Quarterly Report • Jul 30, 2021
Quarterly Report
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natwestgroup.com
"These results have been driven by good operating performances across the Group, underpinned by a robust loan book and a strong capital position. Defaults remain low and, given the improved outlook, we have released a further £0.6 billion of impairment provisions in the quarter. While we see the potential for a more rapid recovery, we will continue to take an appropriate and conservative approach as the government schemes wind down and the economy reopens.
As a result of our strong and resilient performance, coupled with our capital strength and cautiously optimistic outlook, we are announcing an interim dividend of 3p per share and share buy-back of up to £750 million. We are also increasing our minimum annual distribution to shareholders to £1.0 billion for the next three years. Taken together, this means our total distributions for 2021 will be a minimum of £2.9 billion.
We continue to make progress against our strategic targets and to accelerate our digital transformation as we build a bank that is relevant to our customers in every region of the UK and supports them at every stage of their lives. As the UK's leading business bank, we are determined to remove barriers to entry and help the economy build back better. Against the background of an ongoing pandemic, our commitment to helping people, families and businesses to rebuild and thrive has never been more important. Because if they thrive, so will we."
The rollout of COVID-19 vaccines over the first half of 2021 has contributed towards an improved economic outlook. Our central forecasts are disclosed on pages 20 to 23. The outlook remains subject to significant uncertainty and we will continue to refine our internal forecast as the economic position evolves. We retain the guidance provided at the full year results announcement with the exception of the following:
Note:
(1) The guidance, targets, expectations and trends discussed in this section represent management's current expectations and are subject to change, including as a result of the factors described in the Risk Factors section on pages 112 and 113 of this announcement, pages 345 to 362 of the NatWest Group plc 2020 Annual Report and Accounts, pages 48 and 49 of the NatWest Markets Plc 2021 Interim Results announcement and on pages 156 to 172 of the NatWest Markets Plc 2020 Annual Report and Accounts. These statements constitute forward-looking statements. Refer to Forward-looking statements in this announcement.
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 from H1 2021:
For further detail refer to the Climate, Purpose and ESG measures supplement H1 2021.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| Performance key metrics and ratios | 30 June 2021 |
30 June 2020 |
30 June 2021 |
31 March 2021 |
30 June 2020 |
| Total income | £5,319m | £5,838m | £2,660m | £2,659m | £2,676m |
| Operating expenses | (£3,521m) | (£3,750m) | (£1,706m) | (£1,815m) | (£1,909m) |
| Profit before impairment releases/(losses) | £1,798m | £2,088m | £954m | £844m | £767m |
| Operating profit/(loss) before tax | £2,505m | (£770m) | £1,559m | £946m | (£1,289m) |
| Profit/(loss) attributable to ordinary shareholders | £1,842m | (£705m) | £1,222m | £620m | (£993m) |
| Excluding notable items within total income (1) | |||||
| Total income excluding notable items | £5,314m | £5,844m | £2,641m | £2,673m | £2,797m |
| Operating expenses | (£3,521m) | (£3,750m) | (£1,706m) | (£1,815m) | £1,909m |
| Profit before impairment releases/(losses) and | |||||
| excluding notable items | £1,793m | £2,094m | £935m | £858m | £888m |
| Operating profit/(loss) before tax and excluding notable items UK and RBSI retail and commercial income excluding |
£2,500m | (£764m) | £1,540m | £960m | (£1,168m) |
| notable items (2) | £4,687m | £4,847m | £2,368m | £2,319m | £2,325m |
| Performance key metrics and ratios | |||||
| Bank net interest margin (2,3) | 1.62% | 1.78% | 1.61% | 1.64% | 1.67% |
| Bank net interest margin excluding liquid asset buffer (2) | 2.40% | 2.48% | 2.40% | 2.39% | 2.38% |
| Bank average interest earning assets (2,3) | £487bn | £440bn | £494bn | £480bn | £458bn |
| Bank average interest earning assets excluding | |||||
| liquid asset buffer (2) | £329bn | £316bn | £330bn | £328bn | £321bn |
| Cost:income ratio (2) | 65.7% | 63.8% | 63.7% | 67.8% | 70.9% |
| Loan impairment rate (2) | (38bps) | 159bps | (66bps) | (11bps) | 229bps |
| Earnings per share - basic | 15.6p | (5.8p) | 10.6p | 5.1p | (8.2p) |
| Return on tangible equity (2) | 11.7% | (4.4%) | 15.6% | 7.9% | (12.4%) |
| 30 June 2021 |
31 March 2021 |
31 December 2020 |
|||
| Balance sheet | |||||
| Total assets | £775.9bn | £769.8bn | £799.5bn | ||
| Funded assets (2) | £666.3bn | £646.8bn | £633.0bn | ||
| Loans to customers - amortised cost | £362.7bn | £358.7bn | £360.5bn | ||
| Loans to customers and banks - amortised cost and FVOCI UK and RBSI retail and commercial net lending excluding UK Government |
£375.6bn | £371.0bn | £372.4bn | ||
| support schemes (2) | £302.0bn | £300.1bn | £297.9bn | ||
| Impairment provisions - amortised cost | £4.7bn | £5.6bn | £6.0bn | ||
| Total impairment provisions | £4.9bn | £5.8bn | £6.2bn | ||
| Expected credit loss (ECL) coverage ratio | 1.31% | 1.56% | 1.66% | ||
| Assets under management and administration (AUMA) (2) | £34.7bn | £32.6bn | £32.1bn | ||
| Customer deposits | £467.2bn | £453.3bn | £431.7bn | ||
| UK and RBSI retail and commercial customer deposits (2) | £428.7bn | £415.3bn | £403.2bn | ||
| Liquidity and funding | |||||
| Liquidity coverage ratio (LCR) | 164% | 158% | 165% | ||
| Liquidity portfolio | £277bn | £263bn | £262bn | ||
| Net stable funding ratio (NSFR) (4) | 154% | 153% | 151% | ||
| Loan:deposit ratio (2) | 78% | 79% | 84% | ||
| Total wholesale funding | £66bn | £61bn | £71bn | ||
| Short-term wholesale funding | £23bn | £20bn | £19bn | ||
| Capital and leverage | |||||
| Common Equity Tier (CET1) ratio (5) | 18.2% | 18.2% | 18.5% | ||
| Total capital ratio | 24.9% | 24.0% | 24.5% | ||
| Pro forma CET1 ratio, pre dividend accrual (6) | 19.1% | 18.6% | 18.8% | ||
| Risk-weighted assets (RWAs) | £163.0bn | £164.7bn | £170.3bn | ||
| UK leverage ratio (7) | 6.2% | 6.2% | 6.4% | ||
| Tangible net asset value (TNAV) per ordinary share | 266p | 261p | 261p | ||
| Number of ordinary shares in issue (millions) (8) | 11,569 | 11,560 | 12,129 |
Notes:
(1) Refer to page 5 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 £1.2 billion (31 March 2021 - £1.7 billion; 31 December 2020 - £1.7 billion). Excluding this adjustment, the CET1 ratio would be 17.5% (31 March 2021 - 17.2%; 31 December 2020 - 17.5%).
(6) The pro forma CET1 ratio at 30 June 2021 excludes foreseeable items of £1.4 billion, £500 million for ordinary dividends and £924 million foreseeable charges and pension contributions (31 March 2021 excludes foreseeable charges of £547 million for ordinary dividend including £200 million (11bps) in Q1 2021; 31 December 2020 excludes foreseeable charges of £364 million for ordinary dividend (3p per share) and £266 million pension contribution). At 31 March 2020 there was no charge in CET1 for foreseeable dividends or charges.
