortised assets
-
(116)
(116)
-
(17)
(17)
Impairment of intangible assets
1
22
23
-
-
-
Amortisation charge for the year
-
438
438
-
341
341
At 31 December
4,410
2,513
6,923
4,409
2,169
6,578
Net book value at 31 December
5,680
1,934
7,614
5,522
1,594
7,116
\n
(1)
Principally consists of internally generated software.
Intangible assets and goodwill are reviewed for indicators of impairment. Intangible
assets were impaired by \u00a323 million in 2023 (2022 \u2013 nil).
NatWest Group\u2019s goodwill acquired in business combinations is reviewed for impairment
annually at 31 December by cash-generating unit (CGU): 2023 - Retail Banking \u00a32,607
million (2022 - \u00a32,607 million), Ring-Fenced Bank Commercial & Institutional \u00a32,605
million (2022 - \u00a32,606 million), Private Banking \u00a39 million (2022 - \u00a39 million), RBS
International \u00a3300 million (2022 - \u00a3300 million), and Cushon \u00a3159 million (2022 - nil). Our
CGUs represent the smallest group of assets to which we have allocated goodwill and
reflect the lowest level at which we monitor goodwill post acquisition. For Cushon and
RBS International this is at an entity level which represents the lowest level applicable to
the business combination and their cash flows are independent of other CGUs. Analysis
by reportable segment is in Note 4 Segmental analysis.
Impairment testing involves the comparison of the carrying value of each CGU with its
recoverable amount. The carrying values of the segments reflect the equity allocations
made by management, which are consistent with NatWest Group\u2019s capital targets.
Recoverable amount is the higher of fair value less costs of disposal and value in use. Fair
value is the price that would be received to sell an asset in an orderly transaction
between market participants. Value in use is the present value of expected future cash
flows from the CGU.
The recoverable amounts for all CGUs at 31 December 2023 were based on value in
use, using management's latest five-year revenue and cost forecasts. These are
discounted cash flow projections over five years. The forecast is then extrapolated in
perpetuity using a long-term growth rate to compute a terminal value, which comprises
the majority of the value in use. The long-term growth rates have been based on
expected growth of the CGUs (2022 and 2023 \u2013 1.4%). The 2023 pre-tax risk discount
rates are based on those observed to be applied to businesses regarded as peers of the
CGUs: Retail Banking \u2013 16% (2022 - 15.3%), Ring-Fenced Bank Commercial &
Institutional \u2013 16% (2022 - 15.3%), Private Banking \u2013 16% (2022 - 15.3%), Cushon \u2013
15.3% (2022 \u2013 nil), RBS International \u2013 14.6% (2022 \u2013 14%).", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f100835": { "value": "18 Other assets
Other assets are not financial assets and reflect a grouping of assets that are not large enough to present separately on the balance sheet.
.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Interests in associates
(1)
668
688
Property, plant and equipment
(2)
4,227
4,240
Pension schemes in net surplus (Note 5)
201
318
Prepayments
350
340
Accrued income
292
327
Tax recoverable
49
279
Deferred tax (Note 7)
1,894
2,178
Acceptances
575
237
Other
504
569
Other assets
8,760
9,176
\n
(1)
Includes interest in Business Growth Fund \u00a3658 million (2022 - \u00a3677 million).
(2)
The estimated useful lives of NatWest Group\u2019s property, plant and equipment are: freehold buildings and long leasehold 50 years, short leaseholds for unexpired period of lease, property adaptation costs 10 to 15 years, computer equipment up to 5 years
and other equipment 4 to 15 years.", "dimensions": { "concept": "ifrs-full:DisclosureOfPrepaymentsAndOtherAssetsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f100836": { "value": "18 Other assets
Other assets are not financial assets and reflect a grouping of assets that are not large enough to present separately on the balance sheet.
.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Interests in associates
(1)
668
688
Property, plant and equipment
(2)
4,227
4,240
Pension schemes in net surplus (Note 5)
201
318
Prepayments
350
340
Accrued income
292
327
Tax recoverable
49
279
Deferred tax (Note 7)
1,894
2,178
Acceptances
575
237
Other
504
569
Other assets
8,760
9,176
\n
(1)
Includes interest in Business Growth Fund \u00a3658 million (2022 - \u00a3677 million).
(2)
The estimated useful lives of NatWest Group\u2019s property, plant and equipment are: freehold buildings and long leasehold 50 years, short leaseholds for unexpired period of lease, property adaptation costs 10 to 15 years, computer equipment up to 5 years
and other equipment 4 to 15 years.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherAssetsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f100837": { "value": "18 Other assets
Other assets are not financial assets and reflect a grouping of assets that are not large enough to present separately on the balance sheet.
.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Interests in associates
(1)
668
688
Property, plant and equipment
(2)
4,227
4,240
Pension schemes in net surplus (Note 5)
201
318
Prepayments
350
340
Accrued income
292
327
Tax recoverable
49
279
Deferred tax (Note 7)
1,894
2,178
Acceptances
575
237
Other
504
569
Other assets
8,760
9,176
\n
(1)
Includes interest in Business Growth Fund \u00a3658 million (2022 - \u00a3677 million).
(2)
The estimated useful lives of NatWest Group\u2019s property, plant and equipment are: freehold buildings and long leasehold 50 years, short leaseholds for unexpired period of lease, property adaptation costs 10 to 15 years, computer equipment up to 5 years
and other equipment 4 to 15 years.28 Analysis of the net investment in business interests and intangible assets
This note shows cash flows relating to obtaining or losing control of associates or subsidiaries and net assets and liabilities purchased and sold.
These cash flows are presented as investing activities on the cash flow statement.
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Fair value given for business acquired
(139)
-
-
Acquisition of interest in associates
-
(1)
-
Additional investment in associates
(5)
-
(51)
Net assets and liabilities purchased
-
-
(3,128)
Net outflow of cash in respect of acquisitions
(144)
(1)
(3,179)
Disposal of net assets and liabilities
5,560
6,270
114
(Loss)/profit on disposal of net assets and liabilities
(87)
(106)
55
Net inflow of cash in respect of disposals
5,473
6,164
169
Dividends received from associate
16
-
-
Net cash expenditure on intangible assets
(744)
(743)
(479)
Net inflow/(outflow) of cash
4,601
5,420
(3,489)
\nAssociates, joint ventures (JVs) and equity investments
In their roles as
of finance, NatWest Group companies provide
providers
development
capital support
investments
of
businesses.
types
other
to
are made in the
These
and
of
course
NatWest
normal
partnerships,
strategic
Group
further
To
may
business.
seek
in
to invest
hold
of
subsidiary
a
in
third
interest
minority
a
to
parties
third
allow
or
parties
disclose
We
Group.
NatWest
and
ventures
joint
and
associates
for
parties
related
as
where equity interest are over 10%. Ongoing business transactions with these entities
are on normal commercial terms.
Amounts included in the NatWest Group financial statements, in aggregate, by category
of related party are as follows:
\u00a0
Associates and Joint
Equity
\u00a0
\u00a0
Ventures
Shares (1)
Total
31 December 2023
\u00a3m
\u00a3m
\u00a3m
Investments
668
145
813
Loans to customers - amortised cost
-
13
13
Customer deposits
2
10
12
Settlement balances
-
-
-
Other comprehensive income
-
(8)
(8)
Other operating income
(11)
-
(11)
31 December 2022
\u00a0\u00a0\u00a0
Investments
688
149
837
Loans to customers - amortised cost
-
-
-
Customer deposits
1
4
5
Settlement balances
-
34
34
Other comprehensive income
-
11
11
Other operating income
(30)
-
(30)
\n
(1)
Represents investments in entities where ownership is more than 10%", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f100838": { "value": "18 Other assets
Other assets are not financial assets and reflect a grouping of assets that are not large enough to present separately on the balance sheet.
.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Interests in associates
(1)
668
688
Property, plant and equipment
(2)
4,227
4,240
Pension schemes in net surplus (Note 5)
201
318
Prepayments
350
340
Accrued income
292
327
Tax recoverable
49
279
Deferred tax (Note 7)
1,894
2,178
Acceptances
575
237
Other
504
569
Other assets
8,760
9,176
\n
(1)
Includes interest in Business Growth Fund \u00a3658 million (2022 - \u00a3677 million).
(2)
The estimated useful lives of NatWest Group\u2019s property, plant and equipment are: freehold buildings and long leasehold 50 years, short leaseholds for unexpired period of lease, property adaptation costs 10 to 15 years, computer equipment up to 5 years
and other equipment 4 to 15 years.28 Analysis of the net investment in business interests and intangible assets
This note shows cash flows relating to obtaining or losing control of associates or subsidiaries and net assets and liabilities purchased and sold.
These cash flows are presented as investing activities on the cash flow statement.
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Fair value given for business acquired
(139)
-
-
Acquisition of interest in associates
-
(1)
-
Additional investment in associates
(5)
-
(51)
Net assets and liabilities purchased
-
-
(3,128)
Net outflow of cash in respect of acquisitions
(144)
(1)
(3,179)
Disposal of net assets and liabilities
5,560
6,270
114
(Loss)/profit on disposal of net assets and liabilities
(87)
(106)
55
Net inflow of cash in respect of disposals
5,473
6,164
169
Dividends received from associate
16
-
-
Net cash expenditure on intangible assets
(744)
(743)
(479)
Net inflow/(outflow) of cash
4,601
5,420
(3,489)
\nAssociates, joint ventures (JVs) and equity investments
In their roles as
of finance, NatWest Group companies provide
providers
development
capital support
investments
of
businesses.
types
other
to
are made in the
These
and
of
course
NatWest
normal
partnerships,
strategic
Group
further
To
may
business.
seek
in
to invest
hold
of
subsidiary
a
in
third
interest
minority
a
to
parties
third
allow
or
parties
disclose
We
Group.
NatWest
and
ventures
joint
and
associates
for
parties
related
as
where equity interest are over 10%. Ongoing business transactions with these entities
are on normal commercial terms.
Amounts included in the NatWest Group financial statements, in aggregate, by category
of related party are as follows:
\u00a0
Associates and Joint
Equity
\u00a0
\u00a0
Ventures
Shares (1)
Total
31 December 2023
\u00a3m
\u00a3m
\u00a3m
Investments
668
145
813
Loans to customers - amortised cost
-
13
13
Customer deposits
2
10
12
Settlement balances
-
-
-
Other comprehensive income
-
(8)
(8)
Other operating income
(11)
-
(11)
31 December 2022
\u00a0\u00a0\u00a0
Investments
688
149
837
Loans to customers - amortised cost
-
-
-
Customer deposits
1
4
5
Settlement balances
-
34
34
Other comprehensive income
-
11
11
Other operating income
(30)
-
(30)
\n
(1)
Represents investments in entities where ownership is more than 10%", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f100840": { "value": "18 Other assets
Other assets are not financial assets and reflect a grouping of assets that are not large enough to present separately on the balance sheet.
.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Interests in associates
(1)
668
688
Property, plant and equipment
(2)
4,227
4,240
Pension schemes in net surplus (Note 5)
201
318
Prepayments
350
340
Accrued income
292
327
Tax recoverable
49
279
Deferred tax (Note 7)
1,894
2,178
Acceptances
575
237
Other
504
569
Other assets
8,760
9,176
\n
(1)
Includes interest in Business Growth Fund \u00a3658 million (2022 - \u00a3677 million).
(2)
The estimated useful lives of NatWest Group\u2019s property, plant and equipment are: freehold buildings and long leasehold 50 years, short leaseholds for unexpired period of lease, property adaptation costs 10 to 15 years, computer equipment up to 5 years
and other equipment 4 to 15 years.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherCurrentAssetsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f100841": { "value": "18 Other assets
Other assets are not financial assets and reflect a grouping of assets that are not large enough to present separately on the balance sheet.
.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Interests in associates
(1)
668
688
Property, plant and equipment
(2)
4,227
4,240
Pension schemes in net surplus (Note 5)
201
318
Prepayments
350
340
Accrued income
292
327
Tax recoverable
49
279
Deferred tax (Note 7)
1,894
2,178
Acceptances
575
237
Other
504
569
Other assets
8,760
9,176
\n
(1)
Includes interest in Business Growth Fund \u00a3658 million (2022 - \u00a3677 million).
(2)
The estimated useful lives of NatWest Group\u2019s property, plant and equipment are: freehold buildings and long leasehold 50 years, short leaseholds for unexpired period of lease, property adaptation costs 10 to 15 years, computer equipment up to 5 years
and other equipment 4 to 15 years.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherNoncurrentAssetsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f100842": { "value": "18 Other assets
Other assets are not financial assets and reflect a grouping of assets that are not large enough to present separately on the balance sheet.
.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Interests in associates
(1)
668
688
Property, plant and equipment
(2)
4,227
4,240
Pension schemes in net surplus (Note 5)
201
318
Prepayments
350
340
Accrued income
292
327
Tax recoverable
49
279
Deferred tax (Note 7)
1,894
2,178
Acceptances
575
237
Other
504
569
Other assets
8,760
9,176
\n
(1)
Includes interest in Business Growth Fund \u00a3658 million (2022 - \u00a3677 million).
(2)
The estimated useful lives of NatWest Group\u2019s property, plant and equipment are: freehold buildings and long leasehold 50 years, short leaseholds for unexpired period of lease, property adaptation costs 10 to 15 years, computer equipment up to 5 years
and other equipment 4 to 15 years.", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f100855": { "value": "
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Interests in associates
(1)
668
688
Property, plant and equipment
(2)
4,227
4,240
Pension schemes in net surplus (Note 5)
201
318
Prepayments
350
340
Accrued income
292
327
Tax recoverable
49
279
Deferred tax (Note 7)
1,894
2,178
Acceptances
575
237
Other
504
569
Other assets
8,760
9,176
\n
\u00a0
2023
2022
Other liabilities
\u00a3m
\u00a3m
Lease liabilities
670
1,118
Provisions for liabilities and charges
990
1,138
Retirement benefit liabilities (Note 5)
99
98
Accruals
1,411
1,407
Deferred income
402
355
Current tax
332
55
Deferred tax (Note 7)
141
227
Acceptances
575
237
Other liabilities
(1)
582
711
Total
5,202
5,346
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfTaxReceivablesAndPayablesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f101063": { "value": "20 Subordinated liabilities
Subordinated liabilities are debt securities that, in the event of winding up or bankruptcy, rank below other liabilities for interest payments and repayment.
For accounting policy information refer to Accounting policies 3.8 and 3.10.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Dated loan capital
5,573
5,968
Undated loan capital
22
173
Preference shares
119
119
\u00a0
5,714
6,260
\n
Certain preference shares issued by the company are classified as liabilities; these securities remain subject to the capital maintenance rules of the Companies Act 2006.
\u00a0\u00a0
First call
Maturity
Capital
2023
2022
Dated loan capital
\u00a0
date
date
treatment
\u00a3m
\u00a3m
NatWest Group plc
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
$2,250 million
5.125% notes
-
May-24
Tier 2
418
706
$2,000 million
6.000% notes
-
Dec-23
Tier 2
-
536
\u00a31,000 million
3.622% notes
May-25
Aug-30
Tier 2
985
964
\u00a31,000 million
2.105% notes
Aug-26
Nov-31
Tier 2
1,000
1,001
$1,000 million
6.100% notes
-
Jun-23
Tier 2
-
126
$850 million
3.032% notes
Aug-30
Nov-35
Tier 2
541
555
\u20ac750 million
1.043% notes
Jun-27
Sep-32
Tier 2
652
665
$750 million
3.754% notes
Nov-24
Nov-29
Tier 2
592
626
\u20ac700 million
5.763% notes
Nov-28
Feb-34
Tier 2
636
\u00a0
\u00a3650 million
7.416% notes
Mar-28
Jun-33
Tier 2
657
641
\u00a0\u00a0\u00a0\u00a0\u00a0
5,481
5,820
Other subsidiaries
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
\u20ac170 million
Floating rate notes
-
Feb-41
Not applicable
237
223
$150 million
7.125% notes
-
Oct-93
Not applicable
17
18
\u20ac145.6 million
Floating rate notes
-
Apr-23
Tier 2
-
122
$136 million
7.750% notes
-
May-23
Not applicable
-
83
\u00a0\u00a0\u00a0\u00a0\u00a0
5,735
6,266
Fair value hedging
\u00a0\u00a0\u00a0\u00a0
(162)
(298)
\u00a0\u00a0\u00a0\u00a0\u00a0
5,573
5,968
\u00a0\u00a0
First call
Maturity
Capital
2023
2022
Undated loan capital
\u00a0
date
date
treatment
\u00a3m
\u00a3m
Other subsidiaries
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
\u00a335 million
11.500%
notes
Dec-22
-
Not applicable
-
72
\u00a331 million
7.380% notes
-
-
Not applicable
1
2
\u20ac31 million
11.375% notes
-
-
Tier 2
-
48
\u00a316 million
5.630% notes
Sep-26
-
Not applicable
18
18
\u00a311 million
11.750% notes
-
-
Tier 2
-
25
\u00a34.9 million
2.500% fixed notes
-
-
Not applicable
3
6
\u00a31.1 million
SONIA + 2.827% notes
-
-
Tier 2
-
2
\u00a0\u00a0\u00a0\u00a0\u00a0
22
173
Preference shares
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
Other subsidiaries
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
\u00a3140 million
Non-cumulative preference shares of \u00a31
-
-
Not applicable
119
119
\u00a0\u00a0\u00a0\u00a0\u00a0
119
119
Total
\u00a0\u00a0\u00a0\u00a0
5,714
6,260
\n
(1)
Notes redeemed before call date as tax and regulatory benefits discontinued.", "dimensions": { "concept": "ifrs-full:DisclosureOfSubordinatedLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f101673": { "value": "21 Other liabilities
Other liabilities are amounts due to third parties that are not financial liabilities including lease liabilities, amounts due for goods and services that have been received
but not invoiced,
tax due to HMRC, and retirement benefit liabilities. Liabilities which have a level of uncertainty regarding their timing or the future cost to settle them
are included in other liabilities as provisions for liabilities and charges.
\u00a0
2023
2022
Other liabilities
\u00a3m
\u00a3m
Lease liabilities
670
1,118
Provisions for liabilities and charges
990
1,138
Retirement benefit liabilities (Note 5)
99
98
Accruals
1,411
1,407
Deferred income
402
355
Current tax
332
55
Deferred tax (Note 7)
141
227
Acceptances
575
237
Other liabilities
(1)
582
711
Total
5,202
5,346
\n
(1)
Other liabilities include liabilities of disposal groups of \u00a33 million (2022 - \u00a315 million). Refer to Note 8 for further information.
Provisions for liabilities and charges
\u00a0 \u00a0
Litigation and
\u00a0
Commitments
\u00a0 \u00a0
\u00a0
Customer redress
other regulatory
Property
and guarantees
Other (1)
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
431
240
154
87
226
1,138
Expected credit loss impairment release
-
-
-
(9)
-
(9)
Currency translation and other movements
(5)
(9)
-
-
(6)
(20)
Charge to income statement
276
21
41
-
136
474
Release to income statement
(36)
(33)
(64)
-
(28)
(161)
Provisions utilised
(180)
(63)
(32)
-
(157)
(432)
At 31 December 2023
486
156
99
78
171
990
\n
(1)
Other materially comprises provisions relating to restructuring costs.
