NatWest Group plc (NYSE:NWG) Q3 2022 Results Conference Call October 28, 2022 4:00 AM ET Company Participants | --- | |------------------------------------| | | | | | Alison Rose - CEO | | Katie Murray - CFO | | Conference Call Participants | | Aman Rakkar - Barclays | | Jonathan Pierce - Numis Securities | | Benjamin Toms - RBC | | Fahed Kunwar - Redburn | | Guy Stebbings - Exane | | Martin Leitgeb - Goldman Sachs | | Raul Sinha - JPMorgan | | Andrew Coombs - Citi | | Ed Firth - KBW | | Jason Napier - UBS ...

NatWest Group plc (NYSE:NWG) Q2 2022 Earnings Conference Call July 29, 2022 4:30 AM ET | --- | |----------------------------------------| | | | Company Participants | | Alison Rose - CEO | | Katie Murray - CFO | | Conference Call Participants | | Aman Rakkar - Barclays | | Rohith Chandra-Rajan - Bank of America | | Martin Leitgeb - Goldman Sachs | | Alvaro Serrano - Morgan Stanley | | Omar Keenan - Credit Suisse | | Chris Cant - Autonomous | | Edward Hugo Firth - KBW | | Jonathan Pierce - Numis | | Andrew C ...

NatWest Group Plc (NYSE:NWG) Q1 2022 Results Conference Call April 29, 2022 5:00 AM ET Company Participants | --- | |------------------------------------------------------------------------------| | | | Alison Rose - Chief Executive Officer Katie Murray - Chief Financial Officer | | Conference Call Participants | | Aman Rakkar - Barclays | | Andrew Coombs - Citi | | Rahul Sinha - J.P. Morgan | | Omar Keenan - Credit Suisse | | Guy Stebbings - Exane B&P Paribas | | Jonathan Pierce - Numis | | Ed Firth - KBW ...

FORM 20-F General Information [Filing Details](index=1&type=section&id=Filing%20Details) This annual report on Form 20-F for the fiscal year ended December 31, 2021, is filed by NatWest Group plc, a UK-incorporated company with securities registered on the NYSE - The filing is an Annual Report on Form 20-F for the fiscal year ended **December 31, 2021**[2](index=2&type=chunk) - NatWest Group plc is incorporated in the **United Kingdom**[3](index=3&type=chunk) Registered Securities | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :--- | :--- | :--- | | American Depositary Shares, each representing 2 ordinary shares, nominal value £1 per share | RBS | New York Stock Exchange | | Ordinary shares, nominal value £1 per share | | New York Stock Exchange* | | Dollar Perpetual Regulatory Tier 1 Securities | RBSP1 | New York Stock Exchange | | 3.875% Senior Notes due 2023 | RBS23B | New York Stock Exchange | | 6.125% Subordinated Tier 2 Notes due 2022 | RBS22 | New York Stock Exchange | | 6.000% Subordinated Tier 2 Notes due 2023 | RBS23A | New York Stock Exchange | | 6.100% Subordinated Tier 2 Notes due 2023 | RBS23 | New York Stock Exchange | | 5.125% Subordinated Tier 2 Notes due 2024 | RBS24 | New York Stock Exchange | | 3.754% Fixed-to-fixed Reset Rate Subordinated Tier 2 Notes due 2029 | RBS29A | New York Stock Exchange | | 3.032% Fixed-to-fixed Reset Rate Subordinated Tier 2 Notes due 2035 | NWG35 | New York Stock Exchange | | 3.498% Fixed Rate / Floating Rate Senior Notes due 2023 | RBS23D | New York Stock Exchange | | 4.519% Fixed Rate / Floating Rate Senior Notes due 2024 | RBS23A | New York Stock Exchange | | 2.359% Callable Fixed-to-fixed Reset Rate Green Senior Notes due 2024 | RBS24C | New York Stock Exchange | | 4.269% Fixed Rate / Floating Rate Senior Notes due 2025 | RBS25 | New York Stock Exchange | | 1.642% Senior Callable Fixed-to-Fixed Reset Rate Notes due 2027 | NWG27 | New York Stock Exchange | | 3.073% Callable Fixed-to-fixed Reset Rate Senior Notes due 2028 | RBS28 | New York Stock Exchange | | 4.892% Fixed Rate / Floating Rate Senior Notes due 2029 | RBS29 | New York Stock Exchange | | 5.076% Fixed Rate / Floating Rate Senior Notes due 2030 | RBS30 | New York Stock Exchange | | 4.445% Fixed Rate / Floating Rate Senior Notes due 2030 | RBS30A | New York Stock Exchange | | 4.8% Fixed Rate Notes due 2026 | RBS26 | New York Stock Exchange | | Senior Floating Rate Notes due 2023 | RBS23C | New York Stock Exchange | | Senior Floating Rate Notes due 2024 | RBS24B | New York Stock Exchange | [Outstanding Shares and Filer Status](index=2&type=section&id=Outstanding%20Shares%20and%20Filer%20Status) As of December 31, 2021, NatWest Group plc had 11.47 billion ordinary shares outstanding and is classified as a large accelerated filer preparing statements under IFRS Outstanding Shares as of December 31, 2021 | Title of each class | Number of outstanding shares | | :--- | :--- | | Ordinary shares of £1 each | 11,467,982,635 | | 11% cumulative preference shares | 240,686 | | 5½% cumulative preference shares | 242,454 | | Non-cumulative dollar preference shares, Series U | 10,130 | - The registrant is a **large accelerated filer**[10](index=10&type=chunk) - Financial statements are prepared in accordance with **International Financial Reporting Standards** as issued by the International Accounting Standards Board[11](index=11&type=chunk) SEC Form 20-F Cross Reference Guide Forward Looking Statements [Cautionary Statement Regarding Forward-Looking Statements](index=5&type=section&id=Cautionary%20Statement) The report contains forward-looking statements subject to inherent risks and uncertainties, where actual results may differ materially due to various factors - Forward-looking statements include targets for financial performance (income growth, RoTE, CET1 ratio) and non-financial measures (climate and ESG ambitions)[15](index=15&type=chunk) - Statements are based on current plans, expectations, and projections, subject to **significant inherent risks and uncertainties**[16](index=16&type=chunk) - Key risk factors include economic conditions (COVID-19, Brexit), strategic execution, financial resilience, climate change, operational resilience, and legal/regulatory issues[17](index=17&type=chunk) [Climate and ESG Disclosures](index=5&type=section&id=Climate%20and%20ESG%20Disclosures) Climate and ESG disclosures involve a high degree of judgment and evolving data, with future amendments or restatements expected - Climate and ESG disclosures rely on a greater level of judgments, assumptions, and estimates, making materiality assessments **inherently uncertain**[18](index=18&type=chunk) - The company's climate risk analysis and net zero strategy are under development, and underlying data is subject to evolution, leading to expected future amendments[18](index=18&type=chunk) Presentation of Information [Definitions and Currency](index=7&type=section&id=Definitions%20and%20Currency) This section defines key terms and specifies the primary reporting currency as pounds sterling, with abbreviations for millions and billions - Key terms like 'NatWest Group', 'NWH Group', 'NWM Group', and 'Go-forward group' are defined[20](index=20&type=chunk) - Financial statements are published in **pounds sterling (£)**, with abbreviations '£m' for millions and '£bn' for billions[21](index=21&type=chunk) - References to EU legislative provisions in effect in the UK before January 1, 2021, should be read as including applicable UK implementation measures[22](index=22&type=chunk) [Continuing Operations and Recent Developments](index=7&type=section&id=Continuing%20Operations%20and%20Recent%20Developments) The report presents results from continuing operations, excluding activities from the phased withdrawal from the Republic of Ireland, which are classified as discontinued - Business activities related to the sale of UBIDAC as part of the phased withdrawal from the Republic of Ireland are presented as a **discontinued operation**[25](index=25&type=chunk)[26](index=26&type=chunk) - NWM Plc is a defendant in a class action lawsuit alleging artificial suppression of **USD LIBOR**[27](index=27&type=chunk) - On February 25, 2022, the US Court of Appeals for the Second Circuit reversed a lower court's dismissal, finding adequate jurisdiction over defendants in the LIBOR case[27](index=27&type=chunk) Non-IFRS Financial Measures [Overview of Non-IFRS Measures](index=8&type=section&id=Overview%20of%20Non-IFRS%20Measures) NatWest Group uses non-IFRS financial measures to provide a clearer view of underlying business performance by adjusting for notable and one-off items - Non-IFRS measures are adjusted for notable items that management believes are not representative of **underlying business performance**[29](index=29&type=chunk) - These measures provide users with a **consistent basis** for comparing business performance and