UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-10306
NATWEST GROUP plc
(Exact name of Registrant as specified in its charter)
United Kingdom
(Jurisdiction of incorporation)
250 Bishopsgate, London, EC2M 4AA, United Kingdom
(Address of principal executive offices)
Gary Moore, Chief Governance Officer and Company Secretary,
Tel: +44 (0) 370 702 0135, Fax: +44 (0) 131 626 3081
PO Box 1000, Gogarburn, Edinburgh EH12 1HQ
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
TradingSymbol (s)
Name of each exchangeon which registered
American Depositary Shares, each representing 2 ordinary shares, nominal value £1.0769 per share
NWG
New York Stock Exchange
Ordinary shares, nominal value £1.0769 per share*
4.800% Senior Notes due 2026
NWG26
3.032% Fixed-to-fixed Reset Rate Subordinated Tier 2 Notes due 2035
NWG35
6.475% Fixed-to-fixed Reset Rate Subordinated Tier 2 Notes due 2034
NWG34A
1.642% Senior Callable Fixed-to-fixed Reset Rate Notes due 2027
NWG27
5.847% Senior Callable Fixed-to-fixed Reset Rate Notes due 2027
NWG27A
5.516% Senior Callable Fixed-to-fixed Reset Rate Notes due 2028
NWG28A
5.583% Senior Callable Fixed-to-fixed Reset Rate Notes due 2028
NWG28C
5.808% Senior Callable Fixed-to-fixed Reset Rate Notes due 2029
NWG29B
4.964% Senior Callable Fixed-to-fixed Reset Rate Notes due 2030
NWG30B
6.016% Senior Callable Fixed-to-fixed Reset Rate Notes due 2034
NWG34
5.778% Senior Callable Fixed-to-fixed Reset Rate Notes due 2035
NWG35A
Senior Callable Floating Rate Notes due 2028
NWG28B
NWG28D
7.472% Callable Fixed-to-fixed Reset Rate Senior Notes due 2026
NWG26A
3.073% Callable Fixed-to-fixed Reset Rate Senior Notes due 2028
NWG28
4.892% Fixed Rate / Floating Rate Senior Notes due 2029
NWG29
5.076% Fixed Rate / Floating Rate Senior Notes due 2030
NWG30
4.445% Fixed Rate / Floating Rate Senior Notes due 2030
NWG30A
* Not for trading, but only in connection with the registration of American Depositary Shares representing such ordinary shares pursuant to the requirements of the Securities and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2025
Irish Stock Exchange
London Stock Exchange
Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2027
Reset Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2028
Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2031
Reset Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2033
Reset Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2034
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2024, the close of the period covered by the annual report:
(Title of each class)
(Number of outstanding shares)
Ordinary shares of £1.0769* each
8,331,144,875
11% cumulative preference shares
240,686
5½% cumulative preference shares
242,454
* Nominal value of Ordinary shares without rounding is £1.076923076923077
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☒ Yes ☐ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer ", "accelerated filer" and "emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☒
Accelerated filer ☐
Non-Accelerated filer ☐
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ☐
†The term “new or revised financial accounting standard” refers to any update issues by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☐ U.S. GAAP
☒ International Financial Reporting Standards as issued by the International Accounting Standards Board
☐ Other
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
SEC Form 20-F cross reference guide
Item
Item Caption
Pages
PART I
Annual Report on Form 20-F
Exhibit 15.2: Annual Report and Form 20-F Information
1
Identity of Directors, Senior Management and Advisers
Not applicable
2
Offer Statistics and Expected Timetable
3
Key Information
A. [Reserved]
B. Capitalization and indebtedness
C. Reasons for the offer and use of proceeds
D. Risk factors
4-5, 283-304
58-63
4
Information on the Company
A. History and development of the Company
B. Business overview
C. Organizational structure
D. Property, plant and equipment
7-9, 190-195, 311-322
1-24, 194-195, 272-281, 305-310
3, Exhibit 8.1
185, 242, 305
8-9, 10-11, 12-14, 153-156
3-33, 46-57, 153-156
20-21
50-51
4A
Unresolved Staff Comments
5
Operating and Financial Review and Prospects
A. Operating results
B. Liquidity and capital resources
C. Research and development, patents, licences etc.
D. Trend information
E. Critical Accounting Estimates
1-23, 126-141
7-9, 22-23, 103-142, 170, 174,
227-239, 243-244
4-24
3-33, 46-63
4, 11, 58-63
3-33, 46-57
6
Directors, Senior Management and Employees
A. Directors and senior management
B. Compensation
C. Board practices
D. Employees
E. Share ownership
F. Disclosure of a registrant’s action to recover erroneously awarded compensation
186-203, 261
186
188-190, 261, 305, 313-314
68-71, 153-157
113-150
68-71, 73-92, 93-112, 153-156
37-39
7
Major Shareholders and Related Party Transactions
A. Major shareholders
B. Related party transactions
C. Interests of experts and counsel
305-306, 309-310
262-263, 309-310
153-156
8
Financial Information
A. Consolidated statements and other financial information
B. Significant changes
162-263
3-24, 162-263
9
The Offer and Listing
A. Offer and listing details
B. Plan of distribution
C. Markets
D. Selling shareholders
E. Dilution
F. Expenses of the issue
245-246, 313-314
313-314
152
10
Additional information
A. Share capital
B. Memorandum and articles of association
C. Material contracts
D. Exchange controls
E. Taxation
F. Dividends and paying agents
G. Statement of experts
H. Documents on display
I. Subsidiary information
J. Annual Report to Security Holders
316-321
309-310
316
314-316
321
11
Quantitative & Qualitative Disclosure about Market Risk
26-141, 230-240
58-63, 106
12
Description of Securities other than Equity Securities
A. Debt Securities
B. Warrants and Rights
C. Other Securities
D. American Depositary Shares
Exhibit 2.4
282, 314
SEC Form 20-F cross reference guide continued
PART II
13
Defaults, Dividend Arrearages and Delinquencies
14
Material Modifications to the Rights of Security Holders and Use of Proceeds
15
Controls and Procedures
167, Exhibits 12.1 and 12.2
58-63, 96-101, 150-152
16
[Reserved]
16A
Audit Committee financial expert
96
16B
Code of ethics
307
10-11, 40
16C
Principal Accountant Fees and services
203
100
16D
Exemptions from the Listing Standards
16E
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
305-306
154-156
16F
Change in Registrant’s Certifying Accountant
16G
Corporate Governance
73-101, 152, 157
16H
Mine Safety Disclosure
16I
Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
16J
Insider Trading Policies
310
16K
Cybersecurity
156-157
PART III
17
Financial Statements
18
19
Exhibits
323-324
Forward-looking statements and important notices
Cautionary statement regarding forward-looking statements
Certain sections in this document contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements with respect to NatWest Group’s financial condition, results of operations and business, including its strategic priorities, financial, investment and capital targets, and climate and sustainability-related targets, commitments and ambitions described herein. Statements that are not historical facts, including statements about NatWest Group’s beliefs and expectations, are forward-looking statements. Words such as ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘commit’, ‘believe’, ‘should’, ‘intend’, ‘will’, ‘plan’, ‘could’, ‘probability’, ‘risk’, ‘target’, ‘goal’, ‘objective’, ‘may’, ‘endeavour’, ‘outlook’, ‘optimistic’, ‘prospects’ and similar expressions or variations on these expressions are intended to identify forward-looking statements. In particular, this document includes forward-looking targets and guidance relating to financial performance measures, such as income growth, operating expense, RoTE, ROE, discretionary capital distribution targets, impairment loss rates, balance sheet reduction, including the reduction of RWAs, CET1 ratio (and key drivers of the CET1 ratio including timing, impact and details), Pillar 2 and other regulatory buffer requirements and MREL and non-financial performance measures, such as NatWest Group’s initial area of focus, climate and sustainability-related performance ambitions, targets and metrics, including in relation to initiatives to transition to a net zero economy, climate and sustainable funding and financing and financed emissions.
Limitations inherent to forward-looking statements
These statements are based on current plans, expectations, estimates, targets and projections, and are subject to significant inherent risks, uncertainties and other factors, both external and relating to NatWest Group’s strategy or operations, which may result in NatWest Group being unable to achieve the current plans, expectations, estimates, targets, projections and other anticipated outcomes expressed or implied by such forward-looking statements. In addition, certain of these disclosures are dependent on choices relying on key model characteristics and assumptions and are subject to various limitations, including assumptions and estimates made by management. By their nature, certain of these disclosures are only estimates and, as a result, actual future results, gains or losses could differ materially from those that have been estimated. Accordingly, undue reliance should not be placed on these statements. The forward-looking statements contained in this document speak only as of the date we make them and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein, whether to reflect any change in our expectations with regard thereto, any change in events, conditions or circumstances on which any such statement is based, or otherwise, except to the extent legally required.
Important factors that could affect the actual outcome of the forward-looking statements
We caution you that a large number of important factors could adversely affect our results or our ability to implement our strategy, cause us to fail to meet our targets, predictions, expectations and other anticipated outcomes or affect the accuracy of forward-looking statements described in this document. These factors include, but are not limited to, those set forth in the risk factors and the other uncertainties described in NatWest Group plc’s Annual Report on Form 20-F and its other filings with the US Securities and Exchange Commission. The principal risks and uncertainties that could adversely affect NatWest Group’s future results, its financial condition and/or prospects and cause them to be materially different from what is forecast or expected, include, but are not limited to: economic and political risk (including in respect of: political and economic risks and uncertainty in the UK and global markets, including as a result of inflation and interest rates, supply chain disruption and geopolitical developments); changes in interest rates and foreign currency exchange rates; and HM Treasury’s ownership of NatWest Group plc); business change and execution risk (including in respect of the implementation of NatWest Group’s strategy; future acquisitions and divestments, and the transfer of its Western European corporate portfolio); financial resilience risk (including in respect of: NatWest Group’s ability to meet targets and to make discretionary capital distributions; the competitive environment; counterparty and borrower risk; liquidity and funding risks; prudential regulatory requirements for capital and MREL; reductions in the credit ratings; the requirements of regulatory stress tests; model risk; sensitivity to accounting policies, judgments, estimates and assumptions (and the economic, climate, competitive and other forward looking information affecting those judgments, estimates and assumptions); changes in applicable accounting standards; the value or effectiveness of credit protection; the adequacy of NatWest Group’s future assessments by the Prudential Regulation Authority and the Bank of England; and the application of UK statutory stabilisation or resolution powers); climate and sustainability risk (including in respect of: risks relating to climate and sustainability-related risks; both the execution and reputational risk relating to NatWest Group’s climate change-related strategy, ambitions, targets and transition plan; climate and sustainability-related data and model risk; increasing levels of climate, environmental, human rights and sustainability-related regulation and oversight; and increasing; climate, environmental and sustainability-related litigation, enforcement proceedings investigations and conduct risk); operational and IT resilience risk (including in respect of: operational risks (including reliance on third party suppliers); cyberattacks; the accuracy and effective use of data; complex IT systems; attracting, retaining and developing diverse senior management and skilled personnel; NatWest Group’s risk management framework; and reputational risk); and legal, regulatory and conduct risk (including in respect of: the impact of substantial regulation and oversight; the outcome of legal, regulatory and governmental actions, investigations and remedial undertakings; and changes in tax legislation or failure to generate future taxable profits).
NatWest Group Annual Report on Form 20-F 2024
Forward-looking statements and important notices continued
Cautionary statement regarding Non-IFRS financial measures and APMs
NatWest Group prepares its financial statements in accordance with UK - adopted International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). This document may contain financial measures and ratios not specifically defined under GAAP or IFRS (‘Non-IFRS’) and/or alternative performance measures (‘APMs’) as defined in European Securities and Markets Authority (‘ESMA’) guidelines. Non-IFRS measures and APMs are adjusted for notable and other defined items which management believes are not representative of the underlying performance of the business and which distort period-on-period comparison. Non-IFRS measures provide users of the financial statements with a consistent basis for comparing business performance between financial periods and information on elements of performance that are one-off in nature. Any Non-IFRS measures and/or APMs included in this document, are not measures within the scope of IFRS, are based on a number of assumptions that are subject to uncertainties and change, and are not a substitute for IFRS measures.
The information, statements and opinions contained in this document do not constitute a public offer under any applicable legislation or an offer to sell or a solicitation of an offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.
Climate and sustainability-related disclosures
Climate and sustainability-related disclosures in this document are not measures within the scope of International Financial Reporting Standards (‘IFRS’), use a greater number and level of judgments, assumptions and estimates, including with respect to the classification of climate and sustainable funding and financing activities, than our reporting of historical financial information in accordance with IFRS. These judgments, assumptions and estimates are highly likely to change materially over time, and, when coupled with the longer time frames used in these disclosures, make any assessment of materiality inherently uncertain. In addition, our climate risk analysis, our ambition to be net zero across our financed emissions, assets under management and operational value chain by 2050 and the implementation of our climate transition plan remain under development, and the data underlying our analysis and strategy remain subject to evolution over time. The process we have adopted to define, gather and report data on our performance on climate and sustainability-related measures is not subject to the formal processes adopted for financial reporting in accordance with IFRS and there are currently limited industry standards or globally recognised established practices for measuring and defining climate and sustainability-related metrics. As a result, we expect that certain climate and sustainability-related disclosures made in this document are likely to be amended, updated, recalculated or restated in the future. Please also refer to the cautionary statement in the section entitled ‘Climate and sustainability-related and other forward-looking statements and metrics’ of the NatWest Group 2024 Sustainability Report.
Presentation of information
In the Annual Report on Form 20-F, unless specified otherwise, ‘parent company’ refers to NatWest Group plc, and ‘NatWest Group’, ‘Group’ or ‘we’ refers to NatWest Group plc and its subsidiaries. The term ‘NWH Group’ refers to NatWest Holdings Limited (‘NWH Limited’) and its subsidiary and associated undertakings. The term ‘NWM Group’ refers to NatWest Markets Plc (‘NWM Plc’) and its subsidiary and associated undertakings. The term ‘RBSH N.V.’ refers to RBS Holdings N.V. The term ‘NWM N.V.’ refers to NatWest Markets N.V. The term ‘NWM N.V. Group’ refers to NatWest Markets N.V. and its subsidiary and associated undertakings The term ‘NWMSI’ refers to NatWest Markets Securities, Inc. The term ‘RBS plc’ refers to The Royal Bank of Scotland plc. The term ‘NWB Plc’ refers to National Westminster Bank Plc. The term ‘UBIDAC’ refers to Ulster Bank Ireland DAC. The term ‘RBSI Ltd’ refers to The Royal Bank of Scotland International Limited.
NatWest Group publishes its financial statements in pounds sterling (‘£’ or ‘sterling’). The abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions of pounds sterling (‘GBP’), respectively, and references to ‘pence’ represent pence where amounts are denominated in pounds sterling. Reference to ‘dollars’ or ‘$’ are to United States of America (‘US’) dollars. The abbreviations ‘$m’ and ‘$bn’ represent millions and thousands of millions of dollars, respectively. The abbreviation ‘€’ represents the ‘euro’, and the abbreviations ‘€m’ and ‘€bn’ represent millions and thousands of millions of euros, respectively.
To aid readability, this document retains references to EU legislative and regulatory provisions in effect in the UK before 1 January 2021 that have now been implemented in UK domestic law. These references should be read and construed as including references to the applicable UK implementation measures with effect from 1 January 2021.
Any information contained on websites linked or reports referenced in this Annual Report on Form 20-F is for information only and will not be deemed to be incorporated by reference herein.
Non-IFRS financial information
NatWest Group prepares its financial statements in accordance with UK-adopted International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). This document contains a number of non-IFRS measures, also known as alternative performance measures, defined under the European Securities and Markets Authority (ESMA) guidance or non-GAAP financial measures in accordance with the Securities and Exchange Commission (SEC) regulations. These measures are adjusted for notable and other defined items which management believes are not representative of the underlying performance of the business and which distort period-on-period comparison.
The non-IFRS measures provide users of the financial statements with a consistent basis for comparing business performance between financial periods and information on elements of performance that are one-off in nature. The non-IFRS measures also include the basis of calculation for metrics that are used throughout the banking industry.
These non-IFRS measures are not a substitute for IFRS measures and a reconciliation to the closest IFRS measure is presented where appropriate. For details of the basis of preparation and reconciliation where appropriate refer to appendix ‘Non-IFRS financial measures’ on page 264.
Summary risk factors
Principal risks and uncertainties
Set out below is a summary of the principal risks and uncertainties that could adversely affect NatWest Group’s future results, its financial condition and prospects and cause them to be materially different from what is forecast or expected, and directly or indirectly impact the value of its securities in issue. This summary should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties; a fuller description of these and other risk factors is included on pages 283 to 304 of this report on Form 20-F and should be read together with NatWest Group’s other public disclosures. Any of the risks identified may have a material adverse effect on NatWest Group’s business, operations, financial condition or prospects.
Economic and political risk
Business change and execution risk
Financial resilience risk
Summary risk factors continued
Operational and IT resilience risk
Legal and regulatory risk
Climate and sustainability-related risks
Group Chief Financial Officer’s review
‘We have delivered a strong performance in 2024 with a return on equity of 11.9% and a RoTE of 17.5%. Total income was £14.7 billion with total income excluding notable items exceeding our guidance at £14.6 billion. We remain focused on cost discipline and have achieved our cost target to be broadly stable, excluding the impact of increased bank levies and costs in relation to a retail share offering. Levels of default remain stable at low levels. We have strong growth in net lending and customer deposits across our businesses and the CET1 ratio was within our targeted range at 13.6%.’
Financial performance
Total income decreased by 0.3% to £14.7 billion compared with 2023 largely due to foreign exchange recycling gains in 2023. Total income excluding notable items of £14.6 billion was 2.2% higher than the prior year principally reflecting deposit margin expansion, lending growth and strong customer activity in capital markets partially offset by the impact of the deposit balance mix shift from non-interest bearing to interest bearing balances. Full year 2024 Net Interest Margin (NIM) of 2.13% was 1 basis point higher than 2023 primarily due to deposit margin expansion and higher deposit balances partially offset with asset margin compression and the impact of the deposit balance mix shift from non-interest bearing to interest bearing balances.
Total operating expenses of £8.1 billion were £153 million higher than 2023. Other operating expenses were £213 million (2.8%) higher, or excluding a £102 million increase in bank levies and £24 million of costs in relation to a retail share offering, were 1.1% higher and in line with our guidance. The increase was principally driven by higher staff costs due to inflation and severance costs partially offset by savings from the ongoing simplification of our business and lower costs in relation to our withdrawal from the Republic of Ireland.
FTE(1) reduced by 3% to c.59,200 in the year principally reflecting the transformation of our Retail Banking business and our withdrawal from the Republic of Ireland.
A net impairment charge of £359 million, or 9 basis points of gross customer loans, with stable levels of default across the portfolio. Compared with 2023, our ECL provision decreased by £0.2 billion to £3.4 billion and our ECL coverage ratio has decreased from 0.93% to 0.83%. We retain post model adjustments of £0.3 billion related to economic uncertainty, or 8.7% of total impairment provisions. Whilst we are comfortable with the strong credit performance of our book, we continue to assess this position regularly.
As a result, we are pleased to report an attributable profit for 2024 of £4.5 billion, with earnings per share of 53.5 pence, return on equity of 11.9% and a RoTE of 17.5%, the profit for the year includes a deferred tax asset benefit of £232 million, before UK Group and loss relief adjustments which are partially offset by the current tax charge.
Net loans to customers of £400.3 billion increased by £18.9 billion in the year compared to £381.4 billion in 2023. Net loans to customers excluding central items of £368.5 billion increased by £12.9 billion in the year compared to £355.6 billion in 2023 largely reflecting £10.0 billion of growth in Commercial & Institutional due to an increase in term loan facilities and growth in Corporate & Institutions, net of £2.0 billion of UK Government scheme repayments; and a £3.2 billion increase in Retail Banking, including £2.2 billion in respect of the Metro Bank mortgage portfolio acquisition.
Up to 31 December 2024 we have provided £93.4 billion against our target to provide £100 billion climate and sustainable funding and financing between 1 July 2021 and the end of 2025 (2). As part of this we aim to provide at least £10 billion in lending for EPC A- and B-rated residential properties between 1 January 2023 and the end of 2025. During 2024 we provided £31.5 billion climate and sustainable funding and financing, which included £3.5 billion in lending for EPC A- and B-rated residential properties.
Customer deposits of £433.5 billion increased by £2.1 billion during 2024. Customer deposits excluding central items increased by £12.2 billion during 2024 to £431.3 billion principally reflecting £6.8 billion growth in Retail Banking, as an increase in savings was partly offset by a reduction in current account balances, and a £4.7 billion increase in Private Banking due to savings balances partially offset by a reduction in current account and term balances. Commercial & Institutional balances increased £0.7 billion over the year primarily reflecting growth within Commercial Mid-market partially offset by a reduction in Corporate & Institutions. Term balances have remained broadly stable throughout 2024 and compared to the end of 2023 at 16% of the book.
Net Asset Value (NAV) per share increased by 46 pence in the year to 424 pence. Tangible net asset value (TNAV) per share increased by 37 pence in the year to 329 pence primarily reflecting the attributable profit for the period partially offset by the impact of distributions.
The CET1 ratio of 13.6% was 20 basis points higher than 2023 principally reflecting the attributable profit, c.240 basis points partially offset by distributions deducted from capital of c.220 basis points.
RWAs increased by £0.2 billion during 2024 to £183.2 billion principally reflecting lending growth, the annual update to operational risk and £0.9 billion in relation to the Metro Bank mortgage portfolio partially offset by RWA management reduction of £6.8 billion.
Katie Murray
Group Chief Financial Officer
(1)
Full Time Equivalent is permanent and fixed-term contract resource directly employed by NatWest Group; excludes Managed Service Workers and other contractors. Each full-time employee is one FTE, with part-time employees recorded based on hours worked.
(2)
The guidance, targets, expectations, and trends discussed in this section represent NatWest Group plc management's current expectations and are subject to change, including as a result of the factors described in the Risk Factors section of the 2024 NatWest Group plc Annual Report on Form 20-F. These standards constitute forward-looking statements. Refer to Forward-looking statements in this document.
Financial summary
This section includes a discussion on our operating results for the year ended 31 December 2024, including a comparative discussion on our operating results for the year ended 31 December 2023. For a discussion on our operating results for the year ended 31 December 2023, including a comparative discussion on our operating results for the year ended 31 December 2022, refer to the sections “CFO Review”, “Financial Summary” and “Segment Performance” on pages 6 to 24 in our 2023 Annual Report on Form 20-F (File No. 001-10306) filed with the Securities and Exchange Commission on February 23, 2024.
Year ended or as at
2024
2023
Variance
Performance key metrics and ratios
Total income
£14,703m
£14,752m
(0.3)
%
Notable items within total income (1)
£55m
£413m
nm
Total income excluding notable items (1)
£14,648m
£14,339m
2.2
Net interest margin (1)
2.13
2.12
1bps
Average interest earning assets (1)
£529bn
£521bn
1.5
Cost:income ratio (excl. litigation and conduct) (1)
53.4
51.8
1.6
Loan impairment rate (1)
9bps
15bps
(6bps)
Profit attributable to ordinary shareholders
£4,519m
£4,394m
2.8
Total earnings per share attributable to ordinary shareholders - basic
53.5p
47.9p
5.6p
Return on tangible equity (RoTE) (1)
17.5
17.8
Climate and sustainable funding and financing (2)
£31.5bn
£29.3bn
7.5
Financial summary continued
Balance sheet
Total assets
£708.0bn
£692.7bn
Loans to customers - amortised cost
£400.3bn
£381.4bn
5.0
Loans to customers excluding central items (1,3)
£368.5bn
£355.6bn
3.6
Loans to customers and banks - amortised cost and FVOCI
£410.2bn
£392.0bn
4.6
Total impairment provisions (4)
£3.4bn
£3.6bn
(5.6)
Expected credit loss (ECL) coverage ratio
0.83
0.93
(10bps)
Assets under management and administration (AUMA) (1)
£48.9bn
£40.8bn
19.9
Customer deposits
£433.5bn
£431.4bn
0.5
Customer deposits excluding central items (1,3)
£431.3bn
£419.1bn
2.9
Liquidity and funding
Liquidity coverage ratio (LCR)
150
144
Liquidity portfolio
£222bn
£223bn
(0.4)
Net stable funding ratio (NSFR)
137
133
Loan:deposit ratio (excl repos and reverse repos) (1)
85
84
Total wholesale funding
£86bn
£80bn
Short-term wholesale funding
£33bn
£28bn
17.9
Capital and leverage
Common Equity Tier 1 (CET1) ratio (5)
13.6
13.4
20bps
Total capital ratio (5)
19.7
18.4
130bps
Pro forma CET1 ratio (excl. foreseeable items) (6)
14.3
14.2
10bps
Risk-weighted assets (RWAs)
£183.2bn
£183.0bn
0.1
UK leverage ratio
—
Tangible net asset value (TNAV) per ordinary share (1,7)
329p
292p
37p
Number of ordinary shares in issue (millions) (7)
8,043
8,792
(8.5)
Income – continuing operations
£m
Interest receivable (1)
25,187
21,026
4,161
19.8
Interest payable (1)
(13,912)
(9,977)
(3,935)
39.4
Net interest income
11,275
11,049
226
2.0
Net fees and commissions
2,467
2,330
5.9
Income from trading activities
825
794
31
3.9
Other operating income
136
579
(443)
(76.5)
Non-interest income
3,428
3,703
(275)
(7.4)
14,703
14,752
(49)
Total income excluding notable items
14,648
14,339
309
Notable items within total income
Commercial & Institutional
Own credit adjustments (OCA)
(9)
Tax interest on prior periods
Central items & other
Liquidity Asset Bond sale losses
(43)
Share of associate gains/(losses) for Business Growth Fund
21
(4)
Property strategy update
(69)
Interest and foreign exchange management derivatives not in hedge accounting relationships
79
Foreign exchange recycling (losses)/gains
(76)
484
(31)
(35)
55
413
nm = not meaningful
Operating expenses – continuing operations
Staff expenses
3,997
3,839
158
4.1
Premises and equipment
1,211
1,153
58
Other administrative expenses
1,588
1,715
(127)
Depreciation and amortisation
1,058
934
124
13.3
Other operating expenses
7,854
7,641
213
Litigation and conduct costs
295
355
(60)
(16.9)
Operating expenses
8,149
7,996
153
1.9
Tax – continuing operations
Tax charge
(1,465)
(1,434)
UK corporation tax rate
25.0
23.5
Effective tax rate
23.7
23.2
A tax charge of £1,465 million for the year ended 31 December 2024 arises rather than the expected charge of £1,549 million based on the UK corporation tax rate of 25%. The lower tax charge primarily reflects tax credits for the re-recognition of previously impaired deferred tax assets on brought forward tax losses in the UK and the Netherlands. These have been partially offset by the UK banking surcharge and various other non-tax deductible expenses. Refer to Note 7 to the consolidated financial statements for further details.
Impairments – continuing operations
Loans - amortised cost and FVOCI
410,225
392,040
18,185
ECL provisions
3,425
3,645
(220)
(6.0)
ECL provisions coverage ratio
(0.10)
(10.8)
Impairment (releases)/losses
ECL charge (1)
359
578
(219)
(37.9)
Amounts written off
654
319
335
105.0
The table above summarises loans and related credit impairment measured on an IFRS 9 basis. Refer to Credit Risk – Banking activities in the Risk and capital management section for further details.
Compared with 2023, our ECL provision decreased by £0.2 billion to £3.4 billion and our ECL coverage ratio has decreased from 0.93% to 0.83%. Amounts written off increased by £335 million to £654 million and we retain post model adjustments of £0.3 billion related to economic uncertainty, or 8.7% of total impairment provisions.
A net impairment charge of £359 million, or 9 basis points of gross customer loans, primarily reflects continued stable levels of default across the portfolio.
Profit for the year
Operating profit before tax
6,195
6,178
0.3
Profit from continuing operations
4,730
4,744
(14)
Profit/(loss) from discontinued operations, net of tax
81
(112)
193
172.3
4,811
4,632
179
Attributable to:
Ordinary shareholders
4,519
4,394
125
Paid-in equity holders
283
242
41
16.9
Non-controlling interests
Attributable profit to ordinary shareholders of £4,519 million was £125 million, or 2.8%, higher than 2023 primarily due to a lower impairment charge partially offset by higher costs largely attributable to inflationary pressures.
Summary consolidated balance sheet as at 31 December 2024
Assets
Cash and balances at central banks
92,994
104,262
(11,268)
(11)
Trading assets
48,917
45,551
3,366
Derivatives
78,406
78,904
(498)
Settlement balances
2,085
7,231
(5,146)
(71)
Loans to banks - amortised cost
6,030
6,914
(884)
(13)
400,326
381,433
18,893
Other financial assets
63,243
51,102
12,141
24
Other assets (including intangible assets)
15,984
17,276
(1,292)
(7)
707,985
692,673
15,312
Liabilities
Bank deposits
31,452
22,190
9,262
42
433,490
431,377
2,113
0
1,729
6,645
(4,916)
(74)
Trading liabilities
54,714
53,636
1,078
72,082
72,395
(313)
(0)
Other financial liabilities
61,087
55,089
5,998
Subordinated liabilities
6,136
5,714
422
Notes in circulation
3,316
3,237
Other liabilities
4,601
5,202
(601)
(12)
Total liabilities
668,607
655,485
13,122
Total equity
39,378
37,188
2,190
Total liabilities and equity
Tangible net asset value per ordinary share (1)
Tangible net asset value per ordinary share is tangible equity divided by the number of ordinary shares.
Summary consolidated balance sheet as at 31 December 2024 continued
Segment performance
Segmental summary income statements
Central
Total
Retail
Private
Commercial &
items
NatWest
Banking
Institutional
& other
Group
Continuing operations
5,233
645
5,339
Own credit adjustments
Other non-interest income
417
324
2,627
69
3,437
5,650
969
7,957
127
Direct expenses
(777)
(255)
(1,537)
(5,285)
(7,854)
Indirect expenses
(2,050)
(458)
(2,581)
5,089
(2,827)
(713)
(4,118)
(196)
(110)
(3)
(156)
(26)
(295)
(2,937)
(716)
(4,274)
(222)
(8,149)
Operating profit/(loss) before impairment losses/releases
2,713
253
3,683
(95)
6,554
Impairment (losses)/releases
(282)
(98)
(359)
Operating profit/(loss)
2,431
264
3,585
(85)
7,966
63
Return on tangible equity (1)
na
Return on equity (1,2)
17.2
50.0
73.6
Customer deposits (£bn)
194.8
42.4
194.1
433.5
Average interest earning assets (£bn)
222.0
26.9
246.8
529.3
2.36
2.40
2.16
Third party asset rate (1)
4.02
5.05
6.64
Third party customer funding rate (1)
(2.05)
(3.13)
(1.90)
nm = not meaningful, na = not applicable.
For the notes to this table, refer to the following page.
Segment performance continued
Segmental summary income statements continued
5,496
710
5,044
(201)
435
280
2,379
611
3,705
5,931
990
7,421
410
(815)
(1,510)
(5,061)
(7,641)
(1,896)
(421)
(2,357)
4,674
(2,711)
(676)
(3,867)
(387)
(117)
(224)
(5)
(355)
(2,828)
(685)
(4,091)
(392)
(7,996)
Operating profit before impairment losses
3,103
305
3,330
6,756
Impairment losses
(465)
(94)
(578)
Operating profit
2,638
291
3,236
7,420
23.8
14.8
15.4
45.7
68.3
52.1
188.0
37.7
193.4
12.3
431.4
222.2
27.1
244.4
520.6
2.47
2.62
2.06
3.23
4.54
6.15
(1.42)
(2.17)
(1.40)
Refer to the Non-IFRS financial measures section for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
NatWest Group’s CET1 target is in the range of 13-14% but for the purposes of computing segmental return on equity (ROE), to better reflect the differential drivers of capital usage, segmental operating profit or loss adjusted for preference share dividends and tax, is divided by average notional tangible equity allocated at different rates of 13.4% for Retail Banking (2023 – 13.5%), 11.2% for Private Banking (2023 – 11.5%), and 13.8% for Commercial & Institutional (2023 – 14%), of the period average of segmental risk-weighted assets equivalents (RWAe) incorporating the effect of capital deductions.
Retail Banking
Income statement
(263)
(4.8)
(18)
(4.1)
(281)
(4.7)
(116)
4.3
(109)
183
(39.4)
(207)
(7.8)
Performance ratios (1)
Return on equity
(3.9)
Net interest margin
(0.11)
Cost: income ratio (excl. litigation and conduct)
Loan impairment rate
13bps
22bps
(9bps)
Capital and balance sheet
£bn
Loans to customers (amortised cost)
- personal advances
8.1
- mortgages
195.0
193.1
1.0
- cards
7.0
1.1
18.6
Total loans to customers (amortised cost)
210.1
207.1
3.0
1.4
Loan impairment provisions (2)
(1.7)
(1.9)
0.2
(10.5)
Net loans to customers (amortised cost)
208.4
205.2
3.2
232.8
228.7
1.8
6.8
Risk-weighted assets
65.5
61.6
6.3
(1)Refer to the Non-IFRS financial measures section for details of basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
(2)Excludes off-balance sheet ECL of £0.1 billion.
Retail Banking continued
During 2024, Retail Banking delivered a return on equity of 19.9% and operating profit of £2.4 billion, with positive income and net interest margin momentum from the benefit of higher product structural hedge margins, partly offset by the impact of interest rate cuts during 2024. We supported customers with unsecured lending growth of £1.1 billion, or 7.9%, driven by our credit card proposition, and increased mortgage lending of £1.9 billion, or 1.0%, reflecting the acquisition of the Metro Bank mortgage portfolio and positive underlying growth in the second half of the year reflecting improved market conditions and increased demand.
Retail Banking provided £3.3 billion of climate and sustainable funding and financing in 2024 from lending on properties with an EPC rating of A or B.
Private Banking
(65)
(9.2)
44
15.7
(21)
(2.1)
(37)
5.5
(66.7)
4.5
Impairment releases/ (losses)
25
(178.6)
(27)
(9.3)
(0.6)
(0.22)
Cost:income ratio (excl. litigation and conduct)
5.3
8bps
(14bps)
AUMA net flows (£bn) (1)
1.3
- personal
1.7
(0.1)
12.0
(2.4)
- other
18.3
(1.6)
Loan impairment provisions
18.2
18.5
28.6
Assets under management (AUMs) (1)
37.0
31.7
16.7
Assets under administration (AUAs) (1)
11.9
9.1
30.8
48.9
40.8
4.7
12.5
Loan:deposit ratio (excl. repos and reverse repos) (1)
43
49
(6)
(12.2)
11.0
11.2
(0.2)
(1.8)
Private Banking continued
In 2024, Private Banking delivered an operating profit of £264 million and return on equity of 14.2%. We have continued to see strong customer engagement across our propositions, and this has resulted in an increase in AUMA balances of 19.9% in 2024 and strong deposit growth of 12.5%.
Private Banking provided £0.4 billion of climate and sustainable funding and financing in 2024, principally in relation to mortgages on residential properties with an EPC rating of A or B and wholesale transactions.
5.8
2,618
2,377
241
10.1
536
7.2
(251)
6.5
68
(30.4)
(183)
349
10.8
0.10
7bps
- Business Banking
(0.9)
(20.0)
- Commercial Mid-market
74.0
71.5
2.5
3.5
- Corporate & Institutions
65.8
57.4
8.4
14.6
143.4
133.4
10.0
(1.5)
141.9
131.9
7.6
398.7
385.0
13.7
Funded assets
321.6
306.9
14.7
4.8
0.7
0.4
72
104.7
107.4
(2.7)
(2.5)
Refer to the Non-IFRS financial measures section for details of basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
20
Commercial & Institutional continued
During 2024, Commercial & Institutional continued to support customers with an increase in lending of 7.6% and delivered a strong performance in income and operating profit supporting a return on equity of 17.2%, an increase from 15.4% in 2023. We continued to see good client demand for lending and net interest margin expansion supporting overall improved profitability.
Commercial & Institutional provided £27.8 billion of climate and sustainable funding and financing in 2024 to support customers investing in the transition to net zero.
Income statement - continuing operations
(283)
(69.0)
170
(43.4)
of which: Other operating expenses
191
(49.4)
of which: Ulster Bank RoI direct expenses
(83)
192
(69.8)
Impairment releases/(losses)
Operating (loss)/profit
31.8
25.8
6.0
23.3
(10.1)
(82.1)
RWAs
(0.8)
(28.6)
Summary financial statements
Summary consolidated income statement
For the year ended 31 December 2024
2022
9,842
3,314
13,156
(7,687)
Profit before impairment losses
5,469
(337)
5,132
(1,275)
3,857
(262)
3,595
3,340
249
22
Summary financial statements continued
Summary consolidated balance sheet
As at 31 December 2024
144,832
45,577
99,545
2,572
Loans to banks and customers - amortised cost
406,356
388,347
373,479
30,895
Other and intangible assets
23,153
720,053
Deposits
464,942
453,567
470,759
52,808
Settlement balances, derivatives, other financial liabilities and subordinated liabilities
141,034
139,843
151,426
5,346
Owners' equity
39,350
37,157
36,488
3,218
28
NatWest Group’s financial statements are prepared in accordance with UK adopted International Accounting Standards (IAS), and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
23
Competition
Introduction
NatWest Group’s ability to attract and manage funding remains a critical competitive advantage. Other key competitive factors include cost management, growing digital sales focus, branch network re-shaping, and product simplification. Cost management remains a key focus, as banks seek to simplify their organisational and IT architectures while at the same time investing to ensure that they can meet customers’ evolving channel preferences. Customers have increasingly focused on the use of internet and mobile as sales and service channels for certain types of products. Therefore, competitive position and performance increasingly depends on the possession of user-friendly, diverse and efficient online solutions.
In the retail banking business, NatWest Group competes with a range of providers including UK banks and building societies, major retailers and life assurance companies, as well as the UK subsidiaries of major international banks. In the mortgage market, NatWest Group competes with UK banks, building societies and specialist lenders. Increasingly, the ambitions of non-traditional players in the UK market are gaining credibility, with new entrants active and seeking to build their platforms either through organic growth or in some cases by acquiring businesses made available through the restructuring of incumbents.
Entrants with new business models such as peer-to-peer lending platforms, while currently small, continue to grow rapidly and are emerging as significant competitors. Such competitors often target specific elements of the value chain, providing specialised services to particular customer segments.
In the UK credit card market, large retailers and specialist card issuers are active in addition to the UK banks. In addition to physical distribution channels, providers compete through direct marketing activity and digital channels.
NatWest Group distributes life assurance products to banking customers in competition with independent advisors and life assurance companies.
In the Private Banking business, NatWest Group serves UK connected high-net-worth individuals and their business interests. The bank competes with UK private banks, international private banks and wealth managers. Competition remains strong as banks maintain their focus on competing for affluent and high net worth customers, supporting customers in need of financial advice. Investment in digital and M&A remain key themes with fee pressure ongoing, in response to Consumer Duty and market competition.
Commercial & Institutional consists of customer businesses reported under Business Banking, Commercial Mid-market and Corporate & Institutions to support our customers across the full non-personal customer lifecycle, both domestically and internationally, principally customers that trade with and from the UK. Our markets offering provides access to financial markets for NatWest Group customers, with financing and risk management expertise, while our international offering provides full-service banking operations in the Channel Islands, Isle of Man, Gibraltar and Luxembourg.
In the business banking market, the bank competes with other UK banks, specialist finance providers and new entrants, including fin-techs and non-bank challengers. The Commercial Mid-market segment primarily competes with UK Banks and includes an asset finance and invoice finance offering which competes with banks and specialist finance providers, both captive and non-captive. Competition for corporate and institutional customers in the UK is from UK banks, from specialised global investment banks and from large foreign universal banks that offer combined investment and commercial banking capabilities.
Our Corporate and Institution business also competes with international banks which offer offshore and domestic banking services in the Channel Islands, Gibraltar and the Isle of Man as well as depositary services in UK and Luxembourg. The business also provides financing and risk solutions to large corporates in the UK, Western Europe and the United States. Here we compete with large domestic banks, major international banks and investment banks that offer risk management, trading solutions and debt financing to financial institutions and corporate customers.
Competitors are increasingly focusing on improving customer engagement with their services, resulting in intensified competition among banking and financial services providers to attract and retain existing customers. Other primary competitive elements in this market include the introduction of new technology-driven business models, the capability to innovate digitally, and specialised expertise that provides customised solutions offering additional value to customers.
Page
Risk management framework
26
Culture
Governance
Risk appetite
30
Identification and measurement
Mitigation
32
Testing and monitoring
Stress testing
33
Credit risk
39
Definition, source of risk and key developments
40
Governance and risk appetite
Assessment and monitoring
Problem debt management
Forbearance
46
Impairment, provisioning and write-offs
48
Significant increase in credit risk and asset lifetimes
52
Economic loss drivers and UK economic uncertainty
54
Measurement uncertainty and ECL sensitivity analysis
61
Measurement uncertainty and ECL adequacy
64
Banking activities
65
Trading activities
99
Capital, liquidity and funding risk
103
Definitions and sources of risk
Capital, liquidity and funding management
104
Key points
109
Minimum requirements
111
Measurement
112
Market risk
126
Non-traded market risk
Traded market risk
135
Market risk – linkage to balance sheet
141
Pension risk
142
Compliance and conduct risk
Financial crime risk
146
Climate risk
148
Operational risk
Model risk
Reputational risk
160
Where marked as audited in the section header, certain information in the Risk and capital management section (pages 26 to 161) is within the scope of the Independent auditor’s report.
NatWest Group operates an enterprise-wide risk management framework, which is centred on the embedding of a strong risk culture. The framework ensures the governance, capabilities and methods are in place to facilitate risk management and decision-making across the organisation.
The framework ensures that NatWest Group’s principal risks – which are detailed in this section – are appropriately controlled and managed. It sets out the standards and objectives for risk management as well as defining the division of roles and responsibilities. This seeks to ensure a consistent approach to risk management across NatWest Group and its subsidiaries. It aligns risk management with NatWest Group’s overall strategic objectives. The framework, which is designed and maintained by NatWest Group’s independent Risk function, is owned by the Chief Risk Officer. It is reviewed and approved annually by the NatWest Group Board. The framework incorporates risk governance, the three lines of defence operating model and the Risk function’s mandate.
Risk appetite, supported by a robust set of principles, policies and practices, defines the levels of tolerance for a variety of risks and provides a structured approach to risk-taking within agreed boundaries.
While all NatWest Group colleagues are responsible for managing risk, the Risk function provides oversight and monitoring of risk management activities, including the implementation of the framework and adherence to its supporting policies, standards and operational procedures. The Chief Risk Officer plays an integral role in providing the Board with advice on NatWest Group’s risk profile, the performance of its controls and in providing challenge where a proposed business strategy may exceed risk tolerance.
In addition, there is a process to identify and manage top and emerging risks, which are those that could have a significant negative impact on NatWest Group’s ability to meet its strategic objectives.
Both top and emerging risks may incorporate aspects of – or correlate to – a number of principal risks and are reported alongside them to the Board on a regular basis.
The approach to risk culture, under the banner of intelligent risk-taking, ensures a focus on robust risk management behaviours and practices. This underpins the strategy and values across all three lines of defence, enables NatWest Group to support better customer outcomes, develop a stronger and more sustainable business and deliver an improved cost base.
NatWest Group expects leaders to act as role models for strong risk behaviours and practices, building clarity, developing capability and motivating employees to reach the required standards set out in the intelligent risk-taking approach.
Colleagues are expected to:
The target intelligent risk-taking behaviours are embedded in NatWest Group’s Critical People Capabilities and are clearly aligned to the core values of inclusive, curious, robust, sustainable and ambitious.
These aim to act as an effective basis for a strong risk culture because the Critical People Capabilities form the basis of all recruitment and selection processes.
Risk management framework continued
Training
Enabling employees to have the capabilities and confidence to manage risk is core to NatWest Group’s learning strategy. NatWest Group offers a wide range of learning, both technical and behavioural, across the risk disciplines.
This training may be mandatory, role-specific or for personal development. Mandatory learning for all staff is focused on keeping employees, customers and NatWest Group safe. This is easily accessed online and is assigned to each person according to their role and business area. The system allows monitoring at all levels to ensure completion.
Our Code
NatWest Group’s conduct guidance, Our Code, provides direction on expected behaviour and sets out the standards of conduct that support the values. The code explains the effect of decisions that are taken and describes the principles that must be followed.
27
Committee structure
The diagram shows NatWest Group’s governance structure in 2024 and the main purposes of each committee.
Risk management structure
The diagram shows NatWest Group’s risk management structure in 2024.
29
Three lines of defence
NatWest Group uses the industry-standard three lines of defence model to articulate accountabilities and responsibilities for managing risk. This supports the embedding of effective risk management throughout the organisation. All roles below the CEO sit within one of the three lines. The CEO ensures the efficient use of resources and the effective management of risks as stipulated in the risk management framework and is therefore considered to be outside the three lines of defence principles.
First line of defence
The first line of defence incorporates most roles in NatWest Group, including those in the customer-facing businesses, Technology and Services as well as support functions such as People and Transformation, Legal and Finance.
The first line of defence is empowered to take risks within the constraints of the risk management framework, policies, risk appetite statements and measures set by the Board.
The first line of defence is responsible for managing its direct risks, and with the support of specialist functions, it is also responsible for managing its consequential risks, by identifying, assessing, mitigating, monitoring and reporting risks.
Second line of defence
The second line of defence comprises the Risk function and is independent of the first line.
The second line of defence is empowered to design and maintain the risk management framework and its components. It undertakes proactive risk oversight and continuous monitoring activities to confirm that NatWest Group engages in permissible and sustainable risk-taking activities.
The second line of defence advises on, monitors, challenges, approves and escalates where required and reports on the risk-taking activities of the first line of defence, ensuring that these are within the constraints of the risk management framework, policies, risk appetite statements and measures set by the Board.
Third line of defence
The third line of defence is the Internal Audit function and is independent of the first and second lines.
The third line of defence is responsible for providing independent assurance to the Board, its subsidiary legal entity boards and executive management on the overall design and operating effectiveness of the risk management framework and its components. This includes the adequacy and effectiveness of key internal controls, governance and the risk management in place to monitor, manage and mitigate the principal risks to NatWest Group and its subsidiary companies.
The third line of defence executes its duties freely and objectively in accordance with the Chartered Institute of Internal Auditors’ Code of Ethics and International Standards on independence and objectivity.
Risk appetite defines the type and aggregate level of risk NatWest Group is willing to accept in pursuit of its strategic objectives and business plans. Risk appetite supports sound risk-taking, the promotion of robust risk practices and risk behaviours, and is calibrated at least annually.
For certain principal risks, risk capacity defines the maximum level of risk NatWest Group can assume before breaching constraints determined by regulatory capital and liquidity requirements, the operational environment, and from a conduct perspective. Establishing risk capacity helps determine where risk appetite should be set, ensuring there is a buffer between internal risk appetite and NatWest Group’s ultimate capacity to absorb losses.
Risk appetite framework
The risk appetite framework supports effective risk management by promoting sound risk-taking through a structured approach, within agreed boundaries. It also ensures emerging risks and risk-taking activities that might be out of appetite are identified, assessed, escalated and addressed in a timely manner.
To facilitate this, a detailed review of the framework is carried out annually which is approved by the Board. The review includes:
Establishing risk appetite
In line with the risk appetite framework, risk appetite is maintained across NatWest Group through risk appetite statements. These are in place for all principal risks and describe the extent and type of activities that can be undertaken.
Risk appetite statements consist of qualitative statements of appetite supported by risk limits and triggers that operate as a defence against excessive risk-taking. Risk measures and their associated limits are an integral part of the risk appetite approach and a key part of embedding risk appetite in day-to-day risk management decisions. A clear tolerance for each principal risk is set in alignment with business activities.
The process of reviewing and updating risk appetite statements is completed alongside the business and financial planning process. This ensures that plans and risk appetite are appropriately aligned.
The Board sets risk appetite for all principal risks to help ensure NatWest Group is well placed to meet its priorities and long-term targets, even in challenging economic environments. This supports NatWest Group in remaining resilient and secure as it pursues its strategic business objectives.
Risk appetite statements and associated measures are reviewed and approved at least annually by the Board on the Board Risk Committee’s recommendation to ensure they remain appropriate and aligned to strategy.
NatWest Group’s risk profile is continually monitored and frequently reviewed. Management focus is concentrated on all principal risks as well as the top and emerging risks that may correlate to them. Risk profile relative to risk appetite is reported regularly to senior management and the Board.
NatWest Group’s key risk policies define at a high level the qualitative expectations, guidance and standards that stipulate the nature and extent of permissible risk taking across all principal risks. They form part of the qualitative expression of risk appetite and are consistently applied across NatWest Group and its subsidiaries. Key risk policies are reviewed and approved by the Board Risk Committee at least annually.
Identification and measurement within the risk management process comprises:
The financial and non-financial risks that NatWest Group faces are detailed in its risk directory. This provides a common risk language to ensure consistent terminology is used across NatWest Group. The risk directory is subject to annual review to ensure it continues to fully reflect the risks that NatWest Group faces.
Mitigation is a critical aspect of ensuring that risk profile remains within risk appetite. Risk mitigation strategies are discussed and agreed within NatWest Group.
When evaluating possible strategies, costs and benefits, residual risks (risks that are retained) and secondary risks (those that arise from risk mitigation actions themselves) are also considered. Monitoring and review processes are in place to evaluate results. Early identification, and effective management of changes in legislation and regulation are critical to the successful mitigation of compliance and conduct risk. The effects of all changes are managed to ensure the timely achievement of compliance. Those changes assessed as having a high or medium-high impact are managed more closely. Emerging risks that could affect future results and performance are also closely monitored. Action is taken to mitigate potential risks as and when required. Further in-depth analysis, including the stress testing of exposures, is also carried out.
Specific activities relating to compliance and conduct, credit and financial crime risks are subject to testing and monitoring by the Risk function. This confirms to both internal and external stakeholders – including the Board, senior management, the customer-facing businesses, Internal Audit and NatWest Group’s regulators – that risk policies and procedures are being correctly implemented and that they are operating adequately and effectively. Thematic reviews and targeted reviews are also carried out where relevant to ensure appropriate customer outcomes.
The Risk Testing & Monitoring Forum assesses and validates the annual plan as well as the ongoing programme of reviews.
Stress testing – capital management
Stress testing is a key risk management tool and a fundamental component of NatWest Group’s approach to capital management. It is used to quantify and evaluate the potential impact of specified changes to risk factors on the financial strength of NatWest Group, including its capital position.
Stress testing includes:
The process for stress testing consists of four broad stages:
Define scenarios
Assess impact
Calculate results and assess implications
Develop and agree management actions
Stress testing is used widely across NatWest Group. The diagram below summarises key areas of focus.
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Specific areas that involve capital management include:
Reverse stress testing is also carried out in order to identify and assess scenarios that would cause NatWest Group’s business model to become unviable. Reverse stress testing allows potential vulnerabilities in the business model to be examined more fully.
Capital sufficiency – going concern forward-looking view
Going concern capital requirements are examined on a forward-looking basis – including as part of the annual budgeting process – by assessing the resilience of capital adequacy and leverage ratios under hypothetical future states. These assessments include assumptions about regulatory and accounting factors (such as IFRS 9). They incorporate economic variables and key assumptions on balance sheet and profit and loss drivers, such as impairments, to demonstrate that NatWest Group and its operating subsidiaries maintain sufficient capital.
A range of future states are tested. In particular, capital requirements are assessed:
The potential impact of normal and adverse economic and market conditions on capital requirements is assessed through stress testing, the results of which are not only used widely across NatWest Group but also by the regulators to set specific capital buffers. NatWest Group takes part in stress tests run by regulatory authorities to test industry-wide vulnerabilities under crystallising global and domestic systemic risks.
Stress and peak-to-trough movements are used to help assess the amount of capital NatWest Group needs to hold in stress conditions in accordance with the capital risk appetite framework.
Internal assessment of capital adequacy
An internal assessment of material risks is carried out annually to enable an evaluation of the amount, type and distribution of capital required to cover these risks. This is referred to as the Internal Capital Adequacy Assessment Process (ICAAP). The ICAAP consists of a point-in-time assessment of exposures and risks at the end of the financial year together with a forward-looking stress capital assessment. The ICAAP is approved by the Board and submitted to the PRA.
The ICAAP is used to form a view of capital adequacy separately to the minimum regulatory requirements. The ICAAP is used by the PRA to assess NatWest Group’s specific capital requirements through the Pillar 2 framework.
Capital allocation
NatWest Group has mechanisms to allocate capital across its legal entities and businesses. These aim to optimise the use of capital resources taking into account applicable regulatory requirements, strategic and business objectives and risk appetite. The framework for allocating capital is approved by the CFO with support from the Asset & Liability Management Committee.
Capital management is subject to substantial review and governance. The Board approves the capital plans, including those for key legal entities and businesses as well as the results of the stress tests relating to those capital plans.
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Stress testing – liquidity
Liquidity risk monitoring and contingency planning
A suite of tools is used to monitor, limit and stress test the liquidity and funding risks on the balance sheet. Limit frameworks are in place to control the level of liquidity risk, asset and liability mismatches and funding concentrations. Liquidity and funding risks are reviewed at significant legal entity and business levels daily, with performance reported to the Asset & Liability Management Committee on a regular basis. Liquidity condition indicators are monitored daily.
This ensures any build-up of stress is detected early and the response escalated appropriately through recovery planning.
Internal assessment of liquidity
Under the liquidity risk management framework, NatWest Group maintains the Internal Liquidity Adequacy Assessment Process. This includes assessment of net stressed liquidity outflows under a range of severe but plausible stress scenarios. Each scenario evaluates either an idiosyncratic, market-wide or combined stress event as described in the table below.
Type
Description
Idiosyncratic scenario
The market perceives NatWest Group to be suffering from a severe stress event, which results in an immediate assumption of increased credit risk or concerns over solvency.
Market-wide scenario
A market stress event affecting all participants in a market through contagion, potential counterparty failure and other market risks. NatWest Group is affected under this scenario but no more severely than any other participants with equivalent exposure.
Combined scenario
This scenario models the combined impact of an idiosyncratic and market stress occurring at once, severely affecting funding markets and the liquidity of some assets.
NatWest Group uses the most severe outcome to set the internal stress testing scenario which underpins its internal liquidity risk appetite. This complements the regulatory liquidity coverage ratio requirement.
Stress testing – recovery and resolution planning
The NatWest Group recovery plan explains how NatWest Group and its subsidiaries – as a consolidated group – would identify and respond to a financial stress event and restore its financial position so that it remains viable on an ongoing basis.
The recovery plan ensures risks that could delay the implementation of a recovery strategy are highlighted and preparations are made to minimise the impact of these risks. Preparations include:
The plan is intended to enable NatWest Group to maintain critical services and products it provides to its customers, maintain its core business lines and operate while restoring NatWest Group’s financial health.
It is assessed for appropriateness on an ongoing basis and reviewed and approved by the Board prior to submission to the PRA on a biennial basis. Individual recovery plans are also prepared for NatWest Holdings Limited, NatWest Markets Plc, RBS International Limited, RBSH N.V. and NWB Europe. These plans detail the recovery options, recovery indicators and escalation routes for each entity.
Fire drill simulations of possible recovery events are used to test the effectiveness of NatWest Group and individual legal entity recovery plans. The fire drills are designed to replicate possible financial stress conditions and allow senior management to rehearse the responses and decisions that may be required in an actual stress event. The results and lessons learnt from the fire drills are used to enhance NatWest Group’s approach to recovery planning.
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Under the resolution assessment part of the PRA rulebook, NatWest Group is required to carry out an assessment of its preparations for resolution, submit a report of the assessment to the PRA and publish a summary of this report.
Resolution would be implemented if NatWest Group was assessed by the UK authorities to have failed and the appropriate regulator put it into resolution. The process of resolution is owned and implemented by the Bank of England (as the UK Resolution Authority). NatWest Group ensures ongoing maintenance and enhancements of its resolution capabilities, in line with regulatory requirements. These requirements include the development of contingency plans to wind-down parts of the trading book.
Stress testing – market risk
Non-traded exposures are reported to the PRA on a quarterly basis. This provides the regulator with an overview of NatWest Group’s banking book interest rate exposure. The report includes detailed product information analysed by interest rate driver and other characteristics, including accounting classification, currency and counterparty type.
Scenario analysis based on hypothetical adverse scenarios is performed on non-traded exposures as part of the Bank of England and European Banking Authority stress test exercises. NatWest Group also produces an internal scenario analysis as part of its financial planning cycles.
Non-traded exposures are capitalised through the ICAAP. This covers gap risk, basis risk, credit spread risk, pipeline risk, structural foreign exchange risk, prepayment risk, equity risk and accounting volatility risk. The ICAAP is completed with a combination of value and earnings measures. The total non-traded market risk capital requirement is determined by adding the different charges for each sub risk type. The ICAAP methodology captures at least ten years of historical volatility, produced with a 99% confidence level. Methodologies are reviewed by NatWest Group Model Risk and the results are approved by the NatWest Group Balance Sheet Management Committee.
Non-traded market risk stress results are combined with those for other risks into the capital plan presented to the Board. The cross-risk capital planning process is conducted once a year, with a planning horizon of five years.
The scenario narratives cover both regulatory scenarios and macroeconomic scenarios identified by NatWest Group.
Vulnerability-based stress testing begins with the analysis of a portfolio and expresses its key vulnerabilities in terms of plausible vulnerability scenarios under which the portfolio would suffer material losses. These scenarios can be historical, macroeconomic or forward-looking/hypothetical. Vulnerability-based stress testing is used for internal management information and is not subject to limits. The results for relevant scenarios are reported to senior management.
NatWest Group carries out regular market risk stress testing to identify vulnerabilities and potential losses in excess of, or not captured in, value-at-risk. The calculated stresses measure the impact of changes in risk factors on the fair values of the trading portfolios.
NatWest Group conducts historical, macroeconomic and vulnerability-based stress testing. Historical stress testing is a measure that is used for internal management. Using the historical simulation framework employed for value-at-risk, the current portfolio is stressed using historical data since 1 January 2005. This methodology simulates the impact of the 99.9 percentile loss that would be incurred by historical risk factor movements over the period, assuming variable holding periods specific to the risk factors and the businesses.
Historical stress tests form part of the market risk limit framework and their results are reported regularly to senior management.
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Macroeconomic stress tests are carried out periodically as part of the bank-wide, cross-risk capital planning process. The scenario narratives are translated into risk factor shocks using historical events and insights by economists, risk managers and the first line of defence.
Market risk stress results are combined with those for other risks into the capital plan presented to the Board. The cross-risk capital planning process is conducted at least once a year, with a planning horizon of five years. The scenario narratives cover both regulatory scenarios and macroeconomic scenarios identified by NatWest Group.
Vulnerability-based stress testing begins with the analysis of a portfolio and expresses its key vulnerabilities in terms of plausible, vulnerability scenarios under which the portfolio would suffer material losses. These scenarios can be historical, macroeconomic or forward-looking/hypothetical. Vulnerability-based stress testing is used for internal management information and is not subject to limits. The results for relevant scenarios are reported to senior management.
Internal scenarios – climate
In 2024, NatWest Group deployed an enhanced in-house corporate transition risk model, as part of an internal scenario analysis exercise, to assess climate transition related credit risks to corporate counterparties.
This involved running the following two climate scenarios:
These scenarios tested NatWest Group’s resilience to alternative transition pathways, including a disruptive transition, and to identify losses that are sensitive to scenario policy and technology assumptions.
The corporate transition risk model and internal exercise builds on the learnings from the climate biennial exploratory scenario and NatWest Group’s first-generation deployment in 2023. It also supports the processes for integration of climate into ICAAP and credit risk business use-cases. The model is capable of accounting for sector specific exposure to climate-related transition risks and counterparty specific response to a limited set of demand shocks and rising carbon prices, by mitigating emissions and passing costs through to customers.
Regulatory stress testing
In October 2023, the Bank of England undertook round one of its system-wide exploratory scenario (SWES) to enhance understanding of the behaviours of banks and non-bank financial institutions under a scenario informed by the liability driven investment and ‘dash for cash’ crises.
NatWest Group submitted its response to round one during H1 2024. The Bank of England subsequently published the anonymised results in the June 2024 Financial Stability Report providing a narrative account of the market-wide response.
Round two commenced in June 2024. Participants were asked to reconsider their assumptions in light of round one results, and submit revised actions if applicable. The overall results of the SWES exercise were published in November 2024.
Further details can be found at:
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Definition, sources of risk and key developments in 2024
Credit grading models
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Governance and post model adjustments
50
Significant increase in credit risk
Asset lifetimes
53
Economic loss drivers
Movement in ECL provision
Credit risk – Banking activities
Financial instruments within the scope of the IFRS 9 ECL framework
Segment analysis – portfolio summary
67
Segmental loans and impairment metrics
71
Sector analysis – portfolio summary
Non-Personal forbearance
76
Credit risk enhancement and mitigation
77
Personal portfolio
78
Commercial real estate
83
Flow statements
Stage 2 decomposition – by a significant increase in credit risk trigger
92
Stage 3 vintage analysis
94
Asset quality
95
Credit risk – Trading activities
Securities financing transactions and collateral
Debt securities
101
Cross border exposure
102
Credit risk continued
Definition (audited)
Credit risk is the risk that customers, counterparties or issuers fail to meet a contractual obligation to settle outstanding amounts.
Sources of risk (audited)
The principal sources of credit risk for NatWest Group are lending, off-balance sheet products, derivatives and securities financing, and debt securities. NatWest Group is also exposed to settlement risk through foreign exchange, trade finance and payments activities.
Key developments in 2024
Governance (audited)
The credit risk function provides oversight and challenge of frontline credit risk management activities. Governance activities include:
Credit risk appetite is approved by the Board and is set and monitored through risk appetite frameworks tailored to NatWest Group’s Personal and Non-Personal segments. NatWest Group’s qualitative appetite is set out in the credit risk appetite statement. Risk appetite statements and associated measures are reviewed and approved at least annually by the Board on the Board Risk Committee’s recommendation to ensure they remain appropriate and aligned to strategy.
Performance against risk appetite is reported regularly to the Executive Risk Committee, the Board Risk Committee, and the Board. Relevant credit risk matters are escalated through the Executive Risk Committee and Board Risk Committee and to the Board as applicable. For more information, refer to the Governance and remuneration section.
Personal
The Personal credit risk appetite framework sets limits that control the quality and concentration of both existing and new business for each relevant business segment. These risk appetite measures consider the segments’ ability to grow sustainably and the level of losses expected under stress. Credit risk is further controlled through operational limits specific to customer or product characteristics.
Non-Personal
For Non-Personal credit, the framework has been designed to reflect factors that influence the ability to operate within risk appetite. Tools such as stress testing and economic capital are used to measure credit risk volatility and develop links between the framework and risk appetite limits.
The framework is used to manage concentrations of risk which may arise across four lenses – single name, sector, country and product and asset classes. The framework is supported by a suite of transactional acceptance standards that set out the risk parameters within which businesses should operate.
Credit stewardship (audited)
Risks are identified through relationship management and credit stewardship of customers and portfolios. Credit stewardship takes place throughout the customer relationship, beginning with the initial approval. It includes the application of credit assessment standards, credit risk mitigation and collateral, ensuring that credit documentation is complete and appropriate, carrying out regular portfolio or customer reviews and problem debt identification and management.
Asset quality (audited)
All credit grades map to an asset quality (AQ) scale, used for financial reporting. This AQ scale is based on Basel PDs. Performing loans are defined as AQ1-AQ9 (where the PD is less than 100%) and defaulted non-performing loans as AQ10 or Stage 3 under IFRS 9 (where the PD is 100%). Loans are defined as defaulted when the payment status becomes 90 days past due, or earlier if there is clear evidence that the borrower is unlikely to repay, for example bankruptcy or insolvency.
Counterparty credit risk
Counterparty credit risk arises from the obligations of customers under derivative and securities financing transactions. NatWest Group mitigates counterparty credit risk through collateralisation and netting agreements, which allow amounts owed by NatWest Group to a counterparty to be netted against amounts the counterparty owes NatWest Group.
Mitigation techniques, as set out in the appropriate credit risk toolkits and transactional acceptance standards, are used in the management of credit portfolios across NatWest Group. These techniques mitigate credit concentrations in relation to an individual customer, a borrower group or a collection of related borrowers. Where possible, customer credit balances are netted against obligations. Mitigation tools can include structuring a security interest in a physical or financial asset, the use of credit derivatives including credit default swaps, credit-linked debt instruments and securitisation structures, and the use of guarantees and similar instruments (for example, credit insurance) from related and third parties. Property is used to mitigate credit risk across a number of portfolios, in particular residential mortgage lending and commercial real estate (CRE).
The valuation methodologies for collateral in the form of residential mortgage property and CRE are detailed below.
Residential mortgages – NatWest Group takes collateral in the form of residential property to mitigate the credit risk arising from mortgages. NatWest Group values residential property individually during the loan underwriting process, either by obtaining an appraisal by a suitably qualified appraiser (for example, Royal Institution of Chartered Surveyors (RICS)) or using a statistically valid model. In both cases, a sample of the valuation outputs are periodically reviewed by an independent RICS qualified appraiser. NatWest Group updates Retail Banking UK residential property values quarterly using country (Scotland, Wales and Northern Ireland) or English regional specific Office for National Statistics House Price indices.
Within the Private Banking and RBSI segments, properties securing loans greater than £2.5 million or €3 million are revalued every three years.
The current indexed value of the property is a component of the ECL provisioning calculation.
Commercial real estate valuations – NatWest Group has an actively managed panel of chartered surveying firms that cover the spectrum of geography and property sectors in which NatWest Group takes collateral. Suitable RICS registered valuers for particular assets are contracted through a service agreement to ensure consistency of quality and advice. In the UK, an independent third-party market indexation is applied to update external valuations for commercial property once they are more than a year old.
For loan obligations in excess of £2.5 million and where the charged property has a book value in excess of £0.5 million, a formal valuation review is typically commissioned at least every three years.
Practices for credit stewardship – including credit assessment, approval and monitoring as well as the identification and management of problem debts – differ between the Personal and Non-Personal portfolios.
Personal customers are served through a lending approach that entails offering a large number of small-value loans. To ensure that these lending decisions are made consistently, NatWest Group analyses internal credit information as well as external data supplied by credit reference agencies (including historical debt servicing behaviour of customers with respect to both NatWest Group and other lenders).
NatWest Group then sets its lending rules accordingly, developing different rules for different products.
The process is then largely automated, with each customer receiving an individual credit score that reflects both internal and external behaviours and this score is compared with the lending rules set. For relatively high-value, complex personal loans, including some residential mortgage lending, specialist credit managers make the final lending decisions. These decisions are made within specified delegated authority limits that are issued dependent on the experience of the individual.
Underwriting standards and portfolio performance are monitored on an ongoing basis to ensure they remain adequate in the current market environment and are not weakened materially to sustain growth.
The actual performance of each portfolio is tracked relative to operational limits. The limits apply to a range of credit risk-related measures including projected credit default rates across products and the loan-to-value (LTV) ratio of the mortgage portfolios. Where operational limits identify areas of concern management action is taken to adjust credit or business strategy.
Non-Personal customers, including corporates, banks and other financial institutions are typically managed on an individual basis. Customers are aggregated as a single risk when sufficiently interconnected to the extent that a failure of one could lead to the failure of another.
A credit assessment is carried out before credit facilities are made available to customers. The assessment process is dependent on the complexity of the transaction.
Credit approvals are subject to environmental, social and governance risk policies which restrict exposure to certain highly carbon intensive industries as well as those with potentially heightened reputational impacts. Customer specific climate risk commentary is now mandatory.
For lower-risk transactions below specific thresholds, credit decisions can be approved through a combination of fully automated or relationship manager self-sanctioning within the business. This process is facilitated through an auto-decision making system, which utilises scorecards, strategies and policy rules.
For other transactions, both business approval and credit approval are required.
The joint business and credit approvers act within a delegated approval authority under the Wholesale Credit Authorities policy. The level of delegated authority held by approvers is dependent on their experience and expertise with only a small number of senior executives holding the highest approval authority.
Transactional acceptance standards provide detailed transactional lending and risk acceptance metrics and structuring guidance. As such, these standards provide a mechanism to manage risk appetite at the customer/transaction level and are supplementary to the established credit risk appetite.
Credit quality, and loss given default (LGD) are reviewed annually. The review process assesses borrower performance, the adequacy of security, compliance with terms and conditions, and refinancing risk.
Early problem identification
Pre-emptive triggers are in place to help identify customers that may be at risk of being in financial difficulty. These triggers are both internal, using NatWest Group data, and external using information from credit reference agencies. Proactive contact is then made with the customer to establish if they require help with managing their finances. By adopting this approach, the aim is to prevent a customer’s financial position deteriorating.
Personal customers experiencing financial difficulty are managed by the Collections team.
If the Collections team is unable to provide appropriate support after discussing suitable options with the customer, management of that customer moves to the Recoveries team. If at any point in the collections and recoveries process, the customer is identified as being potentially vulnerable, the customer will be supported to ensure they receive appropriate support for their circumstances.
In July 2023, Mortgage Charter support was introduced for residential mortgage customers. Mortgage Charter support includes temporary interest only or term extensions at the customer’s request. A request for Mortgage Charter does not, of itself, trigger transfer to a specialist team.
Collections
When a customer exceeds an agreed limit or misses a regular monthly payment, the customer is contacted by NatWest Group and requested to remedy the position. If the situation is not resolved then, where appropriate, the Collections team will become involved and the customer will be supported by skilled debt management staff who endeavour to provide customers with bespoke solutions.
Solutions include short-term account restructuring, refinance loans and forbearance which can include interest suspension and ‘breathing space’. All treatments available to customers experiencing financial difficulties are reviewed to ensure they remain appropriate for customers impacted by current economic conditions.