Provisions are liabilities of uncertain timing or amount and are recognised when there is
a present obligation as a result of a past event, the outflow of economic benefit is
probable and the outflow can be estimated reliably. Any difference between the final
outcome and the amounts provided will affect the reported results in the period when
the matter is resolved.
For accounting policy information refer to Accounting policy 2.4.
Critical accounting policy: Provisions for liabilities
The key judgement is involved in determining whether a present obligation exists. There
is often a high degree of uncertainty and judgement is based on the specific facts and
circumstances relating to individual events in determining whether there is a present
obligation. Judgement is also involved in estimation of the probability, timing and amount
of any outflows. Where NatWest Group can look to another party such as an insurer to
pay some or all of the expenditure required to settle a provision, any reimbursement is
recognised when, and only when, it is virtually certain that it will be received.
E
E
stimates
-
Provisions are liabilities of uncertain timing or amount and are recognised
when there is a present obligation as a result of a past event, the outflow of economic
benefit is probable and the outflow can be estimated reliably.
Any difference between the final outcome and the amounts provided will affect the
reported results in the period when the matter is resolved.
\ue001
Customer redress: Provisions reflect the estimated cost of redress attributable to
claims where it is determined that a present obligation exists.
\ue001
Litigation and other regulatory: NatWest Group is engaged in various legal
proceedings, both in the UK and in overseas jurisdictions, including the US. For
further information in relation to legal proceedings and discussion of the associated
uncertainties, refer to Note 26.
\ue001
Property: This includes provision for contractual costs associated with vacant
properties.
\ue001
Other provisions: These materially comprise provisions for onerous contracts and
restructuring costs. Onerous contract provisions comprise an estimate of the costs
involved in fulfilling the terms and conditions of contracts net of any expected
benefits to be received. This includes provision for contractual costs associated with
vacant properties. Redundancy and restructuring provisions comprise the estimated
cost of restructuring, including redundancy costs where an obligation exists.
Background information for all material provisions is given in Note 26.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherCurrentLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f101674": { "value": "21 Other liabilities
Other liabilities are amounts due to third parties that are not financial liabilities including lease liabilities, amounts due for goods and services that have been received
but not invoiced,
tax due to HMRC, and retirement benefit liabilities. Liabilities which have a level of uncertainty regarding their timing or the future cost to settle them
are included in other liabilities as provisions for liabilities and charges.
\u00a0
2023
2022
Other liabilities
\u00a3m
\u00a3m
Lease liabilities
670
1,118
Provisions for liabilities and charges
990
1,138
Retirement benefit liabilities (Note 5)
99
98
Accruals
1,411
1,407
Deferred income
402
355
Current tax
332
55
Deferred tax (Note 7)
141
227
Acceptances
575
237
Other liabilities
(1)
582
711
Total
5,202
5,346
\n
(1)
Other liabilities include liabilities of disposal groups of \u00a33 million (2022 - \u00a315 million). Refer to Note 8 for further information.
Provisions for liabilities and charges
\u00a0 \u00a0
Litigation and
\u00a0
Commitments
\u00a0 \u00a0
\u00a0
Customer redress
other regulatory
Property
and guarantees
Other (1)
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
431
240
154
87
226
1,138
Expected credit loss impairment release
-
-
-
(9)
-
(9)
Currency translation and other movements
(5)
(9)
-
-
(6)
(20)
Charge to income statement
276
21
41
-
136
474
Release to income statement
(36)
(33)
(64)
-
(28)
(161)
Provisions utilised
(180)
(63)
(32)
-
(157)
(432)
At 31 December 2023
486
156
99
78
171
990
\n
(1)
Other materially comprises provisions relating to restructuring costs.
Provisions are liabilities of uncertain timing or amount and are recognised when there is
a present obligation as a result of a past event, the outflow of economic benefit is
probable and the outflow can be estimated reliably. Any difference between the final
outcome and the amounts provided will affect the reported results in the period when
the matter is resolved.
For accounting policy information refer to Accounting policy 2.4.
Critical accounting policy: Provisions for liabilities
The key judgement is involved in determining whether a present obligation exists. There
is often a high degree of uncertainty and judgement is based on the specific facts and
circumstances relating to individual events in determining whether there is a present
obligation. Judgement is also involved in estimation of the probability, timing and amount
of any outflows. Where NatWest Group can look to another party such as an insurer to
pay some or all of the expenditure required to settle a provision, any reimbursement is
recognised when, and only when, it is virtually certain that it will be received.
E
E
stimates
-
Provisions are liabilities of uncertain timing or amount and are recognised
when there is a present obligation as a result of a past event, the outflow of economic
benefit is probable and the outflow can be estimated reliably.
Any difference between the final outcome and the amounts provided will affect the
reported results in the period when the matter is resolved.
\ue001
Customer redress: Provisions reflect the estimated cost of redress attributable to
claims where it is determined that a present obligation exists.
\ue001
Litigation and other regulatory: NatWest Group is engaged in various legal
proceedings, both in the UK and in overseas jurisdictions, including the US. For
further information in relation to legal proceedings and discussion of the associated
uncertainties, refer to Note 26.
\ue001
Property: This includes provision for contractual costs associated with vacant
properties.
\ue001
Other provisions: These materially comprise provisions for onerous contracts and
restructuring costs. Onerous contract provisions comprise an estimate of the costs
involved in fulfilling the terms and conditions of contracts net of any expected
benefits to be received. This includes provision for contractual costs associated with
vacant properties. Redundancy and restructuring provisions comprise the estimated
cost of restructuring, including redundancy costs where an obligation exists.
Background information for all material provisions is given in Note 26.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherNoncurrentLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f101686": { "value": "
\u00a0
2023
2022
Other liabilities
\u00a3m
\u00a3m
Lease liabilities
670
1,118
Provisions for liabilities and charges
990
1,138
Retirement benefit liabilities (Note 5)
99
98
Accruals
1,411
1,407
Deferred income
402
355
Current tax
332
55
Deferred tax (Note 7)
141
227
Acceptances
575
237
Other liabilities
(1)
582
711
Total
5,202
5,346
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f101688": { "value": "
\u00a0
2023
2022
Other liabilities
\u00a3m
\u00a3m
Lease liabilities
670
1,118
Provisions for liabilities and charges
990
1,138
Retirement benefit liabilities (Note 5)
99
98
Accruals
1,411
1,407
Deferred income
402
355
Current tax
332
55
Deferred tax (Note 7)
141
227
Acceptances
575
237
Other liabilities
(1)
582
711
Total
5,202
5,346
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredIncomeExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f102067": { "value": "22 Share capital and other equity
Share capital consists of ordinary shares and preference shares and is measured as the number of shares allotted and fully paid, multiplied by the nominal value of a
share. Other equity includes paid-in equity, merger reserve, capital redemption reserve and own shares held.
For accounting policy information refer to Accounting policy 3.10.
\u00a0 \u00a0 \u00a0
Number of shares
\u00a0
2023
2022
2023
2022
Allotted, called up and fully paid
\u00a3m
\u00a3m
000s
000s
Ordinary shares of \u00a31.0769
(1)
9,683
10,539
8,991,737
9,786,024
Cumulative preference shares of \u00a31
0.5
0.5
483.0
483.0
\n
(1)
The nominal value of ordinary shares without rounding is \u00a31.076923076923077 per share.
Movement in allotted, called up and fully paid
\u00a0
Number of shares
ordinary shares
\u00a3m
000s
At 1 January 2022
11,468
11,467,982
Share cancellation
(929)
(929,188)
Share consolidation
-
(752,770)
At 31 December 2022
10,539
9,786,024
Share cancellation
(856)
(794,287)
At 31 December 2023
9,683
8,991,737
\n
Ordinary shares
There is no authorised share capital under the company\u2019s constitution. At 31 December
2023, the directors had authority granted at the 2023 Annual General Meeting (AGM) to
issue up to \u00a3520,573,270 nominal of ordinary shares other than by pre-emption to
existing shareholders.
On-market purchases
At the AGM in 2022, shareholders authorised the company to make market purchases of
up to 1,122,905,024 ordinary shares. The authority was amended at the General
Meeting held on 25 August 2022 to preserve the position as if the August 2022 share
consolidation had not taken place.
The directors used the authority obtained at the 2022 AGM (2022 Authority) to carry out
a share buyback programme (Programme) of up to \u00a3800 million, as announced to the
market on 17 February 2023. The Programme\u2019s purpose is to reduce the ordinary share
capital of NatWest Group. The maximum number of ordinary shares that could be
purchased under the Programme was 966,284,391. This number reflects the impact on
the 2022 Authority of the reduction in issued share capital following the off-market
buyback announced on 28 March 2022.
The Programme commenced on 20 February 2023 and completed on 16 June 2023.
The company purchased 301,380,053 ordinary shares (nominal value \u00a3324,563,134) at
an average price of 265.4456 pence per ordinary share, for the total consideration of
\u00a3799,999,997.76. All of the purchased ordinary shares were cancelled, representing
3.16% of the company\u2019s issued ordinary share capital. At the AGM in 2023, shareholders
renewed the authority for the company to make market purchases of up to 966,778,930
ordinary shares.
The directors used the authority obtained at the 2023 AGM (2023 Authority) to carry out
a Programme of up to \u00a3500 million, as announced to the market on 28 July 2023. The
maximum number of ordinary shared that can be purchased under the Programme is
919,858,922. This number reflects the impact on the 2023 Authority of the reduction in
issued share capital following the off-market buyback announced on 22 May 2023.
The Programme commenced on 31 July 2023 and will end no later than 14 March 2024.
As at 31 December 2023 158,956,435 ordinary shares (nominal
value \u00a3171,183,853)
had been purchased by the company at an average price of 217.6375 pence per
ordinary share for the total consideration of \u00a3345,948,738. All of the purchased ordinary
shares were cancelled, representing 1.75% of the company\u2019s issued ordinary share
capital.
Shareholders will be asked to renew the authority for the company to make market
purchases of ordinary shares at the AGM in 2024.
Off-market purchases
At a General Meeting held on 6 February 2019, shareholders approved a special
resolution authorising the company to make off-market purchases of up to 4.99% of its
issued ordinary share capital in any 12-month period from HMT
(or its nominee). Full
details are set out
in the Circular and Notice of General Meeting available at
natwestgroup.com. Amendments to the Directed Buyback Contract were approved by
the shareholders at a General Meeting on 25 August 2022. The authority for the
company to make off-market purchases of its ordinary shares from HMT (or its nominee)
under the terms of the Directed Buyback Contract was renewed at the AGM in 2023.
The company used the authority obtained at the 2023 AGM
to make an off-market
purchase of 469,200,081 ordinary shares (nominal value \u00a3505,292,395) in the company
from HMT on 22 May 2023, at a price of 268.4 pence per ordinary share for the total
consideration of \u00a31,259,333,017, representing 4.95% of
the company\u2019s issued ordinary
share capital. The company cancelled 336,200,081 of the purchased ordinary shares and
transferred the remaining 133,000,000 ordinary shares to own shares held.
Shareholders will be asked to renew the authority for the company to make off-market
purchases of its ordinary shares from HMT
(or its nominee) at the AGM in 2024.
Dividends
In 2023 NatWest Group paid an interim dividend of \u00a3491 million, or 5.5 pence per
ordinary share (2022 \u2013 \u00a3364 million, or 3.5 pence per ordinary share).
The
company has announced that the directors have recommended a final dividend of
\u00a31.0 billion, or 11.5 pence per ordinary share
(2022 \u2013 \u00a31.0 billion, or 10.0 pence per
ordinary share). The final dividend recommended by directors is subject to shareholders\u2019
approval at the AGM on 23 April 2024. If approved, payment will be made on 29 April
2024 to shareholders on the register at the close of business on 15 March 2024. The ex-
dividend date will be 14 March 2024.
Cumulative preference shares
At the AGM in 2023, shareholders renewed the authority for the company to make an
off-market purchase of its preference shares. Shareholders will be asked to renew the
authority at the AGM in 2024.
Other equity
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Additional Tier 1 notes
\u00a0 \u00a0 \u00a0
US$1.15 billion 8.000% notes callable August 2025
(1)
735
735
735
US$1.50 billion 6.000% notes callable
\u00a0 \u00a0 \u00a0
December 2025 - June 2026
(2)
1,220
1,220
1,220
GBP\u00a31.00 billion 5.125% notes callable May - November 2027
(3)
998
998
998
GBP\u00a30.40 billion \u2013 March 2028 callable
(4)
399
399
399
US$0.75 billion \u2013 June 2031 callable
(5)
538
538
538
\u00a0
3,890
3,890
3,890
\n
(1)
Issued in August 2015. In the event of conversion, converted into ordinary shares at a price of $3.314 per share.
(2)
Issued in June 2020. In the event of conversion, converted into ordinary shares at a price of $2.191 (translated at
applicable exchange rate) per share.
(3)
Issued in November 2020. In the event of conversion, converted into ordinary shares at a price of \u00a31.764 per share.
(4)
Issued in March 2021. In the event of conversion, converted into ordinary shares at a price of \u00a31.764 per share.
(5)
Issued in June 2021. In the event of conversion, converted into ordinary shares at a price of $2.462 (translated at
applicable exchange rate) per share.
Paid-in equity
-
comprises equity instruments issued by the company other than those
legally constituted as shares.
Additional Tier 1 instruments issued by NatWest Group plc having the legal form of debt
are classified as equity under IFRS. The coupons on these instruments are non-
cumulative and payable at the company\u2019s discretion. In the event NatWest Group\u2019s CET1
ratio falls below 7% any outstanding instruments will be converted into ordinary shares at
a fixed price.
Capital recognised for regulatory purposes cannot be redeemed without Prudential
Regulation Authority consent. This includes ordinary shares, preference shares and
additional Tier 1
instruments.", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f102068": { "value": "22 Share capital and other equity
Share capital consists of ordinary shares and preference shares and is measured as the number of shares allotted and fully paid, multiplied by the nominal value of a
share. Other equity includes paid-in equity, merger reserve, capital redemption reserve and own shares held.
For accounting policy information refer to Accounting policy 3.10.
\u00a0 \u00a0 \u00a0
Number of shares
\u00a0
2023
2022
2023
2022
Allotted, called up and fully paid
\u00a3m
\u00a3m
000s
000s
Ordinary shares of \u00a31.0769
(1)
9,683
10,539
8,991,737
9,786,024
Cumulative preference shares of \u00a31
0.5
0.5
483.0
483.0
\n
(1)
The nominal value of ordinary shares without rounding is \u00a31.076923076923077 per share.
Movement in allotted, called up and fully paid
\u00a0
Number of shares
ordinary shares
\u00a3m
000s
At 1 January 2022
11,468
11,467,982
Share cancellation
(929)
(929,188)
Share consolidation
-
(752,770)
At 31 December 2022
10,539
9,786,024
Share cancellation
(856)
(794,287)
At 31 December 2023
9,683
8,991,737
\n
Ordinary shares
There is no authorised share capital under the company\u2019s constitution. At 31 December
2023, the directors had authority granted at the 2023 Annual General Meeting (AGM) to
issue up to \u00a3520,573,270 nominal of ordinary shares other than by pre-emption to
existing shareholders.
On-market purchases
At the AGM in 2022, shareholders authorised the company to make market purchases of
up to 1,122,905,024 ordinary shares. The authority was amended at the General
Meeting held on 25 August 2022 to preserve the position as if the August 2022 share
consolidation had not taken place.
The directors used the authority obtained at the 2022 AGM (2022 Authority) to carry out
a share buyback programme (Programme) of up to \u00a3800 million, as announced to the
market on 17 February 2023. The Programme\u2019s purpose is to reduce the ordinary share
capital of NatWest Group. The maximum number of ordinary shares that could be
purchased under the Programme was 966,284,391. This number reflects the impact on
the 2022 Authority of the reduction in issued share capital following the off-market
buyback announced on 28 March 2022.
The Programme commenced on 20 February 2023 and completed on 16 June 2023.
The company purchased 301,380,053 ordinary shares (nominal value \u00a3324,563,134) at
an average price of 265.4456 pence per ordinary share, for the total consideration of
\u00a3799,999,997.76. All of the purchased ordinary shares were cancelled, representing
3.16% of the company\u2019s issued ordinary share capital. At the AGM in 2023, shareholders
renewed the authority for the company to make market purchases of up to 966,778,930
ordinary shares.
The directors used the authority obtained at the 2023 AGM (2023 Authority) to carry out
a Programme of up to \u00a3500 million, as announced to the market on 28 July 2023. The
maximum number of ordinary shared that can be purchased under the Programme is
919,858,922. This number reflects the impact on the 2023 Authority of the reduction in
issued share capital following the off-market buyback announced on 22 May 2023.
The Programme commenced on 31 July 2023 and will end no later than 14 March 2024.
As at 31 December 2023 158,956,435 ordinary shares (nominal
value \u00a3171,183,853)
had been purchased by the company at an average price of 217.6375 pence per
ordinary share for the total consideration of \u00a3345,948,738. All of the purchased ordinary
shares were cancelled, representing 1.75% of the company\u2019s issued ordinary share
capital.
Shareholders will be asked to renew the authority for the company to make market
purchases of ordinary shares at the AGM in 2024.
Off-market purchases
At a General Meeting held on 6 February 2019, shareholders approved a special
resolution authorising the company to make off-market purchases of up to 4.99% of its
issued ordinary share capital in any 12-month period from HMT
(or its nominee). Full
details are set out
in the Circular and Notice of General Meeting available at
natwestgroup.com. Amendments to the Directed Buyback Contract were approved by
the shareholders at a General Meeting on 25 August 2022. The authority for the
company to make off-market purchases of its ordinary shares from HMT (or its nominee)
under the terms of the Directed Buyback Contract was renewed at the AGM in 2023.
The company used the authority obtained at the 2023 AGM
to make an off-market
purchase of 469,200,081 ordinary shares (nominal value \u00a3505,292,395) in the company
from HMT on 22 May 2023, at a price of 268.4 pence per ordinary share for the total
consideration of \u00a31,259,333,017, representing 4.95% of
the company\u2019s issued ordinary
share capital. The company cancelled 336,200,081 of the purchased ordinary shares and
transferred the remaining 133,000,000 ordinary shares to own shares held.
Shareholders will be asked to renew the authority for the company to make off-market
purchases of its ordinary shares from HMT
(or its nominee) at the AGM in 2024.
Dividends
In 2023 NatWest Group paid an interim dividend of \u00a3491 million, or 5.5 pence per
ordinary share (2022 \u2013 \u00a3364 million, or 3.5 pence per ordinary share).