information on one-off elements[29](index=29&type=chunk) [Key Non-IFRS Performance Measures](index=8&type=section&id=Key%20Non-IFRS%20Performance%20Measures) This section details various non-IFRS measures, including adjustments for notable items, strategic risk reductions, and key performance ratios - Go-forward group income excluding notable items removes the impact of one-offs for **clearer comparisons**[30](index=30&type=chunk) - NWM total income excluding asset disposals/strategic risk reductions and own credit adjustments (OCA) aims to show **underlying income generation**[31](index=31&type=chunk)[32](index=32&type=chunk) - Operating expenses are analyzed to separate strategic and litigation/conduct costs, which are volatile and can **distort comparisons**[33](index=33&type=chunk)[34](index=34&type=chunk) - **Cost:income ratio** is a common metric for profitability comparison, calculated as total operating expenses less OLD divided by total income less OLD[36](index=36&type=chunk) - **Return on tangible equity (RoTE)** measures the return generated on tangible equity, used for relative performance comparison across the banking sector[37](index=37&type=chunk)[38](index=38&type=chunk) - **Bank net interest margin (NIM)** excludes NatWest Markets, liquid asset buffer, and Ulster Bank RoI to present a comparable basis with UK peers[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) - **Loan:deposit ratio** is a common metric used among peers to assess liquidity[50](index=50&type=chunk) Summary Risk Factors [Principal Risks and Uncertainties](index=11&type=section&id=Principal%20Risks%20and%20Uncertainties) NatWest Group faces principal risks including economic uncertainties, strategic execution, financial resilience, climate impacts, operational vulnerabilities, and legal/regulatory issues - The **COVID-19 pandemic** continues to adversely affect UK and global economies, financial markets, and NatWest Group's customers[61](index=61&type=chunk) - Economic and political risks include ongoing uncertainty from **Brexit**, political instability, changes in interest rates, and HM Treasury's influence[61](index=61&type=chunk) - Strategic risks involve the implementation of the **Purpose-led Strategy** and the refocusing of the NWM franchise, both carrying significant execution risks[61](index=61&type=chunk) - Financial resilience risks include challenges in meeting **capital and MREL requirements**, intense market competition, and exposure to counterparty/borrower risk[61](index=61&type=chunk) - Climate and sustainability-related risks encompass the transition to a **low-carbon economy**, data uncertainties, and increased regulation/litigation[62](index=62&type=chunk) - Operational and IT resilience risks include reliance on third-party suppliers, **cyberattacks**, data accuracy, and complex IT systems[63](index=63&type=chunk) - Legal, regulatory, and conduct risks involve substantial regulation, ongoing litigation, **LIBOR transition**, and changes in tax legislation[64](index=64&type=chunk) Chief Financial Officer's Review [2021 Performance Highlights](index=13&type=section&id=2021%20Performance%20Highlights) NatWest Group delivered a strong 2021 operating performance, achieving a 9.4% RoTE, a £1.3 billion net impairment release, and returning £3.8 billion to shareholders - Group Return on Tangible Equity (RoTE) was **9.4%**, benefiting from a **£1.3 billion** net impairment release[66](index=66&type=chunk) - Total operating expenses were **£7,758 million**, a 1.3% decrease from 2020, meeting the Group cost reduction target of 4.0%[66](index=66&type=chunk)[70](index=70&type=chunk) - Net loans to customers decreased by 0.4%, while lending growth across UK and RBSI retail and commercial businesses (excluding UK Government support schemes) was **2.6%**[66](index=66&type=chunk)[73](index=73&type=chunk) - The CET1 ratio remained strong at **18.2%**, reducing to 15.9% on January 1, 2022, after regulatory changes[67](index=67&type=chunk)[76](index=76&type=chunk) - Total income was **£4 million higher** than 2020, while Go-forward group income excluding notable items was 5.6% lower[68](index=68&type=chunk)[103](index=103&type=chunk) - Net interest margin (NIM) was **1.45%**, 10 basis points lower than 2020; Bank NIM was **2.39%**, 7 basis points lower[69](index=69&type=chunk)[104](index=104&type=chunk) - A net impairment release of **£1,278 million** reduced total impairment provisions by £2.4 billion to £3.8 billion[71](index=71&type=chunk)[110](index=110&type=chunk) - Attributable profit for 2021 was **£2,950 million**, with earnings per share of 25.4 pence; total capital distributions amounted to **£3.8 billion**[72](index=72&type=chunk) - Customer deposits increased by **£48.1 billion (11.1%)** compared to 2020[74](index=74&type=chunk) - Tangible Net Asset Value (TNAV) per share increased by 3 pence in the quarter to **272 pence**[75](index=75&type=chunk) - Risk-weighted assets (RWAs) decreased by **£13.3 billion** in 2021 to £157.0 billion[76](index=76&type=chunk) - The liquidity coverage ratio (LCR) increased by 7 percentage points to **172%**, with £89.9 billion headroom[77](index=77&type=chunk) [Financial Summary Table](index=14&type=section&id=Financial%20Summary%20Table) This table provides a concise overview of NatWest Group's key financial performance metrics and balance sheet items for 2021 compared to 2020 Financial Summary (2021 vs 2020) | Metric | 2021 (£m) | 2020 (£m) | Variance (£m) | | :--- | :--- | :--- | :--- | | **Continuing operations** | | | | | Go-forward group income | 10,284 | 10,286 | (2) | | Total income | 10,512 | 10,508 | 4 | | Operating expenses | (7,758) | (7,858) | (100) | | Profit before impairment releases/(losses) | 2,754 | 2,650 | 104 | | Operating profit/(loss) before tax | 4,032 | (481) | 4,513 | | Profit/(loss) attributable to ordinary shareholders | 2,950 | (753) | 3,703 | | **Excluding notable items within total income** | | | | | Go-forward group income excluding notable items | 10,074 | 10,670 | (596) | | Total income excluding notable items | 10,267 | 10,892 | (625) | | Profit before impairment releases/(losses) excluding notable items | 2,509 | 3,034 | (525) | | Operating profit/(loss) before tax excluding notable items | 3,787 | (97) | 3,884 | | UK and RBSI retail and commercial businesses income excluding notable items | 9,620 | 9,486 | 134 | | **Performance key metrics and ratios** | | | | | Bank net interest margin | 2.39 % | 2.46 % | (0.07)% | | Bank average interest earning assets | £314bn | £301bn | £13bn | | Cost:income ratio | 73.4 % | 74.4 % | (1.1) % | | Loan impairment rate | (35bps) | 85bps | (120bps) | | Total earnings per share attributable to ordinary shareholders – basic | 25.4p | (6.2p) | 31.6p | | Go-forward group return on tangible equity | 10.0 % | (1.3)% | 11.3 % | | Return on tangible equity | 9.4 % | (2.4)% | 11.8 % | | **Balance sheet** | | | | | Go-forward group customer deposits | £461.4bn | £412.1bn | £49.3bn | | UK and RBSI retail and commercial net lending excluding UK Government support schemes | £305.7bn | £297.9bn | £7.8bn | | **Capital, liquidity and funding** | | | | | Common Equity Tier (CET1) ratio | 18.2 % | 18.5% | (0.3)% | | Risk-weighted assets (RWAs) | £157.0bn | £170.3bn | (£13.3bn) | | Liquidity coverage ratio (LCR) | 172 % | 165 % | 7 % | | Total wholesale funding | £77bn | £71bn | £6bn | | Tangible net asset value (TNAV) per ordinary share | 272p | 261p | 11p | Financial Review [Segmental Performance Overview](index=15&type=section&id=Segmental%20Performance%20Overview) This section outlines NatWest Group's reportable operating segments and discusses the competitive landscape across these segments - Reportable operating segments include **Retail Banking, Commercial Banking, Private Banking, RBS International (RBSI), NatWest Markets (NWM), Central items & other, and Ulster Bank RoI**[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - Competitive factors across segments include funding management, cost control, digital sales focus, and product simplification[90](index=90&type=chunk) - New entrants with **technology-based business models**, such as peer-to-peer lending platforms, are emerging as significant competitors[92](index=92&type=chunk)[95](index=95&type=chunk) - Ulster Bank RoI's commercial banking closed to new customers since July 2021 as part of its **phased withdrawal**[94](index=94&type=chunk) [Financial