In the event that an affordable and sustainable agreement with a customer cannot be reached, the debt will transition to the Recoveries team.
For provisioning purposes, under IFRS 9, exposure to customers managed by the Collections team is categorised as Stage 2 and subject to a lifetime loss assessment, unless it is 90 days past due or has triggered any other unlikeliness to pay indicators, in which case it is categorised as Stage 3.
Recoveries
The Recoveries team will issue a notice of intention to default to the customer and, if appropriate, a formal demand, while also registering the account with credit reference agencies where appropriate. Following this, the customer’s debt may then be placed with a third-party debt collection agency, or alternatively a solicitor, in order to agree an affordable repayment plan with the customer. An option that may also be considered, is the sale of unsecured debt. Exposures subject to formal debt recovery are defaulted and, under IFRS 9, categorised as Stage 3.
Each segment and sector have defined early warning indicators to identify customers experiencing financial difficulty, and to increase monitoring if needed.
Early warning indicators may be internal, such as a customer’s bank account activity, or external, such as a publicly-listed customer’s share price. If early warning indicators show a customer is experiencing potential or actual difficulty, or if relationship managers or credit officers identify other signs of financial difficulty, they may decide to classify the customer within the Wholesale Problem Debt Management framework.
There is an equivalent process for Business Banking customers, with problem debt cases reallocated to increased monitoring and support under a Portfolio Management Relationship team or the Financial Health and Support Team. Broader macro-economic trends including commodity prices, foreign exchange rates and consumer and government spend are also tracked, helping inform decisions on sector risk appetite.
Customer level early warning indicators are regularly reviewed to ensure alignment with prevailing economic conditions, ensuring both the volume and focus of alerts are aligned to the point-in-time risk within each sector.
The Wholesale Problem Debt Management framework
This framework focuses on Non-Personal customers (excluding business banking) to provide early identification of credit deterioration, support intelligent risk-taking, ensure fair and consistent customer outcomes and provide key insights into Non-Personal lending portfolios.
Expert judgement is applied by experienced credit risk officers to classify cases into categories that reflect progressively deteriorating credit risk to NatWest Group. There are two classifications in the framework that apply to non-defaulted customers who are in financial stress – Heightened Monitoring and Risk of Credit Loss. For the purposes of provisioning, all exposures categorised as Heightened Monitoring or Risk of Credit Loss are categorised as Stage 2 and subject to a lifetime loss assessment.
The framework also applies to those customers that have met NatWest Group’s default criteria (AQ10 exposures). Defaulted exposures are categorised as Stage 3 impaired for provisioning purposes.
Heightened Monitoring customers are performing customers that have met certain characteristics, which have led to significant credit deterioration. Collectively, characteristics reflect circumstances that may affect the customer’s ability to meet repayment obligations. Characteristics include trading issues, covenant breaches, material PD downgrades and past due facilities.
Heightened Monitoring customers require pre-emptive actions (outside the customer’s normal trading patterns) to return or maintain their facilities within NatWest Group’s current risk appetite.
Risk of Credit Loss customers are performing customers that have met the criteria for Heightened Monitoring and also pose a risk of credit loss to NatWest Group in the next 12 months should mitigating action not be taken or not be successful.
Once classified as either Heightened Monitoring or Risk of Credit Loss, a number of mandatory actions are taken in accordance with policies.
Actions include a review of the customer’s credit grade, facility and security documentation and the valuation of security. Depending on the severity of the financial difficulty and the size of the exposure, the customer relationship strategy is reassessed by credit officers, by specialist credit risk or relationship management units in the relevant business, or by Restructuring.
Agreed customer management strategies are regularly monitored by both the business and credit teams.
The largest Risk of Credit Loss exposures are regularly reviewed by a Problem Debt Case Review forum. The forum members are experienced credit, business and restructuring specialists.
The purpose of the forum is to review and challenge the strategies undertaken for customers that pose the largest risk of credit loss to NatWest Group.
Appropriate corrective action is taken when circumstances emerge that may affect the customer’s ability to service its debt. Corrective actions may include granting a customer various types of concessions.
Any decision to approve a concession will be a function of specific appetite, the credit quality of the customer, the market environment and the loan structure and security.
All customers granted forbearance are classified Heightened Monitoring as a minimum.
Other potential outcomes of the relationship review are to: return the customer to a satisfactory status, offer additional lending and continue monitoring, transfer the relationship to Restructuring if appropriate, or exit the relationship.
The Wholesale Problem Debt Management framework does not apply to problem debt management for business banking customers. These customers are, where necessary, managed by specialist problem debt management teams, depending on the size of exposure or by the business banking recoveries team where a loan has been impaired.
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Restructuring
Where customers have lending exposure above £1 million, and meet specific referral criteria, relationships are supported by the Restructuring team.
Restructuring works with corporate and commercial customers in financial difficulty to help them understand their options and how their restructuring or repayment strategies can be delivered.
Helping viable customers return to financial health and restoring a normal banking relationship is always the preferred outcome; however, where this is not possible, NatWest Group will work with customers to achieve a solvent outcome.
Throughout this period, the mainstream relationship manager will remain an integral part of the customer relationship. Insolvency is considered as a last resort and if deemed necessary, NatWest Group will work to recover its capital in a fair and efficient manner, while upholding the fair treatment of customers and NatWest Group’s core values.
Customer Lending Support
With effect from 1 January 2025, Customer Lending Support, a new centre of expertise, was established to support Non-Personal customers in financial difficulty. Customer Lending Support brings together Restructuring, Business Banking, International Retail and Business Banking Northern Ireland teams who support Non-Personal customers in financial difficulty. Collections activity within Commercial Mid-Market will also transfer to Customer Lending Support.
Forbearance (audited)
Forbearance takes place when a concession is made on the contractual terms of a loan/debt in response to a customer’s financial difficulties.
The aim of forbearance is to support and restore the customer to financial health while minimising risk. To ensure that forbearance is appropriate for the needs of the customer, minimum standards are applied when assessing, recording, monitoring and reporting of forbearance.
A credit exposure may be forborne more than once, generally where a temporary concession has been granted and circumstances warrant another temporary or permanent revision of the loan’s terms.
Loans are reported as forborne until they meet the exit criteria as detailed in the appropriate regulatory guidance. These include being classified as performing for two years since the last forbearance event, making regular repayments and the loan/debt being less than 30 days past due.
Types of forbearance
In the Personal portfolio, forbearance may involve payment concessions, loan rescheduling (including extensions in contractual maturity), charging simple interest and capitalisation of arrears. Forbearance support is provided for both mortgages and unsecured lending.
In the Non-Personal portfolio, forbearance may involve covenant waivers, amendments to margins, payment concessions and loan rescheduling (including extensions in contractual maturity), capitalisation of arrears, and debt forgiveness or debt-for-equity swaps.
Monitoring of forbearance
For Personal portfolios, forborne loans are separated and regularly monitored and reported while the forbearance strategy is implemented, until they exit forbearance.
In the Non-Personal portfolio, customer PDs and facility LGDs are reassessed prior to finalising any forbearance arrangement. The ultimate outcome of a forbearance strategy is highly dependent on the co-operation of the borrower and a viable business or repayment outcome. Where forbearance is no longer appropriate, NatWest Group will consider other options such as demanding repayment of facilities, and in the event repayment does not take place, the enforcement of security, insolvency proceedings or both, although these are options of last resort.
Provisioning for forbearance (audited)
The methodology used for provisioning in respect of Personal forborne loans will differ depending on whether the loans are performing or non-performing and which business is managing them due to local market conditions.
Granting forbearance will only change the arrears status of the loan in specific circumstances, which can include capitalisation of principal and interest in arrears, where the loan may be returned to the performing book if the customer has demonstrated an ability to meet regular payments and is likely to continue to do so.
The loan would continue to be reported as forborne until it meets the exit criteria set out by the appropriate regulatory guidance.
For ECL provisioning, all forborne but performing exposures are categorised as Stage 2 and are subject to a lifetime loss provisioning assessment. Where the forbearance treatment includes the cessation of interest on the customer balance (i.e. non-accrual), this will be treated as a Stage 3 default.
For non-performing forborne loans, the Stage 3 loss assessment process is the same as for non-forborne loans.
Provisions for forborne loans are assessed in accordance with normal provisioning policies. The customer’s financial position and prospects – as well as the likely effect of the forbearance, including any concessions granted, and revised PD or LGD gradings – are considered in order to establish whether an impairment provision increase is required.
Non-Personal loans granted forbearance are individually credit assessed in most cases. Performing loans subject to forbearance treatment are categorised as Stage 2 and subject to a lifetime loss assessment.
In line with regulatory guidance, forbearance may lead to a customer being classified as non-performing. In the case of non-performing forborne loans, an individual loan impairment provision assessment generally takes place prior to forbearance being granted.
The amount of the loan impairment provision may change once the terms of the forbearance are known, resulting in an additional provision charge or a release of the provision in the period the forbearance is granted.
The transfer of Non-Personal loans from impaired to performing status follows assessment by relationship managers and credit. When no further losses are anticipated and the customer is expected to meet the loan’s revised terms, any provision is written-off or released and the balance of the loan can be returned to performing status once the exit criteria, as set out by regulatory guidance, are met. Refer to pages 76 and 78 for further details on Non -Personal and Personal forbearance.
Credit grading models is the collective term used to describe all models, frameworks and methodologies used to calculate PD, exposure at default (EAD), LGD, maturity and the production of credit grades.
Credit grading models are designed to provide:
Impairment, provisioning and write-offs (audited)
In the overall assessment of credit risk, impairment provisioning and write-offs are used as key indicators of credit quality.
NatWest Group’s IFRS 9 provisioning models, which use existing internal ratings based (IRB) models as a starting point, incorporate term structures and economic forecasts.
Regulatory conservatism within the IRB models has been removed as appropriate to comply with the IFRS 9 requirement for unbiased ECL estimates.
Five key areas may materially influence the measurement of credit impairment under IFRS 9 – two of these relate to model build and three relate to model application:
Model build:
Model application:
For accounting policy information, refer to Accounting policy 2.3.
IFRS 9 ECL model design principles (audited)
Modelling of ECL for IFRS 9 follows the conventional approach to divide the estimation of credit losses into its component parts of PD, LGD and EAD.
To meet IFRS 9 requirements, the PD, LGD and EAD parameters differ from their Pillar 1 IRB counterparts in the following aspects:
IFRS 9 requires that, at each reporting date, an entity shall assess whether the credit risk on an account has increased significantly since initial recognition. Part of this assessment requires a comparison to be made between the current lifetime PD (i.e. the PD over the remaining lifetime at the reporting date) and the equivalent lifetime PD as determined at the date of initial recognition.
For assets originated before IFRS 9 was introduced, comparable lifetime origination PDs did not exist.
These have been retrospectively created using the relevant model inputs applicable at initial recognition.
PD estimates
Personal models
Personal PD models follow a discrete multi-horizon survival approach, predicting quarterly PDs up to lifetime at account level, with a key driver being scores from related IRB PD models. Forward-looking economic information is brought in by economic response models, which leverage the existing stress test model suite. The current suite of PD models was introduced in 2022 replacing the previous, first-generation models to remediate a range of model weaknesses.
Non-Personal models
Non-Personal PD models use a point-in-time/through-the-cycle framework to convert one-year regulatory PDs into point-in-time estimates that reflect economic conditions at the reporting date. The framework utilises credit cycle indices (CCIs) for a comprehensive set of region/industry segments. Further detail on CCIs is provided in the Economic loss drivers section.
One-year PDs are extended to lifetime PDs using a conditional transition matrix approach and economic forecasts.
LGD estimates
The general approach for the IFRS 9 LGD models is to leverage corresponding IRB LGD models with bespoke adjustments to ensure estimates are unbiased and, where relevant, include economic forecasts.
Economic forecasts are incorporated for the secured portfolios, where changes in property prices can be readily accommodated. Analysis has shown minimal impact of economic conditions on LGDs for the other Personal portfolios.
Economic forecasts are incorporated into LGD estimates using the existing point-in-time/through-the-cycle framework. For low-default portfolios, including sovereigns and banks, loss data is too scarce to substantiate estimates that vary with economic conditions. Consequently, for these portfolios, LGD estimates are assumed to be constant throughout the projection horizon.
EAD estimates
The IFRS 9 Personal modelling approach for EAD is dependent on product type.
Analysis has indicated that there is minimal impact on EAD arising from changes in the economy for all Personal portfolios except mortgages. Therefore, forward-looking information is only incorporated in the mortgage EAD model (through forecast changes in interest rates).
For Non-Personal, EAD values are projected using product-specific credit conversion factors (CCFs), closely following the product segmentation and approach of the respective IRB model.
The CCFs are estimated over multi-year time horizons and contain no regulatory conservatism or downturn assumptions.
No explicit economic forecasts are incorporated, on the basis of analysis showing the movement in CCFs is mainly attributable to changes in exposure management practices rather than economic conditions.
Governance and post model adjustments (audited)
The IFRS 9 PD, EAD and LGD models are subject to NatWest Group’s model risk policy that stipulates periodic model monitoring, periodic re-validation and defines approval procedures and authorities according to model materiality. Various post model adjustments were applied where management judged they were necessary to ensure an adequate level of overall ECL provision. All post model adjustments were subject to review, challenge and approval through model or provisioning committees.
Post model adjustments will remain a key focus area of NatWest Group’s ongoing ECL adequacy assessment process. A holistic framework has been established including reviewing a range of economic data, external benchmark information and portfolio performance trends with a particular focus on segments of the portfolio (both Personal and Non-Personal) that are likely to be more susceptible to high inflation, high interest rates and supply chain disruption.
ECL post model adjustments (audited)
The table below shows ECL post model adjustments.
Commercial
Central items
Mortgages
Other
& Institutional
Deferred model calibrations
Economic uncertainty
90
299
Other adjustments
215
336
Of which:
- Stage 1
166
- Stage 2
119
162
- Stage 3
118
256
429
287
485
75
115
220
167
240
Post model adjustments decreased significantly since 31 December 2023, reflecting reduced economic uncertainty from inflation, higher-for-longer interest rates and liquidity.
51
SICR (audited)
Exposures that are considered significantly credit-deteriorated since initial recognition are classified in Stage 2 and assessed for lifetime ECL measurement (exposures not considered deteriorated carry a 12-month ECL). NatWest Group has adopted a framework to identify deterioration based primarily on relative movements in lifetime PD supported by additional qualitative backstops. The principles applied are consistent across NatWest Group and align to credit risk management practices, where appropriate.
The framework comprises the following elements:
Personal risk bands
PD bandings (basedon residual lifetime PD calculated at DOIR)
PD deterioration threshold criteria
A
<0.762%
PD@DOIR + 1%
B
<4.306%
PD@DOIR + 3%
C
>=4.306%
1.7 x PD@DOIR
SICR (audited) continued
The criteria are based on a significant amount of empirical analysis and seek to meet three key objectives:
Monitoring the effect on relative PD deterioration when originating new lending at times of weaker economic outlook (therefore, higher PDs at initial recognition) is important to ensure SICR criteria remains effective.
Asset lifetimes (audited)
The choice of initial recognition and asset duration is another critical judgement in determining the quantum of lifetime losses that apply.
In the case of credit cards, the most significant judgement is to reflect the operational practice of card reissuance and the associated credit assessment as enabling a formal re-origination trigger. As a consequence, a capped lifetime approach of up to 36 months is used on credit card balances. If the approach was uncapped, the ECL impact is estimated at approximately £71 million (2023 – £110 million). However, credit card balances originated under the 0% balance transfer product and representing approximately 47% (2023 – 37%) of performing card balances, have their ECL calculated on a behavioural lifetime approach as opposed to being capped at a maximum of three years.
The capped approach reflects NatWest Group practice of a credit-based review of customers prior to credit card issuance and complies with IFRS 9. Benchmarking information indicates that peer UK banks use behavioural approaches in the main for credit card portfolios with average durations between three and ten years. Across Europe, durations are shorter and are, in some cases, as low as one year.
Economic loss drivers (audited)
The portfolio segmentation and selection of economic loss drivers for IFRS 9 follows the approach used in stress testing. The stress models for each portfolio segment (defined by product or asset class and where relevant, industry sector and region) are based on a selected, small number of economic variables that best explain the movements in portfolio loss rates. The process to select economic loss drivers involves empirical analysis and expert judgement.
The most significant economic loss drivers for material portfolios are shown in the table below:
Portfolio
Personal mortgages
Unemployment rate, sterling swap rate, house price index, real wage
Personal unsecured
Unemployment rate, sterling swap rate, real wage
Corporates
Stock price index, gross domestic product (GDP)
Stock price index, commercial property price index, GDP
Economic scenarios
At 31 December 2024, the range of anticipated future economic conditions was defined by a set of four internally developed scenarios and their respective probabilities. In addition to the base case, they comprised upside, downside and extreme downside scenarios. The scenarios primarily reflected the current risks faced by the economy. The scenarios primarily reflected the current risks faced by the economy. This approach was similar to that used at 31 December 2023.
For 31 December 2024, the four scenarios were deemed appropriate in capturing the uncertainty in economic forecasts and the non-linearity in outcomes under different scenarios. These four scenarios were developed to provide sufficient coverage across potential rises in unemployment, inflation, asset price declines and the degree of permanent damage to the economy, around which there remains pronounced levels of uncertainty.
Since 31 December 2023, the economic outlook has evolved. The economy came out of post-COVID-19 stagnation with an upswing in the first half of 2024 as household income recovered. The growth lost momentum in the second half of 2024 and the outlook remains that of moderate growth. Inflation declined over the year, although the progress is slower than expected and inflation is likely to take longer to reach the target of 2%. As a result, rates are expected to remain higher-for-longer than previously expected. The unemployment rate increased modestly but it is underpinned by a still resilient labour market. There was emerging risk to the labour market due to higher tax burdens, but the impact is likely to be moderate. House prices were previously assumed to decline in 2024, but they performed better than expected. However, the higher interest rate environment poses a risk to the recovery.
Economic loss drivers (audited) continued
Headline macro variables: what are the risks and where are they captured?
Mini narratives – potential developments, vulnerabilities and risks
Upside
Base case
Downside
Extreme downside
Growth
Outperformance sustained – economy remains close to H1 2024 pace on strong consumer
Steady growth – staying close to trend pace from H2 2024 and beyond
Stalling – 2024 strength proves fleeting, lagged effect of higher rates and cautious consumer stalls the rebound
Extreme stress – extreme fall in GDP, with policy support to facilitate sharp recovery
Inflation
Close to deflation – inflationary pressures diminish amidst pronounced weakness in demand
Battle won – continued downward drift in services inflation, ensuring 2% target is met on sustained basis
Sticky – strong growth and/or wage policies and/or interest rate cuts keep services inflation well above target
Structural factors – sustained bouts of energy, food and goods price inflation on geopolitics/deglobalisation
Labour market
Tighter, still – job growth rebounds strongly, pushing unemployment back down to sub-3.5%
Cooling continues – gradual loosening prompts a gentle rise in unemployment (but remains low), job growth recovers
Job shedding – prolonged weakness in economy prompts redundancies, reduced hours, building slack
Depression – unemployment hits levels close to previous peaks amid severe stress
Rates short-term
Limited cuts – higher growth and inflation keeps the MPC cautious
Steady – approximately one cut per quarter
Mid-cycle quickening – sharp declines through 2025 to support recovery
Sharp drop – drastic easing in policy to support a sharp deterioration in the economy
Rates long-term
Above consensus – 4%
Middle – 3-3.5%
Close to 2010s – 1-2%/2.5%
Main macroeconomic variables
The main macroeconomic variables for each of the four scenarios used for ECL modelling are set out in the main macroeconomic variables table below.
Extreme
Weighted
downside
average
Five-year summary
GDP
0.9
Unemployment rate
6.7
5.2
House price index
0.8
(4.3)
2.7
(5.7)
Commercial real estate price
5.4
1.2
(1.0)
3.1
(2.0)
(6.8)
Consumer price index
2.4
2.6
Bank of England base rate
4.4
4.0
3.8
3.7
5.6
Stock price index
3.4
3.3
World GDP
Probability weight
45.0
19.1
12.7
21.2
20.4
Climate transition
Since 2023, NatWest Group has included explicit assumptions about changes in transition policy, expressed as an additional implicit sectoral carbon price, in the base-case macroeconomic scenario. This approach has been used for financial planning and IFRS 9 reporting ever since. This analysis resulted in climate transition policy contributing £8 million to the total ECL of L3.4 billion at the end of 2024.
In 2024, NatWest Group refined its approach. Instead of applying the economy-wide carbon price from an external scenario used in 2023, NatWest Group calculated the expected implicit carbon prices associated with specific climate transition policies. NatWest Group individually assessed 46 active and potential transition policies that had a significant impact on the cost of emissions and converted them into equivalent sectoral carbon prices. This was calculated as the cost per tonne of the emissions (CO2e) abated as a result of each policy.
NatWest Group estimated that the weighted average carbon price associated with the policies assessed will increase from £73 per tonne in 2024 to £123 per tonne in 2029. Sectoral carbon prices feed into the climate risk macro model. The model has been developed and improved over the past few years to enable NatWest Group to estimate the impact of carbon prices on a macroeconomic scenario.
UK government policies which are estimated to have the largest impact on sectoral carbon prices are:
This analysis presents a very narrow view of climate transition impact from 46 analysed policies. It only covers base case macroeconomic scenario and does not include physical impacts.
NatWest Group and its customers have a dependency on timely and appropriate government policies to provide the necessary impetus for technology development and customer behaviour changes, to enable the UK’s successful transition to net zero. Policy delays and the risks outlined in the UK CCC 2022, 2023 and 2024 Progress Reports, if not adequately addressed in a timely manner, put at risk the UK’s net zero transition and, in turn, that of NatWest Group and its customers.
56
Probability weightings of scenarios
NatWest Group’s quantitative approach to IFRS 9 multiple economic scenarios (MES) involves selecting a suitable set of discrete scenarios to characterise the distribution of risks in the economic outlook and assigning appropriate probability weights. This quantitative approach is used for 31 December 2024.
The approach involves comparing GDP paths for NatWest Group’s scenarios against a set of 1,000 model runs, following which a percentile in the distribution is established that most closely corresponded to the scenario. The probability weight for base case is set first based on judgement, while probability weights for the alternate scenarios are assigned based on these percentiles scores.
The assigned probability weights were judged to be aligned with the subjective assessment of balance of the risks in the economy. The weights were marginally less downside skewed compared to those used at 31 December 2023. The downside risks associated with a materially high inflation have reduced, with inflation lower at the end of 2024 compared to a year ago. However, the economic outlook is still subject to considerable uncertainty especially with respect to persistence of inflation, restrictive trade policies and various geopolitical flashpoints. Given that backdrop, NatWest Group judges it appropriate that downside-biased scenarios have higher combined probability weights than the upside-biased scenario. It presents good coverage to the range of outcomes assumed in the scenarios, including the potential for a robust recovery on the upside and exceptionally challenging outcomes on the downside. A 23.2% weighting was applied to the upside scenario, a 45.0% weighting applied to the base case scenario, a 19.1% weighting applied to the downside scenario and a 12.7% weighting applied to the extreme downside scenario.
57
Annual figures
GDP - annual growth
Upside %
Base case %
Downside %
Extreme downside %
Weighted average %
2025
0.6
2026
(0.5)
2027
2.3
2028
2029
Unemployment rate - annual average
4.2
8.0
8.3
6.9
House price index - four quarter change
7.8
(1.2)
(7.6)
(2.8)
(14.7)
5.1
(8.0)
Commercial real estate price - four quarter change
14.1
(23.7)
(12.7)
5.7
Consumer price index - four quarter change
2.1
59
Bank of England base rate - annual average
5.11
4.63
4.21
3.42
1.40
3.80
3.52
2.10
0.18
2.94
4.00
3.50
2.00
0.40
2.15
1.03
3.04
2.50
1.83
3.21
Stock price index - four quarter change
11.6
(35.0)
(3.0)
15.1
13.1
10.4
Worst points
Quarter
Q1 2024
Q4 2025
Q3 2024
(4.5)
Q4 2024
Unemployment rate - peak
Q4 2026
8.5
Q1 2027
4.9
Q1 2025
Q2 2025
Q2 2027
(25.6)
Q3 2027
(12.5)
(31.7)
Q2 2026
(6.5)
Q3 2026
(16.6)
(39.9)
Q3 2025
(10.2)
Consumer price index - highest four quarter change
6.1
Q1 2026
10.3
Q1 2023
Bank of England base rate - extreme level
Q4 2023
(27.4)
(14.3)
(39.3)
60
Measurement uncertainty and ECL sensitivity analysis (audited)
The recognition and measurement of ECL is complex and involves the use of significant judgement and estimation, particularly in times of economic volatility and uncertainty. This includes the formulation and incorporation of multiple forward-looking economic conditions into ECL to meet the measurement objective of IFRS 9. The ECL provision is sensitive to the model inputs and economic assumptions underlying the estimate.
The impact arising from the base case, upside, downside and extreme downside scenarios was simulated.
In the simulations, NatWest Group has assumed that the economic macro variables associated with these scenarios replace the existing base case economic assumptions, giving them a 100% probability weighting and therefore serving as a single economic scenario.
These scenarios were applied to all modelled portfolios in the analysis below, with the simulation impacting both PDs and LGDs. Post model adjustments included in the ECL estimates that were modelled were sensitised in line with the modelled ECL movements, but those that were judgemental in nature, primarily those for deferred model calibrations and economic uncertainty, were not (refer to the Governance and post model adjustments section) on the basis these would be re-evaluated by management through ECL governance for any new economic scenario outlook and not be subject to an automated calculation. As expected, the scenarios create differing impacts on ECL by portfolio and the impacts are deemed reasonable.
In this simulation, it is assumed that existing modelled relationships between key economic variables and loss drivers hold, but in practice other factors would also have an impact, for example, potential customer behaviour changes and policy changes by lenders that might impact on the wider availability of credit.
The focus of the simulations is on ECL provisioning requirements on performing exposures in Stage 1 and Stage 2. The simulations are run on a stand-alone basis and are independent of each other; the potential ECL impacts reflect the simulated impact at 31 December 2024.
Scenario impacts on SICR should be considered when evaluating the ECL movements of Stage 1 and Stage 2. In all scenarios the total exposure was the same but exposure by stage varied in each scenario.
Stage 3 provisions are not subject to the same level of measurement uncertainty – default is an observed event as at the balance sheet date. Stage 3 provisions therefore were not considered in this analysis.
NatWest Group’s core criterion to identify a SICR is founded on PD deterioration. Under the simulations, PDs change and result in exposures moving between Stage 1 and Stage 2 contributing to the ECL impact.
Measurement uncertainty and ECL sensitivity analysis (audited) continued
Moderate
Base
upside
Actual
scenario
Stage 1 modelled loans (£m)
Retail Banking - mortgages
169,090
170,887
173,703
164,370
154,604
Retail Banking - unsecured
10,269
10,485
10,876
9,847
8,925
Non-personal - property
28,598
28,684
28,827
28,452
25,402
Non-personal - non-property
126,487
127,179
127,557
125,790
107,287
334,444
337,235
340,963
328,459
296,218
Stage 1 modelled ECL (£m)
204
212
210
198
185
82
66
164
218
197
219
331
571
544
531
563
730
Stage 1 coverage
0.04
0.03
1.99
2.02
1.93
2.01
2.07
0.29
0.23
0.20
0.30
0.65
0.17
0.15
0.31
0.16
0.25
Stage 2 modelled loans (£m)
20,980
19,183
16,367
25,700
35,466
3,513
3,297
2,906
3,935
4,857
3,019
2,933
2,790
3,165
6,215
13,143
12,451
12,073
13,840
32,343
40,655
37,864
34,136
46,640
78,881
Stage 2 modelled ECL (£m)
370
348
300
407
532
62
286
251
228
628
778
705
619
852
1,461
Stage 2 coverage
0.28
0.27
0.33
10.53
10.56
10.32
10.34
10.95
2.05
1.81
1.68
2.09
2.18
1.89
2.22
1.94
1.91
1.86
1.85
Stage 1 and Stage 2 modelled loans (£m)
190,070
13,782
31,617
139,630
375,099
Stage 1 and Stage 2 modelled ECL (£m)
122
168
574
560
510
605
717
106
151
347
504
448
419
526
959
1,349
1,249
1,150
1,415
2,191
Stage 1 and Stage 2 coverage
0.07
0.06
0.09
4.16
4.06
3.70
4.39
5.20
0.46
0.38
0.34
0.48
1.10
0.36
0.32
0.69
0.58
Reconciliation to Stage 1 and Stage 2 ECL (£m)
ECL on modelled exposures
ECL on non-modelled exposures
Total Stage 1 and Stage 2 ECL (£m)
1,385
1,285
1,186
1,451
2,227
Variance to actual total Stage 1 and Stage 2 ECL (£m)
(100)
(199)
842
Reconciliation to Stage 1 and Stage 2 flow exposures (£m)
Modelled loans
Non-modelled loans
21,074
Other asset classes
161,548
Measurement uncertainty and ECL adequacy (audited)
Movement in ECL provision(1)
The table below shows the main ECL provision movements during the year.
ECL provision
At 1 January 2024
Transfers to disposal groups and reclassifications
Changes in economic forecasts
(58)
Changes in risk metrics and exposure: Stage 1 and Stage 2
Changes in risk metrics and exposure: Stage 3
699
Judgemental changes:
Changes in post model adjustments for Stage 1, Stage 2 and Stage 3
(126)
Write-offs and other
(600)
At 31 December 2024
At 1 January 2023
3,434
2023 movements
211
At 31 December 2023
This section details the credit risk profile of NatWest Group’s banking activities. Refer to Accounting policy 2.3 and Note 14 to the consolidated financial statements for policies and critical judgements relating to impairment loss determination.
Financial instruments within the scope of the IFRS 9 ECL framework (audited)
Refer to Note 9 to the consolidated financial statements for balance sheet analysis of financial assets that are classified as amortised cost or fair value through other comprehensive income (FVOCI), the starting point for IFRS 9 ECL framework assessment.
31 December 2024
31 December 2023
Gross
ECL
Net
Balance sheet total gross amortised cost and FVOCI
567.2
553.8
In scope of IFRS 9 ECL framework
564.4
545.3
% in scope
98
Loans to customers - in scope - amortised cost
404.2
400.8
385.3
381.7
Loans to customers - in scope - FVOCI
Loans to banks - in scope - amortised cost
Total loans - in scope
410.2
406.8
392.1
388.5
Stage 1
363.8
363.2
348.6
347.9
Stage 2
40.5
39.7
37.9
Stage 3
Other financial assets - in scope - amortised cost
116.4
124.9
Other financial assets - in scope - FVOCI
37.8
28.3
Total other financial assets - in scope
154.2
153.2
153.4
152.0
Out of scope of IFRS 9 ECL framework
Loans to customers - out of scope - amortised cost
Loans to banks - out of scope - amortised cost
Other financial assets - out of scope - amortised cost
Other financial assets - out of scope - FVOCI
na = not applicable
Credit risk – Banking activities continued
Financial instruments within the scope of the IFRS 9 ECL framework (audited) continued
The assets outside the scope of IFRS 9 ECL framework were as follows:
Contingent liabilities and commitments
Total contingent liabilities (including financial guarantees) and commitments within IFRS 9 ECL scope of £140.0 billion (2023 – £132.0 billion) comprised Stage 1 £129.8 billion (2023 – £120.6 billion); Stage 2 £9.4 billion (2023 – £10.7 billion); and Stage 3 £0.8 billion (2023 – £0.7 billion).
The ECL relating to off balance sheet exposures was £0.1 billion (2023 – £0.1 billion). The total ECL in the remainder of the Credit risk section of £3.4 billion (2023 – £3.6 billion) included ECL for both on and off-balance sheet exposures for non-disposal groups.
Segment analysis – portfolio summary (audited)
The table below shows gross loans and ECL, by segment and stage, within the scope of the IFRS 9 ECL framework.
Non-personal
Loans - amortised cost and FVOCI (1,2)
182,366
17,155
128,988
35,312
363,821
13,726
2,226
3,429
126,762
24,242
844
15,339
40,474
352
492
15,297
3,268
322
2,340
5,930
2,288
Of which: individual
233
1,052
1,047
Of which: collective
89
1,288
4,645
1,241
209,876
18,321
146,667
35,361
14,329
2,320
3,992
144,347
ECL provisions (3)
279
289
598
428
346
787
1,063
941
2,040
926
415
451
408
1,589
518
1,770
1,576
1,558
For the notes to this table refer to page 70.
Segment analysis – portfolio summary (audited) continued
ECL provisions coverage (4)
Stage 1 (%)
0.22
0.01
0.13
0.41
Stage 2 (%)
1.77
1.42
2.26
2.04
2.24
Stage 3 (%)
32.53
11.18
40.21
34.40
8.37
28.85
21.13
40.47
0.84
0.35
1.07
0.78
1.00
1.08
ECL (release)/charge (5)
282
(10)
97
(208)
(205)
(438)
(204)
278
360
224
437
223
245
Amounts written-off
430
221
143
80
182,297
17,565
119,047
29,677
348,586
14,296
2,268
3,269
116,779
29,673
21,208
906
15,771
37,891
255
651
15,728
3,133
258
2,162
5,563
209
2,110
845
1,031
840
1,317
4,532
1,270
Subtotal excluding disposal group loans
206,638
18,729
136,980
29,693
14,760
2,363
3,969
134,617
29,680
Disposal group loans
29,760
392,107
29,739
306
356
709
354
502
447
976
1,097
819
1,960
803
298
332
293
521
1,628
Subtotal excluding ECL provisions on disposal group loans
1,905
74
1,622
1,604
ECL provisions on disposal group loans
3,681
For the notes to this table refer to the following page.
0.11
0.02
0.52
2.37
2.21
2.83
2.58
66.67
2.76
2.84
35.01
13.18
37.88
100.00
35.23
9.57
30.77
28.57
38.06
25.00
ECL provisions coverage excluding disposal group loans
0.92
1.18
0.76
1.23
1.19
ECL provisions coverage on disposal group loans
53.73
57.63
0.94
85.71
0.21
465
(172)
(397)
440
182
134
330
Discontinued operations
572
(16)
188
121
277
70
Segmental loans and impairment metrics (audited)
Sector analysis – portfolio summary (audited)
The table below shows financial assets and off-balance sheet exposures gross of ECL and related ECL provisions, impairment and past due by sector, asset quality and geographical region.
Mortgages (1)
Credit cards
Other personal
Corporate and Other (2)
FI
Sovereign
Loans by geography
209,846
6,930
9,749
226,525
111,734
70,321
1,645
183,700
- UK
97,409
43,412
562
141,383
367,908
- Other Europe
6,311
14,747
766
21,824
- RoW
8,014
12,162
317
20,493
Loans by stage
186,250
4,801
7,267
198,318
94,991
69,021
1,491
165,503
21,061
1,953
24,636
14,464
15,838
2,535
176
860
3,571
2,279
2,359
- Of which: individual
1,046
1,118
- Of which: collective
2,394
834
3,404
1,233
Loans - past due analysis (2)
- Not past due
206,739
6,721
8,865
222,325
107,855
70,055
1,627
179,537
401,862
- Past due 1-30 days
1,404
1,524
2,530
2,741
4,265
- Past due 31-90 days
580
398
418
1,148
- Past due 91-180 days
545
139
733
- Past due >180 days
715
1,401
812
816
2,217
Loans - Stage 2
19,939
1,889
1,521
23,349
13,485
1,228
14,846
38,195
853
921
640
1,572
269
366
339
341
707
Weighted average life (4)
- ECL measurement (years)
Weighted average 12 months PDs (4)
- IFRS 9 (%)
0.51
4.59
1.24
5.51
0.86
0.80
- Basel (%)
0.68
3.65
3.18
0.87
1.11
0.82
ECL provisions by geography
462
381
1,812
1,504
1,613
1,335
1,384
3,196
For the notes to this table refer to page 74.
Sector analysis – portfolio summary (audited) continued
ECL provisions by stage
130
284
314
344
358
325
656
1,099
896
382
423
639
1,071
514
ECL provisions coverage (%)
5.50
9.94
1.35
1.16
0.88
- Stage 1 (%)
1.60
1.79
0.14
0.19
- Stage 2 (%)
9.52
11.28
1.74
2.38
0.97
1.50
- Stage 3 (%)
12.82
67.05
76.28
30.78
39.32
67.80
23.81
39.89
ECL (release)/charge
161
328
313
433
Loans by residual maturity
- <1 year
3,367
3,903
3,186
10,456
34,929
54,971
822
90,722
101,178
- 1-5 year
11,651
3,027
5,551
20,229
48,075
10,967
488
59,530
79,759
- > 5 < 15 year
45,454
1,006
46,460
20,623
4,270
25,191
71,651
- > 15 year
149,374
149,380
8,107
113
8,257
157,637
Other financial assets by asset quality (3)
3,644
31,102
119,502
154,248
- AQ1-AQ4
3,639
30,743
153,884
- AQ5-AQ8
364
Off-balance sheet
13,806
20,135
7,947
41,888
75,964
21,925
239
98,128
140,016
- Loan commitments
7,906
41,847
72,940
20,341
93,520
135,367
- Financial guarantees
3,024
1,584
4,608
4,649
Off-balance sheet by asset quality (3)
12,951
6,568
20,029
47,896
20,063
155
68,114
88,143
839
19,276
1,336
21,451
27,657
1,813
29,491
50,942
- AQ9
- AQ10
337
378
392
441
208,275
5,904
9,595
223,774
108,546
57,087
2,633
168,266
5,893
9,592
223,760
95,736
39,906
2,016
137,658
361,418
6,368
8,144
399
14,911
14,925
6,442
9,037
15,697
188,140
3,742
6,983
198,865
91,006
56,105
2,610
149,721
17,854
2,022
1,633
21,509
15,415
966
16,382
2,281
140
979
3,400
2,125
2,163
865
889
2,159
3,258
1,260
1,274
205,405
5,743
8,578
219,726
104,316
56,735
163,684
383,410
1,178
1,290
3,045
4,335
668
616
1,296
445
695
729
731
1,510
788
2,304
16,803
1,971
1,529
20,303
14,358
932
15,291
35,594
765
832
1,472
374
0.50
3.45
5.29
0.75
1.55
0.37
0.89
0.67
3.37
3.15
0.81
420
376
1,168
1,964
1,599
1,681
365
1,163
1,948
1,383
1,434
3,382
159
172
73
88
393
207
238
506
454
470
271
93
1,142
809
818
302
259
764
1,116
507
512
6.37
12.17
1.47
0.12
0.61
0.05
2.03
0.08
0.26
10.24
14.57
2.35
2.95
2.87
11.88
66.43
79.47
33.59
38.07
43.75
9.09
37.82
254
482
184
468
565
(50)
(52)
91
3,375
3,398
3,169
9,942
31,008
43,497
489
74,994
84,936
9,508
2,506
5,431
17,445
49,789
11,616
1,872
63,277
80,722
46,453
993
47,446
19,868
1,939
199
22,006
69,452
148,939
148,941
7,881
7,989
156,930
2,690
26,816
123,683
153,189
26,084
152,457
732
9,843
17,284
8,462
35,589
73,921
22,221
227
96,369
131,958
8,417
35,544
70,942
20,765
91,934
127,478
2,979
1,456
4,435
4,480
9,099
7,271
16,818
47,296
20,644
165
68,105
84,923
721
16,518
1,162
18,401
26,296
1,574
27,915
46,316
312
353
334
687
Internal asset quality band
Probability of default range
Indicative S&P rating
AQ1
0% - 0.034%
AAA to AA
AQ6
1.076% - 2.153%
BB- to B+
AQ2
0.034% - 0.048%
AA to AA-
AQ7
2.153% - 6.089%
B+ to B
AQ3
0.048% - 0.095%
A+ to A
AQ8
6.089% - 17.222%
B- to CCC+
AQ4
0.095% - 0.381%
BBB+ to BBB-
AQ9
17.222% - 100%
CCC to C
AQ5
0.381% - 1.076%
BB+ to BB
AQ10
100%
D
£0.3 billion (2023 – £0.3 billion) of AQ10 Personal balances primarily relate to loan commitments, the drawdown of which is effectively prohibited.
The table below shows ECL by stage, for the Personal portfolio and Non-Personal portfolio including the three largest borrowing sector clusters included in corporate and other.
Loan commitments
Contingent liabilities
Financial institutions (1)
Sovereigns
Corporate and other (2)
16,191
1,517
18,141
6,661
246
Consumer industries
13,312
3,015
444
16,771
10,706
595
323
Mobility and logistics
13,363
2,384
15,895
9,367
128
14,998
17,412
7,155
86
12,586
4,050
541
17,177
10,209
649
222
402
13,186
2,074
15,403
8,728
496
120
Non-personal forbearance (audited)
The table below shows Non-personal forbearance, Heightened Monitoring and Risk of Credit Loss by sector. The table shows current exposure but reflects risk transfers where there is a guarantee by another customer.
Corporate and Other
Financial institution
Forbearance (flow)
3,359
3,496
Forbearance (stock)
4,556
4,680
Heightened Monitoring and Risk of Credit Loss
6,082
3,484
3,562
4,823
4,915
5,208
276
5,484
Credit risk enhancement and mitigation (audited)
The table below shows exposures of modelled portfolios within the scope of the ECL framework and related credit risk enhancement and mitigation (CREM).
Maximum credit risk
CREM by type
CREM coverage
Exposure post CREM
exposure
Financial (1)
Property
Other (2)
Financial assets
91.8
Loans - amortised cost (3)
406.9
46.3
253.0
25.5
324.8
82.1
Personal (4)
226.5
224.7
209.1
209.9
Non-personal (5)
183.7
182.2
45.5
43.9
114.9
67.3
62.5
62.4
Total financial assets
564.5
561.2
46.4
324.9
236.3
Personal (6,7)
41.9
37.1
98.1
98.0
8.2
16.4
81.6
Total off-balance sheet
140.0
139.9
118.7
Total exposure
704.5
701.1
50.6
264.9
30.6
346.1
355.0
103.1
392.0
37.4
248.2
21.8
307.4
81.1
223.7
221.8
207.5
168.3
166.7
36.5
40.7
99.0
67.7
50.1
545.2
541.7
234.3
35.6
96.4
96.3
7.1
13.8
82.5
132.0
11.1
18.8
113.1
677.2
673.6
41.0
259.3
25.9
326.2
347.4
Personal portfolio (audited)
Disclosures in the Personal portfolio section include drawn exposure (gross of provisions).
Personal lending
194,865
12,826
2,161
209,852
Owner occupied
176,137
11,348
1,457
188,942
Buy-to-let
18,728
1,478
704
20,910
Interest only
22,186
11,276
33,899
Mixed (1)
10,384
10,432
ECL provisions (2)
Other personal lending (3)
15,045
1,301
16,588
1,330
1,345
Total personal lending
209,910
14,127
2,403
226,440
Mortgage LTV ratios
- Owner occupied
- Buy-to-let
Gross new mortgage lending
26,440
1,395
257
28,092
25,300
1,266
26,749
-LTV> 90%
888
Weighted average LTV (4)
1,140
129
1,343
1,575
1,238
2,855
1,151
Mortgage forbearance
Forbearance flow (5)
473
487
Forbearance stock
1,680
Current
1,214
1-3 months in arrears
>3 months in arrears
320
327
Personal portfolio (audited) continued
192,915
13,222
2,200
208,337
174,167
11,629
1,464
187,260
18,748
1,593
736
21,077
25,805
11,631
461
37,897
10,068
10,103
397
13,758
15,388
1,508
1,538
206,673
14,617
2,422
223,725
29,664
1,400
180
31,244
27,718
1,267
29,121
- LTV > 90%
1,173
1,946
2,123
2,680
1,224
3,927
1,568
1,570
569
600
1,416
1,459
950
116
350
373
Mortgage LTV distribution by stage
The table below shows gross mortgage lending and related ECL by LTV band for the Retail Banking portfolio.
ECL provisions coverage
≤50%
64,040
8,344
1,159
73,543
190
13.2
>50% and ≤70%
61,739
7,741
855
70,335
156
12.2
>70% and ≤80%
25,022
2,361
173
27,556
>80% and ≤90%
16,718
1,769
18,572
15.3
>90% and ≤100%
4,076
4,614
19.2
>100%
46.2
19.4
Total with LTVs
171,609
20,731
2,311
194,651
303
214
100.0
171,821
20,732
2,312
304
68,092
7,447
1,145
76,684
11.7
65,777
7,011
767
73,555
22,537
24,283
13,583
1,143
14,773
14.9
3,008
3,392
21.4
12.8
173,019
17,610
2,097
192,726
395
189
173,205
17,611
2,099
87
250
Mortgage LTV distribution by region
The table below shows gross mortgage lending by LTV band for Retail Banking, by geographical region.
Flood risk (1,2)
% of regional
Lending at high/
50%≤80%
80%≤100%
average LTV
lending at high
lending at very
very high risk (3)
risk (>60)
high risk (>80)
South East
13,622
19,007
4,506
37,136
37,139
Greater London
13,951
18,537
3,391
35,881
35,884
East of England
7,776
11,730
3,211
22,719
22,720
North West
7,507
8,305
1,878
17,692
17,693
South West
6,577
8,455
2,055
17,088
17,089
West Midlands
5,379
6,970
1,683
14,033
14,034
Scotland
4,860
5,766
1,591
12,218
12,219
Rest of the UK
13,871
19,121
4,871
37,884
38,087
97,891
23,186
14,645
18,510
3,107
36,263
36,265
14,689
18,044
2,366
35,100
35,103
8,576
11,810
2,208
22,594
22,596
7,314
8,629
1,881
17,826
17,828
7,308
8,296
1,379
16,984
16,985
5,391
7,072
13,868
13,869
5,051
5,938
1,445
12,435
12,437
13,711
19,540
4,374
37,657
175
37,832
76,685
97,839
18,164
192,727
Retail Banking fixed rate mortgages by roll-off date (1)
The table below shows gross fixed rate mortgage lending for Retail Banking, by roll-off date.
Retail Banking mortgages - gross exposure (2)
Fixed rate roll-off
<=1 year
34,989
4,309
39,634
30,867
3,670
34,832
>1<= 2 years
44,146
5,080
49,644
39,013
290
42,816
>2 years
78,629
8,667
693
87,989
87,402
7,461
590
95,453
157,764
18,056
1,447
177,267
157,282
14,644
1,175
173,101
Retail Banking mortgages by Energy Performance Certificate (EPC) rating (1)
The table below shows the energy efficiency of Retail Banking residential mortgages.
EPC rating
806
547
21,923
1,480
23,403
21,566
1,458
23,024
31,353
5,876
37,229
29,764
5,712
35,476
45,455
5,748
51,203
46,924
6,056
52,980
E
14,455
1,369
15,824
16,027
1,557
17,584
F
3,026
3,081
3,360
3,422
G
708
752
Unclassified
58,442
4,169
62,611
55,243
3,874
59,117
Commercial real estate (CRE)
CRE LTV distribution by stage (audited)
The table below shows CRE gross loans and related ECL by LTV band.
Gross loans
7,334
380
7,762
4,413
367
4,867
19.5
>70% and ≤100%
474
26.6
266
47.1
12,198
838
333
13,369
174
30.3
Total portfolio average LTV
Other Investment (1)
2,132
2,521
36.6
Investment
14,330
15,890
201
31.0
Development and other (2)
1,861
2,251
50.8
33.7
7,173
664
7,898
3,878
515
273
61.5
6.6
10,898
265
12,564
171
24.2
2,189
390
2,624
42.2
13,087
1,791
15,188
26.8
1,911
2,224
45.3
29.9
Flow statements (audited)
The flow statements that follow show the main ECL and related income statement movements. They also show the changes in ECL as well as the changes in related financial assets used in determining ECL. Due to differences in scope, exposures may differ from those reported in other tables, principally in relation to exposures in Stage 1 and Stage 2. These differences do not have a material ECL effect. Other points to note:
NatWest Group total
504,345
40,294
5,621
550,260
Currency translation and other adjustments
(1,354)
(40)
(1,236)
Transfers from Stage 1 to Stage 2
(40,745)
(231)
40,745
231
Transfers from Stage 2 to Stage 1
27,808
552
(27,808)
(552)
Transfers to Stage 3
(247)
(3,489)
(269)
3,736
274
Transfers from Stage 3
296
761
(1,057)
(56)
Net re-measurement of ECL on stage transfer
(390)
657
Changes in risk parameters
(206)
(114)
Other changes in net exposure
25,749
(8,288)
(174)
(1,891)
(176)
15,570
(195)
Other (P&L only items)
(33)
(39)
Income statement (releases)/charges
Transfers to disposal groups and fair value
(296)
(318)
(653)
(654)
Unwinding of discount
(149)
515,556
42,165
5,901
563,622
Net carrying amount
514,958
41,378
3,861
560,197
507,539
632
48,482
1,043
5,231
1,759
561,252
(3,194)
(8,188)
(67)
(10,992)
503,636
39,318
3,661
546,615
Flow statements (audited) continued
174,038
17,827
2,068
193,933
110
(19,074)
(20)
19,074
12,454
(12,454)
(24)
(1,079)
(8)
1,131
(440)
(15)
3,919
(2,768)
(550)
(75)
601
(87)
171,333
20,992
2,303
194,628
171,257
20,932
1,998
194,187
165,264
18,831
1,762
185,857
8,774
(1,004)
8,076
173,951
17,767
1,818
193,536
Retail Banking - credit cards
3,475
2,046
5,667
363
(1,895)
(42)
1,895
1,300
(1,300)
(158)
1,664
(66)
(45)
(102)
4,523
2,034
117
6,719
379
4,447
1,848
6,340
3,062
1,098
4,273
252
948
1,394
3,405
1,842
5,304
Retail Banking - other personal unsecured
5,240
149
1,657
963
758
7,860
(2,156)
(103)
2,156
1,672
229
(1,672)
(229)
(304)
(32)
(161)
107
909
(395)
(41)
(179)
(148)
187
123
(312)
(34)
5,605
1,465
833
641
7,903
5,478
1,283
6,953
4,784
2,028
779
631
7,591
1,011
456
(371)
5,091
1,419
205
6,715
Commercial & Institutional total
176,302
17,029
195,492
(826)
(845)
(16,117)
(62)
16,117
11,022
(11,022)
(190)
(90)
(1,745)
1,835
194
315
(509)
263
(118)
(96)
13,282
(4,484)
(1,011)
(53)
7,787
(47)
(223)
183,767
16,169
2,275
202,211
183,478
15,823
1,334
200,635
160,352
342
24,711
534
2,198
747
187,261
1,623
15,950
(7,682)
8,231
175,946
16,582
1,342
193,870
Commercial & Institutional - corporate
61,402
12,275
1,454
602
75,131
1,172
(139)
Inter-group transfers
(10,835)
10,835
7,725
(7,725)
(144)
(77)
(1,358)
(55)
1,435
154
262
(416)
(23)
138
(29)
4,235
(2,843)
(737)
655
62,575
11,450
1,562
659
75,587
1,107
62,400
11,177
903
74,480
Commercial & Institutional - property
26,040
3,155
606
195
29,801
(91)
(3,143)
3,143
2,291
(2,291)
(28)
(38)
2,310
(726)
1,361
(44)
27,468
2,980
225
31,038
27,391
2,919
30,675
Commercial & Institutional - other
88,860
90,560
(689)
(695)
(2,140)
2,140
(1,006)
6,738
(914)
5,772
93,724
1,739
95,586
93,687
1,727
95,480
Stage 2 decomposition by a significant increase in credit risk trigger
UK mortgages
Personal trigger (1)
PD movement
14,480
68.8
1,425
72.9
49.9
16,714
67.8
PD persistence
3,951
414
388
23.9
4,753
19.3
Adverse credit bureau recorded with credit reference agency
936
7.3
1,126
Forbearance support provided
Customers in collections
169
Collective SICR and other reasons (2)
1,248
1,577
6.4
Days past due >30
12,969
72.5
1,469
72.7
866
52.9
15,304
71.1
2,317
13.0
481
22.9
3,172
1,195
178
1,087
16.3
1,373
Stage 2 decomposition by a significant increase in credit risk trigger continued
Corporate and Other (3)
Financial institutions
Non-personal trigger (1)
11,800
971
78.2
12,771
80.6
132
99.2
1,814
11.5
396
13.9
9,822
63.7
760
78.7
10,582
64.6
1,070
1,083
3,193
20.7
12.4
3,313
20.2
527
351
The table below shows estimated vintage analysis of the material Stage 3 portfolios.
Retail Banking mortgages (1)
Stage 3 loans (£bn)
Vintage (time in default):
<1 year
1-3 years
3-5 years
>5 years
The table below shows asset quality bands of gross loans and ECL, by stage, for the Personal portfolio.
AQ1-AQ4
104,793
8,416
113,209
0.0
AQ5-AQ8
81,263
11,683
92,946
962
1,156
4,650
1,866
6,516
244
67.1
9.5
691
6,521
1,359
7,880
9.9
25.7
76.3
11.3
105,612
8,543
114,155
92,434
14,908
107,342
243
584
272
1,185
Asset quality (audited) continued
110,694
7,572
118,266
77,290
9,578
86,868
3,612
1,965
5,577
268
9.8
24.6
22.2
66.4
10.2
914
1,374
7,552
318
32.1
25.3
79.5
111,582
7,722
119,304
87,080
12,917
99,997
660
870
1,073
33.6
The table below shows asset quality bands of gross loans and ECL, by stage, for the Non-Personal portfolio.
Corporate and other (1)
41,509
2,409
43,918
53,448
11,783
65,231
232
538
6.2
39.3
64,845
65,078
4,176
996
5,172
1,364
1,365
107,718
2,643
110,361
57,751
12,779
70,530
564
416
450
39.9
40,875
42,217
50,084
13,734
63,818
411
386
7.4
38.1
52,702
665
53,367
3,402
3,686
43.8
2,487
2,488
96,064
2,008
98,072
53,609
14,018
67,627
404
This section details the credit risk profile of NatWest Group’s trading activities.
Securities financing transactions and collateral (audited)
The table below shows securities financing transactions in Commercial & Institutional and Central items & other. Balance sheet captions include balances held at all classifications under IFRS.
Reverse repos
Repos
Outside netting
can be offset
arrangements
87,901
87,861
68,024
67,321
703
IFRS offset
(23,883)
Carrying value
64,018
63,978
44,141
43,438
Master netting arrangements
(1,549)
Securities collateral
(62,217)
(41,889)
Potential for offset not recognised under IFRS
(63,766)
(43,438)
77,508
77,050
458
66,767
66,047
720
(25,903)
51,605
51,147
40,864
40,144
(669)
(50,287)
(39,475)
(50,956)
(40,144)
Credit risk – Trading activities continued
Derivatives (audited)
The table below shows derivatives by type of contract. The master netting agreements and collateral shown do not result in a net presentation on the balance sheet under IFRS. A significant proportion of the derivatives relate to trading activities in Commercial & Institutional. The table also includes hedging derivatives in Central items & other.
Notional
GBP
USD
EUR
Gross exposure
97,152
93,109
99,501
96,264
(18,746)
(21,027)
(20,597)
(23,869)
3,551
5,500
1,152
13,628
13,403
Interest rate (1)
3,228
1,973
4,847
285
10,333
37,499
31,532
10,268
44,563
38,483
Exchange rate
1,446
867
3,279
40,797
40,306
3,120
34,161
33,586
Credit
326
Equity and commodity
Counterparty mark-to-market netting
(61,883)
(60,355)
Cash collateral
(10,005)
(5,801)
(12,284)
(6,788)
(4,072)
(896)
(3,408)
(1,664)
Net exposure
2,446
3,502
2,857
3,588
Banks (2)
345
555
Other financial institutions (3)
1,429
1,422
1,304
Corporate (4)
769
1,669
1,690
Government (5)
UK
1,061
1,774
1,912
Europe
875
978
800
1,209
US
443
604
607
RoW
Asset quality of uncollateralised derivative assets
2,049
2,382
394
471
AQ9-AQ10
Debt securities (audited)
The table below shows debt securities held at mandatory fair value through profit or loss by issuer as well as ratings based on the lowest of Standard & Poor’s, Moody’s and Fitch. Refer to Note 12 on Trading assets and liabilities for details on short positions.
Central and local government
Corporate
AAA
1,368
2,703
AA to AA+
3,734
4,379
A to AA-
2,077
519
4,243
BBB- to A-
831
885
2,278
Non-investment grade
108
275
3,506
2,988
1,573
13,878
1,333
1,132
2,465
2,600
762
3,385
2,729
1,017
4,280
1,477
925
11,954
Cross border exposures comprise both banking and trading activities, including reverse repurchase agreements. Exposures comprise loans and advances, including finance leases and instalment credit receivables, and other monetary assets, such as debt securities. The geographical breakdown is based on the country of domicile of the borrower or guarantor of ultimate risk. Cross border exposures include non-local currency claims of overseas offices on local residents but exclude exposures to local residents in local currencies. The table shows cross border exposures greater than 0.5% of NatWest Group’s total assets.
Government
Banks
Short positions
Net of short positions
Western Europe
8,581
11,669
29,891
50,141
5,889
44,252
Of which: France
2,347
2,543
11,161
16,051
14,560
Of which: Germany
1,149
5,937
702
7,788
1,957
5,831
Of which: Luxembourg
412
7,940
8,413
8,403
Of which: Ireland
3,306
3,517
3,432
United States
5,246
3,307
21,576
30,129
1,767
28,362
Jersey
5,030
Canada
1,555
2,308
5,527
5,501
Other institutions (1)
4,520
4,426
7,830
10,109
26,508
44,447
4,655
39,792
2,229
2,105
7,839
12,173
1,183
10,990
Germany
1,614
4,525
1,065
7,204
5,299
Luxembourg
7,045
7,363
Ireland
3,622
3,741
3,642
6,764
3,440
16,356
26,560
2,974
23,586
1,262
2,059
4,453
4,436
1,741
(1)Other Institutions category denotes any international organisation which is governed by public international law or which has been set up by or on the basis of an agreement between two or more countries.
NatWest Group continually ensures a comprehensive approach is taken to the management of capital, liquidity and funding, underpinned by frameworks, risk appetite and policies, to manage and mitigate its capital, liquidity and funding risks. The framework ensures the tools and capability are in place to facilitate the management and mitigation of risk ensuring NatWest Group operates within its regulatory requirements and risk appetite.
Definitions (audited)
Regulatory capital consists of reserves and instruments issued that are available, have a degree of permanency and are capable of absorbing losses. A number of strict conditions set by regulators must be satisfied to be eligible as capital.
Capital risk is the inability to conduct business in base or stress conditions on a risk or leverage basis due to insufficient qualifying capital as well as the failure to assess, monitor, plan and manage capital adequacy requirements.
Liquidity consists of assets that can be readily converted to cash within a short timeframe at a reliable value. Liquidity risk is defined as the risk that the Group or any of its subsidiaries or branches cannot meet it’s actual or potential financial obligations in a timely manner as they fall due in the short term.
Funding consists of on-balance sheet liabilities that are used to provide cash to finance assets. Funding risk is the current or prospective risk that the Group or its subsidiaries or branches cannot meet financial obligations as they fall due in the medium to long term, either at all or without increasing funding costs unacceptably.
Liquidity and funding risks arise in a number of ways, including through the maturity transformation role that banks perform. The risks are dependent on factors such as:
Capital
The eligibility of instruments and financial resources as regulatory capital is laid down by applicable regulation. Capital is categorised under two tiers (Tier 1 and Tier 2) according to the ability to absorb losses, degree of permanency and the ranking of absorbing losses on either a going or gone concern basis. There are three broad categories of capital across these two tiers:
CET1 capital - CET1 capital must be perpetual and capable of unrestricted and immediate use to cover risks or losses as soon as these occur. This includes ordinary shares issued and retained earnings.
Additional Tier 1 (AT1) capital - This is the second type of loss-absorbing capital and must be capable of absorbing losses on a going concern basis.
These instruments are either written down or converted into CET1 capital when the CET1 ratio falls below a pre-specified level.
Tier 2 capital - Tier 2 capital is the bank entities’ supplementary capital and provides loss absorption on a gone concern basis. Tier 2 capital absorbs losses after Tier 1 capital. It typically consists of subordinated debt securities which must have a minimum of five years to maturity at all times to be fully recognised for regulatory purposes.
Minimum requirement for own funds and eligible liabilities (MREL)
In addition to capital, other specific loss-absorbing instruments, including senior notes and Tier 2 capital instruments with certain qualifying criteria issued by NatWest Group, may be used to cover certain gone concern capital requirements, which is referred to as MREL. Gone concern refers to the situation in which resources must be available to enable an orderly resolution, in the event that the Bank of England (BoE) deems that NatWest Group has failed or is likely to fail.
Capital, liquidity and funding risk continued
Liquidity
NatWest Group maintains a prudent approach to the definition of liquidity portfolio to ensure it is available when and where required, taking into account regulatory, legal and other constraints. Following ringfencing legislation, liquidity is no longer considered fungible across NatWest Group. Principal liquidity portfolios are maintained in the UK Domestic Liquidity Sub-Group (UKDoLSub) (primarily in NatWest Bank Plc), NatWest Markets Plc, RBS International Limited, NWM N.V and NatWest Bank Europe GmbH. Some disclosures in this section where relevant are presented, on a consolidated basis, for NatWest Group and the UK DoLSub.
Liquidity portfolio is divided into primary and secondary liquidity as follows:
Funding
NatWest Group maintains a diversified set of funding sources, including customer deposits, wholesale deposits and term debt issuance. These are managed against both internal funding and regulatory metrics. The principal levels at which funding risk is managed are at NatWest Group, NatWest Holdings Group, UK DoLSub, NatWest Markets Plc, RBS International Limited, NWM N.V. and NatWest Bank Europe GmbH. NatWest Group also retains access to central bank funding facilities.
For further details on capital constituents and the regulatory framework covering capital, liquidity and funding requirements, refer to the 2024 NatWest Group Pillar 3 Report.
Capital risk management
Capital management ensures that there is sufficient capital and other loss-absorbing instruments to operate effectively including meeting minimum regulatory requirements, operating within Board-approved risk appetite, maintaining its credit rating and supporting its strategic goals.
Capital management is critical in supporting the businesses and is enacted through an end-to-end framework across businesses and legal entities. Capital is managed within the organisation at the following levels; NatWest Group consolidated, NWH Group sub consolidated, NatWest Markets Plc, RBS Holdings N.V. and RBS International Limited. The banking subsidiaries within NWH Group are governed by the same principles, processes and management as NatWest Group. Note that although the aforementioned entities are regulated in line with Basel III principles, local implementation of the framework differs across geographies.
Capital planning is integrated into NatWest Group’s wider annual budgeting process and is assessed and updated at least monthly. Regular returns are submitted to the PRA which include a two-year rolling forecast view. Other elements of capital management, including risk appetite and stress testing, are set out on pages 30 to 38.
Produce capital plans
Capital plans are produced for NatWest Group, its key operating entities and its businesses over a five-year planning horizon under expected and stress conditions. Stressed capital plans are produced to support internal stress testing in the ICAAP for regulatory purposes.
Shorter-term forecasts are developed frequently in response to actual performance, changes in internal and external business environment and to manage risks and opportunities.
Assess capital adequacy
Capital plans are developed to maintain capital of sufficient quantity and quality to support NatWest Group’s business, its subsidiaries and strategic plans over the planning horizon within approved risk appetite, as determined via stress testing, and minimum regulatory requirements.
Capital resources and capital requirements are assessed across a defined planning horizon.
Impact assessment captures input from across NatWest Group including from businesses.
Inform capital actions
Capital planning informs potential capital actions including buy backs, redemptions, dividends and new issuance to external investors or via internal transactions.
Decisions on capital actions will be influenced by strategic and regulatory requirements, risk appetite, costs and prevailing market conditions.
As part of capital planning, NatWest Group will monitor its portfolio of external capital securities and assess the optimal blend and most cost effective means of financing.
Capital planning is one of the tools that NatWest Group uses to monitor and manage capital risk on a going and gone concern basis, including the risk of excessive leverage.
Liquidity risk management
NatWest Group manages its liquidity risk taking into account regulatory, legal and other constraints to ensure sufficient liquidity is available where required to cover liquidity stresses.
The principal levels at which liquidity risk is managed are:
The UK DoLSub is PRA-regulated and comprises NatWest Group’s three licensed deposit-taking UK banks: National Westminster Bank Plc (NWB Plc), The Royal Bank of Scotland plc (RBS plc) and Coutts & Company.
NatWest Group categorises its liquidity portfolio, including its locally managed liquidity portfolios, into primary and secondary liquid assets. The size of the liquidity portfolios are determined by referencing NatWest Group’s liquidity risk appetite. NatWest Group retains a prudent approach to setting the composition of the liquidity portfolios, which is subject to internal policies applicable to all entities and limits over quality of counterparty, maturity mix and currency mix.
RBS International Limited and NWM N.V. hold locally managed portfolios that comply with local regulations that may differ from PRA rules.
The liquidity value of the portfolio is determined by taking current market prices and applying a discount or haircut, to give a liquidity value that represents the amount of cash that can be generated by the asset.
Funding risk management
NatWest Group manages funding risk through a comprehensive framework which measures and monitors the funding risk on the balance sheet including quantitative and qualitative analysis of the behavioural aspects of its assets and liabilities as well as the funding concentration.
105
Prudential regulation changes that may impact capital requirements
NatWest Group faces numerous changes in prudential regulation that may impact the minimum amount of capital it must hold and consequently may increase funding costs and reduce return on equity.
Regulatory changes are actively monitored by NatWest Group, including engagement with industry associations and regulators and participation in quantitative impact studies. Monitoring the changing regulatory landscape forms a fundamental part of capital planning and management of its business. NatWest Group believes that its strategy to focus on simpler, lower-risk activities within a more resilient recovery and resolution framework will enable it to manage the impact of these.
UK and EU implementation of Basel framework
The Basel framework is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision (BCBS). The Basel III standards are minimum requirements which apply to internationally active banks and ensure a global level playing field on financial regulation. Individual jurisdictions must decide how to implement the standards.
From 1 January 2021, NatWest Group has been regulated under the on-shored CRR and associated on-shored binding technical standards which were created by the European Union (Withdrawal) Act 2018 and amending statutory instruments. As the Withdrawal Act applied to the CRR in place as of 31 December 2020, changes to the CRR in the EU are not reflected in the UK CRR unless separately legislated and amended by statutory instruments. The Financial Services Bill gives the PRA the power to write prudential rules directly into the PRA rulebook and it will co-ordinate with HM Treasury to implement any required changes to the UK CRR.
On 1 January 2022, the PRA implemented changes to the UK CRR to align to the Basel III standards which included the introduction of a new standardised approach for counterparty credit risk (SA-CCR), amendments to the LCR and NSFR rules as well as new regulation applicable to internal ratings (IRB) models. Changes were also introduced to the UK Leverage Ratio framework. Equivalent reforms were implemented in the EU in June 2021, known as CRR2.
On 30 November 2022, the PRA published its consultation paper CP16/22 setting out its proposed rules and expectations with respect to the remaining Basel III standards to be implemented in the UK, also referred to as “Basel 3.1 standards”. This will complete the implementation of post-global financial crisis prudential reforms, which were designed to i) increase the quantity of capital in the system, per unit of risk; ii) increase the quality of capital held by firms; and iii) improve the accuracy of risk-management firms, reducing the variability of risk-weighted assets (RWAs).
The Basel 3.1 changes mainly impact capital requirements for STD and IRB Credit Risk, Market Risk, Credit Valuation Adjustment (CVA) Risk, Counterparty Credit Risk (CCR) and Operational Risk. An aggregate “output floor” is also being introduced to ensure that total RWAs for firms using advanced or internally modelled methods and subject to the floor cannot fall below 72.5% of RWAs under the standardised approach. The B3.1 proposal did not include further changes to the Leverage Ratio, Large Exposures and Liquidity Risk frameworks.
The consultation paper has been followed up with the publication of the PRA’s policy statement PS17/23 Implementation of the Basel 3.1 standards near-final part 1. That contains the near-final rules on Market Risk, CVA, CCR and Operational Risk sections, along with some Pillar 2 guidance relating to these topics. Part 2, PS9/24, containing rules on the remaining Basel 3.1 changes was published in September 2024. This covered primarily Credit Risk, Credit Risk Mitigation, Output Floor and Disclosures & Reporting.
Following the PRA’s announcement on 17 January 2024, the PRA B3.1 rules are to be implemented from 1 January 2027.
Equivalent changes relating to the Basel III standards will be implemented in the EU by the new Banking Package (CRR III/ CRD VI) for which the European Commission issued a proposal in October 2021, with the final rules published in the Official Journal in June 2024. The EU implementation date was 1 January 2025, except for the Market Risk rules which will be implemented on 1 January 2026. Their impact will be limited to NatWest Group’s EU subsidiaries.
Other developments in 2024
The IFRS 9 transitional capital rules in respect of ECL provisions were effective until 31 December 2024. The transitional factor reduced further from 50 % to 25% in January 2024.
On 29 November 2024, the PRA announced its 2024 list of O-SIIs (Other Systemically Important Institutions) as well as the 2024 O-SII buffers for ring-fenced banks (RFBs). The PRA is required to identify O-SIIs on an annual basis. NatWest Group Plc is part of the PRA’s O-SII list and the O-SII buffer for its ring-fenced sub-group (i.e. NatWest Holdings Group) was kept at 1.5%. An O-SII buffer can apply to O-SIIs, or parts of an O-SII that are ring-fenced banks. The 2024 O-SII rates will apply from 1 January 2026. However, the PRA is expected to re-issue its 2024 O-SII buffer rates in mid-2025 to reflect methodological changes introduced by the Financial Policy Committee (FPC).
Summary of future changes to prudential regulation in UK that may impact NatWest Group
The table below covers expected future changes to prudential regulation in the UK which may impact NatWest Group at a consolidated level. Certain entities within the group will be exposed to changes in prudential regulation from other legislative bodies and/or local supervisory authorities where NatWest Group’s entities are authorised (e.g. the EU and Jersey) on a solo basis and these changes may be different in substance, scope and timing from those highlighted below.