The
company has announced that the directors have recommended a final dividend of
\u00a31.0 billion, or 11.5 pence per ordinary share
(2022 \u2013 \u00a31.0 billion, or 10.0 pence per
ordinary share). The final dividend recommended by directors is subject to shareholders\u2019
approval at the AGM on 23 April 2024. If approved, payment will be made on 29 April
2024 to shareholders on the register at the close of business on 15 March 2024. The ex-
dividend date will be 14 March 2024.
Cumulative preference shares
At the AGM in 2023, shareholders renewed the authority for the company to make an
off-market purchase of its preference shares. Shareholders will be asked to renew the
authority at the AGM in 2024.
Other equity
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Additional Tier 1 notes
\u00a0 \u00a0 \u00a0
US$1.15 billion 8.000% notes callable August 2025
(1)
735
735
735
US$1.50 billion 6.000% notes callable
\u00a0 \u00a0 \u00a0
December 2025 - June 2026
(2)
1,220
1,220
1,220
GBP\u00a31.00 billion 5.125% notes callable May - November 2027
(3)
998
998
998
GBP\u00a30.40 billion \u2013 March 2028 callable
(4)
399
399
399
US$0.75 billion \u2013 June 2031 callable
(5)
538
538
538
\u00a0
3,890
3,890
3,890
\n
(1)
Issued in August 2015. In the event of conversion, converted into ordinary shares at a price of $3.314 per share.
(2)
Issued in June 2020. In the event of conversion, converted into ordinary shares at a price of $2.191 (translated at
applicable exchange rate) per share.
(3)
Issued in November 2020. In the event of conversion, converted into ordinary shares at a price of \u00a31.764 per share.
(4)
Issued in March 2021. In the event of conversion, converted into ordinary shares at a price of \u00a31.764 per share.
(5)
Issued in June 2021. In the event of conversion, converted into ordinary shares at a price of $2.462 (translated at
applicable exchange rate) per share.
Paid-in equity
-
comprises equity instruments issued by the company other than those
legally constituted as shares.
Additional Tier 1 instruments issued by NatWest Group plc having the legal form of debt
are classified as equity under IFRS. The coupons on these instruments are non-
cumulative and payable at the company\u2019s discretion. In the event NatWest Group\u2019s CET1
ratio falls below 7% any outstanding instruments will be converted into ordinary shares at
a fixed price.
Capital recognised for regulatory purposes cannot be redeemed without Prudential
Regulation Authority consent. This includes ordinary shares, preference shares and
additional Tier 1
instruments.
M
M
erger reserve
-
the merger reserve comprises the premium on shares issued to
acquire NatWest Bank Plc less goodwill amortisation charged under previous GAAP.
C
C
apital redemption reserve -
under UK companies legislation, when shares are
redeemed or purchased wholly or partly out of the company's profits, the amount by
which the company's issued share capital is diminished must be transferred to the capital
redemption reserve. The capital maintenance provisions of UK companies legislation
apply to the capital redemption reserve as if it were part of the company\u2019s paid up share
capital. The nominal value of the shares bought back from HMT in March 2023 and via
the Programme during 2023 have been transferred to the Capital redemption reserve.
Own shares held
-
at 31 December 2023, 12 million ordinary shares of \u00a31.0769 each of
the company (2022 - 13 million) were held by employee share trusts in respect of share
awards and options granted to employees. During 2023, the employee share trusts
purchased no ordinary shares and delivered 1 million ordinary shares in satisfaction of
the exercise of options and the vesting of share awards under the employee share plans.
The company retains the flexibility to use newly issued shares, shares purchased by the
NatWest Group Employee Share Ownership Trust and any available treasury shares to
satisfy obligations under its employee share plans.
The company does not use
performance conditions or targets based on earnings per share (EPS), total shareholder
return (TSR), and net asset value (NAV) in connection with its employee share plans.
As part of the shares bought back from HMT in March 2021 and May 2023, the
company transferred 200 million ordinary shares and 133 million ordinary shares,
respectively, to own shares held. The company has used a total of 146 million treasury
shares to satisfy the exercise of options and the vesting of share awards under the
employee share plans. The balance of ordinary shares held in treasury as at 31
December 2023 was 187 million.
NatWest Group plc optimises capital efficiency by maintaining reserves in subsidiaries,
including regulated entities. Certain preference shares and subordinated debt are also
included within regulatory capital. The remittance of reserves to the company or the
redemption of shares or subordinated capital by regulated entities may be subject to
maintaining the capital resources required by the relevant regulator.
UK law prescribes that only the reserves of the company are taken into account for the
purpose of making distributions and in determining permissible applications of the share
premium account.", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f102303": { "value": "1000000000", "decimals": -8, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwners", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f102304": { "value": "0.115", "decimals": 3, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f102447": { "value": "Own shares held
-
at 31 December 2023, 12 million ordinary shares of \u00a31.0769 each of
the company (2022 - 13 million) were held by employee share trusts in respect of share
awards and options granted to employees. During 2023, the employee share trusts
purchased no ordinary shares and delivered 1 million ordinary shares in satisfaction of
the exercise of options and the vesting of share awards under the employee share plans.
The company retains the flexibility to use newly issued shares, shares purchased by the
NatWest Group Employee Share Ownership Trust and any available treasury shares to
satisfy obligations under its employee share plans.
The company does not use
performance conditions or targets based on earnings per share (EPS), total shareholder
return (TSR), and net asset value (NAV) in connection with its employee share plans.
As part of the shares bought back from HMT in March 2021 and May 2023, the
company transferred 200 million ordinary shares and 133 million ordinary shares,
respectively, to own shares held. The company has used a total of 146 million treasury
shares to satisfy the exercise of options and the vesting of share awards under the
employee share plans. The balance of ordinary shares held in treasury as at 31
December 2023 was 187 million.
NatWest Group plc optimises capital efficiency by maintaining reserves in subsidiaries,
including regulated entities. Certain preference shares and subordinated debt are also
included within regulatory capital. The remittance of reserves to the company or the
redemption of shares or subordinated capital by regulated entities may be subject to
maintaining the capital resources required by the relevant regulator.
UK law prescribes that only the reserves of the company are taken into account for the
purpose of making distributions and in determining permissible applications of the share
premium account.", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f102504": { "value": "23 Structured entities
A structured entity (SE) is an entity that has been designed such that voting or similar rights are not the dominant factor in deciding who controls the entity, for
example when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. SEs are usually
established for a specific, limited purpose. They do not carry out a business or trade and typically have no employees.
Securitisations
In a securitisation, assets, or interests in a pool of assets, are transferred, or the credit
risk is transferred via a derivative or financial guarantee to a SE which then issues
liabilities to third party investors.
NatWest Group\u2019s involvement in client securitisations takes a number of forms. It may
provide secured finance to, or purchase asset-backed notes from, client sponsored SEs
secured on assets transferred by the client entity; purchase asset backed securities
issued by client sponsored SEs in the primary or secondary markets; or provide liquidity
facilities to client sponsored SEs. In addition, NatWest Group arranges or acts as lead
manager or placement agent in client primary markets securitisations. NatWest Group
provides portfolio structured derivative hedging solutions to clients. NatWest Group
undertakes own-asset securitisations to transfer the credit risk on portfolios of financial
assets.
Other credit risk transfer securitisations
NatWest Group transfers credit risk on originated loans and mortgages without the
transfer of assets to a SE. As part of this, NatWest Group enters into credit derivative
and financial guarantee contracts with consolidated SEs. At 31 December 2023, debt
securities in issue by such SEs (and held by third parties) were \u00a3863 million (2022 - \u00a3859
million). The associated loans and mortgages at 31 December 2023 were \u00a32,687 million
(2022 - \u00a34,361 million).
At 31 December, ECL in relation to non-defaulted assets was reduced by \u00a311 million
(2022 - \u00a320 million) as a result of financial guarantee contracts with consolidated SEs.
Covered debt programme
Group companies have assigned loans to customers and debt investments to bankruptcy
remote limited liability partnerships to provide security for issues of debt securities.
NatWest Group retains all of the risks and rewards of these assets and continues to
recognise them. The partnerships are consolidated by NatWest Group and the related
covered bonds included within other financial liabilities. At 31 December 2023, \u00a311,067
million (2022 - \u00a38,156 million) of loans to customers provided security for debt securities
in issue and other borrowing of \u00a33,619 million (2022 - \u00a34,132 million).
Lending of own issued securities
NatWest Group has issued, retained, and lent debt securities under securities lending
arrangements. Under standard terms in the UK and US markets, the recipient has an
unrestricted right to sell or repledge collateral, subject to returning equivalent securities
on maturity of the transaction.
NatWest Group retains all of the risks and rewards of own
issued liabilities lent under such arrangements and does not recognise them. At 31
December 2023, \u00a32,312 million (2022 - \u00a32,419 million) of secured own issued liabilities
have been retained and lent under securities lending arrangements. At 31 December
2023, \u00a32,414 million (2022 - \u00a32,244 million) of loans and other debt instruments provided
security for secured own issued liabilities that have been retained and lent under
securities lending arrangements.
Unconsolidated structured entities
The term \u2018unconsolidated structured entities\u2019 refers to structured entities not controlled
by NatWest Group, and which are established either by NatWest Group or a third party.
An interest in a structured entity is any form of contractual or non-contractual
involvement which creates variability in returns for NatWest Group arising from the
performance of the entity. Such interests include holdings of debt or equity securities,
derivatives that transfer financial risks from the entity to NatWest Group, provision of
lending and loan commitments, financial guarantees and investment management
agreements. NatWest Group enters into transactions with unconsolidated structured
entities in the normal course of business to facilitate customer transactions, to provide
risk management services and for specific investment opportunities. Structured entities
may take the form of funds, trusts, partnerships, securitisation vehicles, and private
investment companies. NatWest Group considers itself to be the sponsor of a structured
entity where it is primarily involved in the set up and design of the entity and where
NatWest Group transfers assets to the entity, markets products associated with the
entity in its own name, and/or provides guarantees in relation to the performance of the
entity.
The nature and extent of NatWest Group\u2019s interests in structured entities is summarised
in the following table.
\u00a0
2023
2022
\u00a0
Asset-backed
Investment
\u00a0
Asset-backed
Investment
\u00a0
\u00a0
securitisation
funds
\u00a0
securitisation
funds
\u00a0
\u00a0
vehicles
and other
Total
vehicles
and other
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading assets
303
311
614
616
137
753
Derivatives
134
-
134
343
-
343
Loans to customers
2,701
999
3,700
2,431
648
3,079
Other financial assets
13,096
1,062
14,158
6,334
849
7,183
Total
16,234
2,372
18,606
9,724
1,634
11,358
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Derivatives
213
17
230
388
22
410
Total
213
17
230
388
22
410
Off balance sheet
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Liquidity facilities/loan
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
commitments
1,873
396
2,269
1,723
320
2,043
Guarantees
-
127
127
-
107
107
Total
1,873
523
2,396
1,723
427
2,150
Maximum exposure
17,894
2,878
20,772
11,059
2,039
13,098
33 Related parties
A related party is a person or entity that is related to the entity that is preparing its financial statements. This includes subsidiaries, associates, joint ventures, post-
employment benefits plans, Key management personnel and their close family members and entities controlled by them. Transactions between an entity and any
related party are disclosed in the financial statements in accordance with both accounting standards and relevant listing rules to ensure readers are aware of how
financial statements may be affected by these transactions.
UK Government
Group
through
NatWest
of
shareholder
controlling
the
is
Treasury
HM
Government
UK
Government\u2019s shareholding is managed by UK
UK
plc as per UK listing rules. The
Government. At
Government Investments Limited, a company wholly owned by the UK
31 December 2023 HM Treasury\u2019s holding in the company\u2019s ordinary shares was
37.97%. As a result the UK Government and UK Government-controlled bodies are
related parties of the Group.
NatWest Group enters into transactions with many of these bodies. Transactions include
the payment of: taxes \u2013 principally UK corporation tax (Note 7) and value added tax;
national insurance contributions; local authority rates; and regulatory fees and levies
(including the bank levy Note 3) and FSCS levy (Note 26) - together with banking
transactions such as loans and deposits undertaken in the normal course of banker-
customer relationships.
Bank of England facilities
NatWest Group may participate in a number of schemes operated by the Bank of
England in the normal course of business.
Members of NatWest Group that are UK authorised institutions are required to maintain
non-interest bearing (cash ratio) deposits with the Bank of England amounting to 0.382%
of their average eligible liabilities in excess of \u00a3600 million. They also have access to Bank
of England reserve accounts: sterling current accounts that earn interest at the Bank of
England Base rate.
NatWest Group provides guarantees for certain subsidiaries, liabilities to the Bank of
England.
Other Related Parties
In accordance with IAS 24, transactions or balances between NatWest Group entities
that have been eliminated on consolidation are not reported.
The primary financial statements of the parent company include transactions and
balances with its subsidiaries which have been further disclosed in the relevant notes.
Associates, joint ventures (JVs) and equity investments
In their roles as
of finance, NatWest Group companies provide
providers
development
capital support
investments
of
businesses.
types
other
to
are made in the
These
and
of
course
NatWest
normal
partnerships,
strategic
Group
further
To
may
business.
seek
in
to invest
hold
of
subsidiary
a
in
third
interest
minority
a
to
parties
third
allow
or
parties
disclose
We
Group.
NatWest
and
ventures
joint
and
associates
for
parties
related
as
where equity interest are over 10%. Ongoing business transactions with these entities
are on normal commercial terms.
Amounts included in the NatWest Group financial statements, in aggregate, by category
of related party are as follows:
\u00a0
Associates and Joint
Equity
\u00a0
\u00a0
Ventures
Shares (1)
Total
31 December 2023
\u00a3m
\u00a3m
\u00a3m
Investments
668
145
813
Loans to customers - amortised cost
-
13
13
Customer deposits
2
10
12
Settlement balances
-
-
-
Other comprehensive income
-
(8)
(8)
Other operating income
(11)
-
(11)
31 December 2022
\u00a0\u00a0\u00a0
Investments
688
149
837
Loans to customers - amortised cost
-
-
-
Customer deposits
1
4
5
Settlement balances
-
34
34
Other comprehensive income
-
11
11
Other operating income
(30)
-
(30)
\n
(1)
Represents investments in entities where ownership is more than 10%
Post employment benefits
NatWest Group recharges NatWest Group Pension Fund with the cost of pension
management services incurred by it. NatWest Group Pension Fund holds bank accounts
held with the NatWest Group plc. At 31 December 2023 these balances amounted to
\u00a336.2 million (2022 - \u00a361.7 million).
NatWest Group Pension fund also holds certain interest rate swaps, inflation swaps,
credit derivatives, cross currency swaps and forward exchange rate agreements where
subsidiaries of NatWest Group act as counterparties. These transactions are on
commercial terms and carried out on an arms-length basis.
During February 2023, NatWest Group has entered into an agreement to establish a
new legal structure to hold assets, consolidated on NatWest Group\u2019s balance sheet, to
meet potential future contributions required by the Main section of the Group\u2019 Pension
Fund. This transaction required transfer of \u00a3471 million to the Reservoir Trust after the
final dividend for 2022 approved by shareholders. This transaction does not create a
pension liability with the Main section of the Group Pension Fund. Refer to
details in Note
5 and in Material contracts information on page 444.", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f102505": { "value": "23 Structured entities
A structured entity (SE) is an entity that has been designed such that voting or similar rights are not the dominant factor in deciding who controls the entity, for
example when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. SEs are usually
established for a specific, limited purpose. They do not carry out a business or trade and typically have no employees.
Securitisations
In a securitisation, assets, or interests in a pool of assets, are transferred, or the credit
risk is transferred via a derivative or financial guarantee to a SE which then issues
liabilities to third party investors.
NatWest Group\u2019s involvement in client securitisations takes a number of forms. It may
provide secured finance to, or purchase asset-backed notes from, client sponsored SEs
secured on assets transferred by the client entity; purchase asset backed securities
issued by client sponsored SEs in the primary or secondary markets; or provide liquidity
facilities to client sponsored SEs. In addition, NatWest Group arranges or acts as lead
manager or placement agent in client primary markets securitisations. NatWest Group
provides portfolio structured derivative hedging solutions to clients. NatWest Group
undertakes own-asset securitisations to transfer the credit risk on portfolios of financial
assets.
Other credit risk transfer securitisations
NatWest Group transfers credit risk on originated loans and mortgages without the
transfer of assets to a SE. As part of this, NatWest Group enters into credit derivative
and financial guarantee contracts with consolidated SEs. At 31 December 2023, debt
securities in issue by such SEs (and held by third parties) were \u00a3863 million (2022 - \u00a3859
million). The associated loans and mortgages at 31 December 2023 were \u00a32,687 million
(2022 - \u00a34,361 million).
At 31 December, ECL in relation to non-defaulted assets was reduced by \u00a311 million
(2022 - \u00a320 million) as a result of financial guarantee contracts with consolidated SEs.
Covered debt programme
Group companies have assigned loans to customers and debt investments to bankruptcy
remote limited liability partnerships to provide security for issues of debt securities.
NatWest Group retains all of the risks and rewards of these assets and continues to
recognise them. The partnerships are consolidated by NatWest Group and the related
covered bonds included within other financial liabilities. At 31 December 2023, \u00a311,067
million (2022 - \u00a38,156 million) of loans to customers provided security for debt securities
in issue and other borrowing of \u00a33,619 million (2022 - \u00a34,132 million).
Lending of own issued securities
NatWest Group has issued, retained, and lent debt securities under securities lending
arrangements. Under standard terms in the UK and US markets, the recipient has an
unrestricted right to sell or repledge collateral, subject to returning equivalent securities
on maturity of the transaction.
NatWest Group retains all of the risks and rewards of own
issued liabilities lent under such arrangements and does not recognise them. At 31
December 2023, \u00a32,312 million (2022 - \u00a32,419 million) of secured own issued liabilities
have been retained and lent under securities lending arrangements. At 31 December
2023, \u00a32,414 million (2022 - \u00a32,244 million) of loans and other debt instruments provided
security for secured own issued liabilities that have been retained and lent under
securities lending arrangements.
Unconsolidated structured entities
The term \u2018unconsolidated structured entities\u2019 refers to structured entities not controlled
by NatWest Group, and which are established either by NatWest Group or a third party.
An interest in a structured entity is any form of contractual or non-contractual
involvement which creates variability in returns for NatWest Group arising from the
performance of the entity. Such interests include holdings of debt or equity securities,
derivatives that transfer financial risks from the entity to NatWest Group, provision of
lending and loan commitments, financial guarantees and investment management
agreements. NatWest Group enters into transactions with unconsolidated structured
entities in the normal course of business to facilitate customer transactions, to provide
risk management services and for specific investment opportunities. Structured entities
may take the form of funds, trusts, partnerships, securitisation vehicles, and private
investment companies. NatWest Group considers itself to be the sponsor of a structured
entity where it is primarily involved in the set up and design of the entity and where
NatWest Group transfers assets to the entity, markets products associated with the
entity in its own name, and/or provides guarantees in relation to the performance of the
entity.
The nature and extent of NatWest Group\u2019s interests in structured entities is summarised
in the following table.