Summary](index=17&type=section&id=Financial%20Summary) NatWest Group's total income remained stable in 2021, with a significant impairment release contributing to a strong operating profit before tax Income - Continuing operations | Income - Continuing operations | 2021 (£m) | 2020 (£m) | Variance (£m) | % | | :--- | :--- | :--- | :--- | :--- | | Interest receivable | 9,313 | 9,798 | (485) | (4.9) | | Interest payable | (1,699) | (2,322) | 623 | (26.8) | | Net interest income | 7,614 | 7,476 | 138 | 1.8 | | Net fees and commissions | 2,124 | 2,000 | 124 | 6.2 | | Income from trading activities | 323 | 1,125 | (802) | (71.3) | | Other non-interest income | 451 | (93) | 544 | nm | | Total income | 10,512 | 10,508 | 4 | nm | Operating Expenses - Continuing operations | Operating expenses - Continuing operations | 2021 (£m) | 2020 (£m) | Variance (£m) | % | | :--- | :--- | :--- | :--- | :--- | | Staff expenses | 3,265 | 3,416 | (151) | (4.4) | | Premises and equipment | 1,030 | 989 | 41 | 4.1 | | Other administrative expenses | 1,427 | 1,535 | (108) | (7.0) | | Strategic costs | 787 | 1,013 | (226) | (22.3) | | Litigation and conduct costs | 466 | 113 | 353 | nm | | Depreciation and amortisation | 783 | 792 | (9) | (1.1) | | Operating expenses | 7,758 | 7,858 | (100) | (1.3) | Impairments - Continuing operations | Impairments - Continuing operations | 2021 (£m) | 2020 (£m) | Variance (£m) | | :--- | :--- | :--- | :--- | | Loans - amortised cost and FVOCI | 369,827 | 372,399 | (2,572) | | ECL provisions | 3,806 | 6,186 | (2,380) | | ECL provisions coverage ratio (%) | 1.03 | 1.66 | (0.6) | | Impairment (releases)/losses | (1,278) | 3,131 | (4,409) | | Amounts written off | 876 | 937 | (61) | Tax - Continuing operations | Tax - Continuing operations | 2021 (£m) | 2020 (£m) | | :--- | :--- | :--- | | Tax charge | (996) | (74) | | UK corporation tax rate | 19.0 % | 19.0 % | | Effective tax rate | 24.7 % | (23.7)% | Summary Consolidated Balance Sheet | Assets | 2021 (£m) | 2020 (£m) | Variance (£m) | % | | :--- | :--- | :--- | :--- | :--- | | Cash and balances at central banks | 177,757 | 124,489 | 53,268 | 43 | | Trading assets | 59,158 | 68,990 | (9,832) | (14) | | Derivatives | 106,139 | 166,523 | (60,384) | (36) | | Loans to customers - amortised cost | 358,990 | 360,544 | (1,554) | (0) | | Assets of disposal groups | 9,015 | — | 9,015 | nm | | Total assets | 781,992 | 799,491 | (17,499) | (2) | | Liabilities | | | | | | Customer deposits | 479,810 | 431,739 | 48,071 | 11 | | Derivatives | 100,835 | 160,705 | (59,870) | (37) | | Subordinated liabilities | 8,429 | 9,962 | (1,533) | (15) | | Total liabilities | 740,189 | 755,667 | (15,478) | (2) | | Total equity | 41,803 | 43,824 | (2,021) | (5) | | Tangible net asset value per ordinary share (pence) | 272p | 261p | 11p | 4 | [Segmental Summary Income Statements](index=20&type=section&id=Segmental%20Summary%20Income%20Statements) This section provides a detailed breakdown of income, expenses, and operating profit for each of NatWest Group's operating segments for 2021 and 2020 Segmental Income Statement (2021) | Continuing operations | Retail Banking (£m) | Private Banking (£m) | Commercial Banking (£m) | RBS International (£m) | NatWest Markets (£m) | Central items & other (£m) | Total excluding Ulster Bank RoI (£m) | Ulster Bank RoI (£m) | Total NatWest Group (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net interest income | 4,074 | 480 | 2,582 | 383 | 9 | (14) | 7,514 | 100 | 7,614 | | Non-interest income | 371 | 336 | 1,293 | 165 | 406 | 199 | 2,770 | 128 | 2,898 | | Total income | 4,445 | 816 | 3,875 | 548 | 415 | 185 | 10,284 | 228 | 10,512 | | Operating expenses | (2,513) | (520) | (2,354) | (242) | (1,161) | (486) | (7,276) | (482) | (7,758) | | Impairment releases | 36 | 54 | 1,073 | 52 | 35 | — | 1,250 | 28 | 1,278 | | Operating profit/(loss) | 1,968 | 350 | 2,594 | 358 | (711) | (301) | 4,258 | (226) | 4,032 | Segmental Income Statement (2020) | Continuing operations | Retail Banking (£m) | Private Banking (£m) | Commercial Banking (£m) | RBS International (£m) | NatWest Markets (£m) | Central items & other (£m) | Total excluding Ulster Bank RoI (£m) | Ulster Bank RoI (£m) | Total NatWest Group (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net interest income | 3,868 | 489 | 2,740 | 371 | (57) | (57) | 7,354 | 122 | 7,476 | | Non-interest income | 313 | 274 | 1,218 | 126 | 1,180 | (179) | 2,932 | 100 | 3,032 | | Total income | 4,181 | 763 | 3,958 | 497 | 1,123 | (236) | 10,286 | 222 | 10,508 | | Operating expenses | (2,540) | (455) | (2,430) | (291) | (1,310) | (391) | (7,417) | (441) | (7,858) | | Impairment losses | (792) | (100) | (1,927) | (107) | (40) | (26) | (2,992) | (139) | (3,131) | | Operating profit/(loss) | 849 | 208 | (399) | 99 | (227) | (653) | (123) | (358) | (481) | [Retail Banking Performance](index=22&type=section&id=Retail%20Banking%20Performance) Retail Banking achieved a strong operating profit of £1,968 million and a 26.1% return on equity in 2021, driven by mortgage growth and increased fee income - Retail Banking delivered an operating profit of **£1,968 million** and a return on equity of **26.1%** in 2021[123](index=123&type=chunk) - Total income increased by **£264 million (6.3%)** due to mortgage balance and margin improvement and higher transactional-related fee income[123](index=123&type=chunk) - Operating expenses decreased by **£27 million (1.1%)**, primarily reflecting an 8.8% reduction in headcount due to increased digital adoption[123](index=123&type=chunk) - Net loans to customers increased by **£9.9 billion (5.7%)**, driven by strong gross new mortgage lending of £36.0 billion[123](index=123&type=chunk) - Customer deposits increased by **£17.1 billion (10.0%)** as customers built and retained liquidity[123](index=123&type=chunk) [Private Banking Performance](index=23&type=section&id=Private%20Banking%20Performance) Private Banking reported a 68% increase in operating profit to £350 million and a 17.0% return on equity in 2021, supported by strong AUMA and balance sheet growth - Private Banking delivered an operating profit of **£350 million** and a return on equity of **17.0%** in 2021[127](index=127&type=chunk) - Total income increased by **£53 million (6.9%)**, reflecting a £54 million consideration from the sale of Adam & Company's investment management business[127](index=127&type=chunk) - Net loans to customers increased by **£1.4 billion (8.2%)**, driven by strong mortgage lending growth of £1.1 billion[127](index=127&type=chunk) - Customer deposits increased by **£6.9 billion (21.3%)**, reflecting strong personal and commercial inflows[127](index=127&type=chunk) - Assets Under Management and Administration (AUMA) increased by **£3.5 billion (10.9%)** to £35.6 billion[125](index=125&type=chunk)[127](index=127&type=chunk) [Commercial Banking Performance](index=24&type=section&id=Commercial%20Banking%20Performance) Commercial Banking achieved an operating profit of £2,594 million and a 22.0% return on equity in 2021, benefiting from a significant impairment release - Commercial Banking delivered an operating profit of **£2,594 million** and a return on equity of **22.0%** in 2021, including a £1,073 million impairment release[132](index=132&type=chunk) - Total income decreased by **£83 million (2.1%)** due to reduced deposit returns and lower lending volumes[132](index=132&type=chunk) - Operating expenses decreased by **£76 million (3.1%)**, reflecting cost efficiencies and a 9.8% reduction in headcount[132](index=132&type=chunk) - Net loans to customers decreased by **£7.0 billion (6.4%)**, primarily due to targeted sector reductions and active capital management[132](index=132&type=chunk) - Customer deposits increased by **£10.0 billion (6.0%)**, reflecting customer behavior to build and retain liquidity[132](index=132&type=chunk) - Risk-weighted assets (RWAs) decreased by **£8.7 billion (11.6%)**, mainly due to business movements and targeted sector reductions[132](index=132&type=chunk) [RBS International Performance](index=25&type=section&id=RBS%20International%20Performance) RBS International reported an operating profit of £358 million and a 22.5% return on equity in 2021, driven by strong lending, deposit, and depositary growth - RBS International (RBSI) delivered an operating profit of **£358 million** and a return on equity of **22.5%** in 2021[136](index=136&type=chunk) - Total income increased by **£51 million (10.3%)**, driven by higher average lending balances and increased depositary fee income[136](index=136&type=chunk) - Operating expenses decreased by **£49 million (16.8%)**, primarily reflecting a reduction in the bank levy charge[136](index=136&type=chunk) - Net loans to customers increased by **£2.2 billion (16.5%)**, and customer deposits increased by **£6.2 billion (19.8%)**[136](index=136&type=chunk) - Depositary assets increased by **£51.9 billion (12.1%)** to £479.4 billion[134](index=134&type=chunk)[136](index=136&type=chunk) [NatWest Markets Performance](index=26&type=section&id=NatWest%20Markets%20Performance) NatWest Markets incurred an operating loss of £711 million in 2021, reflecting a significant decrease in total income due to weakness in Fixed Income - NatWest Markets (NWM) incurred an operating loss of **£711 million** in 2021, with a return on equity of **(13.1)%**[137](index=137&type=chunk)[141](index=141&type=chunk) - Total income decreased by **£708 million (63.0%)**, primarily due to weakness in Fixed Income and subdued customer activity[141](index=141&type=chunk) - Operating expenses decreased by **£149 million (11.4%)**, reflecting continued reductions in line with strategic announcements[141](index=141&type=chunk) - Risk-weighted assets (RWAs) decreased by **£2.7 billion (10.0%)**, reflecting lower market and counterparty credit risk[141](index=141&type=chunk) NatWest Markets Income by Product (2021 vs 2020) | Analysis of income by product | 2021 (£m) | 2020 (£m) | Variance (£m) | % | | :--- | :--- | :--- | :--- | :--- | | Fixed income | (64) | 518 | (582) | (112) | | Currencies | 427 | 583 | (156) | (27) | | Capital Markets | 336 | 384 | (48) | (13) | | Capital Management Unit & other | (29) | (62) | 33 | (53) | | Income before revenue share paid, asset disposals and OCA | 670 | 1,423 | (753) | (53) | | Revenue share with other NatWest Group segments | (197) | (193) | (4) | 2 | | Income excluding asset disposals and OCA | 473 | 1,230 | (757) | (62) | | Asset disposals/strategic risk reduction | (64) | (83) | 19 | (23) | | Own credit adjustments (OCA) | 6 | (24) | 30 | (125) | | Total income | 415 | 1,123 | (708) | (63) | [Ulster Bank RoI Performance](index=27&type=section&id=Ulster%20Bank%20RoI%20Performance) Ulster Bank RoI continued its phased withdrawal, reporting an operating loss of £226 million in 2021, a 37% improvement from 2020 - Ulster Bank RoI reported an operating loss of **£226 million** in 2021, a **37% improvement** from 2020[142](index=142&type=chunk) - Total income increased by **£6 million (2.7%)** due to gains from structural hedge restructuring, offset by lower lending and fee income[145](index=145&type=chunk) - Operating expenses increased by **£41 million (9.3%)**, driven by higher VAT costs and regulatory levies, partially offset by a 15% headcount reduction[145](index=145&type=chunk) - Net loans to customers decreased by **£11.3 billion**, primarily due to the reclassification of £9.0 billion of loans to the disposal group[145](index=145&type=chunk) - Legally binding agreements were announced in 2021 for the sale of UBIDAC's commercial lending, performing mortgages, and other assets to **Allied Irish Banks** and **Permanent TSB**[145](index=145&type=chunk) [Central Items & Other Performance](index=28&type=section&id=Central%20Items%20&%20Other%20Performance) Central items & other reported a £301 million operating loss in 2021, an improvement from 2020, reflecting litigation charges and strategic costs - Central items not allocated represented a **£301 million operating loss** in 2021, an improvement from a £653 million loss in 2020[146](index=146&type=chunk)[147](index=147&type=chunk) - The loss primarily reflects **£243 million in litigation and conduct charges**, £201 million in strategic costs, and £138 million in losses on redemption of own debt[147](index=147&type=chunk) - These losses were partially offset by a **£219 million share of gains** under equity accounting for the Business Growth Fund and other Treasury income[147](index=147&type=chunk) Summary Consolidated Financial Statements [Summary Consolidated Income Statement](index=29&type=section&id=Summary%20Consolidated%20Income%20Statement) NatWest Group reported a profit of £3,312 million in 2021, a significant turnaround from a loss of £434 million in 2020, driven by a net impairment release Summary Consolidated Income Statement (2019-2021) | Summary consolidated income statement | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Net interest income | 7,614 | 7,476 | 7,799 | | Non-interest income | 2,898 | 3,032 | 6,188 | | Total income | 10,512 | 10,508 | 13,987 | | Operating expenses | (7,758) | (7,858) | (9,280) | | Profit before impairment losses | 2,754 | 2,650 | 4,707 | | Impairment releases/(losses) | 1,278 | (3,131) | (724) | | Operating profit/(loss) before tax | 4,032 | (481) | 3,983 | | Tax charge | (996) | (74) | (439) | | Profit/(loss) from continuing operations | 3,036 | (555) | 3,544 | | Profit from discontinued operations, net of tax | 276 | 121 | 256 | | Profit/(loss) for the year | 3,312 | (434) | 3,800 | | Attributable to: | | | | | Ordinary shareholders | 2,950 | (753) | 3,133 | | Preference shareholders | 19 | 26 | 39 | | Paid-in equity holders | 299 | 355 | 367 | | Non-controlling interests | 44 | (62) | 261 | | Total | 3,312 | (434) | 3,800 | [Summary Consolidated Balance Sheet](index=29&type=section&id=Summary%20Consolidated%20Balance%20Sheet) The consolidated balance sheet shows a slight decrease in total assets in 2021, driven by reductions in derivatives, partially offset by an increase in cash Summary Consolidated Balance Sheet (2019-2021) | Summary consolidated balance sheet | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Cash and balances at central banks | 177,757 | 124,489 | 80,993 | | Trading assets | 59,158 | 68,990 | 76,745 | | Derivatives | 106,139 | 166,523 | 150,029 | | Loans to banks and customers - amortised cost | 366,672 | 367,499 | 334,501 | | Total assets | 781,992 | 799,491 | 723,039 | | Deposits | 506,089 | 452,345 | 389,740 | | Trading liabilities | 64,598 | 72,256 | 73,949 | | Settlement balances, derivatives, other financial liabilities and subordinated liabilities | 160,658 | 222,023 | 206,147 | | Total liabilities and equity | 781,992 | 799,491 | 723,039 | Financial Statements [Independent Auditor's Report](index=31&type=section&id=Independent%20Auditor's%20Report) Ernst & Young LLP provided an unqualified opinion on NatWest Group's 2021 financial statements and the effectiveness of internal control over financial reporting - Ernst & Young LLP issued an **unqualified opinion** on the consolidated financial statements for 2021 and 2020, stating they present fairly in conformity with IFRS[152](index=152&type=chunk) - An **unqualified opinion** was also expressed on the Group's internal control over financial reporting as of December 31, 2021[153](index=153&type=chunk)[161](index=161&type=chunk) - Critical audit matters included the estimate of **expected credit loss provisions**, impairment of goodwill, provisions for customer redress, and valuation of financial instruments[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) [Consolidated Income Statement](index=36&type=section&id=Consolidated%20Income%20Statement) The consolidated income statement for 2021 shows a profit of £3,312 million, a significant recovery from a £434 million loss in 2020 Consolidated Income Statement (2019-2021) | Metric | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Net interest income | 7,614 | 7,476 | 7,799 | | Non-interest income | 2,898 | 3,032 | 6,188 | | Total income | 10,512 | 10,508 | 13,987 | | Operating expenses | (7,758) | (7,858) | (9,280) | | Profit before impairment releases/(losses) | 2,754 | 2,650 | 4,707 | | Impairment releases/(losses) | 1,278 | (3,131) | (724) | | Operating profit/(loss) before tax | 4,032 | (481) | 3,983 | | Tax charge | (996) | (74) | (439) | | Profit/(loss) from continuing operations | 3,036 | (555) | 3,544 | | Profit from discontinued operations, net of tax | 276 | 121 | 256 | | Profit/(loss) for the year | 3,312 | (434) | 3,800 | | Attributable to ordinary shareholders | 2,950 | (753) | 3,133 | | Total earnings per share attributable to ordinary shareholders - basic | 25.4p | (6.2p) | 26.0p | [Consolidated Statement of Comprehensive Income](index=37&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income) The consolidated statement of comprehensive income shows a total comprehensive income of £1,674 million for 2021, a significant improvement from a £2 million loss in 2020 Consolidated Statement of Comprehensive Income (2019-2021) | Metric | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Profit/(loss) for the year | 3,312 | (434) | 3,800 | | Items that do not qualify for reclassification | | | | | Remeasurement of retirement benefit schemes | (669) | 4 | (142) | | Loss on fair value of credit in financial liabilities designated at FVTPL due to own credit risk | (29) | (52) | (189) | | FVOCI financial assets | 13 | (64) | (71) | | Tax | 164 | 42 | 28 | | Subtotal | (521) | (70) | (374) | | Items that do qualify for reclassification | | | | | FVOCI financial assets | (100) | 44 | (14) | | Cash flow hedges | (848) | 271 | 294 | | Currency translation | (382) | 276 | (1,836) | | Tax | 213 | (89) | (170) | | Subtotal | (1,117) | 502 | (1,726) | | Other comprehensive (loss)/income after tax | (1,638) | 432 | (2,100) | | Total comprehensive income/(loss) for the year | 1,674 | (2) | 1,700 | | Attributable to ordinary shareholders | 1,308 | (338) | 1,044 | - A **£500 million contribution** to the main pension scheme in March 2021 reduced total equity by £365 million after tax relief[172](index=172&type=chunk) - A pre-tax loss of **£192 million (€224 million)** was recorded for the re-measurement of Republic of Ireland pension schemes[172](index=172&type=chunk) [Consolidated Balance Sheet](index=38&type=section&id=Consolidated%20Balance%20Sheet) The consolidated balance sheet shows total assets of £781,992 million at year-end 2021, a 2% decrease from 2020, with customer deposits growing by 11% Consolidated Balance Sheet (2021 vs 2020) | Assets | 2021 (£m) | 2020 (£m) | | :--- | :--- | :--- | | Cash and balances at central banks | 177,757 | 124,489 | | Trading assets | 59,158 | 68,990 | | Derivatives | 106,139 | 166,523 | | Loans to banks - amortised cost | 7,682 | 6,955 | | Loans to customers - amortised cost | 358,990 | 360,544 | | Other financial assets | 46,145 | 55,148 | | Intangible assets | 6,723 | 6,655 | | Other assets | 8,242 | 7,890 | | Assets of disposal groups | 9,015 | — | | Total assets | 781,992 | 799,491 | | Liabilities | | | | Bank deposits | 26,279 | 20,606 | | Customer deposits | 479,810 | 431,739 | | Settlement balances | 2,068 | 5,545 | | Trading liabilities | 64,598 | 72,256 | | Derivatives | 100,835 | 160,705 | | Other financial liabilities | 49,326 | 45,811 | | Subordinated liabilities | 8,429 | 9,962 | | Notes in circulation | 3,047 | 2,655 | | Other liabilities | 5,797 | 6,388 | | Total liabilities | 740,189 | 755,667 | | Total equity | 41,803 | 43,824 | | Total liabilities and equity | 781,992 | 799,491 | - Total assets decreased by **£17.5 billion (2%)** to £782.0 billion, mainly due to decreases in derivatives and trading assets[114](index=114&type=chunk) - Cash and balances at central banks increased by **£53.3 billion (43%)** to £177.8 billion, driven by a net customer funding surplus[114](index=114&type=chunk) - Customer deposits increased by **£48 billion (11%)** to £479.8 billion, reflecting customer liquidity retention[114](index=114&type=chunk) - Total equity decreased by **£2.0 billion (5%)** to £41.8 billion, primarily due to share repurchases and dividends[114](index=114&type=chunk) [Consolidated Statement of Changes in Equity](index=39&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) The statement of changes in equity shows a decrease in total equity to £41,803 million in 2021, primarily due to share cancellations and repurchases Consolidated Statement of Changes in Equity (2019-2021) | Metric | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Called-up share capital - at 1 January | 12,129 | 12,094 | 12,049 | | Share cancellation | (698) | — | — | | Called-up share capital - at 31 December | 11,468 | 12,129 | 12,094 | | Paid-in equity - at 1 January | 4,999 | 4,058 | 4,058 | | Securities issued during the period | 937 | 2,218 | — | | Paid-in equity - at 31 December | 3,890 | 4,999 | 4,058 | | Retained earnings - at 1 January | 12,567 | 13,946 | 14,312 | | Profit/(loss) attributable to ordinary shareholders and other equity owners | 3,268 | (372) | 3,539 | | Ordinary dividends paid | (693) | — | (3,018) | | Shares repurchased during the year | (1,423) | — | — | | Retained earnings - at 31 December | 12,966 | 12,567 | 13,946 | | Owners' equity at 31 December | 41,796 | 43,860 | 43,547 | | Total equity at 31 December | 41,803 | 43,824 | 43,556 | - In March 2021, NatWest Group purchased **591 million ordinary shares** from UKGI for £1.13 billion[178](index=178&type=chunk) - In July 2021, paid-in equity was reclassified to liabilities due to a call of **US$2.65 billion AT1 capital notes**[179](index=179&type=chunk) - A **£500 million contribution** to the main pension scheme in March 2021 reduced total equity by £365 million after tax relief[180](index=180&type=chunk) [Consolidated Cash Flow Statement](index=41&type=section&id=Consolidated%20Cash%20Flow%20Statement) NatWest Group reported a net cash inflow from operating activities of £53,684 million in 2021, a significant increase from £29,095 million in 2020 Consolidated Cash Flow Statement (2019-2021) | Metric | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Operating profit/(loss) before tax from continuing operations | 4,032 | (481) | 3,983 | | Operating profit before tax from discontinued operations | 279 | 130 | 249 | | Impairment (releases)/losses | (1,335) | 3,242 | 696 | | Net cash flows from trading activities | 7,934 | 2,494 | 7,138 | | Decrease/(increase) in loans to customers | 2,721 | (33,748) | (22,642) | | Increase in customer deposits | 48,071 | 62,492 | 8,333 | | Net cash flows from operating activities | 53,684 | 29,095 | (3,079) | | Net cash flows from investing activities | 3,065 | 7,547 | (716) | | Net cash flows from financing activities | (2,601) | 90 | (2,570) | | Net increase/(decrease) in cash and cash equivalents | 51,507 | 38,611 | (8,348) | | Cash and cash equivalents at 31 December | 190,706 | 139,199 | 100,588 | - Net cash flows from operating activities significantly increased in 2021, driven by a **£48,071 million increase in customer deposits**[184](index=184&type=chunk) - Financing activities resulted in a net cash outflow of **£2,601 million**, primarily due to movements in MRELs and subordinated liabilities, and share cancellations[185](index=185&type=chunk) [Accounting Policies](index=43&type=section&id=Accounting%20Policies) This section details NatWest Group's significant accounting policies, including basis of preparation, revenue recognition, and financial instrument classification - Financial statements are prepared in pounds sterling, on a going concern basis in accordance with **UK adopted IAS and IFRS**[191](index=191&type=chunk)[192](index=192&type=chunk)[194](index=194&type=chunk) - Interest income and expense are recognized using the **effective interest rate method**[197](index=197&type=chunk)[198](index=198&type=chunk) - Discontinued operations are presented separately, and assets held for sale are measured at the **lower of carrying amount or fair value less cost to sell**[199](index=199&type=chunk)[200](index=200&type=chunk) - Goodwill is measured at initial cost less impairment losses and **tested annually** for impairment[211](index=211&type=chunk)[214](index=214&type=chunk) - Financial instruments are classified into measurement categories based on **business model and contractual cash flow characteristics**[228](index=228&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) - **Expected Credit Losses (ECL)** are forward-looking, probability-weighted estimates based on 12-month or lifetime expected losses[233](index=233&type=chunk)[234](index=234&type=chunk)[237](index=237&type=chunk) - Critical accounting policies include deferred tax, fair value of financial instruments, loan impairment provisions, and goodwill, all sensitive to **management judgments**[260](index=260&type=chunk)[264](index=264&type=chunk) - **Climate risk** affects accounting judgments and estimates, particularly for ECL measurement, asset impairment, and deferred tax[261](index=261&type=chunk)[262](index=262&type=chunk) [Notes to the Consolidated Financial Statements](index=53&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed notes supporting the consolidated financial statements, covering specific financial