TIDM83NF
RNS Number : 4915H
Natwest Markets PLC
28 July 2023
NatWest Markets Group
Interim Results 2023
NatWest Markets Plc ci.natwest.com
NatWest Markets Group (NWM Group)
Results for the half year ended 30 June 2023
Overview of the half year
In H1 2023, we have continued to focus on our strengths to
support our customers' evolving needs with financing and risk
solutions. Our improved connectivity as part of the NatWest Group
Commercial & Institutional segment is enabling us to unlock
further opportunities for growth and to build even deeper
relationships with NatWest Group customers.
Our business performance has been strong over the half year and
we have maintained our robust capital and liquidity position. We
continue to monitor the evolving economic outlook including the
continued rise in cost of living and are mindful of the impact that
rising inflation and higher interest rates are having on our
customers.
Financial review
NWM Group reported a loss of GBP148 million for H1 2023 compared
with a loss of GBP86 million in H1 2022. Total income of GBP430
million was down by GBP8 million compared with H1 2022, as a
stronger performance in Fixed Income was more than offset by lower
Currencies income and own credit adjustments. Operating expenses
decreased by GBP6 million to GBP534 million, driven by a decrease
in litigation and conduct costs partially offset by an increase in
other operating expenses.
Financial performance
- Total income was GBP430 million, a decrease of GBP8 million compared
with GBP438 million in H1 2022. Fixed Income performance was stronger
in the current period compared with H1 2022 which was impacted by
challenging market conditions. A weaker performance in the Currencies
business largely reflected lower levels of FX volatility. Own credit
adjustments of GBP9 million were down by GBP43 million compared
with H1 2022, a period in which credit spreads widened due to increased
market volatility.
- Operating expenses of GBP534 million in H1 2023 were GBP6 million
lower than GBP540 million in H1 2022. Litigation and conduct costs
of GBP8 million credit reflected ongoing progress in closing legacy
matters and were GBP28 million lower than GBP20 million in H1 2022.
Other operating expenses were up by GBP22 million to GBP542 million
in H1 2023, largely reflecting lower technology investment costs
recognised in the comparative period.
- NWM Group's total assets and liabilities increased by GBP0.7 billion
and GBP1.1 billion to GBP190.5 billion and GBP184.3 billion respectively
at 30 June 2023, compared with 31 December 2022. Increases in funded
assets including settlement balances and cash and balances at central
banks were offset by lower derivative fair values, largely driven
by market volatility across major currencies and increases in interest
rates.
Capital and leverage
- Total NWM Plc RWAs were GBP20.2 billion at 30 June 2023, compared
with GBP21.4 billion at 31 December 2022. The decrease in the period
was primarily due to lower market risk, mainly driven by reduction
in risk exposures and Value-at-Risk (VaR) multiplier, partially
offset by an increase in counterparty credit risk, reflecting the
call of a capital optimisation trade in Q2 2023.
- NWM Plc's Common Equity Tier 1 (CET1) ratio was 17.6% at 30 June
2023, compared with 17.2% at 31 December 2022. The increase in the
period was largely driven by the decrease in RWAs, partially offset
by reserve movements.
- NWM Plc's leverage ratio at 30 June 2023 was 5.4%, unchanged from
31 December 2022.
Liquidity and funding
- NWM Plc's liquidity portfolio at 30 June 2023 was GBP19.5 billion
with an LCR of 249% (31 December 2022 - GBP18.6 billion with LCR
253%).
- NWM Plc issued public benchmark transactions amounting to GBP2.1
billion in the six months ended 30 June 2023 versus guidance of
GBP3 billion to GBP5 billion for FY23. Transactions comprised three
issuances under our EMTN programme being EUR1.5 billion, CHF0.25
billion and GBP0.5 billion of notes respectively. NWM Plc also raised
funding in other formats throughout the period including, but not
limited to, structured note issuance.
ESG highlights
Climate and sustainable funding and financing have continued to
perform well, and as at the end of H1 2023 we had delivered GBP23.9
billion towards the NatWest Group climate and sustainable funding
and financing target(1) of GBP100 billion between 1 July 2021 and
the end of 2025.
(1) This comprises funding and financing for climate and
sustainable finance to support transition towards a net-zero and
climate-resilient economy. NatWest Group uses its climate and
sustainable funding and financing inclusion criteria (CSFFI
criteria) to determine the assets, activities and companies that
are eligible to be counted towards its climate and sustainable
funding and financing targets.
Outlook(1)
We retain the Outlook guidance provided in the NatWest Markets
Plc 2022 Annual Report and Accounts.
(1) The guidance, targets, expectations and trends discussed in
this section represent management's current expectations and are
subject to change, including as a result of the factors described
in the 'Risk Factors' section in the NatWest Markets Plc 2022
Annual Report and Accounts, and the 'Summary Risk Factors' in this
announcement. These statements constitute forward-looking
statements. Refer to 'Forward-looking statements' in this
announcement.
Financial review
The table below presents an analysis of key lines of NWM Group's
income statement for the half year ended 30 June 2023. Commentary
refers to the tables below as well as the consolidated income
statement shown on page 24.
Half year ended
-----------------
30 June 30 June
2023 2022
Income statement (1) GBPm GBPm
-------- -------
Net interest income 78 29
Non-interest income 352 409
---------------------------------------------------- -------- -------
Total income 430 438
---------------------------------------------------- -------- -------
Litigation and conduct costs 8 (20)
Other operating expenses (542) (520)
---------------------------------------------------- -------- -------
Operating expenses (534) (540)
Operating loss before impairment releases/losses (104) (102)
Impairment releases/(losses) 5 (5)
---------------------------------------------------- -------- -------
Operating loss before tax (99) (107)
Tax (charge)/credit (49) 21
---------------------------------------------------- -------- -------
Loss for the period (148) (86)
---------------------------------------------------- -------- -------
Income (2)
---------------------------------------------------- -------- -------
Fixed Income 105 23
Currencies 227 280
Capital Markets 218 217
Capital Management Unit & other (3) (29) (47)
---------------------------------------------------- -------- -------
Income including shared revenue before OCA 521 473
Revenue shared with or paid to fellow NatWest Group
subsidiaries (100) (87)
---------------------------------------------------- -------- -------
Income excluding OCA 421 386
Own credit adjustments (OCA) 9 52
---------------------------------------------------- -------- -------
Total income 430 438
---------------------------------------------------- -------- -------
(1) A presentational change was made in Q1 2023 whereby NWM Group no
longer separately reports the performance of the NatWest Markets
operating segment and Central items & other.
(2) Product performance includes gross income earned on a NatWest Group-wide
basis, including amounts contributed to other NatWest Group subsidiaries.
Income including shared revenue before OCA includes revenue share
from other NatWest Group subsidiaries but before revenue share is
paid to or contributed to those subsidiaries.
(3) Capital Management Unit was set up in Q3 2020 to manage capital
usage and optimisation across all parts of NatWest Markets, with
the income materially relating to legacy positions. Other mainly
related to asset disposal/strategic risk reduction costs that were
separately disclosed prior to Q1 2023.
- Net interest income was GBP78 million in H1 2023 compared with
GBP29 million in H1 2022. Net interest income largely represents
interest income from lending activity and capital hedges, offset by
interest expense from the funding costs of the business. The
movement compared with H1 2022 largely reflects growth in lending
activity.
- Non-interest income of GBP352 million in H1 2023 decreased by
GBP57 million compared with GBP409 million in H1 2022, driven by a
weaker performance in Currencies as FX volatility levels reduced in
the current period, in addition to a reduction of GBP43 million in
own credit adjustments compared with H1 2022, a period in which
credit spreads widened due to increased market volatility . This
was offset by a stronger Fixed Income performance in comparison to
H1 2022, a period which was impacted by challenging market
conditions.
- Operating expenses were GBP534 million in H1 2023, GBP6
million lower than GBP540 million in H1 2022. Litigation and
conduct costs of GBP8 million credit were down by GBP28 million
from GBP20 million in H1 2022 reflecting ongoing progress in
closing legacy matters. Other operating expenses increased to
GBP542 million in H1 2023 from GBP520 million in H1 2022, largely
reflecting lower technology investment costs recognised in the
comparative period.
- Tax charge of GBP49 million on the loss before tax of GBP99
million is higher than the expected UK corporation tax rate of
23.5%, primarily due to adjustments in respect of prior
periods.
Financial review
The table below presents an analysis of key lines of NWM Group's
income statement for the quarter ended 30 June 2023.
Quarter ended
--------------------------
30 June 31 March 30 June
2023 2023 2022
Income statement (1) GBPm GBPm GBPm
------------------------------------------------- ------- -------- -------
Net interest income 43 35 15
Non-interest income 122 230 204
------------------------------------------------- ------- -------- -------
Total income 165 265 219
------------------------------------------------- ------- -------- -------
Litigation and conduct costs 16 (8) (12)
Other operating expenses (265) (277) (237)
------------------------------------------------- ------- -------- -------
Operating expenses (249) (285) (249)
------------------------------------------------- ------- -------- -------
Operating loss before impairment releases/losses (84) (20) (30)
Impairment releases/(losses) 3 2 (4)
------------------------------------------------- ------- -------- -------
Operating loss before tax (81) (18) (34)
Tax (charge)/credit (57) 8 (12)
------------------------------------------------- ------- -------- -------
Loss for the period (138) (10) (46)
------------------------------------------------- ------- -------- -------
Income (2)
------------------------------------------------- ------- -------- -------
Fixed Income 35 70 38
Currencies 109 118 122
Capital Markets 107 111 96
Capital Management Unit & other (3) (37) 8 (23)
------------------------------------------------- ------- -------- -------
Income including shared revenue before OCA 214 307 233
Revenue shared with or paid to fellow NatWest
Group subsidiaries (52) (48) (48)
------------------------------------------------- ------- -------- -------
Income excluding OCA 162 259 185
Own credit adjustments (OCA) 3 6 34
------------------------------------------------- ------- -------- -------
Total income 165 265 219
------------------------------------------------- ------- -------- -------
(1) A presentational change was made in Q1 2023 whereby NWM Group no
longer separately reports the performance of the NatWest Markets
operating segment and Central items & other.
(2) Product performance includes gross income earned on a NatWest Group-wide
basis, including amounts contributed to other NatWest Group subsidiaries.
Income including shared revenue before OCA includes revenue share
from other NatWest Group subsidiaries but before revenue share is
paid to or contributed to those subsidiaries.
(3) Capital Management Unit was set up in Q3 2020 to manage capital
usage and optimisation across all parts of NatWest Markets, with
the income materially relating to legacy positions. Other mainly
related to asset disposal/strategic risk reduction costs that were
separately disclosed prior to Q1 2023.
* Net interest income was GBP43 million in Q2 2023,
compared with GBP35 million in Q1 2023 and GBP15
million in Q2 2022. Net interest income largely
represents interest income from lending activity and
capital hedges, offset by interest expense from the
funding costs of the business. The movement compared
with Q2 2022 largely reflects growth in lending
activity.
* Non-interest income of GBP122 million in Q2 2023
decreased by GBP108 million compared with GBP230
million Q1 2023 and by GBP82 million compared with
GBP204 million in Q2 2022. The decrease in Fixed
Income compared with the previous quarter was mainly
driven by challenging market conditions in the
current period. The decrease in Capital Management
Unit & other income levels in the current quarter
largely reflects fair value movements with regard to
legacy and funding positions.
* Operating expenses were GBP249 million in Q2 2023,
compared with GBP285 million in Q1 2023 and GBP249
million in Q2 2022. Litigation and conduct costs of
GBP16 million credit reflects the ongoing progress in
closing legacy matters and were GBP24 million lower
than GBP8 million in Q1 2023 and GBP28 million lower
than GBP12 million in Q2 2022. Other operating
expenses of GBP265 million in Q2 2023 were GBP12
million lower compared with GBP277 million in Q1 2023
but GBP28 million higher than GBP237 million in Q2
2022, largely reflecting lower technology investment
costs recognised in the comparative period.
* Tax charge of GBP57 million on the loss before tax of
GBP81 million is higher than the expected UK
corporation tax rate of 23.5%, primarily due to
adjustments in respect of prior periods.
Financial review
Balance sheet profile as at 30 June 2023
NWM Group's balance sheet profile is summarised below.
Commentary refers to the table below as well as the consolidated
balance sheet on page 25.
Assets Liabilities
------------------------------------------------- -------------------------------------------------
30 June 31 December 30 June 31 December
2023 2022 2023 2022
GBPbn GBPbn GBPbn GBPbn
Cash and balances at
central banks 21.3 17.0
--------------------------- ------- ----------- ------- ----------- ---------------------------
Securities 16.9 9.9 11.2 9.5 Short positions
Reverse repos (1) 21.3 21.5 27.8 23.7 Repos (2)
Derivative cash collateral Derivative cash collateral
given (3) 10.0 12.7 15.2 17.7 received (4)
Other trading assets 0.6 1.2 1.9 1.9 Other trading liabilities
--------------------------- ------- ----------- ------- ----------- ---------------------------
Total trading assets 48.8 45.3 56.1 52.8 Total trading liabilities
Deposits - amortised
Loans - amortised cost 11.1 11.3 11.7 6.7 cost
Settlement balances 11.6 2.6 10.0 2.0 Settlement balances
Amounts due from holding Amounts due to holding
company company
and fellow subsidiaries 1.3 0.7 6.4 6.2 and fellow subsidiaries
Other financial assets 12.9 11.9 22.5 21.1 Other financial liabilities
Other assets 0.7 0.8 0.5 0.8 Other liabilities
Liabilities excluding
Funded assets 107.7 89.6 107.2 89.6 derivatives
Derivative assets 82.8 100.2 77.1 93.6 Derivative liabilities
--------------------------- ------- ----------- ------- ----------- ---------------------------
Total assets 190.5 189.8 184.3 183.2 Total liabilities
------- ----------- ------- -----------
of which:
24.3 23.5 wholesale funding (5)
short-term wholesale
8.3 7.7 funding (5)
Net derivative assets Net derivative liabilities
(6) 2.5 3.5 5.5 5.6 (6)
--------------------------- ------- ----------- ------- ----------- ---------------------------
(1) Comprises bank reverse repos of GBP5.2 billion (31 December 2022
- GBP4.6 billion) and customer reverse repos of GBP16.1 billion
(31 December 2022 - GBP16.9 billion).
(2) Comprises bank repos of GBP3.0 billion (31 December 2022- GBP1.6
billion) and customer repos of GBP24.8 billion (31 December 2022
- GBP22.1 billion).
(3) Comprises derivative cash collateral given relating to banks of
GBP4.0 billion (31 December 2022 - GBP4.6 billion) and customers
of GBP6.0 billion (31 December 2022 - GBP8.1 billion).
(4) Comprises derivative cash collateral received relating to banks
of GBP6.9 billion (31 December 2022 - GBP7.5 billion) and customers
of GBP8.3 billion (31 December 2022 - GBP10.2 billion).
(5) Wholesale funding predominantly comprises bank deposits (excluding
repos), debt securities in issue and third party subordinated liabilities,
of which short-term wholesale funding is the amount with contractual
maturity of one year or less.
(6) Refer to page 13 for further details.
- Total assets and liabilities in creased by GBP0.7 billion and
GBP1.1 billion to GBP190.5 billion and GBP184.3 billion
respectively at 30 June 2023, compared with GBP189.8 billion and
GBP183.2 billion at 31 December 2022. Funded assets, which exclude
derivatives, increased by GBP18.1 billion to GBP107.7 billion.
Derivative fair values decreased in the period, largely driven by
market volatility across major currencies and increases in interest
rates.
- Cash and balances at central banks increased by GBP4.3 billion
to GBP21.3 billion at 30 June 2023, largely driven by an increase
in funding and customer deposits.
- Trading assets were up by GBP3.5 billion to GBP48.8 billion at
30 June 2023, largely reflecting an increase in securities
partially offset by a decrease in derivatives cash collateral
given. Trading liabilities increased by GBP3.3 billion to GBP56.1
billion, driven by increases in repos and short positions,
partially offset by a decrease in derivative cash collateral
received.
- Derivative assets and derivative liabilities were down by
GBP17.4 billion to GBP82.8 billion and GBP16.5 billion to GBP77.1
billion respectively at 30 June 2023, largely driven by market
volatility across major currencies and increases in interest
rates.
- Settlement balance assets and liabilities were up by GBP9.0
billion and GBP8.0 billion to GBP11.6 billion and GBP10.0 billion
respectively, largely due to increased trading compared with the
seasonally lower levels of customer activity leading up to 31
December 2022.
- Customer deposits increased by GBP5.4 billion to GBP9.0
billion in H1 2023, of which GBP4.2 billion occurred in Q2, in line
with our strategy to increase customer deposits to match planned
banking book asset growth.
- Other financial liabilities increased by GBP1.4 billion to
GBP22.5 billion (31 December 2022 - GBP21.1 billion), largely
driven by new issuance in the period, partially offset by
maturities. The balance at 30 June 2023 includes GBP16.4 billion of
medium-term notes issued.
- Owners' equity was down by GBP0.4 billion to GBP6.2 billion
(31 December 2022 - GBP6.6 billion), largely driven by reserve
movements in the period.
Non-IFRS measures
This document contains a number of non-IFRS measures. For
details of the basis of preparation and reconciliations, where
applicable, refer to the non-IFRS measures section on page
48.
Risk and capital management
Page
------------------------------------------------------------- -----
Market risk
------------------------------------------------------------- -----
One-day 99% traded internal VaR 6
------------------------------------------------------------- -----
Capital, liquidity and funding risk
------------------------------------------------------------- -----
Capital, RWAs and leverage 7
------------------------------------------------------------- -----
Capital resources 8
------------------------------------------------------------- -----
Leverage exposure 9
------------------------------------------------------------- -----
Liquidity portfolio 9
------------------------------------------------------------- -----
Funding sources 10
------------------------------------------------------------- -----
Senior notes and subordinated liabilities 11
------------------------------------------------------------- -----
Credit risk
------------------------------------------------------------- -----
Credit risk - Trading activities 12
------------------------------------------------------------- -----
Credit risk - Net credit exposures for banking and trading
activities 14
------------------------------------------------------------- -----
Credit risk - Economics 15
------------------------------------------------------------- -----
Credit risk - Banking activities 21
------------------------------------------------------------- -----
Certain disclosures in the Risk and capital management section
are within the scope of EY's review report and are marked as
reviewed in the section header.
Market risk (reviewed)
One-day 99% traded internal VaR
The table below shows one-day 99% internal VaR for the trading
portfolios of NWM Group, split by exposure type.