\u00a0
2023
2022
\u00a0
Asset-backed
Investment
\u00a0
Asset-backed
Investment
\u00a0
\u00a0
securitisation
funds
\u00a0
securitisation
funds
\u00a0
\u00a0
vehicles
and other
Total
vehicles
and other
Total
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Trading assets
303
311
614
616
137
753
Derivatives
134
-
134
343
-
343
Loans to customers
2,701
999
3,700
2,431
648
3,079
Other financial assets
13,096
1,062
14,158
6,334
849
7,183
Total
16,234
2,372
18,606
9,724
1,634
11,358
Liabilities
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Derivatives
213
17
230
388
22
410
Total
213
17
230
388
22
410
Off balance sheet
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Liquidity facilities/loan
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
commitments
1,873
396
2,269
1,723
320
2,043
Guarantees
-
127
127
-
107
107
Total
1,873
523
2,396
1,723
427
2,150
Maximum exposure
17,894
2,878
20,772
11,059
2,039
13,098
Guarantees
\u2013
NatWest Group gives guarantees on behalf of customers. A financial
guarantee represents an irrevocable undertaking that NatWest Group will meet a
customer's specified obligations to a third party if the customer fails to do so. The
maximum amount that NatWest Group could be required to pay under a guarantee is its
principal amount as disclosed in the table above. NatWest Group expects most
guarantees it provides to expire unused.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialGuaranteesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f102867": { "value": "Transfers that do not qualify for derecognition
NatWest Group enters into securities repurchase, lending and total return transactions in
accordance with normal market practice which includes the provision of additional
collateral if necessary. Under standard terms in the UK and US markets, the recipient
has an unrestricted right to sell or repledge collateral, subject to returning equivalent
securities on settlement of the transaction.
Securities sold under repurchase transactions and transactions with the substance of
securities repurchase agreements are not derecognised if NatWest Group retains
substantially all the risks and rewards of ownership. The fair value (and carrying value) of
securities transferred under such transactions included on the balance sheet, are set out
below. All of these securities could be sold or repledged by the holder.
\u00a0
2023
2022
The following assets have failed derecognition
(1)
\u00a3m
\u00a3m
Trading assets
7,907
6,668
Loans to bank - amortised cost
10
16
Loans to customers - amortised cost
281
398
Other financial assets
8,764
2,901
Total
16,962
9,983
(1)
Associated liabilities were \u00a316,522 million (2022 \u2013 \u00a39,501 million).
Assets pledged as collateral
NatWest Group pledges collateral with its counterparties in respect of derivative liabilities,
bank and stock borrowings and other transactions.
\u00a0
2023
2022
Assets pledged against liabilities
\u00a3m
\u00a3m
Trading assets
10,976
15,062
Loans to banks - amortised cost
63
66
Loans to customers - amortised cost
21,611
17,493
Other financial assets
(1)
6,506
3,351
Total
39,156
35,972
(1)
Includes assets pledged for pension derivatives and \u00a3482 million of debt securities under the continuing control of NWB
Plc. This follows the agreement between NWB Plc and the Group Pension Fund to establish a bankruptcy remote
reservoir trust to hold these assets. Refer to Note 5 for additional information.
As part of the covered debt programme \u00a311,067 million of loans to customers and other
debt instruments (2022 \u2013 \u00a38,156 million) have been transferred to bankruptcy remote
limited liability partnerships within the NatWest Group to provide collateral for issues of
debt securities and other borrowing by the NatWest Group of \u00a33,619 million (2022 \u2013
\u00a34,132 million). Refer to Note 23.", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialAssetsTransferredDuringPeriodWhichDoNotQualifyForDerecognitionExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f102932": { "value": "Assets pledged as collateral
NatWest Group pledges collateral with its counterparties in respect of derivative liabilities,
bank and stock borrowings and other transactions.
\u00a0
2023
2022
Assets pledged against liabilities
\u00a3m
\u00a3m
Trading assets
10,976
15,062
Loans to banks - amortised cost
63
66
Loans to customers - amortised cost
21,611
17,493
Other financial assets
(1)
6,506
3,351
Total
39,156
35,972
(1)
Includes assets pledged for pension derivatives and \u00a3482 million of debt securities under the continuing control of NWB
Plc. This follows the agreement between NWB Plc and the Group Pension Fund to establish a bankruptcy remote
reservoir trust to hold these assets. Refer to Note 5 for additional information.
As part of the covered debt programme \u00a311,067 million of loans to customers and other
debt instruments (2022 \u2013 \u00a38,156 million) have been transferred to bankruptcy remote
limited liability partnerships within the NatWest Group to provide collateral for issues of
debt securities and other borrowing by the NatWest Group of \u00a33,619 million (2022 \u2013
\u00a34,132 million). Refer to Note 23.", "dimensions": { "concept": "ifrs-full:DisclosureOfCollateralExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f103040": { "value": "25 Capital resources
NatWest Group\u2019s regulatory capital is assessed against minimum requirements that are set out under the UK Capital Requirements Regulation to determine the
strength of its capital base. This note shows a reconciliation of shareholders\u2019 equity to regulatory capital.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Shareholders\u2019 equity (excluding non-controlling interests)
\u00a0\u00a0
Shareholders\u2019 equity
37,157
36,488
Other equity instruments
(3,890)
(3,890)
\u00a0
33,267
32,598
Regulatory adjustments and deductions
\u00a0\u00a0
Own credit
(10)
(58)
Defined benefit pension fund adjustment
(143)
(227)
Cash flow hedging reserve
1,899
2,771
Deferred tax assets
(979)
(912)
Prudential valuation adjustments
(279)
(275)
Goodwill and other intangible assets
(7,614)
(7,116)
Foreseeable ordinary dividends
(1,013)
(967)
Adjustment for trust assets
(1)
(365)
(365)
Foreseeable charges
(525)
(800)
Adjustment under IFRS 9 transitional arrangements
202
361
Insufficient coverage for non-performing exposures
-
(18)
\u00a0
(8,827)
(7,606)
CET1 capital
24,440
24,992
Additional Tier 1 (AT1) capital
\u00a0\u00a0
Qualifying instruments and related share premium
3,875
3,875
AT1 capital
3,875
3,875
Tier 1 capital
28,315
28,867
Qualifying Tier 2 capital
\u00a0\u00a0
Qualifying instruments and related share premium
5,189
4,953
Qualifying instruments issued by subsidiaries and held by third parties
-
82
Other regulatory adjustments
128
18
Tier 2 capital
5,317
5,053
Total regulatory capital
33,632
33,920
\n
(1)
Prudent deduction in respect of agreement with the pension fund to establish legal structure to remove dividend linked contribution. Refer Notes 5 and 33.
It is NatWest Group policy to maintain a strong capital base,
to expand it as appropriate and to utilise it efficiently
throughout its activities to optimise the return to shareholders
while maintaining a prudent relationship between the capital
base and the underlying risks of the business. In carrying out
this policy, NatWest Group has regard to the supervisory
requirements of the PRA. The PRA uses capital ratios as a
measure of capital adequacy in the UK banking sector,
comparing a bank's capital resources with its risk-weighted
assets (the assets and off-balance sheet exposures are
weighted to reflect the inherent credit and other risks); by
international agreement, the Pillar 1 capital ratios should be
not less than 8% with a Common Equity Tier 1 component of
not less than 4.5%. NatWest Group has complied with the
PRA\u2019s capital requirements throughout the year.
A number of subsidiaries and sub-groups within NatWest
Group, principally banking entities, are subject to various
individual regulatory capital requirements in the UK and
overseas. Furthermore, the payment of dividends by
subsidiaries and the ability of members of NatWest Group to
lend money to other members of NatWest Group may be
subject to restrictions such as local regulatory or legal
requirements, the availability of reserves and financial and
operating performance.", "dimensions": { "concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f103298": { "value": "26 Memorandum items
Contingent liabilities and commitments
NatWest Group provides its customers with a variety of services to support
their businesses, such as guarantees. These are reported as
commitments.
Contingent liabilities are possible obligations dependent on a
future event or present obligations which are either not probable or cannot
be measured reliably.
For accounting policy information refer to Accounting policy 2.4.
The amounts shown in the table below are intended only to provide an indication of the
volume of business outstanding at 31 December 2023. Although NatWest Group is
exposed to credit risk in the event of a customer\u2019s failure to meet its obligations, the
amounts shown do not, and are not intended to, provide any indication of NatWest
Group's expectation of future losses.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Contingent liabilities and commitments
\u00a0 \u00a0
Guarantees
2,810
3,150
Other contingent liabilities
1,380
1,855
Standby facilities, credit lines and other commitments
115,441
121,576
Total
119,631
126,581
\n
Banking commitments and contingent obligations, which have been entered into on
behalf of customers and for which there are corresponding obligations from customers,
are not included in assets and liabilities. NatWest Group's maximum exposure to credit
loss, in the event of its obligation crystallising and all counterclaims, collateral or security
proving valueless, is represented by the contractual nominal amount of these
instruments included in the table above. These commitments and contingent obligations
are subject to NatWest Group's normal credit approval processes.Standby facilities and credit lines
- under a loan commitment, NatWest Group agrees to
make funds available to a customer in the future. Loan commitments, which are usually
for a specified term, may be unconditionally cancellable or may persist, provided all
conditions in the loan facility are satisfied or waived. Commitments to lend include
commercial standby facilities and credit lines, liquidity facilities to commercial paper
conduits and unutilised overdraft facilities.
O
O
ther commitments
- these include documentary credits, which are commercial letters
of credit providing for payment by NatWest Group to a named beneficiary against
presentation of specified documents, forward asset purchases, forward deposits placed
and undrawn note issuance and revolving underwriting facilities, and other short-term
trade related transactions.", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f103300": { "value": "26 Memorandum items
Contingent liabilities and commitments
NatWest Group provides its customers with a variety of services to support
their businesses, such as guarantees. These are reported as
commitments.
Contingent liabilities are possible obligations dependent on a
future event or present obligations which are either not probable or cannot
be measured reliably.
For accounting policy information refer to Accounting policy 2.4.
The amounts shown in the table below are intended only to provide an indication of the
volume of business outstanding at 31 December 2023. Although NatWest Group is
exposed to credit risk in the event of a customer\u2019s failure to meet its obligations, the
amounts shown do not, and are not intended to, provide any indication of NatWest
Group's expectation of future losses.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Contingent liabilities and commitments
\u00a0 \u00a0
Guarantees
2,810
3,150
Other contingent liabilities
1,380
1,855
Standby facilities, credit lines and other commitments
115,441
121,576
Total
119,631
126,581
\n
Banking commitments and contingent obligations, which have been entered into on
behalf of customers and for which there are corresponding obligations from customers,
are not included in assets and liabilities. NatWest Group's maximum exposure to credit
loss, in the event of its obligation crystallising and all counterclaims, collateral or security
proving valueless, is represented by the contractual nominal amount of these
instruments included in the table above. These commitments and contingent obligations
are subject to NatWest Group's normal credit approval processes.
Guarantees
\u2013
NatWest Group gives guarantees on behalf of customers. A financial
guarantee represents an irrevocable undertaking that NatWest Group will meet a
customer's specified obligations to a third party if the customer fails to do so. The
maximum amount that NatWest Group could be required to pay under a guarantee is its
principal amount as disclosed in the table above. NatWest Group expects most
guarantees it provides to expire unused.
O
O
ther contingent liabilities
- these include standby letters of credit, supporting customer
debt issues and contingent liabilities relating to customer trading activities such as those
arising from performance and customs bonds, warranties and indemnities.
Standby facilities and credit lines
- under a loan commitment, NatWest Group agrees to
make funds available to a customer in the future. Loan commitments, which are usually
for a specified term, may be unconditionally cancellable or may persist, provided all
conditions in the loan facility are satisfied or waived. Commitments to lend include
commercial standby facilities and credit lines, liquidity facilities to commercial paper
conduits and unutilised overdraft facilities.
O
O
ther commitments
- these include documentary credits, which are commercial letters
of credit providing for payment by NatWest Group to a named beneficiary against
presentation of specified documents, forward asset purchases, forward deposits placed
and undrawn note issuance and revolving underwriting facilities, and other short-term
trade related transactions.
Contractual obligations for future expenditure not provided for in the accounts
The following table shows contractual obligations for future expenditure not provided for
in the accounts at the year end.
\u00a0
2023
2022
\u00a0
\u00a0
\u00a3m
\u00a3m
Capital expenditure on property, plant and equipment
38
8
Contracts to purchase goods or services
(1)
1,121
677
\u00a0
1,159
685
\n
(1)
Of which due within 1 year: \u00a3379 million (2022 \u2013 \u00a3321 million).
Trustee and other fiduciary activities
In its capacity as trustee or other fiduciary role, NatWest Group may hold or place assets
on behalf of individuals, trusts, companies, pension schemes and others. The assets and
their income are not included in NatWest Group's financial statements. NatWest Group
earned fee income of \u00a3264 million (2022 - \u00a3266 million; 2021 - \u00a3280 million) from these
activities.
The Financial Services Compensation Scheme
The Financial Services Compensation Scheme (FSCS), the UK's statutory fund of last
resort for customers of authorised financial services firms, pays compensation if a firm is
unable to meet its obligations. The FSCS funds compensation for customers by raising
management expenses levies and compensation levies on the industry. In relation to
protected deposits, each deposit-taking institution contributes towards these levies in
proportion to their share of total protected deposits on 31 December of the year
preceding the scheme year (which runs from 1 April to 31 March), subject to annual
maxima set by the Prudential Regulation Authority. In addition, the FSCS has the power
to raise levies on a firm that has ceased to participate in the scheme and is in the
process of ceasing to be authorised for the costs that it would have been liable to pay
had the FSCS made a levy in the financial year it ceased to be a participant in the
scheme.
\n
\n\n\n\n
\n\n
Litigation and regulatory matters
\n
NatWest Group plc and certain members of NatWest Group are party to various legal
\n
proceedings and are involved in, or subject to, various regulatory matters, including as
\n
the subject of investigations and other regulatory and governmental action (Matters) in
\n
the United Kingdom (UK), the United States (US), the European Union (EU) and other
\n
jurisdictions.
\n
NatWest Group recognises a provision for a liability in relation to these Matters when it is
\n
probable that an outflow of economic benefits will be required to settle an obligation
\n
resulting from past events, and a reliable estimate can be made of the amount of the
\n
obligation.
\n
In many of the Matters, it is not possible to determine whether any loss is probable, or to
\n
estimate reliably the amount of any loss, either as a direct consequence of the relevant
\n
proceedings and regulatory matters or as a result of adverse impacts or restrictions on
\n
NatWest Group\u2019s reputation, businesses and operations. Numerous legal and factual
\n
issues may need to be resolved, including through potentially lengthy discovery and
\n
document production exercises and determination of important factual matters, and by
\n
addressing novel or unsettled legal questions relevant to the proceedings in question,
\n
before the probability of a liability, if any, arising can reasonably be estimated in respect
\n
of any Matter. NatWest Group cannot predict if, how, or when such claims will be
\n
resolved or what the eventual settlement, damages, fine, penalty or other relief, if any,
\n
may be, particularly for Matters that are at an early stage in their development or where
\n
claimants seek substantial or indeterminate damages.
\n
There are situations where NatWest Group may pursue an approach that in some
\n
instances leads to a settlement agreement. This may occur in order to avoid the
\n
expense, management distraction or reputational implications of continuing to contest
\n
liability, or in order to take account of the risks inherent in defending or contesting
\n
Matters, even for those for which NatWest Group believes it has credible defences and
\n
should prevail on the merits. The uncertainties inherent in all Matters affect the amount
\n
and timing of any potential economic outflows for both Matters with respect to which
\n
provisions have been established and other contingent liabilities in respect of any such
\n
Matter.
\n
It is not practicable to provide an aggregate estimate of potential liability for our Matters
\n
as a class of contingent liabilities.
\n
The future economic outflow in respect of any Matter may ultimately prove to be
\n
substantially greater than, or less than, the aggregate provision, if any, that NatWest
\n
Group has recognised in respect of such Matter. Where a reliable estimate of the
\n
economic outflow cannot be reasonably made, no provision has been recognised.
\n
NatWest Group expects that in future periods, additional provisions and economic
\n
outflows relating to Matters that may or may not be currently known by NatWest Group
\n
will be necessary, in amounts that are expected to be substantial in some instances.
\n
Refer to Note 21 for information on material provisions.
\n
Matters which are, or could be, material, either individually or in aggregate, having
\n
regard to NatWest Group, considered as a whole, in which NatWest Group is currently
\n
involved are set out below. We have provided information on the procedural history of
\n
certain Matters, where we believe appropriate, to aid the understanding of the Matter.
\n
For a discussion of certain risks associated with NatWest Group\u2019s litigation and
\n
regulatory matters (including the Matters), refer to the Risk Factor relating to legal,
\n
regulatory and governmental actions and investigations set out on pages 4
39
to 4
41
.
\n
Litigation
\n
London Interbank Offered Rate (LIBOR) and other rates litigation
\n
NWM Plc and certain other members of NatWest Group, including NatWest Group plc,
\n
are defendants in a number of class actions and individual claims pending in the United
\n
States District Court for the Southern District of New York (SDNY) with respect to the
\n
setting of LIBOR and certain other benchmark interest rates. The complainants allege
\n
that certain members of NatWest Group and other panel banks violated various federal
\n
laws, including the US commodities and antitrust laws, and state statutory and common
\n
law, as well as contracts, by manipulating LIBOR and prices of LIBOR-based derivatives
\n
in various markets through various means.
\n
Several purported class actions relating to USD LIBOR, as well as more than two dozen
\n
non-class actions concerning USD LIBOR and involving NatWest Group companies, are
\n
part of a co-ordinated proceeding in the SDNY. The class actions include claims on
\n
behalf of persons who purchased LIBOR-linked instruments from defendants, bonds
\n
issued by defendants, persons who transacted futures and options on exchanges, and
\n
lenders who made LIBOR-based loans. The coordinated proceeding is currently in the
\n
discovery phase. NatWest Group companies\u2019 previously disclosed settlement of a class
\n
action on behalf of bondholder plaintiffs has received final court approval. The amount of
\n
the settlement was covered by an existing provision.
\n
The non-class claims filed in the SDNY include claims that the FDIC is asserting on behalf
\n
of certain failed US banks. In July 2017, the FDIC, on behalf of 39 of those failed US
\n
banks, commenced substantially similar claims against NatWest Group companies and
\n
others in the High Court of Justice of England and Wales. The action alleges collusion
\n
with regard to the setting of USD LIBOR and that the defendants breached UK and
\n
European competition law, as well as asserting common law claims of fraud under US
\n
law. The defendant banks consented to a request by the FDIC for discontinuance of the
\n
claim in respect of 20 failed US banks, leaving 19 failed US banks as claimants. The trial
\n
is currently anticipated to commence in Q1 2026.
\n
In addition to the USD LIBOR cases described above, there is a class action relating to
\n
derivatives allegedly tied to JPY LIBOR and Euroyen TIBOR, which was dismissed by the
\n
SDNY in relation to NWM Plc and other NatWest Group companies in September 2021.