line items, estimates, and disclosures [Note 1 Net interest income](index=53&type=section&id=Note%201%20Net%20interest%20income) Net interest income increased to £7,614 million in 2021, primarily driven by a significant reduction in interest payable Net Interest Income (2019-2021) | Continuing operations | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Interest receivable | 9,313 | 9,798 | 11,127 | | Interest payable | (1,699) | (2,322) | (3,328) | | Net interest income | 7,614 | 7,476 | 7,799 | - Interest receivable decreased by **£485 million (4.9%)** in 2021, while interest payable decreased by **£623 million (26.8%)**, leading to a net interest income increase of £138 million (1.8%)[101](index=101&type=chunk)[272](index=272&type=chunk) [Note 2 Non-interest income](index=54&type=section&id=Note%202%20Non-interest%20income) Non-interest income decreased to £2,898 million in 2021, primarily due to a significant reduction in income from trading activities Non-Interest Income (2019-2021) | Continuing operations | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Net fees and commissions | 2,124 | 2,000 | 2,497 | | Income from trading activities | 323 | 1,125 | 932 | | Other operating income | 451 | (93) | 2,759 | | Total | 2,898 | 3,032 | 6,188 | - Income from trading activities decreased by **£802 million (71.3%)** in 2021, mainly due to reduced foreign exchange and interest rate trading income[101](index=101&type=chunk)[279](index=279&type=chunk) - Net fees and commissions increased by **£124 million (6.2%)**, while other operating income saw a significant increase of £544 million[101](index=101&type=chunk)[279](index=279&type=chunk) [Note 3 Operating expenses](index=55&type=section&id=Note%203%20Operating%20expenses) Total operating expenses decreased by £100 million (1.3%) to £7,758 million in 2021, driven by lower staff and strategic costs Operating Expenses (2019-2021) | Continuing operations | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Staff costs | 3,676 | 3,878 | 3,976 | | Premises and equipment | 1,133 | 1,222 | 1,258 | | Other administrative expenses | 2,026 | 1,845 | 2,828 | | Depreciation and amortisation | 923 | 913 | 1,218 | | Total | 7,758 | 7,858 | 9,280 | - Staff costs decreased by **£202 million (5.2%)** in 2021, with salaries decreasing by £199 million[286](index=286&type=chunk)[298](index=298&type=chunk) - The average number of persons employed decreased to **59,200** in 2021 from 61,400 in 2020[287](index=287&type=chunk) - Litigation and conduct costs increased significantly to **£466 million** in 2021 from £113 million in 2020[107](index=107&type=chunk)[112](index=112&type=chunk)[286](index=286&type=chunk) [Note 4 Segmental analysis](index=58&type=section&id=Note%204%20Segmental%20analysis) This note provides a detailed breakdown of financial performance by operating segment, including income, expenses, and geographical analysis - Ulster Bank RoI is presented separately from the Go-forward group to reflect the strategic decision on **phased withdrawal**[300](index=300&type=chunk) Segmental Operating Profit/(Loss) (2021) | Segment | Net interest income (£m) | Non-interest income (£m) | Total income (£m) | Operating expenses (£m) | Impairment releases (£m) | Operating profit/(loss) (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Retail Banking | 4,074 | 371 | 4,445 | (2,513) | 36 | 1,968 | | Private Banking | 480 | 336 | 816 | (520) | 54 | 350 | | Commercial Banking | 2,582 | 1,293 | 3,875 | (2,354) | 1,073 | 2,594 | | RBS International | 383 | 165 | 548 | (242) | 52 | 358 | | NatWest Markets | 9 | 406 | 415 | (1,161) | 35 | (711) | | Central items & other | (14) | 199 | 185 | (486) | — | (301) | | Ulster Bank RoI | 100 | 128 | 228 | (482) | 28 | (226) | Geographical Analysis (2021) | Geographical Segment | Total revenue (£m) | Total income (£m) | Operating profit/(loss) before tax (£m) | Total assets (£m) | Total liabilities (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | | UK | 12,100 | 9,920 | 4,143 | 693,221 | 676,684 | | USA | 87 | 100 | 48 | 21,776 | 23,286 | | Europe | 565 | 421 | (199) | 64,415 | 38,835 | | Rest of the World | 33 | 71 | 40 | 2,580 | 1,384 | | Total | 12,785 | 10,512 | 4,032 | 781,992 | 740,189 | - Goodwill impairment of **£85 million** was recognized in Retail Banking during 2021[320](index=320&type=chunk) [Note 5 Pensions](index=63&type=section&id=Note%205%20Pensions) NatWest Group's net pension asset was £488 million at December 31, 2021, with the main scheme significantly hedged against interest rate and inflation risks - NatWest Group operates defined benefit and defined contribution pension schemes, with the net pension asset for all schemes at **£488 million** as of December 31, 2021[324](index=324&type=chunk)[342](index=342&type=chunk) - The Main section of the NatWest Group Pension Fund represents **90% of all plan assets** and employs derivatives to reduce risk[334](index=334&type=chunk)[335](index=335&type=chunk) Major Classes of Plan Assets (Main Section) as % of Total Plan Assets | Major classes of plan assets as a percentage of total plan assets of the Main section | 2021 Quoted (%) | 2021 Unquoted (%) | 2021 Total (%) | 2020 Quoted (%) | 2020 Unquoted (%) | 2020 Total (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Equities | 3.7 | 4.7 | 8.4 | 3.9 | 4.6 | 8.5 | | Index linked bonds | 46.7 | — | 46.7 | 49.4 | — | 49.4 | | Government bonds | 9.8 | — | 9.8 | 6.2 | — | 6.2 | | Corporate and other bonds | 10.7 | 4.4 | 15.1 | 11.8 | 5.0 | 16.8 | | Real estate | — | 4.4 | 4.4 | — | 4.2 | 4.2 | | Derivatives | — | 8.8 | 8.8 | — | 10.0 | 10.0 | | Cash and other assets | — | 6.8 | 6.8 | — | 4.9 | 4.9 | | Total | 70.9 | 29.1 | 100.0 | 71.3 | 28.7 | 100.0 | - Key actuarial assumptions for the Main section include a discount rate of **1.8%** and RPI inflation assumption of **3.3%**[349](index=349&type=chunk) - The funded status is most sensitive to movements in **credit spreads and longevity**[356](index=356&type=chunk) [Note 6 Auditor's remuneration](index=68&type=section&id=Note%206%20Auditor's%20remuneration) Total audit and audit-related assurance services fees paid to Ernst & Young LLP amounted to £39.3 million in 2021 Auditor's Remuneration (2019-2021) | Fees payable for: | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | - the audit of NatWest Group's annual accounts | 4.4 | 4.7 | 3.8 | | - the audit of NatWest Group plc's subsidiaries | 29.6 | 30.6 | 25.7 | | - audit-related assurance services | 5.3 | 4.7 | 3.2 | | Total audit and audit-related assurance services fees | 39.3 | 40.0 | 32.7 | | Other assurance services | 0.4 | 0.6 | 1.2 | | Corporate finance services | 0.5 | 0.4 | 0.6 | | Total other services | 0.9 | 1.0 | 1.8 | - All audit-related and other services are approved by the Group Audit Committee to ensure **auditor independence**[359](index=359&type=chunk) [Note 7 Tax](index=68&type=section&id=Note%207%20Tax) NatWest Group reported a tax charge of £996 million in 2021, significantly higher than 2020, primarily due to the UK banking surcharge Analysis of Tax Charge for the Year (2019-2021) | Continuing operations | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Current tax charge for the year | (1,036) | (191) | (673) | | Deferred tax (Charge)/credit for the year | (185) | 176 | 38 | | UK tax rate change impact | 165 | 75 | — | | Tax charge for the year | (996) | (74) | (439) | - The higher tax charge in 2021 reflects the **UK banking surcharge** and other non-deductible items[112](index=112&type=chunk)[365](index=365&type=chunk) - The net deferred tax asset increased to **£836 million** in 2021 from £610 million in 2020[372](index=372&type=chunk)[376](index=376&type=chunk) - The UK corporation tax rate increase from 19% to 25% resulted in a **£165 million tax credit** in the income statement[380](index=380&type=chunk) [Note 8 Discontinued operations and assets and liabilities of disposal groups](index=72&type=section&id=Note%208%20Discontinued%20operations%20and%20assets%20and%20liabilities%20of%20disposal%20groups) This note details the financial results of discontinued operations, primarily related to the phased withdrawal of UBIDAC from the Republic of Ireland - Profit from discontinued operations, net of tax, was **£276 million** in 2021, compared to £121 million in 2020[394](index=394&type=chunk) Profit from Discontinued Operations, Net of Tax (2019-2021) | Metric | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Total