Natwest Group PLC

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For October 29, 2021

Commission File Number: 001-10306

NatWest Group plc

RBS, Gogarburn, PO Box 1000

Edinburgh EH12 1HQ

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F X Form 40-F ___

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):___

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):___

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ___ No X

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- __

The following information was issued as Company announcements in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K:

Q3 2021

Interim Management Statement

natwestgroup.com

NatWest Group plc

Q3 2021 Interim Management Statement

Alison Rose, Chief Executive Officer, commented:

"Throughout Q3 2021, NatWest continued to deliver a strong operating performance; growing in key areas and accelerating our digital transformation to improve customer experience and make our business more efficient. Our robust capital position means that we have been able to buy back £402 million of our shares to date (1) whilst also investing for growth as we support our customers and drive sustainable returns to our shareholders.

Although we are seeing challenges in the economy and for our customers - especially around supply chains and the cost of living - a number of key indicators remain positive; growth is good, unemployment is low and there are limited signs of default across our book. We have a vital role to play in helping the 19 million people, families and businesses we serve in communities throughout the UK to thrive. Because when they thrive, so do we.

NatWest Group has made addressing the climate challenge and supporting our customers through the transition a key strategic priority. We recently announced a new target to deliver an additional £100 billion of Climate and Sustainable Funding and Financing between 1 July 2021 and the end of 2025, having exceeded our initial two-year target of £20 billion in less than 18 months."

Financial performance in a challenging environment

| ● | Q3 2021
operating profit before tax of £1,074 million, attributable
profit of £674 million and a return on tangible equity (RoTE)
of 8.5%. |
| --- | --- |
| ● | Income
across the UK and RBSI retail and commercial businesses, excluding
notable items, increased by £103 million, or 4.4%, compared
with Q3 2020 principally reflecting balance sheet growth. NatWest
Markets (NWM) income, excluding asset disposals/strategic risk
reduction and OCA, decreased by £175 million, or 62.5%,
compared with Q3 2020 reflecting continued weakness in Fixed Income
which was impacted by subdued levels of customer activity and
ongoing reshaping of the business. |
| ● | Bank
net interest margin (NIM) excluding Liquid Asset Buffer (LAB)
decreased by 6 basis points to 2.34% compared with Q2 2021
principally reflecting the Q2 2021 tax variable lease repricing in
Commercial Banking. Bank NIM of 1.54% decreased by 7 basis
points. |
| ● | Other
expenses, excluding operating lease depreciation (OLD) and Ulster
Bank RoI direct costs, were £198 million, or 4.3% lower for
the year to date. |
| ● | A net
impairment release of £242 million in Q3 2021 mainly reflects
releases in non-default portfolios, principally in Commercial
Banking. |
| Robust balance sheet with strong capital and liquidity
levels | |
| ● | CET1
ratio of 18.7% was 50 basis points higher than Q2 2021 largely
reflecting the attributable profit and reduction in RWAs partially
offset by the foreseeable dividend accrual. |
| ● | The
liquidity coverage ratio (LCR) of 166%, representing £78.6
billion headroom above 100% minimum requirement, increased by 2
percentage points compared with Q2 2021, reflecting continued
growth in customer deposits. |
| ● | Net
lending decreased by £1.7 billion to £361.0 billion
during Q3 2021. Across the UK and RBSI retail and commercial
businesses, net lending excluding UK Government support schemes
increased by £2.9 billion, including £2.5 billion related
to mortgage growth, with year to date annualised growth of
3.1%. |
| ● | Customer
deposits increased by £9.1 billion compared with Q2 2021 to
£476.3 billion. Across the UK and RBSI retail and commercial
businesses customer deposits increased by £8.5 billion, or
2.0%, largely due to customers continuing to build and retain
liquidity and higher short term placements in RBS International
(RBSI). |
| ● | RWAs
decreased by £3.2 billion to £159.8 billion during Q3
2021 mainly reflecting business movements in Commercial Banking and
unwinding of the Q2 2021 increase in NWM following regulatory
approval to update the VaR model to remove the impact of GBP LIBOR
cessation. |

| Outlook (2) |
| --- |
| We
retain the outlook guidance provided in the 2021 Interim Results
document, except: ● We no longer expect to
achieve the majority of the remaining RWA reduction towards the
medium term target in NWM of £20 billion this year;
and ● We now expect Group
RWAs to be below our previously guided range of £185-195
billion on 1 January 2022. |
| (1) At 27 October
2021. (2) The guidance, targets,
expectations and trends discussed in this section represent NatWest
Group plc management's current expectations and are subject to
change, including as a result of the factors described in the
NatWest Group plc Risk Factors section on pages 345 to 362 of the
2020 Annual Report and Accounts, pages 112 and 113 of the NatWest
Group plc 2021 Interim Results, pages 156 to 172 of the NatWest
Markets Plc 2020 Annual Report and Accounts and on pages 48 and 49
of the NatWest Markets Plc 2021 Interim Results. These statements
constitute forward-looking statements. Refer to Forward-looking
statements in this announcement. |

Our Purpose in action

We champion potential, helping people, families and businesses to thrive. If they succeed, so will we. By being relevant to our customers and communities and by supporting our colleagues, we will deliver long-term value and drive sustainable returns to our shareholders. Some key achievements for the nine months ended 30 September 2021 are:

People and families

| ● | Supported
customers with five million financial capability interactions
including 750,000 financial health checks. |
| --- | --- |
| ● | Retail
Banking personalised messaging to customers has grown from 72
million messages in the first nine months of 2020 to 318 million in
the same period of 2021. The personalisation of messages has
resulted in a 41% increase in customer engagement. |
| ● | As part
of our strategy to help families and young people manage their
money more effectively, we acquired the fintech business
RoosterMoney, whose pocket money app aims to build money confidence
and financial capability from an early age. |
| ● | Launched
Housemate, an app designed to help young renters manage shared
bills and help build a history with the bank's data partner
Experian. |
| Businesses | |
| ● | Announced
a target to provide an additional £100 billion Climate and
Sustainable Funding and Financing (CSFF) to customers between the 1
July 2021 and the end of 2025 as well as plans to launch a new
green loan product for Small to Medium-sized Enterprise (SME)
customers. |
| ● | Relaunched
our entrepreneurship proposition and refocused 11 of our 12
Entrepreneur Accelerator hubs to support high growth, female led,
black and minority ethnic led and B Corp focused
businesses. |
| ● | Coutts
collaborated with the Business Growth Fund to provide additional
funding and growth capital, and to support small and medium-sized
enterprises (SMEs). |

Colleagues

| ● | Recognised
as a top ten UK employer by the work-life balance charity Working
Families. |
| --- | --- |
| ● | Introduced
a framework for NatWest Group's new hybrid working model, balancing
the needs of our customers, communities and
colleagues. |
| ● | Named
by LinkedIn as one of the top 25 workplaces in the UK to grow a
career and recognised in The Times Top 50 Employers for Women for
the 11th year running. |
| Communities | |
| ● | Retail
Banking completed Green Mortgages with a value of £565 million
during the nine months ended 30 September 2021. |
| ● | Teamed
up with the manufacturer of one of Britain's best-known childhood
games, Top Trumps, to launch a new MoneySense Climate Savers
competition for primary school pupils across the UK as part
of our principal
sponsorship of the UN Climate Change conference
COP26. |
| ● | Launched
a 'Sustainable Homes and Buildings' Coalition' with British Gas,
Worcester Bosch, and Shelter to improve UK buildings energy
efficiency. The Coalition aims to address the key blockers to
meeting net zero in the UK buildings environment. |
| ● | Issued
a €1 billion affordable housing social bond, the first of its
kind by a UK bank. The proceeds will support lending to
not-for-profit, UK housing associations as part of our commitment
to provide £3 billion of funding to the UK's affordable
housing sector by the end of 2022. |
| ● | Coutts
became the first major UK Private Bank and Wealth Manager to be
certified as a B Corp, demonstrating its commitment to meeting the
highest standards of verifiable social and environmental
performance, public transparency and legal
accountability. |

For further detail refer to the Climate, Purpose and ESG measures supplement Q3 2021.

Business performance summary

| | Nine months ended — 30 September | 30
September | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- | --- | --- |
| | 2021 | 2020 | 2021 | 2021 | 2020 |
| Total
income | £8,093m | £8,261m | £2,774m | £2,660m | £2,423m |
| Operating
expenses | (£5,463m) | (£5,564m) | (£1,942m) | (£1,706m) | (£1,814m) |
| Profit
before impairment releases/(losses) | £2,630m | £2,697m | £832m | £954m | £609m |
| Operating
profit/(loss) before tax | £3,579m | (£415m) | £1,074m | £1,559m | £355m |
| Profit/(loss)
attributable to ordinary shareholders | £2,516m | (£644m) | £674m | £1,222m | £61m |
| Excluding notable items within total
income (1) | | | | | |
| Total
income excluding notable items | £7,910m | £8,564m | £2,621m | £2,621m | £2,720m |
| Operating
expenses | (£5,463m) | (£5,564m) | (£1,942m) | (£1,706m) | (£1,814m) |
| Profit
before impairment releases/(losses) and | | | | | |
| excluding
notable items | £2,447m | £3,000m | £679m | £915m | £906m |
| Operating
profit/(loss) before tax and excluding notable items | £3,396m | (£112m) | £921m | £1,520m | £652m |
| UK and
RBSI retail and commercial income excluding | £7,110m | £7,167m | £2,423m | £2,368m | £2,320m |
| notable
items (2) | | | | | |
| Performance key metrics and ratios | | | | | |
| Bank net interest margin (2,3) | 1.59% | 1.73% | 1.54% | 1.61% | 1.65% |
| Bank net interest margin excluding liquid asset
buffer (2) | 2.38% | 2.45% | 2.34% | 2.40% | 2.39% |
| Bank average interest earning assets (2,3) | £493bn | £449bn | £505bn | £494bn | £469bn |
| Bank
average interest earning assets excluding | | | | | |
| liquid asset
buffer (2) | £330bn | £318bn | £331bn | £330bn | £324bn |
| Cost:income ratio (2) | 67.1% | 66.9% | 69.6% | 63.7% | 74.5% |
| Loan impairment rate (2) | (35bps) | 115bps | (26bps) | (66bps) | 28bps |
| Earnings
per share - basic | 21.5p | (5.3p) | 5.8p | 10.6p | 0.5p |
| Return on tangible equity (2) | 10.7% | (2.7%) | 8.5% | 15.6% | 0.8% |
| | | | 30 September | 30
June | 31
December |
| | | | 2021 | 2021 | 2020 |
| Balance sheet | | | | | |
| Total
assets | | | £778.3bn | £775.9bn | £799.5bn |
| Funded assets (2) | | | £674.5bn | £666.3bn | £633.0bn |
| Loans
to customers - amortised cost | | | £361.0bn | £362.7bn | £360.5bn |
| Loans
to customers and banks - amortised cost and
FVOCI | | | £374.0bn | £375.6bn | £372.4bn |
| UK and
RBSI retail and commercial net lending excluding UK
Government | | | | | |
| support schemes (2) | | | £304.9bn | £302.0bn | £297.9bn |
| Impairment
provisions - amortised cost | | | £4.3bn | £4.7bn | £6.0bn |
| Total
impairment provisions | | | £4.4bn | £4.9bn | £6.2bn |
| Expected
credit loss (ECL) coverage ratio | | | 1.19% | 1.31% | 1.66% |
| Assets under management and administration
(AUMA) (2) | | | £35.7bn | £34.7bn | £32.1bn |
| Customer
deposits | | | £476.3bn | £467.2bn | £431.7bn |
| UK and RBSI retail and commercial customer
deposits (2) | | | £437.2bn | £428.7bn | £403.2bn |
| Liquidity and funding | | | | | |
| Liquidity
coverage ratio (LCR) | | | 166% | 164% | 165% |
| Liquidity
portfolio | | | £278bn | £277bn | £262bn |
| Net stable funding ratio (NSFR) (4) | | | 155% | 154% | 151% |
| Loan:deposit ratio (2) | | | 76% | 78% | 84% |
| Total
wholesale funding | | | £67bn | £66bn | £71bn |
| Short-term
wholesale funding | | | £22bn | £23bn | £19bn |
| Capital and leverage | | | | | |
| Common Equity Tier (CET1) ratio (5) | | | 18.7% | 18.2% | 18.5% |
| Total
capital ratio | | | 24.6% | 24.9% | 24.5% |
| Pro forma CET1 ratio, pre dividend accrual (6) | | | 19.5% | 19.1% | 18.8% |
| Risk-weighted
assets (RWAs) | | | £159.8bn | £163.0bn | £170.3bn |
| UK leverage ratio (7) | | | 5.9% | 6.2% | 6.4% |
| Tangible
net asset value (TNAV) per ordinary share | | | 269p | 266p | 261p |
| Number of ordinary shares in issue
(millions) (8) | | | 11,436 | 11,569 | 12,129 |

| (1) | Refer to page
4 for details of notable items within total
income. |
| --- | --- |
| (2) | Refer to
Non-IFRS financial measures Appendix for details of basis of
preparation and reconciliation of non-IFRS financial measures and
performance metrics. |
| (3) | NatWest Group
excluding NWM. |
| (4) | NSFR reported
in line with CRR2 regulations finalised in June
2019. |
| (5) | Based on CRR
end-point including the IFRS 9 transitional adjustment of £1.0
billion (30 June 2021 - £1.2 billion; 31 December 2020 -
£1.7 billion). Excluding this adjustment, the CET1 ratio would
be 18.1% (30 June 2021 - 17.5%; 31 December 2020 -
17.5%). |
| (6) | The pro forma CET1 ratio at 30
September 2021 excludes foreseeable items of £1.2 billion,
£402 million for ordinary dividends and £816 million
foreseeable charges and pension contributions (30 June 2021
excludes foreseeable items of £1.4 billion, £500 million
for ordinary dividends and £924 million foreseeable charges
and pension contributions; 31 December 2020 excludes foreseeable
charges of £364 million for ordinary dividend (3p per share)
and £266 million pension contribution). |
| (7) | Based on UK
end-point including the IFRS 9 transitional adjustment of £1.0
billion (30 June 2021 - £1.2 billion; 31 December 2020 -
£1.7 billion). Excluding this adjustment the UK leverage ratio
would be 5.8% (30 June 2021 - 6.0%; 31 December 2020 -
6.1%). |
| (8) | In March 2021,
there was an agreement with HM Treasury to buy 591 million ordinary
shares in the Company from UK Government Investments Ltd (UKGI).
NatWest Group cancelled 391 million of the purchased ordinary
shares and held the remaining 200 million in own shares held. The
number of ordinary shares in issue excludes own shares held which
comprises the remainder of the shares purchased and shares held by
the NatWest Group 2001 Employee Share Trust. |

Summary consolidated income statement for the period ended 30 September 2021

| | Nine months ended — 30 September | 30
September | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- | --- | --- |
| | 2021 | 2020 | 2021 | 2021 | 2020 |
| | £m | £m | £m | £m | £m |
| Net interest income | 5,870 | 5,778 | 1,954 | 1,985 | 1,926 |
| Own
credit adjustments | 2 | 19 | 2 | (2) | (34) |
| Other
non-interest income | 2,221 | 2,464 | 818 | 677 | 531 |
| Non-interest income | 2,223 | 2,483 | 820 | 675 | 497 |
| Total income | 8,093 | 8,261 | 2,774 | 2,660 | 2,423 |
| Litigation
and conduct costs | (276) | 81 | (294) | 34 | (8) |
| Strategic
costs | (409) | (687) | (77) | (172) | (223) |
| Other
expenses | (4,778) | (4,958) | (1,571) | (1,568) | (1,583) |
| Operating expenses | (5,463) | (5,564) | (1,942) | (1,706) | (1,814) |
| Profit before impairment releases/(losses) | 2,630 | 2,697 | 832 | 954 | 609 |
| Impairment
releases/(losses) | 949 | (3,112) | 242 | 605 | (254) |
| Operating profit/(loss) before tax | 3,579 | (415) | 1,074 | 1,559 | 355 |
| Tax
(charge)/credit | (765) | 1 | (330) | (202) | (207) |
| Profit/(loss) for the period | 2,814 | (414) | 744 | 1,357 | 148 |
| Attributable to: | | | | | |
| Ordinary
shareholders | 2,516 | (644) | 674 | 1,222 | 61 |
| Preference
shareholders | 14 | 21 | 5 | 4 | 5 |
| Paid-in
equity holders | 241 | 272 | 63 | 91 | 80 |
| Non-controlling
interests | 43 | (63) | 2 | 40 | 2 |

| Notable items within total income (1) — Own
credit adjustments (OCA) | 2 | 19 | 2 | (2) | (34) |
| --- | --- | --- | --- | --- | --- |
| FX
recycling (loss)/gain in Central items &
other | - | (39) | - | - | 64 |
| Liquidity
Asset Bond sale gain | 70 | 111 | 45 | 20 | 1 |
| IFRS volatility in Central items & other (2) | 44 | 38 | - | 45 | 49 |
| Loss on
redemption of own debt | (138) | (324) | - | (20) | (324) |
| Retail
Banking debt sale gain | - | 7 | - | - | 4 |
| Commercial
Banking fair value and disposal (loss)/gain | (18) | (10) | 4 | (8) | 1 |
| Commercial
Banking tax variable lease repricing | 32 | - | - | 32 | - |
| NatWest
Markets asset disposals/strategic risk | | | | | |
| reduction (3) | (52) | (75) | (12) | (36) | (12) |
| Share
of associate profits/(losses) for Business | | | | | |
| Growth
Fund | 208 | (30) | 79 | 8 | (46) |
| Ulster
Bank RoI gain arising from the restructuring of | | | | | |
| structural
hedges | 35 | - | 35 | - | - |
| Total | 183 | (303) | 153 | 39 | (297) |

(1) Refer to page 1 of the Non-IFRS financial measures Appendix.

(2) IFRS volatility relates to derivatives used for risk management not in IFRS hedge accounting relationships and IFRS hedge ineffectiveness.

(3) Asset disposals/strategic risk reduction relates to the cost of exiting positions, which includes changes in carrying value to align to the expected exit valuation, and the impact of risk reduction transactions entered into, in respect of the strategic announcement on 14 February 2020.

Non-IFRS financial measures

This document contains a number of non-IFRS financial measures and performance metrics not defined under IFRS. For details of the basis of preparation and reconciliations, where applicable, refer to the Appendix.

Business performance summary

Chief Financial Officer review

| We have
delivered a strong operating performance in the third quarter. We
have grown lending across our retail and commercial franchises and
have continued to deliver against our CSFF commitments. Good
progress has been made against our cost reduction commitments and
we continue to work towards optimising our capital base. During the
quarter default levels remained low across our portfolio and we
have reported another impairment release as a result. |
| --- |
| Financial performance Total
income increased by 14.5% to £2,774 million compared with Q3
2020. Excluding notable items, income was £99 million, or
3.6%, lower than Q3 2020 principally in NWM, reflecting continued
weakness in Fixed Income which was impacted by subdued levels of
customer activity and ongoing reshaping of the business. The
Currencies and Capital Markets businesses performed in line with
expectations. Across the UK and RBSI retail and commercial
businesses income increased by 4.4% reflecting strong balance sheet
growth, principally in our mortgage book. Excluding notable items
income was in line with the second quarter. Bank NIM, excluding the
LAB, of 2.34% was 6 basis points lower than Q2 2021 reflecting the
one-off tax variable lease repricing adjustment in Q2 2021 and a
£14 million AT1 reclassification in Q3 2021. Bank NIM of 1.54%
was 7 basis points lower reflecting the one-off items and increased
levels of liquidity. |
| We have
delivered a cost reduction of £198 million, or 4.3%, for the
year to date. This has been achieved by transformation across our
Customer Journeys and NWM business, in line with the strategic
announcement made in February 2020, and we remain committed to our
4% full year cost reduction target. Strategic costs of £77
million in the quarter included £50 million in NWM, £18
million of technology spend and £13 million of redundancy
charges. Litigation and conduct costs were £294 million which
included provisions for an anticipated fine in respect of NWB Plc's
breaches of the UK Money Laundering Regulations 2007 and other
matters. |
| A net
impairment release of £242 million reflects the continued low
levels of realised losses we have seen to date. Total impairment
provisions reduced by £0.5 billion to £4.4 billion in the
quarter and as a result ECL coverage ratio decreased from 1.31% to
1.19%. Whilst we are comfortable with the strong credit performance
of our book, we continue to hold economic uncertainty post model
adjustments (PMA) of £0.7 billion, or 16.4% of total
impairment provisions. We will continue to assess this position as
we see the impact within the economy of the UK Government support
measures winding down and we emerge from the pandemic. |
| As a
result, we are pleased to report a Q3 2021 attributable profit of
£674 million, with earnings per share of 5.8 pence and a RoTE
of 8.5%. |
| We
continued to support our customers whilst taking a measured
approach to risk. Across the UK and RBSI retail and commercial
businesses, net lending excluding UK Government support schemes
increased by £2.9 billion in the quarter, including £2.5
billion of mortgage growth, and annualised growth for the year to
date was 3.1%. Total Group net lending reduced by £1.7
billion, which included a £3.5 billion reduction in Ulster
Bank RoI as loans agreed to be sold to Allied Irish Banks p.l.c. as
part of our phased withdrawal from the Republic of Ireland were
reclassified as assets held for sale. During
H1 2021 we exceeded our 2020-21 target of providing an additional
£20 billion CSFF, bringing our delivery against this target to
£21.5 billion. During Q3 2021 we completed £2.0 billion
CSFF which will contribute towards the new £100 billion
target. |
| Customer
deposits increased by £9.1 billion, or 1.9%, in the quarter as
customers continued to build and retain liquidity. TNAV
per share increased by 3 pence in the quarter to 269 pence largely
reflecting the attributable profit partially offset by the impact
of the share buy-back programme. |

| Capital and leverage |
| --- |
| The
CET1 ratio remains robust at 18.7%, or 18.1% excluding IFRS 9
transitional relief, and increased by 50 basis points in the
quarter reflecting the attributable profit and reduction in RWAs
partially offset by a foreseeable dividend accrual, a dividend
linked pension accrual and reduction in IFRS 9 transitional relief.
The total capital ratio decreased by 30 basis points in the quarter
to 24.6%. |
| RWAs
decreased by £3.2 billion to £159.8 billion during Q3
2021 mainly reflecting business movements in Commercial Banking and
unwinding of the Q2 2021 increase in NWM following regulatory
approval to update the VaR model to remove the impact of GBP LIBOR
cessation. |

Funding and liquidity

The LCR increased by 2 percentage points to 166%, representing £78.6 billion headroom above 100% minimum requirement, primarily reflecting continued growth in customer deposits. Total wholesale funding increased by £1 billion in the quarter to £66 billion.

Business performance summary

Retail Banking

| | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £m | £m | £m |
| Total
income | 1,131 | 1,094 | 1,022 |
| Operating
expenses | (552) | (600) | (647) |
| of
which: Other expenses | (543) | (545) | (560) |
| Impairment
(losses)/releases | (16) | 91 | (70) |
| Operating
profit | 563 | 585 | 305 |
| Return
on equity | 29.9% | 32.0% | 15.3% |
| Net
interest margin | 2.09% | 2.08% | 2.05% |
| Cost:income
ratio | 48.8% | 54.8% | 63.3% |
| Loan
impairment rate | 4bps | (20)bps | 17bps |

| | As at — 30 September | 30
June | 31
December |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £bn | £bn | £bn |
| Net
loans to customers - amortised cost | 180.5 | 178.1 | 172.3 |
| Customer
deposits | 186.3 | 184.1 | 171.8 |
| RWAs | 36.6 | 35.6 | 36.7 |

| During
Q3 2021, Retail Banking continued to pursue sustainable growth with
an intelligent approach to risk, delivering an operating profit of
£563 million. Lending growth was supported by a strong
performance in mortgages and a return to unsecured lending growth
with improved customer spending and demand for new lending as the
UK economy continued to recover. Retail Banking completed £0.5
billion of CSFF in Q3 2021 which will contribute towards the new
NatWest Group target of £100 billion between 1 July 2021 and
the end of 2025. Retail Banking also made good progress in
buy-to-let, with application volumes in Q3 2021 more than double Q2
2021 reflecting the alignment of lending criteria with the rest of
the market, the introduction of a simplified policy and customer
journey improvements. | |
| --- | --- |
| ● | Total
income was £109 million, or 10.7%, higher than Q3 2020
primarily due to strong mortgage balance growth and improved asset
margins, partially offset by lower deposit returns and lower
unsecured balances. Total income was £37 million, or 3.4%,
higher than Q2 2021 reflecting balance growth and higher
transactional-related fee income, partially offset by the
non-repeat of Q2 2021 one-off items totalling £12
million. |
| ● | Net
interest margin was 1 basis point higher than Q2 2021 largely
reflecting higher margin unsecured balance growth. Mortgage
completion margins of 143 basis points were lower than the back
book margin of 164 basis points, with application margins of 115
basis points in the quarter decreasing to 105 basis points in the
latter part of Q3 2021, reflecting rising swap rates and continued
strong competition in the market. |
| ● | Other
expenses were £17 million, or 3.0%, lower than Q3 2020
primarily reflecting a 9.6% reduction in headcount as a result of
continued digitalisation, automation and improvement of end-to-end
customer journeys. Customer behaviour continues to shift towards
digital with 89% of retail customer needs met digitally, up from
77% in Q3 2020, and mobile payments increased 13% compared with Q3
2020. Additionally, 7.0 million current account customers are now
exclusively using digital channels to interact with us, up from 6.7
million in Q3 2020. |
| ● | A net
impairment charge of £16 million in Q3 2021 primarily reflects
Stage 3 defaults, which remain at low levels, partially offset by
ECL releases resulting from continued stable portfolio performance
underpinned by government support schemes. |
| ● | Net
loans to customers increased by £2.4 billion, or 1.3%,
compared with Q2 2021 reflecting continued mortgage growth of
£2.2 billion, with gross new mortgage lending of £8.3
billion representing flow share of approximately 11%. Personal
advances and cards both increased by £0.1 billion as customer
demand and spend levels increased. |
| ● | Customer
deposits increased £2.2 billion, or 1.2%, compared with Q2
2021 reflecting slower growth than previous periods as customer
spending increased following the easing of UK Government
restrictions. |
| ● | RWAs
increased by £1.0 billion, or 2.8%, compared with Q2 2021
largely reflecting lending growth across all products and
predictive loss model recalibrations. |

Business performance summary

Private Banking

| | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £m | £m | £m |
| Total
income | 195 | 183 | 187 |
| Operating
expenses | (116) | (128) | (112) |
| o f
which: Other expenses | (117) | (120) | (106) |
| Impairment
releases/(losses) | 15 | 27 | (18) |
| Operating
profit | 94 | 82 | 57 |
| Return
on equity | 18.1% | 15.9% | 11.2% |
| Net
interest margin | 1.76% | 1.75% | 1.99% |
| Cost:income
ratio | 59.5% | 69.9% | 59.9% |
| Loan
impairment rate | (32)bps | (60)bps | 43bps |

| | As at — 30 September | 30
June | 31
December |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £bn | £bn | £bn |
| Net
loans to customers - amortised cost | 18.4 | 18.0 | 17.0 |
| Customer
deposits | 35.7 | 34.7 | 32.4 |
| RWAs | 11.4 | 11.2 | 10.9 |
| Assets under management (AUMs) (1) | 30.5 | 29.6 | 27.0 |
| Assets under administration (AUAs) (1) | 5.2 | 5.1 | 5.1 |
| Total assets under management and administration
(AUMA) (1) | 35.7 | 34.7 | 32.1 |

| (1) The definition of AUMs/AUAs has
been updated to provide clarity on assets where the investment
management is undertaken by Private Banking. AUMs now comprise
assets where the investment management is undertaken by Private
Banking irrespective of the franchise the customer belongs to. AUAs
now comprises third party assets held on an execution-only basis in
custody. Total AUMA remain as before. | |
| --- | --- |
| Private
Banking return on equity of 18.1% and operating profit of £94
million in Q3 2021 was supported by a strong operating performance
and continued balance growth. During the first nine months of the
year approximately 1,300 new customers were onboarded into Private
Banking, an increase of around 10% compared to the same period last
year. | |
| NatWest Group completed the sale of Adam & Company's £1.8
billion investment management business to Canaccord Genuity Wealth
Management on 1 October 2021 for a total consideration of £54
million, which included the Adam & Company brand and the FCA
regulated Adam & Company Investment Management Ltd legal entity
which had net assets of £2 million. The final net gain on sale
will be recorded as a notable item in the Q4 2021
results. | |
| ● | Total
income was £8 million, or 4.3%, higher than Q3 2020 as strong
balance growth was partially offset by lower deposit returns. Total
income was £12 million, or 6.6%, higher than Q2 2021
reflecting continued balance growth. Net interest margin was
broadly in line with Q2 2021. |
| ● | Other
expenses were £11 million, or 10.4%, higher than Q3 2020
principally due to investment in digital infrastructure and an
increase in headcount related to the enhancement of AUMA growth
propositions. |
| ● | A net
impairment release of £15 million in Q3 2021 mainly reflects
ECL releases in non-default portfolios. |
| ● | Net
loans to customers increased by £0.4 billion, or 2.2%,
compared with Q2 2021 due to continued strong mortgage lending
growth, whilst RWAs increased by £0.2 billion, or
1.8%. |
| ● | AUMAs
increased by £1.0 billion, or 2.9%, compared with Q2 2021
reflecting positive investment performance of £0.3 billion and
AUM net new money inflows of £0.7 billion. AUM net new money
inflows of £2.1 billion in the nine months ended 30 September
2021 included £0.6 billion of digital investing net inflows
into NatWest Invest, Royal Bank Invest and Coutts Invest, compared
to £0.2 billion during the same period of
2020. |

Business performance summary

Commercial Banking

| | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £m | £m | £m |
| Total
income | 965 | 982 | 1,004 |
| Operating
expenses | (556) | (569) | (553) |
| of
which: Other expenses (excluding OLD) | (484) | (470) | (490) |
| Impairment
releases/(losses) | 216 | 451 | (127) |
| Operating
profit | 625 | 864 | 324 |
| Return
on equity | 21.7% | 29.3% | 9.2% |
| Net
interest margin | 1.49% | 1.60% | 1.65% |
| Cost:income
ratio | 56.0% | 56.4% | 53.4% |
| Loan
impairment rate | (83)bps | (170)bps | 45bps |

| | 30 September | 30
June | 31
December |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £bn | £bn | £bn |
| Net
loans to customers - amortised cost | 102.7 | 103.8 | 108.2 |
| Customer
deposits | 178.3 | 176.0 | 167.7 |
| RWAs | 66.4 | 69.5 | 75.1 |

| Commercial Banking
delivered a resilient performance in Q3 2021 with an operating
profit of £625 million including a £216 million
impairment release as the UK economy continued to recover.
Commercial Banking continues to actively manage its balance sheet
to enhance returns through a combination of active capital
management, pricing discipline, targeted sector appetite and
growing capital efficient revenue streams. These actions have
enabled the business to deliver a resilient revenue performance
whilst materially increasing capital efficiency and
returns. | |
| --- | --- |
| In the
nine months ended 30 September 2021, Commercial Banking completed
£3.4 billion of CSFF, including £0.9 billion in Q3 2021
which will contribute towards the new NatWest Group target of
£100 billion between 1 July 2021 and the end of 2025.
Commercial Banking continues to scale Tyl to business customers
providing an opportunity to reduce cash usage and customer footfall
in branch network. Tyl has processed over £1.5 billion
transactions since inception in 2019. | |
| ● | Total
income was £39 million, or 3.9%, lower than Q3 2020 as lower
deposit returns and lower lending volumes were partially offset by
a recovery in transactional banking volumes. Total income was
£17 million, or 1.7%, lower than Q2 2021 mainly reflecting the
non-repeat of a tax variable lease repricing gain of £32
million and lower lending volumes, partially offset by higher
deposit returns and increased transactional banking
income. |
| ● | Net
interest margin was 11 basis points lower than Q2 2021 mainly due
to the non-repeat of the tax variable lease repricing gain in Q2
2021. Excluding the impact of the tax variable lease repricing
gain, NIM was broadly stable compared with Q2 2021. |
| ● | Other
expenses were £6 million, or 1.2%, lower than Q3 2020
primarily reflecting an 8.3% reduction in headcount and lower
non-staff costs, including additional VAT recoveries, partially
offset by higher back office operational costs. |
| ● | A net
impairment release of £216 million in Q3 2021 primarily
reflects ECL releases related to the reduced economic uncertainty
with Stage 3 defaults remaining at low levels. |
| ● | Net
loans to customers decreased by £1.1 billion, or 1.1%,
compared with Q2 2021 primarily reflecting UK Government financial
support scheme repayments of £0.7 billion and targeted sector
reductions mainly across Real Estate and Retail, partially offset
by growth in Specialised Business of £0.3 billion as customer
utilisation levels increased. RCF utilisation was approximately 19%
of committed facilities, broadly stable versus Q2 2021 and
significantly below the COVID-19 peak of approximately
40%. |
| ● | Customer
deposits increased by £2.3 billion, or 1.3%, compared with Q2
2021 as customers continued to build and retain
liquidity. |
| ● | RWAs
decreased by £3.1 billion, or 4.5%, compared with Q2 2021
reflecting business movements including targeted sector reductions
across Real Estate and Retail as well as active capital management
of £0.7 billion. |

Business performance summary

International Banking & Markets

RBS International

| | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £m | £m | £m |
| Total
income | 136 | 133 | 112 |
| Operating
expenses | (60) | (55) | (53) |
| of which: Other
expenses | (56) | (52) | (50) |
| Impairment
releases/(losses) | 11 | 27 | (34) |
| Operating
profit | 87 | 105 | 25 |
| Return
on equity | 21.6% | 26.5% | 6.4% |
| Net
interest margin | 0.99% | 1.02% | 1.07% |
| Cost:income
ratio | 44.1% | 41.4% | 47.3% |
| Loan
impairment rate | (28)bps | (71)bps | 105bps |

| | 30 September | 30
June | 31
December |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £bn | £bn | £bn |
| Net
loans to customers - amortised cost | 15.6 | 15.1 | 13.3 |
| Customer
deposits | 36.9 | 33.9 | 31.3 |
| RWAs | 8.1 | 7.6 | 7.5 |
| Depositary assets (1) | 463.8 | 460.4 | 427.5 |

| (1) Assets held by
RBSI as an independent trustee and in a depositary service
capacity.During Q3 2021 RBS International (RBSI) delivered £87
million of operating profit, supported by net lending growth and an
impairment release. RBSI also supported local social enterprises to
thrive through mentoring programmes and delivered digital
enhancements to eQ, our payment processing platform, making batch
payments easier for our customers. In the nine months ended 30
September 2021, RBSI completed £0.6 billion of
CSFF. | |
| --- | --- |
| ● | Total
income was £24 million, or 21.4%, higher than Q3 2020
primarily due to higher average customer volumes and higher non
utilisation and depositary fees. Net interest margin was 3 basis
points lower than Q2 2021 primarily due to lower returns from
higher surplus deposits. |
| ● | Other
expenses were £6 million, or 12.0%, higher than Q3 2020
primarily reflecting higher investment spend. |
| ● | A net
impairment release of £11 million in Q3 2021 primarily
reflects releases across Stage 1 and Stage 2
portfolios. |
| ● | Net
loans to customers increased by £0.5 billion, or 3.3%,
reflecting new business growth and higher utilisation levels in the
Institutional Banking sector. |
| ● | Customer
deposits increased by £3.0 billion, or 8.8%, compared with Q2
2021 due to higher short-term placements in the Institutional
Banking sector. |
| ● | Depositary
assets were £3.4 billion, or 0.7% higher than Q2 2021 and
£60.9 billion, or 15.1%, higher than Q3 2020 reflecting new
client business, new fund launches and strong fund performance from
existing clients. |
| ● | RWAs
increased by £0.5 billion, or 6.6%, compared with Q2 2021
principally due to higher lending volumes and higher deposit
balances placed with third party banks. |

Business performance summary

International Banking & Markets

NatWest Markets (1)

| | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £m | £m | £m |
| Income
excluding revenue share, asset disposals and OCA | 160 | 193 | 325 |
| Revenue
share paid to other NatWest Group segments | (55) | (50) | (45) |
| Income
excluding asset disposals and OCA | 105 | 143 | 280 |
| Asset disposals/strategic risk reduction (2) | (12) | (36) | (12) |
| Own
credit adjustments (OCA) | 2 | (1) | (34) |
| Total
income | 95 | 106 | 234 |
| Operating
expenses | (258) | (285) | (302) |
| of which: Other
expenses | (206) | (216) | (225) |
| Impairment
releases | 3 | 10 | 2 |
| Operating
loss | (160) | (169) | (66) |
| Return
on equity | (12.1%) | (12.1%) | (4.7%) |
| Cost:income
ratio | 271.6% | 268.9% | 129.1% |

| | 30 September | 30
June | 31
December |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £bn | £bn | £bn |
| Funded
assets | 108.0 | 111.8 | 105.9 |
| RWAs | 25.4 | 26.9 | 26.9 |

(1) The NatWest Markets operating segment is not the same as the NatWest Markets Plc legal entity (NWM Plc) or group (NWM or NWM Group) as the NatWest Markets segment excludes the Central items & other segment.

(2) Asset disposals/strategic risk reduction relates to the cost of exiting positions, which includes changes in carrying value to align to the expected exit valuation, and the impact of risk reduction transactions entered into, in respect of the strategic announcement on 14 February 2020.

| NatWest
Markets has supported customers in navigating challenging market
conditions and continued to deliver an integrated customer
proposition across NatWest Group. NatWest Markets has maintained a
focus on product innovation, investing in its people, and on
growing its expertise in areas that matter most to
customers. | |
| --- | --- |
| In the
nine months ended 30 September 2021, NatWest Markets completed
£6.9 billion of CSFF, including £0.5 billion in Q3 2021
which will contribute towards the new NatWest Group target of
£100 billion between 1 July 2021 and the end of
2025. | |
| ● | Income
excluding asset disposals/strategic risk reduction and OCA
decreased by £175 million, or 62.5%, compared with Q3 2020
reflecting continued weakness in Fixed Income which was impacted by
subdued levels of customer activity and ongoing reshaping of the
business, resulting in an operating loss of £160 million in Q3
2021. The Currencies and Capital Markets businesses performed in
line with expectations. |
| ● | Other
expenses decreased £19 million, or 8.4%, compared with Q3
2020, reflecting continued reductions in line with the strategic
announcement in February 2020. |
| ● | RWAs
decreased by £1.5 billion, or 5.6%, compared to Q2 2021 as the
impact related to LIBOR cessation largely unwound, with £2.4
billion unwinding in Q3 2021 and £0.1 billion to unwind in
October, partially offset by higher credit risk driven by activity
in the capital markets business. |

Business performance summary

Ulster Bank RoI

| | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | €m | €m | €m |
| Total
income | 171 | 137 | 145 |
| Operating
expenses | (144) | (156) | (138) |
| of which: Other
expenses | (134) | (149) | (129) |
| Impairment
releases/(losses) | 19 | (1) | (6) |
| Operating
profit/(loss) | 46 | (20) | 1 |
| Return
on equity | 9.9% | (4.1%) | 0.2% |
| Net
interest margin | 1.40% | 1.43% | 1.47% |
| Cost:income
ratio | 84.2% | 113.9% | 95.2% |
| Loan
impairment rate | (48)bps | 2bps | 11bps |

| | 30 September | 30
June | 31
December |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | €bn | €bn | €bn |
| Net
loans to customers - amortised cost | 15.3 | 19.4 | 20.0 |
| Customer
deposits | 21.6 | 21.6 | 21.8 |
| RWAs | 11.7 | 12.2 | 13.2 |

| Ulster
Bank RoI continues its phased withdrawal from the Republic of
Ireland and delivered an operating profit of €46 million for
Q3 2021. Since the end of July, apart from UBIDAC's asset finance
business, commercial banking has been closed to new customers,
remaining open for existing customers only. From the end of
October, Ulster Bank RoI will stop accepting applications from new
personal customers but will continue to consider applications on a
reduced number of products from existing personal customers.
Progress has continued with Allied Irish Banks p.l.c. and Permanent
TSB Group Holdings p.l.c. for the sale of performing loan
portfolios and associated undrawn exposures, UBIDAC's asset finance
business and 25 branch locations, the details of which were
outlined in the interim results. Discussions are ongoing with other
counterparties about their potential interest in other parts of the
bank. | |
| --- | --- |
| ● | Total
income increased by €26 million, or 17.9%, compared with Q3
2020 primarily due to gains arising from the restructuring of the
duration of swaps hedging deposits and other balances under the
withdrawal plan, partially offset by lower lending levels and fee
income as a result of the decision to withdraw from the RoI
market. |
| ● | Net
interest margin was 3 basis points lower than Q2 2021 reflecting
continuation of reducing lending volumes against a stable deposit
base, resulting in higher liquid assets in a negative interest rate
environment. |
| ● | Other
expenses were €5 million, or 3.9%, higher than Q3 2020 as
higher VAT charges and regulatory levies have been partially offset
by a 10.7% reduction in headcount, lower back office operational
costs and the reclassification of withdrawal-related programme
costs to strategic costs. |
| ● | A net
impairment release of €19 million in Q3 2021 reflects
improvements in the mortgage and commercial
portfolios. |
| ● | Net
loans to customers decreased by €4.1 billion, or 21.1%,
compared with Q2 2021 reflecting the reclassification of €3.7
billion of loans agreed to be sold to Allied Irish Banks, p.l.c. as
assets held for sale and repayments continuing to exceed gross new
lending, which was €0.4 billion in Q3 2021. |

Central items & other

| | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £m | £m | £m |
| Central
items not allocated | (173) | 110 | (285) |

● A £173 million operating loss within central items not allocated mainly reflects various litigation and conduct items, partially offset by a £79 million share of gains under equity accounting for Business Growth Fund and other treasury income.

Segment performance

	Nine months ended 30 September 2021
				International Banking & Markets
	Retail	Private	Commercial	RBS	NatWest	Ulster	Central items	Total NatWest
	Banking	Banking	Banking	International	Markets	Bank RoI	& other	Group
	£m	£m	£m	£m	£m	£m	£m	£m
Income statement
Net
interest income	3,017	354	1,937	277	(4)	275	14	5,870
Own
credit adjustments	-	-	-	-	3	-	(1)	2
Other
non-interest income	264	209	951	115	391	113	178	2,221
Total income	3,281	563	2,888	392	390	388	191	8,093
Direct
expenses
- staff costs	(342)	(102)	(421)	(80)	(274)	(140)	(1,146)	(2,505)
- other costs	(161)	(30)	(196)	(36)	(93)	(97)	(1,660)	(2,273)
Indirect
expenses	(1,142)	(227)	(956)	(44)	(295)	(122)	2,786	-
Strategic
costs
- direct	(21)	(7)	(43)	(7)	(141)	(10)	(180)	(409)
- indirect	(49)	(7)	(30)	(3)	(15)	(3)	107	-
Litigation
and conduct costs	(24)	8	(62)	(2)	-	(12)	(184)	(276)
Operating expenses	(1,739)	(365)	(1,708)	(172)	(818)	(384)	(277)	(5,463)
Operating
profit/(loss)before impairment releases	1,542	198	1,180	220	(428)	4	(86)	2,630
Impairment
releases	41	42	784	40	19	27	(4)	949
Operating profit/(loss)	1,583	240	1,964	260	(409)	31	(90)	3,579
Additional information
Return on tangible equity (1)	na	na	na	na	na	na	na	10.7%
Return on equity (1)	28.3%	15.5%	21.9%	21.9%	(10.1%)	2.5%	nm	na
Cost:income ratio (1)	53.0%	64.8%	57.6%	43.9%	209.7%	99.0%	nm	67.1%
Total
assets (£bn)	207.6	28.2	186.0	39.9	210.1	25.2	81.3	778.3
Funded assets (£bn) (1)	207.6	28.2	186.0	39.9	108.0	25.2	79.6	674.5
Net
loans to customers - amortised cost (£bn)	180.5	18.4	102.7	15.6	7.1	13.2	23.5	361.0
Loan impairment rate (1)	(3)bps	(30)bps	(100)bps	(34)bps	nm	(26)bps	nm	(35)bps
Impairment
provisions (£bn)	(1.6)	(0.1)	(1.9)	(0.1)	(0.1)	(0.5)	-	(4.3)
Impairment
provisions - stage 3 (£bn)	(0.8)	-	(0.8)	(0.1)	(0.1)	(0.4)	-	(2.2)
Customer
deposits (£bn)	186.3	35.7	178.3	36.9	2.2	18.5	18.4	476.3
Risk-weighted
assets (RWAs) (£bn)	36.6	11.4	66.4	8.1	25.4	10.0	1.9	159.8
RWA
equivalent (RWAe) (£bn)	36.6	11.4	66.5	8.2	26.9	10.0	2.1	161.7
Employee
numbers (FTEs - thousands)	15.0	1.9	8.8	1.6	1.6	2.5	27.5	58.9
Third party customer asset rate (2)	2.68%	2.36%	2.71%	2.23%	nm	2.27%	nm	nm
Third party customer funding rate (2)	(0.06%)	0.00%	(0.01%)	0.07%	nm	0.01%	nm	nm
Average interest earning assets (£bn) (1)	194.2	26.8	168.0	36.2	32.4	25.6	nm	525.4
Bank net interest margin (1)	2.08%	1.77%	1.54%	1.02%	na	1.44%	nm	1.59%
Bank net interest margin excluding liquid asset
buffer (1)	na	na	na	na	na	na	na	2.38%

nm = not meaningful, na = not applicable.

Refer to page 16 for the notes to this table.

Segment performance

	Nine months ended 30 September 2020
				International Banking & Markets
	Retail	Private	Commercial	RBS	NatWest	Ulster	Central items	Total NatWest
	Banking	Banking	Banking	International	Markets	Bank RoI	& other	Group
	£m	£m	£m	£m	£m	£m	£m	£m
Income statement
Net
interest income	2,919	371	2,073	286	(55)	294	(110)	5,778
Own
credit adjustments	-	-	-	-	19	-	-	19
Other
non-interest income	288	208	934	85	1,086	85	(222)	2,464
Total income	3,207	579	3,007	371	1,050	379	(332)	8,261
Direct
expenses
- staff costs	(399)	(117)	(497)	(92)	(434)	(150)	(934)	(2,623)
- other costs	(152)	(36)	(212)	(37)	(131)	(65)	(1,702)	(2,335)
Indirect
expenses	(1,178)	(194)	(957)	(42)	(229)	(139)	2,739	-
Strategic
costs
- direct	(46)	(4)	(5)	(8)	(187)	(9)	(428)	(687)
- indirect	(138)	(10)	(111)	(3)	(24)	(10)	296	-
Litigation
and conduct costs	191	(3)	8	3	(4)	1	(115)	81
Operating expenses	(1,722)	(364)	(1,774)	(179)	(1,009)	(372)	(144)	(5,564)
Operating
profit/(loss) before impairment (losses)	1,485	215	1,233	192	41	7	(476)	2,697
Impairment
losses	(727)	(74)	(1,917)	(80)	(38)	(251)	(25)	(3,112)
Operating profit/(loss)	758	141	(684)	112	3	(244)	(501)	(415)
Additional information
Return on tangible equity (1)	na	na	na	na	na	na	na	(2.7%)
Return on equity (1)	12.2%	9.2%	(8.7%)	10.0%	(0.8%)	(16.6%)	nm	na
Cost:income ratio (1)	53.7%	62.9%	57.4%	48.2%	96.1%	98.2%	nm	66.9%
Total
assets (£bn)	189.5	24.9	186.9	32.7	283.2	27.4	47.0	791.6
Funded assets (£bn) (1)	189.5	24.9	186.9	32.7	121.3	27.4	44.6	627.3
Net
loans to customers - amortised cost (£bn)	166.7	16.5	110.0	12.8	10.1	18.3	19.3	353.7
Loan impairment rate (1)	57bps	59bps	226bps	83bps	nm	175bps	nm	115bps
Impairment
provisions (£bn)	(1.9)	(0.1)	(3.0)	(0.1)	(0.2)	(0.8)	-	(6.1)
Impairment
provisions - stage 3 (£bn)	(0.9)	-	(1.1)	-	(0.2)	(0.5)	-	(2.7)
Customer
deposits (£bn)	164.9	30.3	161.3	30.4	4.7	19.6	7.2	418.4
Risk-weighted
assets (RWAs) (£bn)	36.3	10.6	76.5	7.0	30.0	12.1	1.4	173.9
RWA
equivalent (RWAe) (£bn)	36.3	10.6	76.6	7.1	32.0	12.1	1.4	176.1
Employee
numbers (FTEs - thousands)	16.6	1.8	9.6	1.7	2.8	2.8	26.3	61.6
Third party customer asset rate (2)	2.92%	2.59%	2.93%	2.57%	nm	2.27%	nm	nm
Third party customer funding rate (2)	(0.23%)	(0.15%)	(0.10%)	(0.03%)	nm	(0.05%)	nm	nm
Average interest earning assets (£bn) (1)	179.8	23.3	160.8	31.3	38.4	26.2	nm	487.8
Bank net interest margin (1)	2.17%	2.12%	1.72%	1.22%	na	1.50%	nm	1.73%
Bank net interest margin excluding liquid asset
buffer (1)	na	na	na	na	na	na	na	2.45%

nm = not meaningful, na = not applicable.

Refer to page 16 for the notes to this table.

Segment performance

	Quarter ended 30 September 2021
				International Banking & Markets
	Retail	Private	Commercial	RBS	NatWest	Ulster	Central items	Total NatWest
	Banking	Banking	Banking	International	Markets	Bank RoI	& other	Group
	£m	£m	£m	£m	£m	£m	£m	£m
Income statement
Net
interest income	1,041	122	629	95	(1)	88	(20)	1,954
Own
credit adjustments	-	-	-	-	2	-	-	2
Other
non-interest income	90	73	336	41	94	57	127	818
Total income	1,131	195	965	136	95	145	107	2,774
Direct
expenses
- staff costs	(110)	(35)	(141)	(28)	(86)	(46)	(378)	(824)
- other costs	(50)	(10)	(65)	(12)	(29)	(29)	(552)	(747)
Indirect
expenses	(383)	(72)	(314)	(16)	(91)	(39)	915	-
Strategic
costs
- direct	(5)	(2)	(4)	(1)	(51)	(9)	(5)	(77)
- indirect	11	-	(7)	(1)	1	(1)	(3)	-
Litigation
and conduct costs	(15)	3	(25)	(2)	(2)	1	(254)	(294)
Operating expenses	(552)	(116)	(556)	(60)	(258)	(123)	(277)	(1,942)
Operating
profit/(loss) before impairment (losses)/releases	579	79	409	76	(163)	22	(170)	832
Impairment
(losses)/releases	(16)	15	216	11	3	16	(3)	242
Operating profit/(loss)	563	94	625	87	(160)	38	(173)	1,074
Additional information
Return on tangible equity (1)	na	na	na	na	na	na	na	8.5%
Return on equity (1)	29.9%	18.1%	21.7%	21.6%	(12.1%)	9.6%	nm	na
Cost:income ratio (1)	48.8%	59.5%	56.0%	44.1%	271.6%	84.8%	nm	69.6%
Total
assets (£bn)	207.6	28.2	186.0	39.9	210.1	25.2	81.3	778.3
Funded assets (£bn) (1)	207.6	28.2	186.0	39.9	108.0	25.2	79.6	674.5
Net
loans to customers - amortised cost (£bn)	180.5	18.4	102.7	15.6	7.1	13.2	23.5	361.0
Loan impairment rate (1)	4bps	(32)bps	(83)bps	(28)bps	nm	(47)bps	nm	(26)bps
Impairment
provisions (£bn)	(1.6)	(0.1)	(1.9)	(0.1)	(0.1)	(0.5)	-	(4.3)
Impairment
provisions - stage 3 (£bn)	(0.8)	-	(0.8)	(0.1)	(0.1)	(0.4)	-	(2.2)
Customer
deposits (£bn)	186.3	35.7	178.3	36.9	2.2	18.5	18.4	476.3
Risk-weighted
assets (RWAs) (£bn)	36.6	11.4	66.4	8.1	25.4	10.0	1.9	159.8
RWA
equivalent (RWAe) (£bn)	36.6	11.4	66.5	8.2	26.9	10.0	2.1	161.7
Employee
numbers (FTEs - thousands)	15.0	1.9	8.8	1.6	1.6	2.5	27.5	58.9
Third party customer asset rate (2)	2.64%	2.36%	2.65%	2.24%	nm	2.24%	nm	nm
Third party customer funding rate (2)	(0.05%)	0.00%	0.00%	0.07%	nm	0.02%	nm	nm
Average interest earning assets (£bn) (1)	197.5	27.5	167.5	37.9	32.5	25.2	nm	537.4
Bank net interest margin (1)	2.09%	1.76%	1.49%	0.99%	na	1.38%	nm	1.54%
Bank net interest margin excluding liquid asset
buffer (1)	na	na	na	na	na	na	na	2.34%

nm = not meaningful, na = not applicable.

Refer to page 16 for the notes to this table.

Segment performance

	Quarter ended 30 June 2021
				International Banking & Markets
	Retail	Private	Commercial	RBS	NatWest	Ulster	Central items	Total NatWest
	Banking	Banking	Banking	International	Markets	Bank RoI	& other	Group
	£m	£m	£m	£m	£m	£m	£m	£m
Income statement
Net
interest income	1,003	117	665	93	4	93	10	1,985
Own
credit adjustments	-	-	-	-	(1)	-	(1)	(2)
Other
non-interest income	91	66	317	40	103	26	34	677
Total income	1,094	183	982	133	106	119	43	2,660
Direct
expenses
- staff costs	(116)	(33)	(139)	(26)	(77)	(47)	(371)	(809)
- other costs	(50)	(11)	(65)	(11)	(35)	(45)	(542)	(759)
Indirect
expenses	(379)	(76)	(301)	(15)	(104)	(38)	913	-
Strategic
costs
- direct	(5)	(5)	(13)	(2)	(60)	(1)	(86)	(172)
- indirect	(43)	(3)	(14)	(1)	(11)	(1)	73	-
Litigation
and conduct costs	(7)	-	(37)	-	2	(4)	80	34
Operating expenses	(600)	(128)	(569)	(55)	(285)	(136)	67	(1,706)
Operating
profit/(loss) before impairment releases/(losses)	494	55	413	78	(179)	(17)	110	954
Impairment
releases/(losses)	91	27	451	27	10	(1)	-	605
Operating profit/(loss)	585	82	864	105	(169)	(18)	110	1,559
Additional information
Return on tangible equity (1)	na	na	na	na	na	na	na	15.6%
Return on equity (1)	32.0%	15.9%	29.3%	26.5%	(12.1%)	(4.3%)	nm	na
Cost:income ratio (1)	54.8%	69.9%	56.4%	41.4%	268.9%	114.3%	nm	63.7%
Total
assets (£bn)	204.2	27.7	185.8	37.0	219.4	25.4	76.4	775.9
Funded assets (£bn) (1)	204.2	27.7	185.8	36.9	111.8	25.4	74.5	666.3
Net
loans to customers - amortised cost (£bn)	178.1	18.0	103.8	15.1	6.3	16.7	24.7	362.7
Loan impairment rate (1)	(20)bps	(60)bps	(170)bps	(71)bps	nm	2bps	nm	(66)bps
Impairment
provisions (£bn)	(1.6)	(0.1)	(2.1)	(0.1)	(0.1)	(0.7)	-	(4.7)
Impairment
provisions - stage 3 (£bn)	(0.8)	-	(0.8)	(0.1)	(0.1)	(0.4)	-	(2.2)
Customer
deposits (£bn)	184.1	34.7	176.0	33.9	2.5	18.5	17.5	467.2
Risk-weighted
assets (RWAs) (£bn)	35.6	11.2	69.5	7.6	26.9	10.5	1.7	163.0
RWA
equivalent (RWAe) (£bn)	35.6	11.3	69.5	7.7	28.6	10.5	1.8	165.0
Employee
numbers (FTEs - thousands)	15.3	1.9	9.1	1.6	1.6	2.6	27.1	59.2
Third party customer asset rate (2)	2.67%	2.36%	2.82%	2.18%	nm	2.28%	nm	nm
Third party customer funding rate (2)	(0.06%)	0.00%	(0.02%)	0.09%	nm	0.01%	nm	nm
Average interest earning assets (£bn) (1)	193.8	26.8	167.1	36.4	32.3	25.8	nm	526.1
Bank net interest margin (1)	2.08%	1.75%	1.60%	1.02%	na	1.45%	nm	1.61%
Bank net interest margin excluding liquid asset
buffer (1)	na	na	na	na	na	na	na	2.40%

nm = not meaningful, na = not applicable.

For the notes to this table, refer to the following page.

Segment performance

	Quarter ended 30 September 2020
				International Banking & Markets
	Retail	Private	Commercial	RBS	NatWest	Ulster	Central items	Total NatWest
	Banking	Banking	Banking	International	Markets	Bank RoI	& other	Group
	£m	£m	£m	£m	£m	£m	£m	£m
Income statement
Net
interest income	937	120	703	85	(21)	100	2	1,926
Own
credit adjustments	-	-	-	-	(34)	-	-	(34)
Other
non-interest income	85	67	301	27	289	30	(268)	531
Total income	1,022	187	1,004	112	234	130	(266)	2,423
Direct
expenses
- staff costs	(131)	(38)	(156)	(27)	(108)	(50)	(317)	(827)
- other costs	(49)	(11)	(72)	(10)	(37)	(23)	(554)	(756)
Indirect
expenses	(380)	(57)	(299)	(13)	(80)	(47)	876	-
Strategic
costs
- direct	(45)	(4)	(3)	(5)	(67)	(5)	(94)	(223)
- indirect	(35)	-	(38)	2	(8)	(2)	81	-
Litigation
and conduct costs	(7)	(2)	15	-	(2)	-	(12)	(8)
Operating expenses	(647)	(112)	(553)	(53)	(302)	(127)	(20)	(1,814)
Operating
profit/(loss) before impairment (losses)/releases	375	75	451	59	(68)	3	(286)	609
Impairment
(losses)/releases	(70)	(18)	(127)	(34)	2	(8)	1	(254)
Operating profit/(loss)	305	57	324	25	(66)	(5)	(285)	355
Additional information
Return on tangible equity (1)	na	na	na	na	na	na	na	0.8%
Return on equity (1)	15.3%	11.2%	9.2%	6.4%	(4.7%)	(1.0%)	nm	na
Cost:income ratio (1)	63.3%	59.9%	53.4%	47.3%	129.1%	97.7%	nm	74.5%
Total
assets (£bn)	189.5	24.9	186.9	32.7	283.2	27.4	47.0	791.6
Funded assets (£bn) (1)	189.5	24.9	186.9	32.7	121.3	27.4	44.6	627.3
Net
loans to customers - amortised cost (£bn)	166.7	16.5	110.0	12.8	10.1	18.3	19.3	353.7
Loan impairment rate (1)	17bps	43bps	45bps	105bps	nm	17bps	nm	28bps
Impairment
provisions (£bn)	(1.9)	(0.1)	(3.0)	(0.1)	(0.2)	(0.8)	-	(6.1)
Impairment
provisions - stage 3 (£bn)	(0.9)	-	(1.1)	-	(0.2)	(0.5)	-	(2.7)
Customer
deposits (£bn)	164.9	30.3	161.3	30.4	4.7	19.6	7.2	418.4
Risk-weighted
assets (RWAs) (£bn)	36.3	10.6	76.5	7.0	30.0	12.1	1.4	173.9
RWA
equivalent (RWAe) (£bn)	36.3	10.6	76.6	7.1	32.0	12.1	1.4	176.1
Employee
numbers (FTEs - thousands)	16.6	1.8	9.6	1.7	2.8	2.8	26.3	61.6
Third party customer asset rate (2)	2.82%	2.43%	2.73%	2.40%	nm	2.27%	nm	nm
Third party customer funding rate (2)	(0.13%)	(0.02%)	(0.02%)	0.03%	nm	(0.01%)	nm	nm
Average interest earning assets (£bn) (1)	182.2	24.0	169.3	31.5	39.2	27.3	nm	508.2
Bank net interest margin (1)	2.05%	1.99%	1.65%	1.07%	na	1.46%	nm	1.65%
Bank net interest margin excluding liquid asset
buffer (1)	na	na	na	na	na	na	na	2.39%

nm = not meaningful, na = not applicable.

| (1) | Refer to Non-IFRS
financial measures Appendix for details of basis of
preparation and reconciliation of non-IFRS financial measures and
performance metrics where relevant. |
| --- | --- |
| (2) | Third party
customer asset rate is calculated as annualised interest receivable
on third-party loans to customers as a percentage of third-party
loans to customers, including those reported as assets held for
sale. This excludes intragroup items, loans to banks and liquid
asset portfolios. Third party customer funding rate reflects
interest payable or receivable on third-party customer deposits,
including interest bearing and non-interest bearing customer
deposits. Intragroup items, bank deposits, debt securities in issue
and subordinated liabilities are excluded for customer funding rate
calculation. Net interest margin is calculated as net interest
income as a percentage of the average interest-earning assets
without these exclusions. |

Risk and capital management

	Page
Credit risk
Segment analysis - portfolio summary	17
Segment analysis - loans	19
Movement in ECL provision	19
ECL post model adjustments	20
Sector analysis -
COVID-19 impact	21
Wholesale support schemes	23
Capital, liquidity and funding risk	24

Credit risk

Segment analysis - portfolio summary

The table below shows gross loans and expected credit loss (ECL), by segment and stage, within the scope of the IFRS 9 ECL framework.

	Retail	Private	Commercial	International Banking & Markets — RBS	NatWest	Ulster	Central items
	Banking	Banking	Banking	International	Markets	Bank RoI (1)	& other	Total
30 September 2021	£m	£m	£m	£m	£m	£m	£m	£m
Loans - amortised cost and FVOCI (2)
Stage
1	167,641	17,511	78,185	15,791	8,401	11,530	28,023	327,082
Stage
2	12,511	1,018	24,266	1,815	361	1,407	107	41,485
Stage
3	1,902	289	2,112	178	98	854	-	5,433
Of which: individual	-	289	1,089	178	88	37	-	1,681
Of which: collective	1,902	-	1,023	-	10	817	-	3,752
	182,054	18,818	104,563	17,784	8,860	13,791	28,130	374,000
ECL provisions (3)
Stage
1	137	16	164	11	9	30	15	382
Stage
2	641	36	1,050	37	35	85	15	1,899
Stage
3	833	40	786	49	81	382	-	2,171
Of which: individual	-	40	380	49	72	14	-	555
Of which: collective	833	-	406	-	9	368	-	1,616
	1,611	92	2,000	97	125	497	30	4,452
ECL provisions coverage (4)
Stage 1
(%)	0.08	0.09	0.21	0.07	0.11	0.26	0.05	0.12
Stage 2
(%)	5.12	3.54	4.33	2.04	9.70	6.04	14.02	4.58
Stage 3
(%)	43.80	13.84	37.22	27.53	82.65	44.73	-	39.96
	0.88	0.49	1.91	0.55	1.41	3.60	0.11	1.19
30 June
2021
Loans - amortised cost and FVOCI (2)
Stage
1	158,989	16,728	75,713	15,027	7,019	13,732	29,493	316,701
Stage
2	18,866	1,444	27,895	1,342	721	2,821	99	53,188
Stage
3	1,921	307	2,226	206	108	935	-	5,703
Of which: individual	-	307	1,202	206	98	38	-	1,851
Of which: collective	1,921	-	1,024	-	10	897	-	3,852
	179,776	18,479	105,834	16,575	7,848	17,488	29,592	375,592
ECL provisions (3)
Stage
1	120	21	208	15	10	44	15	433
Stage
2	709	49	1,222	46	36	225	13	2,300
Stage
3	811	36	812	47	88	398	-	2,192
Of which: individual	-	36	386	47	79	12	-	560
Of which: collective	811	-	426	-	9	386	-	1,632
	1,640	106	2,242	108	134	667	28	4,925
ECL provisions coverage (4)
Stage 1
(%)	0.08	0.13	0.27	0.10	0.14	0.32	0.05	0.14
Stage 2
(%)	3.76	3.39	4.38	3.43	4.99	7.98	13.13	4.32
Stage 3
(%)	42.22	11.73	36.48	22.82	81.48	42.57	-	38.44
	0.91	0.57	2.12	0.65	1.71	3.81	0.09	1.31

For the notes to this table refer to the following page.

Risk and capital management

Credit risk continued

Segment analysis - portfolio summary

	Retail	Private	Commercial	International Banking & Markets — RBS	NatWest	Ulster	Central items
	Banking	Banking	Banking	International	Markets	Bank RoI	& other	Total
31
December 2020	£m	£m	£m	£m	£m	£m	£m	£m
Loans - amortised cost and FVOCI (2)
Stage
1	139,956	15,321	70,685	12,143	7,780	14,380	26,859	287,124
Stage
2	32,414	1,939	37,344	2,242	1,566	3,302	110	78,917
Stage
3	1,891	298	2,551	211	171	1,236	-	6,358
Of which: individual	-	298	1,578	211	162	43	-	2,292
Of which: collective	1,891	-	973	-	9	1,193	-	4,066
	174,261	17,558	110,580	14,596	9,517	18,918	26,969	372,399
ECL provisions (3)
Stage
1	134	31	270	14	12	45	13	519
Stage
2	897	68	1,713	74	49	265	15	3,081
Stage
3	806	39	1,069	48	132	492	-	2,586
Of which: individual	-	39	607	48	124	13	-	831
Of which: collective	806	-	462	-	8	479	-	1,755
	1,837	138	3,052	136	193	802	28	6,186
ECL provisions coverage (4)
Stage 1
(%)	0.10	0.20	0.38	0.12	0.15	0.31	0.05	0.18
Stage 2
(%)	2.77	3.51	4.59	3.30	3.13	8.03	13.64	3.90
Stage 3
(%)	42.62	13.09	41.91	22.75	77.19	39.81	-	40.67
	1.05	0.79	2.76	0.93	2.03	4.24	0.10	1.66

(1) 30 September 2021 data excludes £3.3 billion of gross loans and £148 million of ECL that were reclassified as assets held-for-sale.

(2) Fair value through other comprehensive income (FVOCI).

(3) Includes £7 million (30 June 2021 - £6 million; 31 December 2020 - £6 million) related to assets classified as FVOCI.

(4) ECL provisions coverage is calculated as ECL provisions divided by loans - amortised cost and FVOCI. It is calculated on third party loans and total ECL provisions.

(5) The table shows gross loans only and excludes amounts that were outside the scope of the ECL framework. Other financial assets within the scope of the IFRS 9 ECL framework were cash and balances at central banks totalling £163.6 billion (30 June 2021 - £150.5 billion; 31 December 2020 - £122.7 billion) and debt securities of £45.7 billion (30 June 2021 - £49.8 billion; 31 December 2020 - £53.8 billion).

● Stage 1 and Stage 2 ECL reduced further in Q3 2021, with sustained improvement in underlying risk metrics underpinned by various government support schemes. The Stage 2 population reduced reflecting lower underlying PDs, resulting in migration of cases back to Stage 1. The Stage 2 population remained above pre-COVID-19 levels.

● Stage 3 loans and ECL balances reduced slightly in Q3 2021 mainly due to write-off and repayment of defaulted debt. To date, the various COVID-19 related government support schemes have mitigated new flows into default. It is expected that defaults will increase as the various government support schemes unwind.

● The economic scenarios driving the ECL requirement, as well as the model performance considerations, were consistent with those described in the NatWest Group 2021 Interim Results.

Risk and capital management

Credit risk continued

Segment analysis - loans

● Retail Banking - Balance sheet growth since the 2020 year end was mainly in mortgages, with strong mortgage growth particularly in property purchases following the easing of COVID-19 restrictions and the extension of the stamp duty holiday. Unsecured balances increased slightly during Q3 2021 mainly due to increased credit card spending as lockdown restrictions eased. In both the mortgage and unsecured portfolios, selective relaxation of lending criteria was implemented during 2021. Stage 2 balances decreased, reflecting the ongoing stable portfolio performance but was primarily a result of the improved economic outlook during 2021, with reduced PDs driving migration back into Stage 1 after conclusion of the three month significant increase in credit risk "persistence" period. Stage 3 ECL was stable in Q3 2021 as new defaults remained subdued due to the effects of government support schemes. There is an expectation that defaults will increase in the coming months with the ending of the government job retention scheme, but uncertainty remains on the timing and extent of this.

● Commercial Banking - Balance sheet reduction during Q3 2021 reflected a decrease in both government support scheme debt and conventional debt. A further reduction is expected in government support scheme exposure during Q4 2021 as repayments continue and government support schemes are closed for new lending. Outside of government support scheme lending, there was a decrease due to strategic reductions in exposure to high risk sectors. Sector appetite continues to be regularly reviewed based on updated financial performance and economic outlook for the sectors. Stage 2 balances continued to fall reflecting positive economic outlook and portfolio performance which is lowering PDs and resulting in exposure migrating back to Stage 1. PD deterioration remains the primary driver of cases in Stage 2. This migration of cases back to Stage 1 also led to a reduction in ECL as more exposure moves to a 12 month expected credit loss assessment from a lifetime loss assessment. Stage 3 balances continued to reduce as the pace of repayment and write-off of existing impaired debt outweighed the effect of new flows to default. The termination of the government BBL, CBIL and CLBIL support schemes, commencement of government support scheme repayments and the expiration of capital repayment holidays could trigger a rise in problem debt. While Wholesale forbearance increased during 2020, there has been a reducing trend in 2021. Payment holidays and covenant waivers were, and remain, the most common forms of forbearance granted.

● Ulster Bank RoI - Balance sheet reductions reflected loan amortisation outstripping new lending following the announcement of the phased withdrawal of Ulster Bank RoI from the Irish market. Stage 3 balances continued to reduce as new defaults remained subdued. In Q3 2021, £3.2 billion of net performing commercial loans were reclassified as assets held-for-sale, for which Ulster Bank RoI has entered a binding agreement to sell to Allied Irish Banks p.l.c..

Movement in ECL provision

The table below shows the main ECL provision movements.

	ECL provision
	£m
At 1 January 2021	6,186
Changes
in economic forecasts	(363)
Changes
in risk metrics and exposure: Stage 1 and Stage 2	(784)
Changes
in risk metrics and exposure: Stage 3	122
Judgemental
changes: changes in post model adjustments for Stage 1, Stage 2 and
Stage 3	63
Write-offs
and other	(772)
At 30 September 2021	4,452

● ECL reduced during 2021 as the economy recovered from COVID-19 and government support schemes mitigated the flow of cases into default.

● Economic forecasts were updated for H1 2021 and drove a reduction in ECL on implementation. The positive economics, both forward looking and actual economic outcomes resulted in improving underlying portfolio credit metrics resulting in a reduction in Stage 1 and Stage 2 ECL.

● Stage 3 movements remained relatively muted with low level underlying defaults, partially offset by ECL releases on previously impaired exposure.

● Judgemental overlays increased during 2021, mainly due to deferred model calibrations where implied ECL releases were not deemed supportable.

Risk and capital management

Credit risk continued

ECL post model adjustments

The table below shows ECL post model adjustments by segment.

| | Retail
Banking (1) | Commercial Banking | Ulster Bank
RoI (1) | Other | Total |
| --- | --- | --- | --- | --- | --- |
| 30 September 2021 | £m | £m | £m | £m | £m |
| Deferred
model calibrations | 111 | 62 | 4 | - | 177 |
| Economic
uncertainty | 169 | 469 | 61 | 30 | 729 |
| Other
adjustments | 22 | 5 | 122 | 3 | 152 |
| | 302 | 536 | 187 | 33 | 1,058 |
| 30 June
2021 | | | | | |
| Deferred
model calibrations | 103 | 51 | (2) | - | 152 |
| Economic
uncertainty | 197 | 493 | 114 | 30 | 834 |
| Other
adjustments | 22 | 19 | 118 | 4 | 163 |
| | 322 | 563 | 230 | 34 | 1,149 |
| 31
December 2020 | | | | | |
| Deferred
model calibrations | 34 | 13 | 2 | - | 49 |
| Economic
uncertainty | 158 | 526 | 176 | 18 | 878 |
| Other
adjustments | 20 | 19 | 26 | 3 | 68 |
| | 212 | 558 | 204 | 21 | 995 |

(1) Of which: UK Retail Banking mortgages - £141 million (30 June 2021 - £150 million; 31 December 2020 - £123 million); Ulster Bank RoI mortgages - £181 million (30 June 2021 - £177 million; 31 December 2020 - £139 million); and Ulster Bank RoI Wholesale - £7 million (30 June 2021 - £54 million; 31 December 2020 - £65 million).

● Retail Banking - The post model adjustment for deferred model calibrations increased to £111 million from £103 million at 30 June 2021. This reflected management's continued judgement that the implied ECL decreases that continued to manifest themselves through the standard probability of default model monitoring process during the quarter were not fully supportable. Management retained this view on the basis that underlying portfolio performance has been underpinned by government support schemes and further outcome data is required.

The post model adjustment for economic uncertainty decreased to £169 million from £197 million at 30 June 2021. This was primarily due to a post model adjustment release of £28 million relating to the improvement in the underlying risk profile of customers who had accessed payment holiday support and were previously considered higher risk (£55 million was held at 30 June 2021). In addition, NatWest Group continues to retain a holdback of a modelled ECL release of £69 million, again due to the delayed default emergence reflective of the various government support schemes (£15 million related to mortgages and £54 million related to unsecured lending). The H1 2021 overlay also included an ECL uplift on buy-to-let mortgages of £14 million (31 December 2020 - £15 million) to mitigate the risk of a disproportionate credit deterioration in challenging economic circumstances.

● Commercial Banking - The post model adjustment for economic uncertainty included an overlay of £409 million (£450 million across NatWest Group's Wholesale portfolio) based on a judgemental thesis, reflecting concern that the unprecedented nature of COVID-19 could result in longer debt recovery periods and lower values than history suggested, and also the risk of idiosyncratic credit outcomes. The overlay remains unchanged since December 2020. It also included an overlay of £15 million in respect of elevated concerns around borrowers' ability to refinance facilities at the end of the contractual term. This reduced from £23 million at H1 2021. Additionally, it included overlays to address the effects of government support schemes.

There was also a post model adjustment for deferred model calibrations on the business banking portfolio reflecting management's judgement that the beneficial modelling effect, and implied ECL decrease, was not supportable while portfolio performance was under-pinned by the effect of various government support schemes.

● Ulster Bank RoI - T he post model adjustment for deferred model calibration increased by £6 million from H1 2021. Similar to Retail Banking, this post model adjustment reflected management's view that implied ECL decreases observable through the model monitoring process were not fully supportable. Included in H1 2021 other adjustments, was a post model adjustment of £118 million to reflect judgement that continuing actions on the phased withdrawal of Ulster Bank RoI from the Irish market will lead to higher/earlier crystallisation of losses. This post model adjustment increased by £4 million to £122 million for Q3 2021. In Q3 2021, the economic uncertainty adjustment decreased from £114 million to £61 million. This reduction reflected post-model adjustments of £56 million allocated to assets held-for-sale, for which Ulster Bank RoI has entered a binding agreement to sell to Allied Irish Bank p.l.c..

Risk and capital management

Credit risk continued

Sector analysis - COVID-19 impact

The table below shows ECL, by stage, for the Personal portfolio and key sectors of the Wholesale portfolio, that continue to be affected by COVID-19.

					Off-balance sheet
	Loans - amortised cost & FVOCI				Loan	Contingent	ECL provisions
	Stage 1	Stage 2	Stage 3	Total	commitments	liabilities	Stage 1	Stage 2	Stage 3	Total
30 September 2021	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Personal	194,957	14,036	2,925	211,918	38,867	62	170	716	1,161	2,047
Mortgages	185,621	10,986	2,207	198,814	15,444	-	45	225	559	829
Credit
cards	2,844	909	82	3,835	15,295	-	56	172	60	288
Other
personal	6,492	2,141	636	9,269	8,128	62	69	319	542	930
Wholesale	132,125	27,449	2,508	162,082	84,490	4,323	212	1,183	1,010	2,405
Property	27,657	4,896	1,108	33,661	16,620	461	52	194	402	648
Financial
institutions	48,428	2,251	11	50,690	15,691	976	18	93	6	117
Sovereign	5,609	200	8	5,817	1,222	2	17	1	2	20
Corporate	50,431	20,102	1,381	71,914	50,957	2,884	125	895	600	1,620
Of
which:
Airlines
and aerospace	765	859	75	1,699	1,573	208	2	45	30	77
Automotive	4,486	1,702	20	6,208	3,984	72	12	34	12	58
Health	3,291	1,669	125	5,085	622	12	10	74	43	127
Land
transport and logistics	3,243	1,305	46	4,594	3,081	231	5	62	20	87
Leisure	3,237	4,771	308	8,316	2,151	111	11	321	134	466
Oil
and gas	1,173	349	53	1,575	1,469	403	2	21	30	53
Retail	6,133	1,958	152	8,243	5,211	419	11	46	68	125
Total	327,082	41,485	5,433	374,000	123,357	4,385	382	1,899	2,171	4,452

| 30 June
2021 — Personal | 186,256 | 20,414 | 3,029 | 209,699 | 37,504 | 42 | 152 | 786 | 1,141 | 2,079 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Mortgages | 177,630 | 16,750 | 2,328 | 196,708 | 12,822 | 3 | 43 | 249 | 561 | 853 |
| Credit
cards | 2,562 | 1,083 | 82 | 3,727 | 14,470 | - | 47 | 183 | 59 | 289 |
| Other
personal | 6,064 | 2,581 | 619 | 9,264 | 10,212 | 39 | 62 | 354 | 521 | 937 |
| Wholesale | 130,445 | 32,774 | 2,674 | 165,893 | 85,724 | 4,348 | 281 | 1,514 | 1,051 | 2,846 |
| Property | 28,105 | 6,782 | 1,054 | 35,941 | 17,083 | 508 | 93 | 313 | 391 | 797 |
| Financial
institutions | 47,694 | 2,361 | 17 | 50,072 | 14,659 | 926 | 21 | 115 | 7 | 143 |
| Sovereign | 5,596 | 153 | 9 | 5,758 | 1,356 | 2 | 18 | 1 | 2 | 21 |
| Corporate | 49,050 | 23,478 | 1,594 | 74,122 | 52,626 | 2,912 | 149 | 1,085 | 651 | 1,885 |
| Of
which: | | | | | | | | | | |
| Airlines
and aerospace | 635 | 1,017 | 60 | 1,712 | 1,805 | 209 | 2 | 33 | 27 | 62 |
| Automotive | 4,214 | 1,617 | 201 | 6,032 | 3,897 | 98 | 15 | 60 | 14 | 89 |
| Health | 3,136 | 2,276 | 123 | 5,535 | 650 | 12 | 12 | 116 | 47 | 175 |
| Land
transport and logistics | 3,131 | 1,578 | 53 | 4,762 | 3,061 | 170 | 7 | 83 | 30 | 120 |
| Leisure | 3,264 | 5,578 | 305 | 9,147 | 2,106 | 123 | 15 | 323 | 142 | 480 |
| Oil
and gas | 1,005 | 415 | 60 | 1,480 | 1,663 | 339 | 3 | 11 | 31 | 45 |
| Retail | 6,133 | 2,303 | 191 | 8,627 | 5,339 | 468 | 13 | 112 | 80 | 205 |
| Total | 316,701 | 53,188 | 5,703 | 375,592 | 123,228 | 4,390 | 433 | 2,300 | 2,192 | 4,925 |
| 31
December 2020 | | | | | | | | | | |
| Personal | 166,548 | 34,352 | 3,288 | 204,188 | 38,960 | 45 | 171 | 996 | 1,228 | 2,395 |
| Mortgages | 158,387 | 29,571 | 2,558 | 190,516 | 14,554 | 3 | 51 | 319 | 635 | 1,005 |
| Credit
cards | 2,411 | 1,375 | 109 | 3,895 | 14,262 | - | 53 | 225 | 76 | 354 |
| Other
personal | 5,750 | 3,406 | 621 | 9,777 | 10,144 | 42 | 67 | 452 | 517 | 1,036 |
| Wholesale | 120,576 | 44,565 | 3,070 | 168,211 | 89,845 | 4,785 | 348 | 2,085 | 1,358 | 3,791 |
| Property | 23,733 | 13,021 | 1,322 | 38,076 | 16,829 | 568 | 123 | 507 | 545 | 1,175 |
| Financial
institutions | 44,002 | 3,624 | 17 | 47,643 | 15,935 | 1,076 | 23 | 90 | 8 | 121 |
| Sovereign | 4,751 | 204 | 4 | 4,959 | 1,585 | 2 | 14 | 1 | 2 | 17 |
| Corporate | 48,090 | 27,716 | 1,727 | 77,533 | 55,496 | 3,139 | 188 | 1,487 | 803 | 2,478 |
| Of
which: | | | | | | | | | | |
| Airlines
and aerospace | 753 | 1,213 | 41 | 2,007 | 1,888 | 215 | 2 | 42 | 25 | 69 |
| Automotive | 4,383 | 1,759 | 161 | 6,303 | 4,205 | 102 | 17 | 63 | 17 | 97 |
| Health | 2,694 | 2,984 | 131 | 5,809 | 616 | 14 | 13 | 164 | 48 | 225 |
| Land
transport and logistics | 2,868 | 1,823 | 111 | 4,802 | 3,782 | 197 | 8 | 98 | 32 | 138 |
| Leisure | 3,299 | 6,135 | 385 | 9,819 | 2,199 | 125 | 22 | 439 | 204 | 665 |
| Oil
and gas | 1,178 | 300 | 83 | 1,561 | 2,225 | 346 | 4 | 20 | 59 | 83 |
| Retail | 6,702 | 2,282 | 187 | 9,171 | 5,888 | 512 | 18 | 112 | 101 | 231 |
| Total | 287,124 | 78,917 | 6,358 | 372,399 | 128,805 | 4,830 | 519 | 3,081 | 2,586 | 6,186 |

Risk and capital management

Credit risk continued

Sector analysis - COVID-19 impact

● Personal - Mortgage balances increased during 2021 with strong purchase demand in the UK assisted by the extension of the stamp duty holiday. Unsecured lending balances reduced during 2021, however as noted earlier, increased slightly in Q3 2021 as COVID-19 restrictions eased and lending criteria were selectively relaxed. As also noted previously, ECL in Stage 2 decreased due to migrations back to Stage 1 following the effects of the economic scenarios used since H1 2021 and continued stable portfolio performance supporting improved risk metrics. The total ECL coverage requirements were broadly stable during Q3 2021.

● Wholesale - On and off-balance sheet exposure reduced during the quarter with lower demand for new lending due to uncertainty in the economy and many customers able to utilise the excess liquidity created by various government support schemes. Additionally, there was a £0.7 billion decrease in government support scheme lending following scheduled repayment activity. When the government BBL, CBIL and CLBIL support schemes closed, approximately 317,000 applications across all the schemes had been approved, totalling £14.7 billion in new lending, of which, £13.4 billion had been drawdown. Approximately £1.1 billion has since been repaid. 62% of the government support scheme lending by value had been granted through BBLS. Construction (in Property), Retail and Leisure remain the top three sectors for borrowers accessing the government support schemes. Uptake for the subsequent Recovery Loan Scheme remains muted. Wholesale credit risk outlook is still uncertain despite improving economic metrics. The termination of the government BBL, CBIL and CLBIL support schemes, commencement of government support scheme repayments and the expiration of capital repayment holidays could trigger a rise in problem debt. Credit risk measures continue to reflect a more stable environment but horizon risks remain, including issues in the supply chain and rising energy costs which are contributing to overall inflationary pressures. Sector appetite continued to be regularly reviewed and where appropriate adjusted, for those sectors most affected by COVID-19. Stage 2 balances continued to reduce reflecting positive economic outlook and portfolio performance. In Q3 2021, £3.2 billion of net performing commercial loans were reclassified as assets held-for-sale, for which Ulster Bank RoI has entered a binding agreement to sell to Allied Irish Banks p.l.c..

Risk and capital management

Credit risk continued

Wholesale support schemes

The table below shows the uptake of the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS) by Wholesale customers which ended for new applicants on 31 March 2021. Sectors shown are those that continue to be affected by COVID-19. Drawdown amounts reflect total balances net of repayments. These include the effects of further drawdowns, term extensions, and other loan adjustments.

	BBLS — Approved	Drawdown	% of BBLS to	CBILS — Approved	Drawdown	% of CBILS to	CLBILS — Approved	Drawdown	% of CLBILS to
30 September 2021	volume	amount (£m)	sector loans	volume	amount (£m)	sector loans	volume	amount (£m)	sector loans
Wholesale lending by sector
Airlines and
aerospace	260	6	0.35%	18	9	0.53%	4	16	0.94%
Automotive	12,839	389	6.27%	578	128	2.06%	26	30	0.48%
Education	2,050	50	3.37%	121	66	4.44%	10	32	2.15%
Health	10,248	282	5.55%	630	95	1.87%	3	19	0.37%
Land transport and
logistics	8,996	243	5.29%	399	93	2.02%	1	-	-
Leisure	32,721	931	11.20%	2,182	533	6.41%	39	194	2.33%
Oil and
gas	329	9	0.57%	15	7	0.44%	-	-	-
Retail	32,652	1,007	12.22%	1,655	370	4.49%	26	74	0.90%
Property	71,422	1,899	5.64%	2,491	632	1.88%	37	88	0.26%
Other (including
Business
Banking)	127,787	3,029	3.32%	8,918	1,762	1.93%	84	300	0.33%
Total	299,304	7,845	4.84%	17,007	3,695	2.28%	230	753	0.46%

(1) The Recovery Loan Scheme, a successor to the closed BBLS, CBILS, and CLBILS was launched on 6 April 2021. Uptake of the new scheme was minimal with 364 customers having drawn down £30 million as at 30 September 2021 .

Risk and capital management

Capital, liquidity and funding risk

Introduction

NatWest Group continually ensures a comprehensive approach is taken to the management of Capital, Liquidity and Funding,

underpinned by frameworks, risk appetite and policies, to manage and mitigate Capital, Liquidity and Funding risks. The framework ensures the tools and capability are in place to facilitate the management and mitigation of risk ensuring that NatWest Group operates within its regulatory requirements and risk appetite.

Within the 2020 Annual Report and Accounts, NatWest Group outlined a number of COVID-19 specific relief measures which impacted capital and leverage ratios during the year, one of which was a temporary change to the Prudential Valuation Adjustment (PVA). From 1 January 2021, the aggregation factor reverted to 50% from 66%. This has increased NatWest Group's PVA deduction by c.£120 million.

Key developments since December 2020

| CET1 (CRR end-point) | The
CET1 ratio increased by 20 basis points to 18.7%. The increase is
primarily due to the attributable profit in the period of £2.5
billion and a reduction in RWAs, partially offset by the impact of
the directed buy back and associated pension contribution of
£1.2 billion (72 bps), foreseeable charges and pension
contributions of £0.8 billion (48 bps), a £0.8 billion
decrease in the IFRS 9 transitional adjustment (45 bps) and other
reserve movements in the period. |
| --- | --- |
| Total RWAs | Total
RWAs decreased 6.2% to £159.8 billion mainly reflecting
decreases in credit risk RWAs of £7.6 billion, market risk
RWAs of £1.4 billion and operational risk RWAs of £0.9
billion following the annual recalculation in Q1 2021. The decrease
in credit risk RWAs was mainly driven by reductions in Commercial
Banking and Ulster Bank RoI. Market risk RWAs decreased £1.4
billion predominantly due to the transition from LIBOR to
alternative risk free rates. Counterparty credit risk RWAs reduced
by £0.6 billion as a result of reduced exposures in NatWest
Markets. |
| UK leverage ratio | The UK
leverage ratio decreased c.50 basis points to 5.9% driven by a
£2.7 billion decrease in Tier 1 capital. |
| Liquidity portfolio | The
liquidity portfolio increased by £15.4 billion in the period
to £277.8 billion at Q3 2021, with primary liquidity
increasing by £20.6 billion to £190.9 billion. The
increase in primary liquidity was mainly driven by customer
deposits, cash proceeds from new issuances and the methodology
change to include UBIDAC cash at central banks. This is offset by
the TFSME repayment, buy back of shares owned by UK Government,
pension fund contributions, liability management exercise,
increased lending and the purchase of mortgages from Metro Bank.
Secondary liquidity is lower due to a reduction of collateral
pre-positioned with the Bank of England due to monthly repayments
of underlying assets. |

Risk and capital management

Capital, liquidity and funding risk continued

Maximum Distributable Amount (MDA) and Minimum Capital Requirements

NatWest Group is subject to minimum capital requirements relative to RWAs. The table below summarises the minimum capital requirements (the sum of Pillar 1 and Pillar 2A), and the additional capital buffers which are held in excess of the regulatory minimum requirements and are usable in stress.

Where the CET1 ratio falls below the sum of the minimum capital and the combined buffer requirement, there is a subsequent automatic restriction on the amount available to service discretionary payments (including AT1 coupons), known as the MDA. Note that different requirements apply to individual legal entities or sub-groups and that the table shown does not reflect any incremental PRA buffer requirements, which are not disclosable.

The current capital position provides significant headroom above both our minimum requirements and our MDA threshold requirements.

Type	CET1	Total Tier 1	Total capital
Pillar
1 requirements	4.5%	6.0%	8.0%
Pillar
2A requirements	2.0%	2.7%	3.6%
Minimum
Capital Requirements	6.5%	8.7%	11.6%
Capital
conservation buffer	2.5%	2.5%	2.5%
Countercyclical
capital buffer (1)	-	-	-
MDA
threshold (2)	9.0%	n/a	n/a
Subtotal	9.0%	11.2%	14.1%
Capital
ratios at 30 September 2021	18.7%	21.1%	24.6%
Headroom (3)	9.7%	9.9%	10.5%

(1) In response to COVID-19, many countries reduced their CCyB rates. Most notably for NatWest Group, the Financial Policy Committee reduced the UK rate from 1% to 0% and the CBI also announced a reduction of the Republic of Ireland rate from 1% to 0%.

(2) Pillar 2A requirements for NatWest Group are set on a nominal capital basis.

(3) The headroom does not reflect excess distributable capital and may vary over time.

Risk and capital management

Capital, liquidity and funding risk continued

Capital and leverage ratios

The table below sets out the key capital and leverage ratios.

| | 30 September | 30
June | 31
December |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| Capital adequacy ratios (1) | % | % | % |
| CET1 | 18.7 | 18.2 | 18.5 |
| Tier
1 | 21.1 | 21.8 | 21.4 |
| Total | 24.6 | 24.9 | 24.5 |
| Capital | £m | £m | £m |
| Tangible
equity | 30,769 | 30,751 | 31,712 |
| Prudential
valuation adjustment | (264) | (285) | (286) |
| Deferred
tax assets | (765) | (832) | (760) |
| Own
credit adjustments | 27 | 22 | (1) |
| Pension
fund assets | (385) | (384) | (579) |
| Cash
flow hedging reserve | 254 | 77 | (229) |
| Foreseeable
ordinary dividends | (402) | (500) | (364) |
| Foreseeable
charges - on-market ordinary share buy back programme | (462) | (750) | - |
| Foreseeable
pension contributions | (354) | (174) | (266) |
| Prudential
amortisation of software development costs | 476 | 537 | 473 |
| Adjustments
under IFRS 9 transitional arrangements | 973 | 1,198 | 1,747 |
| Other
adjustments for regulatory purposes | (5) | - | - |
| Total deductions | (907) | (1,091) | (265) |
| CET1
capital | 29,862 | 29,660 | 31,447 |
| AT1
capital | 3,875 | 5,916 | 4,983 |
| Tier 1
capital | 33,737 | 35,576 | 36,430 |
| Tier 2
capital | 5,522 | 4,973 | 5,255 |
| Total regulatory capital | 39,259 | 40,549 | 41,685 |
| Risk-weighted assets | | | |
| Credit
risk | 122,270 | 122,475 | 129,914 |
| Counterparty
credit risk | 8,475 | 8,619 | 9,104 |
| Market
risk | 7,979 | 10,845 | 9,362 |
| Operational
risk | 21,031 | 21,031 | 21,930 |
| Total RWAs | 159,755 | 162,970 | 170,310 |
| Leverage | | | |
| Cash
and balances at central banks | 164,851 | 151,511 | 124,489 |
| Trading
assets | 66,357 | 70,195 | 68,990 |
| Derivatives | 103,770 | 109,556 | 166,523 |
| Financial
assets | 417,273 | 422,356 | 422,647 |
| Other
assets | 26,027 | 22,240 | 16,842 |
| Total assets | 778,278 | 775,858 | 799,491 |
| Derivatives | | | |
| - netting and variation margin | (107,160) | (112,441) | (172,658) |
| - potential future exposures | 36,382 | 37,468 | 38,171 |
| Securities
financing transactions gross up | 1,903 | 1,486 | 1,179 |
| Other
off balance sheet items | 44,292 | 43,979 | 45,853 |
| Regulatory
deductions and other adjustments | (14,340) | (13,831) | (8,943) |
| Claims
on central banks | (161,688) | (148,644) | (122,252) |
| Exclusion
of bounce back loans | (7,845) | (8,239) | (8,283) |
| UK
leverage exposure | 569,822 | 575,636 | 572,558 |
| UK leverage ratio % (2) | 5.9 | 6.2 | 6.4 |

(1) Based on CRR end-point including an IFRS 9 transitional adjustment of £1.0 billion (30 June 2021 - £1.2 billion, 31 December 2020 - £1.7 billion). Excluding this adjustment, the CET1 ratio would be 18.1% (30 June 2021 - 17.5%, 31 December 2020 - 17.5%). The amended article for the prudential treatment of software assets was implemented in December 2020. Excluding this adjustment the CET1 ratio at 30 September 2021 would be 18.4% (30 June 2021 - 17.9%, 31 December 2020 - 18.2%).

(2) The UK leverage ratio excludes central bank claims from the leverage exposure where deposits held are denominated in the same currency and of contractual maturity that is equal or longer than that of the central bank claims. Excluding an IFRS 9 transitional adjustment, the UK leverage ratio would be 5.8% (30 June 2021 - 6.0%, 31 December 2020 - 6.1%). The amended article for the prudential treatment of software assets was implemented in December 2020. Excluding this adjustment, the UK leverage ratio at 30 September 2021 would be 5.8% (30 June 2021 - 6.1%, 31 December 2020 - 6.3%).

Risk and capital management

Capital, liquidity and funding risk continued

Capital flow statement

The table below analyses the movement in CET1, AT1 and Tier 2 capital for the nine months ended 30 September 2021.

	CET1	AT1	Tier 2	Total
	£m	£m	£m	£m
At 1 January 2021	31,447	4,983	5,255	41,685
Attributable
profit for the period	2,516	-	-	2,516
Ordinary
interim dividend paid	(348)	-	-	(348)
Own
credit	28	-	-	28
Share
capital and reserve movements in respect of employee share
schemes	41	-	-	41
Directed
buy back	(1,231)	-	-	(1,231)
On-market
ordinary share buy back programme	(750)	-	-	(750)
Foreseeable
ordinary dividends	(402)	-	-	(402)
Foreseeable
pension contributions	(354)	-	-	(354)
Foreign
exchange reserve	(283)	-	-	(283)
FVOCI
reserve	(123)	-	-	(123)
Goodwill
and intangibles deduction	(65)	-	-	(65)
Deferred
tax assets	(5)	-	-	(5)
Prudential
valuation adjustments	22	-	-	22
New
issues of capital instruments	-	933	1,635	2,568
Redemption
of capital instruments	150	(2,041)	(1,456)	(3,347)
Net
dated subordinated debt instruments	-	-	76	76
Foreign
exchange movements	-	-	26	26
Adjustment
under IFRS 9 transitional arrangements	(774)	-	-	(774)
Other
movements	(7)	-	(14)	(21)
At 30 September 2021	29,862	3,875	5,522	39,259

● CET1 decrease is primarily due to the impact of the directed buy back and associated pension contribution of £1.2 billion, foreseeable dividends and pension contributions of £0.8 billion, a £0.8 billion decrease in the IFRS 9 transitional adjustment and other reserve movements. This is partially offset by an attributable profit in the period. At H1 2021, an on-market ordinary share buy back programme of £750 million was announced resulting in a foreseeable charge to capital, of which £288 million has been executed in the third quarter with the remaining £462 million remaining foreseeable at 30 September 2021.

● AT1 reflects the £400 million 4.5% Reset Perpetual Subordinated Contingent Convertible Notes issued in March 2021 and $750 million 4.600% Reset Perpetual Subordinated Contingent Convertible notes in June 2021. It also reflects a $2.7 billion redemption of 8.625% Perpetual Subordinated Contingent Convertible Additional notes in August 2021.

● The Tier 2 movement is primarily due to the redemption of own debt of £1.5 billion in March 2021, a £1.0 billion issuance of subordinated Tier 2 notes in May 2021 and a €750 million issuance of subordinated Tier 2 notes in September 2021.

Risk and capital management

Capital, liquidity and funding risk continued

Risk-weighted assets

The table below analyses the movement in RWAs during the period, by key drivers.

	Credit risk	Counterparty — credit risk	Market risk	Operational — risk	Total
	£bn	£bn	£bn	£bn	£bn
At 1 January 2021	129.9	9.1	9.4	21.9	170.3
Foreign
exchange movement	(0.8)	(0.1)	-	-	(0.9)
Business
movement	(4.0)	(0.4)	1.9	(0.9)	(3.4)
Risk parameter changes (1)	(1.4)	(0.1)	-	-	(1.5)
Model
updates	(0.4)	-	(3.3)	-	(3.7)
Other movements (2)	(0.8)	-	-	-	(0.8)
Acquisitions and disposals (3)	(0.2)	-	-	-	(0.2)
At 30 September 2021	122.3	8.5	8.0	21.0	159.8

The table below analyses segmental RWAs.

	Retail	Private	Commercial	International Banking & Markets — RBS	NatWest	Ulster	Central — items &
	Banking	Banking	Banking	International	Markets	Bank RoI	other	Total
Total RWAs	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
At 1 January 2021	36.7	10.9	75.1	7.5	26.9	11.8	1.4	170.3
Foreign
exchange movement	-	-	(0.3)	-	(0.2)	(0.4)	-	(0.9)
Business
movement	-	0.5	(6.5)	0.7	2.2	(0.7)	0.4	(3.4)
Risk parameter changes (1)	(0.1)	-	(0.8)	(0.1)	(0.1)	(0.5)	0.1	(1.5)
Model
updates	-	-	(0.4)	-	(3.3)	-	-	(3.7)
Other movements (2)	-	-	(0.7)	-	(0.1)	-	-	(0.8)
Acquisitions and disposals (3)	-	-	-	-	-	(0.2)	-	(0.2)
At 30 September 2021	36.6	11.4	66.4	8.1	25.4	10.0	1.9	159.8
Credit
risk	29.4	10.0	58.1	7.1	6.7	9.1	1.9	122.3
Counterparty
credit risk	0.2	0.1	0.3	-	7.9	-	-	8.5
Market
risk	-	-	-	-	8.0	-	-	8.0
Operational
risk	7.0	1.3	8.0	1.0	2.8	0.9	-	21.0
Total
RWAs	36.6	11.4	66.4	8.1	25.4	10.0	1.9	159.8

(1) Risk parameter changes relate to changes in credit quality metrics of customers and counterparties (such as probability of default and loss given default) as well as internal ratings based model changes relating to counterparty credit risk in line with European Banking Authority Pillar 3 Guidelines.

(2) The movements in other include the following:

a. RWA benefit of £0.8 billion as a result of the CRR COVID-19 amendment for Infrastructure Supporting Factor .

b. Asset transfers from NatWest Markets to Commercial.

(3) The movement in acquisitions & disposals reflected a portfolio sale of non-performing loans in Ulster Bank RoI.

● Total RWAs decreased to £159.8 billion during the period due to the following: o Credit risk RWAs decreased by £7.6 billion due to repayments and expired facilities in Commercial Banking and reductions in business lending and mortgages in Ulster Bank RoI in line with the announced phased withdrawal. o Operational risk RWAs decreased by £0.9 billion following the annual recalculation in Q1 2021. o Counterparty credit risk RWAs reduced by £0.6 billion, mainly reflecting reduced IMM exposures in NatWest Markets. o Market Risk RWAs decreased by £1.4 billion primarily driven by a decrease in modelled market risk reflecting a reduction in tenor basis risk in sterling flow rates, related to the transition from LIBOR to alternative risk-free rates.

Risk and capital management

Capital, liquidity and funding risk continued

Liquidity portfolio

The table below shows the liquidity portfolio by product, with primary liquidity aligned to internal stressed outflow coverage and regulatory liquidity coverage ratio (LCR) categorisation. Secondary liquidity comprises assets eligible for discount at central banks, which do not form part of the liquid asset portfolio for LCR or internal stressed outflow coverage purposes.

	Liquidity value — 30 September 2021	30 June 2021	31 December 2020
	NatWest	NatWest	NatWest
	Group (1)	Group	Group
	£m	£m	£m
Cash
and balances at central banks	161,763	148,904	115,820
AAA to AA- rated governments	25,699	34,639	50,901
A+ and lower rated governments	40	38	79
Government guaranteed issuers, public sector entities
and
government sponsored entities	265	265	272
International organisations and multilateral development
banks	3,027	3,175	3,140
LCR
level 1 bonds	29,031	38,117	54,392
LCR
level 1 assets	190,794	187,021	170,212
LCR
level 2 assets	118	116	124
Non-LCR
eligible assets	-	-	-
Primary
liquidity	190,912	187,137	170,336
Secondary liquidity (2)	86,856	89,909	91,985
Total
liquidity value	277,768	277,046	262,321

| (1) | NatWest Group includes the UK
Domestic Liquidity Sub-Group (NWB Plc, RBS plc, Coutts & Co and
Ulster Bank Limited), NatWest Markets Plc and other significant
operating subsidiaries that hold liquidity portfolios. These
include The Royal Bank of Scotland International Limited, NWM N.V.
and Ulster Bank Ireland DAC who hold managed portfolios that comply
with local regulations that may differ from PRA
rules. |
| --- | --- |
| (2) (3) | Comprises assets eligible for
discounting at the Bank of England and other central
banks. Following a change in methodology
in our internal stressed outflow coverage metric, cash placed at
Central Bank of Ireland within UBIDAC is now reported in the
liquidity portfolio. |

Condensed consolidated income statement for the period ended 30 September 2021 (unaudited)

| | Nine months ended — 30 September | 30
September | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- | --- | --- |
| | 2021 | 2020 | 2021 | 2021 | 2020 |
| | £m | £m | £m | £m | £m |
| Interest
receivable | 7,166 | 7,702 | 2,384 | 2,433 | 2,512 |
| Interest
payable | (1,296) | (1,924) | (430) | (448) | (586) |
| Net interest income | 5,870 | 5,778 | 1,954 | 1,985 | 1,926 |
| Fees
and commissions receivable | 1,982 | 2,081 | 670 | 665 | 651 |
| Fees
and commissions payable | (425) | (591) | (140) | (144) | (199) |
| Income
from trading activities | 326 | 1,054 | 95 | 71 | 252 |
| Other
operating income | 340 | (61) | 195 | 83 | (207) |
| Non-interest income | 2,223 | 2,483 | 820 | 675 | 497 |
| Total income | 8,093 | 8,261 | 2,774 | 2,660 | 2,423 |
| Staff
costs | (2,794) | (2,937) | (892) | (917) | (982) |
| Premises
and equipment | (765) | (902) | (263) | (254) | (251) |
| Other
administrative expenses | (1,291) | (1,081) | (588) | (326) | (385) |
| Depreciation
and amortisation | (613) | (644) | (199) | (209) | (196) |
| Operating expenses | (5,463) | (5,564) | (1,942) | (1,706) | (1,814) |
| Profit before impairment releases/(losses) | 2,630 | 2,697 | 832 | 954 | 609 |
| Impairment
releases/(losses) | 949 | (3,112) | 242 | 605 | (254) |
| Operating profit/(loss) before tax | 3,579 | (415) | 1,074 | 1,559 | 355 |
| Tax
(charge)/credit | (765) | 1 | (330) | (202) | (207) |
| Profit/(loss) for the period | 2,814 | (414) | 744 | 1,357 | 148 |
| Attributable to: | | | | | |
| Ordinary
shareholders | 2,516 | (644) | 674 | 1,222 | 61 |
| Preference
shareholders | 14 | 21 | 5 | 4 | 5 |
| Paid-in
equity holders | 241 | 272 | 63 | 91 | 80 |
| Non-controlling
interests | 43 | (63) | 2 | 40 | 2 |
| | 2,814 | (414) | 744 | 1,357 | 148 |
| Earnings per ordinary share | 21.5p | (5.3p) | 5.8p | 10.6p | 0.5p |
| Earnings per ordinary share - fully diluted | 21.4p | (5.3p) | 5.8p | 10.5p | 0.5p |

(1) Other operating income includes £138 million loss on redemption of own debt for the nine months ended 30 September 2021; Q3 2021 - £nil million (nine months ended 30 September 2020 - £324 million loss; Q2 2021 - £20 million loss; Q3 2020 - £324 million loss).

Condensed consolidated statement of comprehensive income for the period ended 30 September 2021 (unaudited)

| | Nine months ended — 30 September | 30
September | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- | --- | --- |
| | 2021 | 2020 | 2021 | 2021 | 2020 |
| | £m | £m | £m | £m | £m |
| Profit/(loss) for the period | 2,814 | (414) | 744 | 1,357 | 148 |
| Items that do not qualify for reclassification | | | | | |
| Remeasurement of retirement benefit
schemes (1) | (740) | 54 | (6) | (226) | (14) |
| Changes
in fair value of credit in financial liabilities | | | | | |
| designated at fair
value through profit or loss (FVTPL) | | | | | |
| due to
own credit risk | (29) | 20 | (4) | (18) | (63) |
| Fair
value through other comprehensive income (FVOCI) | | | | | |
| financial
assets | 11 | (43) | 3 | 7 | 77 |
| Tax (1) | 185 | 13 | 3 | 45 | 13 |
| | (573) | 44 | (4) | (192) | 13 |
| Items that do qualify for reclassification | | | | | |
| FVOCI
financial assets | (145) | (37) | - | (27) | 74 |
| Cash
flow hedges | (610) | 364 | (245) | (7) | (53) |
| Currency
translation | (267) | 425 | 21 | 55 | (150) |
| Tax | 130 | (85) | 65 | (48) | 94 |
| | (892) | 667 | (159) | (27) | (35) |
| Other comprehensive (loss)/income after tax | (1,465) | 711 | (163) | (219) | (22) |
| Total comprehensive income for the period | 1,349 | 297 | 581 | 1,138 | 126 |
| Attributable to: | | | | | |
| Ordinary
shareholders | 1,047 | 51 | 512 | 998 | 37 |
| Preference
shareholders | 14 | 21 | 5 | 4 | 5 |
| Paid-in
equity holders | 241 | 272 | 63 | 91 | 80 |
| Non-controlling
interests | 47 | (47) | 1 | 45 | 4 |
| | 1,349 | 297 | 581 | 1,138 | 126 |

(1) Following the purchase of ordinary shares from UKGI in March 2021, NatWest Group contributed £500 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 £365 million. There was also a pre tax loss of £176 million (€205 million) in relation to the interim re-measurement of the Ulster Bank Pension Scheme (Republic of Ireland), as a result of significant movements in underlying actuarial assumptions (June 2020: net gain of £90 million (€101 million)). In line with our policy, the present value of defined benefit obligations and the fair value of plan assets at the end of the interim reporting period, are assessed to identity significant market fluctuations and one-off events since the end of the prior financial year.

Condensed consolidated balance sheet as at 30 September 2021 (unaudited)

| | 30 September | 31
December |
| --- | --- | --- |
| | 2021 | 2020 |
| | £m | £m |
| Assets | | |
| Cash
and balances at central banks | 164,851 | 124,489 |
| Trading
assets | 66,357 | 68,990 |
| Derivatives | 103,770 | 166,523 |
| Settlement
balances | 8,140 | 2,297 |
| Loans
to banks - amortised cost | 9,251 | 6,955 |
| Loans
to customers - amortised cost | 361,022 | 360,544 |
| Other
financial assets | 47,000 | 55,148 |
| Intangible
assets | 6,723 | 6,655 |
| Other
assets | 11,164 | 7,890 |
| Total assets | 778,278 | 799,491 |
| Liabilities | | |
| Bank deposits | 17,375 | 20,606 |
| Customer
deposits | 476,319 | 431,739 |
| Settlement
balances | 7,792 | 5,545 |
| Trading
liabilities | 70,946 | 72,256 |
| Derivatives | 98,560 | 160,705 |
| Other
financial liabilities | 47,857 | 45,811 |
| Subordinated
liabilities | 8,675 | 9,962 |
| Notes
in circulation | 3,037 | 2,655 |
| Other
liabilities | 5,830 | 6,388 |
| Total liabilities | 736,391 | 755,667 |
| Equity | | |
| Ordinary
shareholders' interests | 37,492 | 38,367 |
| Other
owners' interests | 4,384 | 5,493 |
| Owners' equity | 41,876 | 43,860 |
| Non-controlling
interests | 11 | (36) |
| Total equity | 41,887 | 43,824 |
| Total liabilities and equity | 778,278 | 799,491 |

Condensed consolidated statement of changes in equity for the period ended 30 September 2021 (unaudited)

	Share
capital and					Total	Non
	statutory	Paid-in	Retained	Other	owners'	controlling	Total
	reserves (1)	equity	earnings	reserves*	equity	interests	equity
	£m	£m	£m	£m	£m	£m	£m
At 1 January 2021	13,216	4,999	12,567	13,078	43,860	(36)	43,824
Profit
attributable to ordinary shareholders
and
other equity owners	-	-	2,771	-	2,771	43	2,814
Other
comprehensive income
- Realised
gains/(losses) in period
on FVOCI equity shares	-	-	2	(2)	-	-	-
- Remeasurement of
retirement
benefit schemes (2)	-	-	(740)	-	(740)	-	(740)
- Changes in fair
value of credit in financial
liabilities designated at FVTPL
due
to
own credit risk	-	-	(29)	-	(29)	-	(29)
- Unrealised
losses: FVOCI and equity shares	-	-	-	(65)	(65)	-	(65)
- Unrealised
losses: cash flow hedges	-	-	-	(501)	(501)	-	(501)
- Foreign exchange
reserve movement	-	-	-	(271)	(271)	4	(267)
- Amount
transferred from equity to earnings	-	-	-	(178)	(178)	-	(178)
-
Tax	-	-	187	128	315	-	315
Ordinary
share dividends paid	-	-	(693)	-	(693)	-	(693)
Preference
share and paid-in equity
dividends
paid	-	-	(255)	-	(255)	-	(255)
Shares repurchased during the period (3,4)	-	-	(1,036)	-	(1,036)	-	(1,036)
Shares and securities issued during the
period (5)	87	937	-	-	1,024	-	1,024
Reclassification of paid-in equity (6)	-	(2,046)	-	-	(2,046)	-	(2,046)
Redemption of paid-in equity (7)	-	-	150	-	150	-	150
Redemption
of preference shares	24	-	(24)	-	-	-	-
Share-based
payments	-	-	(65)	-	(65)	-	(65)
Movement in own shares held (3)	(365)	-	-	-	(365)	-	(365)
At 30 September 2021	12,962	3,890	12,835	12,189	41,876	11	41,887
						30 September
							2021
Attributable to:							£m
Ordinary
shareholders							37,492
Preference
shareholders							494
Paid-in
equity holders							3,890
Non-controlling
interests							11
							41,887
*Other reserves consists of:
Merger
reserve							10,881
FVOCI
reserve							237
Cash
flow hedging reserve							(254)
Foreign
exchange reserve							1,325
							12,189

(1) Share capital and statutory reserves includes share premium, capital redemption reserve and own shares held.

(2) Following the purchase of ordinary shares from UKGI in March 2021, NatWest Group contributed £500 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 £365 million. There was also a pre tax loss of £176 million (€205 million) in relation to the interim re-measurement of the Ulster Bank Pension Scheme (Republic of Ireland), as a result of significant movements in underlying actuarial assumptions (June 2020: net gain of £90 million (€101 million)). In line with our policy, the present value of defined benefit obligations and the fair value of plan assets at the end of the interim reporting period, are assessed to identity significant market fluctuations and one-off events since the end of the prior financial year.

(3) In March 2021, there was an agreement with HM Treasury to buy 591 million ordinary shares in the Company from UK Government Investments Ltd (UKGI), at 190.5p per share for the total consideration of £1.13 billion. NatWest Group cancelled 391 million of the purchased ordinary shares, amounting to £744 million excluding fees, and held the remaining 200 million in own shares held, amounting to £381 million excluding fees. The nominal value of the share cancellation has been transferred to the capital redemption reserve.

(4) In line with the announcement in July 2021, NatWest Group plc repurchased and cancelled 137.1 million shares for total consideration of £292.2 million excluding fees. Of the 137.1 million shares bought back, 2.9 million shares were settled and cancelled in October 2021. The nominal value of the share cancellations has been transferred to the capital redemption reserve with the share premium element to retained earnings.

(5) AT1 capital notes totalling US$750 million less fees were issued in June 2021 (£400 million less fees were issued in March 2021 and US$1.49 billion less fees were issued in June 2020).

(6) In July 2021, paid-in equity reclassified to liabilities as the result of a call in August 2021 of US$2.65 billion AT1 Capital notes.

(7) The redemption of paid-in equity includes a tax credit of £16 million.

Notes

Basis of preparation

The condensed consolidated financial statements should be read in conjunction with NatWest Group plc 2020 Annual Report and Accounts which were prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006.

Going concern

Having reviewed NatWest Group's forecasts, projections, the potential impact of COVID-19, and other relevant evidence, the directors have a reasonable expectation that NatWest Group will continue in operational existence for a period of not less than twelve months. Accordingly, the results for the period ended 30 September 2021 have been prepared on a going concern basis.

Accounting policies

NatWest Group's principal accounting policies are as set out on pages 264 to 268 of the NatWest Group plc 2020 Annual Report and Accounts. Changes to accounting policies from 1 January 2021 had no material effect on NatWest Group plc's

accounts.

Critical accounting policies and key sources of estimation uncertainty

The judgements and assumptions that are considered to be the most important to the portrayal of NatWest Group's financial condition are those relating to deferred tax, fair value of financial instruments, loan impairment provisions, goodwill and provisions for liabilities and charges. These critical accounting policies and judgements are referenced on page 268 of the NatWest Group plc 2020 Annual Report and Accounts. Estimation uncertainty has been affected by the COVID-19 pandemic. Management's consideration of this source of uncertainty is outlined in the relevant sections of NatWest Group plc 2020 Annual Report and Accounts, including the ECL estimate for the period in the Risk and capital management section contained in the NatWest Group plc 2020 Annual Report and Accounts.

It was announced in the UK Government's Budget on 27 October 2021 that the UK banking surcharge will decrease from 8% to 3% from 1 April 2023. This change is expected to be enacted in 2022. The resulting change to the net deferred tax asset position in NatWest Group is not expected to be material.

Information used for significant estimates

The COVID-19 pandemic has continued to cause significant economic and social disruption. Key financial estimates are based

on a range of anticipated future economic conditions described by internally developed scenarios. Measurement of goodwill, deferred tax and expected credit losses are highly sensitive to reasonably possible changes in those anticipated conditions. Other reasonably possible assumptions about the future include a prolonged financial effect of the COVID-19 pandemic on the economy of the UK and other countries. Changes in judgements and assumptions could result in a material adjustment to those estimates in the next reporting periods, refer to the NatWest Group plc Risk factors in the 2020 Annual Report and Accounts.

Notes

Litigation and regulatory matters

NatWest Group plc's Interim Results 2021, issued on 30 July 2021, included disclosures about NatWest Group's litigation and regulatory matters in Note 12. Set out below are the material developments in those matters since publication of the Interim Results 2021.

Litigation

Residential mortgage-backed securities (RMBS) litigation in the US

The State of New Mexico, on behalf of certain state agencies, has been pursuing claims in New Mexico state court against NWMSI concerning certain historical RMBS offerings that allegedly involved materially false or misleading statements and/or omissions regarding the underwriting standards pursuant to which the mortgage loans underlying the RMBS were issued. NWMSI has reached an agreement in principle to settle this matter for an amount that is covered by an existing provision.

London Interbank Offered Rate (LIBOR) and other rates litigation

On 30 September 2021, the United States District Court for the Southern District of New York dismissed all claims against NWM Plc and other NatWest Group companies in the class action alleging that manipulation of JPY LIBOR and Euroyen TIBOR impacted the price of derivatives allegedly tied to those rates, finding a lack of antitrust standing and personal jurisdiction. The dismissal may be the subject of a future appeal.

Madoff

NWM N.V. is a defendant in two actions filed by the trustee for the bankruptcy 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 in redemptions that NWM N.V. allegedly received from certain Madoff feeder funds and certain swap counterparties. In these and similar cases pending against other defendants, the bankruptcy court previously held that, in order to proceed to discovery and pursue its claims, the trustee had to allege that a defendant lacked "good faith" when it received the funds in question. In August 2021, the United States Court of Appeals for the Second Circuit, in similar cases against other defendants, reversed the bankruptcy court's ruling on this question, holding instead that if a defendant wishes to rely on "good faith" arguments, it is a matter for the defendant to prove in their defence. The trustee's actions against NWM N.V. will proceed in light of the appellate court's ruling.

Odd lot corporate bond trading antitrust litigation

On 25 October 2021, the United States District Court for the Southern District of New York granted, on several grounds, defendants' motion to dismiss the class action complaint alleging that from August 2006 onwards various securities dealers, including NWMSI, conspired artificially to widen spreads for odd lots of corporate bonds bought or sold in the United States secondary market and to boycott electronic trading platforms that would have allegedly promoted pricing competition in the market for such bonds. The dismissal is subject to appeal.

Regulatory matters

US investigations relating to fixed-income securities

In October 2017, NWMSI entered into a non-prosecution agreement (NPA) with the United States Attorney for the District of Connecticut (USAO) in connection with alleged misrepresentations to counterparties relating to secondary trading in various forms of asset-backed securities. In the NPA, the USAO agreed not to file criminal charges relating to certain conduct and information described in the NPA, conditional on NWMSI and affiliated companies complying with the NPA's reporting and conduct requirements during its term, including by not engaging in conduct during the NPA that the USAO determines was a felony under federal or state law or a violation of the anti-fraud provisions of the United States securities law.

The NatWest Markets business is currently responding to a separate criminal investigation by the USAO and the US Department of Justice (DoJ) concerning unrelated trading by certain NWM Plc and NWMSI former traders involving alleged spoofing. The NPA (referred to above) has been extended as the criminal investigation has progressed and related discussions with the USAO and the DoJ, including relating to the impact of such alleged conduct on the status of the NPA and the potential consequences thereof, have been ongoing. On 30 August 2021, NWMSI received a letter from USAO stating that it had determined that NWMSI had materially breached the NPA as a result of the alleged spoofing activity and that NWMSI is subject to prosecution for securities fraud in respect of the conduct underlying the NPA. NatWest Markets is engaging in discussions with the U.S. government about the resolution of the alleged spoofing activity investigation and the USAO's determination of the breach of the NPA, including why criminal prosecution of the conduct underlying the NPA should not be pursued.

The precise duration and outcome of this matter remains uncertain.

Notes

Litigation and regulatory matters continued

Adverse outcomes or resolution of current or future legal or regulatory actions (in particular, a finding of criminal liability in this matter) could have material collateral consequences for NatWest Group's business and result in restrictions or limitations on NatWest Group's operations.

These may include the effective or actual disqualification from carrying on certain regulated activities and consequences resulting from the need to reapply for various important licences or obtain waivers to conduct certain existing activities of NatWest Group, particularly but not solely in the US, which may take a significant period of time and the results of which are uncertain. Disqualification from carrying on any activities, whether automatic as a result of the resolution of a particular matter or as a result of the failure to obtain such licences or waivers could adversely impact NatWest Group's business, in particular in the

US. This in turn and/or any fines, settlement payments or penalties could adversely impact NatWest Group's reported financial results and condition, capital position or reputation.

FCA investigation into NatWest Group's compliance with the Money Laundering Regulations 2007

In July 2017, the FCA notified NatWest Group that it was undertaking an investigation into NatWest Group's compliance with the UK Money Laundering Regulations 2007 ("MLR 2007") in relation to certain money service businesses and related parties.

In March 2021, the FCA notified NatWest Group that it had commenced criminal proceedings against NWB Plc for three offences under regulation 45(1) of the MLR 2007 arising from the handling of the accounts of a UK incorporated customer.

On 7 October 2021, NWB Plc pleaded guilty to the three offences under regulation 45(1) of the MLR 2007 for failure to comply with regulation 8(1) of the MLR 2007 between 7 November 2013 and 23 June 2016 and 8(3) and 14(1) of the MLR 2007 between 8 November 2012 and 23 June 2016.

These regulations required the firm to determine and conduct risk sensitive due diligence and ongoing monitoring of its customers for the purposes of preventing money laundering. The offences relate to operational weaknesses between 2012 and 2016, during which period NWB Plc did not adequately monitor the accounts of that customer.

NWB Plc has cooperated fully with the FCA since its investigation began. The FCA has confirmed it will not take action against any individual current or former employee of NWB Plc.

The case has been remitted to the Crown Court for sentencing, which will be determined at a hearing scheduled to take place on a date to be determined by the Crown Court. NWB Plc made a provision at 30 September 2021 in anticipation of a potential fine being imposed at that hearing, but is not disclosing the amount as it remains the matter of ongoing judicial proceedings. In addition to the fine, other material adverse collateral consequences may occur as a result of these convictions.

Review and investigation of treatment of tracker mortgage customers in Ulster Bank Ireland DAC

In December 2015, correspondence was received from the CBI setting out an industry examination framework in respect of the sale of tracker mortgages from approximately 2001 until the end of 2015. The redress and compensation phase has concluded, although an appeals process is currently anticipated to run until at least the end of 2021. NatWest Group has made provisions totalling €350 million (£300 million), of which €332 million (£285 million) had been utilised by 30 September 2021 in respect of redress and compensation.

UBIDAC previously identified further legacy business issues, as an extension to the tracker mortgage review. These remediation programmes are ongoing. NatWest Group has made provisions of €163 million (£140 million), of which €155 million (£133 million) had been utilised by 30 September 2021 for these programmes.

UBIDAC customers continue to lodge tracker mortgage complaints with the Financial Services and Pensions Ombudsman (FSPO). UBIDAC is challenging two recent FSPO adjudications in the Irish High Court. The outcome and impact of that challenge on those and related complaints is uncertain but potentially may be material.

Post balance sheet events

Other than as disclosed there have been no significant events between 30 September 2021 and the date of approval of these accounts that would require a change to or additional disclosure in the condensed consolidated financial statements.

Additional information

Presentation of information

'Parent company' refers to NatWest Group plc and 'NatWest Group' refers to NatWest Group plc and its subsidiary and associated undertakings. The term 'NWH Group' refers to NatWest Holdings Limited ('NWH') and its subsidiary and associated undertakings. The term 'NWM Group' refers to NatWest Markets Plc ('NWM Plc') and its subsidiary and associated undertakings. The term 'NWM N.V.' refers to NatWest Markets N.V. The term 'NWMSI' refers to NatWest Markets Securities, Inc. The term 'RBS plc' refers to The Royal Bank of Scotland plc. The term 'NWB Plc' refers to National Westminster Bank Plc. The term 'UBIDAC' refers to Ulster Bank Ireland DAC. The term 'RBSI Holdings' refers to The Royal Bank of Scotland International (Holdings) Limited.

NatWest Group publishes its financial statements in pounds sterling ('£' or 'sterling'). The abbreviations '£m' and '£bn' represent millions and thousands of millions of pounds sterling, respectively, and references to 'pence' represent pence in the United Kingdom ('UK'). References 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 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').

To aid readability, this document retains references to EU legislative and regulatory provisions in effect in the UK before 1 January 2021 that have now been implemented in UK domestic law. These references should be read and construed as including references to the applicable UK implementation measures with effect from 1 January 2021.

Statutory results

Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2020 have been filed with the Registrar of Companies. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.

MAR - Inside Information

This announcement contains information that qualified or may have qualified as inside information for NatWest Group plc, for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR) as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018. This announcement is made by Alexander Holcroft, Head of Investor Relations for NatWest Group plc.

Contacts

| Analyst
enquiries: | Alexander Holcroft,
Investor Relations | +44
(0) 20 7672 1758 |
| --- | --- | --- |
| Media
enquiries | NatWest
Group Press Office | +44 (0) 131 523
4205 |
| | Management presentation | Webcast and dial in details |
| Date: | 29
October 2021 | www.natwestgroup.com/results |
| Time: | 8:45am
UK time | International:
+44 (0) 203 057 6566 |
| Conference ID: | 1653446 | UK Free
Call: 0800 279 5995 US
Local Dial-In, New York: +1 646 741 2115 |

Available on www.natwestgroup.com/results

● Q3 2021 Interim Management Statement and slides.

● A financial supplement containing income statement, balance sheet and segment performance for the quarter ended 30 September 2021.

● NatWest Group and NWH Group Pillar 3 supplements.

● Climate, Purpose and ESG measures supplement Q3 2021.

Forward looking statements

This document contains 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 NatWest Group's future economic results, business plans and strategies. In particular, this document may include forward-looking statements relating to NatWest Group plc in respect of, but not limited to: the impact of the COVID-19 pandemic, 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 its Purpose-led strategy and the refocusing of its NatWest Markets franchise, its ESG 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 alternative risk free rates and NatWest Group's exposure to economic and political risks (including with respect to terms surrounding Brexit and climate change), operational risk, conduct risk, cyber 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, the impact of the COVID-19 pandemic, future acquisitions, the outcome of legal, regulatory and governmental actions and investigations, the level and extent of future impairments and write-downs (including with respect to goodwill), legislative, political, fiscal and regulatory developments, accounting standards, competitive conditions, technological developments, interest and exchange rate fluctuations, general economic and political conditions and the impact of climate-related risks and the transitioning to a low carbon economy. These and other factors, risks and uncertainties that may impact any forward-looking statement or NatWest Group plc's actual results are discussed in NatWest Group plc's UK 2020 Annual Report and Accounts (ARA), NatWest Group plc's Interim Results for H1 2021 and NatWest Group plc's filings with the US Securities and Exchange Commission, including, but not limited to, NatWest Group plc's most recent Annual Report on Form 20-F and Reports on Form 6-K. The forward-looking statements contained in this document speak only as of the date of this document and NatWest Group 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: 2138005O9XJIJN4JPN90

Appendix

Non-IFRS financial measures

Appendix - Non-IFRS financial measures

NatWest Group prepares its financial statements in accordance with generally accepted accounting principles (GAAP). This document contains a number of adjusted or alternative performance measures, also known as non-GAAP or non-IFRS performance measures. These measures are adjusted for notable and other defined items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. The non-IFRS measures provide users of the financial statements with a consistent basis for comparing business performance between financial periods and information on elements of performance that are one-off in nature. The non-IFRS measures also include the calculation of metrics that are used throughout the banking industry. These non-IFRS measures are not measures within the scope of IFRS and are not a substitute for IFRS measures. These measures include:

Non-IFRS financial measures

Measure	Basis of preparation	Additional analysis or reconciliation
NatWest Group return on tangible equity	Annualised profit or loss for the period attributable to ordinary
shareholders divided by average tangible equity. Average tangible
equity is average total equity excluding non-controlling interests
(NCI) less average intangible assets and average other owners'
equity.	Table 1
Segmental return on equity	Segmental operating profit or loss adjusted for preference share
dividends and tax divided by average notional tangible equity,
allocated at an operating segment specific rate, of the period
average segmental risk-weighted assets incorporating the effect of
capital deductions (RWAes).	Table 2
Operating expenses analysis - management view	The
management analysis of operating expenses shows strategic costs and
litigation and conduct costs in separate lines. Depreciation and
amortisation, and other administrative expenses attributable to
these costs are included in strategic costs and litigation and
conduct costs lines for management analysis. These amounts are
included in staff, premises and equipment and other administrative
expenses in the statutory analysis.	Table 3
Cost:income ratio	Total
operating expenses less operating lease depreciation divided by
total income less operating lease depreciation.	Table 4
Net interest margin (NIM)	Net interest income as a percentage of average interest-earning
assets.	Table
5
Bank NIM	Net interest income of the banking business less NatWest Markets
(NWM) element as a percentage of interest-earning assets of the
banking business less NWM element.	Table 5
Bank NIM excluding Liquid Asset Buffer	Net interest income of the banking business less NWM element as a
percentage of interest-earning assets of the banking business less
NWM element and Liquid Asset Buffer.	Table 5
Income across UK and RBSI retail and commercial businesses
excluding notable items	Comprises income in the Retail Banking, Commercial Banking, Private
Banking and RBS International operating segments, excluding notable
items.	Table 7
Net lending in the UK and RBSI retail and commercial businesses
excluding UK Government support schemes	Comprises customer loans in the Retail Banking, Commercial Banking,
Private Banking and RBS International operating segments, excluding
UK Government support schemes.	Table 8
Customer deposits across UK and RBSI retail and commercial
businesses	Comprises customer deposits in the Retail Banking, Commercial
Banking, Private Banking and RBS International operating
segments.	Table 9
Other expenses excluding operating lease depreciation (OLD) and
Ulster Bank RoI direct costs.	Total
operating expenses less strategic, litigation and conduct costs,
operating lease depreciation and Ulster Bank RoI direct
costs.	Table
10
Commentary - adjusted periodically for specific items	NatWest
Group and segmental business performance commentary have been
adjusted for the impact of specific items such as notable items,
operating lease depreciation, strategic costs and litigation and
conduct costs.	Notable
items - page 4, Operating lease depreciation, Strategic
costs and litigation and conduct costs - pages 12 to 16.

Appendix - Non-IFRS financial measures

Performance metrics based on but not defined under IFRS

Measure	Basis of preparation	Additional analysis or reconciliation
Loan:deposit ratio	Net
customer loans held at amortised cost divided by total customer
deposits.	Table 6
Tangible net asset value (TNAV)	Tangible
equity divided by the number of ordinary shares in issue (excluding
own shares held). Tangible equity is ordinary shareholders' equity
less intangible assets.	Page 3
Funded assets	Total
assets less derivatives.	Pages 3,
10 and 12 to 16
Loan impairment rate	The
annualised loan impairment charge divided by gross customer
loans.	Pages 3,
6 to 9, and 11 to 16
Third party customer asset rate	Third
party customer asset rate is calculated as annualised interest
payable or receivable on third-party loans to customers as a
percentage of third-party loans to customers, including those
reported as assets held for sale. This excludes intragroup items,
loans to banks and liquid asset portfolios, which are included for
the calculation of net interest margin.	Pages 12
to 16
Third party customer funding rate	Third
party customer funding rate is calculated as annualised interest
payable or receivable on third-party customer deposits as a
percentage of third-party customer deposits, including interest
bearing and non-interest bearing customer deposits. Intragroup
items, bank deposits, debt securities in issue and subordinated
liabilities are excluded for customer funding rate
calculation.	Pages 12
to 16
Assets under management and administration (AUMA)	AUMA
comprises both assets under management (AUMs) and assets
under administration
(AUAs) serviced through the Private Banking franchise. AUMs
comprise assets where the investment management is undertaken by
Private Banking on behalf of Private Banking, Retail Banking and
RBSI customers. AUAs
comprise third party assets held on an execution-only basis in
custody by Private Banking, Retail Banking and RBSI for their
customers accordingly, for which the execution services are
supported by Private Banking. Private Banking receive a fee in
respect of providing investment management and execution services
to Retail Banking and RBSI franchises.	Pages 3 and 7
Depositary assets	Assets
held by RBSI as an independent trustee and in a depositary service
capacity.	Page 9

Appendix Non-IFRS financial measures

Return on tangible equity

| | Nine months ended — 30 September | 30
September | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- | --- | --- |
| | 2021 | 2020 | 2021 | 2021 | 2020 |
| Profit/(loss)
attributable to ordinary shareholders (£m) | 2,516 | (644) | 674 | 1,222 | 61 |
| Annualised
profit/(loss) attributable to ordinary | | | | | |
| shareholders
(£m) | 3,355 | (859) | 2,696 | 4,888 | 244 |
| Average
total equity excluding NCI (£m) | 42,978 | 43,766 | 42,507 | 43,011 | 43,145 |
| Adjustment
for other owners' equity and intangibles (£m) | (11,525) | (11,760) | (10,881) | (11,712) | (11,482) |
| Adjusted
total tangible equity (£m) | 31,453 | 32,006 | 31,626 | 31,299 | 31,663 |
| Return
on tangible equity (%) | 10.7% | (2.7%) | 8.5% | 15.6% | 0.8% |

Segmental return on equity

	Retail	Private	Commercial	International Banking & Markets — RBS	NatWest	Ulster
	Banking	Banking	Banking	International	Markets	Bank RoI
Nine months ended 30 September 2021	£m	£m	£m	£m	£m	£m
Operating
profit/(loss) (£m)	1,583	240	1,964	260	(409)	31
Preference
share cost allocation (£m)	(60)	(15)	(114)	(15)	(47)	-
Adjustment
for tax (£m)	(426)	(63)	(518)	(43)	128	-
Adjusted
attributable profit/(loss) (£m)	1,097	162	1,332	202	(328)	31
Annualised
adjusted attributable profit/(loss) (£m)	1,463	216	1,776	269	(437)	41
Average
RWAe (£bn)	35.7	11.1	70.6	7.7	28.8	10.8
Equity
factor	14.5%	12.5%	11.5%	16.0%	15.0%	15.5%
RWAe
applying equity factor (£bn)	5.2	1.4	8.1	1.2	4.3	1.7
Return
on equity	28.3%	15.5%	21.9%	21.9%	(10.1%)	2.5%
Nine months ended 30 September 2020
Operating
profit (£m)	758	141	(684)	112	3	(244)
Preference
share cost allocation (£m)	(66)	(17)	(114)	(15)	(51)	-
Adjustment
for tax (£m)	(194)	(35)	223	(14)	13	-
Adjusted
attributable profit/(loss) (£m)	498	89	(575)	83	(35)	(244)
Annualised
adjusted attributable profit/(loss) (£m)	664	119	(767)	111	(47)	(325)
Average
RWAe (£bn)	37.6	10.3	76.6	6.9	39.2	12.6
Equity
factor	14.5%	12.5%	11.5%	16.0%	15.0%	15.5%
RWAe
applying equity factor (£bn)	5.5	1.3	8.8	1.1	5.9	2.0
Return
on equity	12.2%	9.2%	(8.7%)	10.0%	(0.8%)	(16.6%)

Appendix Non-IFRS financial measures

Segmental return on equity continued

	Retail	Private	Commercial	International Banking & Markets — RBS	NatWest	Ulster
	Banking	Banking	Banking	International	Markets	Bank RoI
Quarter ended 30 September 2021	£m	£m	£m	£m	£m	£m
Operating
profit/(loss) (£m)	563	94	625	87	(160)	38
Preference
share cost allocation (£m)	(20)	(5)	(38)	(5)	(16)	-
Adjustment
for tax (£m)	(152)	(25)	(164)	(14)	49	-
Adjusted
attributable profit/(loss) (£m)	391	64	423	68	(127)	38
Annualised
adjusted attributable profit/(loss) (£m)	1,564	256	1,692	272	(508)	152
Average
RWAe (£bn)	36.1	11.3	67.6	7.8	27.9	10.2
Equity
factor	14.5%	12.5%	11.5%	16.0%	15.0%	15.5%
RWAe
applying equity factor (£bn)	5.2	1.4	7.8	1.3	4.2	1.6
Return
on equity	29.9%	18.1%	21.7%	21.6%	(12.1%)	9.6%
Quarter ended 30 June 2021
Operating
profit/(loss) (£m)	585	82	864	105	(169)	(18)
Preference
share cost allocation (£m)	(20)	(5)	(38)	(5)	(15)	-
Adjustment
for tax (£m)	(158)	(22)	(231)	(18)	52	-
Adjusted
attributable profit/(loss)(£m)	407	55	595	83	(132)	(18)
Annualised
adjusted attributable profit/(loss) (£m)	1,628	220	2,380	332	(528)	(72)
Average
RWAe (£bn)	35.1	11.1	70.6	7.8	29.2	10.8
Equity
factor	14.5%	12.5%	11.5%	16.0%	15.0%	15.5%
RWAe
applying equity factor (£bn)	5.1	1.4	8.1	1.2	4.4	1.7
Return
on equity	32.0%	15.9%	29.3%	26.5%	(12.1%)	(4.3%)
Quarter ended 30 September 2020
Operating
profit/(loss) (£m)	305	57	324	25	(66)	(5)
Preference
share cost allocation (£m)	(22)	(6)	(38)	(5)	(17)	-
Adjustment
for tax (£m)	(79)	(14)	(80)	(3)	23	-
Adjusted
attributable profit/(loss) (£m)	204	37	206	17	(60)	(5)
Annualised
adjusted attributable profit/(loss) (£m)	816	148	824	68	(240)	(20)
Average
RWAe (£bn)	36.7	10.5	77.8	6.8	34.0	12.3
Equity
factor	14.5%	12.5%	11.5%	16.0%	15.0%	15.5%
RWAe
applying equity factor (£bn)	5.3	1.3	8.9	1.1	5.1	1.9
Return
on equity	15.3%	11.2%	9.2%	6.4%	(4.7%)	(1.0%)

Operating expenses analysis

Statutory analysis (1,2)
	Nine months ended		Quarter ended
	30 September	30
September	30 September	30
June	30
September
	2021	2020	2021	2021	2020
Operating expenses	£m	£m	£m	£m	£m
Staff
costs	2,794	2,937	892	917	982
Premises
and equipment	765	902	263	254	251
Other
administrative expenses	1,291	1,081	588	326	385
Depreciation
and amortisation	613	644	199	209	196
Total operating expenses	5,463	5,564	1,942	1,706	1,814

(1) On a statutory, or GAAP, basis strategic costs are included within staff costs, premises and equipment, depreciation and amortisation and other administrative expenses. Strategic costs relate to restructuring provisions, related costs and projects that are transformational in nature.

(2) On a statutory, or GAAP, basis litigation and conduct costs are included within other administrative expenses.

Appendix Non-IFRS financial measures

Operating expenses analysis continued

Non-statutory analysis
	Nine months ended
	30 September 2021
		Litigation
		and		Statutory
	Strategic	conduct	Other	operating
Operating expenses	costs	costs	expenses	expenses
Staff
costs	289	-	2,505	2,794
Premises
and equipment	30	-	735	765
Other
administrative expenses	68	276	947	1,291
Depreciation
and amortisation	22	-	591	613
Total	409	276	4,778	5,463
	Nine months ended
	30 September 2020
		Litigation
		and		Statutory
	Strategic	conduct	Other	operating
Operating expenses	costs	costs	expenses	expenses
Staff
costs	315	-	2,622	2,937
Premises
and equipment	170	-	732	902
Other
administrative expenses	143	(81)	1,019	1,081
Depreciation
and amortisation	59	-	585	644
Total	687	(81)	4,958	5,564
	Quarter ended
	30 September 2021
		Litigation
		and		Statutory
	Strategic	conduct	Other	operating
Operating expenses	costs	costs	expenses	expenses
Staff
costs	74	-	818	892
Premises
and equipment	(2)	-	265	263
Other
administrative expenses	4	294	290	588
Depreciation
and amortisation	1	-	198	199
Total	77	294	1,571	1,942
	Quarter ended
	30 June 2021
		Litigation
		and		Statutory
	Strategic	conduct	Other	operating
Operating expenses	costs	costs	expenses	expenses
Staff
costs	104	-	813	917
Premises
and equipment	16	-	238	254
Other
administrative expenses	41	(34)	319	326
Depreciation
and amortisation	11	-	198	209
Total	172	(34)	1,568	1,706
	Quarter ended
	30 September 2020
		Litigation
		and		Statutory
	Strategic	conduct	Other	operating
Operating expenses	costs	costs	expenses	expenses
Staff
costs	155	-	827	982
Premises
and equipment	22	-	229	251
Other
administrative expenses	43	8	334	385
Depreciation
and amortisation	3	-	193	196
Total	223	8	1,583	1,814

Appendix Non-IFRS performance measures

Cost:income ratio

	Retail	Private	Commercial	International Banking & Markets — RBS	NatWest	Ulster	Central — items	Total — NatWest
	Banking	Banking	Banking	International	Markets	Bank RoI	& other	Group
Nine months ended 30 September 2021	£m	£m	£m	£m	£m	£m	£m	£m
Operating
expenses	(1,739)	(365)	(1,708)	(172)	(818)	(384)	(277)	(5,463)
Operating
lease depreciation	-	-	106	-	-	-	-	106
Adjusted
operating expenses	(1,739)	(365)	(1,602)	(172)	(818)	(384)	(277)	(5,357)
Total
income	3,281	563	2,888	392	390	388	191	8,093
Operating
lease depreciation	-	-	(106)	-	-	-	-	(106)
Adjusted
total income	3,281	563	2,782	392	390	388	191	7,987
Cost:income
ratio	53.0%	64.8%	57.6%	43.9%	209.7%	99.0%	nm	67.1%
Nine months ended 30 September 2020
Operating
expenses	(1,722)	(364)	(1,774)	(179)	(1,009)	(372)	(144)	(5,564)
Operating
lease depreciation	-	-	110	-	-	-	-	110
Adjusted
operating expenses	(1,722)	(364)	(1,664)	(179)	(1,009)	(372)	(144)	(5,454)
Total
income	3,207	579	3,007	371	1,050	379	(332)	8,261
Operating
lease depreciation	-	-	(110)	-	-	-	-	(110)
Adjusted
total income	3,207	579	2,897	371	1,050	379	(332)	8,151
Cost:income
ratio	53.7%	62.9%	57.4%	48.2%	96.1%	98.2%	nm	66.9%

| Quarter ended 30 September 2021 — Operating
expenses | (552) | (116) | (556) | (60) | (258) | (123) | (277) | (1,942) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Operating
lease depreciation | - | - | 36 | - | - | - | - | 36 |
| Adjusted
operating expenses | (552) | (116) | (520) | (60) | (258) | (123) | (277) | (1,906) |
| Total
income | 1,131 | 195 | 965 | 136 | 95 | 145 | 107 | 2,774 |
| Operating
lease depreciation | - | - | (36) | - | - | - | - | (36) |
| Adjusted
total income | 1,131 | 195 | 929 | 136 | 95 | 145 | 107 | 2,738 |
| Cost:income
ratio | 48.8% | 59.5% | 56.0% | 44.1% | 271.6% | 84.8% | nm | 69.6% |
| Quarter ended 30 June 2021 | | | | | | | | |
| Operating
expenses | (600) | (128) | (569) | (55) | (285) | (136) | 67 | (1,706) |
| Operating
lease depreciation | - | - | 35 | - | - | - | - | 35 |
| Adjusted
operating expenses | (600) | (128) | (534) | (55) | (285) | (136) | 67 | (1,671) |
| Total
income | 1,094 | 183 | 982 | 133 | 106 | 119 | 43 | 2,660 |
| Operating
lease depreciation | - | - | (35) | - | - | - | - | (35) |
| Adjusted
total income | 1,094 | 183 | 947 | 133 | 106 | 119 | 43 | 2,625 |
| Cost:income
ratio | 54.8% | 69.9% | 56.4% | 41.4% | 268.9% | 114.3% | nm | 63.7% |
| Quarter ended 30 September 2020 | | | | | | | | |
| Operating
expenses | (647) | (112) | (553) | (53) | (302) | (127) | (20) | (1,814) |
| Operating
lease depreciation | - | - | 37 | - | - | - | - | 37 |
| Adjusted
operating expenses | (647) | (112) | (516) | (53) | (302) | (127) | (20) | (1,777) |
| Total
income | 1,022 | 187 | 1,004 | 112 | 234 | 130 | (266) | 2,423 |
| Operating
lease depreciation | - | - | (37) | - | - | - | - | (37) |
| Adjusted
total income | 1,022 | 187 | 967 | 112 | 234 | 130 | (266) | 2,386 |
| Cost:income
ratio | 63.3% | 59.9% | 53.4% | 47.3% | 129.1% | 97.7% | nm | 74.5% |

Appendix Non-IFRS performance measures

Net interest margin

| | Nine months ended — 30 September | 30
September | Quarter ended or as at — 30 September | 30
June | 30
September |
| --- | --- | --- | --- | --- | --- |
| | 2021 | 2020 | 2021 | 2021 | 2020 |
| | £m | £m | £m | £m | £m |
| NatWest
Group net interest income | 5,870 | 5,778 | 1,954 | 1,985 | 1,926 |
| Less
NWM net interest income | 4 | 55 | 1 | (4) | 21 |
| Net
interest income excluding NWM | 5,874 | 5,833 | 1,955 | 1,981 | 1,947 |
| Annualised
NatWest Group net interest income | 7,848 | 7,718 | 7,752 | 7,962 | 7,662 |
| Annualised
net interest income excluding NWM | 7,854 | 7,792 | 7,756 | 7,946 | 7,746 |
| Average
interest earning assets (IEA) | 525,352 | 487,777 | 537,419 | 526,124 | 508,156 |
| Less
NWM average IEA | 32,397 | 38,403 | 32,497 | 32,263 | 39,213 |
| Bank
average IEA | 492,955 | 449,374 | 504,922 | 493,861 | 468,943 |
| Less liquid asset buffer average IEA (1) | 162,907 | 131,094 | 173,654 | 163,437 | 144,619 |
| Bank
average IEA excluding liquid asset buffer | 330,048 | 318,280 | 331,268 | 330,424 | 324,324 |
| Net
interest margin | 1.49% | 1.58% | 1.44% | 1.51% | 1.51% |
| Bank
net interest margin | 1.59% | 1.73% | 1.54% | 1.61% | 1.65% |
| (NatWest
Group NIM excluding NWM) | | | | | |
| Bank
net interest margin excluding liquid asset buffer | 2.38% | 2.45% | 2.34% | 2.40% | 2.39% |

(1) Liquid asset buffer consists of assets held by NatWest Group, such as cash balances at central banks and high-quality government debt securities, that can be used to ensure repayment of financial obligations as they fall due.

Loan:deposit ratio

| | As at — 30 September | 30
June | 30
September |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £m | £m | £m |
| Loans
to customers - amortised cost | 361,022 | 362,711 | 353,691 |
| Customer
deposits | 476,319 | 467,214 | 418,358 |
| Loan:deposit
ratio (%) | 76% | 78% | 85% |

Income across UK and RBSI retail and commercial businesses excluding notable items

| | Nine months ended — 30 September | 30
September | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- | --- | --- |
| | 2021 | 2020 | 2021 | 2021 | 2020 |
| | £m | £m | £m | £m | £m |
| Retail
Banking | 3,281 | 3,207 | 1,131 | 1,094 | 1,022 |
| Private
Banking | 563 | 579 | 195 | 183 | 187 |
| Commercial
Banking | 2,888 | 3,007 | 965 | 982 | 1,004 |
| RBS
International | 392 | 371 | 136 | 133 | 112 |
| Income | 7,124 | 7,164 | 2,427 | 2,392 | 2,325 |
| Less
notable items | (14) | 3 | (4) | (24) | (5) |
| Total
UK and RBSI retail and commercial businesses | | | | | |
| income
excluding notable items | 7,110 | 7,167 | 2,423 | 2,368 | 2,320 |

Appendix Non-IFRS performance measures

Net lending in the UK and RBSI retail and commercial businesses excluding UK Government support schemes

| | 30 September | 30
June | 30
September |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £bn | £bn | £bn |
| Retail
Banking | 180.5 | 178.1 | 166.7 |
| Private
Banking | 18.4 | 18.0 | 16.5 |
| Commercial
Banking | 102.7 | 103.8 | 110.0 |
| RBS
International | 15.6 | 15.1 | 12.8 |
| Loans
to customers | 317.2 | 315.0 | 306.0 |
| Less UK
Government support schemes | (12.3) | (13.0) | (11.3) |
| Total
UK and RBSI retail and commercial businesses | | | |
| net lending
excluding UK Government support schemes | 304.9 | 302.0 | 294.7 |

Customer deposits across UK and RBSI retail and commercial businesses

| | 30 September | 30
June | 30
September |
| --- | --- | --- | --- |
| | 2021 | 2021 | 2020 |
| | £bn | £bn | £bn |
| Retail
Banking | 186.3 | 184.1 | 164.9 |
| Private
Banking | 35.7 | 34.7 | 30.3 |
| Commercial
Banking | 178.3 | 176.0 | 161.3 |
| RBS
International | 36.9 | 33.9 | 30.4 |
| Total
UK and RBSI retail and commercial businesses customer
deposits | 437.2 | 428.7 | 386.9 |

Other expenses excluding operating lease depreciation (OLD) and Ulster Bank RoI direct costs

| | Nine months ended — 30 September | 30
September | Quarter ended — 30 September | 30
June | 30
September |
| --- | --- | --- | --- | --- | --- |
| | 2021 | 2020 | 2021 | 2021 | 2020 |
| | £m | £m | £m | £m | £m |
| Operating
expenses | 5,463 | 5,564 | 1,942 | 1,706 | 1,814 |
| Less
strategic, litigation and conduct costs | (685) | (606) | (371) | (138) | (231) |
| Other
expenses | 4,778 | 4,958 | 1,571 | 1,568 | 1,583 |
| Less
OLD | (106) | (110) | (36) | (35) | (37) |
| Less
Ulster Bank RoI direct costs | (237) | (215) | (75) | (92) | (73) |
| Other
expenses excluding OLD and | | | | | |
| Ulster Bank
RoI direct costs | 4,435 | 4,633 | 1,460 | 1,441 | 1,473 |

Date: 29 October 2021

| NATWEST
GROUP plc (Registrant) |
| --- |
| By: /s/
Jan Cargill |
| Name:
Jan Cargill |
| Title:
Chief Governance Officer and Company Secretary |

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