\n
That dismissal may be the subject of a future appeal. The SDNY\u2019s dismissal of another
\n
class action, which related to Euroyen TIBOR futures contracts, was affirmed by the
\n
United States Court of Appeals for the Second Circuit (US Court of Appeals) in October
\n
2022. The plaintiffs filed a petition with the United States Supreme Court seeking review
\n
of the dismissal, but that petition was denied in October 2023.
\n
Two other IBOR-related class actions involving NWM Plc, concerning alleged
\n
manipulation of Euribor and Pound Sterling LIBOR, were previously dismissed by the
\n
SDNY for various reasons. The plaintiffs\u2019 appeals in those two cases remain pending.
\n
\n\n\n\n
\n\n
\n
NWM Plc\u2019s previously disclosed settlement of a class action relating to Swiss Franc
\n
LIBOR has received final court approval. The settlement amount has been paid by NWM
\n
Plc and was covered in full by an existing provision.
\n
In August 2020, a complaint was filed in the United States District Court for the Northern
\n
District of California by several United States retail borrowers against the USD ICE
\n
LIBOR panel banks and their affiliates (including NatWest Group plc, NWM Plc, NWMSI
\n
and NWB Plc), alleging (i) that the very process of setting USD ICE LIBOR amounts to
\n
illegal price-fixing; and (ii) that banks in the United States have illegally agreed to use
\n
LIBOR as a component of price in variable retail loans. In September 2022, the district
\n
court dismissed the complaint. The plaintiffs filed an amended complaint but in October
\n
2023, the district court dismissed that complaint as well, and indicated that further
\n
amendment would not be permitted. The plaintiffs have commenced an appeal to the
\n
United States Court of Appeals for the Ninth Circuit which is currently pending.
\n
NWM Plc is also named as a defendant in a motion to certify a class action relating to
\n
LIBOR in the Tel Aviv District Court in Israel. NWM Plc filed a motion for cancellation of
\n
service outside the jurisdiction, which was granted in July 2020. The claimants appealed
\n
that decision and in November 2020 the appeal was refused and the claim dismissed by
\n
the Appellate Court. The claim could in future be recommenced depending on the
\n
outcome of an appeal to Israel\u2019s Supreme Court in respect of the dismissal of the
\n
substantive case against banks that had a presence in Israel.
\n
Foreign exchange litigation
\n
NWM Plc, NWMSI and/or NatWest Group plc are defendants in several cases relating to
\n
NWM Plc\u2019s foreign exchange (FX) business.
\n
An FX-related class action, on behalf of \u2018consumers and end-user businesses\u2019, was
\n
proceeding in the SDNY against NWM Plc and others. In March 2023, the court granted
\n
summary judgment in favour of the defendants, dismissing the plaintiffs\u2019 claims. The
\n
plaintiffs have commenced an appeal of that decision as well as a prior decision denying
\n
class certification in the case.
\n
In May 2019, a cartel class action was filed in the Federal Court of Australia against
\n
NWM Plc and four other banks on behalf of persons who bought or sold currency
\n
through FX spots or forwards between 1 January 2008 and 15 October 2013 with a
\n
total transaction value exceeding AUD $0.5 million. The claimant has alleged that the
\n
banks, including NWM Plc, contravened Australian competition law by sharing
\n
information, coordinating conduct, widening spreads and manipulating FX rates for
\n
certain currency pairs during this period. NatWest Group plc and NWMSI have been
\n
named in the action as \u2018other cartel participants\u2019, but are not respondents. The claim
\n
was served in June 2019 and NWM Plc filed its defence in March 2022.
\n
In July and December 2019, two separate applications seeking opt-out collective
\n
proceedings orders were filed in the UK Competition Appeal Tribunal (CAT) against
\n
NatWest Group plc, NWM Plc and other banks. Both applications were brought on behalf
\n
of persons who, between 18 December 2007 and 31 January 2013, entered into a
\n
relevant FX spot or outright forward transaction in the EEA with a relevant financial
\n
institution or on an electronic communications network. In March 2022, the CAT declined
\n
to certify as collective proceedings either of the applications, which was appealed by the
\n
applicants, and the subject of an application for judicial review.
\n
In its amended judgment in November 2023, the Court of Appeal allowed the appeal and
\n
decided that the claims should proceed on an opt-out basis. Separately, the court
\n
determined which of the two competing applicants can proceed as class representative,
\n
and dismissed the application for judicial review of the CAT\u2019s decision. The case has been
\n
remitted to the CAT for further case management and the banks have sought
\n
permission to appeal directly to the UK Supreme Court.
\n
Two motions to certify FX-related class actions were filed in the Tel Aviv District Court in
\n
Israel in September and October 2018, and were subsequently consolidated into one
\n
motion. The consolidated motion to certify, which names The Royal Bank of Scotland plc
\n
(now NWM Plc) and several other banks as defendants, was served on NWM Plc in May
\n
2020. The applicants have sought the court\u2019s permission to amend their motions to
\n
certify the class actions. NWM Plc has filed a motion challenging the permission granted
\n
by the court for the applicants to serve the consolidated motion outside the Israeli
\n
jurisdiction. That NWM Plc motion remains pending.
\n
In December 2021, a summons was served in the Netherlands against NatWest Group
\n
plc, NWM Plc and NWM N.V. by Stichting FX Claims on behalf of a number of parties,
\n
seeking declarations from the court concerning liability for anti-competitive FX market
\n
conduct described in decisions of the European Commission (EC) of 16 May 2019, along
\n
with unspecified damages. The claimant amended its claim to also refer to a 2 December
\n
2021 decision by the EC, which described anti-competitive FX market conduct. NatWest
\n
Group plc, NWM Plc and other defendants contested the jurisdiction of the Dutch court.
\n
In March 2023, the district court in Amsterdam accepted that it has jurisdiction to hear
\n
claims against NWM N.V. but refused jurisdiction to hear any claims against the other
\n
defendant banks (including NatWest Group plc and NWM Plc) brought on behalf of the
\n
parties represented by the claimant that are domiciled outside of the Netherlands. The
\n
claimant is appealing that decision and the defendant banks have brought cross-appeals
\n
which seek a ruling that the Dutch court has no jurisdiction to hear any claims against
\n
the defendant banks domiciled outside of the Netherlands, including claims brought on
\n
behalf of the parties represented by the claimant that are domiciled in the Netherlands.
\n
In September 2023, second summonses were served by Stichting FX Claims on NWM
\n
N.V., NatWest Group plc and NWM Plc, for claims on behalf of a new group of parties
\n
that have now been brought before the district court in Amsterdam. The summonses
\n
seek declarations from the Dutch court concerning liability for anti-competitive FX
\n
market conduct described in the above referenced decisions of the EC of 16 May 2019
\n
and 2 December 2021, along with unspecified damages.
\n
Certain other foreign exchange transaction related claims have been or may be
\n
threatened. NatWest Group cannot predict whether all or any of these claims will be
\n
pursued.
\n
\n\n\n\n
\n\n
\n
Government securities antitrust litigation
\n
NWMSI and certain other US broker-dealers are defendants in a consolidated antitrust
\n
class action in the SDNY on behalf of persons who transacted in US Treasury securities
\n
or derivatives based on such instruments, including futures and options. The plaintiffs
\n
allege that the defendants rigged the US Treasury securities auction bidding process to
\n
deflate prices at which they bought such securities and colluded to increase the prices at
\n
which they sold such securities to the plaintiffs. In March 2022, the SDNY dismissed the
\n
complaint, without leave to re-plead. In February 2024, the US Court of Appeals affirmed
\n
the SDNY\u2019s decision dismissing the complaint.
\n
Class action antitrust claims commenced in March 2019 are pending in the SDNY
\n
against NWM Plc, NWMSI and other banks in respect of Euro-denominated bonds issued
\n
by various European central banks (European government bonds or EGBs). The
\n
complaint alleges a conspiracy among dealers of EGBs to widen the bid-ask spreads they
\n
quoted to customers, thereby increasing the prices customers paid for the EGBs or
\n
decreasing the prices at which customers sold EGBs. The class consists of those who
\n
purchased or sold EGBs in the US between 2007 and 2012. Previously, in March 2022,
\n
the SDNY dismissed the claims against NWM Plc and NWMSI on the ground that the
\n
complaint\u2019s conspiracy allegations were insufficient. However, in September 2023, the
\n
SDNY ruled that new allegations which plaintiffs have included in an amended complaint
\n
are sufficient to bring those NatWest entities back into the case as defendants.
\n
Swaps antitrust litigation
\n
NWM Plc and other members of NatWest Group, including NatWest Group plc, as well as
\n
a number of other interest rate swap dealers, are defendants in several cases pending in
\n
the SDNY alleging violations of the US antitrust laws in the market for interest rate
\n
swaps. There is a consolidated class action complaint on behalf of persons who entered
\n
into interest rate swaps with the defendants, as well as non-class action claims by three
\n
swap execution facilities (TeraExchange, Javelin, and trueEx). The plaintiffs allege that
\n
the swap execution facilities would have successfully established exchange-like trading of
\n
interest rate swaps if the defendants had not unlawfully conspired to prevent that from
\n
happening through boycotts and other means. Discovery in these cases is complete. In
\n
December 2023, the SDNY denied the plaintiffs\u2019 motion for class certification. The
\n
plaintiffs have filed a petition requesting that the US Court of Appeals review the denial
\n
of class certification.
\n
In June 2021, a class action antitrust complaint was filed against a number of credit
\n
default swap dealers, in New Mexico federal court on behalf of persons who, from 2005
\n
onwards, settled credit default swaps in the United States by reference to the ISDA
\n
credit default swap auction protocol. The complaint alleges that the defendants
\n
conspired to manipulate that benchmark through various means in violation of the
\n
antitrust laws and the Commodity Exchange Act. The defendants filed a motion to
\n
dismiss the complaint and, in June 2023, such motion was denied as regards NWMSI and
\n
other financial institutions, but granted as regards to NWM Plc on the ground that the
\n
court lacks jurisdiction over that entity. As a result, the case entered the discovery phase
\n
as against the non-dismissed defendants. In January 2024, the SDNY issued an order
\n
barring the plaintiffs in the New Mexico case from pursuing claims based on conduct
\n
occurring before 30 June 2014 on the ground that such claims were extinguished by a
\n
2015 settlement agreement that resolved a prior class action relating to credit default
\n
swaps.
\n
O
O
dd lot corporate bond trading antitrust litigation
\n
In October 2021, the SDNY granted the defendants\u2019 motion to dismiss the class action
\n
antitrust complaint alleging that from August 2006 onwards various securities dealers,
\n
including NWMSI, conspired artificially to widen spreads for odd lots of corporate bonds
\n
bought or sold in the United States secondary market and to boycott electronic trading
\n
platforms that would have allegedly promoted pricing competition in the market for such
\n
bonds. The plaintiffs have filed an appeal.
\n
Spoofing litigation
\n
In December 2021, three substantially similar class actions complaints were filed in
\n
federal court in the United States against NWM Plc and NWMSI alleging Commodity
\n
Exchange Act and common law unjust enrichment claims arising from manipulative
\n
trading known as spoofing. The complaints refer to NWM Plc\u2019s December 2021 spoofing-
\n
related guilty plea (described below under \u201cUS investigations relating to fixed-income
\n
securities\u201d) and purport to assert claims on behalf of those who transacted in US
\n
Treasury securities and futures and options on US Treasury securities between 2008 and
\n
2018. In July 2022, defendants filed a motion to dismiss these claims, which have been
\n
consolidated into one matter in the United States District Court for the Northern District
\n
of Illinois.
\n
Madoff
\n
NWM N.V. was named as a defendant in two actions filed by the trustee for the bankrupt
\n
estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, in
\n
bankruptcy court in New York, which together seek to clawback more than US$298
\n
million that NWM N.V. allegedly received from certain Madoff feeder funds and certain
\n
swap counterparties. The claims were previously dismissed, but as a result of an August
\n
2021 decision by the US Court of Appeals, they will now proceed in the bankruptcy
\n
court, where they have been consolidated into one action, subject to NWM N.V.\u2019s legal
\n
and factual defences. In May 2022, NWM N.V. filed a motion to dismiss the amended
\n
complaint in the consolidated action and such motion was denied in March 2023. As a
\n
result, the case has now entered the discovery phase.
\n
EUA trading litigation
\n
NWM Plc was a named defendant in civil proceedings before the High Court of Justice of
\n
England and Wales brought in 2015 by ten
companies (all in liquidation) (the \u2018Liquidated
\n
Companies\u2019) and their respective liquidators (together, \u2018the Claimants\u2019). The Liquidated
\n
Companies previously traded in European Union Allowances (EUAs) in 2009 and were
\n
alleged to be VAT defaulting traders within (or otherwise connected to) EUA supply
\n
chains of which NWM Plc was a party. In March 2020, the court held that NWM Plc and
\n
Mercuria Energy Europe Trading Limited (\u2018Mercuria\u2019) were liable for dishonestly assisting
\n
and knowingly being a party to fraudulent trading during a seven business day period in
\n
2009.
\n
\n\n\n\n
\n\n
\n
In October 2020, the High Court quantified total damages against NWM Plc and
\n
Mercuria at \u00a345 million plus interest and costs, and permitted the defendants to appeal
\n
to the Court of Appeal. In May 2021 the Court of Appeal set aside the High Court\u2019s
\n
judgment and ordered that a retrial take place before a different High Court judge. In
\n
January 2024, NWM Plc entered into an agreement to resolve the claim against it. The
\n
settlement amount paid by NWM Plc was covered in full by an existing provision.
\n
Offshoring VAT assessments
\n
HMRC issued protective tax assessments in 2018 against NatWest Group plc totalling
\n
\u00a3143 million relating to unpaid VAT in respect of the UK branches of two NatWest Group
\n
companies registered in India. NatWest Group formally requested reconsideration by
\n
HMRC of their assessments, and this process was completed in November 2020. HMRC
\n
upheld their original decision and, as a result, NatWest Group plc lodged an appeal with
\n
the Tax Tribunal and an application for judicial review with the High Court of Justice of
\n
England and Wales, both in December 2020. In order to lodge the appeal with the Tax
\n
Tribunal, NatWest Group plc was required to pay \u00a3143 million to HMRC, and payment
\n
was made in December 2020. The appeal and the application for judicial review have
\n
both been stayed pending resolution of separate cases involving other banks.
\n
US Anti-Terrorism Act litigation
\n
NWM N.V. and certain other financial institutions are defendants in several actions filed
\n
by a number of US nationals (or their estates, survivors, or heirs), most of whom are or
\n
were US military personnel, who were killed or injured in attacks in Iraq between 2003
\n
and 2011. NWM Plc is also a defendant in some of these cases.
\n
According to the plaintiffs\u2019 allegations, the defendants are liable for damages arising from
\n
the attacks because they allegedly conspired with and/or aided and abetted Iran and
\n
certain Iranian banks to assist Iran in transferring money to Hezbollah and the Iraqi
\n
terror cells that committed the attacks, in violation of the US Anti-Terrorism Act, by
\n
agreeing to engage in \u2018stripping\u2019 of transactions initiated by the Iranian banks so that the
\n
Iranian nexus to the transactions would not be detected.
\n
The first of these actions, alleging conspiracy claims but not aiding and abetting claims,
\n
was filed in the United States District Court for the Eastern District of New York in
\n
November 2014. In September 2019, the district court dismissed the case, finding that
\n
the claims were deficient for several reasons, including lack of sufficient allegations as to
\n
the alleged conspiracy and causation. In January 2023, the US Court of Appeals affirmed
\n
the district court\u2019s dismissal of this case. The plaintiffs filed a petition with the United
\n
States Supreme Court seeking review of the dismissal of their claims and that petition
\n
was denied in October 2023. It is anticipated that the plaintiffs will file a motion to re-
\n
open the case to assert aiding and abetting claims that they previously did not assert.
\n
Another action, filed in the SDNY in 2017, which asserted both conspiracy and aiding
\n
and abetting claims, was dismissed by the SDNY in March 2019 on similar grounds as
\n
the first case, but remains subject to appeal to the US Court of Appeals. Other follow-on
\n
actions that are substantially similar to those described above are pending in the same
\n
courts.
\n
1
1
MDB litigation
\n
A Malaysian court claim was served in Switzerland in November 2022 by 1MDB, a
\n
Sovereign Wealth Fund, in which Coutts & Co Ltd was named, along with six others, as a
\n
defendant in respect of losses allegedly incurred by 1MDB. It is claimed that Coutts & Co
\n
Ltd is liable as a constructive trustee for having dishonestly assisted the directors of
\n
1MDB in the breach of their fiduciary duties by failing (amongst other alleged claims) to
\n
undertake due diligence in relation to a customer of Coutts & Co Ltd, through which
\n
funds totalling c.US$1 billion were received and paid out between 2009 and 2011. The
\n
claimant seeks the return of that amount plus interest. Coutts & Co Ltd filed an
\n
application in January 2023 challenging the validity of service and the Malaysian court\u2019s
\n
jurisdiction to hear the claim. Before that application was heard, in April 2023, the
\n
claimant filed a notice of discontinuance of its claim against certain defendants including
\n
Coutts & Co Ltd. The claimant subsequently indicated that it intended to issue further
\n
replacement proceedings. Coutts & Co Ltd challenged the claimant\u2019s ability to take that
\n
step. In August 2023, the court disallowed the discontinuation of the claim by the
\n
claimant (a decision that the claimant has appealed) and directed that the application by
\n
Coutts & Co Ltd challenging the validity of the proceedings should proceed to a hearing,
\n
which took place in February 2024. Judgment is awaited.
\n
Coutts & Co Ltd (a subsidiary of RBS Netherlands Holdings B.V., which in turn is a
\n
subsidiary of NWM Plc) is a company registered in Switzerland and is in wind-down
\n
following the announced sale of its business assets in 2015.
\n
Regulatory matters (including investigations and customer redress programmes)
\n
NatWest Group\u2019s businesses and financial condition can be affected by the actions of
\n
various governmental and regulatory authorities in the UK, the US, the EU and
\n
elsewhere. NatWest Group has engaged, and will continue to engage, in discussions with
\n
relevant governmental and regulatory authorities, including in the UK, the US, the EU
\n
and elsewhere, on an ongoing and regular basis, and in response to informal and formal
\n
inquiries or investigations, regarding operational, systems and control evaluations and
\n
issues including those related to compliance with applicable laws and regulations,
\n
including consumer protection, investment advice, business conduct, competition/anti-
\n
trust, VAT recovery, anti-bribery, anti-money laundering and sanctions regimes.
\n
NatWest Group expects government and regulatory intervention in financial services to
\n
be high for the foreseeable future, including increased scrutiny from competition and
\n
other regulators in the retail and SME business sectors.
\n
Any matters discussed or identified during such discussions and inquiries may result in,
\n
among other things, further inquiry or investigation, other action being taken by
\n
governmental and regulatory authorities, increased costs being incurred by NatWest
\n
Group, remediation of systems and controls, public or private censure, restriction of
\n
NatWest Group\u2019s business activities and/or fines. Any of the events or circumstances
\n
mentioned in this paragraph or below could have a material adverse effect on NatWest
\n
Group, its business, authorisations and licences, reputation, results of operations or the
\n
price of securities issued by it, or lead to material additional provisions being taken.