income | 269 | 288 | 266 | | Operating expenses | (47) | (47) | (45) | | Impairment releases/(losses) | 57 | (111) | 28 | | Operating profit before tax | 279 | 130 | 249 | | Tax (charge)/credit | (3) | (9) | 7 | | Profit from discontinued operations, net of tax | 276 | 121 | 256 | Assets and Liabilities of Disposal Groups (2021) | Assets of disposal groups | 2021 (£m) | | :--- | :--- | | Loans to customers - amortised cost | 9,002 | | Derivatives | 5 | | Other assets | 8 | | Total Assets of disposal groups | 9,015 | | Liabilities of disposal groups | | | Other liabilities | 5 | | Total Liabilities of disposal groups | 5 | | Net assets of disposal groups | 9,010 | - Net cash flows from operating activities attributable to discontinued operations were **£1,290 million** in 2021[396](index=396&type=chunk) [Note 9 Earnings per share](index=73&type=section&id=Note%209%20Earnings%20per%20share) Basic earnings per ordinary share significantly improved to 25.4 pence in 2021, from a loss of 6.2 pence in 2020 Earnings Per Share (2019-2021) | Metric | 2021 (£m) | 2020 (£m) | 2019 (£m) | | :--- | :--- | :--- | :--- | | Profit/(loss) from continuing operations attributable to ordinary shareholders | 2,674 | (874) | 2,877 | | Profit from discontinued operations attributable to ordinary shareholders | 276 | 121 | 256 | | Profit/(loss) attributable to ordinary shareholders | 2,950 | (753) | 3,133 | | Weighted average number of ordinary shares outstanding during the year (millions) | 11,622 | 12,095 | 12,067 | | Total earnings per share attributable to ordinary shareholders - basic | 25.4p | (6.2p) | 26.0p | - Basic earnings per ordinary share from continuing operations was **23.0 pence** in 2021, compared to a loss of 7.2 pence in 2020[168](index=168&type=chunk) [Note 10 Financial instruments – classification](index=73&type=section&id=Note%2010%20Financial%20instruments%20%E2%80%93%20classification) This note details the classification of financial instruments on the balance sheet according to IFRS 9 and the impact of IBOR reform - Classification of financial assets involves judgment regarding **business models** and **contractual cash flow characteristics**[400](index=400&type=chunk)[402](index=402&type=chunk) Financial Assets by IFRS 9 Classification (2021 vs 2020) | Assets | 2021 MFVTPL (£m) | 2021 FVOCI (£m) | 2021 Amortised cost (£m) | 2021 Total (£m) | 2020 MFVTPL (£m) | 2020 FVOCI (£m) | 2020 Amortised cost (£m) | 2020 Total (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and balances at central banks | — | — | 177,757 | 177,757 | — | — | 124,489 | 124,489 | | Trading assets | 59,158 | — | — | 59,158 | 68,990 | — | — | 68,990 | | Derivatives | 106,139 | — | — | 106,139 | 166,523 | — | — | 166,523 | | Loans to customers - amortised cost | — | — | 358,990 | 358,990 | — | — | 360,544 | 360,544 | | Other financial assets | 317 | 37,266 | 8,562 | 46,145 | 440 | 44,902 | 9,806 | 55,148 | | Total (excluding other assets) | 165,614 | 37,266 | 555,132 | 758,012 | 235,953 | 44,902 | 504,091 | 784,946 | Financial Liabilities by IFRS 9 Classification (2021 vs 2020) | Liabilities | 2021 Held-for-trading (£m) | 2021 DFV (£m) | 2021 Amortised cost (£m) | 2021 Total (£m) | 2020 Held-for-trading (£m) | 2020 DFV (£m) | 2020 Amortised cost (£m) | 2020 Total (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Customer deposits | — | — | 479,810 | 479,810 | — | — | 431,739 | 431,739 | | Trading liabilities | 64,598 | — | — | 64,598 | 72,256 | — | — | 72,256 | | Derivatives | 100,835 | — | — | 100,835 | 160,705 | — | — | 160,705 | | Other financial liabilities | — | 1,671 | 47,655 | 49,326 | — | 2,403 | 43,408 | 45,811 | | Subordinated liabilities | — | 703 | 7,726 | 8,429 | — | 793 | 9,169 | 9,962 | | Total (excluding other liabilities) | 165,433 | 2,374 | 535,461 | 703,268 | 232,961 | 3,196 | 484,921 | 720,978 | - The total exposure subject to **IBOR conversion** at December 31, 2021, included £22,056 million of assets and £557.7 billion of derivative notionals[412](index=412&type=chunk) [Note 11 Financial instruments – valuation](index=78&type=section&id=Note%2011%20Financial%20instruments%20%E2%80%93%20valuation) This note details the valuation of financial instruments at fair value, categorized into a three-level hierarchy based on observability of inputs - Financial instruments at fair value are classified into **Level 1** (quoted prices), **Level 2** (observable inputs), and **Level 3** (significant unobservable inputs)[431](index=431&type=chunk)[433](index=433&type=chunk)[434](index=434&type=chunk)[435](index=435&type=chunk) Financial Assets Held at Fair Value by Hierarchy Level (2021 vs 2020) | Assets | 2021 Level 1 (£m) | 2021 Level 2 (£m) | 2021 Level 3 (£m) | 2021 Total (£m) | 2020 Level 1 (£m) | 2020 Level 2 (£m) | 2020 Level 3 (£m) | 2020 Total (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Trading assets - Loans | — | 33,482 | 721 | 34,203 | — | 39,550 | 225 | 39,775 | | Trading assets - Securities | 19,563 | 5,371 | 21 | 24,955 | 21,535 | 7,599 | 81 | 29,215 | | Derivatives | — | 105,222 | 917 | 106,139 | — | 165,441 | 1,082 | 166,523 | | Other financial assets - Loans | — | 359 | 207 | 566 | — | 185 | 168 | 353 | | Other financial assets - Securities | 28,880 | 7,951 | 186 | 37,017 | 35,972 | 8,850 | 167 | 44,989 | | Total financial assets held at fair value | 48,443 | 152,385 | 2,052 | 202,880 | 57,507 | 221,625 | 1,723 | 280,855 | Financial Liabilities Held at Fair Value by Hierarchy Level (2021 vs 2020) | Liabilities | 2021 Level 1 (£m) | 2021 Level 2 (£m) | 2021 Level 3 (£m) | 2021 Total (£m) | 2020 Level 1 (£m) | 2020 Level 2 (£m) | 2020 Level 3 (£m) | 2020 Total (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Trading liabilities - Deposits | — | 38,658 | 2 | 38,660 | — | 44,062 | 7 | 44,069 | | Trading liabilities - Debt securities in issue | — | 974 | — | 974 | — | 1,408 | — | 1,408 | | Trading liabilities - Short positions | 20,507 | 4,456 | 1 | 24,964 | 19,045 | 7,734 | — | 26,779 | | Derivatives | — | 100,229 | 606 | 100,835 | — | 159,818 | 887 | 160,705 | | Other financial liabilities - Debt securities in issue | — | 1,103 | — | 1,103 | — | 1,607 | — | 1,607 | | Other financial liabilities - Other deposits | — | 568 | — | 568 | — | 796 | — | 796 | | Subordinated liabilities | — | 703 | — | 703 | — | 793 | — | 793 | | Total financial liabilities held at fair value | 20,507 | 146,691 | 609 | 167,807 | 19,045 | 216,218 | 894 | 236,157 | - Valuation adjustments for trading book instruments totaled **£712 million** in 2021, down from £850 million in 2020[465](index=465&type=chunk) - The fair value of financial instruments measured at amortised cost, such as loans to customers, was **£354.1 billion** in 2021, compared to a carrying value of £359.0 billion[494](index=494&type=chunk) [Note 12 Financial instruments - maturity analysis](index=88&type=section&id=Note%2012%20Financial%20instruments%20-%20maturity%20analysis) This note presents the contractual maturity profile of financial assets and liabilities, highlighting that a significant portion matures within 12 months Financial Assets by Contractual Maturity (2021 vs 2020) | Assets | 2021 Less than 12 months (£m) | 2021 More than 12 months (£m) | 2021 Total (£m) | 2020 Less than 12 months (£m) | 2020 More than 12 months (£m) | 2020 Total (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and balances at central banks | 177,757 | — | 177,757 | 124,489 | — | 124,489 | | Trading assets | 40,263 | 18,895 | 59,158 | 42,037 | 26,953 | 68,990 | | Derivatives | 34,538 | 71,601 | 106,139 | 46,244 | 120,279 | 166,523 | | Loans to customers - amortised cost | 103,689 | 255,301 | 358,990 | 87,531 | 273,013 | 360,544 | | Other financial assets | 11,151 | 34,994 | 46,145 | 8,901 | 46,247 | 55,148 | Financial Liabilities by Contractual Maturity (2021 vs 2020) | Liabilities | 2021 Less than 12 months (£m) | 2021 More than 12 months (£m) | 2021 Total (£m) | 2020 Less than 12 months (£m) | 2020 More than 12 months (£m) | 2020 Total (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Bank deposits | 13,715 | 12,564 | 26,279 | 12,315 | 8,291 | 20,606 | | Customer deposits | 478,801 | 1,009 | 479,810 | 430,283 | 1,456 | 431,739 | | Trading liabilities | 41,664 | 22,934 | 64,598 | 45,037 | 27,219 | 72,256 | | Derivatives | 34,593 | 66,242 | 100,835 | 47,361 | 113,344 | 160,705 | | Subordinated liabilities | 1,375 | 7,054 | 8,429 | 365 | 9,597 | 9,962 | - The tables include all cash flows relating to principal and future coupon payments, presented on an **undiscounted basis**[500](index=500&type=chunk) [Note 13 Trading assets and liabilities](index=90&type=section&id=Note%2013%20Trading%20assets%20and%20liabilities) Trading assets decreased to £59,158 million in 2021, while trading liabilities also decreased to £64,598 million Trading Assets and Liabilities (2021 vs 2020) | Assets | 2021 (£m) | 2020 (£m) | | :--- | :--- | :--- | | Loans - Reverse repos | 20,742 | 19,404 | | Loans - Collateral given | 12,047 | 18,760 | | Securities - Central and local government | 21,277 | 25,769 | | Securities - Financial institutions and corporate | 3,778 | 3,446 | | Total Assets | 59,158 | 68,990 | | Liabilities | | | | Deposits - Repos | 19,389 | 19,036 | | Deposits - Collateral received | 17,718 | 23,229 | | Debt securities in issue | 974 | 1,408 | | Short positions | 24,964 | 26,779 | | Total Liabilities | 64,598 | 72,256 | - Trading assets are held at fair value for **short-term selling or repurchasing**[508](index=508&type=chunk) [Note 14 Derivatives](index=90&type=section&id=Note%2014%20Derivatives) Derivative assets and liabilities decreased significantly in 2021, reflecting reduced volumes and lower mark-to-market valuations Derivatives by Type (2021 vs 2020) | Derivative Type | 2021 Notional (£bn) | 2021 Assets (£m) | 2021 Liabilities (£m) | 2020 Notional (£bn) | 2020 Assets (£m) | 2020 Liabilities (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Exchange rate contracts | 3,167 | 38,517 | 39,286 | 3,328 | 52,239 | 55,107 | | Interest rate contracts | 8,919 | 67,458 | 61,206 | 10,703 | 114,115 | 105,214 | | Credit derivatives | 14 | 154 | 343 | 15 | 161 | 376 | | Equity and commodity contracts | — | 10 | — | 1 | 8 | 8 | | Total | | 106,139 | 100,835 | | 166,523 | 160,705 | - NatWest Group applies **hedge accounting** for interest rate, foreign exchange, and net investment to reduce accounting mismatch[514](index=514&type=chunk)[519](index=519&type=chunk) - Significant transitions in 2021 included **GBP, JPY, and CHF derivatives** to risk-free rates as part of the LCH 'big bang' conversion[523](index=523&type=chunk) Derivatives Held for Hedging Purposes (2021 vs 2020) | Hedging Type | 2021 Notional (£bn) | 2021 Assets (£m) | 2021 Liabilities (£m) | 2020 Notional (£bn) | 2020 Assets (£m) | 2020 Liabilities (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Fair value hedging | 65.6 | 1,176 | 2,057 | 65.5 | 1,878 | 3,844 | | Cash flow hedging | 140.4 | 982 | 1,258 | 139.6 | 2,072 | 1,326 | | Net investment hedging | 0.5 | 11 | 1 | 0.2 | — | 9 | | Total (before netting) | 206.5 | 2,169 | 3,316 | 205.3 | 3,950 | 5,179 | - USD cash flow and fair value hedges maturing post-June 30, 2023, remain directly affected by **interest rate benchmark reform**[524](index=524&type=chunk) [Note 15 Loan impairment provisions](index=96&type=section&id=Note%2015%20Loan%20impairment%20provisions) Loan impairment provisions decreased significantly to £3,806 million in 2021, reflecting a net impairment release of £1,278 million Loans and ECL Provisions (2021 vs 2020) | Metric | 2021 (£m) | 2020 (£m) | | :--- | :--- | :--- | | Loans - amortised cost | | | | Stage 1 | 330,824 | 287,124 | | Stage 2 | 33,981 | 78,917 | | Stage 3 | 5,022 | 6,358 | | Total Loans | 369,827 | 372,399 | | ECL provisions | | | | - Stage 1 | 302 | 519 | | - Stage 2 | 1,478 | 3,081 | | - Stage 3 | 2,026 | 2,586 | | Total ECL provisions | 3,806 | 6,186 | | ECL provision coverage (%) | 1.03 | 1.66 | | Impairment (releases)/losses | (1,278) | 3,131 | | Amounts written off | 876 | 937 | - The net impairment release of **£1,278 million** in 2021 reflects low levels of realized losses and improved economic outlook[110](index=110&type=chunk)[544](index=544&type=chunk) - The measurement of credit impairment under IFRS 9 depends on management's assessment of borrower creditworthiness, modeling, and economic forecasts, requiring **significant judgment**[550](index=550&type=chunk) [Note 16 Other financial assets](index=99&type=section&id=Note%2016%20Other%20financial%20assets) Other financial assets, comprising debt securities, equity shares, and non-trading loans, decreased to £46,145 million in 2021 Other Financial Assets by Classification (2021 vs 2020) | Other financial assets | 2021 Mandatory fair value through profit or loss (£m) | 2021 Fair value through other comprehensive income (£m) | 2021 Amortised cost (£m) | 2021 Total (£m) | 2020 Mandatory fair value through profit or loss (£m) | 2020 Fair value through other comprehensive income (£m) | 2020 Amortised cost (£m) | 2020 Total (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Debt securities | 6 | 36,686 | 8,562 | 45,254 | 88 | 44,593 | 9,806 | 54,487 | | Equity shares | 13 | 312 | — | 325 | 14 | 294 | — | 308 | | Other loans | 298 | 268 | — | 566 | 338 | 15 | — | 353 | | Total | 317 | 37,266 | 8,562 | 46,145 | 440 | 44,902 | 9,806 | 55,148 | - Debt securities, a component of NatWest Group's liquidity portfolio, decreased by **£9,233 million** in 2021[557](index=557&type=chunk) [Note 17 Intangible assets](index=100&type=section&id=Note%2017%20Intangible%20assets) Intangible assets, primarily software and goodwill, had a net book value of £6,723 million at year-end 2021, with an £85 million goodwill impairment recognized Intangible Assets (2021 vs 2020) | Metric | 2021 Goodwill (£m) | 2021 Other (£m) | 2021 Total (£m) | 2020 Goodwill (£m) | 2020 Other (£m) | 2020 Total (£m) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cost at 1 January | 9,939 | 2,592 | 12,531 | 9,980 | 2,293 | 12,273 | | Additions | — | 479 | 479 | — | 348 | 348 | | Accumulated amortisation and impairment at 1 January | 4,332 | 1,544 | 5,876 | 4,373 | 1,278 | 5,651 | | Impa

Q3 2021 Results 29th Oct 2021 | --- | --- | --- | --- | --- | |-------------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Alison Rose Chief Executive Officer | | | | | | | | | | | Q3'21 results highlights | --- | --- | --- | --- | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

NatWest Group plc (NYSE:NWG) Q3 2021 Earnings Conference Call October 29, 2021 4:00 AM ET Company Participants Alison Rose - Chief Executive Officer Katie Murray - Chief Financial Officer Conference Call Participants Omar Keenan - Credit Suisse Fahed Kunwar - Redburn Alvaro Serrano - Morgan Stanley Andrew Coombs - Citi Jonathan Pierce - Numis Guy Stebbings - Exane Chris Cant - Autonomous Aman Rakkar - Barclays Martin Leitgeb - Goldman Sachs Disclaimer*: This transcript is designed to be used alongside the f ...

NatWest Group plc (NYSE:NWG) H1 2021 Earnings Conference Call July 30, 2021 3:00 AM ET Company Participants Alison Rose - Chief Executive Officer Katie Murray - Chief Financial Officer Conference Call Participants Andrew Coombs - Citi Omar Keenan - Credit Suisse Rohith Chandra-Rajan - Bank of America Guy Stebbings - BNP Paribas Jonathan Pierce - Numis Robert Noble - Deutsche Bank John Cronin - Goodbody Alvaro Serrano - Morgan Stanley Martin Leitgeb - Goldman Sachs Robin Down - HSBC Aman Rakkar - Barclays Fa ...

H1 2021 Results 30th July 2021 | --- | --- | --- | --- | --- | |-------------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Alison Rose Chief Executive Officer | | | | | | | | | | | H1'21 results highlights H1'21 performance | --- | --- | --- | --- | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

Natwest Group PLC (NYSE:NWG) Q1 2021 Earnings Conference Call April 29, 2021 4:00 AM ET Â Company Participants | --- | --- | |------------------------------------------------------------------------------|-------| | | | | Alison Rose – Chief Executive Officer Katie Murray – Chief Financial Officer | | | Conference Call Participants | | | Aman Rakkar – Barclays | | | Jonathan Pierce – Numis | | | Benjamin Toms – RBC Capital Markets | | | Alvaro Serrano – Morgan Stanley | | | Andrew Coombs – Citi | | | Omar K ...

Q1 2021 Results 29th April 2021 Alison Rose Chief Executive Officer 2 Q1'21 results highlights Good Q1'21 operating performance Supporting our customers; strong net lending growth Further cost reduction achieved in Q1 Impairments: small release reflects good book releases and government support mitigating level of defaults Strong capital base and liquidity position £1.1bn directed buy back completed 1. Net lending to customers across the UK and RBSI retail and commercial businesses, excluding UK Government ...