Half year ended
-------------------------------------------------------------------------------------------------------
30 June 2023 30 June 2022 31 December 2022
--------------------------------- --------------------------------- ---------------------------------
Period Period Period
Average Maximum Minimum end Average Maximum Minimum end Average Maximum Minimum end
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------- ------- ------- ------ ------- ------- ------- ------ ------- ------- ------- ------
Interest
rate 9.0 19.3 4.3 16.5 7.4 12.6 4.1 6.0 7.3 12.5 4.5 9.0
Credit spread 5.9 6.9 4.9 6.1 8.5 12.0 6.5 6.9 7.2 8.6 6.0 6.4
Currency 2.1 4.9 1.0 1.5 2.8 8.0 1.2 2.3 3.3 6.9 1.5 1.5
Equity - 0.1 - - 0.1 0.3 - - - 0.3 - -
Commodity - - - - - - - - - - - -
Diversification
(1) (6.8) (6.3) (8.3) (6.0) (7.0) (6.8)
---------------- ------- ------ ------- ------- ------- ------- ------
Total 10.2 17.8 6.6 17.8 10.5 15.1 7.2 9.2 10.8 13.7 8.3 10.1
---------------- ------- ------- ------- ------ ------- ------- ------- ------ ------- ------- ------- ------
(1) NWM Group benefits from diversification across various
financial instrument types, currencies and markets. The extent of
the diversification benefit depends on the correlation between the
assets and risk factors in the portfolio at a particular time. The
diversification factor is the sum of the VaR on individual risk
types less the total.
- On an average basis, total traded VaR remained at similar levels in H1 2023 compared to 2022.
- The increase in average interest rate VaR, compared to 2022,
reflected an increase in yield curve risk in sterling and euro flow
trading.
- The decrease in average credit spread VaR reflected lower credit spread volatility in H1 2023.
Risk and capital management
Capital, liquidity and funding risk
Introduction
NWM Group takes a comprehensive approach to the management of
capital, liquidity and funding, underpinned by frameworks, risk
appetite and policies, to manage and mitigate capital, liquidity
and funding risks. The framework ensures the tools and capability
are in place to facilitate the management and mitigation of risk
ensuring that NWM Group operates within its regulatory requirements
and risk appetite.
Capital, RWAs and leverage
Capital resources, RWAs and leverage based on the PRA
transitional arrangements for NWM Plc are set out below. Regulatory
capital is monitored and reported at legal entity level for large
subsidiaries of NatWest Group.
30 June 31 December
2023 2022
Capital adequacy ratios (1,2) % %
------- -----------
CET1 17.6 17.2
Tier 1 20.9 20.4
Total 24.0 25.7
Total MREL 38.8 40.4
------------------------------ ------- -----------
Capital (1,2) GBPm GBPm
CET1 3,542 3,682
Tier 1 4,221 4,361
Total 4,841 5,502
Total MREL (3) 7,822 8,652
------------------------------ ------- -----------
Risk-weighted assets
------------------------------ -------
Credit risk 6,864 7,110
Counterparty credit risk 6,287 5,682
Market risk 5,686 7,152
Operational risk 1,322 1,478
-----------
Total RWAs 20,159 21,422
------------------------------ ------- -----------
(1) NWM Plc's total capital ratio requirement is 11.1%, comprising the
minimum capital requirement of 8%, supplemented with the capital
conservation buffer of 2.5% and the institution specific countercyclical
buffer (CCyB) of 0.6%. The minimum CET1 ratio is 7.6%, including
the minimum capital requirement of 4.5%. The CCyB is based on the
weighted average of NWM Plc's geographical exposures.
(2) In addition, NWM Plc is subject to Pillar 2A requirements for CET1,
AT1 and T2. Refer to the NWM Plc Pillar 3 report for further details
on these additional capital requirements.
(3) Includes senior internal debt instruments issued to NatWest Group
plc with a regulatory value of GBP3.0 billion (31 December 2022
- GBP3.2 billion).
Leverage
The leverage ratio has been calculated in accordance with the
Leverage Ratio (CRR) part of the PRA rulebook.
30 June 31 December
2023 2022
----------------------------- ------- -----------
Leverage exposure (GBPm) (1) 78,064 81,083
Tier 1 capital (GBPm) 4,221 4,361
Leverage ratio (%) 5.4 5.4
----------------------------- ------- -----------
(1) Leverage exposure is broadly aligned to the accounting value of
on and off-balance sheet exposures albeit subject to specific adjustments
for derivatives, securities financing positions and off-balance
sheet exposures.
Risk and capital management
Capital, liquidity and funding risk continued
Capital resources (reviewed)
The minimum requirement for own funds is set out for NWM Plc
legal entity under the Capital Requirements Regulation.
Transitional arrangements on the phasing-in of end-point capital
resources are set by the PRA.
30 June 31 December
2023 2022
Shareholders' equity GBPm GBPm
-----------
Shareholders' equity 6,125 6,518
Other equity instruments (904) (904)
------------------------------------------------------ ------- -----------
5,221 5,614
Regulatory adjustments and deductions
-----------
Own credit 5 11
Defined benefit pension fund adjustment (166) (159)
Cash flow hedging reserve 396 284
Prudential valuation adjustments (171) (197)
Expected losses less impairments (4) (3)
Instruments of financial sector entities where the
institution has a significant investment (1,740) (1,869)
Adjustments under IFRS 9 transitional arrangements 1 1
------------------------------------------------------ ------- -----------
(1,679) (1,932)
CET1 capital 3,542 3,682
------------------------------------------------------ ------- -----------
Additional Tier 1 (AT1) capital
-----------
Qualifying instruments and related share premium 904 904
------- -----------
Tier 1 deductions
-----------
Instruments of financial sector entities where the
institution has a significant investment (225) (225)
------- -----------
Tier 1 capital 4,221 4,361
------------------------------------------------------ ------- -----------
Qualifying Tier 2 capital
-----------
Qualifying instruments and related share premium 1,012 1,555
------- -----------
Tier 2 deductions
-----------
Instruments of financial sector entities where the
institution has a significant investment (420) (441)
Other regulatory adjustments 28 27
------------------------------------------------------ ------- -----------
(392) (414)
Tier 2 capital 620 1,141
------------------------------------------------------ ------- -----------
Total regulatory capital 4,841 5,502
------------------------------------------------------ ------- -----------
Risk and capital management
Capital, liquidity and funding risk continued
Leverage exposure
The leverage exposure has been calculated in accordance with the
Leverage Exposure (CRR) part of the PRA rulebook.
30 June 31 December
2023 2022
Leverage GBPm GBPm
-------------------------------------------- -------- -----------
Cash and balances at central banks 14,124 13,467
Trading assets 26,453 27,301
Derivatives 78,737 96,258
Net loans to customers 28,776 27,011
Other assets 7,916 5,024
-------------------------------------------- -------- -----------
Total assets 156,006 169,061
Derivatives
- netting (77,500) (95,223)
- potential future exposures 14,988 16,540
Securities financing transactions gross up 790 2,862
Undrawn commitments 5,273 5,239
Regulatory deductions and other adjustments (6,965) (3,077)
Exclusion of core UK-group exposures (407) (852)
Claims on central banks (14,121) (13,467)
-------------------------------------------- -------- -----------
Leverage exposure 78,064 81,083
-------------------------------------------- -------- -----------
Liquidity portfolio (reviewed)
The table below shows the liquidity portfolio by LCR product,
with the incorporation of discounts (or haircuts) used within the
internal stressed outflow coverage. Secondary liquidity comprises
assets eligible for discount at central banks, which do not form
part of the liquid asset portfolio for LCR or stressed outflow
coverage purposes. In addition, a reconciliation has been provided
between the liquidity portfolio for internal stressed outflow
coverage and high quality liquid assets on a regulatory LCR
basis.
Liquidity value
30 June 31 December
2023 2022
NatWest Markets Plc GBPm GBPm
------------------------------------------------------------ ------- -----------
Cash and balances at central banks 14,132 13,472
-----------
AAA to AA- rated governments 4,139 4,766
A+ and lower rated governments 668 59
Government guaranteed issuers, public sector entities
and government sponsored entities - 13
International organisations and multilateral development
banks 529 182
------------------------------------------------------------ ------- -----------
LCR level 1 bonds 5,336 5,020
------------------------------------------------------------ ------- -----------
LCR level 1 assets 19,468 18,492
LCR level 2 assets - -
Non-LCR eligible assets - -
------------------------------------------------------------ ------- -----------
Primary liquidity 19,468 18,492
Secondary liquidity 36 68
------------------------------------------------------------ ------- -----------
Total liquidity value 19,504 18,560
------------------------------------------------------------ ------- -----------
30 June
2023
Stressed outflow coverage (SOC) to liquidity coverage GBPm
ratio (LCR) reconciliation *
------------------------------------------------------------
SOC primary liquidity (from table above) 19,468
------------------------------------------------------------ -------
Level 1 assets excluded (1) 641
Level 2 assets excluded (2) 158
Methodology difference (3) (119)
------------------------------------------------------------
Total LCR high quality liquid assets 20,148
------------------------------------------------------------ -------
* Table not within the scope of EY's review report.
(1) LCR level 1 assets include extremely high quality covered
bonds, government guaranteed bonds, and other LCR level 1 assets,
which are not included as primary liquidity, but included as
inflows in stressed outflow coverage.
(2) LCR level 2 assets include high quality covered bonds, asset
backed securities and other level 2 assets which are not included
as primary liquidity but included as outflows in stressed outflow
coverage.
(3) Methodology differences include cash in tills which is
classified as LCR level 1 but not included in stressed outflow
coverage, JPY bonds which are classified as level 1 for stressed
outflow coverage but level 2 for LCR and weighting differences
between stressed outflow coverage and LCR.
The table below shows the liquidity value of the liquidity
portfolio by currency.
GBP USD EUR Other Total
Total liquidity portfolio GBPm GBPm GBPm GBPm GBPm
30 June 2023 8,475 4,323 6,039 667 19,504
31 December 2022 8,660 3,379 6,460 61 18,560
-------------------------- ----- ----- ----- ----- ------
Risk and capital management
Capital, liquidity and funding risk continued
Funding sources (reviewed)
The table below shows NWM Group's carrying values of the
principal funding sources based on contractual maturity.
30 June 2023 31 December 2022
----------------------------- -----------------------------
Short-term Long-term Short-term Long-term
less more less than more than
than than
1 year 1 year Total 1 year 1 year Total
--------------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ---------- --------- ------ ---------- --------- ------
Bank deposits 1,983 718 2,701 2,427 642 3,069
of which: repos (amortised cost) 860 - 860 799 - 799
Customer deposits 8,762 247 9,009 3,353 261 3,614
of which: repos (amortised cost) - 239 239 - 254 254
Trading liabilities (1)
---------- --------- ------
Repos (2) 27,554 254 27,808 23,740 - 23,740
Derivative cash collateral received 15,161 - 15,161 17,663 - 17,663
Other bank and customer deposits 775 440 1,215 414 654 1,068
Debt securities in issue 353 361 714 54 743 797
-------------------------------------- ---------- --------- ------ ---------- --------- ------
43,843 1,055 44,898 41,871 1,397 43,268
Other financial liabilities
---------- --------- ------
Customer deposits (designated fair
value) 144 918 1,062 253 797 1,050
Debt securities in issue
Commercial paper and certificates
of deposits 4,636 141 4,777 3,084 85 3,169
Medium term notes (MTNs) 1,927 14,445 16,372 2,368 14,050 16,418
Subordinated liabilities - 253 253 206 260 466
-------------------------------------- ---------- --------- ------ ---------- --------- ------
6,707 15,757 22,464 5,911 15,192 21,103
Amounts due to holding company and
fellow subsidiaries (3)
---------- --------- ------
Internal MREL 437 2,563 3,000 2,199 974 3,173
Other bank and customer deposits 1,894 - 1,894 1,288 - 1,288
Subordinated liabilities 800 180 980 - 1,519 1,519
-------------------------------------- ---------- --------- ------ ---------- --------- ------
3,131 2,743 5,874 3,487 2,493 5,980
Total funding 64,426 20,520 84,946 57,049 19,985 77,034
-------------------------------------- ---------- --------- ------ ---------- --------- ------
Of which: available in resolution
(4) 2,996 2,753
-------------------------------------- ---------- --------- ------ ---------- --------- ------
(1) Funding sources excludes short positions of GBP11,211 million (31
December 2022 - GBP9,524 million) reflected as trading liabilities on
the balance sheet.
(2) Comprises Central and other bank repos of GBP2,500 million (31 December
2022 - GBP1,642 million), other financial institution repos of GBP22,674
million (31 December 2022 - GBP19,354 million) and other corporate repos
of GBP2,634 million (31 December 2022 - GBP2,744 million).
(3) Amounts due to holding company and fellow subsidiaries relating
to non-financial instruments of GBP83 million (31 December 2022 - GBP211
million) and intercompany settlement balances of GBP456 million (31
December 2022 - GBP26 million) have been excluded from the table.
(4) Eligible liabilities (as defined in the Banking Act 2009 as amended
from time to time) that meet the eligibility criteria set out in the
regulations, rules, policies, guidelines, or statements of the Bank
of England including the Statement of Policy published in December 2021
(updating June 2018).
Risk and capital management
Capital, liquidity and funding risk continued
Senior notes and subordinated liabilities - residual maturity
profile by instrument type (reviewed)
The table below shows NWM Group's debt securities in issue,
subordinated liabilities and internal resolution instruments by
residual maturity.
Trading
liabilities Other financial liabilities Amounts due to
holding
----------- ----------------------------------------
Debt Debt securities company and fellow
in issue
------------------
securities Commercial subsidiaries
----------------------
in issue paper Subordinated Internal Subordinated Total
notes
MTNs and CDs MTNs liabilities Total MREL liabilities in issue
30 June 2023 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Less than 1
year 353 4,636 1,927 - 6,563 437 800 8,153
1-3 years 108 141 9,531 - 9,672 1,711 - 11,491
3-5 years 31 - 4,304 18 4,322 852 - 5,205
More than 5
years 222 - 610 235 845 - 180 1,247
----------- ---------- ------ ------------ ------ --------
Total 714 4,777 16,372 253 21,402 3,000 980 26,096
------------- ----------- ---------- ------ ------------ ------ -------- ------------ --------
31 December
2022
----------- ---------- ------ ------------ ------ -------- ------------ --------
Less than 1
year 54 3,084 2,368 206 5,658 2199 - 7,911
1-3 years 474 73 9,011 - 9,084 974 830 11,362
3-5 years 37 12 4,403 18 4,433 - - 4,470
More than 5
years 232 - 636 242 878 - 689 1,799
----------- ---------- ------ ------------ ------ -------- ------------ --------
Total 797 3,169 16,418 466 20,053 3,173 1,519 25,542
------------- ----------- ---------- ------ ------------ ------ -------- ------------ --------
The table below shows the currency breakdown of total notes in
issue.
GBP USD EUR Other Total
30 June 2023 GBPm GBPm GBPm GBPm GBPm
---------------------------------------- ----- ----- ------ ----- ------
Commercial paper and CDs 361 2,946 1,470 - 4,777
MTNs 1,621 4,232 8,425 2,808 17,086
External subordinated liabilities 19 17 217 - 253
Internal MREL due to NatWest Group plc - 2,148 852 - 3,000
Subordinated liabilities due to NatWest
Group plc - 180 800 - 980
---------------------------------------- ----- ----- ------ ----- ------
Total 2,001 9,523 11,764 2,808 26,096
---------------------------------------- ----- ----- ------ ----- ------
31 December 2022 1,816 9,892 11,160 2,674 25,542
---------------------------------------- ----- ----- ------ ----- ------
Risk and capital management
Credit risk - Trading activities (reviewed)
This section details the credit risk profile of NWM Group's
trading activities.
Securities financing transactions and collateral
The table below shows securities financing transactions in NWM
Group. Balance sheet captions include balances held at all
classifications under IFRS 9.
Reverse repos Repos
--------------------------------- ---------------------------------
Of which: Outside Of which: Outside
can be netting can be netting
Total offset arrangements Total offset arrangements
30 June 2023 GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ -------- --------- ------------ -------- --------- ------------
Gross 46,942 46,653 289 54,076 53,564 512
IFRS offset (25,169) (25,169) - (25,169) (25,169) -
------------------------------------ -------- --------- ------------ -------- --------- ------------
Carrying value 21,773 21,484 289 28,907 28,395 512
------------------------------------ -------- --------- ------------ -------- --------- ------------
Master netting arrangements (2,045) (2,045) - (2,045) (2,045) -
Securities collateral (17,817) (17,817) - (26,350) (26,350) -
------------------------------------ -------- --------- ------------ -------- --------- ------------
Potential for offset not recognised
under IFRS (19,862) (19,862) - (28,395) (28,395) -
------------------------------------ -------- --------- ------------ -------- --------- ------------
Net 1,911 1,622 289 512 - 512
------------------------------------ -------- --------- ------------ -------- --------- ------------
31 December 2022
------------------------------------ -------- --------- ------------ -------- --------- ------------
Gross 36,945 36,411 534 39,340 34,857 4,483
IFRS offset (14,547) (14,547) - (14,547) (14,547) -
------------------------------------ -------- --------- ------------
Carrying value 22,398 21,864 534 24,793 20,310 4,483
------------------------------------ -------- --------- ------------ -------- --------- ------------
Master netting arrangements (2,445) (2,445) - (2,445) (2,445) -
Securities collateral (19,221) (19,221) - (17,865) (17,865) -
------------------------------------ -------- --------- ------------ -------- --------- ------------
Potential for offset not recognised
under IFRS (21,666) (21,666) - (20,310) (20,310) -
------------------------------------ -------- --------- ------------ -------- --------- ------------
Net 732 198 534 4,483 - 4,483
------------------------------------ -------- --------- ------------ -------- --------- ------------
Debt securities
The table below shows debt securities held at mandatory fair
value through profit or loss by issuer as well as ratings based on
the lowest of Standard & Poor's, Moody's and Fitch.
Central and local government Financial
--------------------------------
UK US Other institutions Corporate Total
30 June 2023 GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ---------- --------- --------- ------------ --------- --------
AAA - - 1,452 936 - 2,388
AA to AA+ - 5,478 1,596 1,290 3 8,367
A to AA- 2,703 - 382 511 102 3,698
BBB- to A- - - 1,415 227 645 2,287
Non-investment grade - - - 58 61 119
Unrated - - - 1 - 1
---------------------
Total 2,703 5,478 4,845 3,023 811 16,860
--------------------- ---------- --------- --------- ------------ --------- --------
Short positions (2,377) (2,493) (4,293) (1,911) (137) (11,211)
--------------------- ---------- --------- --------- ------------ --------- --------
31 December 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
--------------------- ---------- --------- --------- ------------ --------- --------
Short positions (2,313) (1,293) (3,936) (1,875) (107) (9,524)
--------------------- ---------- --------- --------- ------------ --------- --------
Risk and capital management
Credit risk - Trading activities continued (reviewed)
Derivatives
The table below shows third-party derivatives by type of
contract. The master netting agreements and collateral shown do not
result in a net presentation on the balance sheet under IFRS.
