TIDM72OH
RNS Number : 2358Q
National Westminster Bank PLC
17 February 2023
National Westminster Bank Plc
2022 Annual Results
Page
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Financial Review
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Presentation of information 2
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Description of business 2
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Principal activities and operating segments 2
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Performance overview 3
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Financial statements 6
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Notes to the financial statements 11
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Statement of directors' responsibilities 20
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Forward-looking statements 21
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Presentation of information
National Westminster Bank Plc ('NWB Plc') is a wholly-owned
subsidiary of NatWest Holdings Limited ('NWH Ltd' or 'the
intermediate holding company'). The term 'NWB Group' or 'we' refers
to NWB Plc and its subsidiary and associated undertakings. The term
'NWH Group' refers to NWH Ltd and its subsidiary and associated
undertakings. NatWest Group plc is 'the ultimate holding company'.
The term 'NatWest Group' refers to NatWest Group plc and its
subsidiary and associated undertakings.
NWB Plc publishes its financial statements in pounds sterling
('GBP' or 'sterling'). The abbreviations 'GBPm' and 'GBPbn'
represent millions and thousands of millions of pounds sterling
('GBP'), respectively, and references to 'pence' represent pence
where amounts are denominated in 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 'EUR'
represents the 'euro', and the abbreviations 'EURm' and 'EURbn'
represent millions and thousands of millions of euros,
respectively.
Description of business
The principal entities under NWH Ltd are National Westminster
Bank Plc (which wholly owns Coutts & Company and Ulster Bank
Limited), The Royal Bank of Scotland plc and Ulster Bank Ireland
DAC (UBIDAC).
Principal activities and operating segments
NWB Group serves customers across the UK with a range of retail
and commercial banking products and services. A wide range of
personal products are offered including current accounts, credit
cards, personal loans, mortgages and wealth management services.
NWB Plc is the main provider of shared services for NatWest
Group.
On 27 January 2022, NatWest Group announced that a new business
segment, Commercial & Institutional, would be created, bringing
together the Commercial, NatWest Markets and RBSI businesses to
form a single business segment, with common management and
objectives, to best support our customers across the full
non-personal customer lifecycle.
Comparatives have been re-presented. The re-presentation of
operating segments does not change the consolidated financial
results of NWB Group.
The reportable operating segments are as follows:
Retail Banking serves personal customers in the UK and includes
Ulster Bank customers.
Private Banking serves UK-connected, high-net-worth, individuals
and their business interests.
Commercial & Institutional offers SME's, Commercial,
Corporate and Institutional clients comprehensive banking and
financing solutions throughout the UK and internationally.
Central items & other includes corporate functions, such as
ring-fenced bank and NatWest Group treasury, finance, risk
management, compliance, legal, communications and human resources.
The services are mainly provided to NWH Group, however, in certain
instances, where permitted, services are also provided to the wider
NatWest Group including the non ring-fenced business.
Performance overview
Strong financial performance
NWB Group profit for the year was GBP3,689 million compared with
GBP2,907 million in 2021, driven by increased income, partially
offset by additional operating expenses and net impairment
losses.
Total income increased by GBP2,474 million compared with 2021,
reflecting the beneficial impact of interest rate increases ,
combined with higher fee income.
Operating expenses increased by GBP89 million compared with
2021, primarily reflecting continued investment in technology and
data capabilities, partially offset by a reduction in conduct and
litigation charges. The cost:income ratio decreased from 66.9% to
53.5%.
Net impairment losses of GBP341 million principally reflects the
latest macro-economics, including updated scenarios, with more
weight being placed on the downside scenarios. Underlying book
performance remains strong. Total impairment provisions increased
by GBP0.1 billion to GBP2.6 billion in the year, which resulted in
a reduction in the ECL coverage ratio from 0.85% at 31 December
2021 to 0.84%.
Robust balance sheet with strong capital levels
Total assets decreased by GBP25.1 billion to GBP409.5 billion
compared with GBP434.6 billion at 31 December 2021. This was
primarily driven by a net decrease of GBP28.1 billion in cash
balances, resulting from growth in loans to customers and customer
deposit outflows.
Loans to customers increased by GBP14.7 billion primarily driven
by growth in mortgage balances and an increase in commercial
lending due to increased facility utilisation, partially offset by
continued UK Government financial support scheme repayments.
Customer deposits decreased by GBP6.8 billion primarily
reflecting higher outflows from savings and current account
balances due to an overall market liquidity contraction.
The CET1 ratio decreased 480 basis points over the period due to
a GBP1.2 billion decrease in CET1 capital and a GBP26.2 billion
increase in RWAs. The CET1 decrease reflects the attributable
profit in the period, offset by dividends paid, the removal of the
adjustment for the prudential amortisation on software development
costs and an increase in intangible assets.
Total RWAs increased by GBP26.2 billion to GBP112.4 billion
mainly reflecting an increase in credit risk RWAs, due to new
regulations impacting model adjustments, combined with increased
exposures, partially offset by improved credit risk metrics.
Summary consolidated income statement for the year ended 31
December 2022
Year ended
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Central
Retail Private Commercial items 31 December 31 December
Banking Banking & Institutional & other 2022 2021 Variance
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GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
Net interest income 4,494 754 2,740 (456) 7,532 6,002 1,530 25
Non-interest income 399 271 1,286 2,255 4,211 3,267 944 29
----------------------------- ------- ------- --------------- ------- ----------- ----------- ------- -----
Total income 4,893 1,025 4,026 1,799 11,743 9,269 2,474 27
Operating expenses (2,115) (596) (1,939) (1,638) (6,288) (6,199) (89) 1
Profit before impairment
losses/releases 2,778 429 2,087 161 5,455 3,070 2,385 78
Impairment (losses)/releases (218) 2 (126) 1 (341) 813 (1,154) (142)
----------------------------- ------- ------- --------------- ------- ----------- ----------- ------- -----
Operating profit before
tax 2,560 431 1,961 162 5,114 3,883 1,231 32
------- ------- --------------- -------
Tax charge (1,425) (976) (449) 46
----------------------------- ------- ------- --------------- ------- ----------- ----------- ------- -----
Profit for the year 3,689 2,907 782 27
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Key metrics and ratios 2022 2021
Cost:income ratio (%) (1) 53.5 66.9
Loan impairment rate (bps) (2) 11 (28)
CET1 ratio (%) (3) 11.3 16.1
Leverage ratio (%) (4) 4.4 4.8
Risk weighted assets (RWAs) (GBPbn) 112.4 86.2
Loan:deposit ratio (%) (5) 90 83
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(1) Cost:income ratio is total operating expenses divided by total income.
(2) Loan impairment rate is the loan impairment charge divided by gross customer loans.
(3) Common Equity Tier 1 (CET1) ratio is CET1 capital divided by RWAs.
(4) Leverage ratio is Tier 1 capital divided by total exposure.
This is in accordance with changes to the UK's leverage ratio
framework, refer to page 63 of the NatWest Bank Plc 2022 Annual
Report and Accounts for further details.
(5) Loan deposit ratio is total loans divided by total deposits.
NWB Group reported a profit of GBP3,689 million compared with
GBP2,907 million in 2021, driven by an increase in total income of
GBP2,474 million, partially offset by an increase in operating
expenses of GBP89 million and net impairment losses of GBP341
million compared with releases of GBP813 million in 2021.