In addition to the future changes shown in the table below, the model changes required under CRD IV are still under development and subject to PRA approval. In line with all firms with permissions to use the IRB approach, NatWest Group is currently undertaking a programme of model and rating system development, to align with new regulations which came into force on 1 January 2022. The final CRD IV model outcomes may lead to an increase in RWAs in 2025 and beyond.
Area of development
Key changes
Status /Implementation date
Updates to the UK policy framework for capital buffers
Large Exposures Framework
Streamlining the Pillar 2A capital framework and the capital communications process
Remainder of CRR: Restatement of assimilated law
Amendments to the approach to setting a minimum requirement for own funds and eligible liabilities (MREL)
Identification and management of step-in risk, shadow banking entities and groups of connected clients
Summary of future changes to prudential regulation in UK that may impact NatWest Group continued
PRA Basel 3.1 implementation: Capital – Output floor
PRA Basel 3.1 implementation:
Credit Risk (STD, IRB, FIRB)
PRA Basel 3.1 implementation: Market Risk
Capitalisation of foreign exchange positions for market risk
PRA Basel 3.1 implementation: CVA & Counterparty Credit Risk
PRA Basel 3.1 implementation: Operational Risk
PRA Basel 3.1 implementation: Disclosures & Reporting
Pillar 2
Definition of Capital: restatement of CRR requirements in PRA Rulebook
CET1 ratio
13.6%
(2023 – 13.4%)
(2023 - £183.0bn)
The CET1 ratio increased by 20 basis points to 13.6% due to a £0.5 billion increase in CET1 capital partially offset by a £0.2 billion increase in RWAs.
The CET1 capital increase was driven by an attributable profit to ordinary shareholders of £4.5 billion partially offset by:
Total RWAs increased by £0.2 billion to £183.2 billion mainly reflecting:
MREL ratio
33.0%
(2023 – 30.5%)
5.0%
(2023 – 5.0%)
The MREL ratio increased to 33.0% driven by a £4.7 billion increase in MREL offset by a £0.2 billion increase in RWAs. MREL increased to £60.5 billion driven by a £2.5 billion increase in eligible capital and a £2.2 billion increase in senior unsecured debt.
The capital increase was driven by CET1 movements, issuance of $1.8 billion Additional Tier 1 instruments and a £0.7 billion increase driven by issuances and redemptions of subordinated debt instruments.
The increase in senior unsecured debt was driven by the issuance of USD debt instruments totalling $4.6 billion and EUR debt instruments totalling €1.8 billion, partially offset by redemption of €1.5 billion debt instruments and a $2.0 billion debt instrument.
The leverage ratio remained static at 5.0%. This was driven by a £45.0 billion increase in leverage exposure offset by a £1.9 billion increase in Tier 1 capital. The key drivers in the leverage exposure were an increase in other financial assets, other off balance sheet items and trading assets.
Key points continued
£222.3bn
(2023 - £222.8bn)
LCR spot
150%
(2023 – 144%)
LCR average
151%
(2023 – 141%)
NSFR spot
137%
(2023 – 133%)
NSFR average
(2023 – 137%)
The liquidity portfolio decreased by £0.5 billion to £222.3 billion during the year. Primary liquidity increased by £13.0 billion to £161.0 billion, driven by an increase in customer deposits and issuance, partially offset by increased lending (including Metro Bank mortgage portfolio acquisition) and capital distributions (share buyback and dividends). Secondary liquidity decreased by £13.5 billion due to a decrease in pre-positioned collateral at the Bank of England.
The spot Liquidity Coverage Ratio (LCR) increased by 6% to 150% during the year driven by increased customer deposits and issuance, partially offset by increased lending (including Metro Bank mortgage portfolio acquisition) and capital distributions (share buyback and dividends).
The spot Net Stable Funding Ratio (NSFR) increased 4% during the year to 137% driven by increased customer deposits, issuance and secured borrowing partially offset by increased lending.
Maximum Distributable Amount (MDA) and Minimum Capital Requirements
NatWest Group is subject to minimum capital requirements relative to RWAs. The table below summarises the minimum capital requirements (the sum of Pillar 1 and Pillar 2A), and the additional capital buffers which are held in excess of the regulatory minimum requirements and are usable in stress.
Where the CET1 ratio falls below the sum of the minimum capital and the combined buffer requirement, there is a subsequent automatic restriction on the amount available to service discretionary payments (including AT1 coupons), known as the MDA. Note that different capital requirements apply to individual legal entities or sub-groups and the table shown does not reflect any incremental PRA buffer requirements, which are not disclosable.
The current capital position provides significant headroom above both our minimum requirements and our MDA threshold requirements.
CET1
Total Tier 1
Total capital
Pillar 1 requirements
Pillar 2A requirements
Minimum Capital Requirements
Capital conservation buffer
Countercyclical capital buffer (1)
MDA threshold (2)
10.5
n/a
Overall capital requirement
12.6
Capital ratios at 31 December 2024
16.5
Headroom (3) (4)
Leverage ratios
The table below summarises the minimum ratios of capital to leverage exposure under the binding PRA UK leverage framework applicable for NatWest Group.
Minimum ratio
2.44
3.25
Countercyclical leverage ratio buffer (1)
3.85
Liquidity and funding ratios
The table below summarises the minimum requirements for key liquidity and funding metrics under the PRA framework.
Liquidity Coverage Ratio (LCR)
Net Stable Funding Ratio (NSFR)
Capital, risk-weighted assets and leverage: Key metrics
The table below sets out the key capital and leverage ratios. NatWest Group is subject to the requirements set out in the PRA Rulebook. The capital and leverage ratios are therefore being presented under these frameworks on a transitional basis. (1)
Capital adequacy ratios (1)
Tier 1
15.5
148,078
147,598
7,103
6,219
21,821
20,198
Total RWAs
183,221
182,989
24,928
24,440
Tier1
30,187
28,315
36,105
33,632
Tier 1 capital
UK leverage exposure
607,799
562,843
UK leverage ratio (%) (2)
UK average Tier 1 capital (3)
29,923
28,323
UK average leverage exposure (3)
600,354
571,225
UK average leverage ratio (%) (3)
Capital flow statement
The table below analyses the movement in CET1, AT1 and Tier 2 capital for the year ended 31 December 2024. It is being presented on a transitional basis based on current PRA rules.
AT1
Tier 2
3,875
5,317
Attributable profit for the period
Ordinary interim dividend paid
(497)
Directed buyback
(2,246)
Foreseeable ordinary dividends
(1,249)
Foreign exchange reserve
FVOCI reserve
(54)
Own credit
Share based remuneration and shares vested
under employee share schemes
Goodwill and intangibles deduction
Deferred tax assets
(105)
Prudential valuation adjustments
New issues of capital instruments
1,387
2,771
Redemption of capital instruments
(622)
Foreign exchange movements
(36)
Adjustment under IFRS 9 transitional arrangements
(169)
Expected loss less impairment
Other movements
(128)
5,259
5,918
The table below analyses the movement in RWAs during the year, by key drivers.
Counterparty
Market
Operational
risk
credit risk
risk(1)
147.6
183.0
Foreign exchange movement
Business movement
Risk parameter changes
Methodology changes
Model updates
Acquisitions and disposals
148.1
183.2
The table below analyses the movement in RWAs by segment during the year.
Total NatWest
(1.3)
(0.7)
57.0
80.1
Total RWAs increased by £0.2 billion during the period mainly reflecting:
114
Leverage exposure
The leverage metrics for UK entities are calculated in accordance with the Leverage ratio (CRR) part of the PRA Rulebook.
31 December
469,599
439,449
Other assets
18,069
24,507
- netting and variation margin
(76,101)
(79,299)
- potential future exposures
16,692
17,212
Securities financing transactions gross up
2,460
1,868
Other off balance sheet items
59,498
50,961
Regulatory deductions and other adjustments
(11,014)
(16,043)
Claims on central banks
(89,299)
(100,735)
Exclusion of bounce back loans
(2,422)
(3,794)
UK leverage ratio (%)
Liquidity key metrics
The table below sets out the key liquidity and related metrics monitored by NatWest Group.
NatWest Group
UK DoLSub
Spot
Average
Liquidity Coverage Ratio (1)
Net Stable Funding Ratio (2)
Stressed Outflow Coverage (3)
Minimum requirements of own funds and eligible liabilities (MREL)
The following table illustrates the components of estimated MREL in NatWest Group and operating subsidiaries and includes external issuances only. The roll-off profile relating to senior debt and subordinated debt instruments is set out on page 118.
Par value (1)
Balance sheet value
Regulatory value
MREL value (2)
CET1 capital (3)
24.9
24.4
Tier 1 capital: end-point CRR compliant AT1
of which: NatWest Group plc (holdco)
of which: NatWest Group plc operating subsidiaries (opcos)
Tier 1 capital: end-point CRR non-compliant
of which: holdco
of which: opcos
Tier 2 capital: end-point CRR compliant
Tier 2 capital: end-point CRR non compliant
Senior unsecured debt securities
24.0
21.7
of which: opcos (4)
33.4
58.1
57.6
55.6
51.6
Tier 2 capital
Other regulatory adjustments
94.5
93.9
36.1
60.5
89.8
85.6
55.8
607.8
562.8
MREL as a ratio of RWAs
33.0
30.5
MREL as a ratio of UK leverage exposure
Minimum requirements of own funds and eligible liabilities (MREL) continued
The following table illustrates the components of the stock of outstanding issuance in NatWest Group and its operating subsidiaries including external and internal issuances.
NWM
RBS
Holdings
Securities
International
Group plc
Limited
NWB Plc
RBS plc
NWM Plc
Markets N.V.
Inc.(6)
Limited (7)
Additional Tier 1
Externally issued
Internally issued
Senior unsecured
Total outstanding issuance
35.0
Roll-off profile
The following table illustrates the roll-off profile of NatWest Group’s major wholesale funding programmes.
As at and for year
ended 31 December 2024
H1 2025
H2 2025
2028 & 2029
2030 & later
Senior debt roll-off profile (1)
NatWest Group plc
23,998
2,443
9,553
7,567
27,060
6,288
4,750
6,530
4,686
4,277
529
NatWest Bank Plc
2,623
2,596
NWM N.V.
2,405
1,358
573
NatWest Bank Plc - Covered bonds
750
Total notes issued
56,836
10,242
5,032
11,538
7,129
14,580
8,315
Subordinated debt instruments roll-off profile (2)
997
585
2,669
551
Total subordinated debt
6,012
958
The table below shows the composition of the liquidity portfolio with primary liquidity aligned to high-quality liquid assets on a regulatory LCR basis. Secondary liquidity comprises of assets which are eligible as collateral for local central bank liquidity facilities and do not form part of the LCR eligible high-quality liquid assets.
NWH
UK DoL
Group (1)
Group (2)
Sub
88,617
58,313
57,523
99,855
68,495
67,954
High quality government/MDB/PSE and GSE bonds (3)
58,818
43,275
36,250
26,510
Extremely high quality covered bonds
4,341
4,340
4,164
LCR level 1 Eligible Assets
151,776
105,928
105,138
140,269
99,169
98,628
LCR level 2 Eligible Assets (4)
9,271
7,796
7,320
Primary liquidity (HQLA) (5)
161,047
113,885
113,095
148,065
106,489
105,948
Secondary liquidity
61,230
61,200
74,722
74,683
Total liquidity value
222,277
175,085
174,295
222,787
181,172
180,631
Funding sources (audited)
The table below shows the carrying values of the principal funding sources based on contractual maturity. Balance sheet captions include balances held at all classifications under IFRS 9.
Short-term less
Long-term more
than 1 year
Bank Deposits
11,967
3,118
Other bank deposits (1)
9,708
9,777
19,485
5,836
13,236
19,072
21,675
8,954
Customer Deposits
1,363
10,844
Non-bank financial institutions
48,761
49,002
46,875
46,888
231,483
2,451
233,934
216,456
6,436
222,892
149,086
149,191
150,718
150,753
430,693
2,797
424,893
6,484
Trading liabilities (2)
Repos (3)
29,752
810
30,562
26,634
26,902
Derivatives collateral
12,509
15,075
Other bank and customer deposits
627
895
768
Debt securities in issue - Medium term notes
237
288
706
42,908
1,315
44,223
42,895
938
43,833
Customer deposits including repos
1,341
1,086
1,280
Debt securities in issue:
Commercial paper and certificates of deposit
10,889
377
11,266
11,116
11,321
Medium term notes
11,118
34,967
46,085
6,878
32,625
39,503
Covered bonds
749
2,122
Securitisation
880
863
22,773
38,314
20,310
34,779
1,051
5,085
4,667
Total funding
519,100
57,288
576,388
498,099
60,104
558,203
Of which: available in resolution (4)
29,742
26,561
Contractual maturity (audited)
This table shows the residual maturity of financial instruments, based on contractual date of maturity of NatWest Group’s banking activities, including hedging derivatives. Trading activities, comprising mandatory fair value through profit or loss (MFVTPL) assets and held-for-trading (HFT) liabilities have been excluded from the maturity analysis and are shown in total in the table below.
Less than
6 months-
More than
Trading
1 months
1‑3 months
3‑6 months
1 year
Subtotal
1‑3 years
3‑5 years
5 years
activities
78,287
4,699
5,360
533
Loans to customers - amortised cost (1)
43,451
19,278
15,927
25,329
103,985
59,798
44,831
195,057
403,671
5,682
2,271
3,089
6,033
17,075
23,657
20,420
164,886
226,038
19,003
5,762
3,794
8,033
36,592
29,353
20,506
25,721
112,172
18,766
11,245
9,044
11,263
50,318
6,788
3,905
4,450
65,461
2,840
3,263
2,478
5,832
14,413
16,083
11,563
20,381
62,440
146,069
22,925
18,701
31,177
218,872
76,479
56,413
215,575
567,339
128,007
695,346
153,397
22,051
17,695
26,226
219,369
71,664
54,626
208,215
553,874
125,050
678,924
6 months - 1 year
Bank deposits excluding repos
260
4,307
9,629
Bank repos
10,692
954
Customer repos
Customer deposits excluding repos
373,869
21,381
16,416
17,664
429,330
2,709
432,127
202,658
5,728
8,010
15,087
2,450
-
127,646
11,633
7,703
2,104
43,565
4,020
464
71,618
3,473
6,266
3,074
9,960
19,729
13,429
5,156
CPs and CDs
3,390
2,329
2,792
2,378
3,914
6,920
18,426
12,409
4,132
Securitisations
873
919
1,007
1,523
939
Lease liabilities
297
630
Total financial liabilities
399,323
28,936
21,299
32,066
481,624
33,905
16,240
6,535
538,304
126,332
664,636
392,957
27,195
22,914
22,236
465,302
31,146
22,787
5,956
525,191
125,762
650,953
Senior notes and subordinated liabilities - residual maturity profile by instrument type (audited)
The table below shows NatWest Group’s debt securities in issue and subordinated liabilities by residual maturity.
liabilities
Debt securities in issue
Covered
Subordinated
Total notes
in issue MTNs
paper and CDs
MTNs
bonds
in issue
Less than 1 year
23,353
23,373
20,333
20,368
15,781
More than 5 years
5,944
6,104
65,411
65,668
21,163
21,581
16,188
1,877
18,567
18,615
11,953
1,874
14,203
4,484
916
5,590
5,830
59,523
60,229
The table below shows the currency breakdown.
Commercial paper and CDs
4,282
4,644
5,015
20,089
18,233
3,005
46,342
3,320
1,448
14,541
23,797
24,325
13,605
21,780
21,766
3,078
Funding gap: maturity and segment analysis
The contractual maturity of loans to customers and customer deposits are shown below. The table demonstrates the maturity transformation role being performed by NatWest Group of lending long-term whilst relying largely on short-term funding. This is possible as the behavioural profiles of many customer deposits, which tend to be repayable on demand, show longer maturity and greater stability than their contractual agreements.
NatWest Group forms expectations on customer behaviours through both qualitative and quantitative techniques, incorporating observed customer behaviours over historic time periods, which includes the more recent periods of interest rate change. Customer behaviour assumptions are approved by the NatWest Group Balance Sheet Committee and have been used to prepare the funding gap analysis, which reduces maturity mismatch across the periods shown.
Contractual maturity
Behavioural maturity
Loans to customers (1)
Net surplus/(gap)
Greater
1-5
than
years
208
202
436
439
368
(197)
421
(189)
Encumbrance (audited)
NatWest Group evaluates the extent to which assets can be financed in a secured form (encumbrance), but certain asset types lend themselves more readily to encumbrance. The typical characteristics that support encumbrance are an ability to pledge those assets to another counterparty or entity through operation of law without necessarily requiring prior notification, homogeneity, predictable and measurable cash flows, and a consistent and uniform underwriting and collection process. Retail assets including residential mortgages, credit card receivables and personal loans display many of these features.
NatWest Group categorises its assets into four broad groups, those that are:
Balance sheet encumbrance
The table shows the retained encumbered assets of NatWest Group.
Encumbered as a result of transactions with
Unencumbered assets not pre-positioned with central banks
counterparties other than central banks
Pre-positioned
Collateral
SFT,
& encumbered
ring-fenced to
derivatives and
assets held at
meet regulatory
Readily
Cannot
debts
other (1,2)
central banks
requirement
available
available (3)
be used (4)
Total (5)
87.9
93.0
18.0
30.9
78.4
Loans to customers - amortised cost (6)
107.0
128.5
293.1
400.3
Other financial assets (7)
17.6
41.5
63.2
Intangible assets
53.5
242.9
132.5
182.8
558.2
708.0
53.1
112.0
223.8
126.3
175.6
525.7
692.7
NatWest Group is exposed to non-traded market risk through its banking activities and to traded market risk through its trading activities. Non-traded and traded market risk exposures are managed and discussed separately. The non-traded market risk section begins below. The traded market risk section begins on page 135. Pension-related activities also give rise to market risk. Refer to page 142 for more information on risk related to pensions.
Non-traded market risk is the risk to the value of assets or liabilities outside the trading book, or the risk to income, that arises from changes in market prices such as interest rates, foreign exchange rates and equity prices, or from changes in managed rates.
Non-traded market risk exists in all balance-sheet exposure that makes reference to market risk factors, when customer behaviour could impact the size and timing of the repricing or maturity of future cash flows, or when valuation of assets and liabilities is driven by market risk factors such as interest rates or foreign exchange rates.
The key sources of non-traded market risk are interest rate risk, credit spread risk, foreign exchange risk, equity risk and accounting volatility risk. Qualitative and quantitative information on these risk types is provided following the VaR table below.
Market risk continued
Responsibility for identifying, measuring, monitoring and controlling market risk arising from non-trading activities lies with the relevant business. Oversight is provided by the independent Risk function.
Non-traded market risk policy sets out the governance and risk management framework.
Non-traded market risk appetite is approved by the Board. NatWest Group’s qualitative appetite is set out in the non-traded market risk appetite statement.
Its quantitative appetite is expressed in terms of value-at-risk (VaR), stressed value-at-risk (SVaR), sensitivity and stress limits, and earnings-at-risk limits. The limits are reviewed to reflect changes in risk appetite, business plans, portfolio composition and the market and economic environments. To ensure approved limits are not breached and that NatWest Group remains within its risk appetite, triggers have been set and are actively managed.
The risk appetite statements and associated measures are reviewed and approved at least annually by the Board on the Board Risk Committee’s recommendation to ensure they remain appropriate and aligned to strategy. For further information on risk appetite and risk controls, refer to pages 30 and 31. Performance against risk appetite is reported regularly to the Executive Risk Committee, the Board Risk Committee, and the Board. Relevant non-traded market risk matters are escalated through the Executive Risk Committee and Board Risk Committee and to the Board as applicable. For more information, refer to the Governance and Remuneration section.
Risk measurement
Non-traded internal VaR (1-day 99%)
The following table shows one-day internal banking book value-at-risk (VaR) at a 99% confidence level, split by risk type. VaR values for each year are calculated based on one-day values for each of the 12 month-end reporting dates.
NatWest Group’s VaR metrics are explained on page 131. Each of the key risk types are discussed in greater detail in their individual sub-sections following this table.
Maximum
Minimum
Period end
Interest rate
28.2
38.0
Credit spread
60.2
48.4
33.1
54.2
20.9
Structural foreign exchange rate
12.1
Equity
8.6
7.7
19.0
Pipeline risk (1)
17.3
Diversification (2)
(35.3)
(23.4)
(34.4)
(29.9)
58.4
73.8
49.1
65.4
83.4
78.5
Interest rate risk
Non-traded interest rate risk (NTIRR) arises from the provision to customers of a range of banking products with differing interest rate characteristics. When aggregated, these products form portfolios of assets and liabilities with varying degrees of sensitivity to changes in market interest rates. Mismatches can give rise to volatility in net interest income as interest rates vary.
NTIRR comprises the following three primary risk types:
To manage exposures within its risk appetite, NatWest Group aggregates interest rate positions and hedges its residual exposure, primarily with interest rate swaps.
Structural hedging aims to reduce gap risk and the sensitivity of earnings to interest rate shocks. It also provides some protection against prolonged periods of falling rates. Structural hedging is explained in greater detail below, followed by information on how NatWest Group measures NTIRR from both an economic value-based and an earnings-based perspective.
Structural hedging
NatWest Group has a significant pool of stable, non and low interest-bearing liabilities, principally comprising current accounts and savings, in addition to its equity and reserves. A proportion of these balances are hedged, either by offsetting the positions against fixed-rate assets (such as fixed-rate mortgages) or by hedging positions externally using interest rate swaps, which are generally booked as cash-flow hedges of floating-rate assets, in order to reduce income volatility and provide a revenue stream in net interest income. (Further details on NatWest Group’s cash-flow hedge accounting programme can be found in Note 13 in the Notes to the accounts.) Hence, the structural hedge is one component of a larger interest rate risk management programme.
After offsetting or hedging the interest rate exposure, NatWest Group attributes income to equity or products in structural hedges by reference to the relevant interest rate swap curve. Over time, this approach has provided a basis for stable income attribution for management purposes to products and interest rate returns. The programme aims to track a time series of medium-term swap rates, but the yield will be affected by changes in product volumes and NatWest Group’s equity capital.
Structural hedging continued
The table below shows incremental income, hedge income, the period-end and average notional balances attributed to the structural hedge, and the total yield. These are analysed between equity and products. Hedge income represents the fixed leg of the hedge, while incremental income represents the difference between hedge income and short-term cash rates. For example, the sterling overnight index average (SONIA) is used to estimate incremental income from sterling structural hedges.
Incremental
Hedge
income
notional
yield
(694)
1.98
Product
(5,806)
3,039
1.75
(6,500)
3,479
196
(611)
1.87
(6,321)
2,822
(6,932)
3,240
Equity structural hedges refer to income allocated primarily to equity and reserves. At 31 December 2024, the equity structural hedge notional was allocated between NWH Group and NWM Group in a ratio of approximately 79%/21% respectively.
Product structural hedges refer to income allocated to customer products by NWH Group Treasury, mainly current account and savings balances in Commercial & Institutional, Retail Banking and Private Banking.
At 31 December 2024, approximately 93% by notional of total structural hedges were sterling-denominated.
Interest rate risk measurement
NTIRR can be measured using value-based or earnings-based approaches. Value-based approaches measure the change in value of the balance sheet assets and liabilities including all cash flows. Earnings-based approaches measure the potential impact on the income statement of changes in interest rates over a defined horizon, generally one to three years.
NatWest Group uses VaR as its value-based approach and sensitivity of net interest earnings as its earnings-based approach.
These two approaches provide complementary views of the impact of interest rate risk on the balance sheet at a point in time. The scenarios employed in the net interest earnings sensitivity approach may incorporate assumptions about how NatWest Group and its customers will respond to a change in the level of interest rates.
In contrast, the VaR approach measures the sensitivity of the balance sheet at a point in time. Capturing all cash flows, VaR also highlights the impact of duration and repricing risks beyond the one-to-three-year period shown in earnings sensitivity calculations.
Value-at-risk
VaR is a statistical estimate of the potential change in the market value of a portfolio (and, thus, the impact on the income statement) over a specified time horizon at a given confidence level.
NatWest Group’s standard VaR metrics – which assume a time horizon of one trading day and a confidence level of 99% – are based on interest rate repricing gaps at the reporting date. Daily rate moves are modelled using observations from the last 500 business days. These incorporate customer products plus associated funding and hedging transactions as well as non-financial assets and liabilities. Behavioural assumptions are applied as appropriate.
The non-traded interest rate risk VaR metrics for NatWest Group’s retail and commercial banking activities are included in the banking book VaR table presented earlier in this section. The VaR captures the risk resulting from mismatches in the repricing dates of assets and liabilities.
It also includes any mismatch between the maturity profile of external hedges and NatWest Group’s target maturity profile for the hedge.
Sensitivity of net interest earnings
Net interest earnings are sensitive to changes in the level of interest rates, mainly because maturing structural hedges are replaced at higher or lower rates and changes to coupons on managed rate customer products do not always match changes in market rates of interest or central bank policy rates (“managed margin”).
Earnings sensitivity is derived from a market-implied forward rate curve, which will incorporate expected changes in central bank policy rates such as the Bank of England base rate.
A simple scenario is shown that projects forward earnings based on the 31 December 2024 balance sheet, which is assumed to remain constant. An earnings projection is derived from the market-implied curve, which is then subjected to interest rate shocks. The difference between the market-implied projection and the shock gives an indication of underlying sensitivity to interest rate movements.
Reported sensitivities should not be considered a forecast of future performance in these rate scenarios. Actions that could reduce interest earnings sensitivity include changes in pricing strategies on customer loans and deposits as well as hedging. Management action may also be taken to stabilise total income also taking into account non-interest income.
131
Three-year 25-basis-point sensitivity table
The table below shows the sensitivity of net interest earnings – for both structural hedges and managed rate accounts – on a one, two and three-year forward-looking basis to an upward or downward interest rate shift of 25 basis points. In all scenarios, yield curves are assumed to move in parallel.
+25 basis points upward shift
-25 basis points downward shift
Year 1
Year 2
Year 3
Structural hedges
(125)
(212)
Managed margin
(142)
(120)
(245)
(138)
(227)
(121)
(259)
(332)
Earnings sensitivity considers only the main drivers, namely structural hedging and margin management.
One-year 25 and 100-basis-point sensitivity table
The following table presents the one-year sensitivity to upward and downward 25-basis-point and 100-basis-point shifts in the yield curve, analysed by currency.
Shifts in yield curve
+25 basis points
-25 basis points
+100 basis points
-100 basis points
Euro
Sterling
(155)
(646)
(577)
US dollar
(17)
(22)
617
(700)
Sensitivity of fair value through other comprehensive income (FVOCI) portfolios and cash flow hedging reserves to interest rate movements
NatWest Group holds most of the bonds in its liquidity portfolio at fair value and the bonds are generally classified as FVOCI for accounting purposes. Valuation changes arising from unexpected movements in market rates are initially recognised in FVOCI reserves.
Interest rate swaps are used to implement the structural hedging programme and also hedging of some personal and commercial lending portfolios, primarily fixed-rate mortgages. Generally, these swaps are booked in cash flow hedge accounting relationships. Changes in the valuation of swaps that are in effective cash flow hedge accounting relationships are recognised in cash flow hedge reserves.
The table below shows the sensitivity of bonds initially classified as FVOCI and swaps subject to cash flow hedge accounting to a parallel shift in all rates. Valuation changes affecting interest rate swaps that hedge bonds in the liquidity portfolio are also included. Where FVOCI bonds and swaps are booked in fair value hedge accounting relationships, the valuation change affecting both instruments would be recognised in the income statement. Cash flow hedges are assumed to be fully effective.
Sensitivity of fair value through other comprehensive income (FVOCI) portfolios and cash flow hedging reserves to interest rate movements continued
The effectiveness of cash flow and fair value hedge relationships is monitored and regularly tested in accordance with IFRS requirements. Note also that valuation changes affecting the cash flow hedge reserve affect tangible net asset value, but would not be expected to affect CET1 capital.
FVOCI reserves
Cash flow hedge reserves
(244)
(946)
1,027
(981)
1,041
(253)
(984)
(252)
(991)
1,040
Credit spread risk
Credit spread risk arises from the potential adverse economic impact of a change in the spread between bond yields and swap rates, where the bond portfolios are accounted at fair value through other comprehensive income.
NatWest Group’s bond portfolios primarily comprise high-quality securities maintained as a liquidity buffer to ensure it can continue to meet its obligations in the event that access to wholesale funding markets is restricted. Additionally, other high-quality bond portfolios are held for collateral purposes and to support payment systems.
Credit spread risk is monitored daily through sensitivities and VaR measures (refer to the non-traded market risk VaR table earlier in this section). Exposures and limit utilisations are reported to senior management on a regular basis. Dealing mandates in place for the bond portfolios further mitigate the risk by imposing constraints by duration, asset class and credit rating.
Foreign exchange risk
Non-traded foreign exchange risk arises from three main sources:
The most material non-traded open currency positions are the structural foreign exchange exposures arising from investments in foreign subsidiaries and branches. These exposures are assessed and managed to predefined risk appetite levels under delegated authority agreed by the CFO with support from the Asset & Liability Management Committee. NatWest Group seeks to limit the potential volatility impact on its CET1 ratio from exchange rate movements by deliberately maintaining a structural open currency position. Gains or losses arising from the retranslation of net investments in overseas operations are recognised in other comprehensive income and reduce the sensitivity of capital ratios to foreign exchange rate movements primarily arising from the retranslation of non-sterling denominated RWAs. Sensitivity is minimised where, for a given currency, the ratio of the structural open position to RWAs equals the CET1 ratio.
The sensitivity of this ratio to exchange rates is monitored monthly and reported to the Asset & Liability Management Committee at least quarterly. Foreign exchange exposures arising from customer transactions are hedged by businesses on a regular basis in line with NatWest Group policy.
Foreign exchange risk continued
The table below shows structural foreign currency exposures.
Net investments
Structural foreign
Residual
in foreign
investment
currency exposures
Economic
structural foreign
operations
hedges
pre-economic hedges
hedges (1)
1,826
(598)
(1,228)
4,162
(2,351)
1,811
Other non-sterling
874
(372)
6,862
(3,321)
3,541
2,313
(228)
957
(957)
4,475
(2,585)
1,890
(429)
6,623
(3,242)
3,381
2,424
Equity risk (audited)
Non-traded equity risk is the potential variation in income and reserves arising from changes in equity valuations. Equity positions are carried on the balance sheet at fair value based on market prices where available. Equity positions may take the form of shares that are publicly listed on a recognised exchange, such as NatWest Group’s investment in Permanent TSB, privately owned investments and shareholdings in industry participations including SWIFT. Further disclosure of NatWest Group’s investments in equity shareholdings, fair value gains and losses and valuation techniques may be found in the notes to the consolidated financial statements.
Investments, acquisitions or disposals of a strategic nature are referred to the Acquisitions & Disposals Committee. Once approved by the CFO with support from the Acquisitions & Disposals Committee for execution, such transactions are referred for approval to the Board, the Executive Committee, the Chief Executive, the Chief Financial Officer or as otherwise required. Decisions to acquire or hold equity positions in the non-trading book that are not of a strategic nature are taken by authorised persons with delegated authority.
Non-traded equity value at risk is monitored monthly and capital allocation to the risk is included in NatWest Group’s annual Internal Capital Adequacy Assessment Process (ICAAP).
Accounting volatility risk
Accounting volatility risk arises when an exposure is accounted for at amortised cost but economically hedged by a derivative that is accounted for at fair value. Although this is not an economic risk, the difference in accounting between the exposure and the hedge creates volatility in the income statement.
Accounting volatility can be mitigated through hedge accounting. However, residual volatility will remain in cases where accounting rules mean that hedge accounting is not an option, or where there is some hedge ineffectiveness. Accounting volatility risk is reported to the Asset & Liability Management Committee monthly and capitalised as part of the ICAAP.
Traded market risk is the risk of losses in trading book positions from fluctuations in market variables, such as interest rates, credit spreads, foreign exchange rates, equity prices, implied volatilities and asset correlations.
NatWest Group is exposed to traded market risk through trading activities entered into by NatWest Markets where such risk arises from market-making activity and by facilitating customer-facing business that cannot be immediately offset with other customers or market participants. From a market risk perspective, activities are focused on rates; currencies; and traded credit. NatWest Markets undertakes transactions in financial instruments including debt securities, as well as securities financing and derivatives.
The key categories of traded market risk are interest rate risk, credit spread risk and foreign currency price risk.
Trading activities may also give rise to counterparty credit risk. For further detail refer to the Credit risk section.
Traded market risk policy defines the key principles and approach to managing and reporting traded market risks across NatWest Group. Responsibility for identifying, measuring, monitoring and controlling market risk arising from trading activities lies with the relevant trading business. The Market Risk function independently advises on, monitors and challenges the risk-taking activities undertaken by the trading business ensuring these are within the constraints of the market risk framework, policies, and risk appetite statements and measures.
Traded market risk appetite is approved by the Board. NatWest Group’s qualitative appetite for traded market risk is set out in the traded market risk appetite statement. Quantitative appetite is expressed in terms of exposure limits. The limits at NatWest Group level comprise value-at-risk (VaR), stressed value-at-risk (SVaR) and stress-testing. More details on these are provided on the following pages.
For each trading business, a document known as a dealing authority compiles details of all applicable limits and trading restrictions. The desk-level mandates comprise qualitative limits related to the product types within the scope of each desk, as well as quantitative metrics specific to the desk’s market risk exposures. These additional limits and metrics aim to control various risk dimensions such as exposure size, aged inventory, currency and tenor.
The limits are reviewed to reflect changes in risk appetite, business plans, portfolio composition and the market and economic environments and recalibrated to ensure that they remain aligned to NatWest Group RWA targets. Limit reviews focus on optimising the alignment between traded market risk exposure and capital usage.
To ensure approved limits are not breached and that NatWest Group remains within its risk appetite, triggers have been set such that if exposures exceed a specified level, action plans are developed by the relevant business and the Market Risk function and implemented. The risk appetite statements and associated measures are reviewed at least annually by the Board on the Board Risk Committee’s recommendation to ensure they remain appropriate and aligned to strategy.
Risk appetite continued
For more detail on risk appetite and risk controls, refer to pages 30 and 31.
Performance against risk appetite is reported regularly to the Executive Risk Committee, the Board Risk Committee, and the Board. Relevant traded market risk matters are escalated through the Executive Risk Committee and Board Risk Committee and to the Board as applicable. For more information, refer to the Governance and Remuneration section.
Monitoring and mitigation
Traded market risk is identified and assessed by gathering, analysing, monitoring and reporting market risk information at desk, business, business segment and NatWest Group-wide levels. Industry expertise, continued system developments and techniques such as stress testing are also used to enhance the effectiveness of the identification and assessment of all material market risks.
Traded market risk exposures are monitored against limits and analysed daily. A daily report summarising the position of exposures against limits at desk, business, business segment and NatWest Group levels is provided to senior management and market risk managers across the function. Limit reporting is supplemented with regulatory capital and stress testing information as well as ad-hoc reporting.
A risk review of trading businesses is undertaken weekly with senior risk and front office staff. This includes a review of profit and loss drivers, notable position concentrations and other positions of concern.
Business profit and loss performance is monitored automatically through loss triggers which, if breached, require a remedial action plan to be agreed between the Market Risk function and the business. The loss triggers are set using both a fall-from-peak approach and an absolute loss level. In addition, regular updates on traded market risk positions are provided to the Executive Risk Committee, the Board Risk Committee and the Board.
NatWest Group uses VaR, SVaR and the incremental risk charge (IRC) to capitalise traded market risk. Risks that are not adequately captured by VaR or SVaR are captured by the Risks Not In VaR (RNIV) framework to ensure that NatWest Group is adequately capitalised for market risk. In addition, stress testing is used to identify any vulnerabilities and potential losses.
The key inputs into these measurement methods are market data and risk factor sensitivities. Sensitivities refer to the changes in trade or portfolio value that result from small changes in market parameters that are subject to the market risk limit framework. Revaluation ladders are used in place of sensitivities to capture the impact of large moves in risk factors or the joint impact of two risk factors.
These methods have been designed to capture correlation effects and allow NatWest Group to form an aggregated view of its traded market risk across risk types, markets and business lines while also taking into account the characteristics of each risk type.
For internal risk management purposes, VaR assumes a time horizon of one trading day and a confidence level of 99%.
The internal VaR model – which captures all trading book positions including those products approved by the regulator – is based on a historical simulation, utilising market data from the previous 500 days, and is sensitive to recent market conditions.
The model also captures the potential impact of interest rate risk; credit spread risk; foreign currency price risk; equity price risk; and commodity price risk.
When simulating potential movements in such risk factors, a combination of absolute, relative and rescaled returns is used.
The performance and adequacy of the VaR model are tested regularly through the following processes:
One-day 99% traded internal VaR
Traded VaR (1-day 99%) (audited)
The table below shows one-day 99% internal VaR for NatWest Group’s trading portfolios, split by exposure type.
Currency
Diversification (1)
(6.3)
(5.4)
(7.0)
(7.2)
16.2
20.0
8.9
VaR back-testing
The main approach employed to assess the VaR model’s ongoing performance is back-testing, which counts the number of days when a loss exceeds the corresponding daily VaR estimate, measured at a 99% confidence level.
Two types of profit and loss (P&L) are used in back-testing comparisons: Actual P&L and Hypothetical P&L. For more details on the back-testing approach, refer to the Pillar 3 Report.
The table below shows internal back-testing exceptions in the major NatWest Markets businesses for the 250-business-day period to 31 December 2024. Internal back-testing compares one-day 99% traded internal VaR with Actual and Hypothetical (Hypo) P&L.
Back-testing exceptions
Hypo
Rates
Currencies
xVA
Stressed VaR (SVaR)
As with VaR, the SVaR methodology produces estimates of the potential change in the market value of a portfolio, over a specified time horizon, at a given confidence level. SVaR is a VaR-based measure using historical data from a one-year period of stressed market conditions.
A simulation of 99% VaR is run on the current portfolio for each 250-day period from 2005 to the current VaR date, moving forward one day at a time. The SVaR is the worst VaR outcome of the simulated results.
This is in contrast with VaR, which is based on a rolling 500-day historical data set. A time horizon of ten trading days is assumed with a confidence level of 99%.
The internal traded SVaR model captures all trading book positions.
Total internal traded SVaR
Risks not in VaR (RNIVs)
The RNIV framework is used to identify and quantify market risks that are not fully captured by the internal VaR and SVaR models.
RNIV calculations form an integral part of ongoing model and data improvement efforts to capture all market risks in scope for model approval in VaR and SVaR.
For further qualitative and quantitative disclosures on RNIVs, refer to the Market risk section of the Pillar 3 Report.
For information on stress testing, refer to page 33.
Incremental risk charge (IRC)
The IRC model quantifies the impact of rating migration and default events on the market value of instruments with embedded credit risk (in particular, bonds and credit default swaps) held in the trading book. It further captures basis risk between different instruments, maturities and reference entities. For further qualitative and quantitative disclosures on the IRC, refer to the Market risk section of the Pillar 3 Report.
The table below analyses NatWest Group’s balance sheet by non-trading and trading business.
Non-trading
business (1)
business (2)
Primary market risk factor
104.3
48.6
45.6
44.8
Interest rate, credit spreads, equity
7.9
77.0
78.9
77.9
Settlement
Loans to banks
Loans to customers
381.4
51.1
9.7
580.4
127.6
563.6
129.1
31.5
54.7
54.5
53.6
Interest rate, credit spreads
72.1
72.4
71.2
61.1
55.1
55.0
668.6
541.3
127.3
655.5
524.0
131.5
Definition
Pension risk is defined as the inability to meet contractual obligations and other liabilities to the established employee or related company pension scheme.
Sources of risk
NatWest Group has exposure to pension risk through its defined benefit schemes worldwide. The Main section of The NatWest Group Pension Fund (the Main section) is the largest source of pension risk with £29.5 billion of assets and £24.5 billion of liabilities at 31 December 2024 (2023 – £33.6 billion of assets and £26.5 billion of liabilities). Refer to Note 5 to the consolidated financial statements, for further details on NatWest Group’s pension obligations, including sensitivities to the main risk factors.
Pension scheme liabilities vary with changes in long-term interest rates and inflation as well as with pensionable salaries, the longevity of scheme members and legislation.
During 2024, the Trustee of NatWest Group’s largest scheme (the Main section of the NatWest Group Pension Fund) completed buy-in transactions with a third-party insurer (buy-in asset valued at £8.0 billion under IAS 19, covering around a third of the defined benefit obligation attributable to the Main section). Under the buy-in insurance contracts, the insurer makes payments to the scheme to cover pension benefits paid to members. As a result, the insured portion of the scheme is protected against all material longevity and investment risks. These risks have been replaced with the risk that the insurer defaults on payments due to the scheme. The uninsured scheme assets continue to vary with changes in interest rates, inflation expectations, credit spreads, exchange rates, and equity and property prices. NatWest Group is therefore still exposed to the risk that the schemes’ assets, together with future returns and additional future contributions, are estimated to be insufficient to meet liabilities as they fall due.
In such circumstances, NatWest Group could be obliged (or might choose) to make additional contributions to the schemes or be required to hold additional capital to mitigate this risk.
During 2024, the Court of Appeal upheld the initial High Court ruling in respect of Virgin Media v NTL Pension Trustees II Limited (and others), calling into question the validity of rule amendments made to defined benefit pension schemes contracted-out on a Reference Scheme Test basis between 6 April 1997 and 5 April 2016. Amendments to these pension schemes over this time required confirmation from the Scheme Actuary that the Reference Scheme Test would continue to be met. In the absence of such a confirmation, the Rule amendment would be void.
There were no other developments on this matter as further disclosed in Note 5 to the consolidated financial statements since last year and it will be kept under review.
Chaired by the Chief Financial Officer, the Asset & Liability Management Committee is a key component of NatWest Group’s approach to managing pension risk. It considers the pension impact of the capital plan for NatWest Group and reviews the performance of NatWest Group’s material pension funds and other issues material to NatWest Group’s pension strategy. It also considers investment strategy proposals from the Trustee of the Main section. The Board reviews and, as appropriate, approves any material pension strategy proposals.
Pension risk continued
Pension risk appetite is approved by the Board. NatWest Group maintains an independent view of the risk inherent in its pension funds. NatWest Group has a pension risk appetite statement incorporating defined metrics against which risk is measured that is reviewed and approved at least annually by the Board on the Board Risk Committee’s recommendation to ensure they remain appropriate and aligned to strategy.
Policies and standards are in place to provide formal controls for pension risk reporting, modelling, governance and stress testing. A pension risk policy, which sits within the enterprise-wide risk management framework, is also in place and is subject to associated framework controls.
Performance against risk appetite is reported regularly to the Executive Risk Committee, the Board Risk Committee, and the Board. Relevant pension risk matters are escalated through the Executive Risk Committee, Asset & Liability Management Committee and Board Risk Committee as appropriate and to the Board as applicable. For more information, refer to the Governance and remuneration section.
Monitoring and measurement
Pension risk is monitored by the Executive Risk Committee and the Board Risk Committee, whilst the Asset & Liability Management Committee receives updates on the performance of NatWest Group’s material pension funds. Relevant pension risk matters are escalated to the Board as applicable. NatWest Group also undertakes stress tests on its material defined benefit pension schemes each year.
These tests are also used to satisfy the requests of regulatory bodies such as the Bank of England. The stress testing framework includes pension risk capital calculations for the purposes of the Internal Capital Adequacy Assessment Process as well as additional stress tests for a number of internal management purposes.
The results of the stress tests and their consequential impact on NatWest Group’s balance sheet, income statement and capital position are incorporated into the overall NatWest Group stress test results. NatWest Bank Plc (a subsidiary of NatWest Group) is the principal employer of the Main section and could be required to fund any deficit that arises. The financial strength of the third-party insurer is monitored on a periodic basis by the Trustee and NatWest Group.
The Main section is now well-protected against interest rate and inflation risks following risk mitigation measures taken by the Trustee in recent years. This includes buy-in transactions completed during 2024, resulting in a low investment risk for the scheme.
If, in an extreme scenario, the insurer was unable to make payments due to the scheme under the buy-in insurance contracts, NatWest Group would continue to be responsible for financially supporting the scheme to meet pension benefits. However, there are strong mitigations in place against this risk, in particular the insurance regulatory regime.
The potential impact of climate change is one of the factors considered in managing the assets of the Main section. The Trustee monitors the risk to its investments from changes in the global economy and invests, where return justifies the risk, in sectors that reduce the world’s reliance on fossil fuels, or that may otherwise promote environmental benefits.
Further details regarding the Main section Trustee’s approach to managing climate change risk can be found in its Responsible Ownership Policy, its net zero commitment and its climate disclosures produced on an annual basis, as required by The Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021.
Compliance risk is the risk that NatWest Group fails to observe the letter and spirit of all relevant laws, codes, rules, regulations and standards of good market practice.
Conduct risk is the risk of inappropriate behaviour towards customers, or in the markets in which NatWest Group operates, which leads to poor or inappropriate customer outcomes. The consequences of failing to meet compliance and/or conduct responsibilities can be significant and could result, for example, in legal action, regulatory enforcement, material financial loss and/or reputational damage.
Compliance and conduct risks exist across all stages of NatWest Group’s relationships with its customers and arise from a variety of activities including product design, marketing and sales, complaint handling, staff training, and handling of confidential inside information.
As set out in Note 25 to the consolidated financial statements, members of NatWest Group are party to legal proceedings and are subject to investigation and other regulatory action in the UK, the US and other jurisdictions.
Compliance and conduct risk continued
NatWest Group defines appropriate standards of compliance and conduct and ensures adherence to those standards through its risk management framework.
To support ongoing oversight of the management of the compliance and conduct risk profile, there are a number of committees in place. These include a Consumer Duty Executive Steering Group and conflicts of interest meetings across both the first and second lines of defence.
Regulatory compliance risk appetite and conduct risk appetite are approved by the Board. The risk appetite statement and associated measures for Compliance and Conduct risks are reviewed and approved at least annually by the Board on the Board Risk Committee’s recommendation to ensure they remain appropriate and aligned to strategy.
Risk appetite statements articulate the levels of risk that legal entities, businesses and functions work within when pursuing their strategic objectives and business plans.
A range of controls is operated to ensure the business delivers good customer outcomes and is conducted in accordance with legal and regulatory requirements. A suite of risk policies, risk standards and regulatory compliance operational policies addressing compliance and conduct risks set appropriate standards across NatWest Group.
Examples of these include those relating to product mis-selling, customers in vulnerable situations, complaints management, cross-border activities and market abuse. Continuous monitoring and targeted assurance are carried out as appropriate.
Performance against risk appetite is reported regularly to the Executive Risk Committee, the Board Risk Committee and the Board. Relevant compliance and conduct risk matters are escalated through the Executive Risk Committee and Board Risk Committee and to the Board as applicable. For more information, refer to the Governance and remuneration section.
Compliance and conduct risks are measured and managed through continuous assessment and regular reporting to NatWest Group’s senior risk committees and at Board level. The compliance and conduct risk framework facilitates the consistent monitoring and measurement of compliance with laws and regulations and the delivery of consistently good customer outcomes.
The first line of defence is responsible for effective risk identification, reporting and monitoring, with oversight, challenge and review by the second line. Compliance and conduct risk management is also integrated into NatWest Group’s strategic planning cycle.
Activity to mitigate the most material compliance and conduct risks is carried out across NatWest Group with specific areas of focus in the customer-facing businesses and legal entities. Examples of mitigation include consideration of customer needs in business and product planning, targeted training, conflicts of interest management, market conduct surveillance, complaints management, mapping of priority regulatory requirements and independent monitoring activity. Internal policies help support a strong customer focus across NatWest Group.
145
Financial crime risk is the risk that NatWest Group’s products, services, employees and/or third parties are intentionally or unintentionally used to facilitate financial crime in the form of money laundering, terrorist financing, bribery and corruption, sanctions and tax evasion, as well as external or internal fraud.
Financial crime risk may be present if NatWest Group’s customers, employees or third parties undertake or facilitate financial crime, or if NatWest Group’s products or services are used intentionally or unintentionally to facilitate such crime. Financial crime risk is an inherent risk across all lines of business.
The Financial Crime Executive Steering Group, which is jointly chaired by the Chief Risk Officer and the Group Chief Information Officer is the core governance committee for financial crime risk (excluding fraud). It oversees financial crime risk management, operational performance, and transformation matters including decision-making and escalations to the Executive Risk Committee, Board Risk Committee and Executive Committee.
The Fraud Executive Steering Group, which is chaired by the Chief Information Officer, is the core governance committee for fraud. It oversees fraud risk management, operational performance, and investment matters including decision-making and escalations to relevant senior committees.
Financial crime risk continued
Financial crime risk appetite is approved by the Board. The risk appetite statements and associated measures for financial crime risk are reviewed and approved at least annually by the Board on the Board Risk Committee’s recommendation to ensure they remain appropriate and aligned to strategy.
There is no appetite to operate in an environment where systems and controls do not enable the effective identification, assessment, monitoring, management and mitigation of financial crime risk.
NatWest Group’s systems and controls must be comprehensive and proportionate to the nature, scale and complexity of its businesses.
NatWest Group operates a framework with preventative and detective controls designed to mitigate the risk that it could facilitate financial crime. These controls are supported by a suite of policies, procedures and guidance to ensure they operate effectively.
Performance against risk appetite is reported regularly to the Executive Risk Committee, the Board Risk Committee, and the Board. Relevant financial crime risk matters are escalated through the Executive Risk Committee and Board Risk Committee and to the Board as applicable. For more information, refer to the Governance and remuneration section.
Financial crime risks are identified and reported through continuous risk management and regular reporting to senior risk committees and the Board Risk Committee. Quantitative and qualitative data is reviewed and assessed to measure whether financial crime risk is within risk appetite.
Through the financial crime framework, relevant policies, systems, processes and controls are used to mitigate and manage financial crime risk. This includes the use of dedicated screening and monitoring systems and controls to identify people, organisations, transactions and behaviours that may require further investigation or other actions. Centralised expertise is available to detect and disrupt threats to NatWest Group and its customers.
Intelligence is shared with law enforcement, regulators and government bodies to strengthen national and international defences against those who would misuse the financial system for criminal motives.
147
Climate and nature risk
Climate and nature risk is the threat of financial loss or adverse non-financial impacts associated with climate change and nature loss respectively and the political, economic and environmental responses to it.
Physical risks may arise from climate events such as heatwaves, droughts, floods, storms and nature-related events such as land or air pollution. They can potentially result in financial losses, impairing asset values and the creditworthiness of borrowers. NatWest Group could be exposed to physical risks directly by the effects on its property portfolio and, indirectly, by the impacts on the wider economy as well as on the property, business interests and supply chains of its customers.
Transition risks may arise from the process of adjustment towards a low-carbon, nature restored economy. Changes in policy, technology and sentiment could prompt reassessment of customers’ financial risk and may lead to falls in the value of a large range of assets. NatWest Group could be exposed to transition risks directly through the costs of adaptation of its own operations as well as supply chain disruption leading to financial impacts. Potential indirect effects include the impact on the wider economy, including on customers, which may erode NatWest Group’s competitiveness and profitability, as well as threaten reputational damage.
Liability risks may arise should stakeholders consider NatWest Group’s climate and nature risk management practices and disclosures insufficient, and responsible for or attributable to, stakeholders’ losses. On the other hand, liability risks may also arise where some jurisdictions believe financial institutions have taken their sustainability-related initiatives too far, with some imposing sanctions in these circumstances.
As climate and nature risk is both a principal risk within NatWest Group’s EWRMF, and a cross cutting risk, which impacts other principal risks, NatWest Group periodically refreshes its assessment of the relative impact of climate-related risk factors to other principal risks, where NatWest Group’s exposure to a principal risk could be taken outside of appetite due to climate-related risk factors. In identifying climate-related risks and opportunities to NatWest Group, the period in which each is likely to occur, was assessed. Risks and opportunities deemed material to the five-year financial planning cycle were viewed as short-term. Aligned with the guidance of the Science Based Targets initiative for financial institutions, long-term was defined as beyond 15 years, while medium-term was defined as within the next five to 15 years(1).
Climate and nature risk continued
Sources of risk continued
The outcome of the latest assessment of the relative impact of climate-related risk factors to other principal risks is included in the table that follows. All principal risks in the table were identified as potentially impacted by climate risk, over short, medium and long-term time horizons.
Risk type
Risks to NatWest Group
Drivers
Identification and assessment
From the adverse impact on future credit worthiness of customers due to climate change risk factors impacting asset valuation, income and costs, for example, from increased flooding events. Mitigants include the use of operational limits in the residential mortgage portfolio (refer to page 60 of the NatWest Group plc 2024 Sustainability Report for more details) and the inclusion of climate considerations in sector strategy within the commercial portfolio.
Physical: acute, chronic(2)
Transition: government policy and legislation, market, technology, reputation
Scenario analysis
Portfolio level assessments
Transaction level assessments
Compliance risk
Due to the need for NatWest Group to ‘observe the letter and spirit’ of all applicable laws and regulations relating to climate. Mitigants include the introduction of an environmental, social and governance regulatory compliance operational policy to give guidance on relevant regulatory expectations.
Liability: greenwashing
Conduct risk
Due to poor customer outcomes arising from the impacts of climate change including changes to financial stability or general wellbeing, which will either be supported or exacerbated by NatWest Group’s conduct. Mitigants include additional checks on sustainability claims and applying product flaw controls.
Due to the increased likelihood and potential impact of business disruption or arising from new and changing policy standards. Mitigants include resilience and disclosure controls.
Due to the risk of damage to NatWest Group’s reputation arising from perceived impact on climate change or adequacy of actions taken in response when compared against ambitions and progress made by peers. Mitigants include the environmental, social and ethical risk framework.
The effective management of climate and nature risk requires the full integration of climate-related risk factors into strategic planning, transactions and decision-making. The approach has evolved since 2021 alongside NatWest Group’s ongoing, multi-year progressive pathway to mature climate risk management capabilities, and in 2024:
The Board is responsible for monitoring and overseeing climate-related risk within NatWest Group’s overall business strategy and risk appetite.
The Chief Risk Officer shares accountability with the Chief Executive Officer under the Senior Managers Regime for identifying and managing the financial risks arising from climate change. This includes ensuring that the financial risks from climate change are adequately reflected in risk management frameworks and policies, and that NatWest Group can identify, measure, monitor, manage and report on its exposure to these risks.
During 2024, the Group Executive Committee provided oversight of the latest iteration of NatWest Group’s climate transition plan, progression in establishing partnerships and opportunities including oversight of progress against the NatWest Group climate and sustainable funding and financing target and ensuring the effective management of climate-related risks. Work continued in 2024 to mature NatWest Group’s climate-related risk management capabilities.
The Group Executive Committee will continue to supervise strategic implementation and delivery, supported by the Climate Centre of Excellence, segments and functions.
Climate risk appetite is approved by the Board. Performance against risk appetite is reported regularly to the Executive Risk Committee, the Board Risk Committee, and the Board. Relevant climate risk matters are escalated through the Executive Risk Committee and Board Risk Committee and to the Board as applicable. For more information, refer to the Governance and remuneration section.
These risk appetite measures alongside additional segment-specific risk measures were used to inform climate risk reporting to senior risk management forums, linking risk management policies to NatWest Group’s strategic priorities.
NatWest Group continues to enhance its processes to effectively measure the potential size and scope of climate-related risks, through the three approaches detailed below. The approach to nature-related risks is not as mature as the approach to climate-related risks with the completion of the LEAP pilot being the first step in identifying and assessing nature-related risks.
NatWest Group focused on continuing to develop the capabilities to use scenario analysis to identify the most material climate risks for its customers, seeking to harness insights to inform risk management practices and support decision making.
Scenario analysis allows NatWest Group to test a range of possible future climate pathways and understand the nature and magnitude of the risks they present. The purpose of scenario analysis is not to forecast the future but to understand and prepare to manage risks that could arise.
NatWest Group recognises a number of potential key use cases for climate scenario analysis, including, but not restricted to, the following:
There are various challenges with climate scenario analysis, including in relation to the immaturity of modelling techniques (for example, not picking up tipping points such as the slow down/potential collapse of the Atlantic meridional overturning circulation (AMOC)) and limitations surrounding data on climate-related risks. In addition, there is significant uncertainty as to how the climate will evolve over time, how and when governments, regulators, businesses, investors and customers respond and how those responses impact the economy, asset valuations, economic systems, policy and wider society. These risks and uncertainties, coupled with significantly long timeframes, make the outputs of climate-related risk modelling with respect to the potential use cases identified inherently more uncertain than outputs modelled for traditional financial planning cycles based on historical financial information.
Portfolio level assessment
NatWest Group uses a number of tools to undertake portfolio level assessments including operational limits in retail credit risk, stress analysis in market risk and heightened climate-related risk sector assessment in Non - personal credit risk. The latter seeks to identify sectors that are likely to see increased credit risks for NatWest Group because of climate-related factors, over a ten to 15-year horizon. A breakdown is included in the NatWest Group plc 2024 Sustainability Report.
NatWest Group also regularly considers the potential impact of existing and emerging regulatory requirements related to climate change at NatWest Group and subsidiary level, through external horizon scanning and monitoring of emerging regulatory requirements.
Transaction level assessment
Assessments are undertaken which consider anti-greenwashing factors within NatWest Group’s marketing and communications processes. NatWest Group’s suppliers are encouraged to undertake assessments which aim to improve sustainability performance. Within the Non-Personal credit portfolio, NatWest Group uses its initial suite of climate risk scorecards and CDF tools to engage with its customers to support them in better understanding climate-related risks for their business and conduct climate transition plan assessments. In 2024, CDF tools were rolled out on a phased test and learn basis focused on business areas covering large corporates, mid - corporates, commercial real estate, housing associations and some financial institutions customer segments. Through this process, NatWest Group continues to build capability among first and second-line risk colleagues, and a culture where consideration of climate risk is part of the credit journey.
NatWest Group manages and mitigates climate-related risk in the Non-Personal portfolio through:
During 2024, Commercial & Institutional continued to enhance pricing frameworks to embed climate considerations. These enable NatWest Group to support businesses to help address the climate challenge and to encourage Commercial & Institutional customers towards more sustainable, transition-aligned transactions.
In the residential mortgage portfolio, lending limits were applied based on climate characteristics, including: (i) exposure to EPC A and B rated properties, (ii) buy-to-let properties with potential EPC between D and G and (iii) flats, new builds and buy-to-let properties at high or very high risk of flood. Additionally, the credit policies do not allow buy-to-let mortgages to properties with an EPC rating between F and G. Limits are continually reviewed to reflect new flood risk data, risk profile and market conditions. Refer to page 82 for a breakdown of Personal exposure by EPC band, and page 81 for a breakdown of Personal exposure at high and very high risk of flooding by region.
NatWest Group continues to participate in a number of industry forums to help shape the financial service industry’s response to the challenges posed by climate risk, including scenario analysis. An example is the Climate Financial Risk Forum, established by the PRA and the FCA.
NatWest Group also continues to engage actively with academia to ensure that best practice and the latest thinking on climate risks is considered within NatWest Group’s work. For example, the work with University of Exeter as described previously.
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or external events. It arises from day-to-day operations and is relevant to every aspect of the business.
Operational risk may arise from a failure to manage operations, systems, processes, transactions and assets appropriately. This includes human error, an inability to deliver change adequately or on time, the non-availability of technology services, or the loss of customer data. It also includes systems failure, theft of NatWest Group property, information loss, the impact of natural or man-made disasters and the threat of cyberattacks. Operational risk can also arise from a failure to account for changes in law or regulations or to take appropriate measures to protect assets.
The risk governance arrangements in place for operational risk are aligned to the requirements set out in the Board approved enterprise-wide risk management framework and are consistent with achieving safety, soundness and sustainable risk outcomes.
Aligned to this, a strong operational risk management oversight function is vital to support NatWest Group’s ambitions to serve its customers better. Improved management of operational risk against defined risk appetite is vital for stability and reputational integrity.
To support ongoing oversight of the management of the operational risk profile an Operational Risk Executive Steering Committee is in place. This forum ensures all material operational risks are monitored and managed within appetite. The Board Risk Committee and Board receive updates on the outputs of the Operational Risk Executive Steering Committee as necessary.
Operational risk appetite is approved by the Board and supports effective management of all operational risks. It expresses the level and types of operational risk NatWest Group is willing to accept to achieve its strategic objectives and business plans. NatWest Group’s operational risk appetite quantitative and qualitative statements encompass the full range of operational risks faced by its legal entities, businesses and functions.
The risk appetite statement and associated measures for operational risk are reviewed at least annually by the Board on the Board Risk Committee’s recommendation to ensure they remain appropriate and aligned to strategy.
Performance against risk appetite is reported regularly to the Executive Risk Committee, the Board Risk Committee, and the Board. Relevant operational risk matters are escalated through the Executive Risk Committee and Board Risk Committee and to the Board as applicable. For more information, refer to the Governance and remuneration section.
Operational risk continued
Risks are mitigated by applying key preventative and detective controls. This is an integral step in the risk self-assessment methodology which is used to determine residual risk exposure. Control owners are accountable for the design, execution, performance, and maintenance of key controls. Key controls are regularly assessed for adequacy and tested for effectiveness. The results are monitored and, where a material change in performance is identified, the associated risk is re-evaluated.
All residual risks that exceed the target appetite position are subject to action plans to bring them within appetite.
Supporting our understanding of control is the CEC process. This is a bi-annual process, which requires senior members of the executive and management to assess the adequacy and effectiveness of their internal control frameworks which supports certification that their business or function is compliant with the Internal Control over Financial Reporting (Sarbanes-Oxley Section 404) regulatory requirements and with the requirements of the UK Corporate Governance Code section on Risk Management and Internal Controls.
CEC covers material risks and the underlying key controls, including financial, operational and compliance controls, as well as supporting risk management frameworks. The CEC outcomes, including forward-looking assessments for the next two half-yearly cycles and progress on control environment improvements, are reported to the Group Audit Committee and Board Risk Committee. They are also shared with external auditors.
Operational risk is measured and managed through continuous assessment and regular reporting to NatWest Group’s senior risk committees and at Board-level.
Risk and control self-assessments are used across business areas and support functions to identify and assess material non-financial risks (including operational risks, financial crime and conduct risks) and key controls. All risks and controls are mapped to NatWest Group’s risk directory. Risk assessments are refreshed at least every two years or sooner in response to internal and external events to ensure they remain relevant and that they capture any emerging risks.
NatWest Group uses the standardised approach to calculate its Pillar 1 operational risk capital requirement. This is based on multiplying three years’ average historical gross income by coefficients set by the regulator based on business line.
As part of the wider Internal Capital Adequacy Assessment Process an operational risk economic capital model is used to assess Pillar 2A, which is a risk-sensitive add-on to Pillar 1. The model uses historical loss data (internal and external) and forward-looking scenario analysis to provide a risk-sensitive view of NatWest Group’s Pillar 2A capital requirement.
Scenario analysis is used to assess how severe but plausible operational risks will affect NatWest Group. It provides a forward-looking basis for evaluating and managing operational risk exposures.
Refer to the Capital, liquidity and funding risk section for the operational risk capital requirement figures.
Operational resilience and cybersecurity
NatWest Group manages and monitors operational resilience through its enhanced risk and control self-assessment methodology. This is underpinned by setting and monitoring of forward-looking risk indicators and performance metrics for the operational resilience of important business services. Significant progress has been made in meeting regulatory expectations for operational resilience, with involvement in a number of industry-wide operational resilience forums.
This enables a cross-sector view of the operational resilience risk profile and the pace of ongoing innovation and change, both internally and externally.
NatWest Group operates layered security controls and its architecture is designed to provide inherent protection against threats. This approach avoids reliance on any one type or method of security control. Minimum security control requirements are set out in key risk policies(1), standards, processes and procedures.
Throughout 2024, NatWest Group continued to monitor and manage the threat landscape focusing on:
As cyberattacks evolve, NatWest Group continues to invest in additional capability designed to defend against emerging risks.
Event and loss data management
The operational risk event and loss data management process ensures NatWest Group captures and records operational risk events with financial and non-financial impacts that meet defined criteria. Loss data is used for internal, regulatory and industry reporting and is included in capital modelling when calculating economic capital for operational risk. The most serious events are escalated in a simple, standardised process to all senior management, by way of an Early Event Escalation process. NatWest Group has not experienced a material cybersecurity breach or associated material loss in the last three years.
All financial impacts and recoveries associated with an operational risk event are reported against the date they were recorded in NatWest Group’s financial accounts. A single event can result in multiple losses (or recoveries) that may take time to crystallise. Losses and recoveries with a financial accounting date in 2024 may relate to events that occurred, or were identified in, prior years. NatWest Group purchases insurance, against specific losses, including cyberattacks, and to comply with statutory or contractual requirements.
Percentage and value of events
At 31 December 2024, due to the release of unutilised conduct-related provisions, the value of losses assigned to the clients, products and business practices (CPBP) event category accounted for a negative 206% of all NWG’s operational risk losses (a positive 72% in 2023).
Value of events
Volume of events (1)
Proportion
Fraud - external
Clients, products and business practices
Execution, delivery and process management
Employment practices and workplace safety
Technology and infrastructure failures
Disasters and public safety
Cybersecurity Risk Management Processes
Our cybersecurity risk management forms an integral part of NatWest Group’s overall enterprise-wide risk management framework (EWRMF) that is designed around a three lines of defence model. Specifically, management of cybersecurity risk is a subset of NatWest Group’s wider operational risk management. To support our cybersecurity risk management, we have information and cybersecurity policies. These policies are reviewed at least annually and benchmarked against industry best practice standards, including the Information Security Forum: Standard Of Good Practice (ISF: SOGP) and relevant publications by competent authorities such as the National Cyber Security Centre (NCSC), to help us identify and remediate any gaps in our controls and procedures. Our policies are also aligned with a number of other international and industry standards, such as ISO 27001 and the National Institute of Standards and Technology Cyber Security Framework. In addition, NatWest Group is certified in Cyber Essentials Plus by the IASME Consortium Ltd (IASME), a recognised government owned scheme operated by the NCSC.
The information and cybersecurity policies form part of our internal process to support NatWest Group’s annual attestation to its management’s assessment of the effectiveness of its internal control over financial reporting required under Section 404 of the Sarbanes-Oxley Act.
Our cybersecurity risk management framework is designed to mitigate the impact of cybersecurity threats and incidents. The framework also includes a structured approach for identifying and managing both internal cybersecurity incidents and external incidents impacting our third-party suppliers.
In addition, the framework includes a process for assessing the severity and source of a cybersecurity threat or incident, including in relation to third-party service providers, enabling us to implement mitigating controls as required and to inform NatWest Group’s management and board of directors of any material impact.
The functions of our cybersecurity risk management framework are based on a three lines of defence model:
Cybersecurity Risk Management Processes continued
Cybersecurity threats for 2024
NatWest Group is continuously exposed to cybersecurity threats across its business and supply chain, which are closely monitored by NatWest Group. In the year ended 31 December 2024, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect NatWest Group. However, given the nature of cybersecurity threats, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident. For more information about these risks, refer to the Risk Factors section – “NatWest Group is subject to increasingly sophisticated and frequent cyberattacks”.
Board Cybersecurity Risk Oversight
Board
The Board of Directors (Board) ensures there is a framework of prudent and effective controls which enables risks – including information and cyber security risk - to be assessed and managed. In addition to approving the EWRMF (including NatWest Group’s risk appetite framework) on recommendation from the Group Board Risk Committee, the Board approves the risk appetite for principal risks, including operational risk of which information and cybersecurity is a component. The Board monitors information and cybersecurity performance against risk appetite through the receipt of regular reporting and receives reporting on top and emerging risks, including the likelihood of a cyber-attack. The Board also considers material risks, including information and cybersecurity, and reviews the effectiveness of risk management and internal control systems.
Group Board Risk Committee (BRC)
In relation to information and cybersecurity risk, BRC provides oversight and advice to the Board on current and future risk exposures of NatWest Group and its subsidiaries; future risk profile including risk appetite; the approval and effectiveness of the EWRMF and the internal controls required to manage risk. It approves the enterprise-wide risk management strategy and oversees its effective delivery. BRC reviews all information and cybersecurity risk exposures and management’s recommendations to monitor, control and mitigate such exposures. It also reviews NatWest Group’s information and cybersecurity performance against risk appetite through the receipt of regular reporting, updates on top and emerging risks and updates from the first and second lines of defence and escalates matters to the Board as required.
Management responsible for managing information and cybersecurity risk
NatWest Group’s first line of defence is responsible for setting NatWest Group’s information and cybersecurity risk management strategy, including: delivering effective and efficient cybersecurity products, policies and services and identifying, considering and assessing material cybersecurity threats on an ongoing basis. NatWest Group’s cybersecurity programmes are under the direction of the Chief Information Officer (CIO) who holds regulatory accountability under the Senior Managers and Certification Regime for defining and delivering NatWest Group’s internal technology, infrastructure services and customer operations, including NatWest Group’s IT strategy, cybersecurity, operational continuity, and resilience. The Chief Information Security Officer (CISO) reports to the CIO and receives regular reports from the cybersecurity team under his supervision. The CIO is an established Technology Leader with over 30 years of experience in Financial Services, joining NWG in 2022. Prior to 2022, the CIO spent eight years at Deutsche Bank where he held a number of roles including CIO for the Corporate and Investment Bank, Head of Technology for Financial Crime, CIO for the UK and Group CTO. Prior to joining Deutsche Bank, the CIO drove the technology strategy and innovation agenda for RBS Markets as their CIO and spent the early part of his career at JP Morgan.
The CISO, via the cybersecurity team, monitors the prevention, detection, mitigation, and remediation of cybersecurity threats and incidents. The CISO and the cybersecurity team are experienced information security professionals with many years of experience in the information and cyber security industry. Prior to joining NatWest Group, the CISO was a technical director at Communications-Electronics Security Group (now known as the UK’s National Cyber Security Centre) where he advised on securing some of the UK’s most critical assets. He is a member of the Chartered Institute of Information Security (CIISec) and has spoken at a wide range of events on cyber security and related topics.