30 June 2023 31 December 2022
--------------------------------------------------------- -------------------------------
Notional
--------------------------
GBP USD EUR Other Total Assets Liabilities Notional Assets Liabilities
GBPbn GBPbn GBPbn GBPbn GBPbn GBPm GBPm GBPbn GBPm GBPm
-----------
Gross exposure 83,918 79,538 101,020 95,478
IFRS offset (2,953) (2,953) (2,509) (2,509)
------------------------ ----- ----- ----- ----- ------ -------- -------- -------- -----------
Carrying value 2,798 3,604 5,695 1,119 13,216 80,965 76,585 13,470 98,511 92,969
------------------------ ----------- -------- -------- -----------
Of which:
Interest rate (1) 2,515 2,261 5,203 261 10,240 49,981 46,341 10,319 52,529 47,873
Exchange rate 281 1,340 485 858 2,964 30,779 29,999 3,136 45,746 44,821
Credit 2 3 7 - 12 205 245 15 236 275
Carrying value 13,216 80,965 76,585 13,470 98,511 92,969
------------------------ ----- ----- ----- ----- ------ -------- ----------- -------- -------- -----------
Counterparty
mark-to-market
netting (61,994) (61,994) (76,722) (76,722)
Cash collateral (12,307) (7,545) (14,064) (9,480)
Securities collateral (4,213) (1,540) (4,210) (1,185)
------------------------ ----- ----- ----- ----- ------ -------- ----------- -------- -------- -----------
Net exposure 2,451 5,506 3,515 5,582
------------------------ ----- ----- ----- ----- ------ -------- ----------- -------- -------- -----------
Banks (2) 231 801 647 669
Other financial
institutions
(3) 1,258 1,886 1,724 1,936
Corporate (4) 907 2,785 1,062 2,890
Government (5) 55 34 82 87
------------------------ ----- ----- ----- ----- ------ -------- ----------- --------
Net exposure 2,451 5,506 3,515 5,582
------------------------ ----- ----- ----- ----- ------ -------- ----------- -------- -------- -----------
UK 1,082 3,082 1,257 2,753
Europe 672 1,690 1,195 1,990
US 592 546 753 626
RoW 105 188 310 213
------------------------ ----- ----- ----- ----- ------ -------- ----------- --------
Net exposure 2,451 5,506 3,515 5,582
------------------------ ----- ----- ----- ----- ------ -------- ----------- -------- -------- -----------
Asset quality of
uncollateralised
derivative assets
------------------------ ----- ----- ----- ----- ------ --------
AQ1-AQ4 2,026 3,001
AQ5-AQ8 422 498
AQ9-AQ10 3 16
------------------------ ----- ----- ----- ----- ------ -------- --------
Net exposure 2,451 3,515
------------------------ ----- ----- ----- ----- ------ -------- --------
(1) The notional amount of interest rate derivatives includes GBP7,442
billion (31 December 2022 - GBP7,651 billion) in respect of contracts
cleared through central clearing counterparties.
(2) Transactions with certain counterparties with which NWM Group has
netting arrangements but collateral is not posted on a daily basis;
certain transactions with specific
terms that may not fall within netting and collateral arrangements;
derivative positions in certain jurisdictions, where the collateral
agreements are not
deemed to be legally enforceable.
(3) Includes transactions with securitisation vehicles and funds where
collateral posting is contingent on NWM Group's external rating.
(4) Mainly large corporates with whom NWM Group may have netting arrangements
in place, but operational capability does not support collateral
posting.
(5) Sovereigns and supranational entities with no collateral arrangements,
collateral arrangements that are not considered enforceable, or one-way
collateral agreements in their favour.
Risk and capital management
Credit risk - Net credit exposures for banking and trading
activities (reviewed)
Asset quality
The table below shows the current and potential exposure by
high-level asset class and asset quality. It represents total
credit risk for assets held in the banking book in addition to
counterparty credit risk for traded products.
Cash Loans Off-
and
balances Sovereign and Other Collateralised Uncollateralised Repo balance
and
at debt other debt rate risk rate risk reverse sheet
central
banks securities lending securities management management repo items Leasing Total
30 June GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
2023
---------- -------- ---------- ------- ---------- -------------- ---------------- ------- ------- ------- ------
AQ1-AQ4 21,305 5,126 9,965 7,159 1,471 1,581 1,457 709 27 48,800
AQ5-AQ8 - - 745 287 179 275 46 20 - 1,552
AQ9 - - 27 - 1 - - - - 28
AQ10 - - 7 1 - - - - - 8
---------- -------- ---------- ------- ---------- -------------- ---------------- ------- ------- ------- ------
Current
exposure 21,305 5,126 10,744 7,447 1,651 1,856 1,503 729 27 50,388
Potential
exposure 21,305 5,126 23,881 7,447 10,437 4,120 2,151 2,028 27 76,522
---------- -------- ---------- ------- ---------- -------------- ---------------- ------- ------- ------- ------
31
December
2022
---------- -------- ---------- ------- ---------- -------------- ---------------- ------- ------- ------- ------
AQ1-AQ4 17,007 5,695 9,987 5,538 2,360 1,964 1,659 596 29 44,835
AQ5-AQ8 - - 687 305 164 327 25 21 - 1,529
AQ9 - - 23 - 2 13 - - - 38
AQ10 - - 47 1 - - - - - 48
---------- -------- ---------- ------- ---------- -------------- ---------------- ------- ------- ------- ------
Current
exposure 17,007 5,695 10,744 5,844 2,526 2,304 1,684 617 29 46,450
Potential
exposure 17,007 5,695 24,235 5,844 11,488 4,749 2,206 1,715 29 72,968
---------- -------- ---------- ------- ---------- -------------- ---------------- ------- ------- ------- ------
- The increase in both current exposure and potential exposure
was primarily in the highest quality AQ1-AQ4 band. The reduction in
exposure in the AQ10 band was driven by the repayment of a single
legacy position.
Risk and capital management
Credit risk - Economics (reviewed)
Economic loss drivers
Introduction
The portfolio segmentation and selection of economic loss
drivers for IFRS 9 follows the approach used in stress testing. To
enable robust modelling the forecasting models for each portfolio
segment (defined by product or asset class and where relevant,
industry sector and region) are based on a selected, small number
of economic variables (typically three to four) that best explain
the temporal variations in portfolio loss rates. The process to
select economic loss drivers involves empirical analysis and expert
judgement.
The most significant economic loss drivers for the UK portfolios
include UK gross domestic product (GDP), world GDP, the
unemployment rate, the house price index, and the Bank of England
base rate. Similar metrics are used for other key country exposures
in NWM Group.
Economic scenarios
At 30 June 2023, the range of anticipated future economic
conditions was defined by a set of four internally developed
scenarios and their respective probabilities. In addition to the
base case, they comprised upside, downside and extreme downside
scenarios. The scenarios primarily reflected the current risks
faced by the economy, particularly related to persistently high
inflation and interest rate environment, resulting in a fall in
real household income, economic slowdown, a rise in unemployment
and asset price declines.
For 30 June 2023, the four scenarios were deemed appropriate in
capturing the uncertainty in economic forecasts and the
non-linearity in outcomes under different scenarios. These four
scenarios were developed to provide sufficient coverage across
potential rises in unemployment, inflation, asset price declines
and the degree of permanent damage to the economy, around which
there remains pronounced levels of uncertainty.
Upside - This scenario assumes robust growth as inflation falls
sharply and rates are lowered. Consumer spending is supported by
savings built up since COVID-19 and further helped by fiscal
support and strong business investment. The labour market remains
resilient, with the unemployment rate remaining below pre-COVID-19
levels. The housing market slows down compared to the previous year
but remains robust.
Base case - In the midst of high inflation and significant
monetary policy tightening, economic growth remains muted. However,
recession is avoided as only a relatively small proportion of
households are directly affected by the rise in mortgage costs. The
unemployment rate rises modestly but job losses are contained.
Inflation moderates over the medium-term and falls to the target
level of 2%. The housing market experiences price decline and lower
activity but the extent of the decline is lower than that
experienced during prior stresses.
Since 31 December 2022, the economic outlook has improved as
energy prices fell sharply and the labour market remained
resilient. However, the inflation outlook remains elevated due to
higher core inflation pressure. As a result, interest rates need to
rise higher than assumed previously. The base case now assumes
muted growth in 2023 as opposed to a mild recession assumed
previously. The unemployment rate still rises but the peak is
lower, reflecting the labour market's recent resilience. The peak
to trough house price correction remains broadly similar to the
previous assumption.
Downside - Inflation remains persistently high. The economy
experiences a recession as consumer confidence weakens due to a
fall in real income. Interest rates are raised higher than the base
case and remain elevated for longer. High rates are assumed to have
a more significant impact on the labour market. Unemployment is
higher than the base case scenario while house prices experience
declines comparable to previous episodes of stress.
The previous year's downside scenario also included a deep
recession, labour market deterioration and asset price falls, but
the current downside scenario explores these risks in a
persistently high inflation, high rates environment.
Extreme downside - This scenario assumes high and persistent
inflation. Households see the highest recorded decline in real
income. Interest rates rise to levels last observed in early 2000.
Resulting economic recession is deep and leads to widespread job
losses. House prices lose approximately a third of their value
while the unemployment rate rises to a level above that observed
during the 2008 financial crisis.
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.
Risk and capital management
Credit risk - Economics continued ( reviewed )
Economic loss drivers
Main macroeconomic variables
30 June 2023 31 December 2022
------------------------------------------- -------------------------------------------
Extreme Weighted Extreme Weighted
Upside Base Downside downside average Upside Base Downside downside average
case case
Five-year summary % % % % % % % % % %
-------------------------- ------ ----- -------- -------- -------- ------ ----- -------- -------- --------
GDP 1.8 0.9 0.4 (0.2) 0.8 2.2 1.3 0.8 0.4 1.2
Unemployment 3.5 4.2 4.9 6.6 4.6 3.9 4.5 4.9 6.7 4.8
House price index 3.8 0.3 (0.8) (6.0) - 5.1 0.8 (0.7) (4.4) 0.6
Commercial real estate
price 3.3 0.2 (2.7) (7.6) (0.7) 1.2 (1.9) (2.8) (9.1) (2.5)
Consumer price index 1.7 2.3 4.2 3.7 2.8 3.6 4.2 4.4 8.2 4.8
Bank of England base rate 2.6 4.2 5.0 5.1 4.2 2.4 3.1 1.5 4.5 2.8
UK stock price index 5.8 4.3 1.8 0.1 3.5 3.0 1.4 (1.1) (3.7) 0.5
World GDP 3.7 3.1 2.7 1.0 2.8 3.7 3.3 1.7 1.1 2.7
Probability weight 19.5 45.0 21.5 14.0 18.6 45.0 20.8 15.6
-------------------------- ------ ----- -------- -------- -------- ------ ----- -------- -------- --------
(1) The five year summary runs from 2023-2027 for 30 June 2023.
(2) The table shows five calendar year CAGR for GDP, average for
unemployment and Bank of England base rate and 20-quarter CAGR for
other parameters.
(3) Comparatives have been aligned with the current calculation approach.
Probability weightings of scenarios
NWM Group's quantitative approach to IFRS 9 multiple economic
scenarios (MES) involves selecting a suitable set of discrete
scenarios to characterise the distribution of risks in the economic
outlook and assigning appropriate probability weights. This
quantitative approach is used for 30 June 2023.
The approach involves comparing UK GDP paths for NWM Group's
scenarios against a set of 1,000 model runs, following which, a
percentile in the distribution is established that most closely
corresponded to the scenario. Probability weight for base case is
set first based on judgement, while probability weights for the
alternate scenarios are assigned based on these percentiles
scores.
The assigned probability weights were judged to be aligned with
the subjective assessment of balance of the risks in the economy.
The weights were broadly comparable to those used at 31 December
2022. Since then, the outlook has improved across key areas of the
economy. However, the risks still remain elevated and there is
considerable uncertainty in the economic outlook, particularly with
respect to persistence and the range of outcomes on inflation.
Given that backdrop, NWM Group judges it appropriate that
downside-biased scenarios have higher probability weights than the
upside-biased scenario. It presents good coverage to the range of
outcomes assumed in the scenarios, including the potential for a
robust recovery on the upside and exceptionally challenging
outcomes on the downside. A 19.5% weighting was applied to the
upside scenario, a 45.0% weighting applied to the base case
scenario, a 21.5% weighting applied to the downside scenario and a
14.0% weighting applied to the extreme downside scenario.
Risk and capital management
Credit risk - Economics continued ( reviewed )
Economic loss drivers
Annual figures
Extreme Weighted
Upside Base Downside downside average
case
GDP - annual growth % % % % %
-------------------- ------ ----- -------- -------- --------
2023 1.4 0.3 - (0.3) 0.3
2024 3.8 0.8 (1.4) (4.1) 0.3
2025 1.4 1.0 1.0 0.9 1.1
2026 1.2 1.3 1.2 1.2 1.2
2027 1.2 1.4 1.3 1.2 1.3
2028 1.2 1.4 1.3 1.2 1.3
-------------------- ------ ----- -------- -------- --------
Extreme Weighted
Upside Base Downside downside average
case
Unemployment rate - annual average % % % % %
----------------------------------- ------ ----- -------- -------- --------
2023 3.9 3.9 4.1 4.3 4.0
2024 3.3 4.2 5.1 7.3 4.7
2025 3.3 4.4 5.3 7.7 4.8
2026 3.4 4.3 5.1 7.1 4.7
2027 3.4 4.3 4.9 6.5 4.6
2028 3.4 4.3 4.7 6.0 4.4
----------------------------------- ------ ----- -------- -------- --------
Extreme Weighted
Upside Base Downside downside average
case
House price index - four quarter change % % % % %
---------------------------------------- ------ ----- -------- -------- --------
2023 (3.3) (6.9) (6.2) (8.2) (6.2)
2024 10.4 (1.0) (13.2) (14.1) (3.1)
2025 6.1 2.9 0.9 (16.4) 0.9
2026 3.1 3.4 8.5 4.3 4.4
2027 3.5 3.4 7.9 6.8 4.7
2028 3.4 3.4 5.5 5.0 4.0
---------------------------------------- ------ ----- -------- -------- --------
Extreme Weighted
Upside Base Downside downside average
case
Commercial real estate price - four quarter % % % % %
change
-------------------------------------------- ------ ----- -------- -------- --------
2023 1.1 (5.8) (7.8) (10.7) (5.6)
2024 5.5 0.5 (13.4) (35.3) (6.1)
2025 4.6 2.5 2.5 2.5 3.0
2026 3.8 2.5 3.6 6.3 3.4
2027 1.8 1.3 3.0 6.9 2.3
2028 1.5 1.3 2.2 4.2 1.8
-------------------------------------------- ------ ----- -------- -------- --------
Extreme Weighted
Upside Base Downside downside average
case
Consumer price index - four quarter change % % % % %
------------------------------------------- ------ ----- -------- -------- --------
2023 1.6 3.4 5.5 7.0 4.0
2024 1.1 2.3 4.3 6.8 3.2
2025 1.8 1.9 3.9 1.7 2.3
2026 1.9 1.9 3.8 1.2 2.2
2027 1.9 1.9 3.7 2.1 2.3
2028 1.9 1.9 3.2 2.1 2.2
------------------------------------------- ------ ----- -------- -------- --------
Extreme Weighted
Upside Base Downside downside average
case
Bank of England base rate - annual average % % % % %
------------------------------------------- ------ ----- -------- -------- --------
2023 4.3 4.8 4.7 4.8 4.7
2024 3.0 5.0 5.5 6.0 4.9
2025 2.3 4.2 5.0 5.7 4.2
2026 2.0 3.7 4.9 4.9 3.8
2027 1.6 3.3 4.7 4.1 3.4
2028 1.5 3.2 4.5 3.4 3.2
------------------------------------------- ------ ----- -------- -------- --------
Extreme Weighted
Upside Base Downside downside average
case
UK stock price index - four quarter change % % % % %
------------------------------------------- ------ ----- -------- -------- --------
2023 13.0 9.1 (9.2) (26.6) 0.9
2024 5.7 3.1 (1.9) (9.4) 1.4
2025 4.1 3.1 9.7 21.2 6.2
2026 3.6 3.1 6.5 12.9 4.9
2027 3.2 3.1 5.3 10.2 4.3
2028 3.0 3.1 5.3 6.4 3.9
------------------------------------------- ------ ----- -------- -------- --------
Risk and capital management
Credit risk - Economics continued ( reviewed )
Worst points
30 June 2023 31 December 2022
---------------------------------------------- ----------------------------------------------
Extreme Weighted Extreme Weighted
Downside downside average Downside downside average
% Quarter % Quarter % % Quarter % Quarter %
-------- ------- -------- ------- -------- -------- ------- -------- ------- --------
GDP (1.7) Q2 2024 (4.9) Q2 2024 0.1 (3.2) Q4 2023 (4.7) Q4 2023 (0.8)
Unemployment rate
- peak 5.4 Q1 2025 8.0 Q4 2024 4.9 6.0 Q1 2024 8.5 Q3 2024 5.4
House price index (18.9) Q1 2025 (34.3) Q1 2026 (9.2) (15.0) Q1 2025 (26.2) Q3 2025 (3.4)
Commercial real
estate
price (20.1) Q4 2024 (42.6) Q1 2025 (11.3) (21.8) Q4 2023 (46.8) Q3 2024 (16.4)
Consumer price index
- highest four
quarter
change 10.1 Q1 2023 10.1 Q1 2023 10.1 15.7 Q1 2023 17.0 Q4 2023 11.7
Bank of England base
rate
- extreme level 5.8 Q1 2024 6.0 Q1 2024 5.3 4.0 Q1 2023 6.0 Q1 2024 4.1
UK stock price index (15.5) Q2 2024 (40.9) Q2 2024 (1.1) (26.0) Q4 2023 (48.7) Q4 2023 (14.1)
-------------------- -------- ------- -------- ------- -------- -------- ------- -------- ------- --------
(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 30 June 2023 scenarios.
(2) Comparatives have been aligned with the current calculation approach.