Total income increased by GBP2,474 million, or 27%, to GBP11,743
million compared with GBP9,269 million in 2021.
Net interest income increased by GBP1,530 million, or 25%, to
GBP7,532 million compared with GBP6,002 million in 2021, reflecting
mortgage balance growth and a beneficial impact from interest rate
increases.
Non-interest income increased by GBP944 million, or 29%, to
GBP4,211 million compared with GBP3,267 million in 2021.
- Net fees and commissions increased by GBP144 million to
GBP1,626 million, primarily due to higher transaction-related fee
income.
Other operating income increased by GBP800 million to GBP2,585
million compared with GBP1,785 million in 2021, reflecting:
- GBP676 million higher income from hedging activities,
including gains on economic hedging derivatives, due to interest
rate rises;
- non-repeat of 2021 incurred losses of GBP117 million upon
partial redemption of debt instruments and GBP44 million upon the
sale of properties;
- an GBP80 million payment received from an insurance settlement; and
- additional GBP152 million income from the recharging of costs
to other NatWest Group entities, principally reflecting the impact
of organisational restructure activity; partially offset by
- bond disposal losses of GBP88 million in 2022, a reduction of
GBP208 million compared with gains of GBP120 million in 2021 and a
number of other small movements.
Operating expenses increased by GBP89 million to GBP6,288
million, compared with GBP6,199 million in 2021, reflecting:
- a staff costs increase of GBP81 million primarily due to
continued investment in key areas, including Data, Technology and
Financial Crime , as well as an increase in costs subsequently
recharged to other NatWest Group entities;
- additional increases in premises and equipment and outsourcing
costs resulting from investment in technology and data
capabilities, partially offset by
- non-repeat of one-off conduct and litigation charges in 2021.
Net impairment losses of GBP341 million principally reflects the
latest macro-economics, including updated scenarios, with more
weight being placed on the downside scenarios. Underlying book
performance remains strong. Total impairment provisions increased
by GBP0.1 billion to GBP2.6 billion in the year, which resulted in
a reduction in the ECL coverage ratio from 0.85% at 31 December
2021 to 0.84%
Summary consolidated balance sheet as at 31 December 2022
2022 2021 Variance
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GBPm GBPm GBPm %
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Assets
Cash and balances at central banks 73,065 101,213 (28,148) (28)
Derivatives 4,407 2,460 1,947 79
Loans to banks - amortised cost 3,197 4,182 (985) (24)
Loans to customers - amortised cost 301,684 286,971 14,713 5
Amounts due from holding companies and fellow
subsidiaries 4,903 3,519 1,384 39
Other financial assets 14,546 29,031 (14,485) (50)
Other assets 7,667 7,187 480 7
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Total assets 409,469 434,563 (25,094) (6)
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Liabilities
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Bank deposits 16,060 22,831 (6,771) (30)
Customer deposits 322,614 329,440 (6,826) (2)
Amounts due to holding companies and fellow
subsidiaries 38,771 45,136 (6,365) (14)
Derivatives 2,088 4,119 (2,031) (49)
Other financial liabilities 5,384 7,251 (1,867) (26)
Subordinated liabilities 197 211 (14) (7)
Notes in circulation 809 904 (95) (11)
Other liabilities 3,470 3,934 (464) (12)
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Total liabilities 389,393 413,826 (24,433) (6)
Total equity 20,076 20,737 (661) (3)
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Total liabilities and equity 409,469 434,563 (25,094) (6)
------- ------- -------- ----
Total assets decreased by GBP25.1 billion to GBP409.5 billion at
31 December 2022, compared with GBP434.6 billion at 31 December
2021.
Cash and balances at central banks decreased by GBP28.1 billion
to GBP73.1 billion, compared with GBP101.2 billion at 31 December
2021, driven primarily by:
- GBP25.0 billion decrease resulting from growth in loans to
customers and customer deposit outflows;
- GBP8.9 billion decrease in balances held at central banks; and
- GBP3.5 billion decrease due to repo activity; partially offset by
- GBP11.7 billion net increase in liquidity assets held.
Loans to banks - amortised cost decreased by GBP1.0 billion to
GBP3.2 billion, compared with GBP4.2 billion at 31 December 2021,
mainly representing a decrease in US dollar and European Central
Bank balances as part of treasury activities.
Loans to customers increased by GBP14.7 billion to GBP301.7
billion, compared with GBP287.0 billion at 31 December 2021, driven
by:
- GBP17.6 billion mortgage growth as a result of strong gross new lending;
- GBP4.5 billion increase in commercial lending, primarily due
to increased facility utilisation, whilst repayments drove further
reductions in UK Government scheme balances;
- GBP6.8 billion net decrease in relation to Treasury reverse repo activity; and
- GBP1.4 billion decrease due to collateral placed for net repo trades.
Amounts due from holding companies and fellow subsidiaries
increased by GBP1.4 billion to GBP4.9 billion, compared with GBP3.5
billion at 31 December 2021, primarily reflecting loans and
advances provided to UBIDAC to support liquidity management during
the phased withdrawal from the Republic of Ireland.
Other financial assets decreased by GBP14.5 billion to GBP14.5
billion, primarily driven by bond disposals and maturities of
GBP25.4 billion, a reduction in fair value of the remaining bond
portfolio of GBP1.6 billion due to changes in interest and FX
rates, partially offset by bond purchases of GBP11.9 billion.
Bank deposits decreased by GBP6.8 billion to GBP16.1 billion,
driven by a GBP6.5 billion decrease in repo balances.
Customer deposits decreased by GBP6.8 billion to GBP322.6
billion, driven by:
- GBP5.9 billion reflecting higher outflows from savings and
current account balances due to an overall market liquidity
contraction;
- GBP5.0 billion decrease in repos facing customers; partially offset by
- GBP4.1 billion deposit growth in Private Banking.
Amounts due to holding companies and fellow subsidiaries
decreased by GBP6.4 billion to GBP38.8 billion, compared with
GBP45.1 billion at 31 December 2021, primarily due to movements on
balances with NWG Plc and NWH Ltd.
Derivative liabilities decreased by GBP2.0 billion to GBP2.1
billion, compared with GBP4.1 billion at 31 December 2021, driven
by interest rate rises across all currencies and GBP spot rate
depreciation.
Other financial liabilities decreased by GBP1.9 billion to
GBP5.4 billion, compared with GBP7.3 billion at 31 December 2021,
driven by a reduction in long term fixed rate investment products,
as a result of the current market environment and increasing rates
outlook.
Other liabilities decreased by GBP0.5 billion to GBP3.5 billion,
compared with GBP3.9 billion at the 31 December 2021, primarily due
to a reduction in financial guarantees and accruals.
Total equity decreased by GBP0.7 billion to GBP20.1 billion,
compared with GBP20.7 billion at 31 December 2021. The decrease
reflects dividends paid to NatWest Holdings and decreases in cash
flow hedging reserves due to interest rate rises, partially offset
by attributable profit of GBP3.7 billion.