157
Model risk is the potential for adverse consequences from model errors or the inappropriate use of modelled outputs to inform business decisions. NatWest Group defines a model as a quantitative method, system, or approach that applies statistical, economic, financial, accounting, mathematical or data science theories, techniques and assumptions to process input data into estimates.
NatWest Group uses a variety of models in the course of its business activities. Examples include the use of model outputs to support customer decisioning, measuring and assessing risk exposures (including credit, market, and climate risk), calculating regulatory capital and liquidity requirements and automation of operational processes.
Model applications may give rise to different risks depending on the business in which they are used. Model risk is therefore assessed separately for each franchise in addition to the overall assessment made for NatWest Group.
A governance framework is in place to ensure policies and processes relating to models are appropriate and effective. Two roles are key to this – model risk owners and model validation leads. Model risk owners are responsible for model approval and ongoing performance monitoring. Model validation leads, in the second line of defence, are responsible for oversight, including ensuring that models are independently validated prior to use and on an ongoing basis aligned to the model’s tier.
Business and function model management committees are used to escalate model risk matters to senior management where required.
The Model Risk Oversight Committee further enhances model risk governance by providing a platform for executive level discussion on emerging model risks, identification of systemic risks and the evolution of model risk management practices.
Model risk appetite is approved by the Board. It is set in order to limit the level of model risk that NatWest Group is willing to accept in the course of its business activities. The model risk appetite statement and associated measures are reviewed and approved by the Board on the Board Risk Committee’s recommendation at least annually to ensure they remain appropriate and aligned to strategy.
Business areas are responsible for monitoring performance against appetite and remediating models outside appetite.
Performance against risk appetite is reported regularly to the Executive Risk Committee, the Board Risk Committee, and the Board. Relevant model risk matters are escalated through the Executive Risk Committee and Board Risk Committee and to the Board as applicable. For more information, refer to the Governance and remuneration section.
Model risk continued
Model risk is measured and managed through continuous assessment and regular reporting to NatWest Group’s senior risk committees and at Board level.
Policies, toolkits and model standards related to the development, validation, approval, implementation, use and ongoing monitoring of models are in place to ensure adequate control across the lifecycle of an individual model.
All models developed for use are assigned a model tier, based on the model’s materiality and complexity. Risk based model tiering is used to prioritise risk management activities throughout the model lifecycle, and to identify and classify those models which pose the highest risk to NatWest Group’s business activities, safety and/or soundness.
Validation of material models is conducted by an independent risk function comprising of skilled, well-informed subject matter experts. This is completed for new models or material amendments to existing models and as part of an ongoing periodic programme to assess model performance. The frequency of periodic revalidation is aligned to the tier of the model. The independent validation focuses on a variety of model features, including model inputs, model processing, model outputs, the implementation of the model and the quality of the ongoing performance monitoring. Independent validation also focuses on the quality and accuracy of the development documentation and the model’s compliance with regulation.
The model materiality combined with the validation rating provides the basis for model risk appetite measures and enables model risk to be robustly monitored and managed across NatWest Group.
Ongoing performance monitoring is conducted by model owners and overseen by the model validators to ensure parameter estimates and model constructs remain fit for purpose, model assumptions remain valid and that models are being used consistently with their intended purpose. This allows timely action to be taken to remediate poor model performance and/or any control gaps or weaknesses.
By their nature – as approximations of reality – model risk is inherent in the use of models. It is managed by refining or redeveloping models where appropriate – due to changes in market conditions, business assumptions or processes – and by applying adjustments to model outputs (either quantitative or based on expert opinion). Enhancements may also be made to the process within which the model output is used in order to further limit risk levels.
Reputational risk is defined as the risk of damage to stakeholder trust due to negative consequences arising from internal actions or external events.
The three primary drivers of reputational risk are: failure in internal risk management systems, processes or culture; NatWest Group’s actions materially conflicting with stakeholder expectations; and contagion (when NatWest Group’s reputation is damaged by failures in key sectors including NatWest Group’s supply chain or other partnerships).
A reputational risk policy supports reputational risk management across NatWest Group. Reputational risk registers are used to manage reputational risks identified within relevant business areas. These are reported to the relevant business executive risk committee.
Material reputational risks to NatWest Group are escalated via the reputational risk register which is reported at every meeting of the Reputational Risk Committee. The Reputational Risk Committee also opines on matters that represent material reputational risks. The Executive and Board Risk Committees oversee the identification and reporting of reputational risk.
Reputational risk appetite is approved by the Board. NatWest Group manages and articulates its appetite for reputational risk through a qualitative reputational risk appetite statement and associated quantitative measures which are reviewed and approved at least annually by the Board on the Board Risk Committee’s recommendation to ensure they remain appropriate and aligned to strategy.
The risk appetite statements and associated measures for reputational risk are reviewed at least annually by the Board on the Board Risk Committee’s recommendation to ensure they remain appropriate and aligned to strategy.
NatWest Group seeks to identify, measure and manage risk aligned to stakeholder trust. However, reputational risk is inherent in NatWest Group’s operating environment and public trust is a specific factor in setting reputational risk appetite.
Reputational risk continued
Relevant internal and external factors are monitored through regular reporting via reputational risk registers at business or legal entity level. They are escalated, where appropriate, to the relevant business risk committee and, where material, to the Reputational Risk Committee.
Additional principal risk indicators for material risks being monitored are also reported to the Reputational Risk Committee and to the Executive and Board Risk Committees.
Standards of conduct are in place across NatWest Group requiring strict adherence to policies, procedures and ways of working to ensure business is transacted in a way that meets – or exceeds – stakeholder expectations.
External events that could cause reputational damage are identified and mitigated through NatWest Group’s top and emerging risks process (where sufficiently material) as well as through the NatWest Group and business - level reputational risk registers.
NatWest Group has in recent years been the subject of investigations and reviews by a number of regulators and governmental authorities, some of which have resulted in past fines, settlements and public censure. Refer to the Litigation and regulatory matters section of Note 25 to the consolidated financial statements for details of material matters currently affecting NatWest Group.
Financial statements
Independent auditor’s report (PCAOB number: 1438)
163
Consolidated income statement for the year ended 31 December 2024
Consolidated statement of comprehensive income for the year ended 31 December 2024
Consolidated balance sheet as at 31 December 2024
Consolidated statement of changes in equity for the year ended 31 December 2024
Consolidated cash flow statement for the year ended 31 December 2024
Accounting policies
Notes to the consolidated financial statements
1 Net interest income
2 Non-interest income
3 Operating expenses
4 Segmental analysis
5 Pensions
6 Auditor’s remuneration
7 Tax
8 Earnings per share
9 Financial instruments – classification
10 Financial instruments – valuation
11 Financial instruments – maturity analysis
12 Trading assets and liabilities
230
13 Derivatives
14 Loan impairment provisions
15 Other financial assets
16 Intangible assets
17 Other assets
18 Other financial liabilities
19 Subordinated liabilities
20 Other liabilities
21 Share capital and other equity
22 Structured entities
248
23 Asset transfers
24 Capital resources
25 Memorandum items
26 Non-cash and other items
27 Analysis of the net investment in business interests and intangible assets
28 Analysis of changes in financing during the year
29 Analysis of cash and cash equivalents
261
30 Directors’ and key management remuneration
31 Transactions with directors and key management
32 Related parties
33 Post balance sheet events
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of NatWest Group plc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of NatWest Group plc (the “Group”) as of 31 December 2024 and 2023, the related consolidated income statement, consolidated statements of comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended 31 December 2024, the related Accounting policies and Notes 1 to 33, and the information identified as audited in the Risk and capital management section (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group at 31 December 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended 31 December 2024, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Group’s internal control over financial reporting as of 31 December 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated 21 February 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on the Group’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Report of Independent Registered Public Accounting Firm continued
Description of the matter
How We Addressed the Matter in Our Audit
Estimate of expected credit loss provisions
At 31 December 2024, the Group reported total gross loans – amortised cost and FVOCI of £410.2 billion and associated £3.4 billion of expected credit losses (‘ECL’). As explained more fully in the Accounting policies, the credit risk section of the Risk and capital management section and Note 14 to the consolidated financial statements, ECL is recognised for financial instruments classified as amortised cost or fair value through other comprehensive income. Performing assets are measured at either (i) 12-month ECL (stage 1) or (ii) for those assets that are considered to have a significant increase in credit risk (‘SICR’), lifetime ECL (stage 2). Defaulted assets (stage 3) are also measured at lifetime ECL.
Auditing the ECL estimate was complex due to the judgemental methods used to estimate the ECL, including: accounting interpretations, modelling assumptions and the selection and use of the data used to build and run modelled estimates of Probability of Default (‘PD’), Loss Given Default (‘LGD’) and Exposure at Default (‘EAD’); how to allocate assets between the stages; multiple economic scenarios incorporated in the models; post-model adjustments applied; and the recovery and timing assumptions for individually provided stage 3 ECLs. The ongoing impact of the uncertain geopolitical and economic outlook led to increased judgements applied in these areas.
We evaluated the design and tested the operating effectiveness of controls over the ECL process, including those over the judgements and estimates noted above. The controls we tested included, amongst others, controls over monitoring of the criteria used to allocate assets into stages, model governance, credit monitoring, individual provisions and the governance over the review of the overall ECL, including the application of model adjustments.
To test the ECL provision, amongst other procedures, we performed an overall assessment of the ECL provision levels by stage to assess if they were reasonable by considering the overall credit quality of the Group’s portfolios, risk profile, the current geopolitical and macroeconomic environment, and the industries to which the Group is exposed, as well as performing peer benchmarking, where available, to assess overall staging and provision coverage levels.
We evaluated the criteria used to allocate a financial asset to stage 1, 2 or 3 in accordance with IFRS 9, recalculated the staging of the complete population of assets, and performed sensitivity analysis to assess the impact of different criteria on the ECL and the impact of performing collective staging downgrades to industries, geographic regions and high-risk populations particularly impacted by recent economic conditions.
We selected a sample of ECL models based on both quantitative and qualitative factors, and involved our modelling specialists to test the assumptions, inputs, methodology and model build. This included a combination of assessing model design and formulae, alternative modelling techniques, recalculating the PD, LGD and EAD, and implementation of new models during the year. We also considered the results of the Group’s internal model monitoring and validation results.
To evaluate completeness and accuracy of data used in the ECL calculation, we agreed a sample of data points to source systems, including data used to run the models and historic loss data to monitor the models.
We involved our economic specialists to assist us in evaluating the base case and alternative economic scenarios, including evaluating probability weights and considering contrary evidence from external sources.
We tested a sample of Post Model Adjustments held at year end. This included challenging the identification of retail customers vulnerable to price and rate increases, commercial sub-sectors susceptible to inflation and liquidity challenges, loss given default assumptions, time to collect and model shortcomings. With our modelling specialists, we assessed the risk of bias and the completeness of these adjustments by considering the data, judgements, methodology, sensitivities, and governance of these adjustments.
We evaluated and recalculated the scenarios, assumptions and cash flows for a sample of individual provisions including the alternative scenarios and the probability weights assigned, involving our valuation specialists where appropriate.
We also evaluated the adequacy of the related disclosures provided in the consolidated financial statements.
Description of the Matter
Valuation of financial instruments with higher risk characteristics
At 31 December 2024 the Group reported level 3 financial assets of £1.7 billion (2023: £2.0 billion) and level 3 financial liabilities of £0.5 billion (2023: £0.7 billion), which includes financial instruments with higher risk characteristics.
Auditing management’s judgements and assumptions used in the estimation of the fair value of these instruments was complex due to the judgemental nature of valuation techniques, modelling assumptions, significant illiquid inputs and certain valuation adjustments. Complex models were used to value exotic features in certain interest rate swaps and options. Judgemental unobservable inputs included discount rates associated with derivatives with complex collateral arrangements and illiquid loans. Judgemental fair value adjustments included Funding Valuation Adjustments (FVA), Credit Valuation Adjustments (CVA), and material product and deal specific adjustments on long-dated derivative portfolios.
We evaluated the design and tested the operating effectiveness of controls relating to financial instrument valuation, which included controls over the bank’s independent price verification process, valuation models governance, collateral management, and income statement analysis.
Amongst other procedures, we involved our financial instrument valuation and modelling specialists to assist us in testing complex model-dependent valuations by performing independent revaluation to assess the appropriateness of models and the adequacy of both assumptions and inputs. We also independently re-priced a sample of instruments that had been valued using illiquid pricing inputs, using alternative pricing sources, where available, to evaluate management’s valuation. In addition, we compared fair value adjustment methodologies against current market practice.
With the assistance of our financial instrument valuation and modelling specialists, we revalued a sample of counterparty level FVAs and CVAs, comparing funding spreads to third party data and independently assessed illiquid CVA inputs. We also tested material product and deal specific adjustments on long-dated derivative portfolios and assessed other information, including trading activity, asset disposals and collateral discrepancies, to evaluate modelling assumptions and inputs.
Valuation of hard to value pension assets and the defined benefit obligation
At 31 December 2024, the Group reported a net pension asset of £110 million comprising £190 million of schemes in surplus and £80 million of schemes in deficit. As explained in the accounting policies and Note 5 to the consolidated financial statements, the defined benefit obligation is measured on an actuarial basis. The charge to the income statement for pension costs is recognised in operating expenses. Actuarial gains and losses are recognised in other comprehensive income in full in the period in which they arise.
Auditing the pension plan was complex due to the judgemental nature of the assumptions used in the estimation of the fair value of the schemes’ illiquid assets and the defined benefit obligation. These assumptions included, the discount rate, inflation, pension payment and longevity used in the valuation of retirement benefit liabilities. The estimation of the fair value of the pension schemes’ assets was complex due to the judgemental nature of the assumptions and calibrations for illiquid or complex model-dependent valuations of certain investments held by the pension schemes.
We evaluated the design and tested the operating effectiveness of controls over the process covering the valuation of the defined benefit obligation and hard to value assets. For example, we tested controls over management’s review of the actuarial assumptions used in developing the defined benefit obligation.
To test the defined benefit obligation, we involved our actuarial specialists to assist in evaluating the actuarial assumptions as discussed above by comparing them to ranges independently developed from third party sources and market data. With the assistance of our specialists, we assessed the impact on pension liabilities due to changes in financial and longevity assumptions over the year, by comparing to third-party sources and market data.
We tested the fair value of scheme assets by independently calculating the fair value for a sample of the assets held. We involved our valuation specialists to assess the appropriateness of management’s valuation methodology including the judgements made in determining significant assumptions used in the valuation of complex and illiquid pension assets including the buy-in insurance contracts and the resultant impact of these buy-in transactions on the financial statements. We independently re-priced illiquid and complex assets that had been valued using unobservable market inputs, using alternative pricing sources where available, to evaluate management’s valuations.
/s/ Ernst & Young LLP
We have served as the Group’s auditors since 2016.
London, United Kingdom
21 February 2025
Opinion on Internal Control over Financial Reporting
We have audited NatWest Group plc and subsidiaries (the “Group”) internal control over financial reporting as of 31 December 2024, based on criteria established in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting at 31 December 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Group as of 31 December 2024 and 2023, the related consolidated income statement, consolidated statements of comprehensive income, changes in equity and cash flows for each of the three years in the period ended 31 December 2024, the related Accounting policies and Notes 1 to 33, and the information identified as audited in the Risk and capital management section (collectively referred to as the “consolidated financial statements”), and our report dated 21 February 2025 expressed an unqualified opinion thereon.
The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Consolidated income statement
Note
Interest receivable
12,637
Interest payable
(2,795)
Fees and commissions receivable
3,175
2,983
2,915
Fees and commissions payable
(708)
(623)
Trading income
1,133
(111)
Staff costs
(4,061)
(3,901)
(3,716)
(1,211)
(1,153)
(1,112)
(1,819)
(2,008)
(2,026)
(1,058)
(934)
(833)
Earnings per ordinary share - continuing operations
52.5p
49.2p
36.5p
Earnings per ordinary share - discontinued operations
1.0p
(1.2p)
(2.7p)
Total earnings per share attributable to ordinary shareholders - basic (2)
33.8p
Earnings per ordinary share - fully diluted continuing operations
52.1p
48.9p
36.2p
Earnings per ordinary share - fully diluted discontinued operations
(2.6p)
Total earnings per share attributable to ordinary shareholders - fully diluted
53.1p
47.7p
33.6p
Consolidated statement of comprehensive income
Items that do not qualify for reclassification
Remeasurement of retirement benefit schemes
(166)
(280)
(840)
Changes in fair value of credit in financial liabilities designated at FVTPL
FVOCI financial assets
Tax
(134)
(544)
Items that do qualify for reclassification
(25)
(457)
Cash flow hedges (1)
622
1,208
(3,277)
Currency translation
(619)
(178)
(361)
1,067
424
(2,426)
Other comprehensive income/(losses) after tax
(2,970)
Total comprehensive income for the year
5,101
625
4,809
4,448
Refer to footnotes 6 and 7 of the Consolidated statement of changes in equity.
Consolidated balance sheet
Securities subject to repurchase agreements
13,555
8,764
Other financial assets excluding securities subject to repurchase agreements
49,688
42,338
7,588
7,614
8,396
9,662
Ordinary shareholders' interests
34,070
33,267
Other owners’ interests
5,280
3,890
Owners’ equity
The accounts were approved by the Board of directors on 13 February 2025 and signed on its behalf by:
Richard Haythornthwaite
John-Paul Thwaite
Chair
Group Chief Executive Officer
Registered No. SC45551
Consolidated statement of changes in equity
Other reserves
Share
Non
capital and
Paid-in
statutory
Retained
Cash flow
Foreign
owners'
controlling
share premium
equity
reserves (8)
earnings
Fair value
hedging (6,7)
exchange
Merger
interests
2,004
10,645
(1,899)
841
10,881
Profit attributable to ordinary shareholders and other equity owners
- continuing operations
4,721
- discontinued operations
Other comprehensive income
Realised gains in period on FVOCI equity shares
Changes in fair value of credit in financial liabilities designated at FVTPL due to own credit risk
Unrealised losses
Amounts recognised in equity
(872)
Retranslation of net assets
(194)
Gains on hedges of net assets
Amount transferred from equity to earnings
1,494
1,592
(119)
Total comprehensive income
4,705
5,092
Transactions with owners
Ordinary share dividends paid
(1,505)
(1,517)
Paid-in equity dividends paid
Shares repurchased during the period (1,2,3)
(711)
711
(2,176)
Securities issued in the year
1,390
Employee share schemes
Shares vested under employee share schemes
Share-based payments
Own shares acquired (2)
(540)
10,133
2,350
11,426
(1,443)
826
For the notes to this table refer to page 173.
Consolidated statement of changes in equity continued
11,700
1,393
10,019
(2,771)
36,496
Profit/(loss) attributable to ordinary shareholders and other equity owners
4,748
Unrealised gains
(239)
Amount transferred from equity to earnings (4)
1,021
(487)
(336)
4,402
872
(637)
4,690
(1,456)
(1,461)
(242)
(856)
856
(2,057)
Acquisition of subsidiary
At 1 January 2022
12,629
12,966
1,205
41,796
41,803
3,851
(113)
(570)
(2,973)
Losses on hedges of net assets
(266)
(137)
181
901
1,254
3,093
(2,376)
(1,205)
(1,210)
Special dividends paid
(1,746)
(249)
(929)
929
(2,054)
Redemption of preference shares (5)
(750)
Tax on redemption of paid-in equity
At 31 December 2022
Consolidated cash flow statement
Cash flows from operating activities
Operating profit before tax from continuing operations
Operating profit/(loss) before tax from discontinued operations
Adjustments for:
Non-cash and other items
4,365
3,208
1,203
Change in operating assets and liabilities
(7,267)
(25,679)
(48,447)
Income taxes paid
(1,602)
(1,033)
(1,223)
Net cash flows from operating activities (1,2)
1,772
(17,438)
(43,597)
Cash flows from investing activities
Sale and maturity of other financial assets
41,618
25,195
36,975
Purchase of other financial assets
(53,961)
(44,906)
(23,510)
Income received on other financial assets
1,829
Net movement in business interests and intangible assets
(1,919)
5,420
Sale of property, plant and equipment
Purchase of property, plant and equipment
(464)
(811)
(639)
Net cash flows from investing activities
(12,699)
(14,694)
19,059
Cash flows from financing activities
Issue of paid-in equity
Issue of subordinated liabilities
1,386
648
Redemption of subordinated liabilities
(999)
(1,250)
(3,693)
Interest paid on subordinated liabilities
(459)
(439)
(374)
Issue of MRELs
3,973
3,721
Maturity and redemption of MRELs
(2,854)
(4,236)
(4,992)
Interest paid on MRELs
(885)
(844)
(703)
Shares repurchased
(2,716)
(2,416)
Dividends paid
(1,800)
(1,703)
(3,205)
Net cash flows from financing activities
(1,886)
(6,304)
(10,652)
Effects of exchange rate changes on cash and cash equivalents
(1,166)
(1,189)
Net decrease in cash and cash equivalents
(13,979)
(39,625)
(32,257)
Cash and cash equivalents at 1 January
118,824
158,449
190,706
Cash and cash equivalents at 31 December
104,845
Includes interest received of £24,996 million (2023 - £20,345 million, 2022 - £12,638 million) and interest paid of £13,689 million (2023 - £8,871 million, 2022 - £2,357 million).
The total cash outflow for leases is £95 million (2023 - £122 million; 2022 - £170 million), including payment of principal amount of £79 million (2023 - £102 million, 2022 - £145 million) which are included in the operating activities.
This section includes the basis of preparation and critical and material accounting policies used to prepare the financial statements.
Our accounting policies are the specific principles, bases, conventions, rules, and practices we apply in preparing and presenting the financial statements. Further information is provided where judgement and estimation is applied to critical accounting policies and key sources of estimation uncertainty.
Future accounting developments details new, or amendments to existing, accounting standards, from when they are effective from and, we are assessing their impact on future financial statements.
1. Presentation of financial statements
NatWest Group plc is incorporated in the UK and registered in Scotland. The financial statements are presented in the functional currency, pounds sterling.
The audited financial statements include these accounting policies, the accompanying notes to the financial statements on pages 184 to 263 and the audited sections of the Risk and capital management section on pages 26 to 161 which together form an integral part of the primary financial statements.
The directors have prepared the financial statements on a going concern basis after assessing the principal risks, forecasts, projections and other relevant evidence over the twelve months from the date the financial statements are approved (refer to the Report of the directors) and in accordance with UK - adopted International Accounting Standards (IAS), and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The critical and material accounting policies and related judgements are set out below.
The financial statements are presented on an historical cost basis except for certain financial instruments which are stated at fair value.
The effect of the amendments to IFRS effective from 1 January 2024 on our financial statements was immaterial.
We have applied the exception from the accounting requirements for deferred taxes in IAS 12 Income taxes in respect of Pillar 2 income taxes issued by the IASB in May 2023. Accordingly, we have not recognised or disclosed information about deferred tax assets and liabilities related to Pillar 2 income taxes.
Our consolidated financial statements incorporate the results of NatWest Group plc and the entities it controls. Control arises when we have the power to direct the activities of an entity so as to affect the return from the entity. Control is assessed by reference to our ability to enforce our will on the other entity, typically through voting rights. The consolidated financial statements are prepared under consistent accounting policies.
A subsidiary is included in the consolidated financial statements at fair value on acquisition from the date it is controlled by us until the date we cease to control it through a sale or a significant change in circumstances. Changes in our interest in a subsidiary that do not result in us ceasing to control that subsidiary are accounted for as equity transactions.
We apply accounting for associates and joint arrangements to entities where we have significant influence, but not control, over the operating and financial policies. We assess significant influence by reference to a presumption of voting rights of more than 20%, but less than 50%, supplemented by a qualitative assessment of substantive rights which include representation at the Board of Directors and significant exchange of managerial personnel or technology amongst others.
Investments in associates and joint ventures are recorded upon initial recognition at cost and increased or decreased each period by the share of the subsequent levels of profit or loss. Other changes in equity are considered in line with their nature.
The judgements and assumptions involved in our accounting policies that are considered by the Board to be the most important to the portrayal of its financial condition are noted below. The use of estimates, assumptions or models that differ from those adopted by us would affect our reported results.
Accounting policies continued
How Climate risk affects our accounting judgements and estimates
Business planning
Key financial estimates are based on management's latest five-year revenue and cost forecasts. The outputs from this forecast affect forward-looking accounting estimates. Measurement of deferred tax and expected credit losses are highly sensitive to reasonably possible changes in those anticipated conditions. In 2024, our scenario planning was enhanced by the further integration of NatWest Group’s climate transition plan, including the assessment of climate - related risks and opportunities.
Our Climate transition plan includes an assessment of:
There remains considerable uncertainty regarding this policy response, including the effect of wider geo-political uncertainty on governmental ambitions regarding climate transition and the effect of decarbonisation on wider economic growth, technology development and customer behaviours.
Information used in other accounting estimates
We make use of reasonable and supportable information to make accounting judgements and estimates. This includes information about the observable effects of the physical and transition risks of climate change on the current creditworthiness of borrowers, asset values and market indicators. Many of the effects arising from climate change will be longer term in nature, with an inherent level of uncertainty, and have limited effect on accounting judgements and estimates for the current period. Some physical and transition risks can manifest in the shorter term. The following items represent the most significant effects:
Effect of climate change in the estimation of expected credit loss
We are monitoring the effect of the physical and transition consequences of climate change on our experience of loan loss. We use available information regarding the effect of climate transition policy largely driven by carbon prices as an adjustment to macroeconomic factors that are used as inputs to the models that generate PD and LGD outcomes, which are key inputs to the ECL calculation. The determination of whether specific loss drivers and climate events generate specific losses is ongoing and is necessary to determine how sensitive changes in ECL could be to climate inputs.
Future cashflows are discounted, so long-dated cashflows are less likely to affect current expectations on credit loss. Our assessment of sector - specific risks, and whether additional adjustments are required, includes expectations of the ability of those sectors to meet their financing needs in the market. Changes in credit stewardship and credit risk appetite that stem from climate transition policies may directly affect our positions.
2. Critical accounting policies
The judgements and assumptions involved in our accounting policies that are considered by the Board to be the most important to the portrayal of our financial condition are noted below. The use of estimates, assumptions or models that differ from those adopted by us would affect our reported results. Management’s consideration of uncertainty is outlined in the relevant sections, including the ECL estimate in the Risk and capital management section.
Information used for significant estimate
Policy
Judgement
Estimate
Further information
Deferred tax
Determination of whether sufficient sustainable taxable profits will be generated in future years to recover the deferred tax asset.
Our estimates are based on the five - year revenue and cost forecasts (which include inherent uncertainties).
Note 7
Fair value – financial instruments
Classification of a fair value instrument as level 3, where the valuation is driven by unobservable inputs.
Estimation of the fair value, where it is reasonably possible to have alternative assumptions in determining the FV.
Note 10
Definition of default against which to apply PD, LGD and EAD models. Selection of multiple economic scenarios.Criteria for a significant increase in credit risk. Identification of risks not captured by the models.
ECL estimates contain a number of measurement uncertainties (such as the weighting of multiple economic scenarios) and disclosures include sensitivities to show the impact on other reasonably possible scenarios.
Note 14
Changes in judgements and assumptions could result in a material adjustment to those estimates in future reporting periods.
2.1. Deferred tax
Deferred tax is the estimated tax expected to be payable or recoverable in respect of temporary differences between the carrying amount of an asset or liability for accounting purposes and the carrying amount for tax purposes in the future. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent their recovery is probable.
Deferred tax is calculated using tax rates expected to apply in the periods when the assets will be realised or the liabilities settled, based on tax rates and laws enacted, or substantively enacted, at the balance sheet date.
Deferred tax asset recoverability is based on the level of supporting eligible and available deferred tax liabilities we have and of our future taxable profits. These future taxable profits are based on our five-year revenue and cost forecasts and the expectation of long - term economic growth beyond this period. The five-year forecast takes account of management’s current expectations of competitiveness and profitability. The long - term growth rate reflects external indicators which will include market expectations on climate risk. We do not consider any additional adjustments to this indicator.
2.2. Fair value – financial instruments
We measure financial instruments at fair value when they are classified as mandatory fair value through profit or loss; held-for-trading; designated fair value through profit or loss and fair value through other comprehensive income and they are recognised in the financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net exposure to either market or credit risk. In these cases, the fair value is derived from the net risk exposure of that portfolio with portfolio level adjustments applied to incorporate bid-offer spreads, counterparty credit risk, and funding costs (refer to ‘Valuation Adjustments’).
Where the market for a financial instrument is not active, fair value is established using a valuation technique. These valuation techniques involve a degree of estimation, the extent of which depends on the instrument’s complexity and the availability of market-based data. The complexity and uncertainty in the financial instrument’s fair value is categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current information and knowledge regarding the effect of climate risk.
2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured at amortised cost or at fair value through other comprehensive income, issued financial guarantee and loan commitment (other than those classified as held for trading) is assessed for impairment. Any change in impairment is reported in the income statement.
177
Loss allowances are forward-looking, based on 12-month ECL where there has not been a significant increase in credit risk rating, otherwise allowances are based on lifetime expected losses.
ECL is a probability-weighted estimate of credit losses. The probability is determined by the risk of default which is applied to the cash flow estimates. In the absence of a change in credit rating, allowances are recognised when there is a reduction in the net present value of expected cash flows. Following a significant increase in credit risk, ECL is adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make payments as they fall due. Future cashflows are discounted, so long-dated cashflows are less likely to affect current expectations on credit loss. Our assessment of sector specific risks, and whether additional adjustments are required, include expectations of the ability of those sectors to meet their financing needs in the market. Changes in credit stewardship and credit risk appetite that stem from climate transition policies may directly affect our positions.
Judgement is exercised as follows:
On restructuring where a financial asset is not derecognised, the revised cash flows are used in re-estimating the credit loss. Where restructuring causes derecognition of the original financial asset, the fair value of the replacement asset is used as the closing cash flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares or property, the exchange is accounted for as the sale of the loan and the acquisition of equity securities or investment property. Where our acquired interest is in equity shares, relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance sheet when we conclude that there is no longer any realistic prospect of recovery of part, or all, of the loan. For financial assets that are individually assessed for impairment, the timing of the write-off is determined on a case-by-case basis. Such financial assets are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, re-negotiation, and similar events
The typical time frames from initial impairment to write-off for our collectively assessed portfolios are:
3. Material accounting policies
3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the effective interest rate method for all financial instruments measured at amortised cost; debt instruments measured as fair value through other comprehensive income; and the effective part of any related accounting hedging instruments. Finance lease income is recognised at a constant periodic rate of return before tax on the net investment on the lease.
Other interest relating to financial instruments measured at fair value is recognised as part of the movement in fair value and is reported in income from trading activities or other operating income as relevant. Fees in respect of services are recognised as the right to consideration accrues through the performance of each distinct service obligation to the customer. The arrangements are generally contractual and the cost of providing the service is incurred as the service is rendered. The price is usually fixed and always determinable.
3.2. Discontinued operations, held for sale and disposal groups
The results of discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss from discontinued operations, net of tax in the income statement. Comparatives are re - presented for the income statement, cash flow statement, statement of changes in equity and related notes.
An asset or disposal group (assets and liabilities) is classified as held for sale if we will recover its carrying amount principally through a sale transaction rather than through continuing use. It is measured at the lower of its carrying amount or fair value less cost to sell unless the existing measurement provisions of IFRS apply. These are presented as single amounts; comparatives are not re - presented.
3.3. Staff costs
Employee costs, such as salaries, paid absences, and other benefits are recognised over the period in which the employees provide the related services to us. Employees may receive variable compensation in cash, in deferred cash or debt instruments of NatWest Group or in ordinary shares of NatWest Group plc subject to deferral, clawback and forfeiture criteria. We operate a number of share-based compensation schemes under which we grant awards of NatWest Group plc shares and share options to our employees. Such awards are subject to vesting conditions.
Variable compensation that is settled in cash or debt instruments is charged to the income statement on a straight-line basis over the period during which services are provided, taking account of forfeiture and clawback criteria. The value of employee services received in exchange for NatWest Group plc shares and share options is recognised as an expense over the vesting period, subject to deferral, clawback, cancellation and forfeiture criteria with a corresponding increase in equity. The fair value of shares granted is the market price adjusted for the expected effect of dividends as employees are not entitled to dividends until shares are vested.
The fair value of options granted is determined using option pricing models to estimate the numbers of shares likely to vest. These consider the exercise price of the option, the current share price, the risk-free interest rate, the expected volatility of the share price over the life of the option and other relevant factors such as the dividend yield.
Defined contribution pension scheme
A scheme where we pay fixed contributions and there is no legal or constructive obligation to pay further contributions or benefits. Contributions are recognised in the income statement as employee service costs accrue.
Defined benefit pension scheme
A scheme that defines the benefit an employee will receive on retirement and is dependent on one or more factors such as age, salary, and years of service. The net of the recognisable scheme assets and obligations is reported on the balance sheet in other assets or other liabilities. The defined benefit obligation is measured on an actuarial basis.
The charge to the income statement for pension costs (mainly the service cost and the net interest on the net defined benefit asset or liability) is recognised in operating expenses.
Actuarial gains and losses (i.e. gains and/or losses on re-measuring the net defined benefit asset or liability due to changes in actuarial measurement assumptions) are recognised in other comprehensive income in full in the period in which they arise, and not subject to recycling to the income statement.
The difference between scheme assets and scheme liabilities, the net defined benefit asset or liability, is recognised on the balance sheet if the criteria of the asset ceiling test are met. This requires the net defined benefit surplus to be limited to the present value of any economic benefits available to us in the form of refunds from the plan or reduced contributions to it.
We will recognise a liability where a minimum funding requirement exists for any of our defined benefit pension schemes. This reflects agreed minimum funding and the availability of a net surplus as described above.
When estimating the liability for minimum funding requirements we only include contributions that are substantively or contractually agreed and do not include contingent and discretionary features, including dividend-linked contributions or contributions subject to contingent events requiring future verification.
We recognise a net defined benefit asset when the net defined benefit surplus can generate a benefit in the form of a refund or reduction in future contributions to the plan. The net benefit pension asset is recognised at the present value of the benefits that will be available to us excluding interest and the effect of the asset ceiling (if any), excluding interest. Changes in the present value of the net benefit pension asset are recognised immediately in other comprehensive income.
In instances where Trustees have the ability to declare augmented benefits to participants, we do not recognise a defined benefit pension asset and record the surplus immediately in other comprehensive income.
3.4. Intangible assets
Intangible assets are identifiable non-monetary assets without physical substance acquired or developed by us, and are stated at cost less accumulated amortisation and impairment losses. Amortisation is a method to spread the cost of such assets over time in the income statement.
This is charged to the income statement over the assets' estimated useful economic lives using methods that best reflect the pattern of economic benefits.
The estimated useful economic lives are:
Computer software
3 to 10 years
Other acquired intangibles
3 to 5 years
Direct costs relating to the development of internal-use computer software are reported on the balance sheet after technical feasibility and economic viability have been established. These direct costs include payroll, the costs of materials and services, and directly attributable overheads. Capitalisation of costs ceases when the software can operate as intended.
During and after development, accumulated costs are reviewed for impairment against the benefits that the software is expected to generate. Costs incurred prior to the establishment of technical feasibility and economic viability are expensed to the income statement as incurred, as are all training costs and general overheads. The costs of licences to use computer software that are expected to generate economic benefits beyond three years are also reported on the balance sheet.
Goodwill on the acquisition of a subsidiary is the excess of the fair value of the consideration paid, the fair value of any existing interest in the subsidiary and the amount of any non-controlling interest measured either at fair value or at its share of the subsidiary’s net assets over the net fair value of the subsidiary’s identifiable assets, liabilities, and contingent liabilities.
Goodwill is measured at initial cost less any subsequent impairment losses. The gain or loss on the disposal of a subsidiary includes the carrying value of any related goodwill.
3.5. Impairment of non-financial assets
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired.
At each balance sheet date, we assess whether there is any indication that other intangible assets or property, plant and equipment are impaired. If any such indication exists, we estimate the recoverable amount of the asset and compare it to its balance sheet value to calculate if an impairment loss should be recognised in the income statement. A reversal of an impairment loss on other intangible assets or property, plant and equipment is recognised in the income statement provided the increased carrying value is not greater than it would have been had no impairment loss been recognised.
The recoverable amount of an asset that does not generate cash flows that are independent from those of other assets or groups of assets, is determined as part of the cash-generating unit to which the asset belongs.
A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. For the purposes of impairment testing, goodwill acquired in a business combination is allocated to our cash-generating units or groups of cash-generating units expected to benefit from the combination.
The recoverable amount of an asset or cash-generating unit is the higher of its fair value less cost to sell or its value in use. Value in use is the present value of future cash flows from the asset or cash-generating unit discounted at a rate that reflects market interest rates adjusted for risks specific to the asset or cash-generating unit that have not been considered in estimating future cash flows.
The assessment of asset impairment is based upon value in use. This represents the value of future cashflows and uses our five-year revenue and cost forecasts and the expectation of long term economic growth beyond this period. The five-year forecast takes account of management’s current expectations of competitiveness and profitability, including near-term effects of climate transition risk. The long-term growth rate reflects external indicators which will include market expectations on climate risk. We do not consider any additional adjustments to this indicator.
3.6. Foreign currencies
Foreign exchange differences arising on the settlement of foreign currency transactions and from the translation of monetary assets and liabilities are reported in income from trading activities except for differences arising on cash flow hedges and hedges of net investments in foreign operations.
Non-monetary items denominated in foreign currencies that are stated at fair value are translated into the functional currency at the foreign exchange rates ruling at the dates the values are determined. Translation differences are recognised in the income statement except for differences arising on non-monetary financial assets classified as fair value through other comprehensive income.
Income and expenses of foreign subsidiaries and branches are translated into sterling at average exchange rates unless these do not approximate the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on the translation of a foreign operation are recognised in other comprehensive income. The amount accumulated in equity is reclassified from equity to the income statement on disposal of a foreign operation.
3.7. Tax
Tax encompassing current tax and deferred tax is recognised in the income statement except when taxable items are recognised in other comprehensive income or equity. Tax consequences arising from servicing financial instruments classified as equity are recognised in the income statement.
Accounting for taxes is judgemental and carries a degree of uncertainty because tax law is subject to interpretation, which might be questioned by the relevant tax authority. We recognise the most likely current and deferred tax liability or asset, assessed for uncertainty using consistent judgements and estimates. Current and deferred tax assets are only recognised where their recovery is deemed probable, and current and deferred tax liabilities are recognised at the amount that represents the best estimate of the probable outcome having regard to their acceptance by the tax authorities.
3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance sheet.
Monetary financial assets are classified into one of the following subsequent measurement categories (subject to business model assessment and review of contractual cash flow for the purposes of sole payments of principal and interest where applicable):
Classification by business model reflects how we manage our financial assets to generate cash flows. A business model assessment helps to ascertain the measurement approach depending on whether cash flows result from holding financial assets to collect the contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which they are managed to achieve a predefined business objective. This is expected to result in the most consistent classification of assets because it aligns with the stated objectives for the portfolio, its risk management, manager’s remuneration and the ability to monitor sales of assets from a portfolio. When a significant change to our business is communicated to external parties, we reassess our business model for managing those financial assets. We reclassify financial assets if we have a significant change to the business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and extension terms; and discounts or penalties to interest rates that are part of meeting environmental, social and governance targets as well as other contingent and leverage features, non-recourse arrangements and features that could modify the timing and/or amount of the contractual cash flows that might reset the effective rate of interest; are considered in determining whether cash flows are solely payments of principal and interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon initial recognition if such designation eliminates, or significantly reduces, accounting mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive income reserve are recycled to the income statement for monetary assets and for non-monetary assets (equity shares) the cumulative gains or losses are transferred directly to retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are recognised on the settlement date; all other regular way transactions in financial assets are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
3.9. Netting
Financial assets and financial liabilities are offset, and the net amount presented on the balance sheet when, and only when, we currently have a legally enforceable right to set off the recognised amounts and we intend either to settle on a net basis or to realise the asset and settle the liability simultaneously. We are party to a number of arrangements, including master netting agreements, that give us the right to offset financial assets and financial liabilities, but where we do not intend to settle the amounts net or simultaneously, the assets and liabilities concerned are presented separately on the balance sheet.
3.10. Capital instruments
We classify a financial instrument that we issue as a financial liability if it is a contractual obligation to deliver cash or another financial asset, or to exchange financial assets or financial liabilities on potentially unfavourable terms and as equity if we evidence a residual interest in our assets after the deduction of liabilities. Incremental costs and related tax that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known as treasury shares or own shares held) is deducted from retained earnings. On the cancellation of treasury shares their nominal value is removed from retained earnings and a consequential amount recognised in capital redemption reserve in compliance with the Companies Act 2006.
On the sale or re-issue of treasury shares the consideration received and related tax are credited to equity, net of any directly attributable incremental costs.
3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all derivatives used to manage risk are in hedge accounting relationships (an IFRS method to reduce accounting mismatch from changes in the fair value of the derivatives reported in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in hedge relationships are recognised in Income from trading activities unless those derivatives are managed together with financial instruments designated at fair value; these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with the requirements of IAS 39 Financial instruments – Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the risk that is being hedged and the way in which effectiveness will be assessed at inception and during the period of the hedge. When designating a hedging relationship, we consider: the economic relationship between the hedged item (including the risk being hedged) and the hedging instrument; the nature of the risk; the risk management objective and strategy for undertaking the hedge; and the appropriateness of the method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a prospective and retrospective basis. This is assessed using regression techniques which model the degree of offsetting between the changes in fair value or cash flows attributable to the hedged risk and the changes in fair value of the designated hedging derivatives. Ineffectiveness is measured based on actual levels of offsetting and recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge - the gain or loss on the hedging instrument and the hedged item attributable to the hedged risk is recognised in the income statement. Where the hedged item is measured at amortised cost, the balance sheet amount of the hedged item is also adjusted.
Cash flow hedge - the effective portion of the designated hedge relationship is recognised in other comprehensive income and the ineffective portion in the income statement. When the hedged item (forecasted cash flows) results in the recognition of a financial asset or financial liability, the cumulative gain or loss is reclassified from equity to the income statement in the same periods in which the hedged forecasted cash flows affect the income statement.
Hedge of net investment in a foreign operation - in the hedge of a net investment in a foreign operation, the effective portion of the designated hedge relationship is recognised in other comprehensive income. Any ineffective portion is recognised in profit or loss. Non-derivative financial liabilities as well as derivatives may be designated as a hedging instrument in a net investment hedge.
Discontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash flows attributable to the hedged risk, consistent with the documented risk management strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement over the life of the hedged item. Where the hedged item is no longer on the balance sheet the adjustment to the hedged item is reported in the income statement. For cash flow hedging the cumulative unrealised gain or loss is reclassified from equity to the income statement when the hedged cash flows occur or, if the forecast transaction results in the recognition of a financial asset or financial liability, when the hedged forecast cash flows affect the income statement. Where a forecast transaction is no longer expected to occur, the cumulative unrealised gain or loss is reclassified from equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the amount accumulated in equity is reclassified from equity to the income statement.
3.12. Provisions
We recognise a provision for a present obligation resulting from a past event when it is more likely than not that we will be required to pay to settle the obligation and the amount of the obligation can be estimated reliably.
Provision is made for restructuring costs, including the costs of redundancy, when we have a constructive obligation.An obligation exists when we have a detailed formal plan for the restructuring and have raised a valid expectation in those affected either by starting to implement the plan or by announcing its main features.
We recognise any onerous cost of the present obligation under a contract as a provision. An onerous cost is the unavoidable cost of meeting our contractual obligations that exceed the expected economic benefits. When we intend to vacate a leasehold property or right of use asset, the asset would be tested for impairment and a provision may be recognised for the ancillary contractual occupancy costs.
4. Future accounting developments
International Financial Reporting Standards
Effective 1 January 2026
Effective 1 January 2027
We are assessing the effect of adopting these accounting developments on our financial statements.
Net interest income is the difference between the interest NatWest Group earns from its interest-bearing assets, such as loans, balances with central banks and other financial assets, and the interest paid on its interest-bearing liabilities, such as deposits and subordinated liabilities.
Interest receivable on financial instruments classified as amortised cost, debt instruments classified as FVOCI and the interest element of the effective portion of any designated hedging relationships are measured using the effective interest rate method, which allocates the interest receivable or interest payable over the expected life of the financial instrument at the rate that exactly discounts all estimated future cash flows to equal the financial instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable or receivable that are an integral part of the financial instrument’s yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs. All contractual terms of a financial instrument are considered when estimating future cash flows. Negative interest on financial assets is presented in interest payable and negative interest on financial liabilities is presented in interest receivable. Included in interest receivable is finance lease income of £549 million (2023 - £484 million; 2022 - £314 million) which is recognised at a constant periodic rate of return before tax on the net investment.
For accounting policy information refer to Accounting policy 3.1.
Balances at central banks and loans to banks - amortised cost
4,047
3,737
1,987
18,295
15,553
10,085
2,845
1,736
1,534
1,039
8,332
5,276
785
3,096
2,977
1,196
Internal funding of trading businesses
13,912
9,977
2,795
Notes to the consolidated financial statements continued
There are three main categories of non-interest income: net fees and commissions, trading income, and other operating income.
Net fees and commissions is the difference between fees received from customers for services provided by NatWest Group, such as credit card annual fees, underwriting fees, payment services, brokerage fees, trade finance, investment management fees, trustee and fiduciary services, and fees incurred in the provision of those services, such as credit card interchange fees, customer incentives, loan administration, foreign currency transaction charges, and brokerage fees.
Trading income is earned from short-term financial assets and financial liabilities to either make a spread between purchase and sale price or held to take advantage of movements in prices and yields.
Other operating income includes revenue from other operating activities which are not related to the principal activities of the company, such as: share of profit or loss from associates; operating lease income; the profit or loss on the sale of a subsidiary or property, plant and equipment profit or loss on own debt; and changes in the fair value of financial assets and liabilities designated at fair value through profit or loss.
For accounting policy information refer to Accounting policies 3.1 and 3.6.
Net fees and commissions (1)
2,292
Foreign exchange
270
Interest rate (2)
(163)
(72)
Changes in fair value of own debt and derivative liabilities attributable to own credit risk
- debt securities in issue
Equities, commodities and other
Gain/(loss) on redemption of own debt
Rental income on operating lease assets and investment property
234
Changes in fair value of financial assets and liabilities designated at fair value through profit or loss (3)
(150)
Changes in fair value of other financial assets at fair value through profit or loss (4)
Hedge ineffectiveness
Profit/ (loss) on disposal of amortised cost assets and liabilities
Loss on disposal of fair value through other comprehensive income assets
(19)
(168)
Profit/ (loss) on sale of property, plant and equipment
Share of profits/ (losses) of associated entities
(30)
Other income (5)
Refer to Note 4 for further analysis.
Includes fair value changes on derivatives not designated in a hedge accounting relationship, and gains and losses from structural hedges.
Includes related derivatives.
Includes instruments that have failed solely payments of principal and interest testing under IFRS 9.
2022 includes £92 million profit from insurance liabilities.
Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other administrative expenses.
For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5.
Salaries
2,477
2,483
2,250
Bonus awards
Temporary and contract costs
Social security costs
371
Pension costs
311
- defined benefit schemes (Note 5)
- defined contribution schemes
329
4,061
3,901
3,716
1,112
UK bank levy
Depreciation and amortisation (1)
Other administrative expenses (2)
1,677
1,899
1,925
Administrative expenses
4,088
4,095
3,971
7,687
(1)Includes depreciation of right of use assets of £103 million (2023 - £104 million; 2022 - £119 million).
(2)Includes litigation and conduct costs, net of amounts recovered. Refer to Note 20 for further details.
The average number of persons employed, rounded to the nearest hundred, during the year, excluding temporary staff,was 60,700 (2023 - 61,500; 2022- 60,000). The average number of temporary employees during 2024 was 1,400 (2023 - 2,100; 2022 - 2,500).
3 Operating expenses continued
The number of persons employed at 31 December, excluding temporary staff, by reportable segment, was as follows:
13,000
14,300
15,100
2,400
2,300
12,700
12,400
12,200
Central items & other (1)
31,800
32,500
31,400
59,700
61,600
61,000
40,100
41,500
41,200
India
17,600
16,900
15,700
Poland
1,500
USA
Republic of Ireland
400
Rest of the World
1,000
900
Award plan
Eligible employees
Nature of award
Vesting conditions (1)
Sharesave
UK, Channel Islands, Gibraltar, Isle of Man, Poland and India.
Option to buy shares under employee savings plan
Continuing employment or leavers in certain circumstances
2025 to 2029
Deferred performance awards
All
Awards of ordinary shares and conditional shares
2025 to 2032
Long-term incentives (2,3)
Senior employees
Continuing employment or leavers in certain circumstances and/or satisfaction of the pre-vesting assessment and underpins
2025 to 2031
Sharing in Success (4)
Future continuing employment and achievement of pre-defined measures.
All awards are subject to discretion of Remuneration Committee.
Long-term incentives include buy-out awards offered to compensate certain new hires for the loss of forfeited awards from their previous employment. Existing Long - term incentives vest over 3 to 7 years.
The existing Restricted Share Plan scheme would be replaced by Performance Share Plan in 2025.
In 2024 16 million shares at total value of £49 million were granted and vested under Sharing in Success.
Shares
exercise price
under option
£
(million)
At 1 January
1.59
1.63
1.61
Granted
Exercised
1.52
1.44
1.88
Cancelled
1.72
At 31 December
The fair value of Sharesave options granted in 2024 was determined using a pricing model that included: expected volatility of share price determined at the grant date based on historical share price volatility over a period of up to five years; expected option lives that equal the vesting period; estimated dividend yield on equity shares; and risk-free interest rates determined from UK gilts with terms matching the expected lives of the options.
The exercise price of options and the fair value on granting awards of fully paid shares is the average market price over the five trading days (three trading days for Sharesave) preceding grant date. When estimating the fair value of the award, the number of shares granted and the prevailing market price as defined on page 138 of exhibit 15.2 are used. The fair value of the award is recognised as services are provided by employees over the vesting period.
Options are exercisable within six months of vesting; 8.9 million options were exercisable at 31 December 2024 (2023 – 19.0 million; 2022 – 5.1 million). The weighted average share price at the date of exercise of options was £4.03 (2023 - £2.20; 2022 - £2.59). At 31 December 2024, exercise prices ranged from £1.42 to £2.94 (2023 - £1.12 to £1.89; 2022 - £1.12 to £2.27) and the remaining average contractual life was 2.35 years (2023 – 2.25 years; 2022 – 2 years). The fair value of options granted in 2024 was £28.3 million (2023 - £27.3 million; 2022 - £22.1 million).
Value at
grant
awarded
Forfeited
Vested
(57)
(81)
The awards granted in 2024 vest in equal tranches on the anniversary of the award, predominantly over three years.
Long-term incentives
Vested/exercised
Lapsed
The market value of awards vested/exercised in 2024 was £19.3 million (2023 - £9.5 million; 2022 - £11.7 million).
Change
March awards (1)
Deferred cash awards
Deferred share awards
Total deferred bonus awards
385
Total bonus awards (2)
Bonus awards as a % of operating profit before tax and bonus awards
Proportion of bonus awards that are deferred
- deferred cash awards
- deferred share awards
Reconciliation of bonus awards to income statement charge
Bonus awarded
Less: deferral of charge for amounts awarded for current year
Income statement charge for amounts awarded in current year
Add: current year charge for amounts deferred from prior years
Less: forfeiture of amounts deferred from prior years
Income statement charge for amounts deferred from prior years
Income statement charge for bonus awards (2)
March cash awards are limited to £2,000 for all employees.
Excludes other performance-related compensation.
Year in which income statement charge is expected to be taken for deferred bonus awards
Expected
and beyond
Bonus awards deferred from 2022 and earlier
Bonus awards deferred from 2023
Bonus awards deferred for 2024
NatWest Group analyses its performance between the different operating segments of the Group as required by IFRS 8, Operating segments. The presentation is consistent with internal financial reporting and how senior management assesses the performance of each operating segment.
Reportable operating segments:
The business is organised into the following reportable segments: Retail Banking, Private Banking, Commercial & Institutional, and Central items & other.
Retail Banking serves personal customers in the UK, including Ulster Bank customers in Northern Ireland.
Private Banking serves UK-connected high net worth individuals and their business interests.
Commercial & Institutional consists of customer businesses reported under Business Banking, Commercial Mid-market and Corporate & Institutions, supporting our customers across the full non-personal customer lifecycle, both domestically and internationally. Our Markets offering helps our customers manage financial risks across different geographies, while our International offering provides full-service banking operations in the Channel Islands, Isle of Man, Gibraltar and Luxembourg.
Central items & other includes corporate functions, such as treasury, finance, risk management, compliance, legal, communications and human resources. Central functions manage NatWest Group capital resources and NatWest Group-wide regulatory projects and provide services to the reportable segments. Central items & other includes businesses and amounts not directly related to any of the other reportable segments. Ulster Bank RoI is no longer an operating segment and its continuing operations now form part of Central items & other.
4 Segmental analysis continued
Allocation of central balance sheet items
NatWest Group allocates all central costs relating to central functions to the business using appropriate drivers; these are reported as indirect costs in the segmental income statements. Assets and risk-weighted assets held centrally, mainly relating to NatWest Group Treasury, are allocated to the business using appropriate drivers.
1,765
961
(154)
(902)
(2,936)
(715)
(4,120)
680
(7,091)
Operating profit/ (loss)
427
1,654
723
(778)
(684)
(3,937)
(7,062)
5,224
777
4,171
(330)
1,580
662
1,022
5,646
1,056
6,413
(672)
(2,593)
(3,583)
(6,854)
(122)
2,824
2,547
(675)
Total revenue (1)
items &
other
External
9,041
1,250
14,194
4,838
29,323
Inter-segmental (2)
(1,769)
9,052
2,788
12,425
5,058
7,366
1,157
12,519
25,382
597
7,371
2,157
10,917
4,937
5,773
7,258
16,574
389
1,263
6,863
2,675
4,743
8,250
1,684
907
943
(293)
(1,557)
4,170
7,730
2,525
1,761
663
(309)
(2,115)
4,956
5,920
1,502
690
493
For the notes to this table refer to page 195.
Analysis of net fees and commissions
- Payment services
700
1,059
- Credit and debit card fees
681
- Lending and financing
771
- Brokerage
- Investment management, trustee and fiduciary services
235
- Underwriting fees
- Other
2,076
(377)
(311)
671
1,030
676
1,923
(352)
642
1,024
401
661
673
701
1,840
(357)
(260)
232,835
198,795
228,684
191,936
226,375
192,282
28,593
42,603
26,894
37,806
29,867
41,491
398,750
367,342
384,958
359,766
404,817
383,768
47,807
59,867
52,137
65,977
58,994
66,016
683,557
Segmental analysis of goodwill
The total carrying value of goodwill at 31 December 2024 was £5,675 million (2023 - £5,680 million) comprising: Retail Banking £2,607 million (2023 - £2,607 million); Commercial & Institutional £2,904 million (2023 - £2,905 million); Private Banking £9 million (2023 - £9 million) and Central items & other £155 million (2023 – £159 million).
Geographical segments
The geographical analysis in the tables below has been compiled on the basis of location of office where the transactions are recorded.
28,067
857
24,276
859
(13,328)
(63)
(516)
2,096
403
(264)
Total income (3)
14,095
Operating profit/(loss) before tax
6,146
(151)
627,519
25,793
53,392
1,281
608,708
23,495
35,602
802
Contingent liabilities and commitments (4)
132,035
7,925
139,961
24,096
1,016
20,192
774
(9,500)
(472)
2,052
556
14,004
505
6,196
610,831
23,725
56,001
2,116
594,250
22,106
37,506
124,298
7,561
131,880
15,795
558
12,242
(2,567)
(221)
1,983
(104)
(140)
12,726
Operating (loss)/profit before tax
5,716
(46)
(620)
589,758
25,979
101,164
3,152
579,476
27,039
75,092
1,950
127,854
8,965
136,836
Total revenue comprises interest receivable, fees and commissions receivable, income from trading activities and other operating income.
Revenue and income from transactions between segments of the group are reported as inter-segment in both the current and comparative information.
Total income excludes internal service fee income which has been calculated on a cost plus mark-up basis.
Refer to Note 25 Memorandum items - Contingent liabilities and commitments.
NatWest Group operates two types of pension scheme: defined contribution and defined benefit. The defined contribution schemes invest contributions in a choice of funds and the accumulated contributions and investment returns are used by the employee to provide benefits on retirement. There is no legal or constructive obligation for NatWest Group to pay any further contributions or benefits. The defined benefit schemes provide pensions in retirement based on employees’ pensionable salaries and service.
NatWest Group’s balance sheet includes any defined benefit pension scheme surplus or deficit as a retirement benefit asset or liability reported in other assets and other liabilities. The surplus or deficit is the difference between the liabilities to be paid from the defined benefit scheme and the assets held by the scheme to meet these liabilities. The liabilities are calculated by external actuaries using a number of financial and demographic assumptions.
For some NatWest Group defined benefit schemes where there is a net defined benefit surplus in excess of the present value of any economic benefits that can be obtained from that surplus, the application of accounting standards means we do not recognise that surplus on the balance sheet.
For accounting policy information refer to Accounting policy 3.3.
Defined contribution schemes
NatWest Group sponsors several defined contribution schemes in different territories, which new employees are entitled to join. NatWest Group pays specific contributions into individual investment funds on employees’ behalf. Once those contributions are paid, there is no further liability on the NatWest Group balance sheet relating to the defined contribution schemes.
Defined benefit schemes
NatWest Group sponsors a number of pension schemes in the UK and overseas, including the Main section of the NatWest Group Pension Fund (the Main section) which operates under UK trust law and is managed and administered on behalf of its members in accordance with the terms of the trust deed, the scheme rules and UK legislation.
Pension fund trustees are appointed to operate each fund and ensure benefits are paid in accordance with the scheme rules and national law. The trustees are the legal owner of a scheme’s assets, and have a duty to act in the best interests of all scheme members.
The schemes generally provide a pension of one -sixtieth of final pensionable salary for each year of service prior to retirement up to a maximum of 40 years and are contributory for current members.
These have been closed to new entrants for over ten years, although active members continue to build up additional pension benefits, currently subject to 2% maximum annual salary inflation, while they remain employed by NatWest Group.
The Main section corporate trustee is NatWest Pension Trustee Limited (the Trustee), a wholly owned subsidiary of NWB Plc, Principal Employer of the Main section.
The Board of the Trustee includes member trustee directors selected from eligible active staff, deferred and pensioner members who apply and trustee directors appointed by NatWest Group.
Under UK legislation, a defined benefit pension scheme is required to meet the statutory funding objective of having sufficient and appropriate assets to cover its liabilities (the pensions that have been promised to members).
Similar governance principles apply to NatWest Group’s other defined benefit pension schemes.
Investment strategy
The assets of the Main section represent 90% of all plan assets at 31 December 2024 (2023 - 91%) and are invested as shown below.
Within the non-insured portfolio the Main section employs physical, derivative and non-derivative instruments to achieve a desired asset class exposure and to reduce the section’s interest rate, inflation, and currency risk. This means that the net funding position is considerably less sensitive to changes in market conditions than the value of the assets or liabilities in isolation. In particular, movements in interest rate and inflation are substantially hedged by the Trustee.
5 Pensions continued
During 2023, the Trustee completed a buy-in insurance transaction for the AA section of the Group Pension Fund. Further transactions for the Main section were completed during 2024. Each transaction saw a premium paid to an insurer in exchange for a buy-in insurance contract. The contracts provide a stream of cashflows to the Trustee replicating payments due to members, thereby passing material demographic and market risk to the insurer.
At 31 December 2024, the Main section included buy-in insurance contracts covering around a third of the liabilities, while around 99% of AA section liabilities were insured.
The premium for each transaction was determined by the insurer using its pricing basis. Under IAS 19, the value placed on this asset mirrors the valuation of the defined benefit obligations covered, incorporating an assessment of credit risk. Since the insurer’s pricing basis is more conservative than the best-estimate valuation under IAS 19, a material asset loss arises at the outset. However, the asset loss is offset by a corresponding movement in the asset ceiling, meaning the net balance sheet and OCI impacts are neutral. Once the contract has been established, the value of the buy-in insurance contracts will move in line with movements in the defined benefit obligations covered, protecting the scheme against demographic and market risk.
Major classes of plan assets as a percentage of total plan assets of the Main section
Quoted
Unquoted
Equities
Index-linked bonds
23.6
36.7
Government bonds
Corporate and other bonds
14.4
25.6
Real estate
Buy-in insurance contracts
27.0
Cash and other assets
11.8
48.0
52.0
69.3
30.7
The Main section’s holdings of derivative instruments are summarised in the table below:
amounts
Inflation rate swaps
1,548
1,929
940
Interest rate swaps
3,763
3,121
3,394
Currency forwards
Equity and bond call options
Equity and bond put options
Swaps have been executed at prevailing market rates and within standard market bid/offer spreads with a number of counterparties, including NWB Plc.
At 31 December 2024, the gross notional value of the swaps was £81 billion (2023 - £81 billion) and had a net positive fair value of £73 million (2023 - £714 million) against which the scheme had posted 85% collateral.
The schemes do not invest directly in NatWest Group but may have exposure to NatWest Group through indirect holdings. The trustees of the respective UK schemes are responsible for ensuring that indirect investments in NatWest Group do not exceed the regulatory limit of 5% of plan assets.
Main section
All schemes
Present value
Asset
of defined
ceiling/
pension
Fair
of plan
benefit
minimum
assets/
value of
assets
obligation (1)
funding
liability
plan assets
benefit obligation (1)
assets (2)
Changes in value of net pension assets/(liability)
34,016
(24,733)
(9,283)
37,598
(27,601)
(9,777)
Income statement - operating expenses
(1,286)
(73)
1,841
(1,478)
(485)
(1,042)
(1,737)
(136)
(1,182)
(1,939)
2,841
Contributions by employer
Contributions by plan participants and other scheme members
Assets/liabilities extinguished upon settlement
Benefits paid
(1,229)
1,229
(1,365)
33,638
(26,534)
(7,104)
37,111
(29,592)
(7,417)
Net interest expense
(1,244)
(341)
1,737
(1,374)
Current service cost
(99)
Past service cost
Loss on curtailments and settlements
(1,319)
(1,468)
(86)
Return on plan assets excluding recognised interest income (3)
(4,612)
(4,860)
Experience gains and losses
Effect of changes in actuarial financial assumptions
2,182
2,343
Effect of changes in actuarial demographic assumptions
Asset ceiling adjustments (3)
2,360
2,416
2,118
Contributions by employer (4)
(1,281)
(1,445)
1,455
At 31 December 2024 (5)
29,546
(24,461)
(5,085)
32,757
(27,287)
(5,360)
Amounts recognised on the balance sheet
Fund asset at fair value
Present value of fund liabilities
Funded status
5,470
7,519
Assets ceiling/minimum funding
Net pension asset/(liability) comprises
Net assets of schemes in surplus (refer to Note 17)
Net liabilities of schemes in deficit (refer to Note 20)
(80)
Funding and contributions by NatWest Group
In the UK, the trustees of defined benefit pension schemes are required to perform funding valuations every three years. The trustees and the sponsor, with the support of the Scheme Actuary, agree the assumptions used to value the liabilities and to determine future contribution requirements. The funding assumptions incorporate a margin for prudence over and above the expected cost of providing the benefits promised to members, taking into account the sponsor’s covenant and the investment strategy of the scheme. Similar arrangements apply in the other territories where NatWest Group sponsors defined benefit pension schemes.
A full triennial funding valuation of the Main section, effective 31 December 2023, was completed during financial year 2024.
This triennial funding valuation determined the funding level to be 115%, pension liabilities to be £29 billion and the surplus to be £4 billion, all assessed on the agreed funding basis. The average cost of the future service of current members is 21.2% of salary before contributions from those members. Given the strong funding level, it was agreed that future service contributions would cease from 1 January 2025. The sponsor will continue to meet administrative expenses.
The key assumptions used to determine the uninsured funding liabilities were the discount rate, which is determined based on fixed interest swap and gilt yields plus 0.64% per annum, and mortality assumptions, which result in life expectancies of 27.1/29.1 years for male/female pensioners who were age 60 and 28.5/30.6 years from age 60 for males/females who were age 40 at the valuation date.
Accounting Assumptions
Placing a value on NatWest Group’s defined benefit pension schemes’ liabilities requires NatWest Group’s management to make a number of assumptions, with the support of independent actuaries. The ultimate cost of the defined benefit obligations depends upon actual future events and the assumptions made are unlikely to be exactly borne out in practice, meaning the final cost may be higher or lower than expected.
The most significant assumptions used for the Main section are shown below:
Principal IAS 19 actuarial assumptions (1)
Discount rate
Inflation assumption (RPI)
Rate of increase in salaries
Rate of increase in deferred pensions
Rate of increase in pensions in payment
Lump sum conversion rate at retirement
Longevity at age 60:
Current pensioners
Males
26.5
Females
28.5
Future pensioners, currently aged 40
27.5
27.7
29.7
29.5
The above financial assumptions are long-term assumptions set with reference to the period over which the obligations are expected to be settled.
The IAS 19 valuation uses a single discount rate set by reference to the yield on a basket of high quality sterling corporate bonds.
Significant judgement is required when setting the criteria for bonds to be included in the basket of bonds that is used to determine the discount rate used in the IAS 19 valuations. The criteria include issue size, quality of pricing and the exclusion of outliers. Judgement is also required in determining the shape of the yield curve at long durations; a constant credit spread relative to gilts is assumed. Sensitivity to the main assumptions is presented below.
200
The weighted average duration of the Main section's defined benefit obligation at 31 December 2024 is 13 years (2023 – 14.0 years). The chart below shows the projected benefit payment pattern for the Main section in nominal terms. These cashflows are based on the most recent formal actuarial valuation, effective 31 December 2023.
The table below shows how the present value of the net pension asset of the Main section would change if the key assumptions used were changed independently. In practice the variables have a degree of correlation and do not move completely in isolation.
(Decrease)/
Increase in
increase in
net pension
(obligations)/
0.5% increase in interest rates/discount rate
(1,554)
(1,529)
0.25% increase in inflation
0.5% increase in credit spreads
1,525
Longevity increase of one year
(537)
0.25% additional rate of increase in pensions in payment
(400)
Increase in equity values of 10% (1)
(2,292)
(546)
811
1,734
902
(706)
The table below shows the combined change in defined benefit obligation from larger movements in these assumptions, assuming no changes in other assumptions.
Change in life expectancies
-2 years
-1 year
No change
+ 1 year
+ 2 years
Change in credit spreads
+50 bps
(3.1)
(2.3)
-50 bps
(3.5)
(2.6)
The defined benefit obligation of the Main section is attributable to the different classes of scheme members in the following proportions:
Membership category
Active members
Deferred members
Pensioners and dependants
52.4
The experience history of NatWest Group schemes is shown below:
2021
2020
Experience history of defined benefit schemes
Fair value of plan assets
52,021
51,323
57,787
57,249
Present value of plan obligations
(42,020)
(43,870)
(46,808)
(48,864)
Net surplus
7,104
9,283
10,001
7,453
9,997
10,979
8,385
Experience (losses)/gains on plan liabilities
(1,531)
(2,053)
(1,599)
(2,137)
455
Experience (losses)/gains on plan assets
(18,180)
5,486
(20,326)
6,027
Actual return on plan assets
(3,023)
634
(17,248)
1,554
6,422
(3,123)
(19,285)
1,667
7,064
(9.0)
(33.2)
(8.4)
(33.4)
Amounts payable to NatWest Group's auditors for statutory audit and other services are set out below.
All audit-related and other services are approved by the Group Audit Committee and are subject to strict controls to ensure the external auditor’s independence is unaffected by the provision of other services. The Group Audit Committee recognises that for certain assignments, the auditors are best placed to perform the work economically; for other work, NatWest Group selects the supplier best placed to meet its requirements. NatWest Group’s auditors are permitted to tender for such work in competition with other firms where the work is permissible under audit independence rules.
Fees payable for:
- the audit of NatWest Group’s annual accounts (1)
- the audit of NatWest Group plc’s subsidiaries (1)
32.5
32.3
31.9
- audit-related assurance services (1,2)
Total audit and audit-related assurance services fees
41.8
41.7
Other assurance services
Corporate finance services (3)
Total other services
The 2024 audit fee was approved by the Group Audit Committee. At 31 December 2024, £16 million has been billed and paid in respect of the 2024 NatWest Group audit fees.
Comprises fees of £1.4 million (2023 - £1.4 million) for reviews of interim financial information and £2.8 million (2023 - £2.8 million) for reports to NatWest Group’s regulators in the UK and overseas.
Comprises fees of £2.3 million (2023 – nil) in relation to a retail share offering and £0.8 million (2023 - £0.7 million) for work performed by the auditors as reporting accountants on debt and equity issuances undertaken by NatWest Group.
NatWest Group’s corporate income tax charge for the period is set out below, together with a reconciliation to the expected tax charge calculated using the UK standard corporation tax rate and details of the NatWest Group’s deferred tax balances.
For accounting policy information refer to Accounting policies 2.1 and 3.7.
Analysis of the tax charge for the year
The tax charge comprises current and deferred tax in respect of profits and losses recognised or originating in the income statement. Tax on items originating outside the income statement is charged to other comprehensive income or direct to equity (as appropriate) and is therefore not reflected in the table below.
Current tax is tax payable or recoverable in respect of the taxable profit or loss for the year and any adjustments to tax payable in prior years. Deferred tax is explained on page 206.