\n
NatWest Group is co-operating fully with the matters described below.
\n
\n\n\n\n
\n\n
\n
US investigations relating to fixed-income securities
\n
In December 2021, NWM Plc pled guilty in the United States District Court for the District
\n
of Connecticut to one count of wire fraud and one count of securities fraud in connection
\n
with historical spoofing conduct by former employees in US Treasuries markets between
\n
January 2008 and May 2014 and, separately, during approximately three months in
\n
2018. The 2018 trading occurred during the term of a non-prosecution agreement (NPA)
\n
between NWMSI and the United States Attorney's Office for the District of Connecticut
\n
(USAO CT), under which non-prosecution was conditioned on NWMSI and affiliated
\n
companies not engaging in criminal conduct during the term of the NPA. The relevant
\n
trading in 2018 was conducted by two NWM traders in Singapore and breached that
\n
NPA. The plea agreement reached with the US Department of Justice and the USAO CT
\n
resolved both the spoofing conduct and the breach of the NPA.
\n
As required by the resolution and sentence imposed by the court, NWM Plc is subject to
\n
a three-year period of probation scheduled to end in December 2024. The plea
\n
agreement also imposes an independent corporate monitor. In addition, NWM Plc has
\n
committed to compliance programme reviews and improvements and agreed to
\n
reporting and co-operation obligations.
\n
Other material adverse collateral consequences may occur as a result of this matter, as
\n
further described in the Risk Factor relating to legal, regulatory and governmental
\n
actions and investigations set out on pages 43
9
to 44
1
.
\n
RBSI inspection report and referral to enforcement
\n
Following an inspection by the Isle of Man Financial Services Authority (IOMFSA) in 2021
\n
into The Royal Bank of Scotland International Limited\u2019s (RBSI\u2019s) compliance with the
\n
Financial Services Rule Book 2016, the Anti-Money Laundering and Countering the
\n
Financing of Terrorism Code 2015 (the \u201c2015 Code\u201d) and the Anti-Money Laundering
\n
and Countering the Financing of Terrorism Code 2019, RBSI and the IOMFSA entered
\n
into a settlement agreement in February 2024 with an agreed public statement that RBSI
\n
had contravened paragraph 7 of the 2015 Code. RBSI did not complete its updated
\n
Customer Risk Assessment process following the introduction of the 2015 Code until
\n
2018, resulting in 2,239 non-personal customers (on-boarded to its Isle of Man branches
\n
between 2015 and 2018, and not rated as high risk) being on-boarded using Customer
\n
Risk Assessments in line with earlier legislation. This constituted less than 3% of the total
\n
customer population of the Isle of Man branches. RBSI was fined \u00a31.0 million (after a
\n
discount for co-operation), which was covered in full by an existing provision.
\n
RBSI reliance regime and referral to enforcement
\n
In January 2023, the Jersey Financial Services Commission notified RBSI that it had been
\n
referred to its Enforcement Division in relation to RBSI\u2019s operation of the reliance regime.
\n
The reliance regime is specific to certain Crown Dependencies and enables the bank to
\n
rely on regulated third parties for specific due diligence information.
\n
I
I
nvestment advice review
\n
In October 2019, the FCA notified NatWest Group of its intention to appoint a Skilled
\n
Person under section 166 of the Financial Services and Markets Act 2000 to conduct a
\n
review of whether NatWest Group\u2019s past business review of investment advice provided
\n
during 2010 to 2015 was subject to appropriate governance and accountability and led
\n
to appropriate customer outcomes. The Skilled Person\u2019s review has concluded and, after
\n
discussion with the FCA, NatWest Group is undertaking additional review / remediation
\n
work.
\n
Reviews into customer account closures
\n
In July 2023, NatWest Group plc commissioned an independent review by the law firm
\n
Travers Smith LLP into issues that had arisen from treatment of a customer in
\n
connection with an account closure decision that attracted significant public attention
\n
and certain related interactions with the media. NatWest Group plc has received reports
\n
in connection with that review (and in October and December 2023 published summaries
\n
of the key findings and recommendations).
\n
In addition, NatWest Group plc is conducting internal reviews with respect to certain
\n
governance processes, policies, systems and controls of NatWest Group entities,
\n
including with respect to customer account closures.
\n
The FCA is conducting supervisory work into how the governance, systems and controls
\n
of NatWest Group and Coutts & Company are working, to identify and address any
\n
significant shortcomings.
\n
Review and investigation of treatment of tracker mortgage customers in Ulster Bank
\n
Ireland DAC
\n
In December 2015, correspondence was received from the Central Bank of Ireland
\n
setting out an industry examination framework in respect of the sale of tracker
\n
mortgages from approximately 2001 until the end of 2015. The redress and
\n
compensation process has now largely concluded, although certain cases remain
\n
outstanding.
\n
UBIDAC customers have lodged tracker mortgage complaints with the Financial Services
\n
and Pensions Ombudsman (FSPO). UBIDAC challenged three FSPO adjudications in the
\n
Irish High Court. In June 2023, the High Court found in favour of the FSPO in all matters
\n
and a provision was recognised. UBIDAC was granted leave to appeal that decision and
\n
an appeal hearing has been scheduled to take place in the Court of Appeal.
\n
Other customer remediation in Ulster Bank Ireland DAC
\n
UBIDAC has identified other legacy issues leading to the establishment of remediation
\nrequirements and progress is ongoing to conclude activities.", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f103301": { "value": "26 Memorandum items
Contingent liabilities and commitments
NatWest Group provides its customers with a variety of services to support
their businesses, such as guarantees. These are reported as
commitments.
Contingent liabilities are possible obligations dependent on a
future event or present obligations which are either not probable or cannot
be measured reliably.
For accounting policy information refer to Accounting policy 2.4.
The amounts shown in the table below are intended only to provide an indication of the
volume of business outstanding at 31 December 2023. Although NatWest Group is
exposed to credit risk in the event of a customer\u2019s failure to meet its obligations, the
amounts shown do not, and are not intended to, provide any indication of NatWest
Group's expectation of future losses.
\u00a0
2023
2022
\u00a0
\u00a3m
\u00a3m
Contingent liabilities and commitments
\u00a0 \u00a0
Guarantees
2,810
3,150
Other contingent liabilities
1,380
1,855
Standby facilities, credit lines and other commitments
115,441
121,576
Total
119,631
126,581
\n
Banking commitments and contingent obligations, which have been entered into on
behalf of customers and for which there are corresponding obligations from customers,
are not included in assets and liabilities. NatWest Group's maximum exposure to credit
loss, in the event of its obligation crystallising and all counterclaims, collateral or security
proving valueless, is represented by the contractual nominal amount of these
instruments included in the table above. These commitments and contingent obligations
are subject to NatWest Group's normal credit approval processes.
Guarantees
\u2013
NatWest Group gives guarantees on behalf of customers. A financial
guarantee represents an irrevocable undertaking that NatWest Group will meet a
customer's specified obligations to a third party if the customer fails to do so. The
maximum amount that NatWest Group could be required to pay under a guarantee is its
principal amount as disclosed in the table above. NatWest Group expects most
guarantees it provides to expire unused.
O
O
ther contingent liabilities
- these include standby letters of credit, supporting customer
debt issues and contingent liabilities relating to customer trading activities such as those
arising from performance and customs bonds, warranties and indemnities.
Standby facilities and credit lines
- under a loan commitment, NatWest Group agrees to
make funds available to a customer in the future. Loan commitments, which are usually
for a specified term, may be unconditionally cancellable or may persist, provided all
conditions in the loan facility are satisfied or waived. Commitments to lend include
commercial standby facilities and credit lines, liquidity facilities to commercial paper
conduits and unutilised overdraft facilities.
O
O
ther commitments
- these include documentary credits, which are commercial letters
of credit providing for payment by NatWest Group to a named beneficiary against
presentation of specified documents, forward asset purchases, forward deposits placed
and undrawn note issuance and revolving underwriting facilities, and other short-term
trade related transactions.
Contractual obligations for future expenditure not provided for in the accounts
The following table shows contractual obligations for future expenditure not provided for
in the accounts at the year end.
\u00a0
2023
2022
\u00a0
\u00a0
\u00a3m
\u00a3m
Capital expenditure on property, plant and equipment
38
8
Contracts to purchase goods or services
(1)
1,121
677
\u00a0
1,159
685
\n
(1)
Of which due within 1 year: \u00a3379 million (2022 \u2013 \u00a3321 million).
Trustee and other fiduciary activities
In its capacity as trustee or other fiduciary role, NatWest Group may hold or place assets
on behalf of individuals, trusts, companies, pension schemes and others. The assets and
their income are not included in NatWest Group's financial statements. NatWest Group
earned fee income of \u00a3264 million (2022 - \u00a3266 million; 2021 - \u00a3280 million) from these
activities.
The Financial Services Compensation Scheme
The Financial Services Compensation Scheme (FSCS), the UK's statutory fund of last
resort for customers of authorised financial services firms, pays compensation if a firm is
unable to meet its obligations. The FSCS funds compensation for customers by raising
management expenses levies and compensation levies on the industry. In relation to
protected deposits, each deposit-taking institution contributes towards these levies in
proportion to their share of total protected deposits on 31 December of the year
preceding the scheme year (which runs from 1 April to 31 March), subject to annual
maxima set by the Prudential Regulation Authority. In addition, the FSCS has the power
to raise levies on a firm that has ceased to participate in the scheme and is in the
process of ceasing to be authorised for the costs that it would have been liable to pay
had the FSCS made a levy in the financial year it ceased to be a participant in the
scheme.
\n
\n\n\n\n
\n\n
Litigation and regulatory matters
\n
NatWest Group plc and certain members of NatWest Group are party to various legal
\n
proceedings and are involved in, or subject to, various regulatory matters, including as
\n
the subject of investigations and other regulatory and governmental action (Matters) in
\n
the United Kingdom (UK), the United States (US), the European Union (EU) and other
\n
jurisdictions.
\n
NatWest Group recognises a provision for a liability in relation to these Matters when it is
\n
probable that an outflow of economic benefits will be required to settle an obligation
\n
resulting from past events, and a reliable estimate can be made of the amount of the
\n
obligation.
\n
In many of the Matters, it is not possible to determine whether any loss is probable, or to
\n
estimate reliably the amount of any loss, either as a direct consequence of the relevant
\n
proceedings and regulatory matters or as a result of adverse impacts or restrictions on
\n
NatWest Group\u2019s reputation, businesses and operations. Numerous legal and factual
\n
issues may need to be resolved, including through potentially lengthy discovery and
\n
document production exercises and determination of important factual matters, and by
\n
addressing novel or unsettled legal questions relevant to the proceedings in question,
\n
before the probability of a liability, if any, arising can reasonably be estimated in respect
\n
of any Matter. NatWest Group cannot predict if, how, or when such claims will be
\n
resolved or what the eventual settlement, damages, fine, penalty or other relief, if any,
\n
may be, particularly for Matters that are at an early stage in their development or where
\n
claimants seek substantial or indeterminate damages.
\n
There are situations where NatWest Group may pursue an approach that in some
\n
instances leads to a settlement agreement. This may occur in order to avoid the
\n
expense, management distraction or reputational implications of continuing to contest
\n
liability, or in order to take account of the risks inherent in defending or contesting
\n
Matters, even for those for which NatWest Group believes it has credible defences and
\n
should prevail on the merits. The uncertainties inherent in all Matters affect the amount
\n
and timing of any potential economic outflows for both Matters with respect to which
\n
provisions have been established and other contingent liabilities in respect of any such
\n
Matter.
\n
It is not practicable to provide an aggregate estimate of potential liability for our Matters
\n
as a class of contingent liabilities.
\n
The future economic outflow in respect of any Matter may ultimately prove to be
\n
substantially greater than, or less than, the aggregate provision, if any, that NatWest
\n
Group has recognised in respect of such Matter. Where a reliable estimate of the
\n
economic outflow cannot be reasonably made, no provision has been recognised.
\n
NatWest Group expects that in future periods, additional provisions and economic
\n
outflows relating to Matters that may or may not be currently known by NatWest Group
\n
will be necessary, in amounts that are expected to be substantial in some instances.
\n
Refer to Note 21 for information on material provisions.
\n
Matters which are, or could be, material, either individually or in aggregate, having
\n
regard to NatWest Group, considered as a whole, in which NatWest Group is currently
\n
involved are set out below. We have provided information on the procedural history of
\n
certain Matters, where we believe appropriate, to aid the understanding of the Matter.
\n
For a discussion of certain risks associated with NatWest Group\u2019s litigation and
\n
regulatory matters (including the Matters), refer to the Risk Factor relating to legal,
\n
regulatory and governmental actions and investigations set out on pages 4
39
to 4
41
.
\n
Litigation
\n
London Interbank Offered Rate (LIBOR) and other rates litigation
\n
NWM Plc and certain other members of NatWest Group, including NatWest Group plc,
\n
are defendants in a number of class actions and individual claims pending in the United
\n
States District Court for the Southern District of New York (SDNY) with respect to the
\n
setting of LIBOR and certain other benchmark interest rates. The complainants allege
\n
that certain members of NatWest Group and other panel banks violated various federal
\n
laws, including the US commodities and antitrust laws, and state statutory and common
\n
law, as well as contracts, by manipulating LIBOR and prices of LIBOR-based derivatives
\n
in various markets through various means.
\n
Several purported class actions relating to USD LIBOR, as well as more than two dozen
\n
non-class actions concerning USD LIBOR and involving NatWest Group companies, are
\n
part of a co-ordinated proceeding in the SDNY. The class actions include claims on
\n
behalf of persons who purchased LIBOR-linked instruments from defendants, bonds
\n
issued by defendants, persons who transacted futures and options on exchanges, and
\n
lenders who made LIBOR-based loans. The coordinated proceeding is currently in the
\n
discovery phase. NatWest Group companies\u2019 previously disclosed settlement of a class
\n
action on behalf of bondholder plaintiffs has received final court approval. The amount of
\n
the settlement was covered by an existing provision.
\n
The non-class claims filed in the SDNY include claims that the FDIC is asserting on behalf
\n
of certain failed US banks. In July 2017, the FDIC, on behalf of 39 of those failed US
\n
banks, commenced substantially similar claims against NatWest Group companies and
\n
others in the High Court of Justice of England and Wales. The action alleges collusion
\n
with regard to the setting of USD LIBOR and that the defendants breached UK and
\n
European competition law, as well as asserting common law claims of fraud under US
\n
law. The defendant banks consented to a request by the FDIC for discontinuance of the
\n
claim in respect of 20 failed US banks, leaving 19 failed US banks as claimants. The trial
\n
is currently anticipated to commence in Q1 2026.
\n
In addition to the USD LIBOR cases described above, there is a class action relating to
\n
derivatives allegedly tied to JPY LIBOR and Euroyen TIBOR, which was dismissed by the
\n
SDNY in relation to NWM Plc and other NatWest Group companies in September 2021.
\n
That dismissal may be the subject of a future appeal. The SDNY\u2019s dismissal of another
\n
class action, which related to Euroyen TIBOR futures contracts, was affirmed by the
\n
United States Court of Appeals for the Second Circuit (US Court of Appeals) in October
\n
2022. The plaintiffs filed a petition with the United States Supreme Court seeking review
\n
of the dismissal, but that petition was denied in October 2023.
\n
Two other IBOR-related class actions involving NWM Plc, concerning alleged
\n
manipulation of Euribor and Pound Sterling LIBOR, were previously dismissed by the
\n
SDNY for various reasons. The plaintiffs\u2019 appeals in those two cases remain pending.
\n
\n\n\n\n
\n\n
\n
NWM Plc\u2019s previously disclosed settlement of a class action relating to Swiss Franc
\n
LIBOR has received final court approval. The settlement amount has been paid by NWM
\n
Plc and was covered in full by an existing provision.
\n
In August 2020, a complaint was filed in the United States District Court for the Northern
\n
District of California by several United States retail borrowers against the USD ICE
\n
LIBOR panel banks and their affiliates (including NatWest Group plc, NWM Plc, NWMSI
\n
and NWB Plc), alleging (i) that the very process of setting USD ICE LIBOR amounts to
\n
illegal price-fixing; and (ii) that banks in the United States have illegally agreed to use
\n
LIBOR as a component of price in variable retail loans. In September 2022, the district
\n
court dismissed the complaint. The plaintiffs filed an amended complaint but in October
\n
2023, the district court dismissed that complaint as well, and indicated that further
\n
amendment would not be permitted. The plaintiffs have commenced an appeal to the
\n
United States Court of Appeals for the Ninth Circuit which is currently pending.
\n
NWM Plc is also named as a defendant in a motion to certify a class action relating to
\n
LIBOR in the Tel Aviv District Court in Israel. NWM Plc filed a motion for cancellation of
\n
service outside the jurisdiction, which was granted in July 2020. The claimants appealed
\n
that decision and in November 2020 the appeal was refused and the claim dismissed by
\n
the Appellate Court. The claim could in future be recommenced depending on the
\n
outcome of an appeal to Israel\u2019s Supreme Court in respect of the dismissal of the
\n
substantive case against banks that had a presence in Israel.
\n
Foreign exchange litigation
\n
NWM Plc, NWMSI and/or NatWest Group plc are defendants in several cases relating to
\n
NWM Plc\u2019s foreign exchange (FX) business.
\n
An FX-related class action, on behalf of \u2018consumers and end-user businesses\u2019, was
\n
proceeding in the SDNY against NWM Plc and others. In March 2023, the court granted
\n
summary judgment in favour of the defendants, dismissing the plaintiffs\u2019 claims. The
\n
plaintiffs have commenced an appeal of that decision as well as a prior decision denying
\n
class certification in the case.
\n
In May 2019, a cartel class action was filed in the Federal Court of Australia against
\n
NWM Plc and four other banks on behalf of persons who bought or sold currency
\n
through FX spots or forwards between 1 January 2008 and 15 October 2013 with a
\n
total transaction value exceeding AUD $0.5 million. The claimant has alleged that the
\n
banks, including NWM Plc, contravened Australian competition law by sharing
\n
information, coordinating conduct, widening spreads and manipulating FX rates for
\n
certain currency pairs during this period. NatWest Group plc and NWMSI have been
\n
named in the action as \u2018other cartel participants\u2019, but are not respondents. The claim
\n
was served in June 2019 and NWM Plc filed its defence in March 2022.
\n
In July and December 2019, two separate applications seeking opt-out collective
\n
proceedings orders were filed in the UK Competition Appeal Tribunal (CAT) against
\n
NatWest Group plc, NWM Plc and other banks. Both applications were brought on behalf
\n
of persons who, between 18 December 2007 and 31 January 2013, entered into a
\n
relevant FX spot or outright forward transaction in the EEA with a relevant financial
\n
institution or on an electronic communications network. In March 2022, the CAT declined
\n
to certify as collective proceedings either of the applications, which was appealed by the
\n
applicants, and the subject of an application for judicial review.