(7) Based on UK end-point including the IFRS9 transitional adjustment of £1.2 billion (31 March 2021 - £1.7 billion; 31 December 2020 - £1.7 billion). Excluding this adjustment the UK leverage ratio would be 6.0% (31 March 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.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2021 |
30 June 2020 |
30 June 2021 |
31 March 2021 |
30 June 2020 |
|
| £m | £m | £m | £m | £m | |
| Net interest income | 3,916 | 3,852 | 1,985 | 1,931 | 1,910 |
| Own credit adjustments Other non-interest income |
- 1,403 |
53 1,933 |
(2) 677 |
2 726 |
(102) 868 |
| Non-interest income | 1,403 | 1,986 | 675 | 728 | 766 |
| Total income | 5,319 | 5,838 | 2,660 | 2,659 | 2,676 |
| Litigation and conduct costs Strategic costs Other expenses |
18 (332) (3,207) |
89 (464) (3,375) |
34 (172) (1,568) |
(16) (160) (1,639) |
85 (333) (1,661) |
| Operating expenses | (3,521) | (3,750) | (1,706) | (1,815) | (1,909) |
| Profit before impairment releases/(losses) Impairment releases/(losses) |
1,798 707 |
2,088 (2,858) |
954 605 |
844 102 |
767 (2,056) |
| Operating profit/(loss) before tax Tax (charge)/credit |
2,505 (435) |
(770) 208 |
1,559 (202) |
946 (233) |
(1,289) 396 |
| Profit/(loss) for the period | 2,070 | (562) | 1,357 | 713 | (893) |
| Attributable to: Ordinary shareholders Preference shareholders Paid-in equity shareholders Non-controlling interests |
1,842 9 178 41 |
(705) 16 192 (65) |
1,222 4 91 40 |
620 5 87 1 |
(993) 8 95 (3) |
| Notable items within total income Own credit adjustments FX recycling (loss)/gain in Central items & other Liquidity Asset Bond sale gain IFRS volatility in Central items & other (1) Loss on redemption of own debt Retail Banking debt sale gain Commercial Banking fair value and disposal (loss)/gain Commercial Banking tax variable lease repricing NatWest Markets asset disposals/strategic risk reduction (2) |
- - - 44 (138) - (22) 32 (40) |
53 (103) 110 (11) - 3 (11) - (63) |
(2) - - 45 (20) - (8) 32 (36) |
2 - - (1) (118) - (14) - (4) |
(102) (39) 17 55 - 3 8 - (63) |
| Share of associate profits for Business Growth Fund Total |
129 5 |
16 (6) |
8 19 |
121 (14) |
- (121) |
Notes:
(1) IFRS volatility relates to derivatives used for risk management not in IFRS hedge accounting relationships and IFRS hedge ineffectiveness.
(2) Asset disposals/strategic risk reduction relates to the costs 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 announcements of 14 February 2020.
We have progressed against our strategic objectives and have delivered a good financial performance in the first half of the year. The interim results include a £707 million impairment release reflecting the improved economic outlook, our capital and liquidity positions remain robust and we have increased our commitment for capital returns.
Total income decreased by £519 million, or 8.9%, compared with H1 2020 reflecting the lower yield curve, subdued transactional business activity and a more normalised level of customer activity in NatWest Markets, partially offset by balance sheet growth. We continue to expect a full year reduction in structural hedge income of around £250 million compared with 2020, of which £157 million was incurred in H1 2021. Excluding notable items, Q2 2021 income decreased by £32 million, or 1.2%, compared with Q1 2021 as a weaker performance in the NWM Fixed Income business was partially offset by positive signs of an initial recovery in transactional business activity as COVID-19 restrictions eased. Bank NIM of 1.61% decreased by 3 basis points compared with Q1 2021 principally due to excess levels of liquidity, 4 basis points, lower structural hedge income, 1 basis point, and lower asset margins, 1 basis point, partially offset by tax variable lease repricing in Commercial Banking following the enactment of future corporation tax rate changes, 3 basis points.
We achieved a cost reduction of £185 million, or 5.9%, compared with H1 2020 mainly reflecting Customer Journey Transformation, the continued shift from physical to digital and actions taken in NatWest Markets in line with the strategic announcement made in February 2020. Strategic costs of £332 million in the first half of 2021 included £87 million redundancy charges, £48 million related to property charges and a £27 million charge related to technology spend. We remain committed to our 4% full year cost reduction target.
Whilst we continue to navigate a high degree of uncertainty in the wider economic environment, a net impairment release of £707 million for the first half of 2021 reflects an improved economic outlook. We have assessed the downside risk posed by COVID-19 to be diminishing over the course of 2021. Given the vaccination roll-out and positive economic data observed since the gradual relaxing of lockdown restrictions, it is appropriate to apply a higher probability to upside-biased scenarios than at the year-end 2020. Total impairment provisions decreased by £0.9 billion to £4.9 billion in the quarter, which resulted in a reduction in the ECL coverage ratio from 1.56% at Q1 2021 to 1.31%. Whilst we are comfortable with the strong performance of our book, we continue to hold economic uncertainty post model adjustments (PMA) of £0.8 billion, or 16.9% of total impairment provisions. We will continue to assess this position as UK Government support winds down and we emerge from the pandemic.
As a result, we are pleased to report an interim attributable profit of £1,842 million, with earnings per share of 15.6 pence and a return on tangible equity (RoTE) of 11.7%.
We continue to support our customers to recover and grow during this period of continued uncertainty, 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 £4.1 billion in the first half of 2021, or 2.8% on an annualised basis, including £7.0 billion of mortgage growth, partially offset by lower unsecured balances and lower Commercial Banking lending volumes. The £1.9 billion increase in the second quarter of 2021 included mortgage lending growth of £3.6 billion.
Customer deposits increased by £35.5 billion, or 8.2%, to £467.2 billon in the first half of 2021. Across the UK and RBSI retail and commercial businesses customer deposits increased by £25.5 billion, or 6.3%, as customers sought to retain liquidity and reduced spending. Treasury repo activity drove a further £11.5 billion.
TNAV per share increased by 5 pence in the quarter to 266 pence largely reflecting the attributable profit partially offset by the full year dividend payment.
The CET1 ratio of 18.2%, or 17.5% excluding IFRS 9 transitional relief, remains robust and was in line with Q1 2021 as the attributable profit for the period and the reduction in RWAs were offset by a £0.5 billion decrease in IFRS 9 transitional relief and foreseeable capital deductions in respect of our proposed in-market buy-backs, dividends and associated pension contribution. The total capital ratio increased by 90 basis points in the quarter to 24.9%.
RWAs of £163.0 billion decreased by £7.3 billion, or 4.3%, in the first half of 2021 reflecting business movements of £2.9 billion, risk parameter improvements of £1.4 billion and FX movements of £1.2 billion. The £1.7 billion reduction in the second quarter of 2021 mainly relates to Commercial Banking business movements.
The UK leverage ratio of 6.2% was in line with Q1 2021.
The liquidity portfolio was £277 billion at the end of Q2 2021, £14 billion higher than Q1 2021, and the LCR increased by 6 percentage points to 164%, representing £75.3 billion headroom above 100% minimum requirement, primarily reflecting the £13.9 billion increase in customer deposits in the quarter. The loan:deposit ratio remained broadly stable with Q1 2021 at 78%.
Total wholesale funding increased by £5 billion compared with Q1 2021. Short term wholesale funding increased by £3 billion in the quarter to £23 billion.
| Half year ended | |||||
|---|---|---|---|---|---|
| 30 June 2021 £m |
30 June 2020 £m |
30 June 2021 £m |
Quarter ended 31 March 2021 £m |
30 June 2020 £m |
|
| Total income | 2,150 | 2,185 | 1,094 | 1,056 | 1,035 |
| Operating expenses | (1,187) | (1,075) | (600) | (587) | (546) |
| of which: Other expenses | (1,102) | (1,169) | (545) | (557) | (577) |
| Impairment releases/(losses) | 57 | (657) | 91 | (34) | (360) |
| Operating profit | 1,020 | 453 | 585 | 435 | 129 |
| Return on equity | 27.5% | 10.7% | 32.0% | 23.0% | 5.7% |
| Net interest margin | 2.07% | 2.23% | 2.08% | 2.06% | 2.18% |
| Cost:income ratio | 55.2% | 49.2% | 54.8% | 55.6% | 52.8% |
| Loan impairment rate | (6)bps | 79bps | (20)bps | 8bps | 87bps |
| As at |
| 30 June | 31 March | 31 December | ||
|---|---|---|---|---|
| 2021 | 2021 | 2020 | ||
| £bn | £bn | £bn | ||
| Net loans to customers (amortised cost) | 178.1 | 174.8 | 172.3 | |
| Customer deposits | 184.1 | 179.1 | 171.8 | |
| RWAs | 35.6 | 35.0 | 36.7 |
During H1 2021, Retail Banking continued to pursue sustainable growth with an intelligent approach to risk. Lending growth was supported by a strong performance in mortgages, partially offset by continued UK Government restrictions impacting customer spending and the continued repayment of unsecured balances, although both customer spending and demand for new unsecured lending continued to improve over H1 2021 as the UK Government restrictions eased.
As at 30 June 2021, Retail Banking had c.500 active mortgage repayment holidays, representing less than 0.1% of the book by volume, and approximately 2,300, or 0.3%, of personal loan customers on active repayment holidays.
RWAs decreased by £1.1 billion, or 3.0%, in H1 2021 largely reflecting lower unsecured balances and continued quality improvements supported by rising house prices and customer behaviour.
