NatWest Markets
N.V.
Interim Results 2024
NatWest Markets N.V.
Results for the half year ended 30
June 2024
As part of the NatWest Group
Commercial & Institutional segment, we continued to support
customers in navigating their financing and risk solutions
requirements in the prevailing high interest rate market and
geopolitical outlook. We will maintain our focus on leveraging
growth opportunities through the delivery of markets products and
collaboration across the segment to meet our customers'
needs.
Climate and sustainable funding
and financing have continued to perform well, and up to 30 June
2024 NWM N.V. has delivered €25.6 billion towards the NatWest Group
climate and sustainable funding and financing
target(1)of £100 billion between 1 July 2021 and the end
of 2025.
Management Board and Supervisory Board
update
In March 2024, Marije Elkenbracht
stepped down as NWM N.V. Chief Risk Officer and Managing Board
member. While a search is underway to identify a permanent
successor, Spencer Lloyd is leading the Risk Management Function on
an interim basis.
In April 2024, Frank Dangeard
became Chairman of the NWM N.V. Supervisory Board. Robert Begbie
stepped down from his role as Chairman while remaining a member of
the Supervisory Board.
In May 2024, Mickey van Wieringen
was appointed Managing Board member and Chief Operating Officer on
a permanent basis.
Outlook(2)
We retain the outlook for the
Common Equity Tier 1 (CET1) ratio and leverage ratio as set out in
the NatWest Markets N.V. 2023 Annual Report and
Accounts.
(1) NatWest Group
uses its climate and sustainable funding and financing inclusion
(CSFFI) criteria to determine the assets, activities and companies
that are eligible to be counted towards its climate and sustainable
funding and financing target. This includes both provision of
committed (on and off-balance sheet) funding and financing,
including provision of services for underwriting issuances and
private placements.
(2) The targets,
expectations and trends discussed in this section represent
management's current expectations and are subject to change,
including as a result of the factors described in the Risk Factors
section of the NatWest Markets N.V. 2023 Annual Report and Accounts
and the Summary Risk Factors set out in this announcement for H1
2024.
Financial review
Profit for the period was €64
million compared with €61 million in H1 2023. The total increase of
€3 million was mainly due to an increase in net interest income of
€17 million (€67 million in H1 2024 compared with €50 million in H1
2023). This was partially offset by a €4 million decrease in
non-interest income (from €95 million in H1 2023 to €91 million in
H1 2024) and a €7 million increase in operating expenses (from €82
million in H1 2023 to €89 million in H1 2024).
Net interest income was €67
million compared with €50 million in H1 2023, primarily driven by
higher interest rates and by changes in the lending portfolio and
the funding book in H1 2024 in comparison with H1 2023.
Non-interest income decreased
by €4 million to €91 million compared with €95 million in H1 2023.
Net fees and commissions of €113 million (H1 2023 - €99 million)
primarily consisted of transfer pricing income from NWM Plc of €75
million (H1 2023 - €61 million) and underwriting fees of €42
million (H1 2023 - €37 million). The increase in transfer pricing
income was mainly driven by higher income from revenue share
models. Income from trading activities was a loss of €11 million
compared with a loss of €5 million in H1 2023. Other operating
income was a loss of €11 million compared with a gain of €1 million
in H1 2023. The other operating income loss in H1 2024 was largely
driven by a fair value adjustment of a legacy investment
property(1).
Operating expenses were €89 million compared
with €82 million in H1 2023. Staff costs
increased by €4 million to €44 million in H1
2024. Premises
and equipment costs were €3 million (H1 2023 - €3 million).
Administrative expenses increased by €3 million to €41 million,
compared with €38 million in H1 2023. Depreciation and amortisation
was €1 million (H1 2023 - €1 million).
Impairments were a release of
€2 million in H1 2024, compared with a release of €3 million in H1
2023.
Tax charge was €7 million
compared with a tax charge of €5 million in H1 2023, largely driven
by the utilisation of deferred tax assets.
Total assets and total liabilities both increased by €3.9 billion to €32.1 billion and €30.1
billion respectively as at 30 June 2024, compared with €28.2
billion and €26.2 billion at 31 December 2023.
-
Cash and balances at central banks increased by
€4.1 billion to €10.1 billion as at 30 June 2024, with the full
balance placed with the Dutch Central Bank.
-
Trading assets increased to €5.5 billion (31
December 2023 - €4.7 billion), driven by an increase in loans
subject to reverse repurchase agreements of €0.9 billion, partially
offset by a decrease in collateral given of €0.2
billion.
-
Derivative assets decreased to €9.2 billion (31
December 2023 - €9.9 billion) and derivative liabilities decreased
to €7.7 billion (31 December 2023 - €8.8 billion), primarily
reflecting changes in the fair value of interest rate derivatives
and foreign exchange derivatives.
-
Amounts due from holding company and fellow
subsidiaries decreased to €1.8 billion compared with €3.2 billion
at 31 December 2023, mainly due to a decrease in trading assets of
€1.9 billion, partially offset by an increase in settlement
balances of €0.5 billion.
-
Customer deposits increased from €4.5 billion to
€5.5 billion as at 30 June 2024, in line with our strategy to
increase customer deposits to match planned banking book asset
growth.
-
Amounts due to holding companies and fellow
subsidiaries decreased by €1.7 billion to €2.3 billion as at 30
June 2024, mainly driven by a decrease in trading liabilities of
€1.5 billion.
-
Trading liabilities increased to €7.3 billion (31
December 2023 - €4.6 billion), primarily reflecting an increase in
deposits subject to repurchase agreements of €2.7 billion,
partially offset by a decrease in collateral received of €0.1
billion.
-
Other financial liabilities increased by €1.2
billion to €4.0 billion as at 30 June 2024 (31 December 2023 - €2.8
billion), largely driven by the issuance
of new debt securities during the period, partially offset by the
maturity of existing ones.
-
Equity attributable to controlling interests
decreased by €36 million to €2.0 billion as at 30 June 2024, mainly
driven by ordinary dividends paid of €42 million, paid-in equity
dividends paid of €13 million, cash flow hedging movements of €26
million and a reduction in own credit
adjustments of €21 million due to tightened credit spread on our
own debts. This was partially offset by the profit for the period of
€64 million and fair value through other
comprehensive income movements of €2 million.
(1) Legacy
transactions pertain to NWM N.V.'s tail business from the period
before the repurposing of its banking license in 2019.
Financial review
Capital and Liquidity
Capital ratios and risk-weighted
assets (RWAs) on the CRR transitional basis are set out
below.
|
|
30 June
|
31
December
|
|
|
2024
|
2023
|
|
Capital ratios
|
%
|
%
|
|
Common Equity Tier 1
(CET1)
|
19.9
|
19.0
|
|
Tier 1
|
23.0
|
22.1
|
|
Total
|
25.0
|
23.9
|
|
|
|
|
|
Risk-weighted assets
|
€m
|
€m
|
|
Credit risk
|
6,241
|
6,799
|
|
Market risk
|
1,278
|
1,103
|
|
Operational risk
|
411
|
332
|
|
Settlement risk
|
-
|
-
|
|
Total RWAs
|
7,930
|
8,234
|
|
|
|
|
|
Liquidity
|
%
|
%
|
|
Liquidity coverage ratio
(LCR)
|
241
|
144
|
-
The higher capital ratios are largely due to
decreased credit risk RWAs during H1 2024.
-
The decrease in overall RWAs is largely driven by
a reduction in credit risk RWAs with a decrease in lending exposure
and equity holdings.
Condensed consolidated income
statement
for the period ended 30 June
2024 (unaudited)
|
|
Half year
ended
|
|
|
30 June
|
30
June
|
|
2024
|
2023
|
|
€m
|
€m
|
|
Interest receivable
|
264
|
145
|
|
Interest payable
|
(197)
|
(95)
|
|
Net interest income
|
67
|
50
|
|
Fees and commissions
receivable
|
129
|
110
|
|
Fees and commissions
payable
|
(16)
|
(11)
|
|
Income from trading
activities
|
(11)
|
(5)
|
|
Other operating income
|
(11)
|
1
|
|
Non-interest income
|
91
|
95
|
|
Total income
|
158
|
145
|
|
Staff costs
|
(44)
|
(40)
|
|
Premises and equipment
|
(3)
|
(3)
|
|
Other administrative
expenses
|
(41)
|
(38)
|
|
Depreciation and
amortisation
|
(1)
|
(1)
|
|
Operating expenses
|
(89)
|
(82)
|
|
Profit before impairment releases
|
69
|
63
|
|
Impairment releases
|
2
|
3
|
|
Operating profit before tax
|
71
|
66
|
|
Tax charge
|
(7)
|
(5)
|
|
Profit for the period
|
64
|
61
|
|
|
|
|
|
Attributable to:
|
|
|
|
Ordinary shareholders
|
51
|
50
|
|
Paid-in-equity holders
|
13
|
11
|
|
|
64
|
61
|
Condensed consolidated statement
of comprehensive income
for the period ended 30 June
2024 (unaudited)
|
|
Half year
ended
|
|
|
30 June
|
30
June
|
|
|
2024
|
2023
|
|
|
€m
|
€m
|
|
Profit for the period
|
64
|
61
|
|
Items that will not be reclassified subsequently to profit or
loss:
|
|
|
|
Changes in fair value of financial
liabilities designated at fair value through profit or loss (FVTPL)
due to
|
|
|
|
changes in credit
risk
|
(21)
|
(5)
|
|
FVOCI financial assets
|
2
|
1
|
|
|
(19)
|
(4)
|
|
|
|
|
|
Items that will be reclassified subsequently to profit or loss
when specific conditions are met:
|
|
|
|
FVOCI financial
assets
|
-
|
3
|
|
Cash flow
hedges (1)
|
(26)
|
(11)
|
|
|
(26)
|
(8)
|
|
Other comprehensive losses after tax
|
(45)
|
(12)
|
|
Total comprehensive income for the period
|
19
|
49
|
|
|
|
|
|
Attributable to:
|
|
|
|
Ordinary shareholders
|
6
|
38
|
|
Paid-in-equity holders
|
13
|
11
|
|
|
19
|
49
|
(1) Refer to
footnote 3 of the consolidated statement of changes in
equity.
Condensed consolidated balance
sheet
as at 30 June 2024
(unaudited)
|
|
30 June
|
31
December
|
|
|
2024
|
2023
|
|
|
€m
|
€m
|
|
Assets
|
|
|
|
Cash and balances at central
banks
|
10,080
|
5,979
|
|
Trading assets
|
5,472
|
4,693
|
|
Derivatives
|
9,198
|
9,890
|
|
Settlement balances
|
1,851
|
565
|
|
Loans to banks - amortised
cost
|
234
|
236
|
|
Loans to customers - amortised
cost
|
802
|
951
|
|
Amounts due from holding company
and fellow subsidiaries
|
1,788
|
3,174
|
|
Other financial assets
|
2,595
|
2,605
|
|
Other assets
|
85
|
95
|
|
Total assets
|
32,105
|
28,188
|
|
|
|
|
|
Liabilities
|
|
|
|
Bank deposits
|
478
|
411
|
|
Customer deposits
|
5,469
|
4,531
|
|
Amounts due to holding company and
fellow subsidiaries
|
2,260
|
3,952
|
|
Settlement balances
|
2,541
|
679
|
|
Trading liabilities
|
7,278
|
4,637
|
|
Derivatives
|
7,726
|
8,814
|
|
Other financial
liabilities
|
4,034
|
2,805
|
|
Subordinated liabilities
|
291
|
293
|
|
Other liabilities
|
63
|
65
|
|
Total liabilities
|
30,140
|
26,187
|
|
Total equity
|
1,965
|
2,001
|
|
Total liabilities and equity
|
32,105
|
28,188
|
Condensed consolidated statement of
changes in equity
for the period ended 30 June
2024 (unaudited)
|
|
Half year
ended
|
|
|
30 June
|
30
June
|
|
|
2024
|
2023
|
|
|
€m
|
€m
|
|
Share capital and premium account
- at beginning of period (1)
|
1,550
|
1,700
|
|
Share capital
restructuring (2)
|
-
|
(150)
|
|
At end of period
|
1,550
|
1,550
|
|
|
|
|
|
Paid-in-equity - at beginning and end of
period
|
250
|
250
|
|
|
|
|
|
FVOCI reserve - at beginning of period
|
(3)
|
(11)
|
|
Unrealised gains
|
1
|
4
|
|
Realised losses
|
1
|
-
|
|
At end of period
|
(1)
|
(7)
|
|
|
|
|
|
Cash flow hedging reserve - at beginning of
period
|
28
|
(10)
|
|
Amount recognised in
equity (3)
|
(36)
|
(27)
|
|
Amount transferred from equity to
earnings
|
10
|
16
|
|
At end of period
|
2
|
(21)
|
|
|
|
|
|
Foreign exchange reserve - at beginning and end of
period
|
6
|
6
|
|
|
|
|
|
Retained earnings - at beginning of period
|
170
|
356
|
|
Profit attributable to ordinary
shareholders and other equity owners
|
64
|
61
|
|
Paid-in-equity dividends
paid
|
(13)
|
(11)
|
|
Ordinary dividends paid
|
(42)
|
(100)
|
|
Share capital
restructuring (2)
|
-
|
150
|
|
Changes in fair value of financial
liabilities designated at FVTPL due to changes in credit
risk
|
(21)
|
(5)
|
|
At end of period
|
158
|
451
|
|
|
|
|
|
Total equity at end of period
|
1,965
|
2,229
|
|
|
|
|
|
Attributable to:
|
|
|
|
Ordinary shareholders
|
1,715
|
1,979
|
|
Paid-in-equity holders
|
250
|
250
|
|
|
1,965
|
2,229
|
|
(1)
(2)
|
Includes ordinary share capital of
€50,004 (2023 - €50,004).
On 31 March 2023, after obtaining
regulatory permission, NWM N.V. executed a share capital
restructuring, converting €150 million of share premium to retained
earnings.
|
|
(3)
|
The change in the cash flow hedging
reserve is driven from realised accrued interest transferred into
the income statement. This is offset by a loss from an increase in
swap rates compared to 31 December 2023. The portfolio of hedging
instruments is predominantly receive fixed swaps.
|
Condensed consolidated cash flow
statement
for the period ended 30 June
2024 (unaudited)
|
|
Half year
ended
|
|
|
30 June
|
30
June
|
|
|
2024
|
2023
|
|
|
€m
|
€m
|
|
Cash flows from operating activities
|
|
|
|
Operating profit before
tax
|
71
|
66
|
|
Adjustments for non-cash and other
items
|
(97)
|
(32)
|
|
Net cash flows from trading activities
|
(26)
|
34
|
|
Changes in operating assets and
liabilities
|
632
|
6,339
|
|
Net cash flows from operating activities before
tax
|
606
|
6,373
|
|
Income taxes paid
|
-
|
(2)
|
|
Net cash flows from operating activities
|
606
|
6,371
|
|
Net cash flows from investing activities
|
83
|
(401)
|
|
Net cash flows from financing activities
|
(61)
|
(211)
|
|
Effects of exchange rate changes on
cash and cash equivalents
|
33
|
27
|
|
Net increase in cash and cash equivalents
|
661
|
5,786
|
|
Cash and cash equivalents at
beginning of period
|
11,610
|
6,518
|
|
Cash and cash equivalents at end of period
|
12,271
|
12,304
|
Notes
1. Presentation of condensed consolidated financial
statements
The condensed consolidated
financial statements should be read in conjunction with NatWest
Markets N.V.'s 2023 Annual Report and Accounts. The accounting
policies are the same as those applied in the consolidated
financial statements.
The directors have prepared the
condensed consolidated financial statements on a going concern
basis after assessing the principal risks, forecasts, projections,
and other relevant evidence over the twelve months from the date
they are approved and in accordance with IAS 34 'Interim Financial
Reporting', as adopted by the European Union.
Amendments to IFRS effective from
1 January 2024 had no material effect on the condensed consolidated
financial statements.
The condensed consolidated
financial statements have not been audited or reviewed by the
external auditor.
2. Analysis of net fees and commissions
|
|
Half year
ended
|
|
|
30 June
|
30
June
|
|
|
2024
|
2023
|
|
|
€m
|
€m
|
|
Fees and commissions
receivable
|
|
|
|
- Transfer pricing arrangements (Note 10)
|
75
|
61
|
|
- Underwriting fees
|
42
|
37
|
|
- Lending and financing
|
12
|
12
|
|
Total
|
129
|
110
|
|
|
|
|
|
Fees and commissions
payable
|
(16)
|
(11)
|
|
Net fees and commissions
|
113
|
99
|
3. Tax
The actual tax charge differs from
the expected tax charge computed by applying the statutory tax rate
of the Netherlands of 25.8% (2023 - 25.8%) as follows:
|
|
Half year
ended
|
|
|
30 June
|
30
June
|
|
|
2024
|
2023
|
|
|
€m
|
€m
|
|
Profit before tax
|
71
|
66
|
|
|
|
|
|
Expected tax charge
|
(18)
|
(17)
|
|
Foreign profits taxed at other
rates
|
(1)
|
(1)
|
|
Losses brought forward and
utilised
|
10
|
9
|
|
Tax on paid-in equity
dividends
|
3
|
3
|
|
Non-taxable items (including
recycling of foreign exchange reserve)
|
(1)
|
-
|
|
Adjustments in respect to prior
years
|
-
|
1
|
|
|
|
|
|
Actual tax charge
|
(7)
|
(5)
|
Deferred tax assets of €63 million
recognised as at 31 December 2023 have decreased to
€57 million at 30 June
2024 due to utilisations. NWM N.V. Group has considered the
carrying value of this asset as at 30 June 2024 and concluded that
it is recoverable based on future profit projections.
Notes
4. Derivatives
The table below shows third party
derivatives by type of contract. The master netting agreements and
collateral shown do not result in a net presentation on the balance
sheet under IFRS.
|
|
30 June
2024
|
|
31
December 2023
|
|
|
Notional
|
|
|
|
|
|
|
|
|
|
GBP
|
USD
|
EUR
|
Other
|
Total
|
Assets
|
Liabilities
|
|
Notional
|
Assets
|
Liabilities
|
|
|
€bn
|
€bn
|
€bn
|
€bn
|
€bn
|
€m
|
€m
|
|
€bn
|
€m
|
€m
|
|
Gross exposure
|
|
|
|
|
|
6,945
|
5,633
|
|
|
7,533
|
6,746
|
|
IFRS offset
|
|
|
|
|
|
(199)
|
(199)
|
|
|
(702)
|
(702)
|
|
Carrying value
|
35
|
91
|
961
|
37
|
1,124
|
6,746
|
5,434
|
|
972
|
6,831
|
6,044
|
|
Of which:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate (1)
|
14
|
13
|
879
|
2
|
908
|
4,557
|
2,978
|
|
802
|
4,370
|
3,151
|
|
Exchange rate
|
21
|
78
|
82
|
35
|
216
|
2,188
|
2,450
|
|
169
|
2,460
|
2,886
|
|
Credit
|
-
|
-
|
-
|
-
|
-
|
1
|
6
|
|
1
|
1
|
7
|
|
Carrying value
|
|
|
|
|
1,124
|
6,746
|
5,434
|
|
972
|
6,831
|
6,044
|
|
Counterparty
mark-to-market netting
|
|
|
|
|
|
(3,097)
|
(3,097)
|
|
|
(3,098)
|
(3,098)
|
|
Cash collateral
|
|
|
|
|
|
(2,731)
|
(1,566)
|
|
|
(2,855)
|
(1,685)
|
|
Securities collateral
|
|
|
|
|
|
(590)
|
(108)
|
|
|
(455)
|
(601)
|
|
Net exposure
|
|
|
|
|
|
328
|
663
|
|
|
423
|
660
|
|
Banks (2)
|
|
|
|
|
|
32
|
20
|
|
|
19
|
29
|
|
Other financial
institutions (3)
|
|
|
|
|
|
101
|
244
|
|
|
139
|
242
|
|
Corporate (4)
|
|
|
|
|
|
194
|
386
|
|
|
262
|
359
|
|
Government (5)
|
|
|
|
|
|
1
|
13
|
|
|
3
|
30
|
|
Net exposure
|
|
|
|
|
|
328
|
663
|
|
|
423
|
660
|
|
UK
|
|
|
|
|
|
1
|
1
|
|
|
7
|
-
|
|
Europe
|
|
|
|
|
|
321
|
662
|
|
|
376
|
660
|
|
US
|
|
|
|
|
|
-
|
-
|
|
|
33
|
-
|
|
RoW
|
|
|
|
|
|
6
|
-
|
|
|
7
|
-
|
|
Net exposure
|
|
|
|
|
|
328
|
663
|
|
|
423
|
660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset quality of uncollateralised
|
|
|
|
|
|
|
|
|
|
|
|
|
derivative
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4
|
|
|
|
|
|
302
|
|
|
|
358
|
|
|
AQ5-AQ10
|
|
|
|
|
|
26
|
|
|
|
65
|
|
|
Net exposure
|
|
|
|
|
|
328
|
|
|
|
423
|
|
(1)
The notional amount of interest rate derivatives includes €792
billion (31 December 2023 - €684 billion) in respect of contracts
cleared through central clearing counterparties.
(2)
Transactions with certain counterparties with whom NWM N.V. has
netting arrangements but collateral is not posted on a daily basis;
certain transactions with specific terms that may not fall within
netting and collateral arrangements; derivative positions in
certain jurisdictions where the collateral agreements are not
deemed to be legally enforceable.
(3)
Includes transactions with securitisation vehicles and funds where
collateral posting is contingent on NWM N.V.'s external
rating.
(4)
Mainly large corporates with whom NWM N.V. may have netting
arrangements in place, but operational capability does not support
collateral posting.
(5)
Sovereigns and supranational entities with no collateral
arrangements, collateral arrangements that are not considered
enforceable, or one-way collateral agreements in their
favour.
Notes
5. Financial instruments -
classification
The following tables analyse
financial assets and liabilities in accordance with the categories
of financial instruments in IFRS 9.
|
|
|
|
Amortised
|
Other
|
|
|
|
MFVTPL
|
FVOCI
|
cost
|
assets
|
Total
|
|
|
€m
|
€m
|
€m
|
€m
|
€m
|
|
Assets
|
|
|
|
|
|
|
Cash and balances at central
banks
|
|
|
10,080
|
|
10,080
|
|
Trading assets
|
5,472
|
|
|
|
5,472
|
|
Derivatives
|
9,198
|
|
|
|
9,198
|
|
Settlement balances
|
|
|
1,851
|
|
1,851
|
|
Loans to banks - amortised
cost (1)
|
|
|
234
|
|
234
|
|
Loans to customers - amortised
cost
|
|
|
802
|
|
802
|
|
Amounts due from holding companies
and fellow subsidiaries
|
875
|
-
|
899
|
14
|
1,788
|
|
Other financial assets
|
1
|
518
|
2,076
|
|
2,595
|
|
Other assets
|
|
|
|
85
|
85
|
|
30
June 2024
|
15,546
|
518
|
15,942
|
99
|
32,105
|
|
|
|
|
|
|
|
|
Cash and balances at central
banks
|
|
|
5,979
|
|
5,979
|
|
Trading assets
|
4,693
|
|
|
|
4,693
|
|
Derivatives
|
9,890
|
|
|
|
9,890
|
|
Settlement balances
|
|
|
565
|
|
565
|
|
Loans to banks - amortised
cost (1)
|
|
|
236
|
|
236
|
|
Loans to customers - amortised
cost
|
|
|
951
|
|
951
|
|
Amounts due from holding companies
and fellow subsidiaries
|
2,740
|
-
|
419
|
15
|
3,174
|
|
Other financial assets
|
1
|
402
|
2,202
|
|
2,605
|
|
Other assets
|
|
|
|
95
|
95
|
|
31 December 2023
|
17,324
|
402
|
10,352
|
110
|
28,188
|
|
|
Held-for-
|
|
Amortised
|
Other
|
|
|
|
trading
|
DFV
|
cost
|
liabilities
|
Total
|
|
|
€m
|
€m
|
€m
|
€m
|
€m
|
|
Liabilities
|
|
|
|
|
|
|
Bank deposits (2)
|
|
|
478
|
|
478
|
|
Customer deposits
|
|
|
5,469
|
|
5,469
|
|
Amounts due to holding companies
and fellow subsidiaries
|
1,188
|
-
|
1,045
|
27
|
2,260
|
|
Settlement balances
|
|
|
2,541
|
|
2,541
|
|
Trading liabilities
|
7,278
|
|
|
|
7,278
|
|
Derivatives
|
7,726
|
|
|
|
7,726
|
|
Other financial
liabilities
|
|
716
|
3,318
|
|
4,034
|
|
Subordinated
liabilities (3)
|
|
270
|
21
|
|
291
|
|
Other
liabilities (4)
|
|
|
9
|
54
|
63
|
|
30
June 2024
|
16,192
|
986
|
12,881
|
81
|
30,140
|
|
|
|
|
|
|
|
|
Bank deposits (2)
|
|
|
411
|
|
411
|
|
Customer deposits
|
|
|
4,531
|
|
4,531
|
|
Amounts due to holding companies
and fellow subsidiaries
|
2,708
|
-
|
1,221
|
23
|
3,952
|
|
Settlement balances
|
|
|
679
|
|
679
|
|
Trading liabilities
|
4,637
|
|
|
|
4,637
|
|
Derivatives
|
8,814
|
|
|
|
8,814
|
|
Other financial
liabilities
|
|
535
|
2,270
|
|
2,805
|
|
Subordinated
liabilities (3)
|
|
273
|
20
|
|
293
|
|
Other
liabilities (4)
|
|
|
9
|
56
|
65
|
|
31 December 2023
|
16,159
|
808
|
9,141
|
79
|
26,187
|
(1)
Includes items in the course of collection from other banks of €1
million (31 December 2023 - €2 million).
(2)
Includes items in the course of transmission to other banks of €1
million (31 December 2023 - €14 million).
(3) The
cumulative own credit adjustment, representing an increase of the
subordinated liability value, was €11 million (31 December 2023 -
€16 million).
(4)
Includes lease liabilities of €8 million (31 December 2023 - €8
million) held at amortised cost.
Notes
5. Financial instruments -
valuation
Disclosures relating to the
control environment, valuation techniques and related aspects
pertaining to financial instruments measured at fair value are
included in the NatWest Markets N.V. 2023 Annual Report and
Accounts. Valuation, sensitivity methodologies and input
methodologies as at 30 June 2024 are consistent with those
described in Note 8 in the NatWest Markets N.V. 2023 Annual Report
and Accounts.
Fair value hierarchy
The table below shows the assets
and liabilities held by NWM N.V. split by fair value hierarchy
level. Level 1 are considered the most liquid instruments, and
level 3 the most illiquid, valued using expert judgment and hence
carry the most significant price uncertainty.
|
|
30 June
2024
|
|
31
December 2023
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
|
€m
|
€m
|
€m
|
€m
|
|
€m
|
€m
|
€m
|
€m
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Trading assets
|
|
|
|
|
|
|
|
|
|
|
Loans
|
-
|
5,466
|
6
|
5,472
|
|
-
|
4,689
|
4
|
4,693
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
Interest
rate
|
-
|
4,529
|
36
|
4,565
|
|
-
|
4,343
|
35
|
4,378
|
|
Foreign
exchange
|
-
|
4,626
|
5
|
4,631
|
|
-
|
5,507
|
4
|
5,511
|
|
Other
|
-
|
2
|
-
|
2
|
|
-
|
1
|
-
|
1
|
|
Amounts due from holding
companies
|
|
|
|
|
|
|
|
|
|
|
and fellow
subsidiaries
|
-
|
875
|
-
|
875
|
|
-
|
2,740
|
-
|
2,740
|
|
Other financial assets
|
|
|
|
|
|
|
|
|
|
|
Securities
|
341
|
178
|
-
|
519
|
|
339
|
62
|
2
|
403
|
|
Total financial assets held at fair value
|
341
|
15,676
|
47
|
16,064
|
|
339
|
17,342
|
45
|
17,726
|
|
As % of total fair value
assets
|
2%
|
98%
|
-
|
|
|
2%
|
98%
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Amounts due to holding
companies
|
|
|
|
|
|
|
|
|
|
|
and fellow
subsidiaries
|
-
|
1,188
|
-
|
1,188
|
|
-
|
2,708
|
-
|
2,708
|
|
Trading liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
-
|
7,278
|
-
|
7,278
|
|
-
|
4,619
|
-
|
4,619
|
|
Short
positions
|
-
|
-
|
-
|
-
|
|
-
|
18
|
-
|
18
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
Interest
rate
|
-
|
2,901
|
121
|
3,022
|
|
-
|
3,102
|
121
|
3,223
|
|
Foreign
exchange
|
-
|
4,692
|
5
|
4,697
|
|
-
|
5,580
|
4
|
5,584
|
|
Other
|
-
|
7
|
-
|
7
|
|
-
|
7
|
-
|
7
|
|
Other financial
liabilities
|
|
|
|
|
|
|
|
|
|
|
Debt securities in
issue
|
-
|
328
|
-
|
328
|
|
-
|
255
|
-
|
255
|
|
Deposits
|
-
|
388
|
-
|
388
|
|
-
|
280
|
-
|
280
|
|
Subordinated liabilities
|
-
|
270
|
-
|
270
|
|
-
|
273
|
-
|
273
|
|
Total financial liabilities held at fair
value
|
-
|
17,052
|
126
|
17,178
|
|
-
|
16,842
|
125
|
16,967
|
|
As % of total fair value
liabilities
|
-
|
99%
|
1%
|
|
|
-
|
99%
|
1%
|
|
(1) Level 1 - Instruments valued using unadjusted quoted prices in
active and liquid markets, for identical financial instruments.
Examples include government bonds, listed equity shares and certain
exchange-traded derivatives.
Level 2 - Instruments valued using
valuation techniques that have observable inputs. Observable inputs
are those that are readily available with limited adjustments
required. Examples include most government agency securities,
investment-grade corporate bonds, certain mortgage products -
including CLOs, most bank loans, repos and reverse repos, state and
municipal obligations, most notes issued, certain money market
securities, loan commitments and most OTC derivatives.
Level 3 - Instruments valued using
a valuation technique where at least one input which could have a
significant effect on the instrument's valuation, is not based on
observable market data. Examples include non-derivative instruments
which trade infrequently, certain syndicated and commercial
mortgage loans, private equity, and derivatives with unobservable
model inputs.
(2) Transfers between levels are deemed to have occurred at the
beginning of the quarter in which the instruments were
transferred.
Notes
5. Financial instruments -
valuation
Level 3 sensitivities
The table below shows the high and
low range of fair value of the level 3 assets and
liabilities.
|
|
30 June
2024
|
|
31
December 2023
|
|
|
Level 3
|
Favourable
|
Unfavourable
|
|
Level
3
|
Favourable
|
Unfavourable
|
|
|
€m
|
€m
|
€m
|
|
€m
|
€m
|
€m
|
|
Assets
|
|
|
|
|
|
|
|
|
Trading assets
|
|
|
|
|
|
|
|
|
Loans
|
6
|
-
|
-
|
|
4
|
-
|
-
|
|
Derivatives
|
|
|
|
|
|
|
|
|
Interest
rate
|
36
|
-
|
-
|
|
35
|
-
|
-
|
|
Foreign
exchange
|
5
|
-
|
-
|
|
4
|
-
|
-
|
|
Other financial
assets
|
|
|
|
|
|
|
|
|
Securities
|
-
|
-
|
-
|
|
2
|
-
|
-
|
|
Total financial assets held at fair value
|
47
|
-
|
-
|
|
45
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
|
|
Interest
rate
|
121
|
10
|
(10)
|
|
121
|
10
|
(10)
|
|
Foreign
exchange
|
5
|
-
|
-
|
|
4
|
-
|
-
|
|
Total financial liabilities held at fair
value
|
126
|
10
|
(10)
|
|
125
|
10
|
(10)
|
Alternative assumptions
Reasonably plausible alternative
assumptions of unobservable inputs are determined based on a
specified target level of certainty of 90%. Alternative assumptions
are determined with reference to all available evidence including
consideration of the following: quality of independent pricing
information considering consistency between different sources,
variation over time, perceived tradability or otherwise of
available quotes; consensus service dispersion ranges; volume of
trading activity and market bias (e.g. one-way inventory); day 1
profit or loss arising on new trades; number and nature of market
participants; market conditions; modelling consistency in the
market; size and nature of risk; length of holding of position; and
market intelligence.
Notes
5. Financial instruments -
valuation continued
Movement in Level 3 assets and
liabilities
The following table shows the
movement in level 3 assets and liabilities.
|
|
|
Other
|
Other
|
|
|
|
Other
|
Other
|
|
|
|
Derivatives
|
trading
|
financial
|
Total
|
|
Derivatives
|
trading
|
financial
|
Total
|
|
|
assets
|
assets (2)
|
assets (3)
|
assets
|
|
liabilities
|
liabilities
(2)
|
liabilities
|
liabilities
|
|
|
€m
|
€m
|
€m
|
€m
|
|
€m
|
€m
|
€m
|
€m
|
|
At
1 January 2024
|
39
|
4
|
2
|
45
|
|
125
|
-
|
-
|
125
|
|
Amounts recorded in the
income
|
|
|
|
|
|
|
|
|
|
|
statement (1)
|
5
|
2
|
-
|
7
|
|
6
|
-
|
-
|
6
|
|
Level 3 transfers in
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
|
Level 3 transfers out
|
(1)
|
-
|
-
|
(1)
|
|
(2)
|
-
|
-
|
(2)
|
|
Purchases/originations
|
1
|
-
|
-
|
1
|
|
2
|
-
|
-
|
2
|
|
Sales
|
(3)
|
-
|
(1)
|
(4)
|
|
(5)
|
-
|
-
|
(5)
|
|
Foreign exchange and other
adjustments
|
-
|
-
|
(1)
|
(1)
|
|
-
|
-
|
-
|
-
|
|
At
30 June 2024
|
41
|
6
|
-
|
47
|
|
126
|
-
|
-
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recorded in the income
statement
|
|
|
|
|
|
|
|
|
|
|
in respect of balances held at period end
|
|
|
|
|
|
|
|
|
|
|
- unrealised
|
62
|
-
|
-
|
62
|
|
62
|
-
|
-
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
1 January 2023
|
56
|
37
|
33
|
126
|
|
176
|
-
|
-
|
176
|
|
Amounts recorded in the
income
|
|
|
|
|
|
|
|
|
|
|
statement (1)
|
(8)
|
7
|
-
|
(1)
|
|
(8)
|
-
|
-
|
(8)
|
|
Level 3 transfers in
|
-
|
-
|
-
|
-
|
|
2
|
-
|
-
|
2
|
|
Level 3 transfers out
|
-
|
(28)
|
-
|
(28)
|
|
(2)
|
-
|
-
|
(2)
|
|
Purchases/originations
|
10
|
-
|
-
|
10
|
|
61
|
-
|
-
|
61
|
|
Sales
|
(8)
|
-
|
-
|
(8)
|
|
(8)
|
-
|
-
|
(8)
|
|
Foreign exchange and other
adjustments
|
-
|
-
|
-
|
-
|
|
(1)
|
-
|
-
|
(1)
|
|
At
30 June 2023
|
50
|
16
|
33
|
99
|
|
220
|
-
|
-
|
220
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recorded in the income
statement
|
|
|
|
|
|
|
|
|
|
|
in respect of balances held at period end
|
|
|
|
|
|
|
|
|
|
|
- unrealised
|
(8)
|
7
|
-
|
(1)
|
|
(8)
|
-
|
-
|
(8)
|
|
(1)
|
There was €1 million net gain on
trading assets and liabilities (30 June 2023 - €7 million) recorded
in income from trading activities.
|
|
(2)
|
Other trading assets and other
trading liabilities comprise assets and liabilities held at fair
value in trading portfolios.
|
|
(3)
|
Other financial assets comprise
fair value through other comprehensive income, designated as at
fair value through profit or loss and other fair value through
profit or loss.
|
Notes
5. Financial instruments -
valuation continued
Fair value of financial instruments
measured at amortised cost on the balance sheet
The following table shows the carrying value and fair
value of financial instruments carried at amortised cost on the
balance sheet.
|
|
|
|
|
|
Items
where
|
|
|
|
|
|
|
fair value
|
|
|
Carrying
|
|
Fair value hierarchy
level
|
approximates
|
|
|
value
|
Fair value
|
Level 2
|
Level 3
|
carrying
value
|
|
30
June 2024
|
€m
|
€m
|
€m
|
€m
|
€m
|
|
Financial assets
|
|
|
|
|
|
|
Cash and balances at central
banks
|
10,080
|
10,080
|
-
|
-
|
10,080
|
|
Settlement balances
|
1,851
|
1,851
|
-
|
-
|
1,851
|
|
Loans to banks
|
234
|
234
|
-
|
-
|
234
|
|
Loans to customers
|
802
|
802
|
-
|
802
|
-
|
|
Amounts due from holding
companies
|
|
|
|
|
|
|
and fellow
subsidiaries
|
899
|
900
|
-
|
42
|
858
|
|
Other financial assets -
securities
|
2,076
|
2,080
|
271
|
1,809
|
-
|
|
|
|
|
|
|
|
|
31 December 2023
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
Cash and balances at central
banks
|
5,979
|
5,979
|
-
|
-
|
5,979
|
|
Settlement balances
|
565
|
565
|
-
|
-
|
565
|
|
Loans to banks
|
236
|
236
|
-
|
-
|
236
|
|
Loans to customers
|
951
|
951
|
-
|
951
|
-
|
|
Amounts due from holding
companies
|
|
|
|
|
|
|
and fellow
subsidiaries
|
419
|
419
|
-
|
102
|
317
|
|
Other financial assets -
securities
|
2,202
|
2,194
|
196
|
1,998
|
-
|
|
|
|
|
|
|
|
|
30
June 2024
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
Bank deposits
|
478
|
478
|
-
|
477
|
1
|
|
Customer deposits
|
5,469
|
5,468
|
-
|
5,449
|
19
|
|
Amounts due to holding
companies
|
|
|
|
|
|
|
and fellow
subsidiaries
|
1,045
|
1,046
|
151
|
668
|
227
|
|
Settlement balances
|
2,541
|
2,541
|
-
|
-
|
2,541
|
|
Other financial liabilities - debt
securities in issue
|
3,318
|
3,319
|
2,825
|
494
|
-
|
|
Subordinated liabilities
|
21
|
20
|
20
|
-
|
-
|
|
|
|
|
|
|
|
|
31 December 2023
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
Bank deposits
|
411
|
411
|
-
|
397
|
14
|
|
Customer deposits
|
4,531
|
4,531
|
-
|
4,502
|
29
|
|
Amounts due to holding
companies
|
|
|
|
|
|
|
and fellow
subsidiaries
|
1,221
|
1,225
|
154
|
898
|
173
|
|
Settlement balances
|
679
|
679
|
-
|
-
|
679
|
|
Other financial liabilities - debt
securities in issue
|
2,269
|
2,269
|
1,509
|
760
|
-
|
|
Subordinated liabilities
|
20
|
21
|
21
|
-
|
-
|
The assumptions and methodologies
underlying the calculation of fair values of financial instruments
at the balance sheet date are as follows:
Short-term financial
instruments
For certain short-term financial
instruments: cash and balances at central banks, items in the
course of collection from other banks, settlement balances, items
in the course of transmission to other banks, and customer demand
deposits, carrying value is deemed a reasonable approximation of
fair value.
Loans to banks and
customers
In estimating the fair value of
net loans to customers and banks measured at amortised cost, NWM
N.V.'s loans are segregated into appropriate portfolios reflecting
the characteristics of the constituent loans. Two principal methods
are used to estimate fair value; contractual cash flows and
expected cash flows.
Debt securities and subordinated
liabilities
Most debt securities are valued
using quoted prices in active markets or from quoted prices of
similar financial instruments in active markets. The remaining
population is valued using discounted cash flows at current offer
rates.
Bank and customer
deposits
Fair values of deposits are
estimated using contractual cashflows using a market discount rate
incorporating the current spread.
Notes
6. Trading assets and liabilities
Trading assets and liabilities
comprise assets and liabilities held at fair value in trading
portfolios.
|
|
30 June
|
31
December
|
|
|
2024
|
2023
|
|
|
€m
|
€m
|
|
Assets
|
|
|
|
Loans
|
|
|
|
Reverse
repos
|
3,714
|
2,769
|
|
Collateral
given
|
1,739
|
1,900
|
|
Other
loans
|
19
|
24
|
|
Total loans
|
5,472
|
4,693
|
|
Total
|
5,472
|
4,693
|
|
|
|
|
|
Liabilities
|
|
|
|
Deposits
|
|
|
|
Repos
|
4,356
|
1,617
|
|
Collateral
received
|
2,921
|
3,000
|
|
Other
deposits
|
1
|
2
|
|
Total deposits
|
7,278
|
4,619
|
|
Short positions
|
|
|
|
Central and local
government
|
|
|
|
-
Other regions
|
-
|
18
|
|
Total short positions
|
-
|
18
|
|
Total
|
7,278
|
4,637
|
Notes
7. Loan impairment provisions
Economic loss drivers
Introduction
The portfolio segmentation and
selection of economic loss drivers for IFRS 9 follows the approach
used in stress testing. To enable robust modelling, the forecasting
models for each portfolio segment (defined by product or asset
class and where relevant, industry sector and region) are based on
a selected, small number of economic variables (typically three to
four) that best explain the movements in portfolio loss rates. The
process to select economic loss drivers involves empirical analysis
and expert judgement.
Economic scenarios
At 30 June 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, particularly in relation to the
path of inflation and interest rates.
For 30 June 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.
Upside - This scenario assumes
robust growth as inflation falls sharply and rates are lowered
quicker than expected. Consumer spending is supported by quicker
recovery in household income, and further helped by higher consumer
confidence, fiscal support and strong business investment. The
labour market remains resilient with the unemployment rate falling.
The housing market shows robust growth.
Compared to 31 December 2023, the
upside scenario remains similarly configured, exploring a more
benign set of economic outcomes, including a stronger performing
stock market, real estate prices, and supported by a stronger
global growth backdrop, relative to the base case view.
Base case - Continued
declining inflation allows an easing cycle to start in the second
half of 2024. The unemployment rate rises modestly over 2024 but
there are no wide-spread job losses. Inflation remains very close
to the current level of 2% through the forecast period. Economic
output also experiences modest but stable growth in contrast to the
stagnation of recent years. The housing market experiences modest
nominal price increase. Housing market activity gradually
strengthens as interest rates fall and real incomes
recover.
Since 31 December 2023, the
economic outlook has improved as household incomes continued to
recover, and the labour market remained resilient. The declining
inflation trend has continued, albeit the progress was slower than
expected. As a result, rates are expected to remain
higher-for-longer than previously expected. The unemployment rate
still rises but the peak is marginally lower and is underpinned by
a resilient labour market. House prices were assumed to decline
previously in 2024, but there has been a better-than-expected
recovery in early 2024 and prices are now expected to show a modest
increase.
Downside - Core inflation
remains persistently high leading to resurgent inflation. The
economy experiences a recession as consumer confidence weakens due
to a fall in real incomes. Interest rates are raised higher than
the base case and remain higher-for-longer. High rates are assumed
to have a more significant impact on the labour market.
Unemployment is higher than the base case scenario while house
prices lose approximately ten percent of their value.
Compared to 31 December 2023, the
downside scenario is similarly configured and explores risks
associated with high inflation and significantly higher interest
rates across the period.
Extreme downside - This
scenario assumes a significant economic downturn with a loss of
consumer confidence leading to a deep economic recession. This
results in widespread job losses with the unemployment rate rising
above the levels seen during the 2008 financial crisis, further
compounding consumer weakness. Rates are cut sharply in response to
the demand shock, leading to some support to the recovery. House
prices lose approximately a third of their value.
Compared to 31 December 2023, the
extreme downside is similarly configured with an extreme set of
economic outcomes, low interest rates, very sharp falls in asset
prices and a marked deterioration in the labour
market.
Notes
7. Loan impairment provisions continued
Main. macroeconomic
variables
The main macroeconomic variables
for each of the four scenarios used for expected credit loss (ECL)
modelling are set out in the main macroeconomic variables table
below.
|
|
30 June
2024
|
|
31
December 2023
|
|
|
|
|
|
Extreme
|
Weighted
|
|
|
|
|
Extreme
|
Weighted
|
|
|
Upside
|
Base case
|
Downside
|
downside
|
average
|
|
Upside
|
Base
case
|
Downside
|
downside
|
average
|
|
Five-year summary
|
%
|
%
|
%
|
%
|
%
|
|
%
|
%
|
%
|
%
|
%
|
|
GDP - CAGR
|
2.4
|
1.5
|
1.0
|
(0.4)
|
1.3
|
|
2.2
|
1.2
|
0.9
|
(0.5)
|
1.1
|
|
Unemployment - average
|
5.6
|
6.5
|
7.0
|
10.5
|
7.0
|
|
5.7
|
6.7
|
7.0
|
10.1
|
7.0
|
|
European Central Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
- main refinancing rate - average
|
2.7
|
2.8
|
4.8
|
2.3
|
3.1
|
|
2.8
|
2.9
|
4.6
|
2.4
|
3.2
|
|
Probability weight
|
22.0
|
45.0
|
19.4
|
13.6
|
|
|
21.2
|
45.0
|
20.4
|
13.4
|
|
(1) The
five-year summary runs from 2024-2028 for 30 June 2024 and from
2023-2027 for 31 December 2023.
Probability weightings of
scenarios
NWM N.V. Group's quantitative
approach to IFRS 9 multiple economic scenarios (MES) involves
selecting a suitable set of discrete scenarios to characterise the
distribution of risks in the economic outlook and assigning
appropriate probability weights. This quantitative approach is used
for 30 June 2024.
The approach involves comparing
GDP paths for NWM N.V. Group's scenarios against a set of 1,000
model runs, following which, a percentile in the distribution is
established that most closely corresponded to the scenario.
Probability weight for base case is set first based on judgement,
while probability weights for the alternate scenarios are assigned
based on these percentiles scores.
The assigned probability weights
were judged to be aligned with the subjective assessment of balance
of the risks in the economy. The weights were broadly comparable to
those used at 31 December 2023 but with slightly less downside
skew. This is reasonable as the inflation outturn since then has
been encouraging, with inflation continuing to decline and a
reduced risk of stagflation. However, the risks of persistent
inflation remain elevated and there is considerable uncertainty in
the economic outlook, particularly with respect to persistence and
the range of outcomes on inflation. Given that backdrop, NWM N.V.
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 22% weighting was applied to the upside scenario, a
45% weighting applied to the base case scenario, a 19.4% weighting
applied to the downside scenario and a 13.6% weighting applied to
the extreme downside scenario.
Annual figures
|
|
|
|
|
Extreme
|
Weighted
|
|
|
Upside
|
Base case
|
Downside
|
downside
|
average
|
|
Eurozone GDP - annual growth
|
%
|
%
|
%
|
%
|
%
|
|
2024
|
1.8
|
0.7
|
0.1
|
(0.2)
|
0.7
|
|
2025
|
4.7
|
1.6
|
(0.1)
|
(4.7)
|
1.1
|
|
2026
|
2.3
|
1.8
|
2.0
|
0.8
|
1.8
|
|
2027
|
1.8
|
1.8
|
1.6
|
1.0
|
1.6
|
|
2028
|
1.3
|
1.5
|
1.3
|
1.0
|
1.3
|
|
2029
|
1.3
|
1.4
|
1.3
|
1.2
|
1.3
|
|
|
|
|
|
|
|
|
Eurozone - unemployment rate - annual
average
|
|
|
|
|
|
|
2024
|
6.5
|
6.6
|
6.8
|
7.2
|
6.7
|
|
2025
|
5.6
|
6.7
|
7.3
|
11.6
|
7.2
|
|
2026
|
5.3
|
6.6
|
7.1
|
12.2
|
7.2
|
|
2027
|
5.4
|
6.5
|
6.9
|
11.3
|
7.0
|
|
2028
|
5.4
|
6.3
|
6.7
|
10.1
|
6.7
|
|
2029
|
5.3
|
6.3
|
6.6
|
9.7
|
6.6
|
|
|
|
|
|
|
|
|
European Central Bank - main refinancing rate - annual
average
|
|
|
|
|
|
|
2024
|
4.3
|
4.3
|
4.5
|
4.2
|
4.3
|
|
2025
|
2.7
|
3.0
|
5.1
|
2.0
|
3.2
|
|
2026
|
2.3
|
2.4
|
4.8
|
1.5
|
2.7
|
|
2027
|
2.3
|
2.3
|
4.8
|
1.6
|
2.7
|
|
2028
|
2.3
|
2.2
|
4.8
|
2.0
|
2.7
|
|
2029
|
2.3
|
2.2
|
4.8
|
2.3
|
2.7
|
Notes
7. Loan impairment provisions continued
Worst points
|
|
30 June
2024
|
|
31
December 2023
|
|
|
|
|
Extreme
|
|
|
|
|
Extreme
|
|
|
|
Downside
|
|
downside
|
|
|
Downside
|
|
downside
|
|
|
Eurozone
|
%
|
Quarter
|
%
|
Quarter
|
|
%
|
Quarter
|
%
|
Quarter
|
|
GDP
|
(0.6)
|
Q1 2025
|
(5.3)
|
Q2 2025
|
|
(1.0)
|
Q3
2024
|
(5.6)
|
Q4
2024
|
|
Unemployment rate - peak
|
7.3
|
Q1 2025
|
12.4
|
Q1 2026
|
|
7.3
|
Q3
2024
|
12.4
|
Q3
2025
|
(1)
Unless specified otherwise, the figures show falls relative to the
starting period. The calculations are performed over five years,
with a starting point of Q4 2023 for 30 June 2024 scenarios and Q4
2022 for 31 December 2023 scenarios.
Use of the scenarios in lending
Lending follows a continuous
scenario approach to calculate ECL. Probability of default (PD) and
loss given default (LGD) values arising from multiple economic
forecasts (based on the concept of credit cycle indices) are
simulated around the central projection. The central projection is
a weighted average of economic scenarios with the scenarios
translated into credit cycle indices using the Wholesale economic
response models.
Economic uncertainty
The high inflation environment
alongside high interest rates is presenting significant headwinds
for some businesses and consumers, in many cases compounding. These
cost pressures remain a feature of the economic environment, though
they are expected to moderate over 2024 and 2025 in the base case
scenario. NWM N.V. Group has considered where these are most likely
to affect the customer base, with the cost of borrowing during 2023
and 2024 for both businesses and consumers presenting an additional
affordability challenge.
The effects of these risks are not
expected to be fully captured by forward-looking credit modelling,
particularly given the high inflation environment, low unemployment
base case outlook. Any incremental ECL effects for these risks will
be captured via post model adjustments and are detailed further in
the Governance and post model adjustments section.
Governance and post model
adjustments
The IFRS 9 PD, EAD and LGD models
are subject to NWM N.V. 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 NWM N.V. Group's ongoing ECL adequacy
assessment process. A holistic framework has been established
including reviewing a range of economic data, external benchmark
information and portfolio performance trends with a particular
focus on segments of the portfolio (both commercial and consumer)
that are likely to be more susceptible to high inflation, high
interest rates and supply chain disruption.
Notes
7. Loan impairment provisions continued
Measurement uncertainty and ECL
sensitivity analysis
The recognition and measurement of
ECL is complex and involves the use of significant judgment and
estimation, particularly in times of economic volatility and
uncertainty. This includes the formulation and incorporation of
multiple forward-looking economic conditions into ECL to meet the
measurement objective of IFRS 9. The ECL provision is sensitive to
the model inputs and economic assumptions underlying the
estimate.
The impact arising from the base
case, upside, downside, and extreme downside scenarios was
simulated. In the simulations, NWM N.V. Group has assumed that the
economic macro variables associated with these scenarios replace
the existing base case economic assumptions, giving them a 100%
probability weighting and therefore serving as a single economic
scenario.
These scenarios were applied to
all modelled portfolios in the analysis below, with the simulation
impacting both PDs and LGDs. Post model adjustments included in the
ECL estimates that were modelled were sensitised in line with the
modelled ECL movements, but those that were judgmental in nature,
primarily those for deferred model calibrations and economic
uncertainty, were not (refer to the Governance and post model
adjustments section) 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 30 June 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.
NWM N.V. 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
adequacy
- If
the economics were as negative as observed in the extreme downside
(i.e. 100% probability weighting), total Stage 1 and Stage 2 ECL
was simulated to increase. In this scenario, Stage 2 exposure increased and was the key driver of the
simulated ECL rise. The movement in Stage 2 balances in the other
simulations was far less significant and the impact to ECL less
material.
- There
was a significant increase in ECL under the extreme downside
scenario.
- Given
that continued uncertainty remained due to persistent inflation,
high interest rates and liquidity concerns at H1 2024, NWM N.V.
Group utilised a framework of quantitative and qualitative measures
to support the levels of ECL coverage. This included economic data,
credit performance insights, supply chain contagion analysis and
problem debt trends. This was particularly important for
consideration of post model adjustments.
- As
the effects of these economic risks evolve during 2024, there is a
risk of further credit deterioration. However, the income statement
effect of this should have been mitigated by the forward-looking
provisions retained on the balance sheet at 30 June
2024.
- There
are a number of key factors that could drive further downside to
impairments, through deteriorating economic and credit metrics and
increased stage migration as credit risk increases for more
customers. Such factors which could impact the IFRS 9 models,
include an adverse deterioration in unemployment and GDP in the
economies in which NWM N.V. Group operates.
Notes
7. Loan impairment provisions continued
Portfolio summary
The table below shows gross loans
and ECL, by stage, within the scope of the ECL IFRS 9
framework.
|
|
30 June
|
31
December
|
|
|
2024
|
2023
|
|
|
€m
|
€m
|
|
Loans - amortised cost and fair
value through other comprehensive income (FVOCI)
|
|
|
|
Stage 1
|
891
|
1,052
|
|
Stage 2
|
152
|
141
|
|
Stage 3
|
-
|
-
|
|
Inter-group (1)
|
36
|
102
|
|
Total
|
1,079
|
1,295
|
|
Total ECL provisions
|
|
|
|
Stage 1
|
5
|
7
|
|
Stage 2
|
3
|
2
|
|
Stage 3
|
-
|
-
|
|
Total
|
8
|
9
|
|
ECL provisions
coverage (2)
|
|
|
|
Stage 1 (%)
|
0.56
|
0.67
|
|
Stage 2 (%)
|
1.97
|
1.42
|
|
Stage 3 (%)
|
-
|
-
|
|
Total
|
0.77
|
0.75
|
|
Other financial assets - gross
exposure
|
12,675
|
8,583
|
|
Other financial assets - ECL
provision
|
1
|
3
|
|
|
|
|
|
|
Half year
ended
|
|
|
30 June
|
30
June
|
|
|
2024
|
2023
|
|
|
€m
|
€m
|
|
Impairment losses
|
|
|
|
ECL (release) - third
party (3)
|
(2)
|
(3)
|
|
Amounts written-off
|
-
|
1
|
(1) The NWM N.V.
intercompany assets were classified in Stage 1. The ECL for these
loans was nil (31 December 2023 - nil).
(2) ECL provisions
coverage is calculated as total 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.
(3) Includes €1.0
million (30 June 2023 - €0.4 million) related to other financial
assets and nil (30 June 2023 - nil) relating to contingent
liabilities.
(4) The table shows
gross loans only and excludes amounts that are outside the scope of
the ECL framework. Refer to page 40 for Financial instruments
within the scope of the IFRS 9 ECL framework in the NatWest Markets
N.V. Group 2023 Annual Report for further details. Other financial
assets within the scope of the IFRS 9 ECL framework were cash and
balances at central banks totalling €10.1 billion (31 December 2023
- €6.0 billion) and debt securities of €2.6 billion (31 December
2023 - €2.6 billion).
Notes
7. Loan impairment provisions continued
Sector analysis - portfolio
summary
The table below shows exposures
and ECL by stage, for selected sectors.
|
|
Loans - amortised cost and
FVOCI
|
|
Off-balance
sheet
|
|
ECL
provisions
|
|
|
|
|
|
|
|
Loan
|
Contingent
|
|
|
|
|
|
|
|
Stage 1
|
Stage 2
|
Stage 3
|
Total
|
|
commitments
|
liabilities
|
|
Stage 1
|
Stage 2
|
Stage 3
|
Total
|
|
30
June 2024
|
€m
|
€m
|
€m
|
€m
|
|
€m
|
€m
|
|
€m
|
€m
|
€m
|
€m
|
|
Property
|
23
|
-
|
-
|
23
|
|
69
|
-
|
|
-
|
-
|
-
|
-
|
|
Financial institutions
|
502
|
43
|
-
|
545
|
|
565
|
508
|
|
2
|
-
|
-
|
2
|
|
Other wholesale
|
366
|
109
|
-
|
475
|
|
6,198
|
-
|
|
3
|
3
|
-
|
6
|
|
Of which:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
-
|
-
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
-
|
-
|
|
Airlines and
aerospace
|
1
|
-
|
-
|
1
|
|
35
|
-
|
|
-
|
-
|
-
|
-
|
|
Automotive
|
2
|
-
|
-
|
2
|
|
635
|
-
|
|
-
|
-
|
-
|
-
|
|
Building
materials
|
5
|
-
|
-
|
5
|
|
196
|
-
|
|
-
|
-
|
-
|
-
|
|
Chemicals
|
9
|
2
|
-
|
11
|
|
74
|
-
|
|
-
|
-
|
-
|
-
|
|
Industrials
|
35
|
22
|
-
|
57
|
|
309
|
-
|
|
1
|
-
|
-
|
1
|
|
Land transport and
logistics
|
56
|
5
|
-
|
61
|
|
671
|
-
|
|
-
|
-
|
-
|
-
|
|
Leisure
|
3
|
-
|
-
|
3
|
|
2
|
-
|
|
-
|
-
|
-
|
-
|
|
Oil and
gas
|
2
|
-
|
-
|
2
|
|
3
|
-
|
|
-
|
-
|
-
|
-
|
|
Power
utilities
|
105
|
-
|
-
|
105
|
|
2,988
|
-
|
|
-
|
-
|
-
|
-
|
|
Retail
|
4
|
-
|
-
|
4
|
|
227
|
-
|
|
-
|
-
|
-
|
-
|
|
Shipping
|
2
|
-
|
-
|
2
|
|
-
|
-
|
|
-
|
-
|
-
|
-
|
|
Water and
waste
|
4
|
16
|
-
|
20
|
|
38
|
-
|
|
-
|
-
|
-
|
-
|
|
Total
|
891
|
152
|
-
|
1,043
|
|
6,832
|
508
|
|
5
|
3
|
-
|
8
|
|
31 December 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
23
|
6
|
-
|
29
|
|
183
|
-
|
|
-
|
-
|
-
|
-
|
|
Financial institutions
|
594
|
3
|
-
|
597
|
|
812
|
527
|
|
3
|
-
|
-
|
3
|
|
Other wholesale
|
435
|
132
|
-
|
567
|
|
6,010
|
-
|
|
4
|
2
|
-
|
6
|
|
Of which:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
1
|
-
|
-
|
1
|
|
-
|
-
|
|
-
|
-
|
-
|
-
|
|
Airlines and
aerospace
|
3
|
-
|
-
|
3
|
|
35
|
-
|
|
-
|
-
|
-
|
-
|
|
Automotive
|
2
|
-
|
-
|
2
|
|
635
|
-
|
|
-
|
-
|
-
|
-
|
|
Building
materials
|
5
|
-
|
-
|
5
|
|
196
|
-
|
|
-
|
-
|
-
|
-
|
|
Chemicals
|
13
|
-
|
-
|
13
|
|
77
|
-
|
|
-
|
-
|
-
|
-
|
|
Industrials
|
34
|
65
|
-
|
99
|
|
271
|
-
|
|
-
|
1
|
-
|
1
|
|
Land transport and
logistics
|
58
|
5
|
-
|
63
|
|
358
|
-
|
|
-
|
-
|
-
|
-
|
|
Leisure
|
3
|
-
|
-
|
3
|
|
-
|
-
|
|
-
|
-
|
-
|
-
|
|
Oil and
gas
|
3
|
-
|
-
|
3
|
|
3
|
-
|
|
-
|
-
|
-
|
-
|
|
Power
utilities
|
130
|
-
|
-
|
130
|
|
3,028
|
-
|
|
-
|
-
|
-
|
-
|
|
Retail
|
14
|
2
|
-
|
16
|
|
450
|
-
|
|
-
|
-
|
-
|
-
|
|
Shipping
|
2
|
-
|
-
|
2
|
|
-
|
-
|
|
-
|
-
|
-
|
-
|
|
Water and
waste
|
4
|
16
|
-
|
20
|
|
38
|
-
|
|
-
|
-
|
-
|
-
|
|
Total
|
1,052
|
141
|
-
|
1,193
|
|
7,005
|
527
|
|
7
|
2
|
-
|
9
|
Notes
7. Loan impairment provisions continued
Flow statement
The flow statement that follows
shows the main ECL and related income statement movements. It
also shows the changes in ECL as well as
the changes in related financial assets used in determining ECL.
Due to differences in scope, exposures may differ from those
reported in other tables, principally in relation to exposures in
Stage 1 and Stage 2. These differences do not have a material ECL
effect because they relate to balances at central banks. Other
points to note:
- Financial
assets include treasury liquidity portfolios, comprising balances
at central banks and debt securities, as well as loans. Both
modelled and non-modelled portfolios are
included.
- Stage
transfers (for example, exposures moving from Stage 1 into Stage 2)
are a key feature of the ECL movements, with the net re-measurement
cost of transitioning to a worse stage being a primary driver of
income statement charges. Similarly, there is an ECL benefit for
accounts improving stage.
- Changes in
risk parameters shows the reassessment of the ECL within a given
stage, including any ECL overlays and residual income statement
gains or losses at the point of write-off or accounting
write-down.
- Amounts
written-off represent the gross asset written-down against accounts
with ECL, including the net asset write-down for any debt sale
activity.
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
|
|
Financial
|
Financial
|
|
Financial
|
Financial
|
|
Financial
|
Financial
|
|
Financial
|
Financial
|
|
|
assets
|
ECL
|
|
assets
|
ECL
|
|
assets
|
ECL
|
|
assets
|
ECL
|
|
|
€m
|
€m
|
|
€m
|
€m
|
|
€m
|
€m
|
|
€m
|
€m
|
|
At
1 January 2024
|
13,731
|
8
|
|
143
|
2
|
|
-
|
-
|
|
13,874
|
10
|
|
Currency translation and other
adjustments
|
269
|
(1)
|
|
1
|
1
|
|
-
|
-
|
|
270
|
-
|
|
Inter-group transfers
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
Transfers from Stage 1 to Stage
2
|
(91)
|
-
|
|
91
|
-
|
|
-
|
-
|
|
-
|
-
|
|
Transfers from Stage 2 to Stage
1
|
19
|
-
|
|
(19)
|
-
|
|
-
|
-
|
|
-
|
-
|
|
Net re-measurement of ECL on stage
transfer
|
|
-
|
|
|
1
|
|
|
-
|
|
|
1
|
|
Changes in risk
parameters
|
|
(1)
|
|
|
-
|
|
|
-
|
|
|
(1)
|
|
Other changes in net
exposure
|
(3,263)
|
(1)
|
|
(44)
|
(1)
|
|
-
|
-
|
|
(3,307)
|
(2)
|
|
Other profit or loss only
items
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Income statement
(releases)/charges
|
|
(2)
|
|
|
-
|
|
|
-
|
|
|
(2)
|
|
Amounts written-off
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
At
30 June 2024
|
10,665
|
5
|
|
172
|
3
|
|
-
|
-
|
|
10,837
|
8
|
|
Net carrying amount
|
10,660
|
|
|
169
|
|
|
-
|
|
|
10,829
|
|
|
At 1 January 2023
|
7,179
|
6
|
|
303
|
5
|
|
-
|
-
|
|
7,482
|
11
|
|
2023 movements
|
1,670
|
(1)
|
|
(152)
|
(2)
|
|
-
|
-
|
|
1,518
|
(3)
|
|
At 30 June 2023
|
8,849
|
5
|
|
151
|
3
|
|
-
|
-
|
|
9,000
|
8
|
|
Net carrying amount
|
8,844
|
|
|
148
|
|
|
-
|
|
|
8,992
|
|
(1)
The table above excludes inter-group.
- There was
a net inflow into Stage 2 assets, however no material financial
losses are expected to materialise. This is partially due to credit
risk insurance that is in place not being reflected in ECL numbers
and expected exits for some of the Stage 2 assets before the
year end.
- The
overall credit portfolio is of good quality with no Stage 3
assets.
- Recent
credit migration into the portfolio was positive with average PD
improving.
Notes
8. Contingent liabilities and commitments
The amounts shown in the table
below are intended only to provide an indication of the volume of
business outstanding at 30 June 2024. Although NWM N.V. 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 NWM N.V. Group's
expectation of future losses.
|
|
30 June
|
31
December
|
|
|
2024
|
2023
|
|
|
€m
|
€m
|
|
Contingent liabilities and commitments
|
|
|
|
Guarantees
|
526
|
527
|
|
Standby facilities, credit lines
and other commitments
|
6,890
|
6,998
|
|
Total
|
7,416
|
7,525
|
Commitments and contingent
obligations are subject to NWM N.V. Group's normal credit approval
processes.
Included
within guarantees and assets pledged as collateral security as at
30 June 2024 was €0.5 billion (31 December 2023 - €0.5 billion)
which relates to the NatWest Group's obligations over liabilities
held within the Dutch State acquired businesses included in ABN
AMRO Bank N.V.
Risk-sharing agreements
NWM Plc and NWM N.V. have limited
risk-sharing arrangements in place to facilitate the smooth
provision of services to NatWest Markets' customers. The
arrangements, which NWM Plc recognises as financial guarantees
within amounts due to fellow subsidiaries, include:
-
The provision of a funded guarantee of up to €1.0
billion by NWM Plc to NWM N.V. that limits certain NWM N.V.'s
exposures to large individual customer credits. Funding is provided
by NWM Plc deposits placed with NWM N.V. of not less than the
guaranteed amount. As at 30 June 2024, the deposits amounted to
€0.6 billion and the guarantee fees in the period were €2.1
million.
-
The provision of funded and unfunded guarantees
by NWM Plc in respect of NWM N.V.'s legacy portfolio. As at 30 June
2024 the exposure at default covered by the guarantees was
approximately €0.2 billion (of which none was cash collateralised).
Fees of €0.5 million in relation to the guarantees were recognised
in the period.
Notes
9. Litigation and regulatory matters
NWM N.V. 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 Netherlands, the United
Kingdom (UK), the European Union (EU), the United States (US) and
other jurisdictions.
NWM N.V. 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 NWM N.V. 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. NWM N.V. 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 NWM
N.V. 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 NWM N.V. 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
NWM N.V. 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.
Matters which are, or could be,
material, either individually or in aggregate, having regard to NWM
N.V. Group, considered as a whole, in which NWM N.V. 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.
NatWest Group is involved in
ongoing litigation and regulatory matters that are not described
below but are described on pages 100 to 105 in NatWest Group's H1
Results 2024. 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. While NWM N.V. Group may not be directly involved in
such NatWest Group matters, any final adverse outcome of those
matters may also have an adverse effect on NWM N.V.
Group.
For a discussion of certain risks
associated with NWM N.V. 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 pages 160 to 161 of the NatWest Markets N.V. 2023 Annual
Report and Accounts.
Litigation
Foreign exchange
litigation
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, second
summonses were served by Stichting FX Claims on NWM N.V., NatWest
Group plc and NWM Plc, for claims on behalf of a new group of
parties that have been brought before the district court in
Amsterdam. The summonses seek declarations from the Dutch court
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 proceedings
pending judgment in the above-mentioned appeals.
Notes
9. Litigation and regulatory matters
continued
In May 2024, a new letter of claim
was received from Stichting FX Claims on behalf of a further group
of parties, containing allegations that are similar in nature to
those contained in the above-mentioned claims.
Certain other foreign exchange
transaction related claims have been or may be threatened. NWM N.V.
Group cannot predict whether all or any of these claims will be
pursued.
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 United States Court of Appeals for the Second
Circuit (US Court of Appeals), they are now proceeding in the
discovery phase in the bankruptcy court, where they have been
consolidated into one action.
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 United States District Court for the Southern District
of New York (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.
Regulatory matters
NWM N.V. Group's financial
condition can be affected by the actions of various governmental
and regulatory authorities in the Netherlands, the UK, the EU, the
US and elsewhere. NatWest Group has engaged, and will continue to
engage, in discussions with relevant governmental and regulatory
authorities, including in the Netherlands, the UK, the EU, the US
and elsewhere, on an ongoing and regular basis, and in response to
informal and formal inquiries or investigations, regarding
operational, systems and control evaluations and issues including
those related to compliance with applicable laws and regulations,
including consumer protection, investment advice, business conduct,
competition/anti-trust, VAT recovery, anti-bribery, anti-money
laundering and sanctions regimes.
Any matters discussed or
identified during such discussions and inquiries may result in,
among other things, further inquiry or investigation, other action
being taken by governmental and regulatory authorities, increased
costs being incurred by NWM N.V. Group, remediation of systems and
controls, public or private censure, restriction of NWM N.V.
Group's business activities and/or fines. Any of these events or
circumstances could have a material adverse effect on NWM N.V.
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.
Notes
10. Related party transactions
NWM N.V. has a related party
relationship with associates, joint ventures, key management and
shareholders. NWM N.V. enters into transactions with related
parties.
Interim pricing
agreement
NWM N.V. is a party to transfer
pricing arrangements with NWM Plc under which NWM N.V. received
income of €75 million (H1 2023 - €61 million) for business
interactions with NWM Plc. The at arm's
length nature of the transfer pricing arrangements is confirmed by
transfer pricing documentation which has been prepared by an
external expert.
Full details of NWM N.V. Group's
related party transactions for the year ended 31 December 2023 are
included in the NatWest Markets N.V. 2023 Annual Report and
Accounts.
Holding companies and fellow
subsidiaries
Amounts due from/to holding
companies and fellow subsidiaries are as below:
|
|
30 June
2024
|
31
December 2023
|
|
|
|
|
|
|
|
|
|
|
Holding
|
Fellow
|
|
Holding
|
Fellow
|
|
|
|
companies
|
subsidiaries
|
Total
|
companies
|
subsidiaries
|
Total
|
|
|
€m
|
€m
|
€m
|
€m
|
€m
|
€m
|
|
Assets
|
|
|
|
|
|
|
|
Trading assets
|
875
|
-
|
875
|
2,740
|
-
|
2,740
|
|
Loans to banks - amortised
cost
|
8
|
7
|
15
|
75
|
6
|
81
|
|
Loans to customers - amortised
cost
|
21
|
-
|
21
|
20
|
-
|
20
|
|
Settlement balances
|
851
|
7
|
858
|
291
|
27
|
318
|
|
Other assets
|
19
|
-
|
19
|
15
|
-
|
15
|
|
Amounts due from holding
companies
|
|
|
|
|
|
|
|
and fellow
subsidiaries
|
1,774
|
14
|
1,788
|
3,141
|
33
|
3,174
|
|
|
|
|
|
|
|
|
|
Derivatives (1)
|
2,452
|
-
|
2,452
|
3,059
|
-
|
3,059
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Trading liabilities
|
1,112
|
76
|
1,188
|
2,708
|
-
|
2,708
|
|
Bank deposits - amortised
cost
|
752
|
-
|
752
|
917
|
-
|
917
|
|
Other financial liabilities -
subordinated liabilities
|
150
|
-
|
150
|
150
|
-
|
150
|
|
Settlement balances
|
142
|
-
|
142
|
153
|
-
|
153
|
|
Other liabilities
|
14
|
14
|
28
|
10
|
14
|
24
|
|
Amounts due to holding
companies
|
|
|
|
|
|
|
|
and
fellow subsidiaries
|
2,170
|
90
|
2,260
|
3,938
|
14
|
3,952
|
|
|
|
|
|
|
|
|
|
Derivatives (1)
|
2,292
|
-
|
2,292
|
2,770
|
-
|
2,770
|
(1) Intercompany
derivatives are included within derivative classification on the
balance sheet.
11. Post balance sheet events
Other than as disclosed in this
document there have been no significant events between 30 June 2024
and the date of approval of this announcement which would require a
change to, or additional disclosure in, the
announcement.
12. Date of approval
The interim results for the half
year ended 30 June 2024 were approved by the Supervisory Board on
25 July 2024.
NatWest Markets N.V. Summary Risk
Factors
Summary of Principal Risks and
Uncertainties
Set out below is a summary of the
principal risks and uncertainties for the remaining six months of
the financial year which could adversely affect NWM N.V. Group.
This summary should not be regarded as a complete and comprehensive
statement of all potential risks and uncertainties; a fuller
description of these and other risk factors is included on pages
137 to 161 of the NatWest Markets N.V. 2023 Annual Report and
Accounts. Any of the risks identified may have a material adverse
effect on NWM N.V. Group's business, operations, financial
condition or prospects.
Economic and political
risk
- NWM
N.V. Group, its customers and its counterparties face continued
economic and political risks and uncertainties in the UK, European
and global markets, including as a result of inflation and interest
rates, supply chain disruption and geopolitical
developments.
- Continuing uncertainty regarding the effects and extent of the
UK's post Brexit divergence from EU laws and regulation, and NWM
N.V.'s post Brexit EU operating model may continue to adversely
affect NWM Plc (NWM N.V.'s parent company) and its operating
environment and NatWest Group plc (NWM N.V.'s ultimate parent
company) and may have an indirect effect on NWM N.V.
Group.
- Changes in interest rates will continue to affect NWM N.V.
Group's business and results.
- HM
Treasury (or UKGI on its behalf) could exercise a significant
degree of influence over NatWest Group and NWM N.V. Group is
ultimately controlled by NatWest Group.
Business change and execution
risk
- NWM
Group (including NWM N.V. Group) has been in a period of
significant structural and other change, including as a result of
NatWest Group's strategy and NatWest Group's creation of its
Commercial & Institutional business segment (of which NWM Group
forms a part) and may continue to be subject to significant
structural and other change.
- The
transfer of NatWest Group's Western European corporate portfolio
involves certain risks.
Financial resilience
risk
- NWM
N.V. is NatWest Group's banking and trading entity located in the
Netherlands. NWM N.V. has repurposed its banking licence, and NWM
N.V. Group may be subject to further changes.
- NWM
Group, including NWM N.V. Group, may not achieve its ambitions,
targets and guidance it communicates, generate returns or implement
its strategy effectively.
- NWM
N.V. may not meet the prudential regulatory requirements for
capital.
- NWM
N.V. 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.
- NWM
N.V. Group is reliant on access to the capital markets to meet its
funding requirements. The inability to do so may adversely affect
NWM N.V. Group.
- NWM
N.V. may not manage its capital, liquidity or funding effectively
which could trigger the execution of certain management actions or
recovery options.
- Any
reduction in the credit rating and/or outlooks assigned to NatWest
Group plc, any of its subsidiaries (including NWM Plc or NWM N.V.)
or any of their respective debt securities could adversely affect
the availability of funding for NWM N.V. Group, reduce NWM N.V.
Group's liquidity position and increase the cost of
funding.
- NWM
N.V. Group operates in markets that are highly competitive, with
increasing competitive pressures and technology
disruption.
- NWM
N.V. Group may be adversely affected if NatWest Group fails to meet
the requirements of regulatory stress tests.
- NWM
N.V. Group has significant exposure to counterparty and borrower
risk including credit losses, which may have an adverse effect on
NWM N.V. Group.
- NWM
N.V. Group could incur losses or be required to maintain higher
levels of capital as a result of limitations or failure of various
models.
- NWM
N.V. Group's financial statements are sensitive to underlying
accounting policies, judgments, estimates and
assumptions.
- Changes in accounting standards may materially impact NWM N.V.
Group's financial results.
- NatWest Group (including NWM N.V.) may become subject to the
application of statutory stabilisation or resolution powers which
may result in, for example, the write-down or conversion of certain
Eligible Liabilities (including NWM N.V.'s Eligible
Liabilities).
NatWest Markets N.V. Summary Risk
Factors continued
Summary of Principal Risks and Uncertainties
continued
- NatWest Group is subject to Bank of England and PRA oversight
in respect of resolution, and NWM N.V. Group could be adversely
affected should the Bank of England in the future deem NatWest
Group's preparations to be inadequate.
Climate and sustainability-related
risks
- NWM
N.V. Group and its value chain face climate-related and
sustainability-related risk that may adversely affect NWM N.V.
Group.
- Climate-related risks may adversely affect the global
financial system, NWM N.V. Group or its value chain.
- NWM
N.V. Group and its value chain may, face other
sustainability-related risks that may adversely affect NWM N.V.
Group.
- NatWest Group's climate change related strategy, 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.
- 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.
- Failure to implement effective governance, procedures, systems
and controls in compliance with legal, regulatory requirements and
societal expectations to manage climate and sustainability-related
risks and opportunities could adversely affect NWM N.V.
Group.
- Increasing levels of climate and other sustainability-related
laws, regulation and oversight may adversely affect NWM N.V.
Group.
- Increasing regulation of "greenwashing" is likely to increase
the risk of regulatory enforcement and investigation and
litigation.
- NWM
N.V. Group may be subject to potential climate and other
sustainability-related litigation, enforcement proceedings,
investigations and conduct risk.
- A
reduction in the ESG ratings of NatWest Group (including NWM N.V.
Group) or NWM N.V. Group could have a negative impact on NatWest
Group's (including NWM N.V. Group's) or NWM N.V. Group's reputation
and on investors' risk appetite and customers' willingness to deal
with NatWest Group (including NWM N.V. Group) or NWM N.V.
Group.
Operational and IT resilience
risk
- Operational risks (including reliance on third party suppliers
and outsourcing of certain activities) are inherent in NWM N.V.
Group's businesses.
- NWM
N.V. Group is subject to sophisticated and frequent
cyberattacks.
- NWM
N.V. Group operations and strategy are highly dependent on the
accuracy and effective use of data.
- NWM
N.V. Group relies on attracting, retaining, developing and
remunerating diverse senior management and skilled personnel (such
as market trading specialists), and is required to maintain good
employee relations.
- NWM
N.V. Group's operations are highly dependent on its complex IT
systems, and any IT failure could adversely affect NWM N.V.
Group.
- A
failure in NWM N.V. Group's risk management framework could
adversely affect NWM N.V. Group, including its ability to achieve
its strategic objectives.
- NWM
N.V. Group's operations are subject to inherent reputational
risk.
Legal, regulatory and conduct
risk
- NWM
N.V. Group's businesses are subject to substantial regulation and
oversight, which are constantly evolving and may adversely affect
NWM N.V. Group.
- NWM
N.V. Group and NWM Plc are exposed to the risk of various
litigation matters, regulatory and governmental actions and
investigations as well as remedial undertakings, the outcomes of
which are inherently difficult to predict, and which could have an
adverse effect on NWM N.V. Group.
Additional Information
Presentation of Information
NatWest Markets N.V. (NWM N.V.) is
a wholly owned subsidiary of RBS Holdings N.V. (RBSH N.V.). NWM
N.V. Group or 'we' refers to NWM N.V. and its subsidiary and
associated undertakings. The term 'RBSH Group' refers to RBSH N.V.
its subsidiaries, NWM N.V and RBS International Depository Services
S.A. RBSH N.V. is a wholly owned subsidiary of NatWest Markets Plc
(NWM Plc). The term 'NWM Group' refers to NWM Plc 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. NatWest Group
plc is registered at 36 St Andrew Square, Edinburgh,
Scotland.
NWM N.V. publishes its financial
statements in 'euro', the European single currency. The
abbreviation '€' represents the 'euro', and the abbreviations '€m'
and '€bn' represent millions and thousands of millions of euros,
respectively, and references to 'cents' represent cents in the
European Union ('EU'). The abbreviations '£m' and '£bn' represent
millions and thousands of millions of pounds sterling,
respectively, and references to 'pence' represent pence in the
United Kingdom ('UK'). Reference to 'dollars' or '$' are to United
States of America ('US') dollars. The abbreviations '$m' and '$bn'
represent millions and thousands of millions of dollars,
respectively, and references to 'cents' represent cents in the US.
The term 'EEA' refers to European Economic Area.
Contact
|
Claire Kane
|
Investor Relations
|
+44 (0) 20 7672 1758
|
Management's report on the interim
financial statements
Pursuant to section 5:25d,
paragraph 2(c), of the Dutch Financial Supervision Act (Wet op het
financieel toezicht (Wft)), the members of the Managing Board state
that to the best of their knowledge:
|
-
|
the interim financial statements
give a true and fair view, in all material respects, of the assets
and liabilities, financial position, and profit or loss of NatWest
Markets N.V. and the companies included in the consolidation as at
30 June 2024 and for the six month period then ended.
|
|
-
|
the interim report, for the six
month period
ending on 30 June 2024, gives a true and fair view of the
information required pursuant to section 5:25d, paragraphs 8 and 9,
of the Dutch Financial Supervision Act of NatWest Markets N.V. and
the companies included in the consolidation.
|
Amsterdam
25 July 2024
Managing Board
Legal Entity
Identifier:
NatWest Group plc
2138005O9XJIJN4JPN90
NatWest Markets N.V.
X3CZP3CK64YBHON1LE12