Consolidated income statement for the year ended 31 December
2022
2022 2021
GBPm GBPm
Interest receivable 9,159 6,721
Interest payable (1,627) (719)
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Net interest income 7,532 6,002
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Fees and commissions receivable 2,119 1,862
Fees and commissions payable (493) (380)
Other operating income 2,585 1,785
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Non-interest income 4,211 3,267
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Total income 11,743 9,269
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Staff costs (2,896) (2,815)
Premises and equipment (994) (948)
Other administrative expenses (1,630) (1,660)
Depreciation and amortisation (768) (776)
Operating expenses (6,288) (6,199)
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Profit before impairment losses/releases 5,455 3,070
Impairment (losses)/releases (341) 813
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Operating profit before tax 5,114 3,883
Tax charge (1,425) (976)
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Profit for the year 3,689 2,907
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Attributable to:
Ordinary shareholders 3,564 2,793
Paid-in equity holders 120 109
Non-controlling interests 5 5
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3,689 2,907
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Consolidated statement of comprehensive income for the year
ended 31 December 2022
2022 2021
GBPm GBPm
Profit for the year 3,689 2,907
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Items that do not qualify for reclassification
Remeasurement of retirement benefit schemes (1) (556) (531)
Tax 146 158
(410) (373)
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Items that do qualify for reclassification
FVOCI financial assets (392) (96)
Cash flow hedges (2) (542) 180
Currency translation (2) (22)
Tax 276 (40)
(660) 22
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Other comprehensive loss after tax (1,070) (351)
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Total comprehensive income for the year 2,619 2,556
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Attributable to:
Ordinary shareholders 2,494 2,442
Paid-in equity holders 120 109
Non-controlling interests 5 5
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2,619 2,556
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(1) Following the purchase of ordinary shares from UKGI in Q1
2022, NatWest Group contributed GBP500 million to its main pension
scheme in line with the memorandum of understanding announced on 17
April 2018. After tax relief, this contribution reduced total
equity by GBP365 million. Other material movements came from asset
underperformance relative to movements in the schemes' liabilities
over the year. In line with our policy, the present value of
defined benefit obligations and the fair value of plan assets at
the end of the reporting period, are assessed to identify
significant market fluctuations and one-off events since the end of
the prior financial year.
(2) The unrealised losses on cash flow hedge reserves is mainly
driven by deferment of losses on GBP net received fixed swaps as
interest rates have increased.
Balance sheet as at 31 December 2022
NWB Group NWB Plc
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2022 2021 2022 2021
GBPm GBPm GBPm GBPm
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Assets
Cash and balances at central banks 73,065 101,213 73,062 101,210
Derivatives 4,407 2,460 4,430 2,547
Loans to banks - amortised cost 3,197 4,182 2,870 3,638
Loans to customers - amortised cost 301,684 286,971 267,401 255,443
Amounts due from holding companies and fellow
subsidiaries 4,903 3,519 32,133 27,122
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Securities subject to repurchase agreements 2,140 10,813 2,140 10,813
Other financial assets excluding securities
subject to repurchase agreements 12,406 18,218 12,040 17,836
----------------------------------------------- ------- ------- ------- -------
Other financial assets 14,546 29,031 14,180 28,649
Investment in group undertakings - - 2,030 2,319
Other assets 7,667 7,187 5,641 5,183
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Total assets 409,469 434,563 401,747 426,111
------- ------- ------- -------
Liabilities
Bank deposits 16,060 22,831 16,059 22,829
Customer deposits 322,614 329,440 281,558 292,470
Amounts due to holding companies and fellow
subsidiaries 38,771 45,136 75,037 76,722
Derivatives 2,088 4,119 2,582 4,336
Other financial liabilities 5,384 7,251 4,525 6,384
Subordinated liabilities 197 211 191 205
Notes in circulation 809 904 809 904
Other liabilities 3,470 3,934 2,743 3,095
----------------------------------------------- ------- ------- ------- -------
Total liabilities 389,393 413,826 383,504 406,945
------- ------- ------- -------
Owners' equity 20,066 20,727 18,243 19,166
Non-controlling interests 10 10 - -
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Total equity 20,076 20,737 18,243 19,166
------- ------- ------- -------
Total liabilities and equity 409,469 434,563 401,747 426,111
------- ------- ------- -------
Owners' equity of NWB Plc as at 31 December 2022 includes the
profit for the year of GBP3,457 million (2021- GBP2,752
million).
Statement of changes in equity for the year ended 31 December
2022
NWB Group NWB Plc
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2022 2021 2022 2021
GBPm GBPm GBPm GBPm
Called-up share capital - at 1 January and
31 December 1,678 1,678 1,678 1,678
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Share premium - at 1 January and 31 December 2,225 2,225 2,225 2,225
---------------------------------------------- ------- ------- ------- -------
Paid-in equity - at 1 January 2,377 2,370 2,377 2,370
Redeemed (359) (934) (359) (934)
Issued 500 941 500 941
At 31 December 2,518 2,377 2,518 2,377
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Merger reserve - at 1 January 14 9 (89) (140)
Additions 24 - - -
Amortisation 39 5 87 51
At 31 December 77 14 (2) (89)
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FVOCI reserve - at 1 January 192 280 193 279
Unrealised (losses)/gains (3) (485) 26 (486) 28
Realised losses/(gains) 93 (122) 93 (122)
Tax 124 8 124 8
At 31 December (76) 192 (76) 193
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Cash flow hedging reserve - at 1 January (1) (133) (2) (133)
Amount recognised in equity (4) (283) 102 (288) 100
Amount transferred from equity to earnings (259) 78 (255) 79
Tax 152 (48) 152 (48)
At 31 December (391) (1) (393) (2)
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Foreign exchange reserve - at 1 January (85) (63) (16) (13)
Retranslation of net assets 29 (44) 31 (18)
Foreign currency (losses)/gains on hedges
of net assets (31) 22 (33) 15
At 31 December (87) (85) (18) (16)
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Capital redemption reserve - at 1 January 820 796 820 796
Redemption of preference shares - 24 - 24
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At 31 December 820 820 820 820
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Retained earnings - at 1 January 13,507 12,720 11,980 11,402
Profit attributable to ordinary shareholders
and other equity owners 3,684 2,902 3,457 2,752
Ordinary dividends paid (3,293) (1,600) (3,293) (1,600)
Paid-in equity dividends paid (120) (109) (120) (109)
Remeasurement of retirement benefit schemes
(2)
- gross (556) (531) (565) (545)
- tax 146 158 146 159
Amortisation of merger reserve (39) (5) (87) (51)
Redemption of preference shares - (24) - (24)
Redemption/reclassification of paid-in equity
- gross (29) (23) (29) (23)
- tax (6) 5 (6) 5
Share-based payments
- gross - (3) - (3)
- tax 2 7 2 7
Employee share schemes 6 10 6 10
---------------------------------------------- ------- ------- ------- -------
At 31 December 13,302 13,507 11,491 11,980
---------------------------------------------- ------- ------- ------- -------
Owners' equity at 31 December 20,066 20,727 18,243 19,166
---------------------------------------------- ------- ------- ------- -------
For the notes to this table refer to the following page.
Statement of changes in equity for the year ended 31 December
2022 continued
NWB Group NWB Plc
-------------- --------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
Non-controlling interests - at 1 January 10 10 - -
Profit attributable to non-controlling interests 5 5 - -
Dividends paid (5) (5) - -
At 31 December 10 10 - -
------------------------------------------------- ------ ------ ------ ------
Total equity at 31 December 20,076 20,737 18,243 19,166
------ ------ ------ ------
Attributable to:
Ordinary shareholders 17,548 18,350 15,725 16,789
Paid-in equity holders 2,518 2,377 2,518 2,377
Non-controlling interests 10 10 - -
------------------------------------------------- ------ ------ ------ ------
20,076 20,737 18,243 19,166
------ ------ ------ ------
(1) The total distributable reserves for NWB Plc is GBP11,002
million (2021 - GBP11,873 million).