Current tax
Charge for the year
(1,415)
(1,373)
(1,611)
(Under)/over provision in respect of prior years
(145)
(123)
(1,560)
(1,496)
(1,511)
(Charge)/credit for the year
(343)
UK tax rate change impact
Net increase in the carrying value of deferred tax assets in respect of UK, RoI and Netherlands losses
267
Over/(under) provision in respect of prior years
(68)
Tax charge for the year
7 Tax continued
Factors affecting the tax charge for the year
Taxable profits differ from profits reported in the income statement as certain amounts of income and expense may not be taxable or deductible. In addition, taxable profits may reflect items that have been included outside the income statement (for instance, in other comprehensive income) or adjustments that are made for tax purposes only.
Current tax for the year ended 31 December 2024 is based on rates of 25% for the standard rate of UK corporation tax and 3% for the UK banking surcharge.
The expected tax charge for the year is calculated by applying the standard UK corporation tax rate of 25% (2023 – 23.5% and 2022 – 19%) to the Operating profit or loss before tax in the income statement.
The actual tax charge differs from the expected tax charge as follows:
Expected tax charge
(1,452)
(975)
Losses and temporary differences in year where no deferred tax asset recognised
Foreign profits and losses taxed at other rates
Items not allowed for tax:
- losses on disposals and write-downs
- UK bank levy
- regulatory and legal actions
- other disallowable items
(61)
(51)
Non-taxable items:
- foreign exchange recycling on UBIDAC capital reduction
- RPI-related uplift on index linked gilts
- other non-taxable items
Taxable foreign exchange movements
Unrecognised losses brought forward and utilised
Net increase/(decrease) in the carrying value of deferred tax assets in respect of:
- UK losses (2)
- RoI losses
- Netherlands losses
Banking surcharge
(236)
(447)
Pillar 2 top-up tax
Tax on paid-in equity dividends
Adjustments in respect of prior years (1, 2)
(135)
(165)
Actual tax charge
(1)Prior year tax adjustments incorporate refinements to tax computations made on submission and agreement with the tax authorities and adjustments to provisions in respect of uncertain tax positions.
(2)Includes a net £61 million benefit from UK group relief and loss relief claims at higher tax rates (refer to the Deferred Tax section below for details of the recent changes in UK tax rates).
Global minimum top-up tax
The Group is subject to the global minimum top-up tax under Pillar Two tax legislation. The top-up tax relates to the Group’s operations in Jersey, Guernsey, Isle of Man and Gibraltar where the statutory tax rate is below 15%. The Group recognised a current tax expense of £20 million related to the top-up tax (2023 - £0 million) which is levied on NatWest Group plc.
The Group has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax and accounts for it as a current tax when it is incurred. In October 2024, Jersey enacted new tax legislation to implement a domestic minimum top-up tax, which is effective from 1 January 2025. As a result, from 2025, The Royal Bank of Scotland International Limited will be liable for the top-up tax in relation to its operations instead of NatWest Group plc.
Judgement: tax contingencies
NatWest Group’s corporate income tax charge and its provisions for corporate income taxes necessarily involve a degree of estimation and judgement. The tax treatment of some transactions is uncertain and tax computations are yet to be agreed with the relevant tax authorities. NatWest Group recognises anticipated tax liabilities based on all available evidence and, where appropriate, in the light of external advice. Any difference between the final outcome and the amounts provided will affect current and deferred income tax charges in the period when the matter is resolved.
Deferred tax is the tax expected to be payable or recoverable in respect of temporary differences where the carrying amount of an asset or liability differs for accounting and tax purposes. Deferred tax liabilities reflect the expected amount of tax payable in the future on these temporary differences. Deferred tax assets reflect the expected amount of tax recoverable in the future on these differences.
The net deferred tax asset recognised by the NatWest Group is shown below, together with details of the accounting judgements and tax rates that have been used to calculate the deferred tax. Details are also provided of any deferred tax assets or liabilities that have not been recognised on the balance sheet.
Analysis of deferred tax
Deferred tax asset
1,876
1,894
Deferred tax liability
(141)
Net deferred tax asset
1,777
1,753
Accelerated
Tax losses
capital
Expense
Financial
carried
Pension
allowances
provisions
instruments (1)
forward
805
952
1,951
(Charge)/credit to income statement:
Credit/(charge) to other comprehensive income
(258)
1,019
Credit/(charge) to income statement:
(Charge)/credit to other comprehensive income
1,106
The in-year movement predominantly relates to cash flow hedges.
206
Deferred tax assets in respect of carried forward tax losses are recognised if the losses can be used to offset probable future taxable profits after taking into account the expected reversal of other temporary differences. Recognised deferred tax assets in respect of tax losses are analysed further below.
UK tax losses carried forward
- NWM Plc
- NWB Plc
362
- RBS plc
685
1,018
Overseas tax losses carried forward
- UBIDAC
- NWM N.V.
Critical accounting policy: Deferred tax
NatWest Group has recognised a deferred tax asset of £1,876 million (2023 - £1,894 million) and a deferred tax liability of £99 million (2023 - £141 million). These include amounts recognised in respect of UK and overseas tax losses of £1,106 million (2023 - £1,019 million).
The main UK corporation tax increased from 19% to 25%, and the UK banking surcharge decreased from 8% to 3%, from 1 April 2023.
Judgement – NatWest Group has considered the carrying value of deferred tax assets and concluded that, based on management’s estimates, sufficient sustainable taxable profits will be generated in future years to recover recognised deferred tax assets.
Estimates – For entities with mature business models and a longer track record of profitability and stable earnings, these estimates are partly based on forecast performance beyond the horizon for management’s detailed plans. They have regard to inherent uncertainties. The deferred tax assets in NWM Plc and UBIDAC are supported substantially by future reversing taxable temporary differences on which deferred tax liabilities are recognised at 31 December 2024.
UK tax losses
Under UK tax rules, tax losses can be carried forward indefinitely. As the recognised tax losses in NatWest Group arose prior to 1 April 2015, credit in future periods is given against 25% of profits at the main rate of UK corporation tax, excluding the Banking Surcharge rate introduced by The Finance (No. 2) Act 2015.
NWM Plc - No deferred tax assets have been recognised at 31 December 2024 (2023 – nil). The basis of recognition in NWM plc is by way of future reversing taxable temporary differences on which deferred tax liabilities are recognised at 31 December 2024. Losses of £5,520 million have not been recognised in the deferred tax balance at 31 December 2024.
NWB Plc – A deferred tax asset of £333 million (2023 - £362 million) has been recognised in respect of losses of £1,333 million of total losses of £2,195 million carried forward at 31 December 2024. The losses arose principally as a result of significant impairment and conduct charges between 2009 and 2012 during challenging economic conditions in the UK banking sector. NWB Plc returned to tax profitability during 2015, and based on a seven year recovery period, expects the deferred tax asset to be utilised against future taxable profits by the end of 2031.
RBS plc – A deferred tax asset of £685 million (2023 - £597 million) has been recognised in respect of losses of £2,740 million of total losses of £2,948 million carried forward at 31 December 2024. The losses were transferred from NatWest Markets Plc as a consequence of the ring fencing regulations. Based on a 7 - year recovery period, RBS plc expects the deferred tax asset to be utilised against future taxable profits by the end of 2031.
Overseas tax losses
UBIDAC – A deferred tax asset of £5 million (2023 - £5 million) has been recognised in respect of losses of £40 million, and is now entirely supported by way of future reversing taxable temporary differences on which deferred tax liabilities are recognised at 31 December 2024.
NatWest Markets N.V. (NWM N.V.) - A deferred tax asset of £83 million (2023 - £55 million) has been recognised in respect of losses of £322 million of total losses of £2,308 million carried forward at 31 December 2024. NWM N.V. Group considers it to be probable, based on its 5 - year budget forecast, that future taxable profits will be available against which the tax losses and tax credits can be partially utilised. The tax losses and the tax credits have no expiry date.
Unrecognised deferred tax
Deferred tax assets of £4,960 million (2023 - £5,168 million; 2022 - £5,534 million) have not been recognised in respect of tax losses and other deductible temporary differences carried forward of £23,238 million (2023 - £24,438 million; 2022 - £25,742 million) in jurisdictions where doubt exists over the availability of future taxable profits. Of these losses and other deductible temporary differences, £4,535 million expire after 10 years. The balance of tax losses and other deductible temporary differences carried forward has no expiry date.
Deferred tax liabilities of £269 million (2023 - £256 million; 2022 - £257 million) on aggregate underlying temporary differences of £1,241 million (2023 - £1,005 million; 2022 - £1,010 million) have not been recognised in respect of retained earnings of overseas subsidiaries and held-over gains on the incorporation of certain overseas branches. Retained earnings of overseas subsidiaries are expected to be reinvested indefinitely or remitted to the UK free from further taxation. No taxation is expected to arise in the foreseeable future in respect of held-over gains on which deferred tax is not recognised. UK tax legislation largely exempts from UK tax overseas dividends received.
Earnings per share measures how much profit NatWest Group makes for each share in issue during the year. Basic earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding. Diluted earnings per ordinary share is calculated by dividing the basic earnings by the weighted average number of ordinary shares outstanding plus the weighted average number of ordinary shares that would be issued on conversion of dilutive share options and convertible securities. The assessment of whether the effect of share options and convertible securities is dilutive or not, is based on the earnings from continuing operations.
Earnings
Profit from continuing operations attributable to ordinary shareholders
4,438
3,602
Profit/(loss) from discontinued operations attributable to ordinary shareholders
Weighted average number of shares (millions)
Weighted average number of ordinary shares outstanding during the year (1)
8,450
9,164
9,872
Effect of dilutive share options and convertible securities
Diluted weighted average number of ordinary shares outstanding during the year
8,516
9,219
9,929
At the General Meeting and Class Meeting on 25 August 2022, the shareholders approved the proposed special dividend and share consolidation. On 30 August 2022 the issued ordinary share capital was consolidated in the ratio of 14 existing shares for 13 new shares. The average number of shares and earnings per share have been adjusted retrospectively.
In 2023, the unrounded Total earnings per share attributable to ordinary shareholders – basic is 47.948p. The unrounded Earnings per ordinary share – continuing operations was 49.170p. The unrounded Earnings per ordinary share – discontinued operations was (1.222p).
Financial instruments are contracts that give rise to a financial asset of one entity and a corresponding financial liability or equity instrument of a counterparty entity, such as cash, derivatives, loans, deposits and settlement balances. This note presents financial instruments classified in accordance with IFRS 9 – Financial Instruments.
Judgement: classification of financial assets
Classification of financial assets between amortised cost and fair value through other comprehensive income requires a degree of judgement in respect of business models and contractual cashflows.
For accounting policy information refer to Accounting policies 3.8, 3.9 and 3.11.
9 Financial instruments – classification continued
The following tables analyse financial assets and liabilities in accordance with the categories of financial instruments in IFRS 9.
Amortised
MFVTPL
DFV
FVOCI
cost
Derivatives (1)
Loans to bank - amortised cost (2)
Loans to customers - amortised cost (3)
798
37,843
24,597
Other assets (4)
128,121
526,032
28,699
21,695
125,158
521,535
Held-for-
trading
Bank deposits (5)
Other financial liabilities (6)
3,548
57,539
5,902
Other liabilities (7)
684
3,917
126,796
3,782
534,112
2,888
52,201
5,477
748
4,454
126,031
3,125
521,875
Includes net hedging derivatives assets of £118 million (2023 - £114 million) and net hedging derivatives liabilities of £464 million (2023 - £270 million).
Includes items in the course of collection from other banks of £59 million (2023 - £255 million).
Includes finance lease receivables of £8,998 million (2023 - £8,731 million).
Includes assets of disposal groups held at FVTPL of nil (2023 - £841 million). The portfolio is classified as level 3 in the fair value hierarchy.
Includes items in the course of transmission to other banks of £136 million (2023 - £92 million).
The carrying amount of customer deposits designated at fair value through profit or loss is materially the same as the principal amount for both periods. No amounts have been recognised in the profit or loss for changes in credit risk associated with these liabilities as the changes are immaterial both during the period and cumulatively.
Includes lease liabilities of £630 million (2023 - £670 million), held at amortised cost.
We originate loans that include features that change the contractual cash flows based on the borrower meeting certain contractually specified environmental, social and governance (ESG) targets. These are known as ESG-linked, or sustainability-linked, loans. As part of the terms of these loans, the contractual interest rate is reduced or increased if the borrower meets, or fails to meet, specific targets linked to the activity of the borrower, for example reducing carbon emissions, increasing the level of diversity at Board level, or achieving a sustainable supply chain. ESG features are first assessed to ascertain whether the adjustment to the contractual cash flows results in a de minimis exposure to risks or volatility in those contractual cash flows. If this is the case the classification of the loan is not affected. If the effect of the ESG feature is assessed as being more than de minimis, we apply judgement to ensure that the ESG features do not generate compensation for risks that are not in line with a basic lending arrangement. This includes, amongst other aspects, a review of the consistency of the ESG targets with the asset or activity of the borrower, and consideration of the targets within our risk appetite. Some of these loans are an integral part of our climate and sustainable funding and financing target disclosed on page 15 of exhibit 15.2.
The table below analyses financial assets forming a component of ESG-linked loans and other products with contractual terms that could change the timing or amount of cash flows. This is based on balance sheet values as at 31 December and the maximum impact of the potential margin changes on these over a 12 month period.
Positive impact on
Negative impact on
product margin
bps
Sustainability-linked loans
Other products
16.1
Lending subject to performance triggers
22.6
Additional information on finance lease receivables
The following table shows the reconciliation of undiscounted finance lease receivables to net investment in finance leases which are presented under Loans to customers-amortised cost on the balance sheet.
Amount receivable under finance leases
Within 1 year
3,493
1 to 2 years
2,499
2,358
2 to 3 years
1,612
1,625
3 to 4 years
4 to 5 years
After 5 years
1,079
Total lease payments
9,953
9,690
Unguaranteed residual values
Future drawdowns
Unearned income
(1,001)
(1,025)
Present value of lease payments
9,090
8,822
Impairments
(92)
Net investment in finance leases
8,998
8,731
Financial instruments – financial assets and liabilities that can be offset
The tables below present information on financial assets and financial liabilities that are offset on the balance sheet under IFRS or subject to enforceable master netting agreements together with financial collateral received or given.
Instruments which can be offset
Potential for offset not recognised by IFRS
Effect of
Net amount
master
after netting
Instruments
netting
agreements and
outside
IFRS
Balance
and similar
Cash
effect of
offset
sheet
agreements
collateral
related collateral
sheet total
Derivative assets
96,624
77,878
1,918
528
Derivative liabilities
92,620
71,593
3,013
Net position (1)
4,004
6,285
(4,204)
(3,176)
(1,095)
6,324
Trading reverse repos
42,261
(15,174)
27,087
(1,469)
(25,406)
27,127
Trading repos
45,033
29,859
(28,390)
Net position
(2,772)
2,984
(663)
(3,435)
Non trading reverse repos
45,600
(8,709)
36,891
(36,811)
Non trading repos
22,288
13,579
(13,499)
23,312
(23,312)
99,023
78,426
478
95,734
71,865
(1,663)
3,059
530
3,289
3,272
6,561
(5,496)
(680)
6,509
39,573
(16,257)
23,316
(664)
(22,461)
23,694
42,442
26,185
(25,520)
(2,869)
(339)
(3,208)
37,477
(9,646)
27,831
(27,826)
27,911
23,605
13,959
(13,954)
13,962
13,872
(13,872)
13,949
Net IFRS offset balance of £2,281 million (2023 - £3,272 million)relates to variation margin netting reflected on other balance sheet lines.
Financial instruments recognised at fair value are revalued using techniques that can include observable inputs (pricing information that is readily available in the market, for example UK Government securities), and unobservable inputs (pricing information that is not readily available, for example unlisted securities). Gains and losses are recognised in the income statement and statement of comprehensive income as appropriate. This note presents information on the valuation of financial instruments.
The table below provides an overview of the various sections contained within the note.
Critical accounting policy: Fair value - financial instruments
Financial instruments classified as mandatory fair value through profit or loss; held-for-trading; designated fair value through profit or loss; and fair value through other comprehensive income are recognised in the financial statements at fair value. All derivatives are measured at fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement considers the characteristics of the asset or liability and the assumptions that a market participant would consider when pricing the asset or liability.
NatWest Group manages some portfolios of financial assets and financial liabilities based on its net exposure to either market or credit risk. In these cases, the fair value is derived from the net risk exposure of that portfolio with portfolio level adjustments applied to incorporate bid-offer spreads, counterparty credit risk, and funding costs (refer to ‘Valuation Adjustments’).
For accounting policy information refer to Accounting policies 2.2, 3.8 and 3.11.
10 Financial instruments – valuation continued
Valuation
Financial instruments
Critical accounting policy: Fair value
Fair value hierarchy (D)
216
Valuation techniques (D)
Inputs to valuation models (D)
Valuation control (D)
217
Key areas of judgement (D)
Assets and liabilities split by fair value hierarchy level (T)
Valuation adjustments
Fair value adjustments made (T)
Funding valuation adjustments (FVA) (D)
Credit valuation adjustments (CVA) (D)
Bid-offer (D)
Product and deal specific (D)
Own credit (D)
Level 3 additional information
Level 3 ranges of unobservable inputs (D)
Level 3 instruments, valuation techniques and inputs (T)
Level 3 sensitivities (D)
Alternative assumptions (D)
Other considerations (D)
High and low range of fair value of level 3 assets and liabilities (T)
Movement in level 3 assets and liabilities over the reporting period (D)
Movement in level 3 assets and liabilities (T)
Fair value of financial instruments measured at amortised cost
Fair value of financial instruments measured at amortised cost on the balance sheet
(D) = Descriptive; (T) = Table
Fair value hierarchy
Financial instruments carried at fair value have been classified under the fair value hierarchy. The classification ranges from level 1 to level 3, with more expert judgement and price uncertainty for those classified at level 3.
The determination of an instrument’s level cannot be made at a global product level as a single product type can be in more than one level. For example, a single name corporate credit default swap could be in level 2 or level 3 depending on the level of market activity for the referenced entity.
Level 1 – instruments valued using unadjusted quoted prices in active and liquid markets, for identical financial instruments. Examples include government bonds, listed equity shares and certain exchange-traded derivatives.
Level 2 - instruments valued using valuation techniques that have observable inputs. Observable inputs are those that are readily available with limited adjustments required. Examples include most government agency securities, investment-grade corporate bonds, certain mortgage products - including collateralised loan obligations (CLOs), most bank loans, repos and reverse repos, state and municipal obligations, most notes issued, certain money market securities, loan commitments and most over the counter (OTC) derivatives.
Level 3 - instruments valued using a valuation technique where at least one input which could have a significant effect on the instrument’s valuation, is not based on observable market data. Examples include non-derivative instruments which trade infrequently, certain syndicated and commercial mortgage loans, private equity, and derivatives with unobservable model inputs.
Valuation techniques
NatWest Group derives the fair value of its instruments differently depending on whether the instrument is a non-modelled or a modelled product.
Non-modelled products are valued directly from a price input, typically on a position-by-position basis. Examples include equities and most debt securities.
Non-modelled products can fall into any fair value levelling hierarchy depending on the observable market activity, liquidity, and assessment of valuation uncertainty of the instruments. The assessment of fair value and the classification of the instrument to a fair value level is subject to the valuation controls discussed in the Valuation control section.
Modelled products - valued using a pricing model range in complexity from comparatively vanilla products such as interest rate swaps and options (e.g., interest rate caps and floors) through to more complex derivatives (e.g., balance guarantee swaps).
For modelled products the fair value is derived using the model and the appropriate model inputs or parameters, as opposed to a cash price equivalent. Model inputs are taken either directly or indirectly from available data, where some inputs are also modelled.
Fair value classification of modelled instruments is either level 2 or level 3, depending on the product/model combination, the observability and quality of input parameters and other factors. All these must be assessed to classify a position. The modelled product is assigned to the lowest fair value hierarchy level of any significant input used in that valuation.
Most derivative instruments, for example vanilla interest rate swaps, foreign exchange swaps and liquid single name credit derivatives, are classified as level 2. This is because they are vanilla products valued using standard market models and with observable inputs. Level 2 products range from vanilla to more complex products, where more complex products remain classified as level 2 due to the low materiality of any unobservable inputs.
Inputs to valuation models
When using valuation techniques, the fair value can be significantly affected by the choice of valuation model and underlying assumptions. Factors considered include the cashflow amounts and timing of those cash flows, and application of appropriate discount rates, incorporating both funding and credit risk. Values between and beyond available data points are obtained by interpolation and extrapolation. The principal inputs to these valuation techniques are as follows:
Bond prices - quoted prices are generally available for government bonds, certain corporate securities, and some mortgage-related products.
Credit spreads/margins - these reflect credit default swap levels or the return required over a benchmark rate or index to compensate for the referenced credit risk. Where available, these are derived from the price of credit default swaps or other credit-based instruments, such as debt securities. When direct prices are not available; credit spreads/margins are determined with reference to available prices of entities with similar characteristics.
Interest rates - these are principally based on interest rate swap prices referencing benchmark interest rates. Interest rates, include SONIA (Sterling Overnight Interbank Average Rate) and other overnight rates. Other quoted interest rates may also be used from both the bond, and futures markets.
Foreign currency exchange rates - there are observable prices both for spot and forward contracts and futures in the world's major currencies.
Equity and equity index prices - quoted prices are generally readily available for equity shares listed on the world's major stock exchanges and for major indices on such shares.
Price volatilities and correlations - volatility is a measure of the tendency of a price to change with time. Correlation measures the degree which two or more prices or variables are observed to move together. Variables that move in the same direction show positive correlation; those that move in opposite directions are negatively correlated.
Prepayment rates - are used to reflect how fast a pool of assets prepay. The fair value of a financial instrument that can be prepaid by the issuer or borrower differs from that of an instrument that cannot be prepaid. When valuing prepayable instruments, the value of this prepayment option is considered.
Recovery rates/loss given default - are used as an input to valuation models and reserves for asset-backed securities and other credit products as an indicator of severity of losses on default. Recovery rates are primarily sourced from market data providers, the value of the underlying collateral or inferred from observable credit spreads.
Valuation control
NatWest Group's control environment for the determination of the fair value of financial instruments includes formalised procedures for the review and validation of fair values. The review of market prices and inputs is performed by an independent price verification (IPV) team.
IPV is a key element of the control environment. Valuations are first performed by the business which entered into the transaction. These valuations are then reviewed by the IPV team, independent of those trading the financial instruments, in light of available pricing evidence.
Independent pricing data is collated from a range of sources. Each source is reviewed for quality and the independent data applied in the IPV processes using a formalised input quality hierarchy. Consensus services are one source of independent data and encompass interest rate, currency, credit, and bond markets, providing comprehensive coverage of vanilla products and a wide selection of exotic products.
Where measurement differences are identified through the IPV process these are grouped by the quality hierarchy of the independent data. If the size of the difference exceeds defined thresholds, an adjustment is made to bring the valuation to within the independently calculated fair value range.
IPV takes place at least monthly, for all fair value financial instruments. The IPV control includes formalised reporting and escalation of any valuation differences in breach of established thresholds.
The quality and completeness of the information gathered in the IPV process gives an indication as to the liquidity and valuation uncertainty of an instrument and forms part of the information considered when determining fair value hierarchy classifications.
Initial fair value level classification of a financial instrument is carried out by the IPV team. These initial classifications are subject to senior management review. Particular attention is paid to instruments transferring from one level to another, new instrument classes or products, instruments where the transaction price is significantly different from the fair value and instruments where valuation uncertainty is high.
Valuation Committees are made up of valuation specialists and senior business representatives from various functions and oversees pricing, reserving and valuations issues. These committees meet monthly to review and ratify any methodology changes. The Executive Valuation Committee meets quarterly to address key material and subjective valuation issues, to review items escalated by Valuation Committees and to discuss other relevant industry matters.
The Group model risk policy sets the policy for model documentation, testing and review. Governance of the model risk policy is carried out by the Group model risk oversight committee, which comprises model risk owners and independent model experts. All models are required to be independently validated in accordance with the Model Risk Policy.
Key areas of judgement
Over the years the business has simplified, with most products classified as level 1 or 2 of the fair value hierarchy. However, the diverse range of products historically traded by NatWest Group means some products remain classified as level 3. Level 3 indicates a significant level of pricing uncertainty, where expert judgement is used. As such, extra disclosures are required in respect of level 3 instruments.
In general, the degree of expert judgement used and hence valuation uncertainty depends on the degree of liquidity of an instrument or input.
Where markets are liquid, little judgement is required. However, when the information regarding the liquidity in a particular market is not clear, a judgement may need to be made. For example, for an equity traded on an exchange, daily volumes of trading can be seen, but for an OTC derivative, assessing the liquidity of the market with no central exchange is more challenging.
A key related matter is where a market moves from liquid to illiquid or vice versa. Where this movement is considered temporary, the fair value level is not changed. For example, if there is little market trading in a product on a reporting date but at the previous reporting date and during the intervening period the market has been liquid. In this case, the instrument will continue to be classified at the same level in the hierarchy. This is to provide consistency so that transfers between levels are driven by genuine changes in market liquidity and do not reflect short term or seasonal effects. Material movements between levels are reviewed quarterly by the business and IPV.
The breadth and depth of the IPV data allows for a rules-based quality assessment to be made of market activity, liquidity, and pricing uncertainty, which assists with the process of allocation to an appropriate level. Where suitable independent pricing information is not readily available, the quality assessment will result in the instrument being assessed as level 3.
The table below shows the assets and liabilities held by NatWest Group split by fair value hierarchy level. Level 1 are considered the most liquid instruments, and level 3 the most illiquid, valued using expert judgement and so carry the most significant price uncertainty.
Level 1
Level 2
Level 3
Loans
34,761
35,039
33,388
33,597
8,772
5,106
8,447
37,026
43,912
650
40,687
34,096
23,943
13,641
37,793
17,848
10,536
28,642
Total financial assets held at fair value
32,715
131,572
1,682
165,969
125,605
1,961
153,862
As a % of total fair value assets
43,966
43,126
43,127
8,766
1,724
10,491
7,936
1,865
9,803
31,253
38,044
40,240
33,528
1,733
1,605
1,608
Other deposits
1,787
Total financial liabilities held at fair value
121,318
494
130,578
120,529
129,156
As a % of total fair value liabilities
Transfers between levels are deemed to have occurred at the beginning of the quarter in which the instrument was transferred.
For an analysis of debt securities held at mandatory fair value through profit or loss by issuer as well as ratings and derivatives, by type and contract, refer to Risk and capital management – Credit risk.
When valuing financial instruments in the trading book, adjustments are made to mid-market valuations to cover bid-offer spread, funding and credit risk. These adjustments are presented in the table below:
Adjustment
Funding valuation adjustments
Credit valuation adjustments
236
Bid–offer
Product and deal specific
546
557
The decrease in funding valuation adjustments was driven by net exposures switching from positive to negative, primarily due to interest rates increasing. The decrease in credit valuation adjustments was driven by a reduction in exposures, primarily due to interest rates increasing and trade unwinds. The decrease in bid-offer was driven by risk reduction. New trading activity was the driver of the increase in product and deal specific, partially offset by trade unwinds.
Funding valuation adjustments (FVA)
FVA represents an estimate of the adjustment that a market participant would make to incorporate funding costs and benefits that arise in relation to derivative exposures. FVA is calculated as a portfolio level adjustment and can result in either a funding charge (positive) or funding benefit (negative).
Funding levels are applied to estimated potential future exposures. For uncollateralised derivatives, the exposure reflects the future valuation of the derivative. For collateralised derivatives, the exposure reflects the difference between the future valuation of the derivative and the level of collateral posted.
Credit valuation adjustments (CVA)
CVA represents an estimate of the adjustment to fair value that is made to incorporate the counterparty credit risk inherent in derivative exposures. CVA is calculated on a portfolio basis reflecting an estimate of the amount a third party would charge to assume the credit risk.
Collateral held under a credit support agreement is factored into the CVA calculation. In such cases where NatWest Group holds collateral against counterparty exposures, CVA is held to the extent that residual risk remains.
FVA and CVA are actively managed by a credit and market risk hedging process, and therefore movements in CVA and FVA are partially offset by trading revenue on the hedges.
Bid-offer
Fair value positions are required to be marked to exit levels, represented by bid (long positions) or offer (short positions) levels. Non-derivative positions are typically marked directly to bid or offer prices. However derivative exposures are adjusted to exit levels by taking bid-offer reserves calculated on a portfolio basis. The reserving approach is based on current market bid-offer spreads and standard market bucketing of risk.
Bid-offer spreads vary by maturity and risk type to reflect different spreads in the market. For positions where there is no observable quote, the bid-offer spreads are widened in comparison to proxies to reflect reduced liquidity or observability.
Netting is applied on a portfolio basis to reflect the value at which NatWest Group believes it could exit the net risk of the portfolio, rather than the sum of exit costs for each of the portfolio’s individual trades. This is applied where the asset and liability positions are managed as a portfolio for risk and reporting purposes.
On initial recognition of financial assets and liabilities valued using valuation techniques which have a significant dependence on information other than observable market data, any difference between the transaction price and that derived from the valuation technique is deferred. Such amounts are recognised in the income statement over the life of the transaction, when market data becomes observable, or when the transaction matures or is closed out as appropriate. On 31 December 2024, net gains of £139 million (2023 - £78 million) were carried forward. During the year, net gains of £218 million (2023 - £119 million) were deferred and £157 million (2023 - £115 million) were recognised in the income statement.
Where system-generated valuations do not accurately reflect market prices, manual valuation adjustments are applied either at a position or portfolio level. Manual adjustments are subject to the scrutiny of independent control teams and are subject to monthly review by senior management.
NatWest Group considers the effect of its own credit standing when valuing financial liabilities recorded at fair value. Own credit spread adjustments are made when valuing issued debt held at fair value, including issued structured notes. An own credit adjustment is applied to positions where it is believed that counterparties would consider NatWest Group's creditworthiness when pricing trades. Accumulated changes in fair value due to credit risk are £44 million (2023 – nil).
For illiquid assets and liabilities, classified as level 3, additional information is provided on the valuation techniques used and price sensitivity of the products to those inputs. This is to enable the reader to gauge the level of uncertainty that arises from positions with significant unobservable inputs or modelling parameters.
Level 3 ranges of unobservable inputs
The table below provides additional information on level 3 instruments and inputs. This shows the valuation technique used for the fair value calculation, the unobservable input and input range.
Financial instrument
Valuation technique
Unobservable inputs
Units
Low
High
Trading assets and Other financial assets
Price-based
Price
Discount cash flow
Credit spreads
Equity Shares
47,312
32,142
Discount margin
Net asset valuation
Fund NAV
Derivative assets and liabilities
Credit derivatives
Credit derivative pricing
Option pricing
Correlation
Volatility
Upfront points
Recovery rate
Interest rate & FX
derivatives
Constant Prepayment Rate
Mean Reversion
Inflation volatility
Inflation rate
Valuation for private equity investments may be estimated by looking at past prices of similar stocks and from valuation statements where valuations are usually derived from earnings measures such as EBITDA or net asset value (NAV). Similarly, for equity or bond fund investments, prices may be estimated from valuation or credit statements using NAV or similar measures.
NatWest Group does not have any material liabilities measured at fair value that are issued with an inseparable third-party credit enhancement.
Level 3 sensitivities
The level 3 sensitivities presented on the next page are calculated at a trade or low-level portfolio basis rather than an overall portfolio basis. As individual sensitivities are aggregated with no reflection of the correlated nature between instruments, the overall portfolio sensitivity may not be accurately reflected. For example, some portfolios may be negatively correlated to others, where a downwards movement in one asset would produce an upwards movement in another. However, due to the additive presentation of the above figures this correlation impact cannot be displayed. As such, the actual potential downside sensitivity of the total portfolio may be less than the non-correlated sum of the additive figures as shown in the table on the next page.
Alternative assumptions
Reasonably plausible alternative assumptions of unobservable inputs are determined based on a specified target level of certainty of 90%.
Alternative assumptions are determined with reference to all available evidence including consideration of the following: quality of independent pricing information considering consistency between different sources, variation over time, perceived tradability or otherwise of available quotes; consensus service dispersion ranges; volume of trading activity and market bias (e.g. one-way inventory); day 1 profit or loss arising on new trades; number and nature of market participants; market conditions; modelling consistency in the market; size and nature of risk; length of holding of position; and market intelligence.
Other considerations
Whilst certain inputs used to calculate CVA, FVA and own credit adjustments are not based on observable market data, the uncertainty of these inputs is not considered to have a significant effect on the net valuation of the related derivative portfolios and issued debt.
As such, the fair value levelling of the derivative portfolios and issued debt is not determined by CVA, FVA or own credit inputs. In addition, any fair value sensitivity driven by these inputs is not included in the level 3 sensitivities presented.
The table below shows the high and low range of fair value of the level 3 assets and liabilities. This range incorporates the range of fair value inputs as described in the previous table.
Favourable
Unfavourable
Movement in level 3 assets and liabilities
The following table shows the movement in level 3 assets and liabilities in the year.
financial
assets (3)
liabilities (2)
823
915
Amounts recorded in the income statement (1)
Amount recorded in the statement of comprehensive income
Level 3 transfers in
Level 3 transfers out
(241)
Purchases/originations
Settlements/other decreases
(89)
Sales
(250)
(182)
(184)
Foreign exchange and other adjustments
Amounts recorded in the income statement in respect of balances held at period end
- unrealised
930
2,333
975
(88)
(243)
463
(70)
(164)
(254)
Amounts recorded in the income statement
in respect of balances held at period end
The following table shows the carrying value and fair value of financial instruments measured at amortised cost on the balance sheet.
Items where
fair value
Carrying
Fair value hierarchy level
approximates
value
carrying value
396.6
34.9
361.7
Other financial assets - securities
373.2
345.7
21.6
Financial liabilities
31.2
433.3
24.3
46.0
363.0
57.5
8.7
22.3
431.0
48.8
351.5
52.2
The assumptions and methodologies underlying the calculation of fair values of financial instruments at the balance sheet date are as follows:
Short-term financial instruments
For certain short-term financial instruments, including but not limited to, cash and balances at central banks, settlement balances, loans with short-term maturities, notes in circulation and customer demand deposits, carrying value is deemed a reasonable approximation of fair value.
Loans to banks and customers
In estimating the fair value of net loans to customers and banks measured at amortised cost, NatWest Group's loans are segregated into appropriate portfolios reflecting the characteristics of the constituent loans. Two principal methods are used to estimate fair value:
Debt securities and subordinated liabilities
Most debt securities are valued using quoted prices in active markets or from quoted prices of similar financial instruments. The remaining population is valued using discounted cashflows at current offer rates.
Bank and customer deposits
Fair values of deposits are estimated using discounted cash flow valuation techniques. Where required, methodologies can be revised as additional information and valuation inputs become available.
11 Financial instruments - maturity analysis
This note shows the maturity profile of NatWest Group’s financial assets and liabilities by contractual date of maturity and contractual cash flows.
Remaining maturity
The following table shows the residual maturity of financial instruments, based on contractual date of maturity.
12 months
37,168
11,749
36,723
8,828
34,267
44,139
29,839
49,065
670
6,650
99,793
300,533
87,663
293,770
14,524
48,719
10,192
40,910
44,683
10,031
45,349
8,287
34,134
37,948
30,721
41,674
568
Assets and liabilities by contractual cash flows up to 20 years
The tables on the following page show the contractual undiscounted cash flows receivable and payable, up to a period of 20 years, including future receipts and payments of interest of financial assets and liabilities by contractual maturity. The balances in the following tables do not agree directly with the consolidated balance sheet, as the tables include all cash flows relating to principal and future coupon payments, presented on an undiscounted basis. The tables have been prepared on the following basis:
Financial assets have been reflected in the time band of the latest date on which they could be repaid, unless earlier repayment can be demanded by NatWest Group. Financial liabilities are included at the earliest date on which the counterparty can require repayment, regardless of whether or not such early repayment results in a penalty. If the repayment of a financial instrument is triggered by, or is subject to, specific criteria such as market price hurdles being reached, the asset is included in the time band that contains the latest date on which it can be repaid, regardless of early repayment. The liability is included in the time band that contains the earliest possible date on which the conditions could be fulfilled, without considering the probability of the conditions being met.
For example, if a structured note is automatically prepaid when an equity index exceeds a certain level, the cash outflow will be included in the less than three months period, whatever the level of the index at the year end. The settlement date of debt securities in issue, issued by certain securitisation vehicles consolidated by NatWest Group, depends on when cash flows are received from the securitised assets. Where these assets are prepayable, the timing of the cash outflow relating to securities assumes that each asset will be prepaid at the earliest possible date. As the repayments of assets and liabilities are linked, the repayment of assets in securitisations is shown on the earliest date that the asset can be prepaid, as this is the basis used for liabilities.
The principal amounts of financial assets and liabilities that are repayable after 20 years or where the counterparty has no right to repayment of the principal are excluded from the table, as are interest payments after 20 years.
11 Financial instruments - maturity analysis continued
The maturity of guarantees and commitments is based on the earliest possible date they would be drawn in order to evaluate NatWest Group's liquidity position.
MFVTPL assets of £128 billion (2023 - £125.1 billion) and HFT liabilities of £126.3 billion (2023 - £125.8 billion) have been excluded from the following tables.
0-3 months
3-12 months
5-10 years
10-20 years
Assets by contractual maturity up to 20 years
Derivatives held for hedging
612
59,702
56,264
82,995
63,857
99,837
123,946
Other financial assets (1)
7,068
9,414
17,417
11,643
11,843
7,493
Finance lease
166,973
66,130
101,257
75,675
111,963
131,998
Liabilities by contractual maturity up to 20 years
16,914
5,315
10,114
396,703
34,316
343
13,501
22,869
15,350
4,710
987
1,201
2,927
754
Other liabilities - Notes in circulation
427,107
54,744
38,275
18,807
5,754
1,444
Guarantees and commitments - notional amount (2)
Guarantees (3)
3,060
Commitments (4)
132,958
136,018
5,234
1,437
52,175
46,894
81,445
61,465
96,577
114,806
4,897
12,304
11,183
8,063
735
173,891
55,358
94,635
73,455
107,301
123,277
8,334
1,279
6,069
8,307
393,363
31,900
6,464
9,094
12,319
18,843
13,818
4,769
1,167
2,301
1,512
1,406
420,846
46,919
34,215
23,951
6,456
847
2,833
124,790
127,623
NatWest Group is only called upon to satisfy a guarantee when the guaranteed party fails to meet its obligations. NatWest Group expects most guarantees it provides to expire unused.
NatWest Group has given commitments to provide funds to customers under undrawn formal facilities, credit lines and other commitments to lend subject to certain conditions being met by the counterparty. NatWest Group does not expect all facilities to be drawn, and some may lapse before drawdown.
Trading assets and liabilities comprise assets and liabilities held at fair value and classified as held-for-trading. Financial instruments are classified as held-for-trading if they are held for the purpose of selling or repurchasing them in the short term, to make a spread between purchase and sale price or held to take advantage of movements in prices and yields.
For accounting policy information refer to Accounting policy 3.8.
Collateral given
7,367
9,141
Other loans
Total loans
- US
Financial institutions and corporate
4,561
3,563
Total securities
Collateral received
Total deposits
1,893
2,071
4,755
4,049
Financial institutions and Corporate
1,790
Total short positions
Derivative is a term covering a wide range of financial instruments that derive their fair value from an underlying rate or price, for example interest rates or exchange rates (the underlying). NatWest Group uses derivatives as a part of its trading activities, to manage its own risks such as interest rate, foreign exchange, or credit risk and in certain customer transactions. This note shows contracted volumes of derivatives, how they are used for hedging purposes and the effects of the application of hedge accounting.
For accounting policy information refer to Accounting policies 3.8 and 3.11.
Liability
Traded on
recognised
Traded over
exchanges
the counter
1,066
9,267
37,479
31,530
- Swaps
7,015
28,960
23,138
- Options
1,490
8,519
8,539
8,392
8,394
- Forwards and futures
1,092
3,278
40,791
40,291
8,195
851
5,385
5,561
5,576
- Spot, forwards and futures
26,956
26,535
12,561
78,380
72,065
9,449
44,515
38,449
6,533
33,807
27,424
1,674
2,184
10,708
10,756
11,025
11,059
1,242
1,551
3,119
449
8,173
7,370
674
675
4,181
4,197
1,996
21,807
22,019
820
12,583
78,856
72,361
Included in the table above is the notional amount of £7,321 billion (2023 - £7,280 billion) of interest rate derivatives that are traded over the counter and settled through central clearing counterparties. NatWest Group has no other type of derivatives that are settled through central counterparties.
Hedge accounting using derivatives
NatWest Group applies hedge accounting to reduce the accounting mismatch caused in the income statement by using derivatives to hedge the following risks: interest rate, foreign exchange and the foreign exchange risk associated with net investment in foreign operations.
13 Derivatives continued
NatWest Group’s interest rate hedging relates to the management of NatWest Group’s non-trading structural interest rate risk, caused by the mismatch between fixed interest rates and floating interest rates on its financial instruments. NatWest Group manages this risk within approved limits. Residual risk positions are hedged with derivatives, principally interest rate swaps.
Cash flow hedges of interest rate risk relate to exposures to the variability in future interest payments and receipts due to the movement of interest rates on forecast transactions and on financial assets and financial liabilities. This variability in cash flows is hedged by interest rate swaps, which convert variable cash flows into fixed. For these cash flow hedge relationships, the hedged items are actual and forecast variable interest rate cash flows arising from financial assets and financial liabilities with interest rates linked to the relevant interest rates, most notably SOFR, EURIBOR, the European Central Bank deposit rate, SONIA and the Bank of England Official Bank Rate. The variability in cash flows due to movements in the relevant interest rate is hedged; this risk component is identified using the risk management systems of NatWest Group and encompasses the majority of cash flow variability risk.
Suitable larger fixed rate financial instruments are subject to fair value hedging in line with documented risk management strategies.
Fair value hedges of interest rate risk involve interest rate swaps transforming the fixed interest rate risk in financial assets and financial liabilities to floating. The hedged risk is the risk of changes in the hedged item’s fair value attributable to changes in the interest rate risk component of the hedged item. The significant interest rates identified as risk components are SOFR, EURIBOR, ESTR and SONIA. These risk components are identified using the risk management systems of NatWest Group and encompass the majority of the hedged item’s fair value risk.
NatWest Group hedges the exchange rate risk of its net investment in foreign currency denominated operations with currency borrowings and forward foreign exchange contracts.
NatWest Group reviews the value of the investments’ net assets, executing hedges where appropriate to reduce the sensitivity of capital ratios to foreign exchange rate movement. Hedge accounting relationships will be designated where required.
Exchange rate risk also arises in NatWest Group where payments are denominated in currencies other than the functional currency. Residual risk positions are hedged with foreign exchange derivatives, fixing the exchange rate the payments will be settled in. The derivatives are documented as cash flow hedges.
For all cash flow hedging, fair value hedge relationships and net investment hedging, NatWest Group determines that there is an economic relationship between the hedged item and hedging instrument via assessing the initial and ongoing effectiveness by comparing movements in the fair value of the expected highly probable forecast interest cash flows/fair value of the hedged item attributable to the hedged risk with movements in the fair value of the expected changes in cash flows from the hedging instrument. The method used for comparing movements is either regression testing, or the dollar offset method. The method for testing effectiveness and the period over which the test is performed depends on the applicable risk management strategy and is applied consistently to each risk management strategy. Hedge effectiveness is assessed on a cumulative basis and the determination of effectiveness is in line with the requirements of IAS 39.
NatWest Group uses either the actual ratio between the hedged item and hedging instrument(s) or one that minimises hedge ineffectiveness to establish the hedge ratio for hedge accounting. Hedge ineffectiveness is measured in line with the requirements of IAS 39 and recognised in the income statement as it arises.
Derivatives in hedge accounting relationships
Included in the table below are derivatives held for hedging purposes as follows.
Changes in fair
value used for
hedge ineffectiveness (1)
Fair value hedging
Interest rate contracts (2)
83.1
1,096
67.6
1,139
2,607
406
Cash flow hedging
Interest rate contracts
167.9
1,424
3,300
581
1,924
4,970
Exchange rate contracts
457
Net investment hedging
Exchange rate contracts (3)
265.7
5,723
1,549
224.8
3,177
7,838
1,602
IFRS netting and clearing house settlements
(2,520)
(5,259)
(3,063)
(7,568)
Hedge ineffectiveness recognised in other operating income comprises.
Loss on hedged items attributable to the hedged risk
(954)
(364)
(442)
Gain on the hedging instruments
Fair value hedging ineffectiveness
Cash flow hedging ineffectiveness
The main sources of ineffectiveness for interest rate risk hedge accounting relationships are:
Maturity of notional hedging contracts
The following table shows the period in which the notional of hedging contract ends.
Over 10 years
Interest rate risk (1)
Hedging assets
42.1
Hedging liabilities
9.0
39.1
10.6
22.0
85.7
17.1
50.7
82.2
Exchange rate risk
14.5
33.9
22.8
85.2
54.8
Average fixed interest rates
The following table shows average fixed rate for cash flow hedges, interest rate risk.
Average fixed interest rate
0.98
2.52
3.32
3.12
2.82
4.34
4.76
3.97
3.09
3.64
4.18
4.03
2.46
2.54
4.36
2.28
3.79
Average foreign exchange rates
For cash flow hedging of exchange rate risk, the average foreign exchange rates applicable across the relationships were as below for the main currencies hedged.
INR/GBP
109.07
105.03
USD/GBP
1.30
1.28
CHF/GBP
JPY/GBP
176.04
170.54
JPY/USD
130.79
129.75
NOK/USD
9.21
Analysis of hedged items and related hedging instruments
The table below analyses assets and liabilities subject to hedging derivatives.
Impact on
value used as
of hedged
hedged items
a basis to
assets and
included in
determine
ineffectiveness (1)
Fair value hedging - interest rate (2)
5,318
(478)
36,724
(347)
Total (3)
42,042
(507)
(529)
Other financial liabilities - debt securities in issue (5)
37,548
(784)
(315)
(107)
43,702
(1,028)
(425)
5,663
(316)
22,896
636
28,559
745
36,305
(1,151)
(1,023)
(320)
42,396
(1,474)
(1,167)
Changes in fair value
Carrying value of
used as a basis to
hedged assets and liabilities
determine ineffectiveness (1)
Cash flow hedging - interest rate
Loans to banks and customers - amortised cost (4)
84,065
85,690
(192)
82,081
(391)
Other financial liabilities - debt securities in issue
82,230
Cash flow hedging - exchange rate
1,598
1,821
8,279
8,474
84,583
(2,796)
623
85,206
(2,818)
54,675
1,610
54,831
1,617
Loans to banks and customer - amortised cost (4)
583
1,839
11,460
11,661
Analysis of cash flow and foreign exchange hedge reserve
The following table shows an analysis of the pre-tax cash flow hedge reserve and foreign exchange hedge reserve.
hedge reserve
Continuing
(1,564)
(2,330)
De-designated
(437)
(771)
(2,005)
(648)
(2,629)
(789)
exchange hedge
reserve
Amount recognised in equity
(931)
Interest rate risk to net interest income
Interest rate risk to non interest income
Foreign exchange risk to net interest income
Foreign exchange risk to non interest income
Foreign exchange risk to operating expenses
There is a risk that customers and counterparties fail to meet their contractual obligation to settle outstanding amounts, for which we hold expected credit losses (ECL). The calculation of ECL considers historical, current, and forward-looking information to determine the amount we do not expect to recover. It considers losses on both defaulted exposures and performing exposures that may default in future. ECL is recognised on drawn exposures, loans commitments, and contingent liabilities.
For accounting policy information refer to Accounting policy 2.3. Further disclosures on credit risk and information on ECL methodology are shown from page 39.
Loan exposure and impairment metrics
The table below summarises loans and credit impairment measures within the scope of IFRS 9 Expected credit loss framework.
ECL provision coverage (4)
ECL charge (5)
The table shows gross loans only and excludes amounts that are outside the scope of the ECL framework. Refer to Financial instruments within the scope of the IFRS 9 ECL framework for further details. Other financial assets within the scope of the IFRS 9 ECL framework were cash and balances at central banks totalling £91.8 billion (2023 – £103.1 billion) and debt securities of £62.4 billion (2023 – £50.1 billion).
Includes loans to customers and banks.
Includes £4 million (2023 - £9 million) related to assets classified as FVOCI and £0.1 billion (2023 - £0.1 billion) related to off-balance sheet exposures.
ECL provisions coverage is calculated as ECL provisions divided by loans – amortised cost and FVOCI. It is calculated on loans and total ECL provisions, including ECL for other (non-loan) assets and unutilised exposure. Some segments with a high proportion of debt securities or unutilised exposure may result in a not meaningful coverage ratio.
Includes a £12 million release (2023 - £16 million release) related to other financial assets, of which £4 million release (2023 - £6 million charge) related to assets classified as FVOCI; and £5 million release (2023 - £9 million release) related to contingent liabilities.
14 Loan impairment provisions continued
For information on Credit risk enhancement and mitigation held as security, refer to Risk and capital management – Credit risk enhancement and mitigation section.
Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2024, impairment provisions amounted to £3,425 million (2023 - £3,645 million). A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan was advanced. Such evidence includes changes in the credit rating of a borrower, the failure to make payments in accordance with the loan agreement, significant reduction in the value of any security, breach of limits or covenants, and observable data about relevant macroeconomic measures.
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management's assessment of any potential deterioration in the creditworthiness of the borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of impairment losses. For further information and sensitivity analysis, refer to Risk and capital management - Measurement uncertainty and ECL sensitivity analysis section.
IFRS 9 ECL model design principles
Refer to Credit risk – IFRS 9 ECL model design principles section for further details.
Approach for multiple economic scenarios (MES)
The base scenario plays a greater part in the calculation of ECL than the approach to MES. Refer to Credit risk - Economic loss drivers - Probability weightings of scenarios section for further details.
Other financial assets consist of debt securities, equity shares and loans that are not held for trading. Balances consist of local and central government securities, a part of NatWest Group’s liquidity portfolio.
debt
shares
Mandatory fair value through profit or loss
793
Designated at fair value
Fair value through other comprehensive income (1)
13,281
4,587
6,192
13,476
37,536
247
Amortised cost
500
20,441
16,852
5,087
6,279
33,921
62,139
6,441
5,517
5,738
10,627
2,889
647
18,124
9,330
6,164
5,776
28,754
50,024
Upon initial recognition, NatWest Group occasionally irrevocably designates some of its equity investments as equity instruments at FVOCI when they meet the definition of equity under IAS 32 Financial instruments: presentation, are not held for trading or they are held for strategic purposes. Such classification is determined on an instrument-by-instrument basis. Gains and losses on these equity instruments are not recycled to the income statement and dividends are recognised in profit or loss except when they represent a recovery of part of the cost of the instrument, in which case such gains are recorded in OCI. Equity instruments at FVOCI are not subject to an impairment assessment.
There were no significant acquisitions of equity shares in either year.
NatWest Group disposed of equity shares in VISA Inc. of £62 million (2023 – nil). In 2023, NatWest Group disposed of equity shares in Permanent TSB p.l.c of £47 million and UBS Equity Funds of £35 million. There were no significant dividends on equity shares held at FVOCI in either year.
Intangible assets, such as internally generated software and goodwill generated on business combinations, are not physical in nature. This note presents the cost of the assets, which is the amount NatWest Group initially paid or incurred, additions and disposals during the year, and any amortisation or impairment. Amortisation is a charge that reflects the usage of the asset and impairment is a reduction in value arising from specific events identified during the year.
For accounting policy information refer to Accounting policies 3.4 and 3.5.
Goodwill
Other (1)
Cost
10,090
14,537
9,931
13,694
Acquisitions of companies and businesses
Additions
614
Disposals and write-off of fully amortised assets
(214)
(115)
10,086
4,782
14,868
Accumulated amortisation and impairment
4,410
2,513
6,923
4,409
2,169
6,578
Impairment of intangible assets
Amortisation charge for the year
561
438
4,411
2,869
7,280
Net book value at 31 December
5,675
1,913
5,680
1,934
Principally consists of internally generated software.
Intangible assets and goodwill are reviewed for indicators of impairment. Intangible assets were impaired by £21 million in 2024 (2023 – £23 million).
NatWest Group’s goodwill acquired in business combinations is reviewed for impairment annually at 31 December by cash-generating unit (CGU): 2024 - Retail Banking £2,607 million (2023 - £2,607 million), Ring-Fenced Bank Commercial & Institutional £2,604 million (2023 - £2,605 million), Other £464 million (2023 - £468 million). Our CGUs represent the smallest group of assets to which we have allocated goodwill and reflect the lowest level at which we monitor goodwill post acquisition. Analysis by reportable segment is in Note 4 Segmental analysis.
Impairment testing involves the comparison of the carrying value of each CGU with its recoverable amount. The carrying values of the segments reflect the equity allocations made by management, which are consistent with NatWest Group’s capital targets.
Recoverable amount is the higher of fair value less costs of disposal and value in use. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants. Value in use is the present value of expected future cash flows from the CGU.
The recoverable amounts for all CGUs at 31 December 2024 were based on value in use, using management's latest five-year revenue and cost forecasts. These are discounted cash flow projections over five years. The forecast is then extrapolated in perpetuity using a long-term growth rate to compute a terminal value, which comprises the majority of the value in use. The long-term growth rates have been based on expected growth of the CGUs (2023 and 2024 – 1.4%). The 2024 pre-tax risk discount rates are based on those observed to be applied to businesses regarded as peers of the CGUs: Retail Banking and Ring-Fenced Bank Commercial & Institutional and Private Banking – 16% (2023 – 16%), Cushon – 15.3% (2023 – 15.3%) and RBS International 14.6% (2023 – 14.6%).
Other assets are non-financial assets and reflect a grouping of assets that are not large enough to present separately on the balance sheet.
Interests in associates (1)
Property, plant and equipment (2)
3,967
4,227
Pension schemes in net surplus (Note 5)
Tax recoverable
Deferred tax (Note 7)
Assets of disposal groups
1,721
Includes interest in Business Growth Fund £678 million (2023 - £658 million).
The estimated useful lives of NatWest Group's property, plant and equipment are: freehold buildings and long leasehold 50 years, short leaseholds for unexpired period of lease, property adaptation costs 10 to 15 years, computer equipment up to 5 years and other equipment 4 to 15 years.
Other financial liabilities consist of customer deposits designated at fair value and debt securities in issue.
For accounting policy information refer to Accounting policies 3.8 and 3.10.
including repos
- MRELs
21,660
- Other medium term notes
22,087
17,843
- Commercial paper and certificates of deposit
- Covered bonds
- Securitisation
Subordinated liabilities are debt securities that, in the event of winding up or bankruptcy, rank below other liabilities for interest payments and repayment.
Dated loan capital
5,996
5,573
Undated loan capital
Preference shares
Certain preference shares issued by the company are classified as liabilities; these securities remain subject to the capital maintenance rules of the Companies Act 2006.
First call
Maturity
date
treatment
$2,250 million
5.125% notes
May-24
£1,000 million
3.622% notes
May-25
Aug-30
985
2.105% notes
Aug-26
Nov-31
1,001
$1,000 million
6.475% notes
Mar-29
Jun-34
799
$850 million
3.032% notes
Nov-35
550
€750 million
1.043% notes
Jun-27
Sep-32
624
652
$750 million
3.754% notes
Nov-24
Nov-29
592
€700 million
5.763% notes
Nov-28
Feb-34
608
£650 million
7.416% notes
Mar-28
Jun-33
644
£600 million
5.642% notes
Oct-29
Oct-34
5,840
5,481
Other subsidiaries
€170 million
Floating rate notes
Feb-41
$150 million
7.125% notes
Oct-93
6,091
5,735
(162)
£31 million
7.380% notes
£16 million
5.630% notes
Sep-26
£4.9 million
2.500% fixed notes
£140 million
Non-cumulative preference shares of £1
Other liabilities are amounts due to third parties that are not financial liabilities but including lease liabilities held at amortised cost. Other liabilities represent, for example, amounts due for goods and services that have been received but not invoiced, tax due to HMRC, and retirement benefit liabilities. Liabilities which have a level of uncertainty regarding their timing or the future cost to settle them are included in other liabilities as provisions for liabilities and charges.
Provisions for liabilities and charges
864
Retirement benefit liabilities (Note 5)
Accruals
1,353
1,411
Deferred income
Other liabilities (1)
918
Other liabilities include liabilities of disposal groups of nil (2023 - £3 million).
Litigation
Customer
and other
Commitments
redress
regulatory
and guarantees
486
Expected credit loss impairment release
Currency translation and other movements
Charge to income statement
301
Release to income statement
Provisions utilised
(428)
Other materially comprises provisions for restructuring costs and provision for Bank of England Levy.
Provisions are liabilities of uncertain timing or amount and are recognised when there is a present obligation as a result of a past event, the outflow of economic benefit is probable and the outflow can be estimated reliably. Any difference between the final outcome and the amounts provided will affect the reported results in the period when the matter is resolved.
For accounting policy information refer to Accounting policy 3.12.
Background information on all material provisions is given in Note 25.
Share capital consists of ordinary shares and preference shares and is measured as the number of shares allotted and fully paid, multiplied by the nominal value of a share. Other equity includes paid-in equity, merger reserve, capital redemption reserve and own shares held.
For accounting policy information refer to Accounting policy 3.10.
Number of shares
Allotted, called up and fully paid
000s
Ordinary shares of £1.0769 (1)
8,972
9,683
8,331,145
8,991,737
Cumulative preference shares of £1
483.0
Number of
Movement in allotted, called up and fully paid ordinary shares
shares 000s
10,539
9,786,024
Share cancellation
(794,287)
(660,592)
Ordinary shares
There is no authorised share capital under the company’s constitution. At 31 December 2024, the directors had authority granted at the 2024 Annual General Meeting (AGM) to issue up to £472 million nominal of ordinary shares other than by pre-emption to existing shareholders.
21 Share capital and other equity continued
On-market purchases
At the AGM in 2023, shareholders renewed the authority for the company to make market purchases of up to 967 million ordinary shares. The directors used the authority obtained at the 2023 AGM (2023 Authority) to carry out share buyback programmes of up to £500 million (2023 Programme) and £300 million (2024 Programme).
The maximum number of ordinary shares that could be purchased under the 2023 Programme was 920 million (reflecting the impact on the 2023 Authority of the reduction in issued share capital following the off-market buyback announced on 22 May 2023).
The maximum number of Ordinary Shares that could be purchased under the 2024 Programme was 697 million (reflecting the impact on the 2023 Authority of the reduction in issued share capital following the off-market buyback announced on 22 May 2023 and further reduced by the number of shares purchased to 19 February 2024 under the 2023 Programme).
The 2023 Programme started on 31 July 2023 and ended on 22 March 2024. 228 million ordinary shares (nominal value £245 million) were purchased by the company under the Programme at a volume weighted average price of 217.1788 pence per Ordinary Share for a total consideration of £495 million. All of the purchased ordinary shares were cancelled, representing 2.52% of the company’s issued ordinary share capital.
The 2024 Programme started on 19 February 2024 and ended on 24 July 2024. 104 million ordinary shares (nominal value £113 million) were purchased by the company under the Programme at a volume weighted average price of 287.1225 pence per ordinary share for a total consideration of £300 million. All of the purchased ordinary shares were cancelled, representing 1.19% of the company’s issued ordinary share capital.
Shareholders will be asked to renew the authority for the company to make market purchases of ordinary shares at the AGM in 2025.
Off-market purchases
A Directed Buyback Contract between the Company and HMT was approved by the shareholders of the Company at a General Meeting on 6 February 2019. Amendments to the Directed Buyback Contract were approved by the shareholders at a General Meeting on 25 August 2022 and at the 2024 AGM.
The authority from shareholders to make off-market purchases of ordinary shares from HMT (or its nominee) under the terms of the Directed Buyback Contract was renewed at the 2024 AGM.
The company used this authority to make an off-market purchase of 392 million ordinary shares (nominal value £423 million) in the company from HMT on 31 May 2024, at a price of 316.2 pence per ordinary share for the total consideration of £1,241 million, representing 4.50% of the company’s issued ordinary share capital. The company cancelled 222 million of the purchased ordinary shares and transferred the remaining 170 million ordinary shares to treasury.
On 11 November 2024, the company made a further off-market purchase of 263 million ordinary shares (nominal value £283 million) in the company from HMT, at a price of 380.8 pence per ordinary share for the total consideration of £1 billion, representing 3.16% of the company’s issued ordinary share capital. The company cancelled all of purchased ordinary shares.
Shareholders will be asked to renew the authority for the company to make off-market purchases of its ordinary shares from HMT (or its nominee) at the AGM in 2025.
Dividends
In 2024 NatWest Group paid an interim dividend of £498 million, or 6 pence per ordinary share (2023 – £491 million, or 5.5 pence per ordinary share).
The company has announced that the directors have recommended a final dividend of £1.2 billion, or 15.5 pence per ordinary share (2023 – £1.0 billion, or 11.5 pence per ordinary share). The final dividend recommended by directors is subject to shareholders’ approval at the AGM on 23 April 2025. If approved, payment will be made on 28 April 2025 to shareholders on the register at the close of business on 14 March 2025. The ex-dividend date will be 13 March 2025.
Cumulative preference shares
At the AGM in 2024, shareholders renewed the authority for the company to make an off-market purchase of its preference shares. Shareholders will be asked to renew the authority at the AGM in 2025.
Other equity
Additional Tier 1 notes
$1.15 billion 8.000% notes callable August 2025 (1)
$1.50 billion 6.000% notes callable December 2025 - June 2026 (2)
1,220
£1.00 billion 5.125% notes callable May - November 2027 (3)
998
£0.40 billion 4.5% notes callable March 2028 (4)
$0.75 billion 4.6% notes callable June 2031 (5)
539
$1.00 billion 8.125% notes callable November 2033 (6)
$0.75 billion 7.3% notes callable November 2034 (7)
Issued in August 2015. In the event of conversion, converted into ordinary shares at a price of $3.314 per share.
Issued in June 2020. In the event of conversion, converted into ordinary shares at a price of $2.191 (translated at applicable exchange rate) per share.
Issued in November 2020. In the event of conversion, converted into ordinary shares at a price of £1.764 per share.
Issued in March 2021. In the event of conversion, converted into ordinary shares at a price of £1.764 per share.
Issued in June 2021. In the event of conversion, converted into ordinary shares at a price of $2.462 (translated at applicable exchange rate) per share.
Issued in May 2024. In the event of conversion, converted into ordinary shares at a price of $2.205 (translated at applicable exchange rate) per share.
Issued in November 2024. In the event of conversion, converted into ordinary shares at a price of $2.226 (translated at applicable exchange rate) per share.
Paid-in equity - comprises equity instruments issued by the company other than those legally constituted as shares.
Additional Tier 1 instruments issued by NatWest Group plc having the legal form of debt are classified as equity under IFRS. The coupons on these instruments are non-cumulative and payable at the company’s discretion. In the event NatWest Group’s CET1 ratio falls below 7% any outstanding instruments will be converted into ordinary shares at a fixed price.
Capital recognised for regulatory purposes cannot be redeemed without Prudential Regulation Authority consent. This includes ordinary shares, preference shares and additional Tier 1 instruments.
Merger reserve - the merger reserve comprises the premium on shares issued to acquire NatWest Bank Plc less goodwill amortisation charged under previous GAAP.
Capital redemption reserve - under UK companies legislation, when shares are redeemed or purchased wholly or partly out of the company’s profits, the amount by which the company’s issued share capital is diminished must be transferred to the capital redemption reserve. The capital maintenance provisions of UK companies legislation apply to the capital redemption reserve as if it were part of the company’s paid up share capital. The nominal value of the shares bought back from HMT in March 2023 and via the Programme during 2023 have been transferred to the Capital redemption reserve.
Own shares held - at 31 December 2024, 11 million ordinary shares of £1.0769 each of the company (2023 –12 million) were held by employee share trusts in respect of share awards and options granted to employees. During 2024, the employee share trusts purchased no ordinary shares and delivered 1 million ordinary shares in satisfaction of the exercise of options and the vesting of share awards under the employee share plans. The company retains the flexibility to use newly issued shares, shares purchased by the NatWest Group Employee Share Ownership Trust and any available treasury shares to satisfy obligations under its employee share plans.
The company does not use performance conditions or targets based on earnings per share (EPS), total shareholder return (TSR), and net asset value (NAV) in connection with its employee share plans.
As part of the shares bought back from HMT in May 2024, the company transferred 170 million ordinary shares to own shares held. The company has used a total of 80 million treasury shares in 2024 to satisfy the exercise of options and the vesting of share awards under the employee share plans. The balance of ordinary shares held in treasury as at 31 December 2024 was 277 million.
NatWest Group plc optimises capital efficiency by maintaining reserves in subsidiaries, including regulated entities. Certain preference shares and subordinated debt are also included within regulatory capital. The remittance of reserves to the company or the redemption of shares or subordinated capital by regulated entities may be subject to maintaining the capital resources required by the relevant regulator.
UK law prescribes that only the reserves of the company are taken into account for the purpose of making distributions and in determining permissible applications of the share premium account.
A structured entity (SE) is an entity that has been designed such that voting or similar rights are not the dominant factor in deciding who controls the entity, for example, when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. SEs are usually established for a specific, limited purpose. They do not carry out a business or trade and typically have no employees.
In a securitisation, assets, or interests in a pool of assets, are transferred, or the credit risk is transferred via a derivative or financial guarantee to a SE which then issues liabilities to third party investors.
NatWest Group’s involvement in client securitisations takes a number of forms. It may provide secured finance to, or purchase asset-backed notes from, client sponsored SEs secured on assets transferred by the client entity; purchase asset backed securities issued by client sponsored SEs in the primary or secondary markets; or provide liquidity facilities to client sponsored SEs. In addition, NatWest Group arranges or acts as lead manager or placement agent in client primary markets securitisations. NatWest Group provides portfolio structured derivative hedging solutions to clients. NatWest Group undertakes own-asset securitisations to transfer the credit risk on portfolios of financial assets.
Other credit risk transfer securitisations
NatWest Group transfers credit risk on originated loans and mortgages without the transfer of assets to a SE. As part of this, NatWest Group enters into credit derivative and financial guarantee contracts with consolidated SEs. At 31 December 2024, debt securities in issue by such SEs (and held by third parties) were £1,175 million (2023 – £863 million). The associated loans and mortgages at 31 December 2024 were £13,226 million (2023 - £2,687 million). At 31 December, ECL in relation to non-defaulted assets was reduced by £43 million (2023 - £11 million) as a result of financial guarantee contracts with consolidated SEs.
Covered debt programme
Group companies have assigned loans to customers and debt investments to bankruptcy remote limited liability partnerships to provide security for issues of debt securities. NatWest Group retains all of the risks and rewards of these assets and continues to recognise them. The partnerships are consolidated by NatWest Group and the related covered bonds included within other financial liabilities. At 31 December 2024, £9,668 million (2023 - £11,067 million) of loans to customers provided security for debt securities in issue and other borrowing of £2,305 million (2023 - £3,619 million).
Lending of own issued securities
NatWest Group has issued, retained, and lent debt securities under securities lending arrangements. Under standard terms in the UK and US markets, the recipient has an unrestricted right to sell or repledge collateral, subject to returning equivalent securities on maturity of the transaction. NatWest Group retains all of the risks and rewards of own issued liabilities lent under such arrangements and does not recognise them. At 31 December 2024, £4,715 million (2023 - £4,062 million) of secured own issued liabilities have been retained and lent under securities lending arrangements. At 31 December 2024, £4,878 million (2023 - £4,168 million) of loans and other debt instruments provided security for secured own issued liabilities that have been retained and lent under securities lending arrangements.
22 Structured entities continued
Unconsolidated structured entities
The term 'unconsolidated structured entities' refers to structured entities not controlled by NatWest Group, and which are established either by NatWest Group or a third party. An interest in a structured entity is any form of contractual or non-contractual involvement which creates variability in returns for NatWest Group arising from the performance of the entity. Such interests include holdings of debt or equity securities, derivatives that transfer financial risks from the entity to NatWest Group, provision of lending and loan commitments, financial guarantees and investment management agreements. NatWest Group enters into transactions with unconsolidated structured entities in the normal course of business to facilitate customer transactions, to provide risk management services and for specific investment opportunities. Structured entities may take the form of funds, trusts, partnerships, securitisation vehicles, and private investment companies. NatWest Group considers itself to be the sponsor of a structured entity where it is primarily involved in the set up and design of the entity and where NatWest Group transfers assets to the entity, markets products associated with the entity in its own name, and/or provides guarantees in relation to the performance of the entity.
The nature and extent of NatWest Group's interests in structured entities is summarised in the following table:
Asset-backed
securitisation
funds and
vehicles
5,399
1,601
7,000
2,701
999
3,700
15,744
923
16,667
13,096
1,062
14,158
21,489
2,740
24,229
16,234
2,372
18,606
Off balance sheet
Liquidity facilities/loan commitments
2,134
2,591
1,873
2,269
Guarantees
2,695
523
2,396
Maximum exposure
23,470
3,293
26,763
17,894
2,878
20,772
This note provides an overview of assets that have been transferred but where the NatWest Group retains substantially all the risks and rewards of the transferred assets and therefore continues to recognize them on balance sheet.
Transfers that do not qualify for derecognition
NatWest Group enters into securities repurchase, lending and total return transactions in accordance with normal market practice which includes the provision of additional collateral if necessary. Under standard terms in the UK and US markets, the recipient has an unrestricted right to sell or repledge collateral, subject to returning equivalent securities on settlement of the transaction.
Securities sold under repurchase transactions and transactions with the substance of securities repurchase agreements are not derecognised if NatWest Group retains substantially all the risks and rewards of ownership. The fair value (and carrying value) of securities transferred under such transactions included on the balance sheet are set out below. All of these securities could be sold or repledged by the holder.
The following assets have failed derecognition (1)
7,708
7,907
Loans to bank - amortised cost
281
13,174
20,997
16,962
Associated liabilities were £20,394 million (2023 - £16,522 million).
Assets pledged as collateral
NatWest Group pledges collateral with its counterparties in respect of derivative liabilities, bank and stock borrowings and other transactions.