\n
In its amended judgment in November 2023, the Court of Appeal allowed the appeal and
\n
decided that the claims should proceed on an opt-out basis. Separately, the court
\n
determined which of the two competing applicants can proceed as class representative,
\n
and dismissed the application for judicial review of the CAT\u2019s decision. The case has been
\n
remitted to the CAT for further case management and the banks have sought
\n
permission to appeal directly to the UK Supreme Court.
\n
Two motions to certify FX-related class actions were filed in the Tel Aviv District Court in
\n
Israel in September and October 2018, and were subsequently consolidated into one
\n
motion. The consolidated motion to certify, which names The Royal Bank of Scotland plc
\n
(now NWM Plc) and several other banks as defendants, was served on NWM Plc in May
\n
2020. The applicants have sought the court\u2019s permission to amend their motions to
\n
certify the class actions. NWM Plc has filed a motion challenging the permission granted
\n
by the court for the applicants to serve the consolidated motion outside the Israeli
\n
jurisdiction. That NWM Plc motion remains pending.
\n
In December 2021, a summons was served in the Netherlands against NatWest Group
\n
plc, NWM Plc and NWM N.V. by Stichting FX Claims on behalf of a number of parties,
\n
seeking declarations from the court concerning liability for anti-competitive FX market
\n
conduct described in decisions of the European Commission (EC) of 16 May 2019, along
\n
with unspecified damages. The claimant amended its claim to also refer to a 2 December
\n
2021 decision by the EC, which described anti-competitive FX market conduct. NatWest
\n
Group plc, NWM Plc and other defendants contested the jurisdiction of the Dutch court.
\n
In March 2023, the district court in Amsterdam accepted that it has jurisdiction to hear
\n
claims against NWM N.V. but refused jurisdiction to hear any claims against the other
\n
defendant banks (including NatWest Group plc and NWM Plc) brought on behalf of the
\n
parties represented by the claimant that are domiciled outside of the Netherlands. The
\n
claimant is appealing that decision and the defendant banks have brought cross-appeals
\n
which seek a ruling that the Dutch court has no jurisdiction to hear any claims against
\n
the defendant banks domiciled outside of the Netherlands, including claims brought on
\n
behalf of the parties represented by the claimant that are domiciled in the Netherlands.
\n
In September 2023, second summonses were served by Stichting FX Claims on NWM
\n
N.V., NatWest Group plc and NWM Plc, for claims on behalf of a new group of parties
\n
that have now been brought before the district court in Amsterdam. The summonses
\n
seek declarations from the Dutch court concerning liability for anti-competitive FX
\n
market conduct described in the above referenced decisions of the EC of 16 May 2019
\n
and 2 December 2021, along with unspecified damages.
\n
Certain other foreign exchange transaction related claims have been or may be
\n
threatened. NatWest Group cannot predict whether all or any of these claims will be
\n
pursued.
\n
\n\n\n\n
\n\n
\n
Government securities antitrust litigation
\n
NWMSI and certain other US broker-dealers are defendants in a consolidated antitrust
\n
class action in the SDNY on behalf of persons who transacted in US Treasury securities
\n
or derivatives based on such instruments, including futures and options. The plaintiffs
\n
allege that the defendants rigged the US Treasury securities auction bidding process to
\n
deflate prices at which they bought such securities and colluded to increase the prices at
\n
which they sold such securities to the plaintiffs. In March 2022, the SDNY dismissed the
\n
complaint, without leave to re-plead. In February 2024, the US Court of Appeals affirmed
\n
the SDNY\u2019s decision dismissing the complaint.
\n
Class action antitrust claims commenced in March 2019 are pending in the SDNY
\n
against NWM Plc, NWMSI and other banks in respect of Euro-denominated bonds issued
\n
by various European central banks (European government bonds or EGBs). The
\n
complaint alleges a conspiracy among dealers of EGBs to widen the bid-ask spreads they
\n
quoted to customers, thereby increasing the prices customers paid for the EGBs or
\n
decreasing the prices at which customers sold EGBs. The class consists of those who
\n
purchased or sold EGBs in the US between 2007 and 2012. Previously, in March 2022,
\n
the SDNY dismissed the claims against NWM Plc and NWMSI on the ground that the
\n
complaint\u2019s conspiracy allegations were insufficient. However, in September 2023, the
\n
SDNY ruled that new allegations which plaintiffs have included in an amended complaint
\n
are sufficient to bring those NatWest entities back into the case as defendants.
\n
Swaps antitrust litigation
\n
NWM Plc and other members of NatWest Group, including NatWest Group plc, as well as
\n
a number of other interest rate swap dealers, are defendants in several cases pending in
\n
the SDNY alleging violations of the US antitrust laws in the market for interest rate
\n
swaps. There is a consolidated class action complaint on behalf of persons who entered
\n
into interest rate swaps with the defendants, as well as non-class action claims by three
\n
swap execution facilities (TeraExchange, Javelin, and trueEx). The plaintiffs allege that
\n
the swap execution facilities would have successfully established exchange-like trading of
\n
interest rate swaps if the defendants had not unlawfully conspired to prevent that from
\n
happening through boycotts and other means. Discovery in these cases is complete. In
\n
December 2023, the SDNY denied the plaintiffs\u2019 motion for class certification. The
\n
plaintiffs have filed a petition requesting that the US Court of Appeals review the denial
\n
of class certification.
\n
In June 2021, a class action antitrust complaint was filed against a number of credit
\n
default swap dealers, in New Mexico federal court on behalf of persons who, from 2005
\n
onwards, settled credit default swaps in the United States by reference to the ISDA
\n
credit default swap auction protocol. The complaint alleges that the defendants
\n
conspired to manipulate that benchmark through various means in violation of the
\n
antitrust laws and the Commodity Exchange Act. The defendants filed a motion to
\n
dismiss the complaint and, in June 2023, such motion was denied as regards NWMSI and
\n
other financial institutions, but granted as regards to NWM Plc on the ground that the
\n
court lacks jurisdiction over that entity. As a result, the case entered the discovery phase
\n
as against the non-dismissed defendants. In January 2024, the SDNY issued an order
\n
barring the plaintiffs in the New Mexico case from pursuing claims based on conduct
\n
occurring before 30 June 2014 on the ground that such claims were extinguished by a
\n
2015 settlement agreement that resolved a prior class action relating to credit default
\n
swaps.
\n
O
O
dd lot corporate bond trading antitrust litigation
\n
In October 2021, the SDNY granted the defendants\u2019 motion to dismiss the class action
\n
antitrust complaint alleging that from August 2006 onwards various securities dealers,
\n
including NWMSI, conspired artificially to widen spreads for odd lots of corporate bonds
\n
bought or sold in the United States secondary market and to boycott electronic trading
\n
platforms that would have allegedly promoted pricing competition in the market for such
\n
bonds. The plaintiffs have filed an appeal.
\n
Spoofing litigation
\n
In December 2021, three substantially similar class actions complaints were filed in
\n
federal court in the United States against NWM Plc and NWMSI alleging Commodity
\n
Exchange Act and common law unjust enrichment claims arising from manipulative
\n
trading known as spoofing. The complaints refer to NWM Plc\u2019s December 2021 spoofing-
\n
related guilty plea (described below under \u201cUS investigations relating to fixed-income
\n
securities\u201d) and purport to assert claims on behalf of those who transacted in US
\n
Treasury securities and futures and options on US Treasury securities between 2008 and
\n
2018. In July 2022, defendants filed a motion to dismiss these claims, which have been
\n
consolidated into one matter in the United States District Court for the Northern District
\n
of Illinois.
\n
Madoff
\n
NWM N.V. was named as a defendant in two actions filed by the trustee for the bankrupt
\n
estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, in
\n
bankruptcy court in New York, which together seek to clawback more than US$298
\n
million that NWM N.V. allegedly received from certain Madoff feeder funds and certain
\n
swap counterparties. The claims were previously dismissed, but as a result of an August
\n
2021 decision by the US Court of Appeals, they will now proceed in the bankruptcy
\n
court, where they have been consolidated into one action, subject to NWM N.V.\u2019s legal
\n
and factual defences. In May 2022, NWM N.V. filed a motion to dismiss the amended
\n
complaint in the consolidated action and such motion was denied in March 2023. As a
\n
result, the case has now entered the discovery phase.
\n
EUA trading litigation
\n
NWM Plc was a named defendant in civil proceedings before the High Court of Justice of
\n
England and Wales brought in 2015 by ten
companies (all in liquidation) (the \u2018Liquidated
\n
Companies\u2019) and their respective liquidators (together, \u2018the Claimants\u2019). The Liquidated
\n
Companies previously traded in European Union Allowances (EUAs) in 2009 and were
\n
alleged to be VAT defaulting traders within (or otherwise connected to) EUA supply
\n
chains of which NWM Plc was a party. In March 2020, the court held that NWM Plc and
\n
Mercuria Energy Europe Trading Limited (\u2018Mercuria\u2019) were liable for dishonestly assisting
\n
and knowingly being a party to fraudulent trading during a seven business day period in
\n
2009.
\n
\n\n\n\n
\n\n
\n
In October 2020, the High Court quantified total damages against NWM Plc and
\n
Mercuria at \u00a345 million plus interest and costs, and permitted the defendants to appeal
\n
to the Court of Appeal. In May 2021 the Court of Appeal set aside the High Court\u2019s
\n
judgment and ordered that a retrial take place before a different High Court judge. In
\n
January 2024, NWM Plc entered into an agreement to resolve the claim against it. The
\n
settlement amount paid by NWM Plc was covered in full by an existing provision.
\n
Offshoring VAT assessments
\n
HMRC issued protective tax assessments in 2018 against NatWest Group plc totalling
\n
\u00a3143 million relating to unpaid VAT in respect of the UK branches of two NatWest Group
\n
companies registered in India. NatWest Group formally requested reconsideration by
\n
HMRC of their assessments, and this process was completed in November 2020. HMRC
\n
upheld their original decision and, as a result, NatWest Group plc lodged an appeal with
\n
the Tax Tribunal and an application for judicial review with the High Court of Justice of
\n
England and Wales, both in December 2020. In order to lodge the appeal with the Tax
\n
Tribunal, NatWest Group plc was required to pay \u00a3143 million to HMRC, and payment
\n
was made in December 2020. The appeal and the application for judicial review have
\n
both been stayed pending resolution of separate cases involving other banks.
\n
US Anti-Terrorism Act litigation
\n
NWM N.V. and certain other financial institutions are defendants in several actions filed
\n
by a number of US nationals (or their estates, survivors, or heirs), most of whom are or
\n
were US military personnel, who were killed or injured in attacks in Iraq between 2003
\n
and 2011. NWM Plc is also a defendant in some of these cases.
\n
According to the plaintiffs\u2019 allegations, the defendants are liable for damages arising from
\n
the attacks because they allegedly conspired with and/or aided and abetted Iran and
\n
certain Iranian banks to assist Iran in transferring money to Hezbollah and the Iraqi
\n
terror cells that committed the attacks, in violation of the US Anti-Terrorism Act, by
\n
agreeing to engage in \u2018stripping\u2019 of transactions initiated by the Iranian banks so that the
\n
Iranian nexus to the transactions would not be detected.
\n
The first of these actions, alleging conspiracy claims but not aiding and abetting claims,
\n
was filed in the United States District Court for the Eastern District of New York in
\n
November 2014. In September 2019, the district court dismissed the case, finding that
\n
the claims were deficient for several reasons, including lack of sufficient allegations as to
\n
the alleged conspiracy and causation. In January 2023, the US Court of Appeals affirmed
\n
the district court\u2019s dismissal of this case. The plaintiffs filed a petition with the United
\n
States Supreme Court seeking review of the dismissal of their claims and that petition
\n
was denied in October 2023. It is anticipated that the plaintiffs will file a motion to re-
\n
open the case to assert aiding and abetting claims that they previously did not assert.
\n
Another action, filed in the SDNY in 2017, which asserted both conspiracy and aiding
\n
and abetting claims, was dismissed by the SDNY in March 2019 on similar grounds as
\n
the first case, but remains subject to appeal to the US Court of Appeals. Other follow-on
\n
actions that are substantially similar to those described above are pending in the same
\n
courts.
\n
1
1
MDB litigation
\n
A Malaysian court claim was served in Switzerland in November 2022 by 1MDB, a
\n
Sovereign Wealth Fund, in which Coutts & Co Ltd was named, along with six others, as a
\n
defendant in respect of losses allegedly incurred by 1MDB. It is claimed that Coutts & Co
\n
Ltd is liable as a constructive trustee for having dishonestly assisted the directors of
\n
1MDB in the breach of their fiduciary duties by failing (amongst other alleged claims) to
\n
undertake due diligence in relation to a customer of Coutts & Co Ltd, through which
\n
funds totalling c.US$1 billion were received and paid out between 2009 and 2011. The
\n
claimant seeks the return of that amount plus interest. Coutts & Co Ltd filed an
\n
application in January 2023 challenging the validity of service and the Malaysian court\u2019s
\n
jurisdiction to hear the claim. Before that application was heard, in April 2023, the
\n
claimant filed a notice of discontinuance of its claim against certain defendants including
\n
Coutts & Co Ltd. The claimant subsequently indicated that it intended to issue further
\n
replacement proceedings. Coutts & Co Ltd challenged the claimant\u2019s ability to take that
\n
step. In August 2023, the court disallowed the discontinuation of the claim by the
\n
claimant (a decision that the claimant has appealed) and directed that the application by
\n
Coutts & Co Ltd challenging the validity of the proceedings should proceed to a hearing,
\n
which took place in February 2024. Judgment is awaited.
\n
Coutts & Co Ltd (a subsidiary of RBS Netherlands Holdings B.V., which in turn is a
\n
subsidiary of NWM Plc) is a company registered in Switzerland and is in wind-down
\n
following the announced sale of its business assets in 2015.
\n
Regulatory matters (including investigations and customer redress programmes)
\n
NatWest Group\u2019s businesses and financial condition can be affected by the actions of
\n
various governmental and regulatory authorities in the UK, the US, the EU and
\n
elsewhere. NatWest Group has engaged, and will continue to engage, in discussions with
\n
relevant governmental and regulatory authorities, including in the UK, the US, the EU
\n
and elsewhere, on an ongoing and regular basis, and in response to informal and formal
\n
inquiries or investigations, regarding operational, systems and control evaluations and
\n
issues including those related to compliance with applicable laws and regulations,
\n
including consumer protection, investment advice, business conduct, competition/anti-
\n
trust, VAT recovery, anti-bribery, anti-money laundering and sanctions regimes.
\n
NatWest Group expects government and regulatory intervention in financial services to
\n
be high for the foreseeable future, including increased scrutiny from competition and
\n
other regulators in the retail and SME business sectors.
\n
Any matters discussed or identified during such discussions and inquiries may result in,
\n
among other things, further inquiry or investigation, other action being taken by
\n
governmental and regulatory authorities, increased costs being incurred by NatWest
\n
Group, remediation of systems and controls, public or private censure, restriction of
\n
NatWest Group\u2019s business activities and/or fines. Any of the events or circumstances
\n
mentioned in this paragraph or below could have a material adverse effect on NatWest
\n
Group, its business, authorisations and licences, reputation, results of operations or the
\n
price of securities issued by it, or lead to material additional provisions being taken.
\n
NatWest Group is co-operating fully with the matters described below.
\n
\n\n\n\n
\n\n
\n
US investigations relating to fixed-income securities
\n
In December 2021, NWM Plc pled guilty in the United States District Court for the District
\n
of Connecticut to one count of wire fraud and one count of securities fraud in connection
\n
with historical spoofing conduct by former employees in US Treasuries markets between
\n
January 2008 and May 2014 and, separately, during approximately three months in
\n
2018. The 2018 trading occurred during the term of a non-prosecution agreement (NPA)
\n
between NWMSI and the United States Attorney's Office for the District of Connecticut
\n
(USAO CT), under which non-prosecution was conditioned on NWMSI and affiliated
\n
companies not engaging in criminal conduct during the term of the NPA. The relevant
\n
trading in 2018 was conducted by two NWM traders in Singapore and breached that
\n
NPA. The plea agreement reached with the US Department of Justice and the USAO CT
\n
resolved both the spoofing conduct and the breach of the NPA.
\n
As required by the resolution and sentence imposed by the court, NWM Plc is subject to
\n
a three-year period of probation scheduled to end in December 2024. The plea
\n
agreement also imposes an independent corporate monitor. In addition, NWM Plc has
\n
committed to compliance programme reviews and improvements and agreed to
\n
reporting and co-operation obligations.
\n
Other material adverse collateral consequences may occur as a result of this matter, as
\n
further described in the Risk Factor relating to legal, regulatory and governmental
\n
actions and investigations set out on pages 43
9
to 44
1
.
\n
RBSI inspection report and referral to enforcement
\n
Following an inspection by the Isle of Man Financial Services Authority (IOMFSA) in 2021
\n
into The Royal Bank of Scotland International Limited\u2019s (RBSI\u2019s) compliance with the
\n
Financial Services Rule Book 2016, the Anti-Money Laundering and Countering the
\n
Financing of Terrorism Code 2015 (the \u201c2015 Code\u201d) and the Anti-Money Laundering
\n
and Countering the Financing of Terrorism Code 2019, RBSI and the IOMFSA entered
\n
into a settlement agreement in February 2024 with an agreed public statement that RBSI
\n
had contravened paragraph 7 of the 2015 Code. RBSI did not complete its updated
\n
Customer Risk Assessment process following the introduction of the 2015 Code until
\n
2018, resulting in 2,239 non-personal customers (on-boarded to its Isle of Man branches
\n
between 2015 and 2018, and not rated as high risk) being on-boarded using Customer
\n
Risk Assessments in line with earlier legislation. This constituted less than 3% of the total
\n
customer population of the Isle of Man branches. RBSI was fined \u00a31.0 million (after a
\n
discount for co-operation), which was covered in full by an existing provision.
\n
RBSI reliance regime and referral to enforcement
\n
In January 2023, the Jersey Financial Services Commission notified RBSI that it had been
\n
referred to its Enforcement Division in relation to RBSI\u2019s operation of the reliance regime.
\n
The reliance regime is specific to certain Crown Dependencies and enables the bank to
\n
rely on regulated third parties for specific due diligence information.
\n
I
I
nvestment advice review
\n
In October 2019, the FCA notified NatWest Group of its intention to appoint a Skilled
\n
Person under section 166 of the Financial Services and Markets Act 2000 to conduct a
\n
review of whether NatWest Group\u2019s past business review of investment advice provided
\n
during 2010 to 2015 was subject to appropriate governance and accountability and led
\n
to appropriate customer outcomes. The Skilled Person\u2019s review has concluded and, after
\n
discussion with the FCA, NatWest Group is undertaking additional review / remediation
\n
work.