(2) Following the purchase of ordinary shares from UKGI in Q1
2022, NatWest Group contributed GBP500 million to its main pension
scheme in line with the memorandum of understanding announced on 17
April 2018. After tax relief, this contribution reduced total
equity by GBP365 million. Other material movements came from asset
underperformance relative to movements in the schemes' liabilities
over the year. In line with our policy, the present value of
defined benefit obligations and the fair value of plan assets at
the end of the reporting period, are assessed to identify
significant market fluctuations and one-off events since the end of
the prior financial year.
(3) Certain assets within this category have been hedged with
derivatives which are not in an accounting hedge relationship. The
effect of this creates a temporary difference between other
comprehensive income and the income statement due to the difference
in recognition criteria. This temporary difference is expected to
reverse through the income statement over the duration of the
hedge.
(4) The unrealised losses on cash flow hedge reserves is mainly
driven by deferment of losses on GBP net received fixed swaps as
interest rates have increased.
Cash flow statement for the year ended 31 December 2022
NWB Group NWB Plc
------------------ ------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
Cash flows from operating activities
Operating profit before tax 5,114 3,883 4,687 3,542
Adjustments for:
Impairment losses/(releases) 341 (813) 389 (732)
Amortisation of discounts and premiums of other
financial assets - 181 - 181
Depreciation and amortisation 768 776 598 594
Net impairment charges of investments in Group
undertakings - - 336 61
Change in fair value taken to profit or loss
on other financial assets 1,177 1,595 1,177 1,595
Change in fair value taken to profit or loss
on other financial liabilities and
subordinated liabilities (912) (420) (924) (418)
Elimination of foreign exchange differences (47) 1,120 (3) 1,118
Other non-cash items (195) 87 (215) 58
Income receivable on other financial assets (303) (412) (303) (412)
Loss/(profit) on sale of other financial assets 93 (120) 93 (120)
Dividends receivable from subsidiaries - - (1,010) (424)
Loss on sale of other assets and net assets/liabilities 5 34 6 34
Loss on redemption of own debt - 117 - 117
Interest payable on MRELs and subordinated
liabilities 371 315 358 310
Charges and releases on provisions 122 388 122 388
Defined benefit pension schemes 154 173 132 146
Net cash flows from trading activities 6,688 6,904 5,443 6,038
--------------------------------------------------------- -------- -------- -------- --------
(Increase)/decrease in derivative assets (2,230) 930 (2,171) 991
Increase in loans to banks (198) (89) (164) (155)
Increase in loans to customers (14,448) (14,511) (12,313) (12,741)
(Increase)/decrease in amounts due from holding
companies and fellow subsidiaries (355) (443) (6,204) 5,288
Decrease/(increase) in other financial assets 239 (116) 239 (116)
(Increase)/decrease in other assets (34) (19) 14 (16)
(Decrease)/increase in bank deposits (6,771) 7,960 (6,770) 7,963
(Decrease)/increase in customer deposits (9,065) 35,835 (10,912) 28,707
(Decrease)/increase in amounts due to holding
companies and fellow subsidiaries (7,218) 6,033 (2,191) 5,426
Decrease in derivative liabilities (2,031) (2,433) (1,754) (2,437)
Decrease in other financial liabilities (1,867) (5) (1,859) (100)
Decrease in notes in circulation (95) (108) (95) (362)
Decrease in other liabilities (1,197) (1,199) (1,194) (1,121)
--------------------------------------------------------- -------- -------- -------- --------
Changes in operating assets and liabilities (45,270) 31,835 (45,374) 31,327
Income taxes paid (1,161) (923) (998) (791)
--------------------------------------------------------- -------- -------- -------- --------
Net cash flows from operating activities (1) (39,743) 37,816 (40,929) 36,574
--------------------------------------------------------- -------- -------- -------- --------
Cash flows from investing activities
Sale and maturity of other financial assets 25,721 10,272 25,339 9,884
Purchase of other financial assets (13,388) (3,193) (13,022) (2,811)
Income received on other financial assets 371 412 371 412
Net movement in business interests and intangible
assets (992) (3,701) (719) (3,093)
Dividends received from subsidiaries - - 1,010 424
Sale of property, plant and equipment 138 58 82 17
Purchase of property, plant and equipment (618) (876) (316) (617)
Net cash flows from investing activities 11,232 2,972 12,745 4,216
--------------------------------------------------------- -------- -------- -------- --------
Cash flows from financing activities
Movement in MRELs 548 1,762 509 1,515
Movement in subordinated liabilities (200) (1,267) (199) (1,267)
Dividends paid (3,418) (1,714) (3,413) (1,709)
Issue of paid-in equity 500 941 500 941
Redemption of paid-in equity (388) (934) (388) (934)
Net cash flows from financing activities (2,958) (1,212) (2,991) (1,454)
--------------------------------------------------------- -------- -------- -------- --------
Effects of exchange rate changes on cash and
cash equivalents 1,142 (979) 1,101 (984)
Net (decrease)/increase in cash and cash equivalents (30,327) 38,597 (30,074) 38,352
Cash and cash equivalents at 1 January 106,645 68,048 105,546 67,194
Cash and cash equivalents at 31 December 76,318 106,645 75,472 105,546
--------------------------------------------------------- -------- -------- -------- --------
(1) NWB Group includes interest received of GBP9,167 million
(2021 - GBP6,623 million) and interest paid of GBP1,412 million
(2021 - GBP693 million), and NWB Plc includes interest received of
GBP8,421 million (2021 - GBP5,937 million) and interest paid of
GBP1,623 million (2021 - GBP779 million).
(2) The total cash outflow for leases for NWB Group was GBP130
million (2021: GBP149 million) and for NWB Plc GBP119 million
(2021: GBP138 million). This included payment of principal for NWB
Group of GBP111 million (2021: GBP126 million) and NWB Plc of GBP99
million (2021: GBP114 million). These amounts are included in the
operating activities in cash flow statement.
1 Presentation of condensed consolidated financial
statements
The condensed consolidated financial statements should be read
in conjunction with NatWest Bank Plc's 2022 Annual Report and
Accounts. The critical and significant accounting policies are the
same as those applied in the consolidated financial statements.
The directors have prepared the condensed consolidated financial
statements on a going concern basis after assessing the principal
risks, forecasts, projections and other relevant evidence over the
twelve months from the date they are approved.
2 Critical accounting policies and key sources of estimation
uncertainty
The critical accounting policies and judgements are noted in
NatWest Bank Plc's 2022 Annual Report and Accounts.
Information used for significant estimates
Key financial estimates are based on management's latest
five-year revenue and cost forecasts. Measurement of deferred tax
and expected credit losses are highly sensitive to reasonably
possible changes in those anticipated conditions. Changes in
judgements and assumptions could result in a material adjustment to
those estimates in future reporting periods. (Refer to the Risk
factors in NatWest Bank Plc's 2022 Annual Report and Accounts).
3 Operating expenses
2022 2021
GBPm GBPm
--------------------------------------
Wages, salaries and other staff costs 2,138 2,079
Temporary and contract costs 207 206
Social security costs 263 241
Pension costs 288 289
- defined benefit schemes 154 173
- defined contribution schemes 134 116
-------------------------------------- ----- -----
Staff costs 2,896 2,815
-------------------------------------- -----
Premises and equipment 994 948
Depreciation and amortisation 768 776
Other administrative expenses (1) 1,630 1,660
Administrative expenses 3,392 3,384
-------------------------------------- ----- -----
6,288 6,199
----- -----
(1) Includes redress and litigation. Further details are provided in Note 7.
4 Segmental analysis
Reportable operating segments
On 27 January 2022, NatWest Group announced that a new business
segment, Commercial & Institutional, would be created, bringing
together the Commercial, NatWest Markets and RBSI businesses to
form a single business segment, with common management and
objectives, to best support our customers across the full
non-personal customer lifecycle. Comparatives have been
re-presented. The re-presentation of operating segments does not
change the consolidated financial results of NatWest Group.
NWB Plc 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 and includes
Ulster Bank customers.
Private Banking serves UK-connected high-net-worth individuals
and their business interests.
Commercial & Institutional offers SME's and Corporate and
Institutional clients comprehensive banking and financing solutions
throughout the UK and internationally.
Central items & other i ncludes corporate functions, such as
NatWest Group treasury, finance, risk management, compliance,
legal, communications and human resources. NWB Plc is the main
provider of shared services and treasury activities for NatWest
Group. The services are mainly provided to NWH Group, however, in
certain instances, where permitted, services are also provided to
the wider NatWest Group including the non-ring fenced business.
Commercial Central
Retail Private & items
Banking Banking Institutional & other Total
2022 GBPm GBPm GBPm GBPm GBPm
Net interest income 4,494 754 2,740 (456) 7,532
Net fees and commissions 334 243 1,038 11 1,626
Other operating
income 65 28 248 2,244 2,585
Total income 4,893 1,025 4,026 1,799 11,743
-------------------------------- ------- -------- ------------- ------- -------
Depreciation and
amortisation - - (135) (633) (768)
Other operating
expenses (2,115) (596) (1,804) (1,005) (5,520)
Impairment (losses)/releases (218) 2 (126) 1 (341)
Operating profit 2,560 431 1,961 162 5,114
------- -------- ------------- ------- -------
2021
Net interest income 3,541 461 2,171 (171) 6,002
Net fees and commissions 303 239 947 (7) 1,482
Other operating
income 42 24 93 1,626 1,785
Total income 3,886 724 3,211 1,448 9,269
---------------------------- ------- ------- ------------- ------- -------
Depreciation and
amortisation - - (146) (630) (776)
Other operating
expenses (1,917) (513) (1,746) (1,247) (5,423)
Impairment releases 23 53 737 - 813
Operating profit/(loss) 1,992 264 2,056 (429) 3,883
------- ------- ------------- ------- -------
Total revenue (1)
Commercial Central
Retail Private & items
Banking Banking Institutional & other Total
2022 GBPm GBPm GBPm GBPm GBPm
External 5,039 856 3,660 4,308 13,863
Intersegment 29 416 118 (563) -
---------------------------- ------- ------- ------------- ------- -------
Total 5,068 1,272 3,778 3,745 13,863
------- ------- ------------- ------- -------
2021
---------------------------- ------- ------- ------------- ------- -------
External 4,660 703 3,030 1,975 10,368
Intersegment 97 161 147 (405) -
---------------------------- ------- ------- ------------- ------- -------
Total 4,757 864 3,177 1,570 10,368
------- ------- ------------- ------- -------
(1) Total revenue comprises interest receivable, fees and
commissions receivable and other operating income.
Total income
Commercial Central
Retail Private & items
Banking Banking Institutional & other Total
2022 GBPm GBPm GBPm GBPm GBPm
------------- ------- ------- ------------- ------- ------
External 4,865 721 4,112 2,045 11,743
Intersegment 28 304 (86) (246) -
------------- ------- ------- ------------- ------- ------
Total 4,893 1,025 4,026 1,799 11,743
------- ------- ------------- ------- ------
2021
------------- ------- ------- ------------- ------- ------
External 3,791 668 3,191 1,619 9,269
Intersegment 95 56 20 (171) -
------------- ------- ------- ------------- ------- ------
Total 3,886 724 3,211 1,448 9,269
------- ------- ------------- ------- ------
Segmental analysis continued
Analysis of net fees and commissions
Commercial Central
Retail Private & items
Banking Banking Institutional & other Total
2022 GBPm GBPm GBPm GBPm GBPm
Fees and commissions receivable
- Payment services 254 25 489 - 768
- Credit and debit card fees 323 14 170 - 507
- Lending and financing 15 8 446 - 469
- Brokerage 34 6 - - 40
- Investment management, trustee and
fiduciary services 4 213 - - 217
- Underwriting fees - - 3 - 3
- Other - 3 113 (1) 115
-------------------------------------- ------- ------- ------------- ------- -----
Total 630 269 1,221 (1) 2,119
Fees and commissions payable (296) (26) (183) 12 (493)
-------------------------------------- ------- ------- ------------- ------- -----
Net fees and commissions 334 243 1,038 11 1,626
------- ------- ------------- ------- -----
2021
Fees and commissions receivable
- Payment services 248 33 415 - 696
- Credit and debit card fees 276 10 111 - 397
- Lending and financing 11 10 416 - 437
- Brokerage 38 5 - - 43
- Investment management, trustee and
fiduciary services 3 214 - - 217
- Underwriting fees - - - - -
- Other - 35 128 (91) 72
-------------------------------------- ------- ------- ------------- ------- -----
Total 576 307 1,070 (91) 1,862
Fees and commissions payable (273) (68) (123) 84 (380)
-------------------------------------- ------- ------- ------------- ------- -----
Net fees and commissions 303 239 947 (7) 1,482
------- ------- ------------- ------- -----
Commercial Central
Retail Private & items
Banking Banking Institutional & other Total
2022 GBPm GBPm GBPm GBPm GBPm
------------ ------- ------- ------------- ------- -------
Assets 184,140 19,734 86,406 119,189 409,469
Liabilities 153,304 41,489 127,301 67,299 389,393
------------ ------- ------- ------------- ------- -------
2021
------------ ------- ------- ------------- ------- -------
Assets 168,228 18,509 83,347 164,479 434,563
Liabilities 153,653 37,219 133,156 89,798 413,826
------------ ------- ------- ------------- ------- -------
5 Tax
2022 2021
GBPm GBPm
Current tax
Charge for the year (1,187) (998)
Over provision in respect of prior years 63 38
------------------------------------------------------ ------- -----
(1,124) (960)
Deferred tax
Charge for the year (151) (195)
UK tax rate change impact (1) (82) 161
(Decrease)/increase in the carrying value of deferred
tax assets in respect of UK losses (6) 14
(Under)/over provision in respect of prior years (2) (62) 4
------------------------------------------------------ ------- -----
Tax charge for the year (1,425) (976)
------- -----
(1) It was announced in the UK Government's budget on 27 October
2021 that the main UK banking surcharge will decrease from 8% to 3%
from 1 April 2023. This legislative change was enacted on 24
February 2022.
(2) 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.
The actual tax charge differs from the expected tax charge,
computed by applying the standard rate of UK corporation tax of 19%
(2021 - 19%), as follows:
2022 2021
GBPm GBPm
Expected tax charge (972) (738)
Losses and temporary differences in period where no deferred
tax asset recognised - 1
Foreign profits taxed at other rates (8) (6)
Items not allowed for tax:
- losses on disposals and write-downs (8) (50)
- UK bank levy (12) (12)
- regulatory and legal actions 6 (73)
- other disallowable items (13) (15)
Non-taxable items 18 9
Taxable foreign exchange movements 2 1
Unrecognised losses brought forward and utilised - 2
(Decrease)/increase in the carrying value of deferred
tax assets in respect of:
- UK losses (6) 14
Banking surcharge (373) (328)
Tax on paid in equity dividends 22 16
UK tax rate change impact (82) 161
Adjustments in respect of prior years 1 42
------------------------------------------------------------- ------- -----
Actual tax charge (1,425) (976)
------- -----
Judgment: Tax contingencies
NWB Group's corporate income tax charge and its provisions for
corporate income taxes necessarily involve a significant degree of
estimation and judgment. The tax treatment of some transactions is
uncertain and tax computations are yet to be agreed with the tax
authorities in a number of jurisdictions. NWB 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 assets and charges in the period
when the matter is resolved.
For accounting policy information see Accounting policies note
3.7 of the NatWest Bank Plc 2022 Annual Report and Accounts.
6 Loan impairment provisions
Loan exposure and impairment metrics
The table below summarises loans and related credit impairment
measures within the scope of ECL framework.
NWB Group NWB Plc
------------------------ ------------------------
31 December 31 December 31 December 31 December
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
Loans - amortised cost
Stage 1 266,722 264,656 236,809 236,255
Stage 2 37,216 26,003 32,765 22,492
Stage 3 3,783 2,985 3,383 2,548
Inter-Group (1) 4,220 2,555 30,633 25,362
----------------------------- ----------- ----------- ----------- -----------
Total 311,941 296,199 303,590 286,657
ECL provisions (2)
Stage 1 506 231 459 207
Stage 2 813 1,105 765 1,026
Stage 3 1,262 1,167 1,170 1,037
Inter-Group 4 1 48 8
----------------------------- ----------- ----------- ----------- -----------
2,585 2,504 2,442 2,278
ECL provision coverage (3)
Stage 1 (%) 0.19 0.09 0.19 0.09
Stage 2 (%) 2.18 4.25 2.33 4.56
Stage 3 (%) 33.36 39.10 34.58 40.70
Inter-Group (%) 0.09 0.04 0.16 0.03
----------------------------- ----------- ----------- ----------- -----------
0.84 0.85 0.88 0.87
Impairment (releases)/losses
ECL (release)/charge (4)
Stage 1 (243) (995) (256) (945)
Stage 2 348 (30) 373 48
Stage 3 233 213 234 183
Third party 338 (812) 351 (714)
Inter-Group 3 (1) 40 (18)
----------------------------- ----------- ----------- ----------- -----------
341 (813) 391 (732)
Amounts written-off 321 388 272 352
----------------------------- ----------- ----------- ----------- -----------
(1) NWB Group's intercompany assets are classified in Stage 1.
(2) Includes GBP2 million (2021 - GBP3 million) related to assets classified as FVOCI.
(3) ECL provisions coverage is calculated as total ECL
provisions divided by third party loans - amortised cost and
FVOCI.
(4) Includes a GBP0 million charge (2021 - GBP1 million charge)
related to other financial assets, of which a GBP1 million release
(2021 - GBP2 million charge) related to assets classified as FVOCI;
and a GBP0 million release (2021 - GBP13 million charge) related to
contingent liabilities.
(5) The table shows gross loans only and excludes amounts that
are outside the scope of the ECL framework. Refer to Financial
instruments within the scope of the IFRS 9 ECL framework of the
NatWest Bank Plc 2022 Annual Report and Accounts for further
details. Other financial assets within the scope of the IFRS 9 ECL
framework were cash and balances at central banks totaling GBP72.5
billion (2021 - GBP100.6 billion) and debt securities of GBP14.1
billion (2021 - GBP28.2 billion).
Credit risk enhancement and mitigation
For information on credit risk enhancement and mitigation held
as security, refer to Risk and capital management - credit risk
enhancement and mitigation section of the NatWest Bank Plc 2022
Annual Report and Accounts.
Critical accounting policy: Loan impairment provisions
Accounting policies note 2.3 of the NatWest Bank Plc 2022 Annual
Report and Accounts sets out how the expected loss approach is
applied. At 31 December 2022, customer loan impairment provisions
amounted to GBP2,585 million (2021 - GBP2,504 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 judgments 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 of the
NatWest Bank Plc 2022 Annual Report and Accounts.
IFRS 9 ECL model design principles
Refer to Credit risk - IFRS 9 ECL model design principles
section of the NatWest Bank Plc 2022 Annual Report and
Accounts 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 of the
NatWest Bank Plc 2022 Annual Report and Accounts for further
details.
7 Provisions for liabilities and charges
NWB Group
-----------------------------------------------------
Financial
----------------------------------
Redress
and other commitments
Other
litigation(1) Property and guarantees (2) Total
Provisions for liabilities and
charges GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------------- -------- -------------- ----- -----
At 1 January 2022 302 166 63 109 640
Expected credit losses impairment
charge - - (4) - (4)
Currency translation and other - - - 1
movements 1
Charge to income statement 134 20 - 96 250
Release to income statement (30) (53) - (45) (128)
Provisions utilised (114) (28) - (67) (209)
----------------------------------
At 31 December 2022 292 105 59 94 550
------------- -------- -------------- ----- -----
NWB Plc
--------------------------------------------------
Financial
----------------------------------
Redress
and other commitments
litigation Other
(1) Property and guarantees (2) Total
Provisions for liabilities and
charges GBPm GBPm GBPm GBPm GBPm
---------------------------------- ---------- -------- -------------- ----- -----
At 1 January 2022 294 163 60 87 604
Expected credit losses impairment
release - (3) - (3)
Charge to income statement 134 18 - 94 246
Release to income statement (30) (52) - (42) (124)
Provisions utilised (112) (26) - (66) (204)
---------------------------------- ---------- -------- -------------- ----- -----
At 31 December 2022 286 103 57 73 519
---------- -------- -------------- ----- -----
(1) Includes payment protection insurance provision which
reflects the estimated cost of PPI redress attributable to claims
prior to the Financial Conduct Authority (FCA) complaint deadline
of 29 August 2019. All pre-deadline complaints have been processed
which removes complaint volume estimation uncertainty from the
provision estimate. NatWest Group continues to conclude remaining
bank-identified closure work and conclude cases with the Financial
Ombudsmen Service.
(2) Other materially comprises provisions relating to restructuring costs.
Provisions are liabilities of uncertain timing or amount and are
recognised when there is a present obligation as a result of a past
event, the outflow of economic benefit is probable and the outflow
can be estimated reliably. Any difference between the final outcome
and the amounts provided will affect the reported results in the
period when the matter is resolved.
For accounting policy information see Accounting policies note
2.4 of the Natwest Bank Plc 2022 Annual Report and Accounts for
further details.
Critical accounting policy: Provisions for liabilities
The key judgment is involved in determining whether a present
obligation exists. There is often a high degree of uncertainty and
judgment is based on the specific facts and circumstances relating
to individual events in determining whether there is a present
obligation. Judgment is also involved in estimation of the
probability, timing and amount of any outflows. Where NWB Group can
look to another party such as an insurer to pay some or all of the
expenditure required to settle a provision, any reimbursement is
recognised when, and only when, it is virtually certain that it
will be received.
Estimates - 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.
- Customer redress: Provisions reflect the estimated cost of
redress attributable to claims where it is determined that a
present obligation exists.
- Litigation and other regulatory: NWB Group is engaged in
various legal proceedings, both in the UK and in overseas
jurisdictions, including the US. For further information in
relation to legal proceedings and discussion of the associated
uncertainties, refer to Note 8.
- Property: This includes provision for contractual costs associated with vacant properties.
- Other provisions: These materially comprise provisions for
onerous contracts and restructuring costs. Onerous contract
provisions comprise an estimate of the costs involved in fulfilling
the terms and conditions of contracts net of any expected benefits
to be received. This includes provision for contractual costs
associated with vacant properties. Redundancy and restructuring
provisions comprise the estimated cost of restructuring, including
redundancy costs where an obligation exists.
- Background information on all material provisions is given in Note 8.
8 Memorandum items
Contingent liabilities and commitments
The amounts shown in the table below are intended only to
provide an indication of the volume of business outstanding at 31
December 2022. Although NWB Group is exposed to credit risk in the
event of non-performance of the obligations undertaken by
customers, the amounts shown do not, and are not intended to,
provide any indication of NWB Group's expectation of future losses
.
For accounting policy information see Accounting policies note
2.4 of the NatWest Bank Plc Annual Report and Accounts for further
details.
NWB Group NWB Plc
-------------- --------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
Contingent liabilities and commitments
Guarantees 1,728 796 1,664 742
Other contingent liabilities 1,197 1,193 1,190 1,187
Standby facilities, credit lines and other
commitments 87,221 79,826 83,321 75,936
------------------------------------------- ------ ------ ------ ------
90,146 81,815 86,175 77,865
------ ------ ------ ------
(1) In the normal course of business, NWB Plc guarantees
specified third party liabilities of certain subsidiaries; it also
gives undertakings that individual subsidiaries will fulfil their
obligations to third parties under contractual or other
arrangements which are excluded from the table above.
Trustee and other fiduciary activities
In its capacity as trustee or other fiduciary role, NWB 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 NWB Group's financial statements. NWB Group
earned fee income of GBP215 million (2021 - GBP216 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
NWB Plc and its subsidiary and associated undertakings ('NWB
Group') are party to legal proceedings and involved in regulatory
matters, including as the subject of investigations and other
regulatory and governmental action (Matters) in the United Kingdom
(UK), the United States (US), the European Union (EU) and other
jurisdictions.
NWB Group recognises a provision for a liability in relation to
these Matters when it is probable that an outflow of economic
benefits will be required to settle an obligation resulting from
past events, and a reliable estimate can be made of the amount of
the obligation.
In many of these Matters, it is not possible to determine
whether any loss is probable, or to estimate reliably the amount of
any loss, either as a direct consequence of the relevant
proceedings and regulatory matters or as a result of adverse
impacts or restrictions on NWB Group's reputation, businesses and
operations. Numerous legal and factual issues may need to be
resolved, including through potentially lengthy discovery and
document production exercises and determination of important
factual matters, and by addressing novel or unsettled legal
questions relevant to the proceedings in question, before a
liability can reasonably be estimated for any claim. NWB Group
cannot predict if, how, or when such claims will be resolved or
what the eventual settlement, damages, fine, penalty or other
relief, if any, may be, particularly for claims that are at an
early stage in their development or where claimants seek
substantial or indeterminate damages.
There are situations where NWB Group may pursue an approach that
in some instances leads to a settlement agreement. This may occur
in order to avoid the expense, management distraction or
reputational implications of continuing to contest liability, or in
order to take account of the risks inherent in defending claims or
regulatory matters, even for those Matters for which NWB Group
believes it has credible defences and should prevail on the merits.
The uncertainties inherent in all such Matters affect the amount
and timing of any potential outflows for both Matters with respect
to which provisions have been established and other contingent
liabilities in respect of any such Matter. It is not practicable to
provide an aggregate estimate of potential liability for our legal
proceedings and regulatory matters as a class of contingent
liabilities.
The future outflow of resources in respect of any Matter may
ultimately prove to be substantially greater than or less than the
aggregate provision that NWB Group has recognised. Where (and as
far as) liability cannot be reasonably estimated, no provision has
been recognised. NWB Group expects that in future periods,
additional provisions, settlement amounts and customer redress
payments will be necessary, in amounts that are expected to be
substantial in some instances. Please refer to Note 7 for
information on material provisions.
Matters which are, or could be material, having regard to NWB
Group, considered as a whole, in which NWB 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 NWB Group's
litigation and regulatory matters, see the Risk Factors relating to
legal, regulatory and governmental actions and investigations set
out on pages 190-192 of the NatWest Bank Plc Annual Report and
Accounts.
8 Memorandum items continued
Litigation
London Interbank Offered Rate (LIBOR) and other rates
litigation
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, NatWest
Markets Plc, NatWest Markets Securities Inc. and NWB Plc), alleging
(i) that the very process of setting USD ICE LIBOR amounts to
illegal price-fixing; and (ii) that banks in the United States have
illegally agreed to use LIBOR as a component of price in variable
retail loans. In September 2022, the district court dismissed the
complaint, subject to re-pleading by the plaintiffs. The plaintiffs
filed an amended complaint in October 2022, which the defendants
are again seeking to have dismissed.
Offshoring VAT assessments
HMRC issued protective tax assessments in 2018 against NatWest
Group plc totalling GBP143 million relating to unpaid VAT in
respect of the UK branches of two NatWest Group companies
registered in India. 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 GBP143 million to HMRC, and payment was made in
December 2020. The appeal and the application for judicial review
have both been stayed pending resolution of a separate case
involving another bank.
Regulatory matters
NWB Group's financial condition can be affected by the actions
of various governmental and regulatory authorities in the UK, the
US, the EU and elsewhere. NWB Group and/or NatWest Group have
engaged, and will continue to engage, in discussions with relevant
governmental and regulatory authorities, including in the UK, the
US, the EU and elsewhere, on an ongoing and regular basis, and in
response to informal and formal inquiries or investigations,
regarding operational, systems and control evaluations and issues
including those related to compliance with applicable laws and
regulations, including consumer protection, investment advice,
business conduct, competition/anti-trust, VAT recovery,
anti-bribery, anti-money laundering and sanctions regimes. NWB
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 NWB
Group, remediation of systems and controls, public or private
censure, restriction of NWB 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 NWB
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.
NWB Group is co-operating fully with the matters described
below.
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 has now commenced additional
review/remediation work.
9 Related parties
UK Government
The UK Government through HM Treasury is the ultimate
controlling party of NatWest Group plc. The UK Government's
shareholding is managed by UK Government Investments Limited, a
company wholly owned by the UK Government. As a result the UK
Government and UK Government controlled bodies are related parties
of the Group.
At 31 December 2022, HM Treasury's holding in NatWest Group's
ordinary shares was 45.97%.
NWB Group enters into transactions with many of these bodies.
Transactions include the payment of: taxes, principally UK
corporation tax (Note 5) and value added tax; national insurance
contributions; local authority rates; and regulatory fees and
levies; together with banking transactions such as loans and levy
sits undertaken in the normal course of banker-customer
relationships.
Bank of England facilities
NWB Group may participate in a number of schemes operated by the
Bank of England in the normal course of business.
Members of NWB Group that are UK authorised institutions are
required to maintain non-interest bearing (cash ratio) deposits
with the Bank of England amounting to 0.403% of their average
eligible liabilities in excess of GBP600 million. They also have
access to Bank of England reserve accounts: sterling current
accounts that earn interest at the Bank of England base rate.
NWB Plc guarantees certain liabilities of NWH Group to the Bank
of England.
Other related parties
(a) In their roles as providers of finance, NWB Group companies
provide development and other types of capital support to
businesses. These investments are made in the normal course of
business.
(b) To further strategic partnerships, NWB 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 where stakes of 10 per cent or more are held. Ongoing
business transactions with these entities are on normal commercial
terms.
(c) NWB Group recharges NatWest Group Pension Fund with the cost
of administration services incurred by it. The amounts involved are
not material to NWB Group.
(d) In accordance with IAS 24, transactions or balances between
NWB Group entities that have been eliminated on consolidation are
not reported.
(e) The captions in the primary financial statements of the
parent company include amounts attributable to subsidiaries. These
amounts have been disclosed in aggregate in the relevant notes to
the financial statements. Other net income/(expenses) represents
the share of post-tax results of associates and joint ventures,
profit (or loss) on disposal of subsidiaries, associates and joint
ventures, and gains on acquisitions.
Holding companies and fellow subsidiaries
Transactions NWB Group enters with its holding companies and
fellow subsidiaries also meet the definition of related party
transactions. The table below discloses transactions between NWB
Group and subsidiaries of NatWest Group.
2022 2021
GBPm GBPm
Interest receivable 41 33
Interest payable (777) (220)
Fees and commissions receivable 97 31
Fees and commissions payable (70) (6)
Other operating income (1) 1,641 1,497
932 1,335
----- -----
(1) Includes internal service recharges of GBP1,616 million.
10 Date of approval
The annual results for the year ended 31 December 2022 were
approved by the board of directors on 16 February 2023
11 Post balance sheet events
On 6 February 2023, NWB reached agreement with the trustees of
the Main Section of the Group pension scheme to recognise that the
final distribution linked contribution to the Main Scheme, of up to
GBP471 million, in 2023 is not expected to be required. In its
place, agreement was reached to establish a new legal structure to
hold assets with a value equivalent to GBP471 million. These assets
would become transferrable to the Main section in the event that
future triggers, reflecting a funding requirement, were met. The
assets are not de-recognised from NWB balance sheet, but are
recorded as encumbered. The Group believes likelihood of triggers
being met are remote given the current funding position of the Main
section.
There have been no other significant events between 31 December
2022 and the date of approval of these accounts which would require
a change to or additional disclosure in the accounts.
This statement should be read in conjunction with the
responsibilities of the auditor set out in their report on pages 89
to 99 of the NatWest Bank Plc 2022 Annual Report and Accounts .
The directors are responsible for the preparation of the Annual
Report and Accounts. The directors are required to prepare Group
financial statements, and as permitted by the Companies Act 2006
have elected to prepare company financial statements, for each
financial year in accordance with UK adopted International
Accounting Standards. They are responsible for preparing financial
statements that present fairly the financial position, financial
performance and cash flows of NWB Group and NWB Plc. In preparing
those financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable, relevant and reliable; and
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
- prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the company and Group
will continue in business.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of NWB Group and to enable them to ensure that
the Annual Report and Accounts complies with the Companies Act
2006. They are also responsible for safeguarding the assets of NWB
Plc and NWB Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic report and Directors' report,
that comply with that law and those regulations. The directors are
responsible for the maintenance and integrity of the corporate and
financial information included on the company's website.
The directors confirm that to the best of their knowledge:
- the financial statements, prepared in accordance with UK
adopted International Accounting Standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Bank and the undertakings included in the consolidation
taken as a whole; and
- the Strategic report and Directors' report (incorporating the
Financial review) includes a fair review of the development and
performance of the business and the position of the Bank and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
By order of the Board
Howard Davies Alison Rose-Slade DBE Katie Murray
Chairman Chief Executive Officer Chief Financial Officer
16 February 2023
Board of directors
Chairman Executive directors Non-executive directors
Howard Davies Alison Rose-Slade DBE Francesca Barnes
Katie Murray Graham Beale
Ian Cormack
Roisin Donnelly
Patrick Flynn
Morten Friis
Yasmin Jetha
Mike Rogers
Mark Seligman
Lena Wilson
Cautionary statement regarding forward-looking statements
This document may include forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995, such as statements that include, without limitation,
the words 'expect', 'estimate', 'project', 'anticipate', 'commit',
'believe', 'should', 'intend', 'will', 'plan', 'could',
'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal',
'objective', 'may', 'endeavour', 'outlook', 'optimistic',
'prospects' and similar expressions or variations on these
expressions. These statements concern or may affect future matters,
such as NWB Group's future economic results, business plans and
strategies. In particular, this document may include
forward-looking statements relating to NWB Group in respect of, but
not limited to: its economic and political risks, its regulatory
capital position and related requirements, its financial position,
profitability and financial performance (including financial,
capital, cost savings and operational targets), the implementation
of NatWest Group's purpose-led strategy, its environmental, social
and governance and climate related targets, its access to adequate
sources of liquidity and funding, increasing competition from new
incumbents and disruptive technologies, its exposure to third party
risks, its ongoing compliance with the UK ring-fencing regime and
ensuring operational continuity in resolution, its impairment
losses and credit exposures under certain specified scenarios,
substantial regulation and oversight, ongoing legal, regulatory and
governmental actions and investigations, the transition of LIBOR
and IBOR rates to replacement risk free rates and NWB Group's
exposure to, operational risk, conduct risk, financial crime risk,
cyber, data and IT risk, key person risk and credit rating risk.
Forward-looking statements are subject to a number of risks and
uncertainties that might cause actual results and performance to
differ materially from any expected future results or performance
expressed or implied by the forward-looking statements. Factors
that could cause or contribute to differences in current
expectations include, but are not limited to, future growth
initiatives (including acquisitions, joint ventures and strategic
partnerships), the outcome of legal, regulatory and governmental
actions and investigations, the level and extent of future
impairments and write-downs, legislative, political, fiscal and
regulatory developments, accounting standards, competitive
conditions, technological developments, interest and exchange rate
fluctuations, and general economic and political conditions and the
impact of climate related risks and the transitioning to a net zero
economy. These and other factors, risks and uncertainties that may
impact any forward-looking statement or the NWB Group's actual
results are discussed in the NWB Plc's UK 2021 Annual Report and
Accounts (ARA). The forward-looking statements contained in this
document speak only as of the date of this document and NWB Plc
does not assume or undertake any obligation or responsibility to
update any of the forward-looking statements contained in this
document, whether as a result of new information, future events or
otherwise, except to the extent legally required.
Legal Entity Identifier: 213800IBT39XQ9C4CP71
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END
FR TRMJTMTTBMLJ
(END) Dow Jones Newswires
February 17, 2023 03:00 ET (08:00 GMT)
Natwest Und.nts (LSE:72OH)
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