Economic loss drivers
Use of the scenarios in lending
The lending scenario methodology is based on the concept of
credit cycle indices (CCIs). The CCIs represent all relevant
economic drivers for a region/industry segment aggregated into a
single index value that describes the credit conditions in the
respective segment relative to its long-run average. A CCI value of
zero corresponds to credit conditions at long-run average levels, a
positive CCI value corresponds to credit conditions below long run
average levels and a negative CCI value corresponds to credit
conditions above long-run average levels.
The individual economic scenarios are translated into
forward-looking projections of CCIs using a set of econometric
models. Subsequently the CCI projections for the individual
scenarios are averaged into a single central CCI projection
according to the given scenario probabilities. The central CCI
projection is then extended with an additional mean reversion
assumption to gradually revert to the long-run average CCI value of
zero in the outer years of the projection horizon.
Finally, ECL is calculated using a Monte Carlo approach by
averaging PD and LGD values arising from many CCI paths simulated
around the central CCI projection.
UK economic uncertainty
The high inflation environment alongside rapidly rising interest
rates and supply chain disruption are presenting significant
headwinds for some businesses and consumers. These are a result of
various factors and in many cases are compounding and look set to
remain a feature of the economic environment into 2024. NWM Group
has considered where these are most likely to affect the customer
base, with the rising cost of borrowing during 2023 for both
businesses and consumers presenting an additional affordability
challenge for many borrowers in recent months.
The effects of these risks are not expected to be fully captured
by forward-looking credit modelling, particularly given the unique
high inflation environment, low unemployment base case outlook. Any
incremental ECL effects for these risks will be captured via post
model adjustments and are detailed further in the Governance and
post model adjustments section.
Risk and capital management
Credit risk - Economics continued ( reviewed )
Governance and post model adjustments
The IFRS 9 PD, EAD and LGD models are subject to NWM Group's
model risk policy that stipulates periodic model monitoring,
periodic re-validation and defines approval procedures and
authorities according to model materiality. Various post model
adjustments were applied where management judged they were
necessary to ensure an adequate level of overall ECL provision. All
post model adjustments were subject to formal approval through
provisioning governance, and were categorised as follows:
- Deferred model calibrations - ECL adjustments where model
monitoring and similar analyses indicates that model adjustments
will be required to ensure ECL adequacy. As a consequence, an
estimate of the ECL impact is recorded on the balance sheet until
modelled ECL levels are affirmed by new model parallel runs or
similar analyses.
- Economic uncertainty - ECL adjustments primarily arising from
uncertainties associated with high inflation and rapidly rising
interest rates as well as supply chain disruption, along with the
residual effects from COVID-19 government support schemes. In all
cases, management judged that additional ECL was required until
further credit performance data became available as the observable
effects of these issues crystallise.
- Other adjustments - ECL adjustments where it was judged that
the modelled ECL required amendment.
Post model adjustments will remain a key focus area of NWM
Group's ongoing ECL adequacy assessment process. A holistic
framework has been established including reviewing a range of
economic data, external benchmark information and portfolio
performance trends with a particular focus on segments of the
portfolio (both commercial and consumer) that are likely to be more
susceptible to high inflation, rapidly rising interest rates and
supply chain disruption, where risks may not be fully captured by
the models.
Measurement uncertainty and ECL sensitivity analysis
The recognition and measurement of ECL is complex and involves
the use of significant judgment and estimation, particularly in
times of economic volatility and uncertainty. This includes the
formulation and incorporation of multiple forward-looking economic
conditions into ECL to meet the measurement objective of IFRS 9.
The ECL provision is sensitive to the model inputs and economic
assumptions underlying the estimate.
The impact arising from the base case, upside, downside and
extreme downside scenarios was simulated. NWM Group has assumed
that the economic macro variables associated with these scenarios
replace the existing base case economic assumptions, giving them a
100% probability weighting and therefore serving as a single
economic scenario.
These scenarios were applied to all modelled portfolios in the
analysis below, with the simulation impacting both PDs and LGDs.
Post model adjustments included in the ECL estimates that were
modelled were sensitised in line with the modelled ECL movements,
but those that were judgmental in nature, primarily those for
deferred model calibrations and economic uncertainty, were not
(refer to the Governance and post model adjustments section). As
expected, the scenarios create differing impacts on ECL by
portfolio and the impacts are deemed reasonable. In this
simulation, it is assumed that existing modelled relationships
between key economic variables and loss drivers hold, but in
practice other factors would also have an impact, for example,
potential customer behaviour changes and policy changes by lenders
that might impact on the wider availability of credit.
The focus of the simulations is on ECL provisioning requirements
on performing exposures in Stage 1 and Stage 2. The simulations are
run on a stand-alone basis and are independent of each other; the
potential ECL impacts reflect the simulated impact at 30 June 2023.
Scenario impacts on SICR should be considered when evaluating the
ECL movements of Stage 1 and Stage 2. In all scenarios the total
exposure was the same but exposure by stage varied in each
scenario.
Stage 3 provisions are not subject to the same level of
measurement uncertainty - default is an observed event as at the
balance sheet date. Stage 3 provisions therefore were not
considered in this analysis.
NWM Group's core criterion to identify a SICR is founded on PD
deterioration. Under the simulations, PDs change and result in
exposures moving between Stage 1 and Stage 2 contributing to the
ECL impact.
Risk and capital management
Credit risk - Economics continued ( reviewed )
Moderate Moderate Extreme
Base upside downside downside
30 June 2023 Actual scenario scenario scenario scenario
------------------------------------------ ------ -------- -------- -------- --------
Stage 1 modelled loans (GBPm) 10,995 11,107 11,124 10,995 10,190
Stage 1 modelled ECL (GBPm) 18 16 14 21 28
Stage 1 coverage (%) 0.16% 0.14% 0.13% 0.19% 0.27%
------------------------------------------ ------ -------- -------- -------- --------
Stage 2 modelled loans (GBPm) 295 183 166 295 1,100
Stage 2 modelled ECL (GBPm) 6 5 3 7 18
Stage 2 coverage (%) 2.03% 2.73% 1.81% 2.37% 1.64%
------------------------------------------ ------ -------- -------- -------- --------
Stage 1 and Stage 2 modelled loans (GBPm) 11,290 11,290 11,290 11,290 11,290
Stage 1 and Stage 2 modelled ECL (GBPm) 24 21 17 28 46
Stage 1 and Stage 2 coverage (%) 0.21% 0.19% 0.15% 0.25% 0.41%
------------------------------------------
Variance - (lower)/higher to actual total
Stage 1 and Stage 2 ECL (GBPm) (3) (7) 4 22
------------------------------------------ ------ -------- -------- -------- --------
Reconciliation to Stage 1 and Stage 2
flow exposure (GBPm)
Modelled loans 11,290 11,290 11,290 11,290 11,290
Other asset classes 30,354 30,354 30,354 30,354 30,354
------------------------------------------ ------ -------- -------- -------- --------
(1) Variations in future undrawn exposure values across the scenarios
are modelled, however the exposure position reported is that used
to calculate modelled ECL as at 30 June 2023 and therefore does not
include variation in future undrawn exposure values.
(2) Reflects ECL for all modelled exposure in scope for IFRS 9. The analysis
excludes non-modelled portfolios.
(3) All simulations are run on a stand-alone basis and are independent
of each other, with the potential ECL impact reflecting the simulated
impact as at 30 June 2023. The simulations change the composition
of Stage 1 and Stage 2 exposure but total exposure is unchanged under
each scenario as the loan population is static.
(4) Refer to the Economic loss drivers section for details of economic
scenarios.
(5) Refer to the NatWest Markets Plc 2022 Annual Report and Accounts
for 31 December 2022 comparatives.
Measurement uncertainty and ECL adequacy
- The changes in the economic outlook and scenarios used in the
IFRS 9 MES framework at 30 June 2023 resulted in a decrease in
modelled ECL. Given that continued uncertainty remains due to high
inflation, rapidly rising interest rates and supply chain
disruption, NWM Group utilised a framework of quantitative and
qualitative measures to support the levels of ECL coverage,
including economic data, credit performance insights , supply chain
contagion analysis and problem debt trends. This was particularly
important for consideration of post model adjustments.
- As the effects of high inflation, rapidly rising interest
rates and supply chain disruption evolve during 2023 and into 2024,
there is a risk of credit deterioration. However, the income
statement effect of this should have been mitigated by the
forward-looking provisions retained on the balance sheet at 30 June
2023.
- There are a number of key factors that could drive further
downside to impairments, through deteriorating economic and credit
metrics and increased stage migration as credit risk increases for
more customers. Such factors which could impact the IFRS 9 models,
include an adverse deterioration in GDP and unemployment in the
economies in which NWM Group operates.
Risk and capital management
Credit risk - Banking activities ( reviewed )
This section details the credit risk profile of NWM Group's
banking activities.
Portfolio summary
The table below shows gross loans and ECL, by stage, within the
scope of the IFRS 9 ECL framework .
30 June 31 December
2023 2022
GBPm GBPm
---------------------------------------------------- ------- -----------
Loans - amortised cost and fair value through other
comprehensive income (FVOCI)
Stage 1 10,809 10,791
Stage 2 304 497
Stage 3 29 49
Of which: individual 21 37
Of which: collective 8 12
Inter-Group (1) 1,148 434
---------------------------------------------------- -----------
Total 12,290 11,771
---------------------------------------------------- ------- -----------
ECL provisions
Stage 1 18 20
Stage 2 6 8
Stage 3 25 26
Of which: individual 17 15
Of which: collective 8 11
Inter-Group (1) 1 -
----------------------------------------------------
Total 50 54
---------------------------------------------------- ------- -----------
ECL provisions coverage (2)
Stage 1 (%) 0.17 0.19
Stage 2 (%) 1.97 1.61
Stage 3 (%) 86.21 53.06
Inter-Group (%) 0.09 -
----------------------------------------------------
Total 0.44 0.48
---------------------------------------------------- ------- -----------
Half year ended
--------------------
30 June 30 June
2023 2022
GBPm GBPm
---------------------------------------------------- ------- -----------
Impairment (releases)/losses
ECL (release)/charge
Stage 1 (2) 2
Stage 2 1 4
Stage 3 (4) (1)
Of which: individual (2) -
Of which: collective (2) (1)
Third party (5) 5
Total (5) 5
---------------------------------------------------- ------- -----------
Amounts written-off 2 43
---------------------------------------------------- ------- -----------
(1) NWM Group's intercompany assets were classified in Stage 1. The
ECL for these loans was GBP0.6 million ( 31 December 2022 - GBP0.4 million).
(2) ECL provisions coverage is calculated as ECL provisions divided
by loans - amortised cost and FVOCI. It is calculated on third party
loans and total ECL provisions.
(3) The table shows gross loans only and excludes amounts that are outside
the scope of the ECL framework. For further details, refer to Financial
instruments within the scope of the IFRS 9 ECL framework on page 68
of the NatWest Markets Plc 2022 Annual Report and Accounts. Other financial
assets within the scope of the IFRS 9 ECL framework were cash and balances
at central banks totalling GBP21.3 billion (31 December 2022 - GBP17.0
billion) and debt securities of GBP12.8 billion (31 December 2022 -
GBP11.8 billion).
(4) The stage allocation of the ECL charge was aligned to the stage
transition approach that underpins the analysis in the Flow Statement
section.
* The impairment release of GBP5 million was driven by
improved economic conditions compared to the end of
2022 which resulted in a small decrease in provisions
coverage.
Risk and capital management
Credit risk - Banking activities continued ( reviewed )
Sector analysis - portfolio summary
The table below shows exposures and ECL by stage, for key
sectors .
Off-balance sheet
------------------------
Loans - amortised
cost and FVOCI Loan Contingent ECL provisions
---------------------------- --------------------------
Stage Stage Stage Stage Stage Stage
1 2 3 Total commitments liabilities 1 2 3 Total
30 June 2023 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------ ----- ----- ------ ----------- ----------- ----- ----- ----- -----
Property 42 18 15 75 203 14 - 2 9 11
Financial institutions 9,731 109 - 9,840 6,925 548 14 - - 14
Sovereign 357 - 3 360 62 153 1 - 3 4
Corporate 679 177 11 867 6,432 19 3 4 13 20
Of which:
Agriculture 1 - - 1 1 - - - - -
Airlines and aerospace - 20 - 20 279 - - - - -
Automotive 2 - - 2 594 - - - - -
Chemicals 9 - - 9 64 - - - - -
Health 41 1 - 42 - - - - - -
Industrials 153 53 - 206 235 5 - 1 - 1
Land transport and
logistics 10 50 - 60 311 2 - - - -
Leisure 1 - - 1 158 - - - - -
Mining and metals - - 3 3 - - - - 3 3
Oil and gas 2 - 1 3 320 1 - - 1 1
Power Utilities 104 - - 104 2,621 2 - - - -
Retail 4 - - 4 398 2 - - - -
Shipping 2 - - 2 - - - - - -
Water and waste 31 - - 31 52 - - - - -
----------------------------- ------ ----- ----- ------ ----------- ----------- ----- ----- ----- -----
Total 10,809 304 29 11,142 13,622 734 18 6 25 49
----------------------------- ------ ----- ----- ------ ----------- ----------- ----- ----- ----- -----
31 December 2022
----------------------------- ------ --- ------ ------ ---
Property 35 151 15 201 190 14 1 1 8 10
Financial institutions 9,797 116 - 9,913 6,481 586 12 2 - 14
Sovereign 367 - 3 370 59 - 2 - 2 4
Corporate 592 230 31 853 7,180 24 5 516 26
Of which:
Agriculture - 2 - 2 1 - - - - -
Airlines and aerospace - 22 1 23 412 - - 1 1 2
Automotive 2 43 - 45 623 2 - 1 - 1
Chemicals 13 - - 13 64 - - - - -
Health 41 2 1 44 - - - - 1 1
Industrials 34 56 - 90 271 5 1 - - 1
Land transport and
logistics 18 53 - 71 314 1 - 1 - 1
Leisure 1 - - 1 158 - - - - -
Mining and metals - - 3 3 - - - - 3 3
Oil and gas 3 - 20 23 549 1 - - 2 2
Power Utilities 118 - - 118 2,595 2 1 - - 1
Retail 9 - - 9 518 4 - - - -
Shipping 2 - - 2 14 - - - - -
Water and waste 32 - - 32 256 - - - - -
----------------------------- ------ --- ------ ------
Total 10,791 497 49 11,337 13,910 624 20 826 54
----------------------------- ------ --- ------ ------ ---
Risk and capital management
Credit risk - Banking activities continued ( reviewed )
Flow statement
The flow statement that follows shows the main ECL and related
income statement movements. It also shows the changes in ECL as
well as the changes in related financial assets used in determining
ECL. Due to differences in scope, exposures may differ from those
reported in other tables, principally in relation to exposures in
Stage 1 and Stage 2. These differences do not have a material ECL
effect. Other points to note:
- Financial assets include treasury liquidity portfolios,
comprising balances at central banks and debt securities, as well
as loans. Both modelled and non-modelled portfolios are
included.
- Stage transfers (for example, exposures moving from Stage 1
into Stage 2) are a key feature of the ECL movements, with the net
re-measurement cost of transitioning to a worse stage being a
primary driver of income statement charges. Similarly, there is an
ECL benefit for accounts improving stage.
- Changes in risk parameters shows the reassessment of the ECL
within a given stage, including any ECL overlays and residual
income statement gains or losses at the point of write-off or
accounting write-down.
- Other (P&L only items) includes any subsequent changes in
the value of written-down assets along with other direct write-off
items such as direct recovery costs. Other (P&L only items)
affects the income statement but does not affect balance sheet ECL
movements.
- Amounts written-off represent the gross asset written-down
against accounts with ECL, including the net asset write-down for
any debt sale activity.
Stage 1 Stage 2 Stage 3 Total
--------------- --------------- --------------- ---------------
Financial Financial Financial Financial
assets ECL assets ECL assets ECL assets ECL
NWM Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- ---- --------- ---- --------- ---- --------- ----
At 1 January 2023 39,875 20 491 8 58 26 40,424 54
Currency translation and
other adjustments (1,197) - (14) - - - (1,211) -
Inter-Group transfers - - - - - - - -
Transfers from Stage 1 to
Stage 2 (223) (1) 223 1 - - - -
Transfers from Stage 2 to
Stage 1 226 3 (226) (3) - - - -
Net re-measurement of ECL
on stage transfer (2) 1 - (1)
Changes in risk parameters
(model inputs) (3) 1 - (2)
Other changes in net exposure 2,630 1 (140) (1) (28) - 2,462 -
Other (P&L only items) 2 - (4) (2)
------------------------------ --------- ---- --------- ---- --------- ---- --------- ----
Income statement releases (2) 1 (4) (5)
Amounts written-off - - (1) (1) (1) (1) (2) (2)
At 30 June 2023 41,311 18 333 6 29 25 41,673 49
------------------------------ --------- ---- --------- ---- --------- ---- --------- ----
Net carrying amount 41,293 327 4 41,624
------------------------------
At 1 January 2022 33,383 6 197 3 95 75 33,675 84
2022 movements 5,686 6 70 - (27) (38) 5,729 (32)
At 30 June 2022 39,069 12 267 3 68 37 39,404 52
------------------------------ --------- ---- --------- ---- --------- ---- --------- ----
Net carrying amount 39,057 264 31 39,352
------------------------------ --------- ---- --------- ---- --------- ---- --------- ----
- The net transfers between ECL stages were minimal, with the
overall change driven by changes in net exposure, partially offset
by currency translations and other adjustments.
Condensed consolidated income statement for the half year ended
30 June 2023 (unaudited)
Half year ended
-----------------
30 June 30 June
2023 2022
GBPm GBPm
--------
Interest receivable 895 243
Interest payable (817) (214)
-------
Net interest income 78 29
--------------------------------------- --------
Fees and commissions receivable 186 180
Fees and commissions payable (74) (77)
Income from trading activities 251 296
Other operating income (11) 10
-------
Non-interest income 352 409
--------------------------------------- --------
Total income 430 438
--------------------------------------- -------- -------
Staff costs (222) (213)
Premises and equipment (31) (25)
Other administrative expenses (274) (291)
Depreciation and amortisation (7) (11)
---------------------------------------
Operating expenses (534) (540)
--------------------------------------- -------- -------
Loss before impairment releases/losses (104) (102)
Impairment releases/(losses) 5 (5)
Operating loss before tax (99) (107)
Tax (charge)/credit (49) 21
--------------------------------------- -------
Loss for the period (148) (86)
--------------------------------------- -------- -------
Attributable to:
Ordinary shareholders (183) (120)
Paid-in equity holders 35 33
Non-controlling interests - 1
--------------------------------------- -------
(148) (86)
--------------------------------------- -------- -------
Condensed consolidated statement of comprehensive income
for the half year ended 30 June 2023 (unaudited)
Half year ended
-----------------
30 June 30 June
2023 2022
GBPm GBPm
--------------------------------------------------------- -------- -------
Loss for the period (148) (86)
--------------------------------------------------------- -------- -------
Items that do not qualify for reclassification
Remeasurement of retirement benefit schemes - (1)
Changes in fair value of credit in financial liabilities
designated at FVTPL (4) 91
FVOCI financial assets 3 1
Tax (1) (9)
--------------------------------------------------------- -------- -------
(2) 82
--------------------------------------------------------- -------- -------
Items that do qualify for reclassification
FVOCI financial assets 4 (17)
Cash flow hedges (104) (254)
Currency translation (144) 170
Tax (16) 78
--------------------------------------------------------- -------- -------
(260) (23)
--------------------------------------------------------- -------- -------
Other comprehensive (losses)/income after tax (262) 59
--------------------------------------------------------- -------- -------
Total comprehensive loss for the period (410) (27)
--------------------------------------------------------- -------- -------
Attributable to:
Ordinary shareholders (445) (60)
Paid-in equity holders 35 33
(410) (27)
--------------------------------------------------------- -------- -------
Condensed consolidated balance sheet as at 30 June 2023
(unaudited)
30 June 31 December
2023 2022
GBPm GBPm
Assets
Cash and balances at central banks 21,305 17,007
Trading assets 48,832 45,291
Derivatives 82,836 100,154
Settlement balances 11,600 2,558
Loans to banks - amortised cost 1,226 1,146
Loans to customers - amortised cost 9,870 10,171
Amounts due from holding company and fellow subsidiaries 1,297 740
Other financial assets 12,878 11,870
Other assets 689 832
--------------------------------------------------------- ------- -----------
Total assets 190,533 189,769
--------------------------------------------------------- ------- -----------
Liabilities
Bank deposits 2,701 3,069
Customer deposits 9,009 3,614
Amounts due to holding company and fellow subsidiaries 6,413 6,217
Settlement balances 9,959 2,010
Trading liabilities 56,109 52,792
Derivatives 77,099 93,585
Other financial liabilities 22,464 21,103
Other liabilities 584 816
--------------------------------------------------------- -----------
Total liabilities 184,338 183,206
--------------------------------------------------------- ------- -----------
Owners' equity 6,197 6,565
Non-controlling interests (2) (2)
--------------------------------------------------------- ------- -----------
Total equity 6,195 6,563
--------------------------------------------------------- ------- -----------
Total liabilities and equity 190,533 189,769
--------------------------------------------------------- ------- -----------
Condensed consolidated statement of changes in equity
for the half year ended 30 June 2023 (unaudited)
Half year ended
-----------------
30 June 30 June
2023 2022
GBPm GBPm
Called-up share capital - at beginning and end of period 400 400
--------------------------------------------------------- -------- -------
Share premium account - at beginning and end of period 1,946 1,946
--------------------------------------------------------- -------- -------
Paid-in equity - at beginning and end of period 904 904
--------------------------------------------------------- -------- -------
FVOCI reserve - at beginning of period 3 33
Unrealised gains/(losses) 7 (23)
Realised losses - 1
Tax (1) 4
At end of period 9 15
--------------------------------------------------------- -------- -------
Cash flow hedging reserve - at beginning of period (294) 47
Amount recognised in equity (30) (238)
Amount transferred from equity to earnings (74) (16)
Tax (16) 74
At end of period (414) (133)
--------------------------------------------------------- -------- -------
Foreign exchange reserve - at beginning of period 232 (13)
Retranslation of net assets (181) 213
Foreign currency gains/(losses) on hedges of net assets 36 (42)
Recycled to profit or loss on disposal of businesses 1 -
At end of period 88 158
--------------------------------------------------------- -------- -------
Retained earnings - at beginning of period 3,374 4,138
Loss attributable to ordinary shareholders and other
equity owners (148) (87)
Paid-in equity dividends paid (35) (33)
Ordinary dividends paid - (250)
Capital contribution (1) 96 -
Realised gains in period on FVOCI equity shares - 6
Remeasurement of the retirement benefit schemes - (1)
Changes in fair value of credit in financial liabilities
designated at FVTPL
- gross (4) 91
- tax - (9)
Share-based payments
- gross (19) (26)
- tax - (1)
At end of period 3,264 3,828
--------------------------------------------------------- -------- -------
Owners' equity at end of period 6,197 7,118
--------------------------------------------------------- -------- -------
Non-controlling interests - at beginning of period (2) (3)
Currency translation adjustments and other movements - (1)
Profit attributable to non-controlling interests - 1
At end of period (2) (3)
--------------------------------------------------------- -------- -------
Total equity at end of period 6,195 7,115
--------------------------------------------------------- -------- -------
Attributable to:
Ordinary shareholders 5,293 6,214
Paid-in equity holders 904 904
Non-controlling interests (2) (3)
6,195 7,115
--------------------------------------------------------- -------- -------
(1) During H1 2023, NatWest Markets invoked a claim against the
parent, NatWest Group plc, in respect of a legacy (non-trading)
matter which was covered by an indemnity agreement. This resulted
in a capital contribution.
Condensed consolidated cash flow statement for the half year
ended 30 June 2023 (unaudited)
Half year ended
-----------------
30 June 30 June
2023 2022
GBPm GBPm
-------------------------------------------------------------- -------- -------
Operating activities
Operating loss before tax (99) (107)
Adjustments for non-cash and other items 263 (634)
-------------------------------------------------------------- -------- -------
Net cash flows from trading activities 164 (741)
Changes in operating assets and liabilities 7,164 13,593
-------------------------------------------------------------- -------- -------
Net cash flows from operating activities before tax 7,328 12,852
Income taxes received/(paid) 69 (36)
-------------------------------------------------------------- -------- -------
Net cash flows from operating activities 7,397 12,816
Net cash flows from investing activities (425) (2,106)
Net cash flows from financing activities (911) (1,572)
Effects of exchange rate changes on cash and cash equivalents (751) 1,040
-------------------------------------------------------------- -------- -------
Net increase in cash and cash equivalents 5,310 10,178
Cash and cash equivalents at beginning of period 26,828 25,250
-------------------------------------------------------------- -------- -------
Cash and cash equivalents at end of period 32,138 35,428
-------------------------------------------------------------- -------- -------
Notes
1. Presentation of condensed consolidated financial
statements
The condensed consolidated financial statements should be read
in conjunction with NatWest Markets Plc's 2022 Annual Report and
Accounts. The accounting policies are the same as those applied in
the consolidated financial statements.
The directors have prepared the condensed consolidated financial
statements on a going concern basis after assessing the principal
risks, forecasts, projections and other relevant evidence over the
twelve months from the date they are approved and in accordance
with IAS 34 'Interim Financial Reporting', as adopted by the UK and
as issued by the International Accounting Standards Board (IASB),
and the Disclosure Guidance and Transparency Rules sourcebook of
the UK's Financial Conduct Authority.
Amendments to IFRS effective from 1 January 2023 had no material
effect on the condensed consolidated financial statements.
2. Non-interest income
Half year ended
-----------------
30 June 30 June
2023 2022
GBPm GBPm
---------------------------------------------------------------- -------- -------
Net fees and commissions
Fees and commissions receivable
- Lending and financing 39 46
- Brokerage 20 21
- Underwriting fees 71 64
- Other 56 49
---------------------------------------------------------------- -------- -------
Total 186 180
---------------------------------------------------------------- -------- -------
Fees and commissions payable (74) (77)
---------------------------------------------------------------- -------- -------
112 103
---------------------------------------------------------------- -------- -------
Income from trading activities
Foreign exchange 64 148
Interest rate 212 63
Credit (34) 33
Changes in fair value of own debt and derivative liabilities
attributable to own credit risk
- debt securities in issue 9 52
---------------------------------------------------------------- -------- -------
251 296
---------------------------------------------------------------- -------- -------
Other operating income
Loss on redemption of own debt (14) -
Changes in fair value of financial assets and liabilities
designated at fair value through profit or loss (1) (7) 21
Changes in fair value of other financial assets and liabilities
designated at fair value through profit
or loss 5 10
Other income 5 (21)
---------------------------------------------------------------- -------- -------
(11) 10
---------------------------------------------------------------- -------- -------
Non-interest income 352 409
---------------------------------------------------------------- -------- -------
(1) Includes related derivatives.
Notes
3. Operating expenses
Half year ended
-----------------
30 June 30 June
2023 2022
GBPm GBPm
Salaries 130 121
Bonus awards 59 57
Temporary and contract costs 3 2
Social security costs 23 22
Pension costs 7 11
- defined benefit schemes (3) 3
- defined contribution schemes 10 8
---------------------------------- -------- -------
Staff costs 222 213
---------------------------------- -------- -------
Premises and equipment 31 25
Depreciation and amortisation 7 11
Other administrative expenses (1) 274 291
Administrative expenses 312 327
---------------------------------- -------- -------
Operating expenses 534 540
---------------------------------- -------- -------
(1) Includes GBP258 million (30 June 2022 - GBP255 million) of recharges
from other NatWest Group entities, mainly NWB Plc which provides the
majority of shared services (including technology) and operational processes.
Also included are litigation and other regulatory costs.
4. Tax
The actual tax credit differs from the expected tax credit
computed by applying the standard UK corporation tax rate of 23.5%
(2022 - 19%), as analysed below:
Half year ended
-----------------
30 June 30 June
2023 2022
GBPm GBPm
------------------------------------------------------------- -------- -------
Loss before tax (99) (107)
------------------------------------------------------------- -------- -------
Expected tax credit 23 20
Losses and temporary differences in period where no deferred
tax asset recognised - (12)
Foreign profits taxed at other rates (2) 2
Items not allowed for tax:
- losses on disposals and write-downs - (1)
- UK bank levy (2) (1)
- regulatory and legal actions 2 (2)
Non-taxable items 7 1
Losses brought forward and utilised 8 -
Decrease in the carrying value of deferred tax assets
in respect of UK losses (3) (21)
Banking surcharge 8 6
Tax on paid-in equity 5 7
UK tax rate change impact - 22
Adjustments in respect of prior periods (95) -
------------------------------------------------------------- -------- -------
Actual tax (charge)/credit (49) 21
------------------------------------------------------------- -------- -------
At 30 June 2023, NWM Group has recognised a deferred tax asset
of GBP43 million (31 December 2022 - GBP46 million) and a deferred
tax liability of GBP84 million (31 December 2022 - GBP101 million).
These amounts include deferred tax assets recognised in respect of
trading losses of GBP42 million (31 December 2022 - GBP49 million).
NWM Group has considered the carrying value of these assets as at
30 June 2023 and concluded that they are recoverable.
Notes
5. Financial instruments - classification
The following tables analyse financial assets and liabilities in
accordance with the categories of financial instruments in IFRS
9.
Amortised Other
MFVTPL FVOCI cost assets Total
GBPm GBPm GBPm GBPm GBPm
------------------------------------ ------- ----- --------- ------ -------
Assets
Cash and balances at central banks 21,305 21,305
Trading assets 48,832 48,832
Derivatives (1) 82,836 82,836
Settlement balances 11,600 11,600
Loans to banks - amortised cost (2) 1,226 1,226
Loans to customers - amortised cost 9,870 9,870
Amounts due from holding company
and fellow subsidiaries 120 - 1,148 29 1,297
Other financial assets 45 5,635 7,198 12,878
Other assets 689 689
------------------------------------ ------ -------
30 June 2023 131,833 5,635 52,347 718 190,533
------------------------------------ ------- ----- --------- ------ -------
Cash and balances at central banks 17,007 17,007
Trading assets 45,291 45,291
Derivatives (1) 100,154 100,154
Settlement balances 2,558 2,558
Loans to banks - amortised cost (2) 1,146 1,146
Loans to customers - amortised cost 10,171 10,171
Amounts due from holding company
and fellow subsidiaries 274 - 438 28 740
Other financial assets 80 6,040 5,750 11,870
Other assets 832 832
------------------------------------ ------ -------
31 December 2022 145,799 6,040 37,070 860 189,769
------------------------------------ ------- ----- --------- ------ -------
Held-for- Amortised Other
trading DFV cost liabilities Total
GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- ----- --------- ----------- -------
Liabilities
Bank deposits (3) 2,701 2,701
Customer deposits 9,009 9,009
Amounts due to holding company and
fellow subsidiaries 1,462 - 4,871 80 6,413
Settlement balances 9,959 9,959
Trading liabilities 56,109 56,109
Derivatives (1) 77,099 77,099
Other financial liabilities 2,602 19,862 22,464
Other liabilities (4) 50 534 584
----------------------------------- --------- ----- --------- ----------- -------
30 June 2023 134,670 2,602 46,452 614 184,338
----------------------------------- --------- ----- --------- ----------- -------
Bank deposits (3) 3,069 3,069
Customer deposits 3,614 3,614
Amounts due to holding company and
fellow subsidiaries 1,129 - 4,884 204 6,217
Settlement balances 2,010 2,010
Trading liabilities 52,792 52,792
Derivatives (1) 93,585 93,585
Other financial liabilities 2,722 18,381 21,103
Other liabilities (4) 53 763 816
----------------------------------- --------- ----- --------- ----------- -------
31 December 2022 147,506 2,722 32,011 967 183,206
----------------------------------- --------- ----- --------- ----------- -------
(1) Includes net hedging derivative assets of GBP51 million (31 December
2022 - GBP122 million) and net hedging derivative liabilities of
GBP328 million (31 December 2022 - GBP170 million).
(2) Includes items in the course of collection from other banks of GBP108
million (31 December 2022 - GBP156 million).
(3) Includes items in the course of transmission to other banks of GBP44
million (31 December 2022 - GBP236 million).
(4) Includes lease liabilities of GBP45 million (31 December 2022 - GBP47
million), held at amortised cost.
Notes
5. Financial instruments - classification continued
NWM Group's financial assets and liabilities include amounts due
from/to the holding company and fellow subsidiaries as below:
30 June 2023 31 December 2022
---------------------------- ----------------------------
Holding Fellow Holding Fellow
company subsidiaries Total company subsidiaries Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------- ------------ ----- ------- ------------ -----
Assets
Trading assets - 120 120 - 274 274
Loans to banks - amortised
cost - 1,118 1,118 - 406 406
Loans to customers - amortised
cost 17 13 30 18 12 30
Settlement balances - - - - 2 2
Other assets - 29 29 - 28 28
-------------------------------
Amounts due from holding
company and
fellow subsidiaries 17 1,280 1,297 18 722 740
------------------------------- ------- ------------ ----- ------- ------------ -----
Derivatives (1) 1,226 645 1,871 1,074 569 1,643
------------------------------- ------- ------------ ----- ------- ------------ -----
Liabilities
Bank deposits - amortised
cost - 333 333 - 108 108
Customer deposits - amortised
cost - 99 99 - 51 51
Trading liabilities 1,046 416 1,462 811 318 1,129
Settlement balances - 456 456 - 26 26
Other financial liabilities
- subordinated liabilities 980 - 980 1,519 - 1,519
MREL instruments issued to
NatWest Group plc 3,000 - 3,000 3,173 - 3,173
Other liabilities - 83 83 16 195 211
-------------------------------
Amounts due to holding company
and
fellow subsidiaries 5,026 1,387 6,413 5,519 698 6,217
------------------------------- ------- ------------ ----- ------- ------------ -----
Derivatives (1) 165 349 514 252 364 616
------------------------------- ------- ------------ ----- ------- ------------ -----
(1) Intercompany derivatives are included within derivatives
classification on the balance sheet.
Notes
5 . Financial instruments - valuation
Disclosures relating to the control environment, valuation
techniques and related aspects pertaining to financial instruments
measured at fair value are included in NatWest Markets Plc's 2022
Annual Report and Accounts. Valuation, sensitivity methodologies
and inputs at 30 June 2023 are consistent with those described in
Note 10 to NatWest Markets Plc's 2022 Annual Report and
Accounts.
Fair value hierarchy
The table below shows the assets and liabilities held by NWM
Group split by fair value hierarchy level. Level 1 are considered
the most liquid instruments, and level 3 the most illiquid, valued
using expert judgment and hence carry the most significant price
uncertainty.
30 June 2023 31 December 2022
------------------------------- -------------------------------
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------ ------- ----- ------- ------ ------- ----- -------
Assets
Trading assets
Loans - 31,695 277 31,972 - 34,974 395 35,369
Securities 13,099 3,761 - 16,860 7,463 2,458 1 9,922
Derivatives 1 81,891 944 82,836 5 99,126 1,023 100,154
Amount due from holding
company
and fellow subsidiaries - 120 - 120 - 274 - 274
Other financial assets
Loans - - 137 137 - 34 160 194
Securities 4,360 1,101 82 5,543 4,958 891 77 5,926
------------------------------
Total financial assets
held at fair value 17,460 118,568 1,440 137,468 12,426 137,757 1,656 151,839
------------------------------ ------ ------- ----- ------- ------ ------- ----- -------
As % of total fair value
assets 13% 86% 1% 8% 91% 1%
------------------------------ ------ ------- ----- ------- ------ ------- ----- -------
Liabilities
Amount due to holding company
and fellow subsidiaries - 1,462 - 1,462 - 1,129 - 1,129
Trading liabilities
Deposits - 44,183 1 44,184 - 42,470 1 42,471
Debt securities in issue - 713 1 714 - 797 - 797
Short positions 9,142 2,069 - 11,211 7,462 2,062 - 9,524
Derivatives 1 76,177 921 77,099 2 92,584 999 93,585
Other financial liabilities
Deposits - 1,062 - 1,062 - 1,050 - 1,050
Debt securities in issue - 1,323 - 1,323 - 1,327 - 1,327
Subordinated liabilities - 217 - 217 - 345 - 345
------------------------------ ------ ------- ----- ------- ------ ------- ----- -------
Total financial liabilities
held at fair value 9,143 127,206 923 137,272 7,464 141,764 1,000 150,228
------------------------------ ------ ------- ----- ------- ------ ------- ----- -------
As % of total fair value
liabilities 7% 92% 1% 5% 94% 1%
------------------------------ ------ ------- ----- ------- ------ ------- ----- -------
(1) Level 1 - Instruments valued using unadjusted quoted prices in active
and liquid markets, for identical financial instruments. Examples
include government bonds, listed equity shares and certain exchange-traded
derivatives.
Level 2 - Instruments valued using valuation techniques that have
observable inputs. Observable inputs are those that are readily available
with limited adjustments required. Examples include most government
agency securities, investment-grade corporate bonds, certain mortgage
products - including CLOs, most bank loans, repos and reverse repos,
state and municipal obligations, most notes issued, certain money
market securities, loan commitments and most OTC derivatives.
Level 3 - Instruments valued using a valuation technique where at
least one input which could have a significant effect on the instrument's
valuation, is not based on observable market data. Examples include
non-derivative instruments which trade infrequently, certain syndicated
and commercial mortgage loans, private equity, and derivatives with
unobservable model inputs.
(2) Transfers between levels are deemed to have occurred at the beginning
of the quarter in which the instruments were transferred.
(3) For an analysis of debt securities held at mandatorily fair value
through profit or loss by issuer as well as ratings and derivatives,
by type and contract, refer to Risk and capital management - Credit
risk.
Notes
5 . Financial instruments - valuation continued
Valuation adjustments
When valuing financial instruments in the trading book,
adjustments are made to mid-market valuations to cover bid-offer
spread, funding and credit risk. These adjustments are presented in
the table below. For further information refer to the descriptions
of valuation adjustments within 'Financial instruments - valuation'
on page 133 of NatWest Markets Plc's 2022 Annual Report and
Accounts.
30 June 31 December
2023 2022
--------------------------
GBPm GBPm
-------------------------- ------- -----------
Funding - FVA - 7
Credit - CVA 253 300
Bid - Offer 74 103
Product and deal specific 117 140
-------------------------- ------- -----------
Total 444 550
-------------------------- ------- -----------
- Valuation reserves comprising credit valuation adjustments
(CVA), funding valuation adjustment (FVA), bid-offer and product
and deal specific reserves, decreased to GBP444 million at 30 June
2023 (31 December 2022 - GBP550 million).
- The decreases in CVA and FVA were driven by a reduction in
underlying derivative exposures, with the decrease in FVA primarily
driven by increases in interest rates, and the decrease in CVA
driven by a combination of tighter credit spreads and increases in
interest rates. The decrease in bid-offer was driven by risk
reduction over the period.
Level 3 sensitivities
The table below shows the high and low range of fair value of
the level 3 assets and liabilities.
30 June 2023 31 December 2022
------------------------------- -------------------------------
Level Favourable Unfavourable Level Favourable Unfavourable
3 3
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ----- ---------- ------------ ----- ---------- ------------
Assets
Trading assets
Loans 277 - - 395 10 (10)
Securities - - - 1 - -
Derivatives 944 30 (40) 1,023 50 (50)
Other financial assets
Loans 137 - - 160 - -
Securities 82 10 (10) 77 10 (10)
--------------------------- ----- ---------- ------------ ----- ---------- ------------
Total 1,440 40 (50) 1,656 70 (70)
--------------------------- ----- ---------- ------------ ----- ---------- ------------
Liabilities
Trading liabilities
Deposits 1 - - 1 - -
Debt securities in issue 1 - - - - -
Derivatives 921 30 (30) 999 30 (30)
---------------------------
Total 923 30 (30) 1,000 30 (30)
--------------------------- ----- ---------- ------------ ----- ---------- ------------
Alternative assumptions
Reasonably plausible alternative assumptions of unobservable
inputs are determined based on a specified target level of
certainty of 90%. Alternative assumptions are determined with
reference to all available evidence including consideration of the
following: quality of independent pricing information considering
consistency between different sources, variation over time,
perceived tradability or otherwise of available quotes; consensus
service dispersion ranges; volume of trading activity and market
bias (e.g. one-way inventory); day 1 profit or loss arising on new
trades; number and nature of market participants; market
conditions; modelling consistency in the market; size and nature of
risk; length of holding of position; and market intelligence.
Notes
5 . Financial instruments - valuation continued
Movement in level 3 assets and liabilities
The following table shows the movement in level 3 assets and
liabilities.
Half year ended 30 June Half year ended 30 June
2023 2022
--------------------------------------- ---------------------------------------
Other Other
Trading financial Total Total Trading financial Total Total
assets assets assets liabilities assets assets assets liabilities
(1) (2) (1) (2)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------- --------- ------ ----------- ------- --------- ------ -----------
At 1 January 1,419 237 1,656 1,000 1,808 156 1,964 617
Amounts recorded in the
income
statement (3) (82) (1) (83) (82) 33 (10) 23 148
Amount recorded in the
statement of
comprehensive income - 8 8 - - (22) (22) -
Level 3 transfers in 4 - 4 7 143 - 143 31
Level 3 transfers out (34) - (34) (5) (101) (1) (102) (36)
Purchases/originations 92 - 92 89 352 67 419 158
Settlements/other decreases (24) - (24) (27) (28) - (28) (15)
Sales (151) (24) (175) (54) (530) - (530) (139)
Foreign exchange and
other adjustments (3) (1) (4) (5) 3 - 3 2
---------------------------- ------- --------- ------ ----------- ------- --------- ------ -----------
At 30 June 1,221 219 1,440 923 1,680 190 1,870 766
---------------------------- ------- --------- ------ ----------- ------- --------- ------ -----------
Amounts recorded in the
income
statement in respect
of balances
held at period end:
- unrealised (82) (1) (83) (82) 33 (10) 23 148
---------------------------- ------- --------- ------ ----------- ------- --------- ------ -----------
(1) Trading assets comprise assets held at fair value in trading portfolios.
(2) Other financial assets comprise fair value through other comprehensive
income, designated as at fair value through profit or loss and other
fair value through profit or loss.
(3) Net losses of nil million on trading assets and liabilities (30 June
2022 - GBP115 million) were recorded in income from trading activities.
Net losses on other instruments of GBP1 million (30 June 2022 - GBP10
million) were recorded in other operating income and interest income
as appropriate.
Notes
5. Financial instruments - valuation continued
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 carried at amortised cost on the balance
sheet.
Items where
fair
value approximates Carrying Fair Fair value hierarchy
level
----------------------
carrying value value value Level Level
2 3
30 June 2023 GBPbn GBPbn GBPbn GBPbn GBPbn
------------------------------- ------------------ -------- ----- ---------- ----------
Financial assets
Cash and balances at central
banks 21.3
Settlement balances 11.6
Loans to banks 0.1 1.1 1.1 0.5 0.6
Loans to customers 9.9 9.9 0.5 9.4
Amounts due from holding
company
and fellow subsidiaries 0.1 1.0 1.0 - 1.0
Other financial assets -
securities 7.2 7.1 - 7.1
------------------------------- ------------------ -------- ----- ---------- ----------
31 December 2022
------------------------------- ------------------ -------- ----- ---------- ----------
Financial assets
Cash and balances at central
banks 17.0
Settlement balances 2.6
Loans to banks 0.1 1.0 1.0 0.5 0.5
Loans to customers 10.2 10.1 0.9 9.2
Amounts due from holding
company
and fellow subsidiaries 0.1 0.3 0.3 - 0.3
Other financial assets -
securities 5.8 5.7 - 5.7
------------------------------- ------------------ -------- ----- ---------- ----------
30 June 2023
------------------------------- ------------------ -------- ----- ---------- ----------
Financial liabilities
Bank deposits - 2.7 2.7 0.9 1.8
Customer deposits 0.1 8.9 8.9 0.2 8.7
Amounts due to holding company
and fellow subsidiaries 0.5 4.4 4.3 3.9 0.4
Settlement balances 10.0
Other financial liabilities
Debt securities in issue 19.8 19.2 15.4 3.8
Subordinated liabilities - - - -
------------------------------- ------------------ -------- ----- ---------- ----------
31 December 2022
------------------------------- ------------------ -------- ----- ---------- ----------
Financial liabilities
Bank deposits 0.3 2.8 2.8 0.8 2.0
Customer deposits 0.1 3.5 3.5 0.3 3.2
Amounts due to holding company
and fellow subsidiaries 0.2 4.7 4.6 4.6 -
Settlement balances 2.0
Other financial liabilities
Debt securities in issue 18.4 17.6 14.8 2.8
Subordinated liabilities 0.1 0.1 0.1 -
------------------------------- ------------------ -------- ----- ---------- ----------
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: cash and balances
at central banks, items in the course of collection from other
banks, settlement balances, items in the course of transmission to
other banks, 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, NWM Group's loans are segregated into
appropriate portfolios reflecting the characteristics of the
constituent loans. Two principal methods are used to estimate fair
value; contractual cash flows and expected cash flows.
Debt securities and subordinated liabilities
Most debt securities are valued using quoted prices in active
markets or from quoted prices of similar financial instruments in
active markets. For the remaining population, fair values are
determined using market standard valuation techniques, such as
discounted cash flows.
Bank and customer deposits
Fair values of deposits are estimated using discounted cash flow
valuation techniques.
Notes
6. Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities
held at fair value in trading portfolios.
30 June 31 December
2023 2022
GBPm GBPm
---------------------------------------- ------- -----------
Assets
Loans
Reverse repos 21,347 21,537
Collateral given 9,966 12,719
Other loans 659 1,113
Total loans 31,972 35,369
---------------------------------------- ------- -----------
Securities
Central and local government
- UK 2,703 2,205
- US 5,478 2,345
- Other 4,845 2,799
Financial institutions and Corporate 3,834 2,573
----------------------------------------
Total securities 16,860 9,922
---------------------------------------- ------- -----------
Total 48,832 45,291
---------------------------------------- ------- -----------
Liabilities
Deposits
Repos 27,808 23,740
Collateral received 15,161 17,663
Other deposits 1,215 1,068
Total deposits 44,184 42,471
---------------------------------------- ------- -----------
Debt securities in issue 714 797
Short positions 11,211 9,524
---------------------------------------- ------- -----------
Total 56,109 52,792
---------------------------------------- ------- -----------
Notes
7. Loan impairment provisions
Portfolio summary
The table below shows gross loans and ECL, by segment and stage,
within the scope of ECL framework .
30 June 31 December
2023 2022
GBPm GBPm
---------------------------------------------------- ------- -----------
Loans - amortised cost and fair value through other
comprehensive income (FVOCI)
Stage 1 10,809 10,791
Stage 2 304 497
Stage 3 29 49
Of which: individual 21 37
Of which: collective 8 12
Inter-Group (1) 1,148 434
---------------------------------------------------- -----------
Total 12,290 11,771
---------------------------------------------------- ------- -----------
ECL provisions
Stage 1 18 20
Stage 2 6 8
Stage 3 25 26
Of which: individual 17 15
Of which: collective 8 11
Inter-Group 1 -
---------------------------------------------------- -----------
Total 50 54
---------------------------------------------------- ------- -----------
ECL provisions coverage (2)
Stage 1 (%) 0.17 0.19
Stage 2 (%) 1.97 1.61
Stage 3 (%) 86.21 53.06
Inter-Group (%) 0.09 -
Total 0.44 0.48
---------------------------------------------------- ------- -----------
Half year ended
--------------------
30 June 30 June
2023 2022
GBPm GBPm
---------------------------------------------------- ------- -----------
Impairment losses
ECL charge/(release)
Stage 1 (2) 2
Stage 2 1 4
Stage 3 (4) (1)
Of which: individual (2) -
Of which: collective (2) (1)
Third party (5) 5
Inter-Group - -
----------------------------------------------------
Total (5) 5
---------------------------------------------------- ------- -----------
Amounts written-off 2 43
---------------------------------------------------- ------- -----------
(1) NWM Group's intercompany assets were classified in Stage 1. The ECL
for these loans was GBP0.6 million ( 31 December 2022 - GBP0.4 million).
(2) ECL provisions coverage is calculated as ECL provisions divided by
loans - amortised cost and FVOCI. It is calculated on third party
loans and total ECL provisions.
(3) The table shows gross loans only and excludes amounts that are outside
the scope of the ECL framework. For further details, refer to Financial
instruments within the scope of the IFRS 9 ECL framework on page
68 of the NatWest Markets Plc 2022 Annual Report and Accounts. Other
financial assets within the scope of the IFRS 9 ECL framework were
cash and balances at central banks totalling GBP21.3 billion (31
December 2022 - GBP17.0 billion) and debt securities of GBP12.8 billion
(31 December 2022 - GBP11.8 billion).
Notes
8. Provisions for liabilities and charges
Litigation
and other
regulatory Other (1) Total
GBPm GBPm GBPm
----------------------------------------- ---------- --------- -----
At 1 January 2023 225 49 274
Currency translation and other movements (7) (3) (10)
Charge to income statement 5 3 8
Release to income statement (33) (2) (35)
Provisions utilised (62) (12) (74)
----------------------------------------- ---------- --------- -----
At 30 June 2023 128 35 163
----------------------------------------- ---------- --------- -----
(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.
9. Dividends
No interim ordinary dividends were paid to NWM Plc's parent
company NatWest Group plc during H1 2023 (H1 2022 - GBP250
million).
10. Contingent liabilities and commitments
The amounts shown in the table below are intended only to
provide an indication of the volume of business outstanding at 30
June 2023. Although the NWM Group is exposed to credit risk in the
event of a customer's failure to meet its obligations, the amounts
shown do not, and are not intended to, provide any indication of
NWM Group's expectation of future losses.
30 June 31 December
2023 2022
GBPm GBPm
------------------------------------------------------- ------- -----------
Contingent liabilities and commitments
Guarantees 708 594
Other contingent liabilities 26 30
Standby facilities, credit lines and other commitments 13,903 13,973
------------------------------------------------------- ------- -----------
Total 14,637 14,597
------------------------------------------------------- ------- -----------
Commitments and contingent obligations are subject to NWM
Group's normal credit approval processes.
Risk-sharing arrangements
NWM Plc and NWM N.V. have limited risk-sharing arrangements in
place to facilitate the smooth provision of services to NatWest
Markets' customers. The arrangements include:
- The provision of a funded guarantee of up to GBP1.0 billion by
NWM Plc to NWM N.V. that limits certain NWM N.V.'s exposures to
large individual customer credits. Funding is provided by NWM Plc
deposits placed with NWM N.V. of not less than the guaranteed
amount. At 30 June 2023 the deposits amounted to GBP0.8 billion and
the guarantee fees in the period were GBP2.4 million.
- The provision of a funded and an unfunded guarantee by NWM Plc
in respect of NWM N.V.'s legacy portfolio. At 30 June 2023 the
exposure at default covered by the guarantees was approximately
GBP0.2 billion (of which GBP27 million was cash collateralised).
Fees of GBP0.7 million in relation to the guarantees were
recognised in the period.
Indemnity deed
In April 2019 NWM Plc and NWB Plc entered into a cross indemnity
agreement for losses incurred within the entities in relation to
business transferred to or from the ring-fenced bank under the
NatWest Group's structural re-organisation. Under the agreement,
NWM Plc is indemnified by NWB Plc against losses relating to NWB
Plc transferring businesses and ring-fenced bank obligations and
NWB Plc is indemnified by NWM Plc against losses relating to NWM
Plc transferring businesses and non-ring-fenced bank obligations
with effect from the relevant transfer date.
Notes
11. Litigation and regulatory matters
NWM Plc and its subsidiary and associated undertakings (NWM
Group) are party to legal proceedings and involved in regulatory
matters, including as the subject of investigations and other
regulatory and governmental action (Matters) in the United Kingdom
(UK), the United States (US), the European Union (EU) and other
jurisdictions.
NWM Group recognises a provision for a liability in relation to
these Matters when it is probable that an outflow of economic
benefits will be required to settle an obligation resulting from
past events, and a reliable estimate can be made of the amount of
the obligation.
In many of these Matters, it is not possible to determine
whether any loss is probable, or to estimate reliably the amount of
any loss, either as a direct consequence of the relevant
proceedings and regulatory matters or as a result of adverse
impacts or restrictions on NWM Group's reputation, businesses and
operations. Numerous legal and factual issues may need to be
resolved, including through potentially lengthy discovery and
document production exercises and determination of important
factual matters, and by addressing novel or unsettled legal
questions relevant to the proceedings in question, before a
liability can reasonably be estimated for any claim. NWM Group
cannot predict if, how, or when such claims will be resolved or
what the eventual settlement, damages, fine, penalty or other
relief, if any, may be, particularly for claims that are at an
early stage in their development or where claimants seek
substantial or indeterminate damages.
There are situations where NWM Group may pursue an approach that
in some instances leads to a settlement agreement. This may occur
in order to avoid the expense, management distraction or
reputational implications of continuing to contest liability, or in
order to take account of the risks inherent in defending claims or
regulatory matters, even for those Matters for which NWM Group
believes it has credible defences and should prevail on the merits.
The uncertainties inherent in all such Matters affect the amount
and timing of any potential outflows for both Matters with respect
to which provisions have been established and other contingent
liabilities in respect of any such Matter.
It is not practicable to provide an aggregate estimate of
potential liability for our legal proceedings and regulatory
matters as a class of contingent liabilities.
The future outflow of resources in respect of any Matter may
ultimately prove to be substantially greater than or less than the
aggregate provision that NWM Group has recognised. Where (and as
far as) liability cannot be reasonably estimated, no provision has
been recognised. NWM Group expects that in future periods,
additional provisions, settlement amounts and customer redress
payments will be necessary, in amounts that are expected to be
substantial in some instances. Please refer to Note 8 for
information on material provisions.
Matters which are, or could be material, having regard to NWM
Group, considered as a whole, in which NWM Group is currently
involved are set out below. We have provided information on the
procedural history of certain Matters, where we believe
appropriate, to aid the understanding of the Matter.
For a discussion of certain risks associated with NWM Group's
litigation and regulatory matters, see the Risk Factor relating to
legal, regulatory and governmental actions and investigations set
out on page 191 of the NatWest Markets Plc 2022 Annual Report and
Accounts.
Litigation
Residential mortgage-backed securities (RMBS) litigation in the
US
NatWest Markets Securities Inc. (NWMSI) was defending an
RMBS-related claim in the US in which the plaintiff, the Federal
Deposit Insurance Corporation (FDIC), alleged that certain
disclosures made in connection with the relevant offerings of RMBS
contained materially false or misleading statements and/or
omissions regarding the underwriting standards pursuant to which
the mortgage loans underlying the RMBS were issued. In June 2023,
NWMSI entered into an agreement to resolve that claim. The
settlement amount paid by NWMSI was covered by an existing
provision.
London Interbank Offered Rate (LIBOR) and other rates
litigation
NWM Plc and certain other members of NatWest Group, including
NatWest Group plc, are defendants in a number of class actions and
individual claims pending in the United States District Court for
the Southern District of New York (SDNY) with respect to the
setting of LIBOR and certain other benchmark interest rates. The
complaints allege that the NWM Group defendants and other panel
banks violated various federal laws, including the US commodities
and antitrust laws, and state statutory and common law, as well as
contracts, by manipulating LIBOR and prices of LIBOR-based
derivatives in various markets through various means.
Several purported class actions relating to USD LIBOR, as well
as more than two dozen non-class actions concerning USD LIBOR, are
part of a coordinated proceeding in the SDNY. The class actions
include claims on behalf of persons who purchased LIBOR-linked
instruments from defendants, bonds issued by defendants, persons
who transacted futures and options on exchanges, and lenders who
made LIBOR-based loans. The coordinated proceeding is currently in
the discovery phase. In March 2020, NatWest Group companies
finalised a settlement resolving the class action on behalf of
bondholder plaintiffs (those who held bonds issued by
non-defendants on which interest was paid from 2007 to 2010 at a
rate expressly tied to USD LIBOR). The amount of the settlement
(which was covered by an existing provision) was paid into escrow
pending court approval of the settlement.
The non-class claims filed in the SDNY include claims that the
FDIC is asserting on behalf of certain failed US banks. In July
2017, the FDIC, on behalf of 39 of those failed US banks, commenced
substantially similar claims against NWM Plc, NatWest Group plc and
others in the High Court of Justice of England and Wales. The
action alleges collusion with regard to the setting of USD LIBOR
and that the defendants breached UK and European competition law,
as well as asserting common law claims of fraud under US law. The
defendant banks consented to a request by the FDIC for
discontinuance of the claim in respect of 20 failed US banks,
leaving 19 failed US banks as claimants. The trial is currently
anticipated to take place in Q4 2025.
Notes
11. Litigation and regulatory matters continued
In addition to the USD LIBOR cases described above, there are
two class actions relating to JPY LIBOR and Euroyen TIBOR. The
first class action, which relates to Euroyen TIBOR futures
contracts, was dismissed by the SDNY in September 2020 on
jurisdictional and other grounds, and that decision was affirmed by
the United States Court of Appeals for the Second Circuit (US Court
of Appeals) in October 2022. The plaintiffs petitioned the court
for a rehearing of their appeal and that petition was denied. The
second class action, which relates to other derivatives allegedly
tied to JPY LIBOR and Euroyen TIBOR, was dismissed by the SDNY in
relation to NWM Plc and other NWM Group companies in September
2021. That dismissal may be the subject of a future appeal.
Two other IBOR-related class actions, concerning alleged
manipulation of Euribor and Pound Sterling LIBOR, were previously
dismissed by the SDNY for various reasons. The plaintiffs' appeals
in those two cases remain pending.
In June 2021, NWM Plc and the plaintiffs in the Swiss Franc
LIBOR class action finalised a settlement resolving that case. The
amount of that settlement has been paid into escrow pending final
court approval of the settlement.
In August 2020, a complaint was filed in the United States
District Court for the Northern District of California by several
United States retail borrowers against the USD ICE LIBOR panel
banks and their affiliates (including NatWest Group plc, NWM Plc,
NWMSI and NWB Plc), alleging (i) that the very process of setting
USD ICE LIBOR amounts to illegal price-fixing; and (ii) that banks
in the United States have illegally agreed to use LIBOR as a
component of price in variable retail loans. In September 2022, the
district court dismissed the complaint, subject to re-pleading by
the plaintiffs. The plaintiffs filed an amended complaint in
October 2022, which the defendants are again seeking to have
dismissed.
NWM Plc is also named as a defendant in a motion to certify a
class action relating to LIBOR in the Tel Aviv District Court in
Israel. NWM Plc filed a motion for cancellation of service outside
the jurisdiction, which was granted in July 2020. The claimants
appealed that decision and in November 2020 the appeal was refused
and the claim dismissed by the Appellate Court. The claim could in
future be recommenced depending on the outcome of an appeal to
Israel's Supreme Court in respect of the dismissal of the
substantive case against banks that had a presence in Israel.
FX litigation
NWM Plc, NWMSI and/or NatWest Group plc are defendants in
several cases relating to NWM Plc's foreign exchange (FX) business.
In 2015, NWM Plc paid US$255 million to settle the consolidated
antitrust class action filed in the SDNY on behalf of persons who
entered into over-the-counter FX transactions with defendants or
who traded FX instruments on exchanges. In 2018, some members of
the settlement class who opted out of that class action settlement
filed their own non-class complaint in the SDNY asserting antitrust
claims against NWM Plc, NWMSI and other banks.
In April 2019, some of the claimants in the opt-out case
described above, as well as others, served proceedings in the High
Court of Justice of England and Wales, asserting competition claims
against NWM Plc and several other banks. The claim was transferred
from the High Court of Justice of England and Wales in December
2021 and registered in the UK Competition Appeal Tribunal (CAT) in
January 2022. In March 2023, NWM Plc entered into an agreement to
resolve both the SDNY and CAT cases. The settlement amount paid by
NWM Plc was covered by an existing provision.
An FX-related class action, on behalf of 'consumers and end-user
businesses', was proceeding in the SDNY against NWM Plc and others.
In March 2023, the court granted summary judgment in favour of the
defendants, dismissing the plaintiffs' claims. The plaintiffs have
commenced an appeal of that decision as well as a prior decision
denying class certification in the case.
In May 2019, a cartel class action was filed in the Federal
Court of Australia against NWM Plc and four other banks on behalf
of persons who bought or sold currency through FX spots or forwards
between 1 January 2008 and 15 October 2013 with a total transaction
value exceeding AUD $0.5 million. The claimant has alleged that the
banks, including NWM Plc, contravened Australian competition law by
sharing information, coordinating conduct, widening spreads and
manipulating FX rates for certain currency pairs during this
period. NatWest Group plc and NWMSI have been named in the action
as 'other cartel participants', but are not respondents. The claim
was served in June 2019 and NWM Plc filed its defence in March
2022.
In July and December 2019, two separate applications seeking
opt-out collective proceedings orders were filed in the CAT against
NatWest Group plc, NWM Plc and other banks. Both applications were
brought on behalf of persons who, between 18 December 2007 and 31
January 2013, entered into a relevant FX spot or outright forward
transaction in the EEA with a relevant financial institution or on
an electronic communications network. In March 2022, the CAT
declined to certify as collective proceedings either of the
applications, which was appealed by the applicants, and the subject
of an application for judicial review. In July 2023, the Court of
Appeal allowed the appeal and decided that the claims should
proceed on an opt-out basis. Separately, the court determined which
of the two competing applicants can proceed as class
representative, and dismissed the application for judicial review
of the CAT's decision. Subject to any potential appeal to the UK
Supreme Court, the case will be remitted to the CAT for further
case management.
Two motions to certify FX-related class actions were filed in
the Tel Aviv District Court in Israel in September and October
2018, and were subsequently consolidated into one motion. The
consolidated motion to certify, which names The Royal Bank of
Scotland plc (now NWM Plc) and several other banks as defendants,
was served on NWM Plc in May 2020. The applicants have sought the
court's permission to amend their motions to certify the class
actions. NWM Plc has filed a motion challenging the permission
granted by the court for the applicants to serve the consolidated
motion outside the Israeli jurisdiction. That NWM Plc motion
remains pending.
Notes
11. Litigation and regulatory matters continued
In December 2021, a claim was filed in the Netherlands against
NatWest Group plc, NWM Plc and NWM N.V. by Stichting FX Claims on
behalf of a number of claimants, seeking a declaration from the
court that anti-competitive FX market conduct described in
decisions of the European Commission (EC) of 16 May 2019 is
unlawful, along with unspecified damages. The claimants amended
their claim to also refer to a December 2021 decision by the EC,
which described anti-competitive FX market conduct. The defendants
contested the jurisdiction of the Dutch court. In March 2023, the
district court in Amsterdam accepted that it has jurisdiction to
hear claims against NWM N.V. but refused jurisdiction to hear any
claims against the other defendant banks (including NatWest Group
plc and NWM Plc) unless the claimants are domiciled in the
Netherlands. Certain of the claimants are so domiciled and are
therefore permitted to continue with their claims against all
defendants, including NatWest Group plc and NWM Plc. The claimants
are appealing that decision. In June 2023, a new group of claimants
indicated their intention to join Stichting FX Claims to pursue
similar claims against the defendants.
Certain other foreign exchange transaction related claims have
been or may be threatened. NWM Group cannot predict whether all or
any of these claims will be pursued.
Government securities antitrust litigation
NWMSI and certain other US broker-dealers are defendants in a
consolidated antitrust class action in the SDNY on behalf of
persons who transacted in US Treasury securities or derivatives
based on such instruments, including futures and options. The
plaintiffs allege that the defendants rigged the US Treasury
securities auction bidding process to deflate prices at which they
bought such securities and colluded to increase the prices at which
they sold such securities to the plaintiffs. In March 2022, the
SDNY dismissed the complaint, without leave to re-plead. The
plaintiffs are appealing the dismissal.
Class action antitrust claims commenced in March 2019 are
pending in the SDNY against NWM Plc, NWMSI and other banks in
respect of Euro-denominated bonds issued by European central banks
(EGBs). The complaint alleges a conspiracy among dealers of EGBs to
widen the bid-ask spreads they quoted to customers, thereby
increasing the prices customers paid for the EGBs or decreasing the
prices at which customers sold the bonds. The class consists of
those who purchased or sold EGBs in the US between 2007 and 2012.
In March 2022, the SDNY dismissed the claims against NWM Plc and
NWMSI on the ground that the complaint's conspiracy allegations are
insufficient. The plaintiffs have filed a motion for permission to
file an amended complaint.
Swaps antitrust litigation
NWM Plc, NWMSI and NatWest Group plc, as well as a number of
other interest rate swap dealers, are defendants in several cases
pending in the SDNY alleging violations of the US antitrust laws in
the market for interest rate swaps. There is a consolidated class
action complaint on behalf of persons who entered into interest
rate swaps with the defendants, as well as non-class action claims
by three swap execution facilities (TeraExchange, Javelin, and
trueEx). The plaintiffs allege that the swap execution facilities
would have successfully established exchange-like trading of
interest rate swaps if the defendants had not unlawfully conspired
to prevent that from happening through boycotts and other means.
Discovery in these cases is complete, and the plaintiffs' motion
for class certification remains pending.
In June 2021, a class action antitrust complaint was filed
against a number of credit default swap dealers in New Mexico
federal court on behalf of persons who, from 2005 onwards, settled
credit default swaps in the United States by reference to the ISDA
credit default swap auction protocol. The complaint alleges that
the defendants conspired to manipulate that benchmark through
various means in violation of the antitrust laws and the Commodity
Exchange Act. The defendants filed a motion to dismiss the
complaint and, in June 2023, such motion was denied as regards
NWMSI and other financial institutions, but granted as regards to
NWM Plc on the ground that the court lacks jurisdiction over that
entity. As a result, the case is now expected to enter the
discovery phase as against the non-dismissed defendants.
Odd lot corporate bond trading antitrust litigation
In October 2021, the SDNY granted the defendants' motion to
dismiss the class action antitrust complaint alleging that from
August 2006 onwards various securities dealers, including NWMSI,
conspired artificially to widen spreads for odd lots of corporate
bonds bought or sold in the United States secondary market and to
boycott electronic trading platforms that would have allegedly
promoted pricing competition in the market for such bonds. The
plaintiffs have filed an appeal.
Spoofing litigation
In December 2021, three substantially similar class actions
complaints were filed in federal court in the United States against
NWM Plc and NWMSI alleging Commodity Exchange Act and common law
unjust enrichment claims arising from manipulative trading known as
spoofing. The complaints refer to NWM Plc's December 2021
spoofing-related guilty plea (described below under "US
investigations relating to fixed-income securities") and purport to
assert claims on behalf of those who transacted in US Treasury
securities and futures and options on US Treasury securities
between 2008 and 2018. In July 2022, defendants filed a motion to
dismiss these claims, which have been consolidated into one matter
in the United States District Court for the Northern District of
Illinois.
Madoff
NWM N.V. was named as a defendant in two actions filed by the
trustee for the bankrupt estates of Bernard L. Madoff and Bernard
L. Madoff Investment Securities LLC, in bankruptcy court in New
York, which together seek to clawback more than US$298 million that
NWM N.V. allegedly received from certain Madoff feeder funds and
certain swap counterparties. The claims were previously dismissed,
but as a result of an August 2021 decision by the US Court of
Appeals, they will now proceed in the bankruptcy court, where they
have been consolidated into one action, subject to NWM N.V.'s legal
and factual defences. In May 2022, NWM N.V. filed a motion to
dismiss the amended complaint in the consolidated action and such
motion was denied in March 2023. As a result, the case is now
expected to enter the discovery phase.
Notes
11. Litigation and regulatory matters continued
EUA trading litigation
NWM Plc was a named defendant in civil proceedings before the
High Court of Justice of England and Wales brought in 2015 by ten
companies (all in liquidation) (the 'Liquidated Companies') and
their respective liquidators (together, 'the Claimants'). The
Liquidated Companies previously traded in European Union Allowances
(EUAs) in 2009 and were alleged to be VAT defaulting traders within
(or otherwise connected to) EUA supply chains of which NWM Plc was
a party. In March 2020, the court held that NWM Plc and Mercuria
Energy Europe Trading Limited ('Mercuria') were liable for
dishonestly assisting and knowingly being a party to fraudulent
trading during a seven business day period in 2009.
In October 2020, the High Court quantified total damages against
NWM Plc and Mercuria at GBP45 million plus interest and costs, and
permitted the defendants to appeal to the Court of Appeal. In May
2021 the Court of Appeal set aside the High Court's judgment and
ordered that a retrial take place before a different High Court
judge. The claimants have been denied permission by the Supreme
Court to appeal that decision and the retrial is therefore expected
to proceed on a date to be scheduled. Mercuria has also been denied
permission by the Supreme Court to appeal the High Court's finding
that NWM Plc and Mercuria were both vicariously liable.
US Anti-Terrorism Act litigation
NWM N.V. and certain other financial institutions are defendants
in several actions filed by a number of US nationals (or their
estates, survivors, or heirs), most of whom are or were US military
personnel, who were killed or injured in attacks in Iraq between
2003 and 2011. NWM Plc is also a defendant in some of these
cases.
According to the plaintiffs' allegations, the defendants are
liable for damages arising from the attacks because they allegedly
conspired with and/or aided and abetted Iran and certain Iranian
banks to assist Iran in transferring money to Hezbollah and the
Iraqi terror cells that committed the attacks, in violation of the
US Anti-Terrorism Act, by agreeing to engage in 'stripping' of
transactions initiated by the Iranian banks so that the Iranian
nexus to the transactions would not be detected.
The first of these actions, alleging conspiracy claims but not
aiding and abetting claims, was filed in the United States District
Court for the Eastern District of New York in November 2014. In
September 2019, the district court dismissed the case, finding that
the claims were deficient for several reasons, including lack of
sufficient allegations as to the alleged conspiracy and causation.
In January 2023, the US Court of Appeals affirmed the district
court's dismissal of this case. It is anticipated that the
plaintiffs will file a motion to re-open the case to assert aiding
and abetting claims that they previously did not assert. Another
action, filed in the SDNY in 2017, which asserted both conspiracy
and aiding and abetting claims, was dismissed by the SDNY in March
2019 on similar grounds as the first case, but remains subject to
appeal to the US Court of Appeals. Other follow-on actions that are
substantially similar to those described above are pending in the
same courts.
1MDB litigation
A Malaysian court claim was served in Switzerland in November
2022 by 1MDB, a Sovereign Wealth Fund, in which Coutts & Co Ltd
was named, along with six others, as a defendant in respect of
losses allegedly incurred by 1MDB. It is claimed that Coutts &
Co Ltd is liable as a constructive trustee for having dishonestly
assisted the directors of 1MDB in the breach of their fiduciary
duties by failing (amongst other alleged claims) to undertake due
diligence in relation to a customer of Coutts & Co Ltd, through
which funds totalling c.US$1 billion were received and paid out
between 2009 and 2011. The claimant seeks the return of that amount
plus interest. Coutts & Co Ltd filed an application in January
2023 challenging the validity of service and the Malaysian court's
jurisdiction to hear the claim.
In April 2023, the claimant filed a notice of discontinuance of
its claim against certain defendants including Coutts & Co Ltd.
The claimant subsequently indicated that it intends to issue
further replacement proceedings. Coutts & Co Ltd is challenging
the claimant's ability to take that step and a hearing took place
in the Malaysian Court in June 2023 to consider the validity of any
new proceedings. Judgment is awaited.
Coutts & Co Ltd is a company registered in Switzerland and
is in wind-down following the announced sale of its business assets
in 2015.
Regulatory matters (including investigations)
NWM Group's financial condition can be affected by the actions
of various governmental and regulatory authorities in the UK, the
US, the EU and elsewhere. NWM Group companies have engaged, and
will continue to engage, in discussions with relevant governmental
and regulatory authorities, including in the UK, the US, the EU and
elsewhere, on an ongoing and regular basis, and in response to
informal and formal inquiries or investigations, regarding
operational, systems and control evaluations and issues including
those related to compliance with applicable laws and regulations,
including consumer protection, investment advice, business conduct,
competition/anti-trust, VAT recovery, anti-bribery, anti-money
laundering and sanctions regimes.
Any matters discussed or identified during such discussions and
inquiries may result in, among other things, further inquiry or
investigation, other action being taken by governmental and
regulatory authorities, increased costs being incurred by NWM
Group, remediation of systems and controls, public or private
censure, restriction of NWM Group's business activities and/or
fines. Any of the events or circumstances mentioned in this
paragraph or below could have a material adverse effect on NWM
Group, its business, authorisations and licences, reputation,
results of operations or the price of securities issued by it, or
lead to material additional provisions being taken.
NWM Group is co-operating fully with the matters described
below.
Notes
11. Litigation and regulatory matters continued
US investigations relating to fixed-income securities
In December 2021, NWM Plc pled guilty in the United States
District Court for the District of Connecticut to one count of wire
fraud and one count of securities fraud in connection with
historical spoofing conduct by former employees in US Treasuries
markets between January 2008 and May 2014 and, separately, during
approximately three months in 2018. The 2018 trading occurred
during the term of a non-prosecution agreement (NPA) between NWMSI
and the United States Attorney's Office for the District of
Connecticut (USAO CT), under which non-prosecution was conditioned
on NWMSI and affiliated companies not engaging in criminal conduct
during the term of the NPA. The relevant trading in 2018 was
conducted by two NWM traders in Singapore and breached that NPA.
The plea agreement reached with the US Department of Justice and
the USAO CT resolved both the spoofing conduct and the breach of
the NPA.