\n
Reviews into customer account closures
\n
In July 2023, NatWest Group plc commissioned an independent review by the law firm
\n
Travers Smith LLP into issues that had arisen from treatment of a customer in
\n
connection with an account closure decision that attracted significant public attention
\n
and certain related interactions with the media. NatWest Group plc has received reports
\n
in connection with that review (and in October and December 2023 published summaries
\n
of the key findings and recommendations).
\n
In addition, NatWest Group plc is conducting internal reviews with respect to certain
\n
governance processes, policies, systems and controls of NatWest Group entities,
\n
including with respect to customer account closures.
\n
The FCA is conducting supervisory work into how the governance, systems and controls
\n
of NatWest Group and Coutts & Company are working, to identify and address any
\n
significant shortcomings.
\n
Review and investigation of treatment of tracker mortgage customers in Ulster Bank
\n
Ireland DAC
\n
In December 2015, correspondence was received from the Central Bank of Ireland
\n
setting out an industry examination framework in respect of the sale of tracker
\n
mortgages from approximately 2001 until the end of 2015. The redress and
\n
compensation process has now largely concluded, although certain cases remain
\n
outstanding.
\n
UBIDAC customers have lodged tracker mortgage complaints with the Financial Services
\n
and Pensions Ombudsman (FSPO). UBIDAC challenged three FSPO adjudications in the
\n
Irish High Court. In June 2023, the High Court found in favour of the FSPO in all matters
\n
and a provision was recognised. UBIDAC was granted leave to appeal that decision and
\n
an appeal hearing has been scheduled to take place in the Court of Appeal.
\n
Other customer remediation in Ulster Bank Ireland DAC
\n
UBIDAC has identified other legacy issues leading to the establishment of remediation
\nrequirements and progress is ongoing to conclude activities.", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f104240": { "value": "27 Non-cash and other items
This note shows non-cash items adjusted for in the cash flow statement and movement in operating assets and liabilities.
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Impairment losses/(releases)
572
266
(1,335)
Depreciation and amortisation
934
833
923
Change in fair value taken to profit or loss of other financial assets
(584)
1,267
1,771
Change in fair value taken to profit or loss on other financial liabilities and subordinated liabilities
831
(2,400)
(1,083)
Foreign exchange recycling (gains)/losses
(484)
(5)
10
Elimination of foreign exchange differences
312
10
2,446
Income receivable on other financial assets
(1,415)
(585)
(378)
Loss/(profit) on sale of other financial assets
44
172
(118)
Profit on sale of subsidiaries and associates
-
-
(48)
Share of loss/(profit) of associates
9
30
(216)
Loss on sale of other assets and net assets and liabilities
125
154
23
Interest payable on MRELs and subordinated liabilities
1,352
1,103
964
(Gain)/loss on redemption of own debt
(3)
161
145
Charges and releases on provisions
313
248
478
Change in fair value of cash flow hedges
1,021
(304)
(161)
Other non-cash items
59
48
(13)
Defined benefit pension schemes
122
205
215
Non-cash and other items
3,208
1,203
3,623
Change in operating assets and liabilities
\u00a0 \u00a0 \u00a0
Change in trading assets
327
14,991
7,751
Change in derivative assets
20,826
3,621
59,697
Change in settlement balance assets
(4,659)
(431)
156
Change in loans to banks
752
(202)
(252)
Change in loans to customers
(15,626)
(7,628)
2,721
Change in other financial assets
132
(328)
(128)
Change in other assets
(213)
(255)
(57)
Change in assets of disposal groups
412
(4,117)
(9,015)
Change in bank deposits
1,749
(5,838)
5,673
Change in customer deposits
(18,964)
(29,492)
48,071
Change in settlement balance liabilities
4,633
(56)
(350)
Change in trading liabilities
828
(11,790)
(7,658)
Change in derivative liabilities
(21,652)
(6,788)
(59,870)
Change in other financial liabilities
6,564
989
938
Change in notes in circulation
19
171
392
Change in other liabilities
(807)
(1,294)
(1,463)
Change in operating assets and liabilities
(25,679)
(48,447)
46,606
\n29 Analysis of changes in financing during the year
This note shows cash flows and non-cash movements relating to the financing activities of the Group. These activities reflect movements in share capital, share
premium, paid-in equity, subordinated liabilities and MRELs.
\u00a0
Share capital, share premium,
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
\u00a0 \u00a0
and paid-in equity
\u00a0
Subordinated liabilities
MRELs
\u00a0
2023
2022
2021
2023
2022
2021
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
15,590
16,519
18,239
6,260
8,429
9,962
22,265
23,423
20,873
Issue of paid-in equity
-
-
937
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Issue of subordinated liabilities
\u00a0 \u00a0 \u00a0
611
648
1,634
\u00a0 \u00a0 \u00a0
Issue of MRELs
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
3,973
3,721
3,383
Redemption of subordinated liabilities
\u00a0 \u00a0 \u00a0
(1,250)
(3,693)
(4,765)
\u00a0 \u00a0 \u00a0
Interest paid on subordinated liabilities
\u00a0 \u00a0 \u00a0
(439)
(374)
(321)
\u00a0 \u00a0 \u00a0
Maturity and redemption of MRELs
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
(4,236)
(4,992)
-
Interest paid on MRELs
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
(844)
(703)
(647)
Net cash flows from financing activities
-
-
937
(1,078)
(3,419)
(3,452)
(1,107)
(1,974)
2,736
Ordinary shares issued
-
-
87
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Shares repurchased
(856)
(929)
(698)
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Effects of foreign exchange
\u00a0 \u00a0 \u00a0
(166)
597
(18)
(987)
1,889
(190)
Changes in fair value of subordinated liabilities and MRELs
\u00a0 \u00a0 \u00a0
230
(594)
(434)
601
(1,806)
(649)
Preference shares reclassified to subordinated liabilities
\u00a0 \u00a0 \u00a0
-
750
-
\u00a0 \u00a0 \u00a0
Paid-in equity reclassified to subordinated liabilities
-
-
(2,046)
-
-
1,915
\u00a0 \u00a0 \u00a0
(Gain)/loss on redemption of own debt
\u00a0 \u00a0 \u00a0
(3)
161
145
\u00a0
-
-
Interest payable on subordinated liabilities and MRELs
\u00a0 \u00a0 \u00a0
464
370
311
888
733
653
Other
-
-
-
7
(34)
-
-
-
-
At 31 December
14,734
15,590
16,519
5,714
6,260
8,429
21,660
22,265
23,423
30 Analysis of cash and cash equivalents
Non-cash and other add back items and movements in operating assets and liabilities are adjusted for in the cash flow statement. Loans to banks and treasury bills with
an original maturity of less than three months that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
104,262
144,832
177,757
Trading assets
8,851
8,551
7,137
Other financial assets
139
19
16
Loans to banks
(1)
5,572
5,047
5,796
Cash and cash equivalents
118,824
158,449
190,706
\n
(1)
Includes cash collateral posted with bank counterparties in respect of derivative liabilities of \u00a34,434 million (2022 - \u00a34,895 million; 2021 - \u00a34,293 million).
Certain members of NatWest Group are required by law or regulation to maintain balances with the central banks in the jurisdictions in which they operate. NatWest Markets N.V.
had
mandatory reserve deposits with
De Nederlandsche Bank N.V.
of \u20ac132 million (2022 - \u20ac64 million, 2021 - \u20ac60 million).
The Royal Bank of Scotland International Limited had balances
with Central Bank of Luxembourg of \u00a3135 million (2022 - \u00a3108 million, 2021 - \u00a3123 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f104610": { "value": "28 Analysis of the net investment in business interests and intangible assets
This note shows cash flows relating to obtaining or losing control of associates or subsidiaries and net assets and liabilities purchased and sold.
These cash flows are presented as investing activities on the cash flow statement.
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Fair value given for business acquired
(139)
-
-
Acquisition of interest in associates
-
(1)
-
Additional investment in associates
(5)
-
(51)
Net assets and liabilities purchased
-
-
(3,128)
Net outflow of cash in respect of acquisitions
(144)
(1)
(3,179)
Disposal of net assets and liabilities
5,560
6,270
114
(Loss)/profit on disposal of net assets and liabilities
(87)
(106)
55
Net inflow of cash in respect of disposals
5,473
6,164
169
Dividends received from associate
16
-
-
Net cash expenditure on intangible assets
(744)
(743)
(479)
Net inflow/(outflow) of cash
4,601
5,420
(3,489)
\n", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f105196": { "value": "30 Analysis of cash and cash equivalents
Non-cash and other add back items and movements in operating assets and liabilities are adjusted for in the cash flow statement. Loans to banks and treasury bills with
an original maturity of less than three months that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
104,262
144,832
177,757
Trading assets
8,851
8,551
7,137
Other financial assets
139
19
16
Loans to banks
(1)
5,572
5,047
5,796
Cash and cash equivalents
118,824
158,449
190,706
\n
(1)
Includes cash collateral posted with bank counterparties in respect of derivative liabilities of \u00a34,434 million (2022 - \u00a34,895 million; 2021 - \u00a34,293 million).
Certain members of NatWest Group are required by law or regulation to maintain balances with the central banks in the jurisdictions in which they operate. NatWest Markets N.V.
had
mandatory reserve deposits with
De Nederlandsche Bank N.V.
of \u20ac132 million (2022 - \u20ac64 million, 2021 - \u20ac60 million).
The Royal Bank of Scotland International Limited had balances
with Central Bank of Luxembourg of \u00a3135 million (2022 - \u00a3108 million, 2021 - \u00a3123 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f105197": { "value": "30 Analysis of cash and cash equivalents
Non-cash and other add back items and movements in operating assets and liabilities are adjusted for in the cash flow statement. Loans to banks and treasury bills with
an original maturity of less than three months that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
104,262
144,832
177,757
Trading assets
8,851
8,551
7,137
Other financial assets
139
19
16
Loans to banks
(1)
5,572
5,047
5,796
Cash and cash equivalents
118,824
158,449
190,706
\n
(1)
Includes cash collateral posted with bank counterparties in respect of derivative liabilities of \u00a34,434 million (2022 - \u00a34,895 million; 2021 - \u00a34,293 million).
Certain members of NatWest Group are required by law or regulation to maintain balances with the central banks in the jurisdictions in which they operate. NatWest Markets N.V.
had
mandatory reserve deposits with
De Nederlandsche Bank N.V.
of \u20ac132 million (2022 - \u20ac64 million, 2021 - \u20ac60 million).
The Royal Bank of Scotland International Limited had balances
with Central Bank of Luxembourg of \u00a3135 million (2022 - \u00a3108 million, 2021 - \u00a3123 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndBankBalancesAtCentralBanksExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f105198": { "value": "30 Analysis of cash and cash equivalents
Non-cash and other add back items and movements in operating assets and liabilities are adjusted for in the cash flow statement. Loans to banks and treasury bills with
an original maturity of less than three months that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.
\u00a0
2023
2022
2021
\u00a0
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks
104,262
144,832
177,757
Trading assets
8,851
8,551
7,137
Other financial assets
139
19
16
Loans to banks
(1)
5,572
5,047
5,796
Cash and cash equivalents
118,824
158,449
190,706
\n
(1)
Includes cash collateral posted with bank counterparties in respect of derivative liabilities of \u00a34,434 million (2022 - \u00a34,895 million; 2021 - \u00a34,293 million).
Certain members of NatWest Group are required by law or regulation to maintain balances with the central banks in the jurisdictions in which they operate. NatWest Markets N.V.
had
mandatory reserve deposits with
De Nederlandsche Bank N.V.
of \u20ac132 million (2022 - \u20ac64 million, 2021 - \u20ac60 million).
The Royal Bank of Scotland International Limited had balances
with Central Bank of Luxembourg of \u00a3135 million (2022 - \u00a3108 million, 2021 - \u00a3123 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfRestrictedCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f105307": { "value": "31 Directors\u2019 and key management remuneration
Directors and key management are remunerated for services rendered in the
period. The executive directors may participate in the company's long-term
incentive plans, executive share option and sharesave schemes and details of
their interests in the company's shares arising from their participation are
given in the directors' remuneration report. Details of the remuneration
received by each director are also given in the directors' remuneration report.
Key management comprises members of the NatWest Group plc and NWH Ltd Boards,
members of the NatWest Group plc and NWH Ltd Executive Committees, and the Chief
Executives of NatWest Markets Plc and RBS International (Holdings) Limited. This is on
the basis that these individuals have been identified as Persons Discharging Managerial
Responsibilities of NatWest Group plc under the new governance structure.
\u00a0
2023
2022
Directors' remuneration
\u00a3000
\u00a3000
Non-executive directors emoluments
1,574
1,685
Chairman and executive directors emoluments
6,408
5,804
\u00a0
7,982
7,489
Amounts receivable under long-term incentive plans
\u00a0 \u00a0
and share option plans
2,708
542
Total
10,690
8,031
\n
Compensation of key management
The aggregate remuneration of directors and other members of key management during
the year was as follows:
\u00a0
2023
2022
\u00a0
\u00a3000
\u00a3000
Short-term benefits
21,098
22,175
Post-employment benefits
741
732
Share-based payments
7,264
2,547
\u00a0
29,103
25,454
\n
Short term benefits include benefits expected to be settled wholly within twelve months
of balance sheet date. Post-employment benefits include defined benefit contributions for
active members and pension funding to support contributions to the defined contribution
schemes. Share-based payments include awards vested under rewards schemes.
32 Transactions with directors and key management
This note presents information relating to any transactions with directors and
key management. Key management comprises directors of the company and
Persons Discharging Managerial Responsibilities (PDMRs) of NatWest Group
plc.
For the purposes of IAS 24 Related party disclosures, key management comprises
directors of the company and PDMRs of NatWest Group plc. Key management have
banking relationships with NatWest Group entities which are entered into in the normal
course of business and on substantially the same terms, including interest rates and
security, as for comparable transactions with other persons of a similar standing or,
where applicable, with other employees. These transactions did not involve more than
the normal risk of repayment or present other unfavourable features.
Amounts in the table below are attributed to each person at their highest level of
NatWest Group key management, and relate to those who were key management at
any time during the financial period.
\u00a0
At 31 December
\u00a0
2023
2022
\u00a0
\u00a3000
\u00a3000
Loans to customers - amortised cost
11,406
12,137
Customer deposits
55,254
47,866
\n
At 31 December 2023, amounts outstanding in relation to transactions, arrangements
and agreements entered into by authorised institutions in NatWest Group, as defined in
UK legislation, were \u00a38,397,763 in respect of loans to 9 persons who were directors of
the company at any time during the financial period.", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f105527": { "value": "A related party is a person or entity that is related to the entity that is preparing its financial statements. This includes subsidiaries, associates, joint ventures, post-
employment benefits plans, Key management personnel and their close family members and entities controlled by them. Transactions between an entity and any
related party are disclosed in the financial statements in accordance with both accounting standards and relevant listing rules to ensure readers are aware of how
financial statements may be affected by these transactions.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTransactionsWithRelatedPartiesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f105578": { "value": "Associates, joint ventures (JVs) and equity investments
In their roles as
of finance, NatWest Group companies provide
providers
development
capital support
investments
of
businesses.
types
other
to
are made in the
These
and
of
course
NatWest
normal
partnerships,
strategic
Group
further
To
may
business.
seek
in
to invest
hold
of
subsidiary
a
in
third
interest
minority
a
to
parties
third
allow
or
parties
disclose
We
Group.
NatWest
and
ventures
joint
and
associates
for
parties
related
as
where equity interest are over 10%. Ongoing business transactions with these entities
are on normal commercial terms.
Amounts included in the NatWest Group financial statements, in aggregate, by category
of related party are as follows:
\u00a0
Associates and Joint
Equity
\u00a0
\u00a0
Ventures
Shares (1)
Total
31 December 2023
\u00a3m
\u00a3m
\u00a3m
Investments
668
145
813
Loans to customers - amortised cost
-
13
13
Customer deposits
2
10
12
Settlement balances
-
-
-
Other comprehensive income
-
(8)
(8)
Other operating income
(11)
-
(11)
31 December 2022
\u00a0\u00a0\u00a0
Investments
688
149
837
Loans to customers - amortised cost
-
-
-
Customer deposits
1
4
5
Settlement balances
-
34
34
Other comprehensive income
-
11
11
Other operating income
(30)
-
(30)
\n
(1)
Represents investments in entities where ownership is more than 10%", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f105579": { "value": "Associates, joint ventures (JVs) and equity investments
In their roles as
of finance, NatWest Group companies provide
providers
development
capital support
investments
of
businesses.
types
other
to
are made in the
These
and
of
course
NatWest
normal
partnerships,
strategic
Group
further
To
may
business.
seek
in
to invest
hold
of
subsidiary
a
in
third
interest
minority
a
to
parties
third
allow
or
parties
disclose
We
Group.
NatWest
and
ventures
joint
and
associates
for
parties
related
as
where equity interest are over 10%. Ongoing business transactions with these entities
are on normal commercial terms.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f105580": { "value": "Associates, joint ventures (JVs) and equity investments
In their roles as
of finance, NatWest Group companies provide
providers
development
capital support
investments
of
businesses.
types
other
to
are made in the
These
and
of
course
NatWest
normal
partnerships,
strategic
Group
further
To
may
business.
seek
in
to invest
hold
of
subsidiary
a
in
third
interest
minority
a
to
parties
third
allow
or
parties
disclose
We
Group.
NatWest
and
ventures
joint
and
associates
for
parties
related
as
where equity interest are over 10%. Ongoing business transactions with these entities
are on normal commercial terms.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f105581": { "value": "Associates, joint ventures (JVs) and equity investments
In their roles as
of finance, NatWest Group companies provide
providers
development
capital support
investments
of
businesses.
types
other
to
are made in the
These
and
of
course
NatWest
normal
partnerships,
strategic
Group
further
To
may
business.
seek
in
to invest
hold
of
subsidiary
a
in
third
interest
minority
a
to
parties
third
allow
or
parties
disclose
We
Group.
NatWest
and
ventures
joint
and
associates
for
parties
related
as
where equity interest are over 10%. Ongoing business transactions with these entities
are on normal commercial terms.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsInJointVentures", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f105876": { "value": "34 Post balance sheet events
A post balance sheet event is an event that takes place between the reporting
date and the date of approval of the financial statements. Significant events
are included in the financial statements either to provide new information
about conditions that existed at 31 December 2023 (reporting date), including
estimates used to prepare the financial statements (known as an adjusting
event) or to provide new information about conditions that did not exist at 31
December 2023 (non-adjusting events). This note provides information relating
to material non-adjusting events.
As part of the ongoing on-market share buyback programme, NatWest Group plc has
repurchased and cancelled a further 63.9 million shares since December 2023 for a total
consideration (excluding fees) of \u00a3136.9 million.
Other than as disclosed in the accounts, there have been no other significant events
subsequent to 31 December 2023 which would require a change or additional disclosure.", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f110011": { "value": "London", "dimensions": { "concept": "ifrs-full:PrincipalPlaceOfBusiness", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f118490": { "value": "36 St Andrew Square Edinburgh, EH2 2YB", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:2138005O9XJIJN4JPN90", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } } } }