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 ...

Natwest Group PLC (RBS) Full Year 2020 Earnings Conference Call February 19, 2021 4:00 AM ET Company Participants Howard Davies – Chairman Alison Rose – Chief Executive Officer Katie Murray – Chief Financial Officer Christine McPherson – Finance Director of Services and Functions Alexander Holcroft – Head of Investor Relations Conference Call Participants James Invine – SG Rohit Chandra-Rajan – Bank of America Raul Sinha – JPMorgan Andrew Coombs – Citi Jonathan Pierce – Numis Alvaro Serrano – Morgan Stanley ...