As required by the resolution and sentence imposed by the court,
NWM Plc is subject to a three-year period of probation. The plea
agreement also imposes an independent corporate monitor. In
addition, NWM Plc has committed to compliance programme reviews and
improvements and agreed to reporting and co-operation
obligations.
Other material adverse collateral consequences may occur as a
result of this matter, as further described in the Risk Factor
relating to legal, regulatory and governmental actions and
investigations set out on page 191 of the NatWest Markets Plc 2022
Annual Report and Accounts.
12. Related party transactions
UK Government
The UK Government through HM Treasury is the ultimate
controlling party of NatWest Group plc. The UK Government's
shareholding is managed by UK Government Investments Limited, a
company wholly owned by the UK Government. As a result the UK
Government and UK Government controlled bodies are related parties
of the Group.
At 30 June 2023 HM Treasury's holding in the NatWest Group's
ordinary shares was 38.53%.
NWM Group enters into transactions with many of these bodies.
Transactions include the payment of: taxes - principally UK
corporation tax and value added tax; national insurance
contributions; local authority rates; regulatory fees and levies;
together with banking transactions such as loans and deposits
undertaken in the normal course of banker customer
relationships.
Bank of England facilities
In the ordinary course of business, NWM Group may from time to
time access market-wide facilities provided by the Bank of
England.
Other related parties
(a) In their roles as providers of finance, NWM Group companies
provide development and other types of capital support to
businesses. These investments are made in the normal course of
business.
(b) To further strategic partnerships, NWM Group may seek to
invest in third parties or allow third parties to hold a minority
interest in a subsidiary of NWM Group. We disclose as related
parties where stakes of 10 per cent or more are held. Ongoing
business transactions with these entities are on normal commercial
terms.
(c) NWM Group is recharged from other NatWest Group entities,
mainly NWB Plc which provides the majority of shared services
(including technology) and operational processes.
(d) In accordance with IAS 24, transactions or balances between
NWM Group entities that have been eliminated on consolidation are
not reported.
Full details of NWM Group's related party transactions for the
year ended 31 December 2022 are included in the NatWest Markets Plc
2022 Annual Report and Accounts.
13. Post balance sheet events
Other than as disclosed in this document, there have been no
other significant events between 30 June 2023 and the date of
approval of this announcement which would require a change to or
additional disclosure in the announcement.
14. Date of approval
This announcement was approved by the Board of Directors on 27
July 2023.
Independent review report to NatWest Markets Plc
Conclusion
We have been engaged by NatWest Markets plc ("the Group") to
review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 which
comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the
condensed consolidated balance sheet, the condensed consolidated
statement of changes in equity, the condensed consolidated cash
flow statement, and related Notes 1 to 14, and the Risk and capital
management disclosures for those identified as within the scope of
our review. We have read the other information contained in the
half yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with UK adopted International
Accounting Standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Group a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Group in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the Group,
for our work, for this report, or for the conclusions we have
formed.
Ernst & Young LLP
London, United Kingdom
27 July 2023
NatWest Markets Plc Summary Risk Factors
Summary of Principal risks and uncertainties
Set out below is a summary of the principal risks and
uncertainties for the remaining six months of the financial year
which could adversely affect NWM Group. This summary should not be
regarded as a complete and comprehensive statement of all potential
risks and uncertainties; a fuller description of these and other
risk factors is included on pages 173 to 193 of the NatWest Markets
Plc 2022 Annual Report and Accounts and pages 15 to 48 of the NWM
Plc Registration Document dated 15 March 2023 (as supplemented and
amended from time to time). Any of the risks identified may have a
material adverse effect on NWM Group's business, operations,
financial condition or prospects.
Economic and political risk
- NWM Group, its customers and its counterparties face continued
economic and political risks and uncertainties in the UK and global
markets, including as a result of high inflation and rising
interest rates, supply chain disruption, and the Russian invasion
of Ukraine.
- Fluctuations in currency exchange rates may adversely affect
NWM Group's results and financial condition.
- Changes in interest rates have affected, and will continue to
affect, NWM Group's business and results.
- Continuing uncertainty regarding the effects and extent of the
UK's post Brexit divergence from EU laws and regulation, and NWM
Group's post Brexit EU operating model may adversely affect NWM
Group and its operating environment. As of 30 June 2023, NWM N.V.
surpassed a balance sheet total of EUR 30 billion at the regulatory
consolidated level. By exceeding this threshold, NWM N.V. will most
likely qualify as a "significant institution" in the foreseeable
future, which may result in changes to supervision and regulations
applicable to it. This could impact NWM Group's business strategy,
operating model and prudential requirements.
- HM Treasury (or UKGI on its behalf) could exercise a
significant degree of influence over NatWest Group and NWM Group is
controlled by NatWest Group.
Strategic risk
- NWM Group has been in a period of significant structural and
other change, including as a result of NatWest Group's purpose-led
strategy and NatWest Group's recent creation of its C&I
business segment (of which NWM Group forms part) and may continue
to be subject to significant structural and other change.
Financial resilience risk
- NWM Group may not meet the targets it communicates, generate
returns or implement its strategy effectively.
- NWM Plc and/or its regulated subsidiaries may not meet the
prudential regulatory requirements for regulatory capital.
- NWM Group is reliant on access to the capital markets to meet
its funding requirements, both directly through wholesale markets,
and indirectly through its parent (NatWest Group) for the
subscription to its internal capital and MREL. The inability to do
so may adversely affect NWM Group.
- NWM Group may not be able to adequately access sources of liquidity and funding.
- NWM Plc and/or its regulated subsidiaries may not manage their
capital, liquidity or funding effectively which could trigger the
execution of certain management actions or recovery options.
- Any reduction in the credit rating and/or outlooks assigned to
NatWest Group plc, any of its subsidiaries (including NWM Plc or
NWM Group subsidiaries) or any of their respective debt securities
could adversely affect the availability of funding for NWM Group,
reduce NWM Group's liquidity position and increase the cost of
funding.
- NWM Group operates in markets that are highly competitive,
with increasing competitive pressures and technology
disruption.
- NWM Group may be adversely affected if NatWest Group fails to
meet the requirements of regulatory stress tests.
- NWM Group has significant exposure to counterparty and borrower risk.
- NWM Group could incur losses or be required to maintain higher
levels of capital as a result of limitations or failure of various
models.
- NWM Group's financial statements are sensitive to underlying
accounting policies, judgments, estimates and assumptions.
- Changes in accounting standards may materially impact NWM Group's financial results.
- NatWest Group is subject to Bank of England and PRA oversight
in respect of resolution, and NatWest Group could be adversely
affected should the Bank of England in the future deem NatWest
Group's preparations to be inadequate.
- NatWest Group (including NWM Group) may become subject to the
application of UK statutory stabilisation or resolution powers
which may result in, for example, the write-down or conversion of
NWM Group entities' Eligible Liabilities.
Climate and sustainability-related risks
- NWM Group and its customers, suppliers and counterparties face significant climate and sustainability-related risks, which may adversely affect NWM Group.
- NatWest Group's climate change related strategy, ambitions,
targets and transition plan entail significant execution and
reputational risk and are unlikely to be achieved without
significant and timely government policy, technology and customer
behavioural changes.
- There are significant limitations related to accessing
reliable, verifiable and comparable climate and other
sustainability-related data, including as a result of lack of
standardisation, consistency and completeness which, alongside
other factors, contribute to substantial uncertainties in
accurately modelling and reporting on climate and sustainability
information, as well as making appropriate important internal
decisions.
- A failure to implement effective climate change resilient
governance, procedures, systems and controls in compliance with
legal and regulatory expectations to manage climate and
sustainability-related risks and opportunities could adversely
affect NWM Group's ability to manage those risks.
- Increasing levels of climate, environmental, human rights and
other sustainability-related laws, regulation and oversight which
are constantly evolving may adversely affect NWM Group.
-
NatWest Markets Plc Summary Risk Factors
Summary of Principal risks and uncertainties continued
- NWM Group may be subject to potential climate, environmental,
human rights and other sustainability-related litigation,
enforcement proceedings, investigations and conduct risk.
- A reduction in the ESG ratings of NatWest Group (including NWM
Group) or NWM Group could have a negative impact on NatWest Group's
(including NWM Group's) or NWM Group's reputation and on investors'
risk appetite and customers' willingness to deal with NatWest Group
(including NWM Group) or NWM Group.
Operational and IT resilience risk
- Operational risks (including reliance on third party suppliers
and outsourcing of certain activities) are inherent in NWM Group's
businesses.
- NWM Group is subject to increasingly sophisticated and frequent cyberattacks.
- NWM Group operations and strategy are highly dependent on the
accuracy and effective use of data.
- NWM Group relies on attracting, retaining, developing and
remunerating diverse senior management and skilled personnel (such
as market trading specialists), and is required to maintain good
employee relations.
- NWM Group's operations are highly dependent on its complex IT
systems and any IT failure could adversely affect NWM Group.
- A failure in NWM Group's risk management framework could
adversely affect NWM Group, including its ability to achieve its
strategic objectives.
- NWM Group's operations are subject to inherent reputational risk.
Legal, regulatory and conduct risk
- NWM Group's businesses are subject to substantial regulation
and oversight, which are constantly evolving and may adversely
affect NWM Group.
- NWM Group is exposed to the risk of various litigation
matters, regulatory and governmental actions and investigations as
well as remedial undertakings, the outcomes of which are inherently
difficult to predict, and which could have an adverse effect on NWM
Group.
- NWM Group may not effectively manage the transition of LIBOR
and other IBOR rates to replacement risk-free rates.
- Changes in tax legislation or failure to generate future
taxable profits may impact the recoverability of certain deferred
tax assets recognised by NWM Group.
Statement of directors' responsibilities
We, the directors listed below, confirm that to the best of our
knowledge:
- the condensed financial statements have been prepared in
accordance with IAS 34 'Interim Financial Reporting', as adopted by
the UK and as issued by the International Accounting Standards
Board (IASB);
- the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
- the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board
Frank Dangeard Robert Begbie Simon Lowe
Chairman Chief Executive Officer Chief Financial Officer
27 July 2023
Board of directors
Chairman Executive directors Non-executive directors
Frank Dangeard Robert Begbie Anne Simpson
Simon Lowe Tamsin Rowe
Vivek Ahuja
Non-IFRS financial measures
NWM Group prepares its financial statements in accordance with
IFRS as issued by the IASB which constitutes a body of generally
accepted accounting principles (GAAP). This document contains a
number of adjusted or alternative performance measures, also known
as non-GAAP or non-IFRS financial measures. These measures are
adjusted for certain items which management believe are not
representative of the underlying performance of the business and
which distort period-on-period comparison. These non-IFRS measures
are not measures within the scope of IFRS and are not a substitute
for IFRS measures. These measures include:
- Management analysis of operating expenses shows litigation and
conduct costs on a separate line. These amounts are included within
staff costs and other administrative expenses in the statutory
analysis. Other operating expenses excludes litigation and conduct
costs which are more volatile and may distort comparisons with
prior periods.
- Funded assets are defined as total assets less derivative
assets. This measure allows review of balance sheet trends
exclusive of the volatility associated with derivative fair
values.
- Management view of income by business including shared revenue
and before own credit adjustments. This measure is used to show
underlying income generation in NatWest Markets excluding the
impact of own credit adjustments.
- Revenue share refers to income generated by NatWest Markets
products from customers that have their primary relationship with
other NatWest Group subsidiaries, a proportion of which is shared
between NatWest Markets and those subsidiaries.
- Own credit adjustments are applied to positions where it is
believed that the counterparties would consider NWM Group's
creditworthiness when pricing trades. The fair value of certain
issued debt securities, including structured notes, is adjusted to
reflect the changes in own credit spreads and the resulting gain or
loss recognised in income.
Non-IFRS financial measures
Operating expenses - management view
Half year ended
------------------------------------------------------------------
30 June 2023 30 June 2022
-------------------------------- --------------------------------
Litigation Litigation
and Other Statutory and Other Statutory
conduct operating operating conduct operating operating
costs expenses expenses costs expenses expenses
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---------- --------- --------- ---------- --------- ---------
Staff costs 4 218 222 2 211 213
Premises and equipment - 31 31 - 25 25
Depreciation and amortisation - 7 7 - 11 11
Other administrative expenses (12) 286 274 18 273 291
------------------------------
Total (8) 542 534 20 520 540
------------------------------ ---------- --------- --------- ---------- --------- ---------
Quarter ended
--------------------------------
30 June 2023
--------------------------------
Litigation
and Other Statutory
conduct operating operating
costs expenses expenses
GBPm GBPm GBPm
------------------------------ ---------- --------- --------- ---------- --------- ---------
Staff costs 3 106 109
Premises and equipment - 16 16
Depreciation and amortisation - 4 4
Other administrative expenses (19) 139 120
------------------------------ ---------- --------- ---------
Total (16) 265 249
------------------------------ ---------- --------- --------- ---------- --------- ---------
Quarter ended
--------------------------------
31 March 2023
--------------------------------
Litigation
and Other Statutory
conduct operating operating
costs expenses expenses
GBPm GBPm GBPm
------------------------------ ---------- --------- --------- ---------- --------- ---------
Staff costs 1 112 113
Premises and equipment - 15 15
Depreciation and amortisation - 3 3
Other administrative expenses 7 147 154
------------------------------ ---------- --------- --------- ----------
Total 8 277 285
------------------------------ ---------- --------- --------- ---------- --------- ---------
Quarter ended
--------------------------------
30 June 2022
--------------------------------
Litigation
and Other Statutory
conduct operating operating
costs expenses expenses
GBPm GBPm GBPm
------------------------------ ---------- --------- --------- ---------- --------- ---------
Staff costs 2 78 80
Premises and equipment - 1 1
Depreciation and amortisation - 7 7
Other administrative expenses 10 151 161
------------------------------ ---------- --------- ---------
Total 12 237 249
------------------------------ ---------- --------- --------- ---------- --------- ---------
Presentation of information
NatWest Markets Plc ('NWM Plc') is a wholly owned subsidiary of
NatWest Group plc or 'the ultimate holding company'. The NatWest
Markets Group ('NWM Group') comprises NWM Plc and its subsidiary
and associated undertakings. The term 'NatWest Group' or 'we'
refers to NatWest Group plc and its subsidiary and associated
undertakings. The term 'NWH Group' refers to NatWest Holdings
Limited ('NWH') and its subsidiary and associated undertakings. The
term 'NatWest Bank Plc' or 'NWB Plc' refers to National Westminster
Bank Plc.
NWM Plc publishes its financial statements in pounds sterling
('GBP' or 'sterling'). The abbreviations 'GBPm' and 'GBPbn'
represent millions and thousands of millions of pounds sterling
('GBP'), respectively, and references to 'pence' represent pence in
the United Kingdom ('UK'). Reference to 'dollars' or '$' are to
United States of America ('US') dollars. The abbreviations '$m' and
'$bn' represent millions and thousands of millions of dollars,
respectively, and references to 'cents' represent cents in the US.
The abbreviation 'EUR' represents the 'euro', and the abbreviations
'EURm' and 'EURbn' represent millions and thousands of millions of
euros, respectively, and references to 'cents' represent cents in
the European Union ('EU').
Statutory accounts
Financial information contained in this document does not
constitute statutory accounts within the meaning of section 434 of
the Companies Act 2006 ("the Act"). The statutory accounts for the
year ended 31 December 2022 have been filed with the Registrar of
Companies. The report of the auditor on those statutory accounts
was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or
(3) of the Act.
MAR - Inside Information
This announcement contains information that qualified or may
have qualified as inside information for NatWest Markets Plc, for
the purposes of Article 7 of the Market Abuse Regulation (EU)
596/2014 (MAR) as it forms part of domestic law by virtue of the
European Union (Withdrawal) Act 2018 for NatWest Markets Plc. This
announcement is made by Paul Pybus, Head of Investor Relations for
NatWest Markets Plc.
Contact
Paul Pybus Investor Relations +44 (0) 7769 161183
----------- ------------------- -------------------
Forward-looking statements.
This document contains forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995, such as statements that include, without limitation,
the words 'expect', 'estimate', 'project', 'anticipate', 'commit',
'believe', 'should', 'intend', 'will', 'plan', 'could',
'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal',
'objective', 'may', 'endeavour', 'outlook', 'optimistic',
'prospects' and similar expressions or variations on these
expressions. These statements concern or may affect future matters,
such as NWM Group's future economic results, business plans and
strategies. In particular, this document may include
forward-looking statements relating to NWM Group in respect of, but
not limited to: its economic and political risks (including due to
high inflation, supply chain disruption and the Russian invasion of
Ukraine), its regulatory capital position and related requirements,
its financial position, profitability and financial performance
(including financial, capital, cost savings and operational
targets), implementation of NWM Group's strategy and NatWest
Group's purpose-led strategy and NatWest Group's recent creation of
its Commercial & Institutional franchise (of which NWM Group
forms part), its ESG and climate related targets, its access to
adequate sources of liquidity and funding, increasing competition
from new incumbents and disruptive technologies, its exposure to
third party risks, its ongoing compliance with the UK ring-fencing
regime and ensuring operational continuity in resolution, its
impairment losses and credit exposures under certain specified
scenarios, substantial regulation and oversight, ongoing legal,
regulatory and governmental actions and investigations, the
transition of LIBOR and other IBOR rates to replacement risk-free
rates and NWM Group's exposure to operational risk, conduct risk,
financial crime risk, cyber, data and IT risk, key person risk and
credit rating risk. Forward-looking statements are subject to a
number of risks and uncertainties that might cause actual results
and performance to differ materially from any expected future
results or performance expressed or implied by the forward-looking
statements. Factors that could cause or contribute to differences
in current expectations include, but are not limited to, the
outcome of legal, regulatory and governmental actions and
investigations, the level and extent of future impairments and
write-downs, legislative, political, fiscal and regulatory
developments, accounting standards, competitive conditions,
technological developments, interest and exchange rate
fluctuations, general economic and political conditions, the impact
of climate related risks and the transitioning to a net zero
economy. These and other factors, risks and uncertainties that may
impact any forward-looking statement or NWM Group's actual results
are discussed in NWM Plc's 2022 Annual Report and Accounts (ARA),
NWM Group's Interim Management Statement for Q1 and H1 2023, and
other public filings. The forward-looking statements contained in
this document speak only as of the date of this document and NWM
Group does not assume or undertake any obligation or responsibility
to update any of the forward-looking statements contained in this
document, whether as a result of new information, future events or
otherwise, except to the extent legally required.
Legal Entity Identifier: RR3QWICWWIPCS8A4S074
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END
IR SESEDWEDSEIW
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July 28, 2023 02:00 ET (06:00 GMT)
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