Assets pledged against liabilities
10,288
10,976
19,030
21,611
4,451
6,506
33,769
39,156
Includes assets pledged for pension derivatives and £499 million of debt securities under the continuing control of NWB Plc. This follows the agreement between NWB Plc and the Group Pension Fund to establish a bankruptcy remote reservoir trust to hold these assets. Refer to Note 5 for additional information.
As part of the covered debt programme £9,668 million of loans to customers and other debt instruments (2023 – £11,067 million) have been transferred to bankruptcy remote limited liability partnerships within the NatWest Group to provide collateral for issuances of debt securities and other borrowings by the NatWest Group of £2,305 million (2023 – £3,619 million). Refer to Note 22.
NatWest Group’s regulatory capital is assessed against minimum requirements that are set out under the UK Capital Requirements Regulation to determine the strength of its capital base. This note shows a reconciliation of shareholders’ equity to regulatory capital.
Shareholders’ equity (excluding non-controlling interests)
Shareholders’ equity
Other equity instruments
(5,280)
(3,890)
Regulatory adjustments and deductions
Defined benefit pension fund adjustment
(147)
(143)
Cash flow hedging reserve
1,443
(1,084)
(979)
(230)
(279)
Goodwill and other intangible assets
(7,544)
(7,614)
(1,013)
Adjustment for trust assets (1)
(365)
Foreseeable charges
(525)
(9,142)
(8,827)
CET1 capital
Additional Tier 1 (AT1) capital
Qualifying instruments and related share premium
AT1 capital
Qualifying Tier 2 capital
5,189
Total regulatory capital
(1)Prudent deduction in respect of agreement with the pension fund to establish legal structure to remove dividend linked contribution. Refer Notes 5 and 32.
It is NatWest Group policy to maintain a strong capital base, to expand it as appropriate and to utilise it efficiently throughout its activities to optimise the return to shareholders while maintaining a prudent relationship between the capital base and the underlying risks of the business. In carrying out this policy, NatWest Group has regard to the supervisory requirements of the PRA. The PRA uses capital ratios as a measure of capital adequacy in the UK banking sector, comparing a bank’s capital resources with its risk-weighted assets (the assets and off-balance sheet exposures are weighted to reflect the inherent credit and other risks); by international agreement, the Pillar 1 capital ratios should be not less than 8% with a Common Equity Tier 1 component of not less than 4.5%. NatWest Group has complied with the PRA’s capital requirements throughout the year.
A number of subsidiaries and sub-groups within NatWest Group, principally banking entities, are subject to various individual regulatory capital requirements in the UK and overseas. Furthermore, the payment of dividends by subsidiaries and the ability of members of NatWest Group to lend money to other members of NatWest Group may be subject to restrictions such as local regulatory or legal requirements, the availability of reserves and financial and operating performance.
NatWest Group provides its customers with a variety of services to support their businesses, such as guarantees. These are reported as commitments. Contingent liabilities are possible obligations dependent on a future event or present obligations which are either not probable or cannot be measured reliably.
The amounts shown in the table below are intended only to provide an indication of the volume of business outstanding at 31 December 2024. Although NatWest Group is exposed to credit risk in the event of a customer’s failure to meet its obligations, the amounts shown do not, and are not intended to, provide any indication of NatWest Group’s expectation of future losses.
2,823
Other contingent liabilities
1,496
Standby facilities, credit lines and other commitments
135,405
127,424
Updated to reflect the regulatory treatment of revocable commitments.
Banking commitments and contingent obligations, which have been entered into on behalf of customers and for which there are corresponding obligations from customers, are not included in assets and liabilities. NatWest Group’s maximum exposure to credit loss, in the event of its obligation crystallising and all counterclaims, collateral or security proving valueless, is represented by the contractual nominal amount of these instruments included in the table above. These commitments and contingent obligations are subject to NatWest Group’s normal credit approval processes.
Guarantees – NatWest Group gives guarantees on behalf of customers. A financial guarantee represents an irrevocable undertaking that NatWest Group will meet a customer’s specified obligations to a third party if the customer fails to do so. The maximum amount that NatWest Group could be required to pay under a guarantee is its principal amount as disclosed in the table above. NatWest Group expects most guarantees it provides to expire unused.
Other contingent liabilities - these include standby letters of credit, supporting customer debt issues and contingent liabilities relating to customer trading activities such as those arising from performance and customs bonds, warranties and indemnities.
Standby facilities and credit lines - under a loan commitment, NatWest Group agrees to make funds available to a customer in the future. Loan commitments, which are usually for a specified term, may be unconditionally cancellable or may persist, provided all conditions in the loan facility are satisfied or waived. Commitments to lend include commercial standby facilities and credit lines, liquidity facilities to commercial paper conduits and unutilised overdraft facilities.
Other commitments - these include documentary credits, which are commercial letters of credit providing for payment by NatWest Group to a named beneficiary against presentation of specified documents, forward asset purchases, forward deposits placed and undrawn note issuance and revolving underwriting facilities, and other short-term trade related transactions.
Contractual obligations for future expenditure not provided for in the accounts
The following table shows contractual obligations for future expenditure not provided for in the accounts at the year end.
Capital expenditure on property, plant and equipment
Contracts to purchase goods or services (1)
1,160
1,121
1,174
Of which due within 1 year: £356 million (2023 - £379 million).
25 Memorandum items continued
Trustee and other fiduciary activities
In its capacity as trustee or other fiduciary role, NatWest Group may hold or place assets on behalf of individuals, trusts, companies, pension schemes and others. The assets and their income are not included in NatWest Group’s financial statements. NatWest Group earned fee income of £302 million (2023 - £264 million; 2022 - £266 million) from these activities.
The Financial Services Compensation Scheme
The Financial Services Compensation Scheme (FSCS), the UK’s statutory fund of last resort for customers of authorised financial services firms, pays compensation if a firm is unable to meet its obligations. The FSCS funds compensation for customers by raising management expenses levies and compensation levies on the industry. In relation to protected deposits, each deposit-taking institution contributes towards these levies in proportion to their share of total protected deposits on 31 December of the year preceding the scheme year (which runs from 1 April to 31 March), subject to annual maxima set by the Prudential Regulation Authority. In addition, the FSCS has the power to raise levies on a firm that has ceased to participate in the scheme and is in the process of ceasing to be authorised for the costs that it would have been liable to pay had the FSCS made a levy in the financial year it ceased to be a participant in the scheme.
Litigation and regulatory matters
NatWest Group plc and certain members of NatWest Group are party to various legal proceedings and are involved in, or subject to, various regulatory matters, including as the subject of investigations and other regulatory and governmental action (Matters) in the United Kingdom (UK), the United States (US), the European Union (EU) and other jurisdictions.
NatWest Group recognises a provision for a liability in relation to these Matters when it is probable that an outflow of economic benefits will be required to settle an obligation resulting from past events, and a reliable estimate can be made of the amount of the obligation.
In many of the Matters, it is not possible to determine whether any loss is probable, or to estimate reliably the amount of any loss, either as a direct consequence of the relevant proceedings and regulatory matters or as a result of adverse impacts or restrictions on NatWest Group’s reputation, businesses and operations. Numerous legal and factual issues may need to be resolved, including through potentially lengthy discovery and document production exercises and determination of important factual matters, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before the probability of a liability, if any, arising can reasonably be estimated in respect of any Matter. NatWest Group cannot predict if, how, or when such claims will be resolved or what the eventual settlement, damages, fine, penalty or other relief, if any, may be, particularly for Matters that are at an early stage in their development or where claimants seek substantial or indeterminate damages.
There are situations where NatWest Group may pursue an approach that in some instances leads to a settlement agreement. This may occur in order to avoid the expense, management distraction or reputational implications of continuing to contest liability, or in order to take account of the risks inherent in defending or contesting Matters, even for those for which NatWest Group believes it has credible defences and should prevail on the merits. The uncertainties inherent in all Matters affect the amount and timing of any potential economic outflows for both Matters with respect to which provisions have been established and other contingent liabilities in respect of any such Matter.
It is not practicable to provide an aggregate estimate of potential liability for our Matters as a class of contingent liabilities.
The future economic outflow in respect of any Matter may ultimately prove to be substantially greater than, or less than, the aggregate provision, if any, that NatWest Group has recognised in respect of such Matter. Where a reliable estimate of the economic outflow cannot be reasonably made, no provision has been recognised. NatWest Group expects that in future periods, additional provisions and economic outflows relating to Matters that may or may not be currently known by NatWest Group will be necessary, in amounts that are expected to be substantial in some instances. Refer to Note 20 for information on material provisions.
Matters which are, or could be, material, either individually or in aggregate, having regard to NatWest Group, considered as a whole, in which NatWest Group is currently involved are set out below. We have provided information on the procedural history of certain Matters, where we believe appropriate, to aid the understanding of the Matter.
For a discussion of certain risks associated with NatWest Group’s litigation and regulatory matters (including the Matters), refer to the Risk Factor relating to legal, regulatory and governmental actions and investigations set out on page 300.
London Interbank Offered Rate (LIBOR) and other rates litigation
NatWest Group plc and certain other members of NatWest Group, including NWM Plc, are defendants in a number of claims pending in the United States District Court for the Southern District of New York (SDNY) with respect to the setting of USD LIBOR. The complainants allege that certain members of NatWest Group and other panel banks violated various federal laws, including the US commodities and antitrust laws, and state statutory and common law, as well as contracts, by manipulating LIBOR and prices of LIBOR-based derivatives in various markets through various means.
The co-ordinated proceeding in the SDNY relating to USD LIBOR now includes one remaining class action, which is on behalf of persons who purchased LIBOR-linked instruments from defendants and bonds issued by defendants, as well as several non-class actions. The defendants in the co-ordinated proceeding have filed a summary judgment motion on the issue of liability, and briefing on that motion concluded in January 2025.
In March 2024, NatWest Group companies reached an agreement to settle the USD LIBOR class action that asserted claims on behalf of lenders who made USD LIBOR based loans. The settlement amount, which was covered in full by an existing provision, has been paid and the settlement has now received final court approval.
The non-class claims filed in the SDNY include claims that the Federal Deposit Insurance Corporation (FDIC) is asserting on behalf of certain failed US banks. In July 2017, the FDIC, on behalf of 39 of those failed US banks, commenced substantially similar claims against NatWest Group companies and others in the High Court of Justice of England and Wales. The action alleges collusion with regard to the setting of USD LIBOR and that the defendants breached UK and European competition law, as well as asserting common law claims of fraud under US law. The defendant banks consented to a request by the FDIC for discontinuance of the claim in respect of 20 failed US banks, leaving 19 failed US banks as claimants. The trial is currently scheduled to commence in Q1 2026.
In addition to the USD LIBOR cases described above, there is a class action relating to derivatives allegedly tied to JPY LIBOR and Euroyen TIBOR, which was dismissed by the SDNY in relation to NWM Plc and other NatWest Group companies in September 2021. That dismissal is now the subject of an appeal to the United States Court of Appeals for the Second Circuit (US Court of Appeals).
Two other IBOR-related class actions involving NWM Plc, concerning alleged manipulation of Euribor and Pound Sterling LIBOR, were previously dismissed by the SDNY for various reasons. The plaintiffs’ appeals in those two cases remain pending.
In August 2020, a complaint was filed in the United States District Court for the Northern District of California by several United States retail borrowers against the USD ICE LIBOR panel banks and their affiliates (including NatWest Group plc, NWM Plc, NWMSI and NWB Plc), alleging (i) that the very process of setting USD ICE LIBOR amounts to illegal price-fixing; and (ii) that banks in the United States have illegally agreed to use LIBOR as a component of price in variable retail loans. In September 2022, the district court dismissed the complaint. In December 2024, the United States Court of Appeals for the Ninth Circuit affirmed the district court’s decision.
NWM Plc is also named as a defendant in a motion to certify a class action relating to LIBOR in the Tel Aviv District Court in Israel. NWM Plc filed a motion for cancellation of service outside the jurisdiction, which was granted in July 2020. The claimants appealed that decision and in November 2020 the appeal was refused and the claim dismissed by the Appellate Court. The claim could in future be recommenced depending on the outcome of an appeal to Israel’s Supreme Court in respect of the dismissal of the substantive case against banks that had a presence in Israel.
Foreign exchange litigation
NatWest Group plc, NWM Plc and/or NWMSI are defendants in several cases relating to NWM Plc’s foreign exchange (FX) business.
In May 2019, a cartel class action was filed in the Federal Court of Australia against NWM Plc and four other banks on behalf of persons who bought or sold currency through FX spots or forwards between 1 January 2008 and 15 October 2013 with a total transaction value exceeding AUD 0.5 million. The claimant has alleged that the banks, including NWM Plc, contravened Australian competition law by sharing information, coordinating conduct, widening spreads and manipulating FX rates for certain currency pairs during this period. NatWest Group plc and NWMSI have been named in the action as 'other cartel participants', but are not respondents. The claim was served in June 2019 and NWM Plc filed its defence in March 2022. The court has ordered that potential class members are required to either opt out of the proceedings or register to be included in or benefit from any potential settlement of the claim. Directions have been made for the provision of evidence during 2025 and 2026.
In July and December 2019, two separate applications seeking opt-out collective proceedings orders were filed in the UK Competition Appeal Tribunal (CAT) against NatWest Group plc, NWM Plc and other banks. Both applications were brought on behalf of persons who, between 18 December 2007 and 31 January 2013, entered into a relevant FX spot or outright forward transaction in the European Economic Area with a relevant financial institution or on an electronic communications network.
In March 2022, the CAT declined to certify as collective proceedings either of the applications, which was appealed by the applicants and the subject of an application for judicial review.
In its amended judgment in November 2023, the Court of Appeal allowed the appeal and decided that the claims should proceed on an opt-out basis. Separately, the court determined which of the two competing applicants can proceed as class representative, and dismissed the application for judicial review of the CAT’s decision. The other applicant has discontinued its claim and withdrawn from the proceedings. The banks sought permission to appeal the Court of Appeal decision directly to the UK Supreme Court, which was granted in April 2024. The appeal is scheduled to be heard in April 2025.
Two motions to certify FX-related class actions were filed in the Tel Aviv District Court in Israel in September and October 2018, and were subsequently consolidated into one motion. The consolidated motion to certify, which names The Royal Bank of Scotland plc (now NWM Plc) and several other banks as defendants, was served on NWM Plc in May 2020. The applicants sought the court’s permission to amend their motions to certify the class actions. NWM Plc filed a motion challenging the permission granted by the court for the applicants to serve the consolidated motion outside the Israeli jurisdiction. That NWM Plc motion remains pending. In February 2024, NWM Plc executed an agreement to settle the claim, subject to court approval. The settlement amount is covered in full by an existing provision.
In December 2021, a summons was served in the Netherlands against NatWest Group plc, NWM Plc and NWM N.V. by Stichting FX Claims on behalf of a number of parties, seeking declarations from the court concerning liability for anti-competitive FX market conduct described in decisions of the European Commission (EC) of 16 May 2019, along with unspecified damages. The claimant amended its claim to also refer to a 2 December 2021 decision by the EC, which described anti-competitive FX market conduct. NatWest Group plc, NWM Plc and other defendants contested the jurisdiction of the Dutch court. In March 2023, the district court in Amsterdam accepted that it has jurisdiction to hear claims against NWM N.V. but refused jurisdiction to hear any claims against the other defendant banks (including NatWest Group plc and NWM Plc) brought on behalf of the parties represented by the claimant that are domiciled outside of the Netherlands. The claimant is appealing that decision. The defendant banks have brought cross-appeals which seek a ruling that the Dutch court has no jurisdiction to hear any claims against the defendant banks domiciled outside of the Netherlands, irrespective of whether the claim has been brought on behalf of a party represented by the claimant that is domiciled within or outside of the Netherlands. The Amsterdam Court of Appeal has stayed these appeal proceedings until the Court of Justice of the European Union has answered preliminary questions that have been referred to it in another matter.
In September 2023, a second summons was served by Stichting FX Claims on NatWest Group plc, NWM Plc and NWM N.V., on behalf of a new group of parties. The claimant seeks declarations from the district court in Amsterdam concerning liability for anti-competitive FX market conduct described in the above referenced decisions of the EC of 16 May 2019 and 2 December 2021, along with unspecified damages. NatWest Group plc, NWM Plc and other defendants are contesting the Dutch court's jurisdiction. The district court has stayed the proceedings pending judgment in the above-mentioned appeals.
In January 2025, a third summons was served by Stichting FX Claims on NatWest Group plc, NWM Plc and NWM N.V., on behalf of another new group of parties. The claimant seeks similar declarations from the district court in Amsterdam to those being sought in the above-mentioned claims, along with unspecified damages.
Certain other foreign exchange transaction related claims have been or may be threatened. NatWest Group cannot predict whether all or any of these claims will be pursued.
Government securities antitrust litigation
Class action antitrust claims commenced in March 2019 were pending in the SDNY against NWM Plc, NWMSI and other banks in respect of Euro-denominated bonds issued by various European central banks (European government bonds or EGBs). The complaint alleged a conspiracy among dealers of EGBs to widen the bid-ask spreads they quoted to customers, thereby increasing the prices customers paid for the EGBs or decreasing the prices at which customers sold EGBs.
In March 2024, NatWest Group companies reached an agreement to settle the class action. The settlement amount, which was covered in full by an existing provision, has been paid and the settlement has now received final court approval.
Swaps antitrust litigation
NWM Plc and other members of NatWest Group, including NatWest Group plc, as well as a number of other interest rate swap dealers, are defendants in several cases pending in the SDNY alleging violations of the US antitrust laws in the market for interest rate swaps. There is a consolidated class action complaint on behalf of persons who entered into interest rate swaps with the defendants, as well as non-class action claims by three swap execution facilities (TeraExchange, Javelin, and trueEx). The plaintiffs allege that the swap execution facilities would have successfully established exchange-like trading of interest rate swaps if the defendants had not unlawfully conspired to prevent that from happening through boycotts and other means. Discovery in the non-class action claims is complete. In March 2024, NatWest Group companies reached an agreement to settle the class action. The settlement amount has been paid into escrow pending final court approval of the settlement and was covered in full by an existing provision.
In June 2021, a class action antitrust complaint was filed against a number of credit default swap dealers, in New Mexico federal court on behalf of persons who, from 2005 onwards, settled credit default swaps in the United States by reference to the ISDA credit default swap auction protocol. The complaint alleges that the defendants conspired to manipulate that benchmark through various means in violation of the antitrust laws and the Commodity Exchange Act. The defendants filed a motion to dismiss the complaint and, in June 2023, such motion was denied as regards to NWMSI and other financial institutions, but granted as regards to NWM Plc on the ground that the court lacks jurisdiction over that entity. As a result, the case entered the discovery phase as against the non-dismissed defendants. In January 2024, the SDNY issued an order barring the plaintiffs in the New Mexico case from pursuing claims based on conduct occurring before 30 June 2014 on the ground that such claims were extinguished by a 2015 settlement agreement that resolved a prior class action relating to credit default swaps. The SDNY's decision is the subject of a pending appeal to the US Court of Appeals.
Odd lot corporate bond trading antitrust litigation
In July 2024, the US Court of Appeals vacated the SDNY's October 2021 dismissal of the class action antitrust complaint alleging that from August 2006 onwards various securities dealers, including NWMSI, conspired artificially to widen spreads for odd lots of corporate bonds bought or sold in the United States secondary market and to boycott electronic trading platforms that would have allegedly promoted pricing competition in the market for such bonds. The appellate court held that the district judge who made the decision should not have been presiding over the case because a member of the judge’s family had owned stock in one of the defendants while the motion was pending. The defendants are now seeking dismissal by a different district court judge.
Spoofing litigation
In December 2021, three substantially similar class actions complaints were filed in federal court in the United States against NWM Plc and NWMSI alleging Commodity Exchange Act and common law unjust enrichment claims arising from manipulative trading known as spoofing. The complaints refer to NWM Plc’s December 2021 spoofing-related guilty plea (described below under “US investigations relating to fixed-income securities”) and purport to assert claims on behalf of those who transacted in US Treasury securities and futures and options on US Treasury securities between 2008 and 2018. In July 2022, the defendants filed a motion to dismiss these claims, which have been consolidated into one matter in the United States District Court for the Northern District of Illinois.
Madoff
NWM N.V. was named as a defendant in two actions filed by the trustee for the bankrupt estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, in bankruptcy court in New York, which together seek to clawback more than US$298 million that NWM N.V. allegedly received from certain Madoff feeder funds and certain swap counterparties. The claims were previously dismissed, but as a result of an August 2021 decision by the US Court of Appeals, they are now proceeding in the discovery phase in the bankruptcy court, where they have been consolidated into one action.
Offshoring VAT assessments
HMRC, as part of an industry - wide review, issued protective tax assessments in 2018 against NatWest Group plc totalling £143 million relating to unpaid VAT in respect of the UK branches of two NatWest Group companies registered in India for the period from 1 January 2014 until 31 December 2017 inclusive. NatWest Group formally requested reconsideration by HMRC of their assessments, and this process was completed in November 2020. HMRC upheld their original decision and, as a result, NatWest Group plc lodged an appeal with the Tax Tribunal and an application for judicial review with the High Court of Justice of England and Wales, both in December 2020. In order to lodge the appeal with the Tax Tribunal, NatWest Group plc was required to pay amounts totalling £153 million (including statutory interest) to HMRC in December 2020 and May 2022. The appeal and the application for judicial review have both been stayed pending further discussion with HMRC in relation to a separate case involving another bank. The amount of £153 million continues to be recognised as an asset that NatWest Group plc expects to recover. Since 1 January 2018, NatWest Group plc has paid VAT on intra-group supplies from the India-registered NatWest Group companies.
US Anti-Terrorism Act litigation
NWM N.V. and certain other financial institutions are defendants in several actions filed by a number of US nationals (or their estates, survivors, or heirs), most of whom are or were US military personnel, who were killed or injured in attacks in Iraq between 2003 and 2011. NWM Plc is also a defendant in some of these cases.
According to the plaintiffs’ allegations, the defendants are liable for damages arising from the attacks because they allegedly conspired with and/or aided and abetted Iran and certain Iranian banks to assist Iran in transferring money to Hezbollah and the Iraqi terror cells that committed the attacks, in violation of the US Anti-Terrorism Act, by agreeing to engage in ‘stripping’ of transactions initiated by the Iranian banks so that the Iranian nexus to the transactions would not be detected.
The first of these actions , alleging conspiracy claims but not aiding and abetting claims, was filed in the United States District Court for the Eastern District of New York in November 2014. In September 2019, the district court dismissed the case, finding that the claims were deficient for several reasons, including lack of sufficient allegations as to the alleged conspiracy and causation. In January 2023, the US Court of Appeals affirmed the district court’s dismissal of this case. The plaintiffs have now filed a motion in the district court to re-open the case to assert aiding and abetting claims that they previously did not assert , which the defendants are opposing. Another action, filed in the SDNY in 2017, which asserted both conspiracy and aiding and abetting claims, was dismissed by the SDNY in March 2019 on similar grounds as the first case, but remains subject to appeal to the US Court of Appeals.
Other follow-on actions that are substantially similar to those described above are pending in the same courts.
1MDB litigation
A Malaysian court claim was served in Switzerland in November 2022 by 1MDB, a sovereign wealth fund, in which Coutts & Co Ltd was named, along with six others, as a defendant in respect of losses allegedly incurred by 1MDB. It is claimed that Coutts & Co Ltd is liable as a constructive trustee for having dishonestly assisted the directors of 1MDB in the breach of their fiduciary duties by failing (amongst other alleged claims) to undertake due diligence in relation to a customer of Coutts & Co Ltd, through which funds totalling c.US$1 billion were received and paid out between 2009 and 2011. 1MDB seeks the return of that amount plus interest. Coutts & Co Ltd filed an application in January 2023 challenging the validity of service and the Malaysian court’s jurisdiction to hear the claim, and a hearing took place in February 2024. In March 2024, the court granted that application. 1MDB has appealed that decision and a prior decision by the court not to allow them to discontinue their claim. Both appeals are scheduled to be heard in November 2025.
Coutts & Co Ltd (a subsidiary of RBS Netherlands Holdings B.V., which in turn is a subsidiary of NWM Plc) is a company registered in Switzerland and is in wind-down following the announced sale of its business assets in 2015.
Regulatory matters (including investigations and customer redress programmes)
NatWest Group's businesses and financial condition can be affected by the actions of various governmental and regulatory authorities in the UK, the US, the EU and elsewhere. NatWest Group has engaged, and will continue to engage, in discussions with relevant governmental and regulatory authorities, including in the UK, the US, the EU and elsewhere, on an ongoing and regular basis, and in response to informal and formal inquiries or investigations, regarding operational, systems and control evaluations and issues including those related to compliance with applicable laws and regulations, including consumer protection, investment advice, business conduct, competition/anti-trust, VAT recovery, anti-bribery, anti-money laundering and sanctions regimes. NatWest Group expects government and regulatory intervention in financial services to be high for the foreseeable future, including increased scrutiny from competition and other regulators in the retail and SME business sectors.
Any matters discussed or identified during such discussions and inquiries may result in, among other things, further inquiry or investigation, other action being taken by governmental and regulatory authorities, increased costs being incurred by NatWest Group, remediation of systems and controls, public or private censure, restriction of NatWest Group's business activities and/or fines. Any of the events or circumstances mentioned in this paragraph or below could have a material adverse effect on NatWest Group, its business, authorisations and licences, reputation, results of operations or the price of securities issued by it, or lead to material additional provisions being taken.
NatWest Group is co-operating fully with the matters described below.
US investigations relating to fixed-income securities
In December 2021, NWM Plc pled guilty in the United States District Court for the District of Connecticut to one count of wire fraud and one count of securities fraud in connection with historical spoofing conduct by former employees in US Treasuries markets between January 2008 and May 2014 and, separately, during approximately three months in 2018. The 2018 trading occurred during the term of a non-prosecution agreement (NPA) between NWMSI and the United States Attorney’s Office for the District of Connecticut (USAO CT), under which non-prosecution was conditioned on NWMSI and affiliated companies not engaging in criminal conduct during the term of the NPA. The relevant trading in 2018 was conducted by two NWM traders in Singapore and breached that NPA. The plea agreement reached with the US Department of Justice (DOJ) and the USAO CT resolved both the spoofing conduct and the breach of the NPA.
As required by the resolution and sentence imposed by the court, NWM Plc is subject to a probationary period, which was extended to end concurrently with the conclusion of the independent monitorship, which is also required under the plea agreement. The term of the independent monitorship and the ongoing implementation of recommendations made by it is currently scheduled to conclude in December 2025 but may be extended by agreement with the DOJ. In addition, NWM Plc has committed to compliance programme reviews and improvements and agreed to reporting and co-operation obligations.
In the event that NWM Plc does not meet its obligations to the DOJ, this may lead to adverse consequences such as increased costs from any extension of monitorship and/or the period of the probation, findings that NWM Plc violated its probation term, and possible re - sentencing, amongst other consequences. Other material adverse collateral consequences may occur as a result of this matter, as further described in the Risk Factor relating to legal, regulatory and governmental actions and investigations set out on page 300.
RBSI Ltd reliance regime and referral to enforcement
In January 2023, the Jersey Financial Services Commission (JFSC) notified RBSI Ltd that it had been referred to its Enforcement Division in relation to RBSI Ltd’s operation of the reliance regime. The reliance regime is specific to certain Crown Dependencies and enables RBSI Ltd to rely on regulated third parties for specific due diligence information. RBSI Ltd has provided information to the JFSC at its request.
Investment advice review
In October 2019, the FCA notified NatWest Group of its intention to appoint a Skilled Person under section 166 of the Financial Services and Markets Act 2000 to conduct a review of whether NatWest Group’s past business review of investment advice provided during 2010 to 2015 was subject to appropriate governance and accountability and led to appropriate customer outcomes. The Skilled Person’s review has concluded and, after discussion with the FCA, NatWest Group is undertaking additional review / remediation work.
Review and investigation of treatment of tracker mortgage customers in Ulster Bank Ireland DAC
In December 2015, correspondence was received from the Central Bank of Ireland setting out an industry examination framework in respect of the sale of tracker mortgages from approximately 2001 until the end of 2015.
The redress and compensation process has now largely concluded, although a small number of cases remain outstanding relating to uncontactable customers.
UBIDAC customers have lodged tracker mortgage complaints with the Financial Services and Pensions Ombudsman (FSPO). UBIDAC challenged three FSPO adjudications in the Irish High Court. In June 2023, the High Court found in favour of the FSPO in all matters. UBIDAC appealed that decision to the Court of Appeal. In September 2024, the Court of Appeal allowed UBIDAC’s appeal and set aside certain findings of the FSPO. The Court of Appeal directed one aspect of the FSPO decisions to be remitted to the FSPO for its consideration following an oral hearing, and UBIDAC is following up with the FSPO in that regard.
Other customer remediation in Ulster Bank Ireland DAC
UBIDAC identified other legacy issues leading to the establishment of remediation requirements and progress is ongoing to conclude activities.
This note shows non-cash items adjusted for in the cash flow statement and movement in operating assets and liabilities.
Change in fair value taken to profit or loss of other financial assets
(584)
Change in fair value taken to profit or loss of other financial liabilities and subordinated liabilities
(2,400)
Foreign exchange recycling losses/(gains)
(484)
Elimination of foreign exchange differences
Income receivable on other financial assets
(2,459)
(585)
Loss on sale of other financial assets
Share of (profit)/loss of associates
(Gain)/loss on sale of other assets and net assets and liabilities
Interest payable on MRELs and subordinated liabilities
1,407
1,352
1,103
(Gain)/loss on redemption of own debt
Charges and releases on provisions
Change in fair value of cash flow hedges
Other non-cash items
Defined benefit pension schemes
Change in trading assets
(5,331)
14,991
Change in derivative assets
(373)
20,826
3,621
Change in settlement balance assets
5,146
(4,659)
(431)
Change in loans to banks
(202)
Change in loans to customers
(17,173)
(15,626)
(7,628)
Change in other financial assets
(328)
Change in other assets
(213)
Change in assets of disposal groups
(4,117)
Change in bank deposits
1,749
(5,838)
Change in customer deposits
(18,964)
(29,492)
Change in settlement balance liabilities
4,633
Change in trading liabilities
828
(11,790)
Change in derivative liabilities
(21,652)
Change in other financial liabilities
3,640
6,564
989
Change in notes in circulation
Change in other liabilities
(904)
(807)
(1,294)
This note shows cash flows relating to obtaining or losing significant influence in associates or control of subsidiaries and net assets and liabilities purchased and sold. These cash flows are presented as investing activities on the cash flow statement.
Fair value given for business acquired
Acquisition of interest in associates
Additional investment in associates
Net assets and liabilities purchased
(2,296)
Net outflow of cash in respect of acquisitions
(2,301)
Disposal of net assets and liabilities
1,003
5,560
6,270
Loss on disposal of net assets and liabilities
(106)
Net inflow of cash in respect of disposals
995
5,473
Dividends received from associate
Net cash expenditure on intangible assets
(614)
(744)
(743)
Net (outflow)/inflow of cash
This note shows cash flows and non-cash movements relating to the financing activities of the Group, including movements in share capital, share premium, paid-in equity, subordinated liabilities and MRELs.
Share capital, share premium,
and paid-in equity
MRELs
14,734
15,590
16,519
6,260
8,429
22,265
23,423
(1,078)
(3,419)
1,312
(1,107)
(1,974)
Effects of foreign exchange
(987)
Changes in fair value of subordinated liabilities and MRELs
(594)
(1,806)
Preference shares reclassified to subordinated liabilities
Interest payable on subordinated liabilities and MRELs
942
15,413
Non-cash and other add back items and movements in operating assets and liabilities are adjusted for in the cash flow statement. Loans to banks and treasury bills with an original maturity of less than three months that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.
6,886
8,851
8,551
Loans to banks (1)
4,965
5,572
5,047
Cash and cash equivalents
Includes cash collateral posted with bank counterparties in respect of derivative liabilities of £3,660 million (2023 - £4,434 million; 2022 - £4,895 million).
Certain members of NatWest Group are required by law or regulation to maintain balances with the central banks in the jurisdictions in which they operate. NatWest Markets N.V. had mandatory reserve deposits with De Nederlandsche Bank N.V. of €95 million (2023 - €132 million, 2022 - €64 million). The Royal Bank of Scotland International Limited had balances with Central Bank of Luxembourg of £111 million (2023 - £135 million, 2022 - £108 million).
30 Directors' and key management remuneration
Directors and key management are remunerated for services rendered in the period. The executive directors may participate in the company's long-term incentive plans, executive share option and sharesave schemes and details of their interests in the company's shares arising from their participation are given in the directors' remuneration report. Details of the remuneration received by each director are also given in the directors' remuneration report.
Key management comprises members of the NatWest Group plc and NWH Ltd Boards, members of the NatWest Group plc and NWH Ltd Executive Committees, and the Chief Executives of NatWest Markets Plc and RBS International (Holdings) Limited. This is on the basis that these individuals have been identified as Persons Discharging Managerial Responsibilities of NatWest Group plc under the new governance structure.
Directors' remuneration
£000
Non-executive directors emoluments
1,547
Chair and executive directors emoluments
6,425
6,408
7,972
7,982
Amounts receivable under long-term incentive plans and share option plans
1,471
2,708
9,443
10,690
Compensation of key management
The aggregate remuneration of directors and other members of key management during the year was as follows:
Short-term benefits
20,862
21,098
Post-employment benefits
643
741
5,624
7,264
27,129
29,103
Short term benefits include benefits expected to be settled wholly within twelve months of balance sheet date. Post-employment benefits include defined benefit contributions for active members and pension funding to support contributions to the defined contribution schemes. Share-based payments include awards vested under rewards schemes.
This note presents information relating to any transactions with directors and key management. Key management comprises directors of the company and Persons Discharging Managerial Responsibilities (PDMRs) of NatWest Group plc.
For the purposes of IAS 24 Related party disclosures, key management comprises directors of the company and PDMRs of NatWest Group plc. Key management have banking relationships with NatWest Group entities which are entered into in the normal course of business and on substantially the same terms, including interest rates and security, as for comparable transactions with other persons of a similar standing or, where applicable, with other employees. These transactions did not involve more than the normal risk of repayment or present other unfavourable features.
Amounts in the table below are attributed to each person at their highest level of NatWest Group key management, and relate to those who were key management at any time during the financial period.
3,538
11,406
39,431
55,254
At 31 December 2024, amounts outstanding in relation to transactions, arrangements and agreements entered into by authorised institutions in NatWest Group, as defined in UK legislation, were £2,570,654 in respect of loans to 7 persons who were directors of the company at any time during the financial period.
A related party is a person or entity that is related to the entity that is preparing its financial statements. This includes subsidiaries, associates, joint ventures, post-employment benefits plans, Key management personnel and their close family members and entities controlled by them. Transactions between an entity and any related party are disclosed in the financial statements in accordance with both accounting standards and relevant listing rules to ensure readers are aware of how financial statements may be affected by these transactions.
UK Government
The UK Government’s shareholding in NatWest Group plc is managed by UK Government Investments Limited, a company wholly owned by the UK Government. At 31 December 2024 HM Treasury’s holding in NatWest Group plc’s ordinary shares was 9.99% (31 December 2023 - 37.97%). As a result, the UK Government through HM Treasury is no longer the controlling shareholder of NatWest Group plc as per UK listing rules. The UK Government and UK Government-controlled bodies remain related parties of the NatWest Group.
NatWest Group enters into transactions with many of these bodies. Transactions include the payment of: taxes – principally UK corporation tax (Note 7) and value added tax; national insurance contributions; local authority rates; and regulatory fees and levies (including the UK bank levy Note 3) and FSCS levy (Note 25) - together with banking transactions such as loans and deposits undertaken in the normal course of banker-customer relationships.
Bank of England facilities
NatWest Group may participate in a number of schemes operated by the Bank of England in the normal course of business.
In March 2024 Bank of England Levy replaced the Cash Ratio Deposit scheme. Members of NatWest Group that are UK authorised institutions are required to pay the levy having eligible liabilities greater than £600 million. They also have access to Bank of England reserve accounts: sterling current accounts that earn interest at the Bank of England Base rate.
NatWest Group provides guarantees for certain subsidiaries, liabilities to the Bank of England.
Other Related Parties
In accordance with IAS 24, transactions or balances between NatWest Group entities that have been eliminated on consolidation are not reported.
The primary financial statements of the parent company include transactions and balances with its subsidiaries which have been further disclosed in the relevant notes.
32 Related parties continued
Associates, joint ventures (JVs) and equity investments
In their roles as providers of finance, NatWest Group companies provide development and other types of capital support to businesses. These investments are made in the normal course of business. To further strategic partnerships, NatWest Group may seek to invest in third parties or allow third parties to hold a minority interest in a subsidiary of NatWest Group. We disclose as related parties for associates and joint ventures and where equity interest are over 10%. Ongoing business transactions with these entities are on normal commercial terms.
Amounts included in the NatWest Group financial statements, in aggregate, by category of related party are as follows:
Associates and
joint ventures
shares (1)
Investments
Loans to customers- amortised cost
813
(1)Represents investments in entities where ownership is more than 10%
Post employment benefits
NatWest Group recharges NatWest Group Pension Fund with the cost of pension management services incurred by it. NatWest Group Pension Fund holds bank accounts held with the NatWest Group plc. At 31 December 2024 these balances amounted to £43.2 million (2023 - £36.2 million).
NatWest Group Pension fund also holds certain interest rate swaps, inflation swaps, credit derivatives, cross currency swaps and forward exchange rate agreements where subsidiaries of NatWest Group act as counterparties. These transactions are on commercial terms and carried out on an arms-length basis.
During February 2023, NatWest Group entered into an agreement to establish a new legal structure to hold assets, consolidated on NatWest Group’s balance sheet, to meet potential future contributions required by the Main section of the Group’ Pension Fund. This transaction required transfer of £471 million to the Reservoir Trust after the final dividend for 2022 approved by shareholders. This transaction does not create a pension liability with the Main section of the Group Pension Fund. Refer to details in Note 5 and in Material contracts information on page 309.
A post balance sheet event is an event that takes place between the reporting date and the date of approval of the financial statements. Significant events are included in the financial statements either to provide new information about conditions that existed at 31 December 2024 (reporting date), including estimates used to prepare the financial statements (known as an adjusting event) or to provide new information about conditions that did not exist at 31 December 2024 (non-adjusting events). This note provides information relating to material non-adjusting events.
On 18 February 2025, NatWest Group plc priced €1,000,000,000 3.723% fixed to fixed rate reset subordinated Tier 2 notes due 2035, settling on 25 February 2025.
Other than as disclosed in the accounts, there have been no other significant events subsequent to 31 December 2024 which would require a change or additional disclosure.
Non-IFRS financial measures
NatWest Group prepares its financial statements in accordance with UK-adopted International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). This document contains a number of non-IFRS measures, also known as alternative performance measures, defined under the European Securities and Markets Authority (ESMA)guidance or non-GAAP financial measures in accordance with the Securities and Exchange Commission (SEC) regulations. These measures are adjusted for notable and other defined items which management believes are not representative of the underlying performance of the business and which distort period-on-period comparison. The non-IFRS measures provide users of the financial statements with a consistent basis for comparing business performance between financial periods and information on elements of performance that are one-off in nature. The non-IFRS measures also include the basis of calculation for metrics that are used throughout the banking industry. These non-IFRS measures are not a substitute for IFRS measures and a reconciliation to the closest IFRS measure is presented where appropriate.
Measure
Refer to table 3. Cost:income ratio (excl. litigation and conduct) on page 268.
The cost:income ratio (excl. litigation and conduct) is calculated as other operating expenses (operating expenses less litigation and conduct costs) divided by total income. Litigation and conduct costs are excluded as they are one-off in nature, difficult to forecast for Outlook purposes and distort period-on-period comparisons.
Customer deposits excluding central items
Refer to Segmental performance on pages 14-21 for components of calculation.
Customer deposits excluding central items is calculated as total NatWest Group customer deposits excluding Central items & other customer deposits. Central items & other includes Treasury repo activity and Ulster Bank RoI. The exclusion of Central items & other removes the volatility relating to Treasury repo activity and the reduction of deposits as part of our withdrawal from the Republic of Ireland.
These items may distort period-on-period comparisons and their removal gives the user of the financial statements a better understanding of the movements in customer deposits.
Refer to Condensed consolidated balance sheet on page 170 for components of calculation.
Funded assets is calculated as total assets less derivative assets. This measure allows review of balance sheet trends exclusive of the volatility associated with derivative fair values.
Loan:deposit ratio (excl. repos and reverse repos)
Refer to table 7. Loan:deposit ratio (excl. repos and reverse repos) on page 270.
Loan:deposit ratio (excl. repos and reverse repos) is calculated as net customer loans held at amortised cost excluding reverse repos divided by total customer deposits excluding repos. This metric is used to assess liquidity.
The removal of repos and reverse repos reduces volatility and presents the ratio on a basis that is comparable to UK peers. The nearest ratio using IFRS measures is: loan:deposit ratio - this is calculated as net loans to customers held at amortised cost divided by customer deposits.
NatWest Group return on tangible equity
Refer to table 4. NatWest Group return on tangible equity on page 269.
NatWest Group return on tangible equity comprises annualised profit or loss for the period attributable to ordinary shareholders divided by average tangible equity. Average tangible equity is average total equity excluding average non-controlling interests, average other owners’ equity and average intangible assets. This measure shows the return NatWest Group generates on tangible equity deployed. It is used to determine relative performance of banks and used widely across the sector, although different banks may calculate the rate differently. The nearest ratio using IFRS measures is: return on equity - this comprises profit attributable to ordinary shareholders divided by average total equity.
Non-IFRS financial measures continued
Net interest margin and average interest earning assets
Net interest margin is net interest income, as a percentage of average interest earning assets (IEA). Average IEA are average IEA of the banking business of NatWest Group and primarily consists of cash and balances at central banks, loans to banks, loans to customers and other financial assets mostly comprising debt securities. Average IEA shows the average asset base generating interest over the period.
Net loans to customers excluding central items
Net loans to customers excluding central items is calculated as total NatWest Group net loans to customers excluding Central items & other net loans to customers. Central items & other includes Treasury reverse repo activity and Ulster Bank RoI. The exclusion of Central items & other removes the volatility relating to Treasury reverse repo activity and the reduction of loans to customers as part of our withdrawal from the Republic of Ireland.
This allows for better period-on-period comparisons and gives the user of the financial statements a better understanding of the movements in net loans to customers.
Operating expenses excluding litigation and conduct
Refer to table 2. Operating expenses excluding litigation and conduct on page 267.
The management analysis of operating expenses shows litigation and conduct costs separately. These amounts are included within staff costs and other administrative expenses in the statutory analysis. Other operating expenses excludes litigation and conduct costs, which are more volatile and may distort period-on-period comparisons.
Segmental return on equity
Refer to table 5. Segmental return on equity on page 269.
Segment return on equity comprises segmental operating profit or loss, adjusted for paid-in equity and tax, divided by average notional equity. Average RWAe is defined as average segmental RWAs incorporating the effect of capital deductions. This is multiplied by an allocated equity factor for each segment to calculate the average notional equity. This measure shows the return generated by operating segments on equity deployed.
Tangible net asset value (TNAV) per ordinary share
Refer to table 6. Tangible net asset value (TNAV) per ordinary share on page 270.
TNAV per ordinary share is calculated as tangible equity divided by the number of ordinary shares in issue. This is a measure used by external analysts in valuing the bank and allows for comparison with other per ordinary share metrics including the share price. The nearest ratio using IFRS measures is: net asset value (NAV) per ordinary share - this comprises ordinary shareholders’ interests divided by the number of ordinary shares in issue.
Refer to table 1. Total income excluding notable items on page 266.
Total income excluding notable items is calculated as total income less notable items. The exclusion of notable items aims to remove the impact of one-offs and other items which may distort period-on-period comparisons.
1. Total income excluding notable items
Less notable items:
Fair value, disposal losses and asset disposals/strategic risk reduction
Loss on redemption of own debt
Effective interest rate adjustment as a result of redemption of own debt
Profit from insurance liabilities
Liquidity Asset Bond sale (losses)/gains
369
Ulster Bank RoI fair value mortgage adjustments
13,061
2. Operating expenses excluding litigation and conduct
Statutory
and conduct
operating
costs
expenses
Year ended 31 December 2024
1,819
Year ended 31 December 2023
Year ended 31 December 2022
3,671
340
1,686
2,026
7,302
3. Cost:income ratio (excl. litigation and conduct)
2,937
716
4,274
Less litigation and conduct costs
2,827
713
4,118
Cost:income ratio
73.9
53.7
55.4
2,828
4,091
2,711
3,867
387
47.7
69.2
2,593
3,744
728
(181)
(385)
2,484
610
45.9
58.9
44.0
57.8
55.5
4. NatWest Group return on tangible equity
Average total equity
38,018
36,201
Adjustment for other owners' equity and intangibles
(12,226)
(11,486)
Adjusted total tangible equity
25,792
24,715
Return on tangible equity
5. Segmental return on equity
Operating profit (£m)
Paid-in equity cost allocation (£m)
(79)
Adjustment for tax (£m)
(659)
(851)
Adjusted attributable profit (£m)
1,693
2,551
Average RWAe (£bn)
63.4
Equity factor
Average notional equity (£bn)
(723)
(768)
1,860
11.4
13.5
14.0
15.0
(187)
(590)
1,976
104.0
24.5
6. Tangible net asset value (TNAV) per ordinary share
Year ended
Ordinary shareholders’ interests (£m)
Less intangible assets (£m)
(7,588)
Tangible equity (£m)
26,482
25,653
Ordinary shares in issue (millions) (1)
NAV per ordinary share (pence)
424p
378p
TNAV per ordinary share (pence)
The number of ordinary shares in issue excludes own shares held.
7. Loan:deposit ratio (excl. repos and reverse repos)
As at
366,340
Less reverse repos
(34,846)
(27,117)
(19,749)
Loans to customers - amortised cost (excl. reverse repos)
365,480
354,316
346,591
450,318
Less repos
(1,363)
(10,844)
(9,828)
Customer deposits cost (excl. repos)
420,533
440,490
Loan:deposit ratio
Performance measures not defined under IFRS
The table below summarises other performance measures used by NatWest Group, not defined under IFRS, and therefore a reconciliation to the nearest IFRS measure is not applicable.
AUMAs
AUMAs comprises both assets under management (AUMs) and assets under administration (AUAs) serviced through the Private Banking segment. AUMs comprise assets where the investment management is undertaken by Private Banking on behalf of Private Banking, Retail Banking and Commercial & Institutional customers.
AUAs comprise i) third party assets held on an execution-only basis in custody by Private Banking, Retail Banking and Commercial & Institutional for their customers, for which the execution services are supported by Private Banking, and for which Private Banking receives a fee for providing investment management and execution services to Retail Banking and Commercial & Institutional business segments ii) AUA of Cushon, acquired on 1 June 2023, which are supported by Private Banking and held and managed by third parties.
This measure is tracked and reported as the amount of funds that we manage or administer, and directly impacts the level of investment income that we receive.
AUMA net flows
AUMA net flows represents assets under management and assets under administration.
AUMA net flows is reported and tracked to monitor the business performance of new business inflows and management of existing client withdrawals across Private Banking, Retail Banking and Commercial & Institutional.
Climate and sustainable funding and financing
The climate and sustainable funding and financing metric is used by NatWest Group to measure the level of support it provides customers, through lending products and underwriting activities, to help in their transition towards a net zero, climate resilient and sustainable economy. We have a target to provide £100 billion of climate and sustainable funding and financing between the 1 of July 2021 and the end of 2025. As part of this, we aim to provide at least £10 billion in lending for residential properties with EPC ratings A and B between 1 January 2023 and the end of 2025.
Loan impairment rate is the annualised loan impairment charge divided by gross customer loans. This measure is used to assess the credit quality of the loan book.
Third party rates
Third party customer asset rate is calculated as annualised interest receivable on third-party loans to customers as a percentage of third-party loans to customers. This excludes assets of disposal groups, intragroup items, loans to banks and liquid asset portfolios. Third party customer funding rate reflects interest payable or receivable on third-party customer deposits, including interest bearing and non- interest bearing customer deposits. Intragroup items, bank deposits, debt securities in issue and subordinated liabilities are excluded for customer funding rate calculation.
Wholesale funding
Wholesale funding comprises deposits by banks (excluding repos), debt securities in issue and subordinated liabilities. Funding risk is the risk of not maintaining a diversified, stable and cost-effective funding base. The disclosure of wholesale funding highlights the extent of our diversification and how we mitigate funding risk.
Selected statistical and other data
Exchange rates
ADR payment information
Risk factors
Description of property and equipment
Major shareholders
Our code of conduct
Iran sanctions and related disclosures
Supervision
Material contracts
Insider trading policy
The geographic analysis, including the average balance sheet and interest rates, changes in net interest income and average interest rates, yields and spreads in this report have generally been compiled on the basis of location of office - UK and overseas - unless indicated otherwise. ‘UK’ in this context includes transactions conducted through the offices in the UK which service international banking transactions.
Yields and spreads of the banking business
Gross yield (1,4)
- Group
4.04
2.29
4.22
2.42
- Overseas
1.45
Interest spread (2,4)
1.32
1.58
1.37
1.70
(1.79)
(2.86)
(0.03)
Net interest yield (3,4)
1.92
0.90
Gross yield is the interest earned on average interest-earning assets of the banking book as reported within the average balance sheet and related interest table.
Interest spread is the difference between the gross yield and the interest rate paid on average interest-bearing liabilities of the banking business as reported within the average balance sheet and related interest table.
Net interest yield is net interest income of the banking business as a percentage of interest-earning assets (IEA) of the banking business as reported within the average balance sheet and related interest table.
The analysis into UK and overseas has been compiled on the basis of location of office.
Average balance sheet and related interest
balance
Interest
Rate
-UK
113,948
3.29
105,564
3,443
3.26
146,705
1,859
1.27
-Overseas
26,089
29,072
294
1.01
28,885
351,680
18,169
5.17
345,875
15,458
4.47
328,467
9,972
1,858
6.78
1,744
5.31
52,110
35,753
1,638
4.58
34,632
525
5.28
2,583
3.77
3,468
0.45
Interest-earning assets
517,738
24,622
487,192
20,539
509,804
12,356
30,540
33,399
34,429
Total interest-earning assets
-banking business (1,2,3,5)
548,278
520,591
21,023
544,233
12,461
-trading business (4)
60,350
51,932
69,618
608,628
572,523
613,851
Non-interest-earning assets
115,655
130,927
151,653
724,283
703,450
765,504
Percentage of assets applicable to overseas operations
12.93
14.27
10.44
29,684
1,516
16,428
1,033
6.29
15,443
1.73
4.37
0.91
Customer deposits: demand
93,513
2,090
2.23
90,833
1,428
1.57
98,226
742
6,808
Customer deposits: savings
142,847
3,182
141,374
2,305
158,453
Customer deposits: other time
59,054
2,901
4.91
35,307
1,389
3.93
14,755
4,439
3.56
4,569
3.33
2,497
56,236
5.30
52,927
2,908
5.49
45,910
1,161
2.53
2,912
1,978
1,256
6,120
7.58
6,334
460
7.26
7,426
4.75
0.44
459
3.76
Internal funding of trading business
13,817
17,625
1.26
(470)
(2,691)
(1,774)
Interest-bearing liabilities
401,271
13,623
3.39
360,828
9,744
2.70
355,803
2,580
0.73
7,934
5,342
4.31
11,593
Total interest-bearing liabilities
-banking business (1,2)
409,205
3.40
366,170
9,974
2.72
367,396
2,619
0.71
79,398
72,085
68,505
488,603
438,255
435,901
Non-interest-bearing liabilities:
Demand deposits
133,030
145,403
172,175
577
3,497
64,393
83,000
115,724
38,055
36,215
38,207
Percentage of liabilities applicable to overseas operations
9.99
9.64
7.82
Other financial data
Return on average total assets (1)
Ratios
Wholesale
cards
personal
Average loans (£m)
205,254
6,390
220,408
26,802
80,467
106,955
217,460
437,868
Provision charges/(releases) (£m)
As a % of average loans during the year
Total provisions charged/(released) to income statement
0.00
1.80
1.84
205,499
5,099
219,449
29,976
77,467
99,289
4,278
211,010
430,459
Provision charges/(releases)
3.78
(0.05)
197,287
9,189
210,526
31,595
81,880
100,169
5,084
218,728
429,254
(0.04)
1.38
(0.06)
1-5 Years
5-15 years
15 years
10,964
37,696
81,709
78,340
208,709
2,260
6,786
3,979
4,081
559
8,861
6,529
17,513
6,083
2,036
32,161
88,269
11,485
4,752
104,600
2,829
4,127
28,502
31,336
14,382
2,785
77,005
142,440
104,714
110,160
84,935
442,249
of which:
Fixed interest rates
52,006
46,977
83,021
75,593
257,597
Variable interest rates
55,678
56,800
27,047
9,234
148,759
19,627
19,664
15,119
15,375
Other financial asset
Analysis of change in net interest income - volume and rate analysis
Volume and rate variances have been calculated based on movements in average balances over the period and changes in interest rates on average interest-earning assets and average interest-bearing liabilities. Changes due to a combination of volume and rate are allocated pro rata to volume and rate movements.
2024 over 2023 - statutory
2023 over 2022 - statutory
(Decrease)/increase due to changes in:
volume
rate
change
2,230
Overseas
2,449
4,931
1,095
1,113
Total interest receivable of the banking business
2,724
4,082
8,256
8,183
1,332
2,832
8,653
8,562
(483)
(748)
(766)
(662)
(1,235)
(1,218)
(853)
(877)
(2,094)
(2,066)
(1,103)
(409)
(1,512)
(633)
(471)
(1,104)
(130)
(203)
(1,545)
(1,748)
(323)
(146)
Total interest payable of the banking business
(1,981)
(1,898)
(3,879)
(760)
(6,404)
(7,164)
(59)
(170)
(191)
(2,019)
(3,938)
(781)
(6,574)
(7,355)
Movement in net interest income
1,852
(64)
(687)
913
2,079
1,207
Analysis of debt securities - fair value through other comprehensive income
The following table analyses debt securities and the related yield (based on weighted averages) by remaining maturity and issuer:
After 1 but within 5 years
After 5 but within 10 years
After 10 years
Amount
Yield
Central and local governments
8,291
2,087
2,041
862
338
3,773
2,010
1,069
Other debt
9,833
1,479
12,589
18,698
4,913
Of which ABS (1)
3,442
620
3,690
1,310
2,147
2,323
1,123
2,124
6,887
1,418
7,968
13,520
4,491
2,344
1,571
2,579
511
2,120
3,934
850
7,175
501
1,757
4,232
1,309
6,765
4,387
8,821
2,296
16,499
425
1,993
2,961
Includes covered bonds.
Analysis of debt securities – amortised cost
The following table analyses debt securities at amortised cost and the related yield (based on weighted averages) by remaining maturity and issuer.
3,153
5,449
5,373
8,486
8,903
2,064
1,198
4,987
7,529
7,560
4,481
2,562
937
786
2,316
2,561
9,582
5,925
2,737
13,135
Analysis of deposits - product analysis
The following table analyses deposits excluding repos by geographical area (location of office) and type of deposit.
- interest-free
136,477
142,865
174,337
- interest-bearing
316,585
299,011
286,023
Total UK
453,062
441,876
460,360
12,732
14,402
16,213
Total overseas
13,518
15,234
18,921
466,580
457,110
479,281
13,475
15,211
18,899
23,872
26,088
19,991
16,723
13,371
14,647
3,546
1,405
Total repos
35,015
Time deposits
Uninsured time deposits by maturity
19,063
17,797
12,573
3-6 months
7,479
12,941
6,274
6-12 months
11,034
4,889
Over 12 months
11,006
18,422
15,414
49,199
60,194
39,149
Total uninsured time deposits have been calculated as the aggregate carrying value of the Group’s time deposits less the insured time deposit amounts as determined for regulatory purposes by the Group’s licensed deposit-takers, being those deposits eligible for immediate protection under deposit protection schemes (principally the Financial Services Compensation Scheme in the UK)
Short-term borrowings
Short-term borrowings comprise repurchase agreements, borrowings from financial institutions, commercial paper and certificates of deposit. Derivative collateral received from financial institutions is excluded from the table, as are certain long-term borrowings.
At year end
During the year
Weighted average
interest rate
Maximum balance
Average balance
Commercial paper
Certificates of deposits
Excludes derivative cash collateral of £13 billion at 31 December 2024 (2023 - £15 billion; 2022 - £18 billion); and 2024 average of £13 billion (2023 - £15 billion; 2022 - £19 billion).
Balances are generally based on monthly data. Average interest rates during the year are computed by dividing total interest expense by the average amount borrowed. Weighted average interest rates at year end are for a single day and as such may reflect one-day market distortions, which may not be indicative of generally prevailing rates.
Other contractual cash obligations
The table below summarises other contractual cash obligations by payment date.
Contractual obligations to purchase goods or services
490
Undrawn formal facilities, credit lines and other commitments to lend were £132,958 million (2023 - £124,790 million; 2022 - £118,779 million). While NatWest Group has given commitments to provide these funds, some facilities may be subject to certain conditions being met by the counterparty. NatWest Group does not expect all facilities to be drawn, and some may lapse before drawdown.
Additional information on reverse repos and repos
The following table shows the value of reverse repos and repos included within the below balance sheet captions:
1,794
34,846
27,117
The following tables show the Noon Buying Rate in New York for cable transfers in sterling as certified for customs purposes by the Federal Reserve Bank of New York.
January
December
November
October
September
August
US dollars per £1
Noon Buying Rate
1.2530
1.2783
1.3015
1.3282
1.3428
1.3235
1.2158
1.2521
1.2516
1.2856
1.3027
1.2695
Period end rate
1.2743
1.2077
1.3500
1.3662
Average rate for the year (1)
1.2778
1.2477
1.2323
1.3739
1.2923
Consolidation rate (2)
1.2540
1.2746
1.2040
1.3486
1.3655
Average rate for the year
1.2780
1.2437
1.2370
1.3755
1.2836
Fees paid by ADR holders
The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depository may collect its annual fee for depository services by deductions from cash distributions or by directly billing investors or by changing the book-entry system accounts of participants acting for them. The depository may generally refuse to provide fee-attracting services until its fees for those services are paid.
Persons depositing or withdrawing shares must pay:
For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
$0.02 (or less) per ADS
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs
Registration or transfer fees
Expenses of the depository
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes
Any charges incurred by the depository or its agents for servicing the deposited securities
Fees payable by the depository to the issuer
Fees incurred in past annual Period
From 1 January 2024 to 31 December 2024, the company received from the depository $1,226,827.48 for continuing annual stock exchange listing fees, standard out-of-pocket maintenance costs for the ADRs (consisting of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend cheques, electronic filling of U.S. Federal tax information, mailing required tax forms, stationary, postage, facsimile, and telephone calls), any applicable performance indicators relating to the ADR facility, underwriting fees and legal fees.
Fees to be paid in the future
The Bank of New York Mellon, as depository, has agreed to reimburse the company for expenses they incur that are related to establishment and maintenance expenses of the ADS program. The depository has agreed to reimburse the Company for its continuing annual stock exchange listing fees. The depository has also agreed to pay the standard out-of-pocket maintenance costs for the ADRs, which consist of the expenses of postage and envelopes for mailing annual and interim reports, printing and distributing dividend cheques, electronic filing of U.S. federal tax information, mailing required tax forms, stationary, postage, facsimile, and telephone calls. It has also agreed to reimburse the company annually for certain investor relationship programs of special investor relations promotional activities. In certain instances, the depository has agreed to provide additional payments to the company based on any applicable performance indicators relating to the ADR facility. There are limits on the amount of expenses for which the depository will reimburse the company, but the amount of reimbursement available to the company is not necessarily tied to the amount of fees the depository collects from investors.
Principal Risks and Uncertainties
Set out below are certain risk factors that could have a material adverse effect on NatWest Group’s future results, its financial condition and/or prospects and cause them to be materially different from what is forecast or expected, and directly or indirectly impact the value of its securities. These risk factors are broadly categorised and should be read in conjunction with other risk factors in this section and other parts of this annual report, including the forward-looking statements section, the strategic report and the risk and capital management section. They should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties facing NatWest Group.
NatWest Group, its customers and its counterparties face continued economic and political risks and uncertainties in the UK and global markets, including as a result of inflation and interest rates, supply chain disruption, and geopolitical developments.
As a principally UK-focused banking group, NatWest Group is affected by global economic and market conditions and is particularly exposed to those conditions in the UK. Uncertain and volatile economic conditions in the UK or globally can create a challenging operating environment for financial services companies such as NatWest Group.
The outlook for the UK and the global economy is affected by many dynamic factors including: GDP, unemployment, inflation and interest rates, asset prices (including residential and commercial property), energy prices, monetary and fiscal policy (such as increases in bank levies), supply chain disruption, protectionist policies or trade barriers (including tariffs).
Economic and market conditions could be exacerbated by a number of factors including: instability in the UK and/or global financial systems, market volatility and change, fluctuations in the value of the pound sterling, new or extended economic sanctions, volatility in commodity prices, political uncertainty, concerns regarding sovereign debt (including sovereign credit ratings), any lack or perceived lack of creditworthiness of a counterparty or borrower that may trigger market-wide liquidity problems, changing demographics in the markets that NatWest Group and its customers serve, rapid changes to the economic environment due to the adoption of technology, automation, artificial intelligence, or due to the consequences of climate change, biodiversity loss, nature degradation and/or increasing social and other inequalities.
NatWest Group is also exposed to risks arising out of geopolitical events or political developments that may hinder economic or financial activity levels and may, directly or indirectly, impact UK, regional or global trade and/or NatWest Group’s customers and counterparties. NatWest Group’s business and performance could be negatively affected by political, military or diplomatic events, geopolitical tensions, armed conflict (for example, the Russia-Ukraine conflict and Middle East conflicts), terrorist acts or threats, more severe and frequent extreme weather events, widespread public health crises, and the responses to any of the above scenarios by various governments and markets.
In recent years, the UK has experienced significant political uncertainty. NatWest Group may also face political uncertainty in Scotland if there is another Scottish independence referendum. Scottish independence may adversely affect NatWest Group plc both in relation to its entities incorporated in Scotland and in other jurisdictions. Any changes to Scotland’s relationship with the UK or the EU may adversely affect the environment in which NatWest Group plc and its subsidiaries operate and may require further changes to NatWest Group, independently or in conjunction with other mandatory or strategic structural and organisational changes, any of which could adversely affect NatWest Group.
The value of NatWest Group’s own and other securities may be materially affected by economic and market conditions. Market volatility, illiquid market conditions and disruptions in the financial markets may make it very difficult to value certain of NatWest Group’s own and other securities, particularly during periods of market displacement. This could cause a decline in the value of NatWest Group’s own and other securities, or inaccurate carrying values for certain financial instruments.
In addition, financial markets are susceptible to severe events evidenced by, or resulting in, rapid depreciation in asset values, which may be accompanied by a reduction in asset liquidity. Under these conditions, hedging and other risk management strategies may not be as effective at mitigating losses as they would be under more normal market conditions. Moreover, under these conditions, market participants are particularly exposed to trading strategies employed by many market participants simultaneously (and often automatically) and on a large scale, increasing NatWest Group’s counterparty risk. NatWest Group’s risk management and monitoring processes seek to quantify and mitigate NatWest Group’s exposure to extreme market moves. However, market events have historically been difficult to predict, and NatWest Group, its customers and its counterparties could realise significant losses if severe market events were to occur.
Any of the above may have a material adverse effect on NatWest Group’s future results, financial condition, prospects, and/or reputation.
Risk factors continued
Changes in interest rates will continue to affect NatWest Group’s business and results.
NatWest Group’s performance is affected by changes in interest rates. Benchmark overnight interest rates, such as the UK base rate, decreased in 2024, and forward rates suggest that interest rates will continue to decline in 2025. Stable interest rates support more predictable income flow and less volatility in asset and liability valuations, although persistently low and negative interest rates may adversely affect NatWest Group. Further, volatility in interest rates may result in unexpected outcomes both for interest income and asset and liability valuations which may adversely affect NatWest Group. For example, decreases in key benchmark rates such as the UK base rate may adversely affect NatWest Group’s net interest margin, and unexpected movements in spreads between key benchmark rates such as sovereign and swap rates may in turn affect liquidity portfolio valuations. In addition, unexpected sharp rises in rates may also have negative impacts on some asset and derivative valuations.
Moreover, customer and investor responses to rapid changes in interest rates can have an adverse effect on NatWest Group. For example, customers may make deposit choices that provide them with higher returns than those being offered by NatWest Group. Alternatively, NatWest Group may not respond with competitive products as rapidly, for example following an interest rate change, which may in turn decrease NatWest Group’s net interest income.
Movements in interest rates also influence and reflect the macroeconomic situation more broadly, affecting factors such as business and consumer confidence, property prices, default rates on loans, customer behaviour (which may adversely impact the effectiveness of NatWest Group’s hedging strategy) and other indicators that may indirectly affect NatWest Group.
Fluctuations in currency exchange rates may adversely affect NatWest Group’s results and financial condition.
Decisions of central banks (including the BoE, the European Central Bank (‘ECB’) and the US Federal Reserve) and political or market events, which are outside NatWest Group’s control, may lead to sharp and sudden fluctuations in currency exchange rates.
Although NatWest Group is principally a UK-focused banking group, it is subject to structural foreign exchange risk from capital deployed in NatWest Group’s foreign subsidiaries, branches and other strategic equity shareholdings. NatWest Group also relies on issuing securities in non-sterling currencies, such as US dollars and euros, that assist in meeting NatWest Group’s regulatory requirements. In addition, NatWest Group conducts banking activities in non-sterling currencies (for example, loans, deposits and dealing activity) which affect its revenue. NatWest Group also uses service providers based outside the UK for certain services and as a result certain operating results are subject to fluctuations in currency exchange rates.
NatWest Group maintains policies and procedures designed to manage the impact of its exposure to fluctuations in currency exchange rates. Nevertheless, changes in currency exchange rates, particularly in the sterling-US dollar and sterling-euro rates, may adversely affect various accounting and financial metrics including, the value of assets, liabilities (including the total amount of instruments eligible to contribute towards the minimum requirement for own funds and eligible liabilities (‘MREL’)), foreign exchange dealing activity, income and expenses, RWAs and hence the reported earnings and financial condition of NatWest Group.
HM Treasury (or UKGI on its behalf) could exercise, or be perceived as being capable of exercising, influence over NatWest Group.
In its Autumn Budget 2024, the UK Government confirmed its commitment to exit its shareholding in NatWest Group plc by 2025-2026 subject to market conditions and sales representing value for money for taxpayers. Moreover, following various prior sell-downs of parts of its shareholding in NatWest Group plc HM Treasury is no longer a “controlling shareholder” of NatWest Group plc. As at 13 January 2025, HM Treasury held 8.90% of the ordinary share capital with voting rights of NatWest Group plc.
HM Treasury has indicated that it intends to respect the commercial decisions of NatWest Group and that NatWest Group will continue to have its own independent board of directors and management team determining its own strategy. However, for as long as HM Treasury remains NatWest Group plc’s largest single shareholder, HM Treasury and UK Government Investments Limited (‘UKGI’) (as manager of HM Treasury’s shareholding) could exercise, or be perceived as being capable of exercising, influence over NatWest Group plc, such as on matters relating to changes to NatWest Group’s directors and senior management, its capital strategy, dividend policy, remuneration policy or the conduct by NatWest Group of its operations. HM Treasury or UKGI’s approach largely depends on government policy, which could change. Any exercise of such influence, or the perception that such influence may be exercised, may have an adverse effect on NatWest Group’s reputation or the price of its securities.
The way in which HM Treasury or UKGI exercises HM Treasury’s rights as NatWest Group’s largest single shareholder could give rise to conflicts between the interests of HM Treasury and the interests of other shareholders, including as a result of a change in government policy, which may in turn adversely affect NatWest Group.
Any of the above may have a material adverse effect on NatWest Group’s future results, financial condition, prospects, reputation, and/or the price of its securities.
The implementation and execution of NatWest Group’s strategy carries execution and operational risks and it may not achieve its stated aims and targeted outcomes.
NatWest Group’s strategy (including the strategic priorities of disciplined growth, bank-wide simplification and active balance sheet and risk management) is intended to reflect the rapidly changing environment and backdrop of significant disruption in society driven by technology and changing customer expectations.
Further, shifting trends including digitalisation, decarbonisation, automation, artificial intelligence, e-commerce and hybrid working, have resulted in significant market volatility and change.
There is also increasing investor, employee, stakeholder, regulatory and customer scrutiny regarding how businesses address these changes and related environmental challenges, including climate change, biodiversity and other sustainability issues, including how NatWest Group supports its customers’ transition to net zero, is tackling inequality, working conditions, workplace health, safety and wellbeing, diversity and inclusion, data protection and management, workforce management, human rights and supply chain management.
Many factors may adversely impact the successful implementation of NatWest Group’s strategy, including:
Delivery of NatWest Group’s strategy will require:
In pursuing its strategy, NatWest Group may not be able to successfully: (i) implement some or all aspects of its strategy; (ii) meet any or all of the related targets or expectations of its strategy; and otherwise realise the anticipated benefits of its strategy, in a timely manner, or at all; or (iii) realise the intended strategic objectives of any other future strategic or growth initiative. The scale and scope of NatWest Group’s strategy and the intended changes continue to present material business, operational and regulatory (including compliance with the UK ring-fencing regime), conflicts, legal, execution, IT system, cybersecurity, internal culture, conduct and people risks. Implementing changes and strategic actions, including in respect of any growth, simplification or cost-saving initiatives, requires the effective application of robust governance and controls frameworks and IT systems and there is a risk that NatWest Group may not be successful in these respects.
The implementation of NatWest Group’s strategy could result in materially higher costs or risks than initially contemplated (including due to material uncertainties and factors outside of NatWest Group’s control) and may not be completed as planned (both in terms of substantive targets and timing), or at all. This could lead to additional management actions by NatWest Group.
Additionally, as a result of the UK’s withdrawal from the EU, certain aspects of the services provided by NatWest Group require local licences or individual equivalence decisions (temporary or otherwise) by relevant regulators.
In April 2024, the European Parliament approved the Banking Package (CRR III/CRD VI). From 10 January 2027, non-EU firms providing ‘banking services’ will be required to apply for and obtain authorisation to operate as third country branches in each relevant EU member state where they provide these services, unless an exemption applies. NatWest Group continues to evaluate its EU operating model, making adaptations as necessary. Changes to, or uncertainty regarding, NatWest Group’s EU operating model have been, and may continue to be, costly and may: (i) adversely affect customers and counterparties who are dependent on trading with the EU or personnel from the EU; and/or (ii) result in further costs and/or regulatory sanction, due to a failure to receive the required regulatory permissions and/or further changes to NatWest Group’s business operations, product offering, customer engagement, and regulatory requirements.
Each of these risks, and others identified in this section entitled ‘Principal Risks and Uncertainties’, individually or collectively could jeopardise the implementation and delivery of NatWest Group’s strategy, impact NatWest Group’s products and services offering, its reputation with customers or business model and adversely affect NatWest Group’s ability to deliver its strategy and meet its targets, guidance, and forecasts.
Acquisitions, divestments, or other transactions by NatWest Group may not be successful.
NatWest Group may decide to undertake acquisitions, investments, the purchase of assets and liabilities, divestments, restructurings, reorganisations, joint ventures and other strategic partnerships, as well as other transactions and initiatives. In doing so, NatWest Group may have to compete with larger banks or financial institutions or other larger entities offering financial services products (including those that emerge from mergers and consolidations, as well as retail and technology conglomerates). These competitors may have more bargaining power in negotiations than NatWest Group, and therefore may be in a position to extract more advantageous terms than NatWest Group. Refer to ‘NatWest Group operates in markets that are highly competitive, with competitive pressures and technology disruption’.
NatWest Group may pursue these transactions and initiatives to, amongst others: (i) enhance capabilities and/or increase scale that may lead to better productivity or cost efficiencies; (ii) acquire talent; (iii) pursue new products or expand existing products; and/or (iv) enter new markets or enhance its presence in existing markets. In pursuing its strategy, NatWest Group may not fully realise the expected benefits and value from the above-mentioned transactions and initiatives in the time, or to the degree, anticipated, or at all.
In particular, NatWest Group may: (i) fail to realise the business rationale for the transaction or initiative, or rely on assumptions underlying the business plans supporting the valuation of a target transaction or initiative that may prove inaccurate (for example, regarding synergies and expected commercial demand); (ii) fail to successfully integrate any acquired businesses, investment, joint-venture or assets (including in respect of technologies, existing strategies, products, governance, systems and controls, and human capital) or to successfully divest or restructure a business; (iii) fail to retain key employees, customers and suppliers of any acquired or restructured business; (iv) be required or wish to terminate pre-existing contractual relationships, which could prove costly and/or be executed on unfavourable terms and conditions; (v) fail to discover certain contingent or undisclosed liabilities in businesses that it acquires, or its due diligence to discover any such liabilities may be inadequate; and (vi) not obtain necessary regulatory and other approvals or onerous conditions may be attached to such approvals. Accordingly, NatWest Group may not be successful in achieving its strategy and any particular transaction may not succeed, may be limited in scope or scale and may not conclude on the terms contemplated, or at all.
The transfer of NatWest Group’s Western European corporate portfolio involves certain risks.
To improve efficiencies and best serve customers following the UK’s withdrawal from the EU, certain assets, liabilities, transactions and activities of NatWest Group (including its Western European corporate portfolio principally consisting of term funding and revolving credit facilities), are expected to be: (i) transferred from the ring-fenced subgroup of NatWest Group to NWM Group and/or (ii) transferred to the ring-fenced subgroup of NatWest Group from NWM Group, subject to regulatory and customer requirements. The timing, success and quantum of any of these transfers remain uncertain as is the impact of these transactions on its results of operations.
As a result, this may have a material adverse effect on NatWest Group’s future results, financial condition, prospects, and/or reputation.
NatWest Group may not achieve its ambitions or targets, meet its guidance, or be in a position to continue to make discretionary capital distributions (including dividends to shareholders).
NatWest Group has set a number of financial, capital and operational targets and provided guidance including in respect of its: CET1 ratio target, return on tangible equity (RoTE), total income, other operating expenses, loan impairment rate, RWAs, ordinary dividends, funding plans and requirements, employee engagement, diversity and inclusion as well as climate-related targets (including its climate and sustainable funding and financing targets) and customer satisfaction targets and discretionary capital distributions (including dividends to shareholders). Refer to ‘The implementation and execution of NatWest Group’s strategy carries execution and operational risks and it may not achieve its stated aims and targeted outcomes.’
NatWest Group’s ability to meet its ambitions, targets, guidance, and make discretionary capital distributions is subject to various internal and external factors, risks and uncertainties. These include but are not limited to: UK and global macroeconomic, political, market and regulatory uncertainties, customer behaviour, operational risks and risks relating to NatWest Group’s business model and strategy (including risks associated with climate and other sustainability-related issues), competitive pressures, and litigation, governmental actions, investigations and regulatory matters. If assumptions, judgements and estimates (for example about future economic conditions) prove to be incorrect, NatWest Group may not achieve any or all of its ambitions or targets, or meet its guidance.
In addition, as NatWest Group plc is a non-operating holding company, its source of income is from its operating subsidiaries that hold the principal assets and operations of NatWest Group and its ability to continue to make capital distributions (including dividends to shareholders) is therefore subject to such subsidiaries’ financial performance, and their respective ability to make capital distributions directly or indirectly to NatWest Group plc which, in certain cases, could also be restricted by applicable laws, regulations and other requirements. Refer to ‘NatWest Group, its customers and its counterparties face continued economic and political risks and uncertainties in the UK and global markets, including as a result of inflation and interest rates, supply chain disruption and geopolitical developments.’
Any failure of NatWest Group to achieve ambitions or target, meet its guidance, or make discretionary capital distributions may have a material adverse effect on NatWest Group’s future results, financial condition, prospects, and/or reputation.
NatWest Group operates in markets that are highly competitive, with competitive pressures and technology disruption.
NatWest Group faces increasing competitive pressures and technology disruption from incumbent traditional UK banks, challenger banks and building societies (including those resulting from mergers between these entities), fintech companies, large technology conglomerates and new market entrants who could look to scale technology and/or other competitive advantages to compete with NatWest Group for customer engagement. “BigTech” companies are seen as threats to incumbent banking providers because of their customer innovation and global reach. In addition, digital-first banks (often referred to as “neobanks”) and fintechs are aiming to compete with incumbent banking providers on the basis that customers increasingly use a constellation of providers to support their complex and evolving needs (e.g., personal financial management and paying for goods and services in foreign currency).
NatWest Group expects competition to continue and intensify in response to various trends including: evolving customer behaviour, technological changes (including digital currencies, stablecoins and the growth of digital banking), competitor behaviour, new market entrants, competitive foreign exchange offerings, industry trends resulting in increased disaggregation or unbundling of financial services or, conversely, the re-intermediation of traditional banking services, and the impact of regulatory actions, among others. In particular, NatWest Group may be unable to grow or retain its market share due to new (or more competitive) banking, lending and payment products and services that are offered by rapidly evolving incumbents and challengers (including shadow banks, alternative or direct lenders and new entrants).
These competitive pressures and the introduction of disruptive technology may result in a shift in customer behaviour and impact NatWest Group’s revenues and profitability, particularly in its key UK retail and Commercial & Institutional banking segments. Moreover, innovations in biometrics, artificial intelligence, automation, cloud services, blockchain, cryptocurrencies and quantum computing may rapidly facilitate industry transformation.
Increasingly, many of NatWest Group’s products and services are, and will become, more technology intensive, including through digitalisation, automation, and the use of artificial intelligence while needing to continue complying with applicable and evolving regulations. NatWest Group’s ability to develop or acquire digital solutions and their integration into NatWest Group’s structures, systems and controls has become increasingly important for retaining and growing NatWest Group’s market share and customer-facing businesses. NatWest Group’s innovation strategy, which includes investing in its IT capability to address increasing customer and merchant use of online and mobile banking technology, as well as selective acquisitions (such as fintech ventures, including Mettle, Rooster Money, Boxed and Cushon), may not be successful or may not result in NatWest Group offering innovative products and services in the future.
Furthermore, current or future competitors may be more successful than NatWest Group in implementing technologies for delivering products or services to their customers, which may adversely affect its competitive position. In addition, continued consolidation and/or technological developments in the financial services industry could result in the emergence of new competitors or NatWest Group’s competitors gaining greater capital and other resources, including the ability to offer a broader, more attractive and/or better value range of products and services and geographic diversity. For example, new market entrants, including non-traditional financial services providers, such as retail or technology conglomerates, may have competitive advantages in scale, technology and customer engagement and may be able to develop and deliver financial services at a lower cost base.
NatWest Group may also fail to identify future opportunities, or fail to derive benefits from technological innovation, changing customer behaviour and changing regulatory demands. Competitors may be better able to attract and retain customers and key employees, have more effective IT systems, have access to lower cost funding and/or be able to attract deposits on more favourable terms than NatWest Group. Although NatWest Group invests in new technologies and participates in industry and research-led technology development initiatives, such investments may be insufficient or ineffective, especially given NatWest Group’s focus on business simplification and cost efficiencies. This could affect NatWest Group’s ability to offer innovative products or technologies to customers.
If NatWest Group is unable to offer competitive, attractive and innovative products that are also profitable and released in a timely manner; it will lose market share, incur losses on some or all of its initiatives and possibly lose growth opportunities. For example, NatWest Group is investing in the automation of certain solutions and interactions within its customer-facing businesses, including through artificial intelligence. There can be no certainty that such initiatives will allow NatWest Group to compete effectively or will deliver the expected cost savings.
In addition, the implementation of NatWest Group’s strategy, delivery on its climate ambition and cost-controlling measures, may also have an impact on its ability to compete effectively and maintain satisfactory returns. Moreover, activist investors have increasingly become engaged and interventionist in recent years, which may pose a threat to NatWest Group’s strategic initiatives.
Some of these trends have been catalysed by various regulatory and competition policy interventions, including the UK initiative on Open Banking, ‘Open Finance’ and other remedies imposed by the Competition and Markets Authority (‘CMA’), which are designed to further promote competition within the financial sector.
NatWest Group has significant exposure to counterparty and borrower risk including credit losses, which may have an adverse effect on NatWest Group.
NatWest Group has exposure to many different sectors, customers and counterparties, and risks arising from actual or perceived changes in credit quality and the recoverability of monies due from borrowers and other counterparties are inherent in a wide range of NatWest Group’s businesses. NatWest Group’s lending strategy and associated processes and systems may fail to identify, anticipate or quickly react to weaknesses or risks in a particular sector, market, borrower or counterparty, or NatWest Group’s credit risk appetite relative to competitors, or fail to appropriately value physical or financial collateral. This may result in increased default rates or a higher loss given default for loans, which may, in turn, impact NatWest Group’s profitability. Refer to ‘Risk and capital management — Credit Risk’.
The credit quality of NatWest Group’s borrowers and other counterparties may be affected by UK and global macroeconomic and political uncertainties, as well as prevailing economic and market conditions. Refer to ‘NatWest Group, its customers and its counterparties face continued economic and political risks and uncertainties in the UK and global markets, including as a result of inflation and interest rates, supply chain disruption, and geopolitical developments’. Any further deterioration in these conditions or changes to legal or regulatory landscapes could worsen borrower and counterparty credit quality or impact the enforcement of contractual rights, increasing credit risk. Any increase in drawings upon committed credit facilities may also increase NatWest Group’s RWAs. In addition, the level of household indebtedness (on a per capita basis) in the UK remains high. The ability of households and businesses to service their debts could be worsened by a period of high unemployment, or high interest rates or inflation, particularly if prolonged.
NatWest Group may be affected by volatility in property prices (including as a result of UK political or economic conditions) given that NatWest Group’s mortgage loan portfolio as at 31 December 2024 amounted to £209.8 billion, representing 51% of NatWest Group’s total loan exposure. If property prices in the UK were to weaken this could lead to higher impairment charges, particularly if default rates also increase. In addition, NatWest Group’s credit risk may be exacerbated if the collateral that it holds cannot be realised as a result of market conditions, regulatory intervention, or other applicable laws, or if it is liquidated at prices not sufficient to recover the net amount outstanding to NatWest Group after accounting for any IFRS 9 provisions already made. This is most likely to occur during periods of illiquidity or depressed asset valuations.
NatWest Group is exposed to the financial sector, including sovereign debt securities, financial institutions, financial intermediation providers (including providing facilities to financial sponsors and funds, backed by assets or investor commitments) and securitised products (typically senior lending to special purpose vehicles backed by pools of financial assets). Concerns about, or a default by, a financial institution or intermediary could lead to significant liquidity problems and losses or defaults by other financial institutions or intermediaries, since the commercial and financial soundness of many financial institutions and intermediaries is closely related and interdependent as a result of credit, trading, clearing and other relationships. Any perceived lack of creditworthiness of a counterparty or borrower may lead to market-wide liquidity problems and losses for NatWest Group. In addition, the value of collateral may be correlated with the probability of default by the relevant counterparty (‘wrong way risk’), which would increase NatWest Group’s potential loss. Any of the above risks may also adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges with which NatWest Group interacts on a regular basis. Refer to ‘NatWest Group may not meet the prudential regulatory requirements for liquidity and funding or may not be able to adequately access sources of liquidity and funding, which could trigger the execution of certain management actions or recovery options.’
As a result, adverse changes in borrower and counterparty credit risk may cause additional impairment charges under IFRS 9, increased repurchase demands, higher costs, additional write-downs and losses for NatWest Group and an inability to engage in routine funding transactions. If NatWest Group experiences losses and a reduction in profitability, this is likely to affect the recoverable value of fixed assets, including goodwill and deferred taxes, which may lead to write-downs.
NatWest Group has applied an internal analysis of multiple economic scenarios (MES) together with the determination of specific overlay adjustments to inform its IFRS 9 ECL (Expected Credit Loss). The recognition and measurement of ECL is complex and involves the use of significant judgement and estimation.
This includes the formulation and incorporation of multiple forward-looking economic scenarios into ECL to meet the measurement objective of IFRS 9. The ECL provision is sensitive to the model inputs and economic assumptions underlying the estimate. Going forward, NatWest Group anticipates observable credit deterioration of a proportion of assets resulting in a systematic uplift in defaults, which is mitigated by those economic assumption scenarios being reflected in the Stage 2 ECL across portfolios, along with a combination of post model overlays in both wholesale and retail portfolios reflecting the uncertainty of credit outcomes. Refer to ‘Risk and capital management – Credit Risk’. A credit deterioration would also lead to RWA increases. Furthermore, the assumptions and judgements used in the MES and ECL assessment at 31 December 2024 may not prove to be adequate resulting in incremental ECL provisions for NatWest Group.
As NatWest Group has exposure to the financial industry, it also has exposure to shadow banking entities (i.e. entities which carry out activities of a similar nature to banks but without the same regulatory oversight). As a result, NatWest Group is required to identify and monitor its exposure to shadow banking entities, implement and maintain an internal framework for the identification, management, control and mitigation of the risks associated with exposure to shadow banking entities, and ensure effective reporting and governance in respect of such exposure. If NatWest Group is unable to properly identify and monitor its shadow banking exposure, maintain an adequate framework, and/or ensure effective reporting and governance in respect of shadow banking exposure, this may adversely affect NatWest Group.
In line with certain mandated COVID-19 pandemic support schemes, NatWest Group assisted customers with a number of initiatives including NatWest Group’s participation in the Bounce Back Loan Scheme (‘BBLS’), the Coronavirus Business Interruption Loan Scheme (‘CBILS’) and the Coronavirus Large Business Interruption Loan Scheme (‘CLBILS’) products. NatWest Group sought to manage the risks of fraud and money laundering against the need for the fast and efficient release of funds to customers and businesses. NatWest Group may be exposed to fraud, conduct and litigation risks arising from inappropriate approval (or denial) of BBLS, CBILS or CLBILS or the enforcing or pursuing repayment of BBLS, CBILS and CLBILS (or a failure to exercise forbearance), which may have an adverse effect on NatWest Group’s reputation and results of operations. The implementation of the initiatives and efforts mentioned above may result in litigation, regulatory and government actions and proceedings. These actions may result in judgements, settlements, penalties, fines, or removal of recourse to the government guarantee provided under those schemes for impacted loans.
NatWest Group may not meet the prudential regulatory requirements for liquidity and funding or may not be able to adequately access sources of liquidity and funding, which could trigger the execution of certain management actions or recovery options.
Liquidity and the ability to raise funds continues to be a key area of focus for NatWest Group and the industry as a whole. NatWest Group is required by regulators in the UK, the EU and other jurisdictions in which it undertakes regulated activities to maintain adequate liquidity and funding resources. To satisfy its liquidity and funding requirements, NatWest Group may therefore access sources of liquidity and funding through retail and wholesale deposits, as well as through the debt capital markets. As at 31 December 2024, NatWest Group plc subsidiaries held £464.9 billion in deposits from banks and customers.
The level of deposits of NatWest Group may fluctuate due to factors outside of its control, such as a loss of customers, loss of customer and/or investor confidence (including in individual NatWest Group entities or as a result of volatility in the financial industry), changes in customer behaviour, changes in interest rates, government support, increasing competitive pressures for retail and corporate customer deposits or the reduction or cessation of deposits by wholesale depositors, which could result in a significant outflow of deposits within a short period of time. An inability to grow or any material decrease in NatWest Group’s deposits could, particularly if accompanied by one or more of the other factors mentioned above, adversely affect NatWest Group’s ability to satisfy its liquidity or funding needs, or comply with its related regulatory requirements. In turn, this could require NatWest Group to adapt its funding plans or change its operations.
Macroeconomic developments, political uncertainty, changes in interest rates, and market volatility could affect NatWest Group’s ability to access sources of liquidity and funding on satisfactory terms, or at all. This may result in higher funding costs and failure to comply with regulatory capital, funding and leverage requirements.
As a result, NatWest Group and its subsidiaries could be required to change their funding plans. This could exacerbate funding and liquidity risk, which may adversely affect NatWest Group.
As at 31 December 2024, NatWest Group plc’s liquidity coverage ratio was 150% and net stable funding ratio was 137%. If its liquidity position and/or funding were to come under stress, and if NatWest Group were unable to raise funds through deposits, in the debt capital markets or through other reliable funding sources, on acceptable terms, or at all, its liquidity position would likely be adversely affected and it might be unable to meet deposit withdrawals on demand or at their contractual maturity, to repay borrowings as they mature, to meet its obligations under committed financing facilities, to comply with regulatory funding requirements, to undertake certain capital and/or debt management activities, and/or to fund new loans, investments and businesses or make capital distributions to its shareholders.
If, under a stress scenario, the level of liquidity falls outside of NatWest Group’s risk appetite, there are a range of recovery management actions that NatWest Group could take to manage its liquidity levels, but any such actions may not be sufficient to restore adequate liquidity levels and the related implementation may have adverse consequences for NatWest Group’s operations. Under the PRA Rulebook, NatWest Group must maintain a recovery plan acceptable to its regulator, such that a breach of NatWest Group’s applicable liquidity requirements may trigger the application of NatWest Group’s recovery plan to attempt to remediate a deficient liquidity position. NatWest Group may need to liquidate assets to meet its liabilities, including disposals of assets not previously identified for disposal to reduce its funding commitments or trigger the execution of certain management actions or recovery options. In a time of reduced liquidity, NatWest Group may be unable to sell its assets, at attractive prices, or at all, which may adversely affect NatWest Group’s liquidity.
NatWest Group may not meet the prudential regulatory requirements for regulatory capital and MREL, or manage its capital effectively, which could trigger the execution of certain management actions or recovery options.
NatWest Group is required by regulators in the UK, the EU and other jurisdictions in which it undertakes regulated activities to maintain adequate financial resources. Adequate levels of capital provide NatWest Group with financial flexibility specifically in its core UK operations in the face of turbulence and uncertainty in the UK and the global economy. Adequate levels of capital also enable NatWest Group plc to make discretionary capital distributions (including dividends to shareholders) and undertake buybacks of its shares.
As at 31 December 2024, NatWest Group plc’s CET1 ratio was 13.6% and is targeting a CET1 ratio in the range of 13-14% by 31 December 2025. NatWest Group plc’s target CET1 ratio is based on a combination of its views on the appropriate level of capital and its actual and expected regulatory requirements and internal modelling, including stress scenarios and management’s and/or the Prudential Regulation Authority’s (PRA) views on appropriate buffers above minimum required operating levels. NatWest Group plc’s current capital strategy is based on the expected accumulation of additional capital through the accrual of retained earnings over time, planned capital actions (including issuances, redemptions, and discretionary capital distributions), RWA growth in the form of regulatory uplifts and lending growth and other capital management initiatives which focus on improving capital efficiency and ensuring NatWest Group meets its medium-to-long term targets. NatWest Group intends to make capital distributions to its equity investors of certain amounts surplus to its publicly stated CET1 ratio target of 13-14%, subject to macroeconomic conditions and regulatory approval, via a combination of dividends and buybacks. In making dividends distribution and buyback decisions, consideration is given to previously guided ordinary dividend pay-out ratios, an intention to continue to help reduce HM Treasury’s stake in NatWest Group, and maximising shareholder value.
A number of factors may impact NatWest Group plc’s ability to maintain its CET1 ratio target and achieve its capital strategy. These include:
A shortage or reduction of capital could in turn affect NatWest Group plc’s capital ratio, and/or its ability to make capital distributions and in turn NatWest Group may not remain a viable, competitive or profitable banking business.
A minimum level of capital is required to be met by NatWest Group plc for it to be entitled to make certain discretionary payments, and institutions such as NatWest Group plc which fail to meet the regulatory combined buffer requirement are subject to restricted discretionary payments.
The resulting restrictions are scaled according to the extent of the breach of the combined buffer requirement and calculated as a percentage of the profits of the institution since the last distribution of profits or discretionary payment which gives rise to a maximum distributable amount (MDA) (if any) that the financial institution can distribute through discretionary payments. Any breach of the combined buffer requirement may necessitate for NatWest Group plc reducing or ceasing discretionary payments to shareholders (including payments of dividends) and buybacks depending on the extent of the breach.
NatWest Group plc is required to meet an external MREL equivalent to the higher of: (i) two times the sum of Pillar 1 and Pillar 2A, or (ii) if subject to a leverage ratio requirement, two times the applicable requirement. The BoE has identified a “single point-of-entry” at NatWest Group plc, as the preferred resolution strategy for NatWest Group. As a result, NatWest Group plc is the only entity within NatWest Group that can externally issue securities that count towards its MREL requirements, the proceeds of which can then be downstreamed to meet the internal MREL of its operating entities and intermediate holding companies.
If NatWest Group plc is unable to raise or retain the requisite amount of regulatory capital or MREL, downstream the proceeds of MREL to subsidiaries as required, or to otherwise meet its regulatory capital, MREL and leverage requirements, it may be exposed to increased regulatory supervision or sanctions, loss of customer and/or investor confidence, constrained or more expensive funding and be unable to make discretionary payments on capital instruments.
If, under a stress scenario, the level of regulatory capital or MREL falls outside of NatWest Group’s risk appetite, there are a range of recovery management actions (focused on risk reduction and mitigation) that NatWest Group could seek to take to manage its capital levels, but any such actions may not be sufficient to restore adequate capital levels. Under the PRA Rulebook, NatWest Group must maintain a recovery plan acceptable to its regulator, such that a breach of NatWest Group’s applicable capital or leverage requirements may trigger the application of NatWest Group’s recovery plan to remediate a deficient capital position.
NatWest Group’s regulator may request that NatWest Group carry out certain capital management actions or, if NatWest Group plc’s CET1 ratio falls below 7%, certain regulatory capital instruments issued by NatWest Group plc will be written-down or converted into equity, and there may be an issue of additional equity by NatWest Group plc, which could result in the reduction in value of the holdings of NatWest Group plc’s existing shareholders. The success of such issuances will also be dependent on favourable market conditions and NatWest Group may not be able to raise the amount of capital required on acceptable terms, or at all.
Separately, NatWest Group may address a shortage of capital by taking action to reduce leverage exposure and/or RWAs via asset or business disposals. These actions may, in turn, affect: NatWest Group’s product offering, credit ratings, ability to operate its businesses, pursue its strategy and strategic opportunities, any of which may adversely affect NatWest Group. Refer to ‘NatWest Group may become subject to the application of UK statutory stabilisation or resolution powers which may result in, for example, the cancellation, transfer or dilution of ordinary shares, or the write-down or conversion of certain other of NatWest Group’s securities.’; and ‘NatWest Group may be adversely affected if it fails to meet the requirements of regulatory stress tests.’
Any reduction in the credit rating and/or outlooks assigned to NatWest Group plc, any of its subsidiaries or any of their respective debt securities could adversely affect the availability of funding for NatWest Group, reduce NatWest Group’s liquidity and funding position and increase the cost of funding.
Rating agencies regularly review NatWest Group plc and other NatWest Group entities’ credit ratings and outlooks. NatWest Group entities’ credit ratings and outlooks could be negatively affected (directly and indirectly) by a number of factors that can change over time, including, without limitation: credit rating agencies’ assessment of NatWest Group’s strategy and management’s capability; its financial condition including in respect of profitability, asset quality, capital, funding and liquidity, and risk management practices; the level of political support for the sectors and regions in which NatWest Group operates; the legal and regulatory frameworks applicable to NatWest Group’s legal structure; business activities and the rights of its creditors; changes in rating methodologies; changes in the relative size of the loss-absorbing buffers protecting bondholders and depositors; the competitive environment; political, geopolitical and economic conditions in NatWest Group’s key markets (including inflation and interest rates, supply chain disruptions and geopolitical developments); any reduction of the UK’s sovereign credit rating and market uncertainty. In addition, credit rating agencies are increasingly taking into account sustainability-related factors, including climate, environmental, social and governance related risk, as part of the credit rating analysis, as are investors in their investment decisions.
Any reductions in the credit ratings of NatWest Group plc or of certain other NatWest Group entities could significantly affect NatWest Group. Adverse consequences for NatWest Group from downgrades could include, without limitation, a reduction in the access to capital markets or in the size of its deposit base, and trigger additional collateral or other requirements in its funding arrangements or the need to amend such arrangements, which could adversely affect NatWest Group’s liquidity and funding position, cost of funding and could limit the range of counterparties willing to enter into transactions with NatWest Group on favourable terms, or at all. This may in turn adversely affect NatWest Group’s competitive position and threaten its prospects.
NatWest Group may be adversely affected if it fails to meet the requirements of regulatory stress tests.
NatWest Group entities are subject to annual and other stress tests by their respective regulators in the UK and EU.
Stress tests are designed to assess the resilience of banks such as NatWest Group to potential adverse economic or financial developments and ensure that they have robust, forward-looking capital planning processes that account for the risks associated with their business profile. If the stress tests reveal that a bank’s existing regulatory capital buffers are not sufficient to absorb the impact of the stress, then it is possible that NatWest Group may need to take action to strengthen its capital position.
Failure by NatWest Group to meet the quantitative and qualitative requirements of the stress tests as set forth by its UK regulator may result in: NatWest Group’s regulators requiring NatWest Group to generate additional capital, reputational damage, increased supervision and/or regulatory sanctions, restrictions on capital distributions and loss of investor confidence, all of which may adversely affect NatWest Group.
NatWest Group could incur losses or be required to maintain higher levels of capital as a result of limitations or failure of various models.
Given the complexity of NatWest Group’s business, strategy and capital requirements, NatWest Group relies on models for a wide range of purposes, including to manage its business, assess the value of its assets and its risk exposure, as well as to anticipate capital and funding requirements (including to facilitate NatWest Group’s mandated stress testing). In addition, NatWest Group utilises models for valuations, credit approvals, calculation of loan impairment charges on an IFRS 9 basis, financial reporting and to help address financial crime (criminal activities in the form of money laundering, terrorist financing, bribery and corruption, tax evasion and sanctions as well as external or internal fraud (collectively, ‘financial crime’)). NatWest Group’s models, and the parameters and assumptions on which they are based, are periodically reviewed.
Model outputs are inherently uncertain, because they are imperfect representations of real-world phenomena, are simplifications of complex real-world systems and processes, and are based on a limited set of observations. NatWest Group may face adverse consequences as a result of actions or decisions based on models that are poorly developed, incorrectly implemented, non-compliant, outdated or used inappropriately. This includes models that are based on inaccurate or non-representative data (for example, where there have been changes in the micro or macroeconomic environment in which NatWest Group operates) or as a result of the modelled outcome being misunderstood, or used for purposes for which it was not designed. This could result in findings of deficiencies by NatWest Group’s regulators (including as part of NatWest Group’s mandated stress testing), increased capital requirements, may render some business lines uneconomical, may require management action or may subject NatWest Group to regulatory sanction, any of which in turn may also have an adverse effect on NatWest Group and its customers.
NatWest Group’s financial statements are sensitive to underlying accounting policies, judgements, estimates and assumptions.
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses, exposures and RWAs. While estimates, judgements and assumptions take into account historical experience and other factors (including market practice and expectations of future events that are believed to be reasonable under the circumstances), actual results may differ due to the inherent uncertainty in making estimates, judgements and assumptions (particularly those involving the use of complex models).
Further, accounting policy and financial statement reporting requirements increasingly require management to adjust existing judgements, estimates and assumptions for the effects of climate-related, sustainability and other matters that are inherently uncertain and for which there is little historical experience which may affect the comparability of NatWest Group’s future financial results with its historical results. Actual results may differ due to the inherent uncertainty in making climate-related and sustainability estimates, judgements and assumptions.
Accounting policies deemed critical to NatWest Group’s results and financial position, based upon materiality and significant judgements and estimates, involve a high degree of uncertainty and may have a material impact on its results. For 2024, these include loan impairments, fair value, and deferred tax. These are set out in ‘Critical accounting policies and sources of estimation uncertainty’.
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Changes in accounting standards may materially impact NatWest Group’s financial results.
NatWest Group prepares its consolidated financial statements in conformity with the requirements of the Companies Act 2006 and in accordance with IFRS as issued by the International Accounting Standards Board. Changes in accounting standards or guidance by accounting bodies or in the timing of their implementation, whether immediate or foreseeable, could result in NatWest Group having to recognise additional liabilities on its balance sheet, or in further write-downs or impairments to its assets and could also have a material adverse effect on NatWest Group. From time to time, the International Accounting Standards Board may issue new accounting standards or interpretations that could materially impact how NatWest Group calculates, reports and discloses its financial results and financial condition, and which may affect NatWest Group capital ratios, including the CET1 ratio and the required levels of regulatory capital. New accounting standards and interpretations that have been issued by the International Accounting Standards Board but which have not yet been adopted by NatWest Group are discussed in ‘Future accounting developments’.
The value or effectiveness of any credit protection that NatWest Group has purchased depends on the value of the underlying assets and the financial condition of the insurers and counterparties.
NatWest Group has credit exposure arising from over-the-counter derivative contracts, mainly credit default swaps (CDSs), and other credit derivatives, each of which are carried at fair value. The fair value of these CDSs, as well as NatWest Group’s exposure to the risk of default by the underlying counterparties, depends on the valuation and the perceived credit risk of the instrument against which protection has been bought. Many market counterparties have been adversely affected by their exposure to residential mortgage-linked and corporate credit products, whether synthetic or otherwise, and their actual and perceived creditworthiness may deteriorate rapidly. If the financial condition of these counterparties or their actual or perceived creditworthiness deteriorates, NatWest Group may record further credit valuation adjustments on the credit protection bought from these counterparties under the CDSs. NatWest Group also recognises any fluctuations in the fair value of other credit derivatives.
Any such adjustments or fair value changes may have a material adverse effect on NatWest Group’s future results, financial condition, prospects, and/or reputation.
NatWest Group is subject to regulatory oversight in respect of resolution, and NatWest Group could be adversely affected should the BoE in the future deem NatWest Group’s preparations to be inadequate.
NatWest Group is subject to regulatory oversight by the BoE and the PRA and is required under the PRA rulebook to carry out an assessment of its preparations for resolution, submit a report of the assessment to the PRA, and disclose a summary of this report. NatWest Group has dedicated significant resources towards the preparation of NatWest Group for a potential resolution scenario.
In August 2024, the BoE communicated its assessment of NatWest Group’s preparations and did not identify any areas for further enhancement, shortcomings, deficiencies or substantive impediments. NatWest Group could be adversely affected should future BoE assessments deem NatWest Group’s preparations to be inadequate. If future BoE assessments identify any areas for further enhancement, shortcomings, deficiencies or substantive impediments in NatWest Group’s ability to achieve the resolvability outcomes or reveal that NatWest Group is not adequately prepared to be resolved, or does not have adequate plans in place to meet resolvability requirements, NatWest Group may be required to take action to enhance its preparations to be resolvable, resulting in additional costs and the dedication of additional resources. Such a scenario may have an impact on NatWest Group as, depending on the BoE’s assessment, potential action may include, but is not limited to, restrictions on NatWest Group’s maximum individual and aggregate exposures, a requirement to dispose of specified assets, a requirement to change its legal or operational structure, a requirement to cease carrying out certain activities, a requirement not to make discretionary distributions or undertake NatWest Group’s shares buybacks, and/or a requirement to maintain a specified amount of MREL. This may also impact NatWest Group’s strategic plans.
Any of the above may have a material adverse effect on NatWest Group’s future results, financial condition, prospects, and/or reputation, or lead to a loss of investor confidence.
NatWest Group may become subject to the application of UK statutory stabilisation or resolution powers which may result in, for example, the cancellation, transfer or dilution of ordinary shares, or the write-down or conversion of certain other of NatWest Group’s securities.
The BoE, the PRA, the FCA, and HM Treasury (together, the ‘Authorities’) are granted substantial powers to resolve and stabilise UK-incorporated financial institutions. Five stabilisation options exist: (i) transfer of all of the business of a relevant entity or the shares of the relevant entity to a private sector purchaser; (ii) transfer of all or part of the business of the relevant entity to a ‘bridge bank’ wholly or partially owned by the BoE; (iii) transfer of part of the assets, rights or liabilities of the relevant entity to one or more asset management vehicles for management of the transferor’s assets, rights or liabilities; (iv) the write-down, conversion, transfer, modification, or suspension of the relevant entity’s equity, capital instruments and liabilities; and (v) temporary public ownership of the relevant entity. These options may be applied to NatWest Group plc as the parent company or to any subsidiary where certain conditions are met (such as, whether the firm is failing or likely to fail, or whether it is reasonably likely that action will be taken (outside of resolution) that will result in the firm no longer failing or being likely to fail). Moreover, there are modified insolvency and administration procedures for relevant entities within NatWest Group, and the Authorities have the power to modify or override certain contractual arrangements in certain circumstances and amend the law for the purpose of enabling their powers to be used effectively and may promulgate provisions with retrospective applicability.
Under the UK Banking Act 2009, the Authorities are generally required to have regard to specified objectives in exercising the powers provided for by the UK Banking Act 2009. One of the objectives (which is required to be balanced as appropriate with the other specified objectives) refers to the protection and enhancement of the stability of the financial system of the UK. Moreover, the ‘no creditor worse off’ safeguard provides that where certain resolution actions are taken, the Authorities are required to ensure that no creditor is in a worse position than if the bank had entered into normal insolvency proceedings. Although, this safeguard may not apply in relation to an application of the separate write-down and conversion power relating to capital instruments in circumstances where a stabilisation power is not also used, the UK Banking Act 2009 still requires the Authorities to respect the hierarchy on insolvency when using the write-down and conversion power. Further, holders of debt instruments which are subject to the power may, however, have ordinary shares transferred to or issued to them by way of compensation.
Uncertainty exists as to how the Authorities may exercise their powers including the determination of actions to be undertaken in relation to the ordinary shares and other securities issued by NatWest Group, which may depend on factors outside of NatWest Group’s control. Moreover, the UK Banking Act 2009 provisions remain largely untested in practice, particularly in respect of resolutions of large financial institutions and groups.
If NatWest Group is at or is approaching the point such that regulatory intervention is required, any exercise of the resolution regime powers by the Authorities may adversely affect holders of NatWest Group plc’s ordinary shares or other NatWest Group securities. This may result in various actions being undertaken in relation to NatWest Group and any securities of NatWest Group, including cancellation, transfer, dilution, write-down or conversion (as applicable). There may also be a corresponding adverse effect on the market price of such ordinary shares and other NatWest Group securities.
Each of these actions may also have a material adverse effect on NatWest Group’s future results, financial condition, prospects, and/or reputation.
Operational risks (including reliance on third party suppliers and outsourcing of certain activities) are inherent in NatWest Group’s businesses.
Operational risk is the risk of loss or disruption resulting from inadequate or failed internal processes, procedures, people or systems, or from external events, including legal and regulatory risks, third party processes, procedures, people or systems.
NatWest Group operates in several countries, offering a diverse range of products and services supported directly or indirectly by third party suppliers. As a result, operational risks or losses can arise from a number of internal or external factors (including for example, payment errors or financial crime and fraud), for which there is continued scrutiny by third parties of NatWest Group’s compliance with financial crime requirements; refer to, ‘NatWest Group is exposed to the risks of various litigation matters, regulatory and governmental actions and investigations as well as remedial undertakings, the outcomes of which are inherently difficult to predict, and which could have an adverse effect on NatWest Group.’ These risks are also present when NatWest Group relies on critical service providers (suppliers) or vendors to provide services to it or its customers, as is increasingly the case as NatWest Group outsources certain activities, including with respect to the implementation of technologies, innovation (such as cloud services and artificial intelligence) and responding to regulatory and market changes.
Operational risks also exist due to the implementation of NatWest Group’s strategy, and the organisational and operational changes involved, including: NatWest Group’s cost-controlling and simplification measures; continued digitalisation and the integration of artificial intelligence in the business; acquisition, divestments and other transactions; the implementation of recommendations from internal and external reviews with respect to certain governance processes, policies, systems and controls of NatWest Group entities including with respect to customer account closures; and conditions affecting the financial services industry generally (including macroeconomic and other geopolitical developments) as well as the legal and regulatory uncertainty resulting from these conditions. Any of the above may place significant pressure on NatWest Group’s ability to maintain effective internal controls and governance frameworks.
NatWest Group also faces operational risks as it continues to invest in the automation of certain solutions and customer interactions, including through artificial intelligence. Such initiatives may result in operational, reputational and conduct risks if the technology is not used appropriately, is defective or inadequate, or is not fully integrated into NatWest Group’s current solutions, systems and controls.
The effective management of operational risks is critical to meeting customer service expectations and retaining and attracting customer business. Although NatWest Group has implemented risk controls and mitigation actions, with resources and planning having been devoted to mitigate operational risk, such measures may not be effective in controlling each of the operational risks faced by NatWest Group.
Ineffective management of such risks may have a material adverse effect on NatWest Group’s future results, financial condition, prospects, and/or reputation.
NatWest Group is subject to sophisticated and frequent cyberattacks, and compliance with cybersecurity and data protection regulations is becoming increasingly complex.
NatWest Group experiences a constant threat from cyberattacks across the entire NatWest Group and against NatWest Group’s supply chain networks, reinforcing the importance of the due diligence of, ongoing risk management of, and close working relationship with, the third parties on which NatWest Group relies. NatWest Group is reliant on technology, against which there is a constantly evolving series of attacks that are increasing in terms of frequency, sophistication, impact and severity. As cyberattacks evolve and become more sophisticated, NatWest Group is required to continue to invest significant resources in additional capability designed to defend against emerging threats.
Third parties continue to make hostile attempts to gain access to, introduce malware (including ransomware) into, and exploit potential vulnerabilities of, financial services institutions’ IT systems, including those of NatWest Group. For example, in 2024, NatWest Group and its supply chain were subjected to a small number of attempted Distributed Denial of Service and ransomware attacks. These hostile attempts were addressed without material impact on NatWest Group or its customers by deploying cybersecurity capabilities and controls that seek to manage the impact of any such attacks, and sustain availability of services for NatWest Group’s customers.
Consequently, NatWest Group continues to invest significant resources in developing and evolving cybersecurity capabilities and controls that are designed to mitigate the potential effect of such attacks. However, given the nature of the threat, there can be no assurance that these capabilities and controls will prevent the potential adverse effect of an attack from occurring. Refer to ‘NatWest Group’s operations are highly dependent on its complex IT systems and any IT failure could adversely affect NatWest Group.’
Any failure in NatWest Group’s information and cybersecurity policies, procedures or controls, may result in significant financial losses, major business disruption, inability to deliver customer services, or loss of, or ability to access, data or systems or other sensitive information (including as a result of an outage) and may cause associated reputational damage. Any of these factors could increase costs (including costs relating to notification of, or compensation for customers, credit monitoring or card reissuance), result in regulatory investigations or sanctions being imposed or may affect NatWest Group’s ability to retain and attract customers. Regulators in the UK, US, Europe and Asia continue to recognise cybersecurity as an important systemic risk to the financial sector and have highlighted the need for financial institutions to improve their monitoring and control of, and resilience (particularly of critical services) to cyberattacks, and to provide timely reporting or notification of them, as appropriate (including, for example, the SEC cybersecurity requirements and the new EU Digital Operational Resilience Act (‘DORA’)). Furthermore, cyberattacks on NatWest Group’s counterparties and suppliers may also have an adverse effect on NatWest Group’s operations.
Additionally, malicious third parties may induce employees, customers, third-party providers or other users with access to NatWest Group’s systems to wrongfully disclose sensitive information to gain access to NatWest Group’s data or systems or that of NatWest Group’s customers or employees. Cybersecurity and information security events can derive from groups or factors such as: internal or external threat actors, human error, fraud or malice on the part of NatWest Group’s employees or third parties, including third party providers, or may result from technological failure (including defective, inadequate or inappropriately used artificial intelligence based solutions).
NatWest Group expects greater regulatory engagement, supervision and enforcement to continue in relation to its overall resilience to withstand IT and IT-related disruption, either through a cyberattack or some other disruptive event. Such increased regulatory engagement, supervision and enforcement is uncertain in relation to the scope, cost, consequence and the pace of change, which may have a material adverse effect on NatWest Group. Due to NatWest Group’s reliance on technology, the adoption of innovative solutions, the integration of automated processes and artificial intelligence in its business and the increasing sophistication, frequency and impact of cyberattacks, such attacks may have an adverse effect on NatWest Group.
In accordance with applicable UK and EU data protection, and cybersecurity laws and regulations, NatWest Group is required to ensure it implements timely, appropriate and effective organisational and technological safeguards against unauthorised or unlawful access to the data of NatWest Group, its customers and its employees. In order to meet this requirement, NatWest Group relies on the effectiveness of its internal policies, controls and procedures to protect the confidentiality, integrity and availability of information held on its IT systems, networks and devices as well as with third parties with whom NatWest Group interacts. A failure to monitor and manage data in accordance with applicable requirements may result in financial losses, regulatory fines and investigations and associated reputational damage.
NatWest Group’s operations and strategy are highly dependent on the accuracy and effective use of data.
NatWest Group relies on the availability, sourcing, and effective use of accurate and high quality data to support, monitor, evaluate, manage and enhance its operations, innovate its products offering, meet its regulatory obligations, and deliver its strategy. Investment is being made in data tools and analytics, including raising awareness around ethical data usage (for example, in relation to the use of artificial intelligence) and privacy across NatWest Group. The availability and accessibility of current, complete, detailed, accurate and, wherever possible, machine-readable customer segment and sub-sector data, together with appropriate governance and accountability for data, is fast becoming a critical strategic asset, which is subject to increased regulatory focus.
Failure to have or be able to access that data or the ineffective use or governance of that data could result in a failure to manage and report important risks and opportunities or satisfy customers’ expectations including the inability to deliver products and services. This could also place NatWest Group at a competitive disadvantage by increasing its costs, inhibiting its efforts to reduce costs or its ability to improve its systems, controls and processes. Any of the above could result in a failure to deliver NatWest Group’s strategy.
These data weaknesses and limitations, or the unethical or inappropriate use of data, and/or non-compliance with data protection laws could give rise to conduct and litigation risks and may increase the risk of operational challenges, losses, reputational damage or other adverse consequences due to inappropriate models, systems, processes, decisions or other actions.
NatWest Group’s operations are highly dependent on its complex IT systems and any IT failure could adversely affect NatWest Group.
NatWest Group’s operations are highly dependent on the ability to process a very large number of transactions efficiently and accurately while complying with applicable laws and regulations. The proper functioning of NatWest Group’s transactional and payment systems, financial crime and fraud detection systems and controls, risk management, credit analysis and reporting, accounting, customer service and other IT systems, including cloud services providers (some of which are owned and operated by other entities in NatWest Group or third parties), as well as the communication networks between its branches and main data processing centres, is critical to NatWest Group’s operations. Individually or collectively, any system failure (including defective or inadequate automated processes or artificial intelligence based solutions), loss of service availability, mobile banking disruption, or breach of data security could potentially cause significant damage to: (i) important business services across NatWest Group; and (ii) NatWest Group’s ability to provide services to its customers, which could result in reputational damage, significant compensation costs and regulatory sanctions (including fines resulting from regulatory investigations) or a breach of applicable regulations and could affect NatWest Group’s regulatory approvals, competitive position, business and brands, which could undermine its ability to attract and retain customers and talent.
NatWest Group outsources certain functions as it innovates and offers new digital solutions to its customers to meet the demand for online and mobile banking. Outsourcing alongside remote working heighten the above risks.
NatWest Group uses IT systems that enable remote working interface with third-party systems. NatWest Group could experience service denials or disruptions if such IT systems exceed capacity or if NatWest Group or a third-party system fails or experiences any interruptions, all of which could result in business and customer interruption and related reputational damage, significant compensation costs, regulatory sanctions and/or a breach of applicable regulations.
In 2024, NatWest Group continued to make considerable investments to further simplify, upgrade and improve its IT and technology capabilities (including migration of certain services to cloud platforms). NatWest Group continues to develop and enhance digital services for its customers and seeks to improve its competitive position through integrating automated processes and artificial intelligence based solutions in its business and by enhancing controls and procedures and strengthening the resilience of services including cybersecurity. Any failure of these investment and rationalisation initiatives to achieve the expected results, due to cost challenges, poor implementation, defects or otherwise, may adversely affect NatWest Group’s operations, its reputation and ability to retain or grow its customer business or adversely affect its competitive position.
NatWest Group relies on attracting, retaining and developing diverse senior management and skilled personnel, and is required to maintain good employee relations.
NatWest Group’s success depends on its ability to attract, retain (through creating an inclusive environment), and develop highly skilled and qualified diverse personnel, including senior management, directors and key employees (including technology and data focused roles), in a highly competitive market and under internal cost efficiency pressures.
NatWest Group’s ability to attract, retain and develop highly skilled and qualified diverse senior management and skilled personnel may be more difficult due to cost-controlling measures, failure to pay employees competitive compensation, heightened regulatory oversight of banks and the increasing scrutiny of, and (in some cases) restrictions placed upon, employee compensation arrangements. In addition, certain economic, market and regulatory conditions and political developments may reduce the pool of candidates for key management and non-executive roles, including non-executive directors with the right skills, knowledge and experience, or may increase the number of departures of existing employees. Moreover, a failure to foster a diverse and inclusive workforce may adversely affect NatWest Group’s employee engagement and the formulation and execution of its strategy and could also have an adverse effect on its reputation with employees, customers, investors and regulators.
Many of NatWest Group’s employees in the UK, the Republic of Ireland and continental Europe are represented by employee representative bodies, including trade unions and works councils. Engagement with its employees and such bodies is important to NatWest Group in maintaining good employee relations. Any failure to do so may adversely affect NatWest Group’s ability to operate its business effectively.
A failure in NatWest Group’s risk management framework could adversely affect NatWest Group, including its ability to achieve its strategic objectives.
Risk management is an integral part of all of NatWest Group’s activities and delivery of its long-term strategy. NatWest Group’s Enterprise-Wide Risk Management Framework sets out the approach for managing risk within NatWest Group including in relation to risk governance and risk appetite. A failure to adhere to this framework and to agreed risk appetite statements, or any material weaknesses or deficiencies in the framework’s controls and procedures, could adversely affect NatWest Group’s financial condition and strategic delivery, as well as accurate reporting of risk exposures.
In addition, financial crime risk management is dependent on the use and effectiveness of financial crime assessment, systems and controls. Weak or ineffective financial crime processes and controls may risk NatWest Group inadvertently facilitating financial crime which may result in regulatory investigation, sanction, litigation, fines and/or reputational damage.
Financial crime continues to evolve, whether through fraud, scams, cyberattacks or other criminal activity. These risks are exacerbated as NatWest Group continues to innovate its product offering and increasingly offers digital solutions to its customers, including through mobile banking. NatWest Group has made and continues to make significant, multi-year investments to strengthen and improve its overall financial crime control framework with prevention systems and capabilities, including investment in new technologies and capabilities to further enhance customer due diligence, transaction monitoring, sanctions and anti-bribery and corruption systems.
Financial risk management is highly dependent on the use and effectiveness of internal stress tests and models and ineffective risk management may arise from a wide variety of factors, including lack of transparency or incomplete risk reporting, manual processes and controls, inaccurate data, inadequate IT systems, unidentified conflicts or misaligned incentives, lack of accountability control and governance, incomplete risk monitoring and management, insufficient challenges or assurance processes, or a failure to commence or timely complete risk remediation projects. Failure to manage risks effectively, or within regulatory expectations, could adversely affect NatWest Group’s reputation or its relationship with its regulators, customers, shareholders or other stakeholders.
NatWest Group’s operations are inherently exposed to conduct risks, which include business decisions, actions or reward mechanisms that are not responsive to or aligned with NatWest Group’s regulatory obligations, customers’ needs or do not reflect NatWest Group’s strategy, ineffective product management, unethical or inappropriate use of data, information asymmetry, implementation and utilisation of new technologies, outsourcing of customer service and product delivery, inappropriate behaviour towards customers, customer outcomes, the possibility of mis-selling of financial products and mishandling of customer complaints. Some of these risks have materialised in the past and ineffective management and oversight of conduct risks may lead to further remediation and regulatory intervention or enforcement.
NatWest Group’s businesses are also exposed to risks from employee, contractor or service providers misconduct including non-compliance with policies and regulations, negligence or fraud (including financial crimes and fraud), any of which could result in regulatory fines or sanctions and serious reputational or financial harm to NatWest Group. Hybrid working arrangements for NatWest Group employees place heavy reliance on the IT systems that enable remote working and may place additional pressure on NatWest Group’s ability to maintain effective internal controls and governance frameworks and increase operational risk. Hybrid working arrangements are also subject to regulatory scrutiny to ensure adequate recording, surveillance and supervision of regulated activities, and compliance with regulatory requirements and expectations, including requirements to: meet threshold conditions for regulated activities; ensure the ability to oversee functions (including any outsourced functions); ensure no detriment is caused to customers; and ensure no increased risk of financial crime.
In addition, the UK’s Net Zero Strategy and NatWest Group’s strategy relating to climate and sustainability are important drivers as to how NatWest Group integrates climate (including physical and transition risks) and other sustainability-related risks into its risk management framework and practices (including for financing activities or engaging with counterparties (including suppliers)). Furthermore, legislative and regulatory authorities are publishing expectations as to how banks should prudently manage and transparently disclose climate and other sustainability-related risks. Any failure of NatWest Group to fully and timely embed climate and other sustainability-related risks into its risk management practices and framework to appropriately identify, assess, prioritise and monitor such risks may have an adverse effect on NatWest Group. Similarly, if the Group is unable to apply the appropriate product governance processes in line with NatWest Group’s strategy and applicable legal and regulatory requirements and expectations it may have an adverse effect on NatWest Group.
NatWest Group seeks to embed a risk awareness culture across the organisation and has implemented policies and allocated new resources across all levels of the organisation to manage and mitigate conduct risk and expects to continue to invest in risk management, including the ongoing development of a risk management strategy in line with regulatory expectations. However, such efforts may not insulate NatWest Group from instances of misconduct and no assurance can be given that NatWest Group’s strategy and control framework will be effective. Any failure in NatWest Group’s risk management framework may result in the inability to achieve its strategic objectives for its customers, employees and wider stakeholders.
NatWest Group’s operations are subject to inherent reputational risk.
Reputational risk relates to stakeholder and public perceptions of NatWest Group arising from an actual or perceived failure to meet stakeholder or the public’s expectations, including with respect to NatWest Group’s strategy and related targets or due to any events, behaviour, action or inaction by NatWest Group, its employees or those with whom NatWest Group is associated. Refer to ‘NatWest Group’s businesses are subject to substantial regulation and oversight, which are constantly evolving and may adversely affect NatWest Group.’ This includes harm to its brand, which may be detrimental to NatWest Group’s business, including its ability to build or sustain business relationships with customers, stakeholders and regulators, and may cause low employee morale, regulatory censure or reduced access to, or an increase in the cost of, funding. Reputational risk may arise whenever there is, or there is perceived to be, a material lapse in standards of integrity, controls, compliance, customer or operating efficiency, or regulatory or press scrutiny, and may adversely affect NatWest Group’s ability to attract and retain customers.
In particular, NatWest Group’s ability to attract and retain customers (particularly, corporate/institutional and retail depositors), and talent, and engage with counterparties may be adversely affected by factors including: negative public opinion resulting from the actual or perceived manner in which NatWest Group conducts or modifies its business activities and operations, media coverage (whether accurate or otherwise), employee misconduct, NatWest Group’s financial performance, IT systems failures or cyberattacks, data breaches, financial crime and fraud, the level of direct and indirect government support, or the actual or perceived practices in the banking and financial industry in general, or a wide variety of other factors.
Technologies, in particular online social networks and other broadcast tools that facilitate communication with large audiences in short timeframes and with minimal costs, may also significantly increase and accelerate the impact of damaging information and allegations.
Although NatWest Group has a Reputational Risk Policy and framework to identify, measure and manage material reputational risk exposures, there is a risk that it may not be successful in avoiding or mitigating damage to its business or its various brands from reputational risk.
Any of the above aspects of reputational risk may have a material adverse effect on NatWest Group’s future results, financial condition, prospects, and/or reputation.
NatWest Group’s businesses are subject to substantial regulation and oversight, which are constantly evolving and may adversely affect NatWest Group.
NatWest Group is subject to extensive laws, regulations, guidelines, corporate governance practice and disclosure requirements, administrative actions and policies in each jurisdiction in which it operates, which represents ongoing compliance and conduct risks. Many of these are constantly evolving and are subject to further material changes, which may increase compliance and conduct risks, particularly as the laws of different jurisdictions (including those of the EU/EEA and UK) diverge. NatWest Group expects government and regulatory intervention in the financial services industry to remain high for the foreseeable future.
Regulators and governments continue to focus on reforming the prudential regulation of the financial services industry and the way financial services are conducted. Measures have included: enhanced capital, liquidity and funding requirements, through initiatives such as the Basel 3.1 standards implementation (and any resulting effect on RWAs and models), the UK ring-fencing regime, the strengthening of the recovery and resolution framework applicable to financial institutions in the UK, EU and US, financial industry reforms (such as the FSMA 2023), corporate governance requirements, rules relating to the compensation of senior management and other employees, enhanced data protection and IT resilience requirements (such as DORA), financial market infrastructure reforms, enhanced regulations in respect of the provision of ‘investment services and activities’.
There is also increased regulatory focus in certain areas, including conduct, model risk governance, consumer protection in retail or other financial markets (such as the FCA’s rules governing interactions with and the provision of services to retail customers, the ‘Consumer Duty’), competition and disputes regimes, anti-money laundering, anti-corruption, anti-bribery, anti-tax evasion, payment systems, sanctions and anti-terrorism laws and regulations.
In addition, there is significant oversight by competition authorities. The competitive landscape for banks and other financial institutions in the UK, EU/EEA, US and Asia is rapidly changing. Recent regulatory and legal changes have resulted, and may continue to result, in new market participants and changed competitive dynamics in certain key areas. Regulatory and competition authorities, including the CMA, are also looking at and focusing more on how they can support competition and innovation in digital and other markets. Future competition investigations, market reviews, or regulation of mergers may lead to the imposition of financial penalties or market remedies that may adversely affect NatWest Group’s competitive or financial position. Recent regulatory changes and heightened levels of public and regulatory scrutiny in the UK, EU and US have resulted in increased capital, funding and liquidity requirements, changes in the competitive landscape, changes in other regulatory requirements and increased operating costs, and have impacted, and will continue to impact, product offerings and business models.
Moreover, uncertainties remain as to the extent to which EU/EEA laws will diverge from UK law. For example, bank regulation in the UK may diverge from European bank regulation following the enactment of the Financial Services and Markets Act 2023 (‘FSMA 2023’) and the Retained EU Law (Revocation and Reform) Act 2023. In particular, FSMA 2023 provides for the revocation of retained EU laws relating to financial services regulation, but sets out that this process will likely take a number of years and the intention is that specific retained EU laws will not be revoked until such time as replacement regulatory rules are in place.
The actions taken by regulators in response to any new or revised bank regulation and other rules affecting financial services, may adversely affect NatWest Group, including its business, non-UK operations, group structure, compliance costs, intragroup arrangements and capital requirements.
Other areas in which, and examples of where, governmental policies, regulatory and accounting changes, and increased public and regulatory scrutiny may have an adverse effect (some of which could be material) on NatWest Group include, but are not limited to:
Any of these developments (including any failure to comply with or correctly interpret new rules and regulations) could also have an adverse effect on NatWest Group’s authorisations and licences, the products and services that it may offer, its reputation and the value of its assets, NatWest Group’s operations or legal entity structure, and the manner in which it conducts its business.
Material consequences could arise should NatWest Group be found non-compliant with these regulatory requirements. Regulatory developments may also result in an increased number of regulatory investigations and proceedings and have increased the risks relating to NatWest Group’s ability to comply with the applicable body of rules and regulations in the manner and within the timeframes required.
Changes in laws, rules or regulations, or in their interpretation or enforcement, or the implementation of new laws, rules or regulations, including contradictory or conflicting laws, rules or regulations by key regulators or policymakers in different jurisdictions, or failure by NatWest Group to comply with such laws, rules and regulations, may adversely affect NatWest Group’s business, results of operations and outlook. In addition, uncertainty and insufficient international regulatory coordination as enhanced supervisory standards are developed and implemented may adversely affect NatWest Group’s ability to engage in effective business, capital and risk management planning.
NatWest Group is exposed to the risks of various litigation matters, regulatory and governmental actions and investigations as well as remedial undertakings, the outcomes of which are inherently difficult to predict, and which could have an adverse effect on NatWest Group.
NatWest Group’s operations are diverse and complex and it operates in legal and regulatory environments that expose it to potentially significant civil actions (including those following on from regulatory sanction), as well as criminal, regulatory and governmental proceedings. NatWest Group has resolved a number of legal and regulatory actions over the past several years but continues to be, and may in the future be, involved in such actions in the US, the UK, Europe, Asia and other jurisdictions.
NatWest Group is, has been or will likely be involved in a number of significant legal and regulatory actions, including investigations, proceedings and ongoing reviews (both formal and informal) by governmental law enforcement and other agencies and litigation proceedings, including in relation to the offering of securities, conduct in the foreign exchange market, the setting of benchmark rates such as LIBOR and related derivatives trading, the issuance, underwriting, and sales and trading of fixed-income securities (including government securities), product mis-selling, customer mistreatment, anti-money laundering, antitrust, VAT recovery, record keeping, reporting and various other issues. There is also an increasing risk of new class action claims being brought against NatWest Group in the Competition Appeal Tribunal for breaches of competition law, as well as a risk of activist actions, particularly relating to climate change and sustainability-related matters. Legal and regulatory actions are subject to many uncertainties, and their outcomes, including the timing, amount of fines, damages or settlements or the form of any settlements, which may be material and in excess of any related provisions, are often difficult to predict, particularly in the early stages of a case or investigation. NatWest Group’s expectation for resolution may change and substantial additional provisions and costs may be recognised in respect of any matter.
The resolution of significant investigations includes NWM Plc’s December 2021 spoofing-related guilty plea in the United States that was agreed with the US Department of Justice (‘DOJ’), and involves a multi-year period of probation, an independent corporate monitor and the ongoing implementation of recommendations made by it, and commitments to compliance programme reviews and improvements, and reporting obligations. In the event that NWM Plc does not meet its obligations to the DOJ, this may lead to adverse consequences such as findings that NWM Plc violated its probation term and possible re-sentencing, increased costs from any extension of monitorship and/or the period of the probation, amongst other consequences. For additional information relating to this and other legal and regulatory proceedings and matters to which NatWest Group is currently exposed, see ‘Litigation and regulatory matters’ at Note 25 to the consolidated accounts.
Recently resolved matters or adverse outcomes or resolution of current or future legal, regulatory or other matters, including conduct-related reviews and redress projects, could increase the risk of greater regulatory and third-party scrutiny and/or result in future legal or regulatory actions, and could have material financial, reputational, or collateral consequences for NatWest Group’s business and result in restrictions or limitations on NatWest Group’s operations.
These may include the effective or actual disqualification from carrying on certain regulated activities and consequences resulting from the need to reapply for various important licences or obtain waivers to conduct certain existing activities of NatWest Group, particularly but not solely in the US, which may take a significant period of time and the results and implications of which are uncertain.
Disqualification from carrying on any activities, whether automatically as a result of the resolution of a particular matter or as a result of the failure to obtain such licences or waivers could adversely affect NatWest Group’s business, in particular in the US. This in turn and/or any fines, settlement payments or penalties may have an adverse effect on NatWest Group.
Failure to comply with undertakings made by NatWest Group to its regulators, or the conditions of probation resulting from the spoofing-related guilty plea, may result in additional measures or penalties being taken against NatWest Group. In addition, any failure to administer conduct redress processes adequately, or to handle individual complaints fairly or appropriately, could result in further claims as well as the imposition of additional measures or limitations on NatWest Group’s operations, additional supervision by NatWest Group’s regulators, and loss of investor confidence.
Changes in tax legislation (or application thereof) or failure to generate future taxable profits may impact the recoverability of certain deferred tax assets recognised by NatWest Group.
In accordance with the accounting policies set out in ‘Critical accounting policies and sources of estimation uncertainty’, NatWest Group has recognised deferred tax assets on losses available to relieve future profits from tax only to the extent it is probable that they will be recovered. The deferred tax assets are quantified on the basis of current tax legislation and accounting standards and are subject to change in respect of the future rates of tax or the rules for computing taxable profits and offsetting allowable losses.
Failure to generate sufficient future taxable profits or further changes in tax legislation or the application thereof (including with respect to rates of tax), or changes in accounting standards may reduce the recoverable amount of the recognised tax loss deferred tax assets, amounting to £1.106 billion as at 31 December 2024. Changes to the treatment of certain deferred tax assets may impact NatWest Group’s capital position. In addition, NatWest Group’s interpretation or application of relevant tax laws may differ from those of the relevant tax authorities and provisions are made for potential tax liabilities that may arise on the basis of the amounts expected to be paid to tax authorities. The amounts ultimately paid may differ materially from the amounts provided depending on the ultimate resolution of such matters.
NatWest Group and its Value Chain face climate and sustainability-related risks that may adversely affect NatWest Group.
Climate change has been identified as a source of systemic risk, with potentially severe consequences for financial institutions. The financial impacts of climate and sustainability-related risks are expected to be widespread and may disrupt the orderly functioning of financial markets and have an adverse effect on financial institutions, including NatWest Group.
Financial and non-financial risks from climate change can arise through physical and transition risks. In addition, physical and transition risks can trigger further losses, stemming directly or indirectly from legal claims, litigation and conduct liability (referred to as ‘liability risk’).
Whilst there are significant uncertainties relating to the location, magnitude and timing of climate-related physical risks, scientific research suggests physical risks may occur in increasing frequency and severity. Climate-related events like flood, wildfires and climatic changes can damage assets and disrupt operations, leading to increased costs, changes in asset values and loan defaults.
Damage or disruption to NatWest Group customers’ and counterparties’ (including suppliers’) properties, premises and operations could disrupt business, result in the deterioration of the value of collateral or insurance shortfalls, impair asset values and negatively impact the creditworthiness of customers and their ability and/or willingness to pay fees, afford new products or repay their debts, leading to increased default rates, delinquencies, write-offs and impairment charges in NatWest Group’s portfolios. In addition, NatWest Group’s premises and operations, or those of its critical outsourced functions may experience damage or disruption leading to increased costs for NatWest Group.
To meet the goals of the UK’s Net Zero Strategy by 2050 will require a net-zero transition across all sectors of the UK economy. The timing and pace of the transition to a net-zero economy will depend on many factors and uncertainties and may be near-term, gradual and orderly, or delayed, rapid and disorderly, or a combination of these. A transition to a net-zero economy requires significant and timely policy and regulatory changes, immediate actions from national and regional governments, new technological innovations and changes to supply and demand systems within industries. The transition to a net-zero economy may also trigger changes in consumer behaviour and market sentiment. In addition, there is significant uncertainty about how climate change and the world’s transition to a net-zero economy will unfold over time and how and when climate and other sustainability-related risks will manifest. These timeframes are considerably longer than NatWest Group’s historical and current strategic, financial, resilience and investment planning horizons.
NatWest Group and its value chain (including its investors, customers, counterparties (including its suppliers), business partners and employees) (‘NatWest Group’s Value Chain’) may face financial and non-financial risks arising from broader (i.e. non-climate-related) sustainability issues such as risks relating to nature loss (such as the loss and/or decline of the state of nature including but not limited to, the reduction of any aspect of biological diversity and other forms of environmental degradation such as air, water and land pollution, soil quality degradation and water stress). NatWest Group recognises that climate and nature-related risks are interlinked and therefore NatWest Group aims to work towards enhancing processes and capabilities to include assessments of nature-related risks and opportunities within governance, risk management and stakeholder engagement practices.
Climate and nature-related risks may:
In addition to nature-related risks, NatWest Group and NatWest Group’s Value Chain may face financial and non-financial risks arising from other sustainability-related issues such as: (i) risks related to social issues (including human rights), for example, negative impact on people’s standard of living and health, political and geopolitical tensions and conflict endangering people’s lives and security, displacement of communities, the violation of indigenous people’s rights, unjust working conditions and labour rights breaches (including discrimination, lack of diversity and inclusion, inequality, gender/ethnicity pay gap and payments under the minimum wage), modern slavery, accessible banking and financial inclusion, financial crime, data privacy breaches, innovation, digitalisation and AI, and lack of support for the vulnerable; and (ii) governance-related risks (including board diversity, ethical corporate culture, executive compensation and management structure).
There is also growing expectation from customers, investors, policymakers, regulators and society of the need for a ”just transition”– in recognition that the transition to net zero should happen in a way that is as fair and inclusive as possible to everyone concerned. Although NatWest Group continues to evaluate and assess whether and, if so, how it integrates ‘just transition’ considerations into its strategy and decision-making, a failure (or perception of failure) by NatWest Group to sufficiently factor these considerations into existing products and service offerings may adversely affect NatWest Group, including NatWest Group’s reputation.
If NatWest Group fails to identify, assess, prioritise, monitor, react to and prevent appropriately: (i) climate and sustainability-related impacts, risks and opportunities; and (ii) changing regulatory and market expectations and societal preferences that NatWest Group and NatWest Group’s Value Chain face, in a timely manner or at all, this may have a material adverse effect on NatWest Group’s business, future results, financial condition, prospects (including cash flows, access to finance or cost of capital over the short, medium or long term), reputation or the price of its securities.
NatWest Group’s strategy relating to climate change, ambitions, targets and transition plan entail significant execution and/or reputational risks and are unlikely to be achieved without significant and timely government policy, technology and customer behavioural changes.
At NatWest Group’s Annual General Meeting in April 2022, ordinary shareholders passed an advisory ‘Say on Climate’ resolution endorsing NatWest Group’s previously announced strategic direction on climate change, including its ambitions to at least halve the climate impact of its financing activity by 2030, achieve alignment with the 2015 Paris Agreement and reach net zero across its financed emissions, assets under management and operational value chain by 2050. NatWest Group may also announce other climate and sustainability-related ambitions, targets and initiatives and/or retire or change existing ones.
Making the changes necessary to achieve NatWest Group’s climate ambitions and targets and executing its transition plan, together with the active management of climate and sustainability-related risks and other regulatory, policy and market changes, is likely to necessitate material changes to NatWest Group’s business, operating model, its existing exposures and the products and services NatWest Group provides to its customers (potentially on accelerated timescales). NatWest Group may be required to: (i) in the medium and long term significantly reduce its financed emissions and its exposure to customers that do not align with a transition to net zero or do not have a credible transition plan in place, and (ii) divest or discontinue certain activities for regulatory or legal reasons or in response to the transition to a less carbon-dependent economy. Increases in lending and financing activities may wholly or partially offset some or all these reductions, which may increase the extent of changes and reductions necessary.
Making the necessary changes, or failing to make the necessary changes in a timely manner, or at all to achieve NatWest Group’s climate ambitions and targets and executing its transition plan, together with the active management of climate and sustainability-related risks and other regulatory, policy and market changes may have an adverse effect on NatWest Group and NatWest Group’s ability to achieve its climate and financial ambitions and targets, take advantage of climate change-related opportunities and generate sustainable returns.
NatWest Group’s ability to achieve its strategy, including its climate ambitions and targets, will significantly depend on many factors and uncertainties beyond NatWest Group’s control. These include: (i) the extent and pace of climate change, including the timing and manifestation of physical and transition risks; (ii) the macroeconomic environment; (iii) the effectiveness of actions of governments, legislators, regulators and businesses; (iv) the response of the wider society, NatWest Group’s Value Chain and other stakeholders to mitigate the impact of climate and sustainability-related risks; (v) changes in customer behaviour and demand; (vi) appetite for new markets, credit appetite, concentration risk appetite, lending opportunities; (vii) developments in the available technology; (viii) the rollout of low carbon infrastructure; and (ix) the availability of accurate, verifiable, reliable, auditable, consistent and comparable data. These external factors and other uncertainties will make it challenging for NatWest Group to meet its climate ambitions and targets and there is a significant risk that all or some of these ambitions and targets will not be achieved or not achieved within the intended timescales.
NatWest Group’s ability to achieve its climate ambitions and targets depends to a significant extent on the timely implementation and integration of appropriate government policies. The UK Climate Change Committee (the ‘UK CCC’) 2024 Progress Report to the UK Parliament states that the UK is not on track to hit its legislated target to reduce emissions in 2030 by 68% compared to 1990 levels, and only a third of the emission reductions required to achieve the UK’s 2030 target are currently covered by credible plans, with action needed across all sectors of the economy. NatWest Group’s climate ambitions are unlikely to be achieved without timely and appropriate government policy and technology developments, as well as supplier, customer and societal response required to support the transition.
The UK CCC is expected to publish its Seventh Carbon Budget on 26 February 2025. NatWest Group expects this to take into account new UK policy initiatives announced by the UK government in November 2024 and NatWest Group plans to review its climate ambitions in the context of the of the UK’s Seventh Carbon Budget, once released.
Climate and sustainability matters are also becoming increasingly politicised and polarised.
Some of NatWest Group’s customers, investors or other stakeholders may decide not to do business with NatWest Group because, according to their own assessment, NatWest Group’s strategy, ambitions and targets related to climate and sustainability do not meet their expectations, either for lacking the necessary ambition or progress or for being perceived as overly concerned about sustainability.
Any delay or failure in putting into effect, making progress against or meeting NatWest Group’s climate-related ambitions, targets and plans may have a material adverse effect on NatWest Group’s future results, financial condition, prospects, and/or reputation and may increase the climate and sustainability-related risks NatWest Group faces.
There are significant limitations related to accessing accurate, reliable, verifiable, auditable, consistent and comparable climate and other sustainability-related data that contribute to substantial uncertainties in accurately modelling and reporting on climate and sustainability information, as well as making appropriate important internal decisions.
Accurate assessment and reporting of climate and sustainability-related impacts, risks, opportunities and other climate and sustainability-related matters, and related metrics depends on access to accurate, reliable, verifiable, auditable, consistent and comparable data from counterparties (including suppliers), customers, or other third parties. Data of adequate quality may not be generally available or, if available, may not be accurate, reliable, verifiable, auditable, consistent, or comparable. In the absence of other sources, reporting on climate and sustainability-related matters (including reporting on NatWest Group’s financed emissions) may be based on estimated or aggregated information developed by third parties that may be prepared in an inconsistent way using different methodologies, interpretations, or assumptions that may not be accurate for a given counterparty (including supplier) or customer. There may also be data gaps and limitations that are addressed using estimates based on assumptions about matters that are inherently uncertain or proxy data, such as sectoral averages or use of emissions estimated by a third party, again developed in a variety of ways and in some cases not in a timely manner causing data to be potentially outdated at the time when they are used.
Significant risks, uncertainties and variables are inherent in the assessment, measurement and mitigation of climate and sustainability-related risks. These include data quality gaps and limitations mentioned above, as well as the pace at which climate science, greenhouse gas accounting standards and various emissions reduction solutions develop. In addition, there is significant uncertainty about how climate change and the world’s transition to a net-zero economy will unfold over time and how and when climate and sustainability-related risks will manifest. These timeframes are considerably longer than NatWest Group’s historical and current strategic, financial, resilience and investment planning horizons.
As a result, NatWest Group’s assessment of climate and sustainability impacts, risks, opportunities and other climate and sustainability-related matters is likely to evolve and its climate and sustainability-related disclosures may be amended, updated or restated in the future as the quality and completeness of NatWest Group’s data and methodologies continue to improve.
These data quality challenges, gaps and limitations may also have a material impact on NatWest Group’s ability to make effective business decisions about climate and sustainability-related impacts, risks, opportunities and other climate and sustainability-related matters, including risk management decisions, to comply with disclosure requirements and to monitor and report progress in meeting ambitions, targets and pathways all of which may have an adverse effect on NatWest Group.
Climate-related risks are challenging to model due to their forward-looking nature, the lack of and/or quality of historical testing capabilities, lack of accuracy, standardisation and incompleteness of emissions and other climate and sub-sector related data and the immature nature of risk measurement and modelling methodologies. As a result, it is very difficult to predict and model the impact of climate-related risks into precise financial and economic outcomes.
The evaluation of climate-related risk exposure and the development of associated potential risk mitigation techniques also largely depend on the choice of climate scenario modelling methodology and the assumptions made which involves a number of risks and uncertainties.
Accordingly, these risks and uncertainties coupled with significantly long timeframes make the outputs of climate-related risk modelling, climate-related targets (including emission reduction targets) and pathways, inherently more uncertain than outputs modelled for traditional financial planning cycles based on historical financial information.
Capabilities within NatWest Group to appropriately assess, model, report and manage climate and sustainability-related impacts and risks and the suitability of the assumptions required to model and manage climate and sustainability-related risks appropriately continue to mature and develop. Even when those capabilities are appropriately developed, the high level of uncertainty regarding any assumptions modelled, the highly subjective nature of risk measurement and mitigation techniques, incorrect or inadequate assumptions and judgements and data quality gaps and limitations may lead to inadequate risk management information and frameworks, or ineffective business adaptation or mitigation strategies or regulatory non-compliance.
Any of the above may have a material adverse effect on NatWest Group’s business, future results, financial condition, prospects, reputation and the price of its securities.
NatWest Group is becoming subject to more extensive, and sophisticated climate and other sustainability-related laws, regulation and oversight and there is an increasing risk of regulatory enforcement, investigation and litigation.
NatWest Group plc and its subsidiaries are increasingly becoming subject to more extensive, and sophisticated sustainability-related laws and regulations in the UK, EU and the US, including in relation to mandatory climate and other sustainability reporting and due diligence, climate transition plan, product labelling and combatting “greenwashing”.
Compliance with these complex, evolving and often diverging legal, regulatory and supervisory requirements and voluntary standards and initiatives is likely to require NatWest Group to implement significant changes to its business models, IT systems, products, governance, internal controls over financial and non-financial reporting, disclosure controls and procedures, modelling capability and risk management systems, which may increase the cost of doing business, result in higher capital requirements, and entail additional change risk and increased compliance, regulatory sanctions, conduct and litigation (including settlements) costs. A failure by NatWest Group or any of its subsidiaries to comply with these climate and sustainability-related legal, regulatory and supervisory requirements and standards and meet expectations of NatWest Group’s Value Chain in this respect may result in investigations and regulatory sanction each of which may have an adverse effect on NatWest Group and the successful implementation of NatWest Group’s strategy relating to climate and sustainability.
Certain non-UK subsidiaries of NatWest Group in the EU and elsewhere may also be subject to EU, national and other climate and sustainability laws and regulations which in some cases may differ. Divergence between UK, EU, US and other climate and sustainability-related legal, regulatory and supervisory requirements and their interpretation may increase the cost of doing business (including increased operating costs) and may result in regulatory non-compliance and litigation risk. Failure by NatWest Group to comply with these divergent legal, regulatory and supervisory requirements (if applicable to NatWest Group) may have an adverse effect on NatWest Group’s successful implementation of its strategy relating to climate change including when setting up its climate ambitions and targets and executing its transition plan and may result in NatWest Group and/or its subsidiaries not meeting investors’ expectations.
Increasing new climate and sustainability-related jurisprudence, laws and regulations in the UK and other jurisdictions, regulatory scrutiny, expose financial institutions, including NatWest Group, to face increasing litigation, conduct, enforcement and contract liability risks related to climate change, nature-related degradation, human rights violations and other social, governance and sustainability-related issues. Furthermore, regulatory and enforcement activity around climate and sustainability initiatives that promote more extensive sustainability-related requirements and those that impose divestment and other sanctions against financial institutions that implement climate and sustainability-related initiatives is becoming increasingly divergent and conflicting between jurisdictions, in particular in the United States.
Any failure of NatWest Group to develop and implement robust and effective governance, controls and procedures over climate and sustainability-related impact assessment, disclosure, reporting and other communications and sustainability-related claims (including in relation to NatWest Group’s products, services and strategy) and comply with them in line with applicable legal and regulatory requirements and expectations, may give rise to increased complaints, regulatory enforcement (including sanctions), investigation and litigation and may adversely affect NatWest Group’s regulatory compliance, investor base and reputation.
Furthermore, there is a risk that shareholders, campaign groups, customers and activist groups could seek to take legal action against NatWest Group for financing or contributing to actual or perceived harm to the environment or people, climate change, nature-related degradation and human rights violations, failure to implement or follow adequate governance procedures and for not supporting the principles of ‘just transition’ (i.e. maximising the social benefits of the transition, mitigating the social risks of the transition, empowering those affected by the change, anticipating future shifts to address issues up front and mobilising investments from the public and private sectors).
NatWest operates from a number of locations worldwide. At 31 December 2024, RBS plc, NWB plc and Ulster Bank had 70, 389 and 25 retail branches respectively. Additionally, there is a network of business banking offices across the UK. NatWest Group has major headquarter hubs in London and Edinburgh, operational sites in some regional areas across the UK and India, and data centres in Edinburgh and London. The majority of its property portfolio is owned or under leases with unexpired terms of over 50 years.
Following placing and open offers in December 2008 and in April 2009, HM Treasury (HMT) owned approximately 70.3% of the enlarged ordinary share capital of the company. In December 2009, company issued a further £25.5 billion of new capital to HMT in the form of B shares. In August 2015, HMT sold 630 million of its holding of the company’s ordinary shares. In October 2015, HMT converted its entire holding of 51 billion B shares into 5.1 billion new ordinary shares of £1 each in the company. In June 2018, HMT sold a further 925 million of its holding of the company’s ordinary shares.
In March 2021, the company carried out an off-market purchase of 591 million of its ordinary shares from HMT. In May 2021, HMT sold 580 million ordinary shares through an accelerated book building process to institutional investors. In July 2021, HMT announced its intention to sell part of its shareholding over a 12 month period from August 2021 via a trading plan, for up to 15% of the aggregate total trading volume. In March 2022, the company carried out an off-market purchase of 550 million of its ordinary shares from HMT. In June2022 HMT announced that its trading plan was extended for a further 12 month term to August 2023 and, in April 2023, HMT announced a further extension to its trading plan to August 2025.
In May 2023, the company carried out an off-market purchase of 469 million of its ordinary shares from HMT. In May 2024 and November 2024, the company carried out off-market purchases of 392 million and 263 million, respectively, of its ordinary shares from HMT.
At 31 December 2024, HMT’s holding in the total voting rights of the company was 9.99%. The percentage was correct as at the date of notification on 12 December 2024.
Norges Bank has notified the company that it holds 3.01% of the total voting rights in the company, the percentage was correct as at the date of notification on 2 August 2024.
Blackrock, Inc. has notified the company that it holds 5.26% of the total voting rights in the company, the percentage was correct as at the date of notification on 31 May 2024.
Massachusetts Financial Services Company has notified the company that it holds 5.12% of the total voting rights in the company, the percentage was correct as at the date of notification on 6 March 2024.
The Capital Group Companies, Inc has notified the company that it holds 5.01% of the total voting rights in the company, the percentage was correct as at the date of notification on 19 November 2024.
Since 1 January 2018, the company has redeemed substantially all of the preference shares that were in issue (refer to Note 19 for further details). All shareholders within a class of the company’s shares have the same voting rights.
At the 2024 Annual General Meeting (AGM), shareholders renewed the authority for the company to make an off-market purchase of cumulative preference shares in the company. Shareholders will be asked to renew the authority at the AGM in 2025.
As at 31 December 2024 almost all of the company’s US$ denominated American Depository Shares representing ordinary shares were held by shareholders registered in the US. All other shares were predominantly held by shareholders registered outside the US.
The Buyback Programme (the 2023 Programme)
On 28 July 2023, the company announced a share buyback programme (the “2023 Programme”) of up to an aggregate market value equivalent of £500 million in ordinary shares in the company (“Ordinary Shares”). The 2023 Programme commenced on 31 July 2023 and completed on 22 March 2024.
Additional information continued
The 2023 Programme, the purpose of which was to reduce the capital of the company, was conducted within the limitations of the authority granted by the company’s shareholders to the Board at the company’s Annual General Meeting, held on 25 April 2023. The maximum number of Ordinary Shares that the company was authorized to repurchase under the 2023 Programme was 919,858,922. This number reflects the impact on the 2023 Authority of the reduction in the issued share capital of the company as a result of the off-market buyback on 22 May 2023 by the Company of 469m Ordinary Shares from HM Treasury (the “2023 Off-Market Buyback”).
The company entered into non-discretionary instructions with UBS AG, London Branch to conduct the 2023 Programme on its behalf and to make trading decisions under the 2023 Programme independently of the company.
The company cancelled the Ordinary Shares it repurchased under the 2023 Programme.
The Buyback Programme (the 2024 Programme)
On 16 February 2024, the company announced a share buyback programme (“the 2024 Programme”) of up to an aggregate market value equivalent of £300 million in Ordinary Shares. The 2024 Programme commenced on 19 February 2024 and ended on 24 July 2024.
The 2024 Programme, the purpose of which was to reduce the issued share capital of the company, took place within the limitations of the authority granted by the company’s shareholders to the Board at the company’s Annual General Meeting, held on 25 April 2023 (the “2023 Authority”). The maximum number of Ordinary Shares that the company was authorized to repurchase under the 2024 Programme was 696,743,990. This number reflects the impact on the 2023 Authority of the reduction in the issued share capital of the company as a result of the 2023 Off-Market Buyback. It is further reduced by the number of shares purchased by the Company under the 2023 Programme..
The company entered into non-discretionary instructions with UBS AG, London Branch to conduct the 2024 Programme on its behalf and to make trading decisions under the Programme independently of the company.
The company cancelled the Ordinary Shares it repurchased under the 2024 Programme.
Issuer Purchases of Equity Securities
Total number of shares purchased
Maximum value of shares that may
Average price paid per
as part of publicly announced
yet be purchased under the plans
Period
share in £
programmes(2)
or programmes in £ million
January 2024(3)
36,380,674
2.139862
February 2024(3)
27,777,823
2.144077
February 2024(4)
509,227
2.282988
March 2024(3)
4,645,692
2.430576
March 2024(4)
30,871,821
2.414997
April 2024(4)
17,870,966
2.763974
May 2024(4)
20,164,660
3.137569
June 2024(4)
21,439,190
3.116107
July 2024(4)
13,629,151
3.287978
173,289,204
Our Code of conduct
NatWest Group has a code of conduct (Our Code) which sets out the behaviours that are expected when employees are living our values in their everyday work. It ensures that we live by our purpose, values and behaviours and do the right thing for our colleagues, customers, suppliers, communities and shareholders. Our Code is supplemented by a number key tools and policies, which inform how we do things. They outline the expectations of the Bank, customers and regulators, and processes and procedures that must be followed. The key policies and guidance include, among others, Anti Bullying and Harassment, Competition, Complaints Management, Customers in Vulnerable Situations, Data Ethics, Financial Crime , Conflicts of Interest, Inside Information and Personal Account Dealing, Market Abuse and Inside Information, Privacy and Client Confidentiality and Security. By following our policies, NatWest Group’s approach to risk management is consistent and will keep it and its customers safe and secure. There are local country policies which align to country laws and regulations. Our Code applies to permanent colleagues, contractors, agency or temporary workers. Our Code is available to view on NatWest Group’s website at natwestgroup.com.
Disclosure pursuant to section 13(r) of the Securities Exchange Act
Section 13(r) of the Securities Exchange Act, added by Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, requires an issuer to disclose in its annual or quarterly reports, as applicable, whether, during the period covered by the report, it or any of its affiliates knowingly engaged in specified activities or transactions relating to Iran or with individuals or entities designated under Executive Order 13382 or 13224. Disclosure is required of certain activities conducted outside the United States by non-U.S. entities in compliance with local law, whether or not the activities are sanctionable under U.S. law.
In order to comply with this requirement, the following activities of NatWest Group’s affiliates are disclosed in response to Section 13(r).
Transactions involving Iranian Government owned entities
During 2024, affiliates of NatWest Group did not knowingly facilitate any payments remitted by, or on behalf of, an Iranian Government owned entity.
NatWest Group has a restrictive risk appetite in relation to transactions involving Iran and will only engage in certain transactions that are in compliance with applicable sanctions laws and within NatWest Group’s risk appetite.
NatWest Group maintain one account for an Iranian Government entity located in the United Kingdom. The purpose of the account is to facilitate UK domestic transactions only for employees’ salaries and operating costs such as UK taxes and utilities. No commercial activity is processed through the account and any revenue or profit generated is negligible. NatWest Group intends to continue servicing this account but will not offer any additional products or services to the Iranian Government.
Under applicable licenses granted by appropriate authorities, affiliates of NatWest Group hold three legacy guarantees entered into between 1984 and 1998, which support arrangements lawfully entered into by affiliates of NatWest Group customers with Iranian counterparties. These legacy guarantees are in favour of Iranian Government owned financial institutions. Any revenue or profit generated by these guarantees is negligible. These guarantees will remain on NatWest Group’s books until we are released from our obligations, in compliance with applicable sanctions regimes. NatWest Group does not intend to offer any additional products or services to Iranian counterparties.
Iranian Petroleum Industry
Section 13(r) of the Securities Exchange Act (as amended) requires disclosure of any knowing engagement in activity described in Section 5 (a) or (b) of the Iran Sanctions Act, including significant investments in or transactions that could develop the Iranian petroleum or petrochemical sectors.
During 2024, no transactions that meet these criteria have been facilitated by NatWest Group.
The home supervisors for NatWest Group are the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). As with all significant banking institutions, the PRA is the consolidated supervisor of NatWest Group. The FCA’s overall objective is to ensure financial markets function well. This is supported by its operational objectives of: securing an appropriate degree of protection for consumers; protecting and enhancing the integrity of the UK financial system; and promoting effective competition in the interests of consumers.
As at 31 December 2024, 15 companies in NatWest Group, spanning a range of financial services sectors, including banking and investment business, were authorised to conduct financial activities in the UK. The material UK authorised banks in NatWest Group are The Royal Bank of Scotland plc (RBS plc), National Westminster Bank Plc (NWB Plc), NatWest Markets Plc (NWM Plc) and Coutts & Company. Wholesale activities, other than Treasury activities, are concentrated in NatWest Markets Plc. Retail banking activities in England, Scotland and Wales are managed by the Retail Banking, Commercial & Institutional Banking and Wealth businesses of RBS plc, NWB Plc and Coutts & Company.
NatWest Group’s banking service in the Republic of Ireland is provided by Ulster Bank Ireland DAC (UBI DAC), which is supervised by the Central Bank of Ireland and the European Central Bank under the Single Supervisory Mechanism. In February 2021, NatWest Group announced the phased withdrawal of UBI DAC from the Republic of Ireland. We are currently at an advanced stage of our withdrawal process and continue to progress in line with our integrated plan whilst also taking the necessary steps to keep the bank safe, help our customers and support our colleagues. We intend to hand back our banking license in H1 2025.
Investment management business is principally undertaken by companies in the Commercial & Institutional Banking and Wealth businesses, including Coutts & Company.
NatWest Group is subject to extensive regulations that impose obligations on financial institutions to maintain appropriate policies, procedures and controls to ensure compliance with the rules and regulations to which they are subject.
NatWest Group conducts business in the US through its investment bank, NWM Plc. NWM Plc’s regulated entities in the US are its broker-dealer affiliate, NatWest Markets Securities Inc. (NWMSI); NWMSI’s Futures Commission Merchant (FCM); NWM Plc’s non-FCM clearing member; NWM Plc’s non-US-based Swap Dealer; and NWM Plc’s Connecticut Representative Office. NWM Plc is subject to the supervision of the Board of Governors of the Federal Reserve System (Federal Reserve) due to an outstanding enforcement action brought against NatWest Group by the Federal Reserve, namely the 2015 FX Cease and Desist Consent Order.
In addition, NWMSI is a Primary Dealer of the Federal Reserve Board of New York (FRB-NY) and, as such, is subject to certain rules and expectations of the Federal Reserve Board of New York.
NWMSI is subject to the regulations of a number of US securities regulators, mainly the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), Depository Trust & Clearing Corporation (DTCC), and various state regulators. NWMSI’s FCM is mainly subject to the regulations of the Commodity Futures Trading Commission (CFTC), National Futures Association (NFA) and the Chicago Mercantile Exchange Group (CME).
NWM Plc is a non-FCM clearing member of the CME and is subject to the regulations of the CME and the CFTC. NWM Plc is also a non-US-based provisionally-registered swap dealer and as such it is subject to oversight by the US regulators the CFTC and the NFA.
The NWM Plc Connecticut Representative Office is supervised by the FRB-NY and the Connecticut Department of Banking.
The anti-money laundering, anti-terrorism and economic sanctions regulations are a major focus of the US government for financial institutions and are rigorously enforced by most of the regulators mentioned above and the Financial Crimes Enforcement Network (FinCEN) of US Department of the Treasury.
Other jurisdictions
NatWest Group operates in a number of countries through a network of branches, local banks and non-bank subsidiaries and these activities are subject to supervision in most cases by a local regulator or central bank.
From 1 January 2024 our 5 EU institutions (RBSH N.V, NWM N.V, RBSI DS, NWBE and UBIDAC) came under the formal supervision of the ECB. These entities are subject to proportionate supervision by the ECB, with RBSH N.V. considered as a “true Significant Institution”.
308
Material Contracts
The company and its subsidiaries are party to various contracts in the ordinary course of business. Material contracts include the following:
B Share Acquisition and Contingent Capital Agreement
On 26 November 2009, the company and HM Treasury entered into the Acquisition and Contingent Capital Agreement pursuant to which HM Treasury subscribed for the initial B shares and the Dividend Access Share (the Acquisitions) and agreed the terms of HM Treasury’s contingent subscription (the Contingent Subscription) for an additional £8 billion in aggregate in the form of further B shares (the Contingent B shares), to be issued on the same terms as the initial B shares. The Acquisitions were subject to the satisfaction of various conditions, including the company having obtained the approval of its shareholders in relation to the Acquisitions.
On 16 December 2013, the company announced that, having received approval from the PRA, it had terminated the £8 billion Contingent Subscription. The company was able to cancel the Contingent Subscription as a result of the actions announced in the second half of 2013 to further strengthen its capital position.
On 9 October 2015, the company announced that on 8 October 2015, it had received a valid conversion notice from HM Treasury in respect of all outstanding B shares held by HM Treasury.
The new ordinary shares issued on conversion of the B shares were admitted to the official list of the UK Listing Authority (UKLA), and to trading on the London Stock Exchange plc, on 14 October 2015. Following such conversion, HM Treasury no longer holds any B shares.
The company gave certain representations and warranties to HM Treasury on the date of the Acquisition and Contingent Capital Agreement, on the date the circular was posted to shareholders, on the first date on which all of the conditions precedent were satisfied, or waived, and on the date of the Acquisitions. The company also agreed to a number of undertakings.
The company agreed to reimburse HM Treasury for its expenses incurred in connection with the Acquisitions.
For as long as it is a substantial shareholder of the company (within the meaning of the UKLA’s Listing Rules), HM Treasury has undertaken not to vote on related party transaction resolutions at general meetings and to direct that its affiliates do not so vote.
Directed Buyback Contract
On 7 February 2019, the company and HM Treasury entered into the Directed Buyback Contract to help facilitate the return of the company to full private ownership through the use of any excess capital to buy back the company’s ordinary shares held by HM Treasury.
Under the terms of the Directed Buyback Contract, the company may agree with HM Treasury to make off-market purchases from time to time of its ordinary shares held by HM Treasury, including by way of one or more standalone purchases, through a non-discretionary, broker-managed directed trading programme, or in conjunction with any offer or sale by HM Treasury by way of an institutional placing.
Neither the company nor HM Treasury would be under an obligation to agree to make such off-market purchases and would only do so subject to regulatory approval at the time. The price to be paid for each ordinary share is required to be the market price at the time of purchase or, if the directed buyback is in conjunction with an institutional placing, the placing price.
Previously, the aggregate number of ordinary shares that the company could purchase from HM Treasury under the Directed Buyback Contract could not exceed 4.99% of the company’s issued share capital and the aggregate consideration to be paid could not exceed 4.99% of the company’s market capitalisation. The new UK Listing Rules which came into force on 29 July 2024 removed the previous 5% threshold for aggregated Related Party Transactions (RPTs) in any 12-month period (beyond which separate shareholder approval would be required). The company’s AGM in April 2024 approved increasing the buyback authority to a maximum of 15% of the company’s issued share capital in any 12-month period.
The AGM also approved amending the Directed Buyback Contract accordingly and an amended and restated Directed Buyback Contract was entered into on 7 May 2024.
To date, the company has made five separate off-market purchases under the Directed Buyback Contract. One purchase took place in 2021, the second purchase took place in 2022, the third purchase took place in 2023 and two further purchases took place in 2024.
On 19 March 2021, the company announced that it had agreed with HM Treasury to make an off-market purchase under the Directed Buyback Contract for the total consideration of £1,125,341,269 for 590,730,325 ordinary shares representing 4.86% of the company’s issued share capital at that point in time.
On 28 March 2022, the company announced an off-market purchase of 549,851,147 ordinary shares for the total consideration of £1,212,421,779. The purchased ordinary shares represented 4.91% of the company’s issued share capital at the time (excluding treasury shares). This took HM Treasury's ownership in the company below 50% for the first time since 2008.
Material contracts continued
On 22 May 2023, the company announced an off-market purchase of 469,200,081 ordinary shares for a total consideration of £1,259,333,017. The purchased ordinary shares represented 4.95% of the company's issued ordinary share capital at the time (excluding treasury shares).
On 31 May 2024, the company announced an off-market purchase of 392,448,233 ordinary shares for a total consideration of £1,240,921,313. The purchased ordinary shares represented 4.50% of the company's issued ordinary share capital at the time (excluding treasury shares).
On 11 November 2024, the company announced an off-market purchase of 262,605,042 ordinary shares for a total consideration of £1,000,000,000. The purchased ordinary shares represented 3.16% of the company's issued ordinary share capital at the time (excluding treasury shares).
Memorandum of Understanding Relating to The Royal Bank of Scotland Group Pension Fund
On 16 April 2018 the company entered into a Memorandum of Understanding (MOU) with the trustee of The Royal Bank of Scotland Group Pension Fund (the Group Fund), which aimed to facilitate both the necessary changes to the Main Section of the Group Fund to align the employing entity structure with the requirements of the UK ring-fencing legislation and acceleration of the settlement framework for the 31 December 2017 triennial valuation of the Main Section of the Group Fund (brought forward from 31 December 2018).
In addition, the MoU also provided clarity on the additional related funding contributions required to be made by the company to the Main Section of the Group Fund as follows: (i) a pre-tax payment of £2 billion that was made in the second half of 2018 and (ii) from 1 January 2020, further pre-tax contributions of up to £1.5 billion in aggregate linked to the making of future distributions to RBS shareholders including ordinary and special dividends and/or share buy backs (subject to an annual cap on contributions of £500 million before tax).
Framework Agreement Relating to the NatWest Group Pension Fund
On 28 September 2018, National Westminster Bank plc (NWB Plc) entered into a framework agreement (the Framework Agreement) with, among others, the trustee (Trustee) of the NatWest Group Pension Fund (the Group Fund). Amongst others, the Framework Agreement set out the funding contributions required to be made by NatWest Group to the Main Section of the Group Fund as follows: (i) a pre-tax payment of £2 billion that was made in the second half of 2018 and (ii) from 1 January 2020, further pre-tax contributions of up to £1.5 billion in aggregate linked to the making of future distributions to NatWest Group shareholders including ordinary and special dividends and/or share buy backs (subject to an annual cap on contributions of £471 million before tax). Pursuant to funding requirements in the Framework Agreement, NatWest Group made contributions to the Main Section of the Group Fund in an aggregate amount of £500 million in 2021 and £500 million in 2022.
On 6 February 2023, NWB Plc and the Trustee entered into an amendment to the Framework Agreement, a supplemental framework agreement and a revised Schedule of Contributions to, among others, restructure the requirement to make a distribution-linked contribution to the Main Section of the Group Fund of up to £500 million (before tax) in 2023. In place of this requirement, NWB Plc and the Trustee agreed to establish a bankruptcy remote reservoir trust to hold assets with a value equivalent to £471 million under the continuing control of NWB Plc. These assets would become transferrable to the Main Section of the Group Fund in the event that specified payment triggers, reflecting a funding requirement, were met in two consecutive financial years. The bankruptcy remote reservoir trust arrangement was given effect through NWB Plc and the Trustee, among others, entering into a suite of related agreements in May 2023. These documents include a Reservoir Trust Deed, a Payment Triggers Agreement and a Security Agreement. Together, they establish the reservoir trust and set out the circumstances under which assets are payable to the Group Fund or NWB Plc.
NatWest Group maintains insider trading policies and procedures governing the purchase, sale, and/or other dispositions of NatWest Group securities by directors, officers, and employees, that NatWest Group believe are reasonably designed to promote compliance with insider trading laws, rules, and regulations, as well as the exchange listing standards applicable to NatWest Group. A copy of our insider trading policy is filed as exhibit 11.1 to our annual report on Form 20-F.
Shareholder information
Financial calendar
Shareholder enquiries
Analysis of ordinary shareholders
Trading market
Dividend history
Taxation for US holders
Exchange controls
Memorandum and Articles of Association
Incorporation and registration
Documents on display
Important addresses
Principal offices
Payment dates
30 May and 31 December 2025
Ordinary shares (2024 final)
28 April 2025
Ex dividend date
1 May and 27 November 2025
13 March 2025
Record date
2 May and 28 November 2025
14 March 2025
Annual General Meeting
23 April 2025
Interim results
25 July 2025
Shareholder information continued
Manage your shareholding online
Log into Investor Centre at investor.centre.co.uk and:
You can also check your shareholding by contacting our Registrar:
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol BS99 6ZZ
Telephone: +44 (0)370 702 0135
Website: www-uk.computershare.com/investor/
Copies of the Annual Report on Form 20-F
You can download copies from our website at natwestgroup.com. An accessible version will also be available on the website.
Contact the Registrar on the number above if you need a hard copy.
ShareGift
ShareGift is a free charity donation service operated by The Orr Mackintosh Foundation. If you would like to donate shares to charity, contact ShareGift at:
ShareGift, The Orr Mackintosh Foundation (registered charity 1052686)
6th Floor, London Wall Place
London
EC2Y 5AU
Telephone: +44 (0)20 7930 3737
Website: www.sharegift.org
American Deposit Receipts (ADRs)
Our ordinary shares are traded on the New York Stock Exchange via an ADR facility. ADRs are quoted and traded in US dollars in the US securities market and the dividends are paid to investors in US dollars. Bank of New York Mellon are the depository bank for our ADR programme and their contact details can be found below:
Email: shrrelations@cpushareownerservices.com,
Tel: Toll free in USA +1888 269 2377
International calls +1 201 680 6825
Share price information
Details of our latest and historic share prices can be found on our website at natwestgroup.com
Shareholder security
Shareholders should be wary of cold callers offering to the chance to buy or sell shares, often with the promise of returns that sound too good to be true. Fraudsters use sophisticated and persuasive tactics to pressure shareholders into high-risk investments or scams.
Check the Financial Conduct Authority’s (FCA) register at www.fca.org.uk to make sure that the company contacting you is authorised. Don’t give any personal details to any caller unless you’re certain that they are genuine. It is unlikely that companies authorised by the FCA will contact you unexpectedly. We strongly recommend that you seek independent professional advice from an FCA authorised adviser before making any investment.
Report a scam
If you think that you have been approached by fraudsters, or have any concerns about a potential scam, contact the FCA’s Consumer Helpline on 0800 111 6768 or use their Share Fraud Reporting Form which can be found on their website at www.fca.org.uk/scams. You can also contact Action Fraud on 0300 123 2040 or visit www.actionfraud.org.uk
Number
Shareholdings
of shares
Individuals
151,277
137,040,634
1.65
Banks and nominee companies
1,831
7,398,454,008
88.81
Other corporate bodies
766,879,386
9.20
Other companies
375
25,087,143
Insurance companies
2,136
Investment trusts
3,592,731
Pension trusts
33,320
Scottish trusts
55,517
153,798
Range of shareholdings:
1 - 1,000
134,242
31,491,282
1,001 - 10,000
17,654
39,879,798
10,001 - 100,000
28,429,138
100,001 - 1,000,000
219,658,435
2.64
1,000,001 - 10,000,000
1,144,371,280
13.74
10,000,001 and over
6,867,314,942
82.42
ADSs representing ordinary shares
In October 2007, the company listed ADSs, each representing one ordinary share nominal value 25p each (or a right to receive one ordinary share), and evidenced by an ADR or uncertificated securities, on the NYSE under the symbol ‘NWG’. With effect from 7 November 2008, the ratio of one ADS representing one ordinary share changed to one ADS representing 20 ordinary shares.
Following a sub-division and one-for-ten consolidation of NatWest Group’s ordinary shares in June 2012, the ratio of one ADS representing 20 ordinary shares was adjusted to one ADS representing two ordinary shares. As at 31 December 2024, 110,799,614 ADSs were outstanding.
At a General Meeting of the company on 25 August 2022, shareholders approved a share consolidation of the company's ordinary shares. Every 14 existing ordinary shares of £1 each in the capital of the company in issue as at 26 August 2022 were consolidated into one intermediate ordinary share of £14.00 and immediately divided into 13 new ordinary shares of £1.0769 in the capital of the company.
As a result, for each existing ADR held on the ADR Register on 26 August 2022, ADR Holders, upon cancellation of their existing ADRs, were issued and received new ADRs in the ratio of 13 new ADRs to replace each 14 existing ADRs (distributed in accordance with the Deposit Agreement after giving effect to the fees and expenses provided for therein).
The ordinary ADSs were issued pursuant to a Deposit Agreement, among the company, The Bank of New York Mellon, as depository, and all owners and holders from time to time of ordinary ADSs issued thereunder. The ordinary shares of the company are listed and traded on the London Stock Exchange under the symbol ‘NWG’. All ordinary shares are deposited with the principal London office of The Bank of New York Mellon, as custodian for the depository.
Preference dividends
Amount per share
$
Non-cumulative preference shares of US$0.01-Series U (1)
2,602
Ordinary dividends
In 2024 NatWest Group paid an interim dividend of £498 million, or 6 pence per ordinary share (2023 - £491 million, or 5.5 pence per ordinary share). In addition, the company has announced that the directors have recommended a final dividend of £1.2 billion, or 15.5 pence per ordinary share (2023 - £1.0 billion, or 11.5 pence per ordinary share) subject to shareholders’ approval at the Annual General Meeting on 23 April 2025.
If approved, payment will be made on 28 April 2025 to shareholders on the register at the close of business on 14 March 2025. The ex-dividend date will be 13 March 2025.
Taxation of US Holders
The following discussion summarises certain US federal and UK tax consequences of the ownership and disposition of ordinary shares or ADSs representing ordinary shares by a beneficial owner that is a citizen or resident of the United States or that otherwise will be subject to US federal income tax on a net income basis in respect of the ordinary shares or ADSs (a “US Holder”). This summary assumes that a US Holder is holding ordinary shares or ADSs, as applicable, as capital assets. This summary does not address the tax consequences to a US Holder (i) that is resident in the UK for UK tax purposes, (ii) that carries on a trade, profession or vocation through a branch, agency or permanent establishment in the UK in connection with which their ordinary shares or ADSs are held, used or acquired, or (iii) generally, that is a corporation which alone or together with one or more associated companies, controls, directly or indirectly, 10% or more of the voting stock of the company, nor does this summary address all of the tax consequences that may be relevant to a US Holder in light of its particular circumstances, including any minimum tax and Medicare contribution tax consequences, as well as differing tax consequences that may apply to US Holders subject to special rules, such as certain financial institutions, dealers or traders in securities that use a mark-to-market method of tax accounting, persons holding ordinary shares or ADSs as part of a hedging transaction, straddle, wash sale, conversion transaction or integrated transaction or persons entering into a constructive sale with respect to such securities, persons whose functional currency for US federal income tax purposes is not the US dollar, persons required for US federal income tax purposes to conform the timing of income accruals to their financial statements under Section 451 of the Internal Revenue Code of 1986, as amended (the “Code”), entities classified as partnerships for US federal income tax purposes, tax-exempt entities or persons that own or are deemed to own 10% or more of the stock of the company by vote or value.
The statements and practices set forth below regarding US and UK tax laws, including the US/UK double taxation convention relating to income and capital gains which entered into force on 31 March 2003 (the “Treaty”) and the US/UK double taxation convention relating to estate and gift taxes (the “Estate Taxation Treaty”), are based on those laws and practices as in force and as applied in practice on the date of this report. This summary is not exhaustive of all possible tax considerations and holders are advised to satisfy themselves as to the overall tax consequences, including specifically the consequences under US federal, state, local and other laws, and possible changes in taxation law, of the acquisition, ownership and disposition of ordinary shares or ADSs by consulting their own tax advisers.
Except as described in “Passive Foreign Investment Company (PFIC) considerations” below, the following discussion assumes that the company has not been a passive foreign investment company for any taxable year.
Taxation of dividends
For the purposes of the Treaty, the Estate Taxation Treaty and the Code, US Holders of ADSs should be treated as owners of the ordinary shares underlying such ADSs.
The company is not required to withhold UK tax at source from dividend payments it makes or from any amount (including any amounts in respect of accrued dividends) distributed by the company. US Holders who are not resident in the UK and who do not carry on a trade, profession or vocation in the UK through a branch, agency or permanent establishment in connection with which their ordinary shares or ADSs are held, used or acquired will not be subject to UK tax in respect of any dividends received on the shares or ADSs.
Distributions by the company (other than certain pro-rata distributions of ordinary shares or rights to receive such shares) will constitute foreign source dividend income for US federal income tax purposes to the extent paid out of the current or accumulated earnings and profits of the company, as determined under US federal income tax principles. Because the company does not maintain calculations of its earnings and profits under US federal income tax principles, it is expected that distributions will be reported to US Holders as dividends. Payments will not be eligible for the dividends-received deduction generally allowed to corporate US holders.
Subject to applicable limitations that vary depending upon a US Holder’s particular circumstances, dividends paid to certain non-corporate US Holders may be taxable at the favourable rates applicable to long-term capital gain. Non-corporate US Holders should consult their tax advisers to determine whether they are subject to any special rules that limit their ability to be taxed at these favourable rates.
Dividends will be included in a US Holder’s income on the date of the US Holder’s (or in the case of ADSs, the depositary’s) receipt of the dividend. The amount of any dividend paid in pounds sterling to be included in income by a US Holder will be the US dollar amount calculated by reference to the relevant exchange rate in effect on the date of such receipt regardless of whether the payment is in fact converted into US dollars. If the dividend is converted into US dollars on the date of receipt, the US Holder generally should not be required to recognise foreign currency gain or loss in respect of the dividend income. If the amount of such dividend is converted into US dollars after the date of receipt, the US Holder may have foreign currency gain or loss.
Taxation of Capital Gains
A US Holder that is not resident in the UK will not normally be liable for UK tax on capital gains realised on the disposal of an ordinary share or ADS unless at the time of the disposal, in the case of a corporate US Holder, such US Holder carries on a trade in the UK through a permanent establishment or, in the case of any other US Holder, such US Holder carries on a trade, profession or vocation in the UK through a branch or agency and, in each case, such ordinary share ADS is or has been used, held or acquired by or for the purposes of such trade (or profession or vocation), or carried on through such permanent establishment, branch or agency. Special rules apply to individuals who are temporarily not resident in the UK.
A US Holder will, upon the sale or other disposition of an ordinary share or ADS, or upon the redemption of preference ADS, generally recognise capital gain or loss for US federal income tax purposes in an amount equal to the difference between the amount realised and the US Holder’s tax basis in such share or ADS. This capital gain or loss will be long-term capital gain or loss if the US Holder held the share or ADS so sold or disposed for more than one year. The deductibility of capital losses is subject to limitations.
A US Holder who is liable for both UK and US tax on a gain recognised on the disposal of an ordinary share or ADS should consult its tax adviser regarding the credibility or deductibility of such UK tax for US federal income purposes.
Estate and gift tax
Subject to the discussion of the Estate Tax Treaty in the following paragraph, ordinary shares or ADSs beneficially owned by an individual may be subject to UK inheritance tax (subject to exemptions and reliefs) on the death of the individual or in certain circumstances, if such shares or ADSs are the subject of a gift (including a transfer at less than market value) by such individual. Inheritance tax is not generally chargeable on gifts to individuals made more than seven years before the death of the donor.
An ordinary share or ADS beneficially owned by an individual, whose domicile is determined to be the United States for purposes of the Estate Tax Treaty and who is not a national of the UK, will not be subject to UK inheritance tax on the individual’s death or on a lifetime transfer of such share or ADS, except in certain cases where the share or ADS (i) is comprised in a settlement (unless, at the time of the settlement, the settlor was domiciled in the United States and was not a national of the UK); (ii) is part of the business property of a UK permanent establishment of an enterprise; or (iii) pertains to a UK fixed base of an individual used for the performance of independent personal services.
The Estate Tax Treaty generally provides a credit against US federal estate or gift tax liability for the amount of any tax paid in the UK in a case where the ordinary share or ADS is subject to both UK inheritance tax and US federal estate or gift tax.
UK stamp duty and stamp duty reserve tax (SDRT)
The following is a summary of the UK stamp duty and SDRT consequences of transferring an ADS (otherwise than to the custodian on cancellation of the ADS) or of transferring an ordinary share. A transfer of an ADS executed and retained in the United States will not give rise to a liability to pay stamp duty and an agreement to transfer an ADS through the facilities of DTC will not give rise to SDRT (provided that DTC has not made an election under section 97A of the UK Finance Act 1986). Stamp duty or SDRT will normally be payable on or in respect of transfers of ordinary shares and accordingly any holder that acquires or intends to acquire ordinary shares is advised to consult its own tax adviser in relation to stamp duty and SDRT.
Any UK stamp duty or SDRT imposed upon transfers of ordinary shares will not be creditable for US federal income tax purposes. US Holders should consult their tax advisers regarding whether any such UK stamp duty or SDRT may be deductible or reduce the amount of gain (or increase the amount of loss) recognized upon a sale or other disposition of ordinary share.
Passive Foreign Investment Company (PFIC) considerations
In general, a foreign corporation will be a PFIC for any taxable year in which, after taking into account the income and assets of the corporation and certain subsidiaries pursuant to applicable ‘look-through rules’, either (i) at least 75% of its gross income is ‘passive income’ or (ii) at least 50% of the average value of its assets (generally determined on a quarterly basis) is attributable to assets that produce passive income or are held for the production of passive income. Although interest income is generally passive income, a special rule (in proposed Treasury regulations that taxpayers can rely on pending finalization) allows banks to treat their banking business income as non-passive. To qualify for this rule, a bank must satisfy certain requirements regarding its licensing and activities. The company does not believe that it was a PFIC for its 2024 taxable year. The company’s possible status as a PFIC is determined annually, however, and may be subject to change if the company fails to qualify under this special rule for any year in which a US Holder owned ordinary shares or ADSs. In addition, no assurance can be given that the proposed Treasury regulations will be finalized in their current form.
If the company is a PFIC for any taxable year during which a US Holder owns ordinary shares or ADSs, it generally will continue to be a PFIC with respect to that US Holder also for subsequent years, and the US Holder generally will be subject to adverse US federal income tax consequences (including an increased tax liability on dispositions of ordinary shares or ADSs or on the receipt of certain excess distributions and the treatment of any gain from the sale of ordinary shares or ADSs as ordinary income) and certain reporting obligations. US Holders should consult their tax advisers as to the potential application of the PFIC rules to the ownership and disposition of the company’s ordinary shares or ADSs.
Information reporting and backup withholding
Payments on, and proceeds from the sale or disposition of ordinary shares or ADSs that are made within the United States or through certain US-related financial intermediaries may be subject to information reporting and backup withholding unless (i) the US Holder is an exempt recipient (and establishes that status if required to do so) or (ii) in the case of backup withholding, the US Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. The amount of any backup withholding from a payment to a US Holder will be allowed as a credit against the US Holder’s US federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the Internal Revenue Service.
Foreign financial assets reporting
Certain US Holders who are individuals (and certain entities controlled by individuals) may be required to report information relating to the company’s securities, of non-US. accounts through which such securities are held. US Holders are urged to consult their tax advisers regarding the application of these rules in their particular circumstances.
The company has been advised that there are currently no UK laws, decrees or regulations which would prevent the import or export of capital, including the availability of cash or cash equivalents for use by the Group, or the remittance of dividends, interest or other payments to non-UK resident holders of the company’s securities.
There are no restrictions under the Articles of Association of the company or under UK law, as currently in effect, which limit the right of non-UK resident owners to hold or, when entitled to vote, freely to vote the company’s securities.
The company’s Memorandum and Articles of Association as in effect at the date of this Annual Report are registered with the Registrar of Companies of Scotland.
The following information is a summary of certain terms of the company’s Memorandum of Association (the “Memorandum”) and Articles of Association (the “Articles”) as in effect at the date of this Annual Report on Form 20-F and certain relevant provisions of the Companies Act 2006 (the “2006 Act”) where appropriate and as relevant to the holders of any class of share. In 2020, the Articles were updated primarily to bring clearer language into the Articles to better reflect modern best practice. The following summary description is qualified in its entirety by reference to the terms and provisions of the Memorandum and Articles (and, in the case of the summary description of the non-cumulative preference shares, by reference to the terms of issue of those shares determined by the Directors pursuant to the Articles prior to allotment). The Memorandum and Articles are registered with the Registrar of Companies of Scotland. Holders of any class of share are encouraged to read the full Memorandum and Articles, which have been filed as an exhibit to this Annual Report on Form 20-F. The company’s Memorandum and Articles of Association as in effect at the date of this Annual Report are registered with the Registrar of Companies of Scotland.
The following summary description is qualified in its entirety by reference to the terms and provisions of the Memorandum and Articles (and, in the case of the summary description of the non-cumulative preference shares, by reference to the terms of issue of those shares determined by the Directors pursuant to the Articles prior to allotment). The Memorandum and Articles are registered with the Registrar of Companies of Scotland. Holders of any class of share are encouraged to read the full Memorandum and Articles, which have been filed as an exhibit to this Annual Report on Form 20-F. The company’s Memorandum and Articles of Association as in effect at the date of this Annual Report are registered with the Registrar of Companies of Scotland.
The current Articles were adopted on 25 August 2022 to amend the nominal value and voting rights of the ordinary shares of the Company following the share consolidation which took place in August 2022.
The company was incorporated and registered in Scotland under the Companies Act 1948 as a limited company on 25 March 1968 under the name National and Commercial Banking Group Limited. On 3 September 1979 the name was changed to The Royal Bank of Scotland Group Limited and on 10 March 1982, it changed its name to its present name and was registered under the Companies Acts 1948 to 1980 as a public company with limited liability. The company is registered under Company No. SC45551. The Royal Bank of Scotland Group plc was renamed NatWest Group plc on 22 July 2020.
Purpose and objects
The 2006 Act greatly reduces the constitutional significance of a company’s memorandum of association and provides that a memorandum of association will record only the names of the subscribers and the number of shares each subscriber has agreed to take in the company. The 2006 Act further states that, unless a company’s articles provide otherwise, a company’s objects are unrestricted and abolishes the need for companies to have objects clauses. The company removed its objects clause together with all other provisions of its memorandum of association which by virtue of the 2006 Act were treated as forming part of the company’s articles. The articles of association contain an express statement regarding the limited liability of the shareholders.
Directors
At each annual general meeting of the company, any Director appointed since the last annual general meeting and any Directors who were not appointed at one of the preceding two annual general meetings shall retire from office and may offer themselves for re-election by the members. Directors may be appointed by the company by ordinary resolution or by the Board. A director appointed by the Board holds office only until the next annual general meeting, whereupon he will be eligible for re-election.
Unless and until otherwise determined by ordinary resolution, the directors (other than alternate directors) shall be not more than twenty five. There is no stipulation in the Articles regarding a minimum number of directors; under the 2006 Act, and in the absence of express provision, the minimum number is two.
Directors’ interests
A director shall not vote at a meeting of the Board or a Committee of the Board on any resolution of the Board concerning a matter in which he has an interest (otherwise than by virtue of his interest in shares, debentures or other securities of, or otherwise in or through, the company) which (together with any interest of any person connected with him) is, to his knowledge, material unless his interests arises only because the resolution relates to one or more of the following matters:
(i)
the giving of any security or indemnity to him pursuant to the Articles or in respect of money lent, or obligations incurred, by him at the request of, or for the benefit of, the company or any of its subsidiary undertakings;
(ii)
the giving of any security or indemnity to a third party in respect of a debt or obligation of the company or any of its subsidiary undertakings for which he has assumed responsibility (in whole or in part) under a guarantee or indemnity or by the giving of security;
(iii)
a proposal concerning an offer of shares, debentures or other securities of the company, or any of its subsidiary undertakings, for subscription or purchase, in which offer he is, or may be, entitled to participate as a holder of securities or in the underwriting or sub-underwriting of which he is to participate;
(iv)
any proposal concerning any other body corporate in which he is interested, directly or indirectly, whether as an officer or shareholder or otherwise, provided that he is not the holder of shares representing one per cent or more of any class of the equity share capital of such body corporate;
(v)
any proposal concerning the adoption, modification or operation of a pension fund or retirement, death or disability benefits scheme or employees’ share scheme which relates both to directors and employees of the company or a subsidiary of the company and does not provide any privilege or advantage in respect of any director which it does not accord to the employees to which the fund or scheme relates;
(vi)
a contract or arrangement for the benefit of the employees of the company or any of its subsidiary undertakings which does not accord him any privilege or advantage not generally accorded to the employees to whom the contract or arrangement relates; and
(vii)
a proposal concerning any insurance which the company proposes to purchase and/or maintain for the benefit of any directors or for persons who include directors of the company.
Under the 2006 Act, a director must avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the company’s interests.
The 2006 Act allows directors of public companies, where appropriate, to authorise conflicts and potential conflicts where the articles of association contain a provision to this effect. The 2006 Act also allows the articles of association to contain other provisions for dealing with directors’ conflicts of interest to avoid a breach of duty.
Clause 91 of the Articles, gives the directors authority to authorise any matter which would or might otherwise constitute or give rise to a breach of the duty of a director under the 2006 Act to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the company.
Authorisation of any matter pursuant to Clause 91 must be approved in accordance with normal board procedures by directors who have no interest in the matter being considered. In taking the decision, the directors must act in a way they consider, in good faith, will be most likely to promote the company’s success.
Any authorisation of a matter may be given on or subject to such conditions or limitations as the directors determine, whether at the time of authorisation or subsequently, including providing for the exclusion of the interested directors from the receipt of information or participation in discussion relating to the matter authorised by the directors and providing that interested directors in receipt of confidential information from a third party are not obliged to disclose such information to the company or use the information in relation to the company’s affairs. Any authorisation may be terminated by the directors at any time.
A director is not, except as otherwise agreed by him, accountable to the company for any benefit which he, or a person connected with him, derives from any matter authorised by the directors and any contract, transaction or arrangement relating to such matter is not liable to be avoided on the grounds of such benefit.
Directors’ power to allot securities
In line with market practice, the Articles provide that the authority to allot shares and the disapplication of pre-emption rights will not be set out in the Articles, but subject to resolutions passed at the company’s annual general meeting to obtain these authorities on an annual basis.
Borrowing powers
The directors may exercise all the powers of the company to borrow money and to mortgage or charge its undertaking, property and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, guarantee, liability or obligation of the company, or of any third party.
Qualifying shareholding
Directors are not required to hold any shares of the company by way of qualification.
Classes of shares
The company has issued and outstanding the following two general classes of shares, namely ordinary shares, and cumulative preference shares, to which the provisions set forth below apply.
General
Subject to the provisions of the 2006 Act and Clause 122 of the Articles, the company may, by ordinary resolution, declare dividends on ordinary shares save that no dividend shall be payable except out of profits available for distribution, or in excess of the amount recommended by the Board or in contravention of the special rights attaching to any share. Any dividend which has remained unclaimed for 12 years from the date of declaration shall be forfeited and shall revert to the company.
Dividends may be paid by such method as the Directors, in their absolute discretion may decide, and may include direct debit, bank transfer and electronic funds transfer, cheque, warrant or other financial instrument. The company may cease sending dividend warrants and cheques by post or otherwise to a member if such instruments have been returned undelivered to, or left uncashed by, that member on at least two consecutive occasions, or, following one such occasion, reasonable enquiries have failed to establish any new address or account of the registered holder. The company may resume sending warrants and cheques if the holder requests such recommencement in writing.
Each cumulative preference share confers the right to a fixed cumulative preferential dividend payable half-yearly. The rate of such dividend and the date of payment thereof, together with the terms and conditions of the dividend, are as may be determined by the directors prior to allotment. Cumulative preference share dividends are paid in priority to any dividend on any other class of share.
Subject to existing class rights of shareholders, new preference shares can be issued with such rights and restrictions as the directors may determine.
Distribution of assets on liquidation
In the event of a return of capital on a winding-up or otherwise, the holders of cumulative preference shares are entitled to receive out of the surplus assets of the company available for distribution amongst the members (i) in priority to the holders of the non-cumulative preference shares and any other shares ranking pari passu therewith, the arrears of any fixed dividends including the amount of any dividend due for a payment after the date of commencement of any winding-up or liquidation but which is payable in respect of a half-year period ending on or before such date and (ii) pari passu with the holders of the non-cumulative preference shares and any other shares ranking pari passu therewith, the amount paid up or credited as paid up on such shares together with any premium.
On a winding-up of the company, the liquidator may, with the authority of any extraordinary resolution and any other sanction required by the Insolvency Act 1986 and subject to the rights attaching to any class of shares after payment of all liabilities, including the payment to holders of preference shares, divide amongst the members in specie or kind the whole or any part of the assets of the company or vest the whole or any part of the assets in trustees upon such trusts for the benefit of the members and may determine the scope and terms of those trusts. No member shall be compelled to accept any assets on which there is a liability.
Voting Rights
Subject to any rights or restrictions as to voting attaching to any shares or class of shares, on a show of hands every member who is present in person or by proxy at a general meeting shall have one vote (except that a proxy who is appointed by more than one member has one vote for and one vote against if the proxy has been instructed by one or more members to vote for the resolution and by one or more members to vote against the resolution) and on a poll every holder of ordinary shares present in person or by proxy and entitled to vote, shall have four votes for every share held, and holders of cumulative preference shares shall have one vote for each 25p nominal amount held. No member shall, unless the directors otherwise determine, be entitled to vote at a general meeting or at a separate meeting of the holders of shares in the capital of the company, either in person or by proxy, in respect of any share held by him unless all monies presently payable by him in respect of that share have been paid. There is no obligation on the company to check and ensure that a proxy is voting at a general meeting in accordance with the voting directions provided by the appointing member. The chairman of a general meeting does not have a casting vote in the event of an equality of votes, as this is not permitted under the 2006 Act. The quorum required for a meeting of members is not less than five members present in person and entitled to vote. If a meeting is adjourned because of the lack of a quorum, the members present in person or by proxy and entitled to vote will constitute a quorum at the adjourned meeting.
Meetings are convened upon written notice of not less than 21 days in respect of annual general meetings of members and not less than 14 days in respect of other meetings of members subject to certain conditions. An adjourned meeting may be called at shorter notice than applied to the original meeting, but where a meeting is adjourned for lack of quorum only if the adjourned meeting is held at least ten days after the original meeting and does not include any new business.
At a general meeting of the company, every holder of a cumulative preference share who is present in person or by proxy shall be entitled to one vote on a show of hands and, on a poll, every person who is present in person or by proxy shall have one vote for each 25 pence in nominal amount of shares held. No member shall be entitled to vote any share in person or by proxy unless all moneys owed in respect of that share have been paid.
Redemption
Except as set forth in the following paragraph, unless the directors determine, prior to allotment of any particular series of non-cumulative preference shares, that such series shall be non-redeemable, the preference shares will be redeemable at the option of the company on any date which (subject to certain exceptions described in the terms of such shares) falls no earlier than such date (if any) as may be fixed by the directors, prior to allotment of such shares. On redemption, there shall be paid on each non-cumulative preference share the aggregate of its nominal amount together with any premium paid on issue, where applicable a redemption premium and accruals of dividend.
If the company wishes to issue redeemable shares, the Directors are authorised to determine the terms and manner of redemption.
Purchase
Under the 2006 Act a company requires shareholder authority to purchase its own shares, consolidate and sub-divide its shares and reduce its share capital.
Whenever non-cumulative preference shares are issued in the future the Articles have no restriction on the maximum purchase price payable by the company unless such restriction is expressly applied by the directors in relation to an issuance of non-cumulative preference shares.
Changes in share capital and variation of rights
Subject to the provisions of the 2006 Act and without prejudice to any rights attached to any existing shares or class of shares, any share may be issued with such rights or restrictions as the company may by ordinary resolution determine or, subject to and in default of such determination, as the Board shall determine. Subject to the provisions of the 2006 Act, the company may issue shares which are, or at the option of the company or the holder are liable, to be redeemed. Subject to the provisions of the 2006 Act and the Articles, unissued shares are at the disposal of the Board.
The company may by ordinary resolution: increase its share capital; consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; subject to the provisions of the 2006 Act, subdivide its shares, or any of them, into shares of smaller amount than is fixed by the Memorandum; or cancel any shares which have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled.
Subject to the provisions of the 2006 Act, if at any time the capital of the company is divided into different classes of shares, the rights attached to any class of shares may (unless further conditions are provided by the terms of issue of the shares of that class) be varied or abrogated, whether or not the company is being wound up, either with the consent in writing of the holders of three-quarters in-nominal value of the issued shares of the class or with the sanction of an extraordinary resolution passed at a separate general meeting of holders of the shares of the class (but not otherwise). To any such separate general meeting the provision of the Articles relating to general meeting s will apply, save that:
if at any adjourned meeting of such holders a quorum as defined above is not present, two people who hold shares of the class, or their proxies, are a quorum; and
any such holder present in person or by proxy may demand a poll.
The rights attaching to any class of shares having preferential rights are not, unless otherwise expressly provided by the terms of issue thereof, deemed to be varied by the creation or issue of further shares ranking, as regards participation in the profits or assets of the company, pari passu therewith, but in no respect in priority thereto.
Disclosure of interests in shares
The 2006 Act gives the company the power to require persons who it believes to be, or have been within the previous three years, interested in its shares, to disclose prescribed particulars of those interests. Failure to supply the information or supplying a statement which is materially false may lead to the Board imposing restrictions upon the relevant shares. The restrictions available are the suspension of voting or other rights conferred by membership in relation to meetings of the company in respect of the relevant shares and, additionally, in the case of a shareholding representing at least 0.25 per cent of the class of shares concerned, the withholding of payment of dividends on, and the restriction of transfers of, the relevant shares.
Limitations on rights to own shares
There are no limitations imposed by UK law or the Memorandum and Articles on the right of non-residents or foreign persons to hold or vote the company’s shares other than the limitations that would generally apply to all of the company’s shareholders.
Members resident abroad
Members with registered addresses outside the United Kingdom are not entitled to receive notices from the company unless they have given the company an address within the United Kingdom at which such notices may be served.
Sending notices and other documents to shareholders
The company may communicate with members by electronic and/or website communications. A member whose registered address is not within the United Kingdom shall not be entitled to receive any notice from the Company unless he gives the Company a postal address within the United Kingdom at which notices may be given to him.
Documents concerning the company may be inspected at 36 St Andrew Square, Edinburgh, EH2 2YB.
Executive directors’ service contracts and copies of directors’ indemnities granted by the company in terms of section 236 of the Companies Act 2006 may be inspected at the company’s office at Gogarburn, Edinburgh, EH12 1HQ.
We are subject to the informational requirements of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith, we file reports and other information with the SEC. The SEC’s website, at http://www.sec.gov, and our website, at http://www.natwestgroup.com, contain reports and other information in electronic form that we have filed. Except for SEC filings incorporated by reference in this prospectus supplement and the accompanying prospectus, none of the information on or that can be access through our website is part of this prospectus supplement or the accompanying prospectus. You may also request a copy of any filings referred to below (other than exhibits not specifically incorporated by reference) at no cost, by contacting us at NatWest Group plc, Gogarburn, P.O. Box 1000, Edinburgh EH12 1HQ, Scotland.
Shareholder enquiries Registrar
Bridgwater Road Bristol BS99 6ZZ
Facsimile: +44 (0)370 703 6009
Website: www-uk.computershare.com/investor
ADR Depositary Bank
BNY Mellon Shareowner Services
PO Box 505000
Louisville, KY 40233-5000
Direct Mailing for overnight packages:
462 South 4th Street
Suite 1600
Louisville KY 40202
Telephone: 1-888-269-2377 (US callers – toll free)
Telephone: +1 201 680 6825 (International)
Email: shrrelations@cpushareownerservices.com
Website: www.mybnymdr.com
PO Box 1000
Gogarburn Edinburgh EH12 1HQ
Investor Relations
250 Bishopsgate London EC2M 4AA
Email: investor.relations@natwest.com
Registered office
36 St Andrew Square
Edinburgh EH2 2YB
Registered in Scotland No. SC45551
Website
natwestgroup.com
National Westminster Bank Plc
250 Bishopsgate, London, EC2M 4AA, England
The Royal Bank of Scotland plc
Coutts & Company
440 Strand, London WC2R 0QS, England
NatWest Markets Plc
250 Bishopsgate, London
EC2M 4AA, England
NatWest Markets N.V.
Claude Debussylaan, 94
Amsterdam, 1082 MD
The Royal Bank of Scotland International Limited
Royal Bank House, 71 Bath Street
St Helier, JE4 8PJ
Exhibit Index
Memorandum and Articles of Association of NatWest Group plc (previously filed and incorporated by reference to Exhibit 1.1 to the Group’s Annual Report on Form 20 - F for the fiscal year ended 31 December 2022 (file No. 1 - 10306))
Form of Amended and Restated Deposit Agreement among NatWest Group plc, The Bank of New York and all owners and holders from time to time of American Depositary Shares issued thereunder, including the Form of the American Depositary Receipt (previously filed in preliminary form as Exhibit 1 to the Registration Statement on Form F - 6 filed on October 6, 2020, Registration No. 333 - 144756)
Form of Deposit Agreement among NatWest Group plc, The Bank of New York and all holders from time to time of American Depositary Receipts issued thereunder, including the Form of the American Depositary Receipt (previously filed in preliminary form as Exhibit 1 to the Registration Statement on Form F - 6 filed on August 26, 2005, Registration No. 333 - 127687)
NatWest Group plc is not party to any single instrument relating to long - term debt pursuant to which a total amount of securities exceeding 10% of the Group's total assets (on a consolidated basis) is authorized to be issued. NatWest Group plc hereby agrees to furnish to the Securities and Exchange Commission (the " Commission"), upon its request, a copy of any instrument defining the rights of holders of its long - term debt or the rights of holders of the long - term debt of any of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed with the Commission
Description of Securities Registered under Section 12 of the Exchange Act
Service agreement for Paul Thwaite, Group Chief Executive, dated 15 August 2023 (previously filed and incorporated by reference to Exhibit 4.1 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2023 (file No. 1 - 10306))
Service Agreement for Katie Murray, Chief Financial Officer, dated 1 February 2019 (previously filed and incorporated by reference to Exhibit 4.2 to the Group’s Annual Report on Form 20 - F for the fiscal year ended 31 December 2018 (file No. 1 - 10306))
Letter of Appointment for Frank Dangeard, Non - Executive Director, dated 30 May 2018 (previously filed and incorporated by reference to Exhibit 4.5 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2018 (file No. 1 - 10306))
Letter of Appointment for Mark Seligman, Non - Executive Director, dated 30 May 2018 (previously filed and incorporated by reference to Exhibit 4.6 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2018 (file No. 1 - 10306))
Letter of Appointment for Dr. Lena Wilson, Non - Executive Director, dated 30 May 2018 (previously filed and incorporated by reference to Exhibit 4.7 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2018 (file No. 1 - 10306))
Letter of Appointment for Patrick Flynn, Non - Executive Director, dated 26 April 2018 (previously filed and incorporated by reference to Exhibit 4.8 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2018 (file No. 1 - 10306))
Letter of Appointment for Yasmin Jetha, Non - Executive Director, dated 30 March 2020 (previously filed and incorporated by reference to Exhibit 4.14 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2020 (file No. 1 - 10306))
Letter of Appointment for Roisin Donnelly, Non - Executive Director, dated 30 September 2022 (previously filed and incorporated by reference to Exhibit 4.12 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2022 (file No. 1 - 10306))
Letter of Appointment for Stuart Lewis, Non - Executive Director, dated 13 December 2022 (previously filed and incorporated by reference to Exhibit 4.11 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2023 (file No. 1 - 10306))
4.10
Letter of Appointment for Richard Neil Haythornthwaite, Chair and Non - Executive Director, dated 8 January 2024
4.11
Letter of Appointment for Geeta Gopalan, Non - Executive Director, dated 11 June 2024
4.12
Letter of Appointment for Gill Whitehead, Non - Executive Director, dated 13 December 2024
4.13
Standard Terms of Appointment for Non - Executive Directors (previously filed and incorporated by reference to Exhibit 4.13 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2022 (file No. 1 - 10306))
4.14
Form of Deed of Indemnity for Directors (previously filed and incorporated by reference to Exhibit 4.16 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2020 (file No. 1 - 10306))
4.15
Memorandum of Understanding between National Westminster Bank Plc and RBS Pension Trustee Limited, dated 26 January 2016 (previously filed and incorporated by reference to Exhibit 4.6 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2015 (File No. 1 - 10306))
Framework Agreement dated 28 September 2018 relating to the Royal Bank of Scotland Group Pension Fund (previously filed and incorporated by reference to Exhibit 4.16 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2018 (file No. 1 - 10306))
4.16(2)
Acquisition and contingent capital agreement dated 26 November 2009 among NatWest Group plc and The Commissioners of Her Majesty's Treasury (previously filed and incorporated by reference to Exhibit 4.17 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2022 (file No. 1 - 10306))
4.17(2)
State Aid Cost Reimbursement Deed dated 26 November 2009 among The Commissioners of Her Majesty's Treasury and NatWest Group plc (previously filed and incorporated by reference to Exhibit 4.18 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2022 (file No. 1 - 10306))
4.18(1)
Framework and State Aid Deed dated 25 April 2018, among The Commissioners of Her Majesty's Treasury, Banking Competition Remedies Limited and NatWest Group plc (previously filed and incorporated by reference to Exhibit 4.19 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2018 (file No. 1 - 10306))
4.19(1)
Trust Deed dated 25 April 2018, between the Banking Competition Remedies Limited and NatWest Group plc (previously filed and incorporated by reference to Exhibit 4.20 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2018 (file No. 1 - 10306))
4.20(1)
Deed of Indemnity dated 25 April 2018, between The Commissioners of Her Majesty's Treasury and NatWest Group plc (previously filed and incorporated by reference to Exhibit 4.21 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2018 (file No. 1 - 10306))
Relationship Agreement, dated 7 November 2014 among Her Majesty's Treasury and NatWest Group plc (Previously filed and incorporated by reference to Exhibit 4.12 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2014 (File No. 1 - 10306))
Share Purchase Deed dated 7 February 2019 between NatWest Group plc and The Commissioners of Her Majesty's Treasury (previously filed and incorporated by reference to Exhibit 4.23 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2018 (file No. 1 - 10306))
4.23(2)
Deed of Amendment to the Share Purchase Deed dated 7 May 2024 between NatWest Group plc and The Commissioners of Her Majesty's Treasury
4.24
Trust Deed dated 5 May 2023 among The Law Debenture Trust Corporation Plc, NatWest RT Holdings Limited, NatWest Pension Trustee Limited and National Westminster Bank Plc (previously filed and incorporated by reference to Exhibit 4.23 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2023 (file No. 1 - 10306))
4.25
Payment Triggers Agreement dated 5 May 2023 among National Westminster Bank Plc, NatWest Pension Trustee Limited and NatWest RT Holdings Limited (previously filed and incorporated by reference to Exhibit 4.24 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2023 (file No. 1 - 10306))
4.26
Security Agreement dated 5 May 2023 between NatWest RT Holdings Limited and NatWest Pension Trustee Limited (previously filed and incorporated by reference to Exhibit 4.25 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2023 (file No. 1 - 10306))
4.27(2)
Framework Agreement dated 6 February 2023 between National Westminster Bank Plc and NatWest Pension Trustee Limited (previously filed and incorporated by reference to Exhibit 4.24 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2022 (file No. 1 - 10306))
4.28
Deed of Amendment to the 28 September 2018 Framework Agreement dated 6 February 2023 between National Westminster Bank Plc and NatWest Pension Trustee Limited (previously filed and incorporated by reference to Exhibit 4.25 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2022 (file No. 1 - 10306))
Principal subsidiaries of NatWest Group plc
Insider Trading Policy
CEO certification required by Rule 13a-14(a)
CFO certification required by Rule 13a-14(a)
Certification required by Rule 13a-14(b)
Consent of independent registered public accounting firm (Ernst & Young LLP)
15.2
Annual Report and Form 20 - F Information
Malus Clawback Policy Guideline (previously filed and incorporated by reference to Exhibit 4.28 to the Group's Annual Report on Form 20 - F for the fiscal year ended 31 December 2023 (file No. 1 - 10306))
101 INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Scheme
101.CAL
XBRL Taxonomy Extension Scheme Calculation Linkbase
101.DEF
XBRL Taxonomy Extension Scheme Definition Linkbase
101. LAB
XBRL Taxonomy Extension Scheme Label Linkbase
101.PRE
XBRL Taxonomy Extension Scheme Presentation Linkbase
Note:
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
Registrant
/s/ Katie Murray