Total income was £38 million higher than Q1 2021 as strong mortgage completions and a full quarter impact of savings customer rate changes were partially offset by the non-repeat of an insurance profit share. In comparison with Q2 2020, total income was £59 million, or 5.7%, higher due to stronger asset margins and transactional related fee income, partially offset by lower deposit returns. Non-interest income in Q2 2021 benefitted from a debt sale, along with other one-off items which will not repeat in Q3 2021, totalling around £12 million.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2021 | 2020 | 2021 | 2021 | 2020 | |
| £m | £m | £m | £m | £m | |
| Total income | 368 | 392 | 183 | 185 | 191 |
| Operating expenses | (249) | (252) | (128) | (121) | (129) |
| of which: Other expenses | (242) | (241) | (120) | (122) | (123) |
| Impairment releases/(losses) | 27 | (56) | 27 | - | (27) |
| Operating profit | 146 | 84 | 82 | 64 | 35 |
| Return on equity | 14.2% | 8.2% | 15.9% | 12.4% | 6.6% |
| Net interest margin | 1.77% | 2.20% | 1.75% | 1.79% | 2.14% |
| Cost:income ratio | 67.7% | 64.3% | 69.9% | 65.4% | 67.5% |
| Loan impairment rate | (30)bps | 70bps | (60)bps | - | 67bps |
| As at | ||||
|---|---|---|---|---|
| 30 June | 31 March | 31 December | ||
| 2021 | 2021 | 2020 | ||
| £bn | £bn | £bn | ||
| Net loans to customers (amortised cost) | 18.0 | 17.5 | 17.0 | |
| Customer deposits | 34.7 | 33.5 | 32.4 | |
| RWAs | 11.2 | 11.2 | 10.9 | |
| Assets under management (AUMs) (1) | 29.6 | 27.6 | 27.0 | |
| Assets under administration (AUAs) (1) | 5.1 | 5.0 | 5.1 | |
| Total assets under management and administration (AUMA) (1) | 34.7 | 32.6 | 32.1 |
Note:
(1) The definitions of AUMs/AUAs have been updated to provide clarity on assets where the investment management is undertaken by Private Banking. AUMs now comprises 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 delivered strong balance growth and a resilient operating performance in H1 2021, including a £27 million impairment release, which supported a return on equity of 14.2%. AUMA growth in H1 2021 included £1.4 billion of AUM net new money, of which £0.5 billion related to digital investing inflows into NatWest Invest, Royal Bank Invest and Coutts Invest, more than double H1 2020 levels.
AUMAs increased by £2.6 billion, or 8.1%, in H1 2021 largely due to AUM net new money inflows of £1.4 billion and AUM positive investment performance of £1.2 billion.
Total income decreased by £2 million compared to Q1 2021 as lower fee income was partially offset by continued balance growth. In comparison to Q2 2020, total income decreased by £8 million, or 4.2%, as lower deposit returns were partially offset by strong balance growth. Net interest margin decreased by 4 basis points compared with Q1 2021 reflecting higher liquidity portfolio costs.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2021 | 2020 | 2021 | 2021 | 2020 | |
| £m | £m | £m | £m | £m | |
| Total income | 1,923 | 2,003 | 982 | 941 | 995 |
| Operating expenses | (1,152) | (1,221) | (569) | (583) | (611) |
| of which: Other expenses (excluding OLD) | (983) | (1,066) | (470) | (513) | (534) |
| Impairment releases/(losses) | 568 | (1,790) | 451 | 117 | (1,355) |
| Operating profit/(loss) | 1,339 | (1,008) | 864 | 475 | (971) |
| Return on equity | 21.9% | (17.9%) | 29.3% | 14.9% | (32.5%) |
| Net interest margin | 1.57% | 1.76% | 1.60% | 1.54% | 1.70% |
| Cost:income ratio | 58.4% | 59.5% | 56.4% | 60.5% | 59.9% |
| Loan impairment rate | (107)bps | 311bps | (170)bps | (43)bps | 472bps |
| As at | |||||
| 30 June | 31 March | 31 December | |||
| 2021 | 2021 | 2020 | |||
| £bn | £bn | £bn | |||
| Net loans to customers (amortised cost) | 103.8 | 106.6 | 108.2 | ||
| Customer deposits | 176.0 | 169.4 | 167.7 | ||
| RWAs | 69.5 | 71.6 | 75.1 |
Note:
(1) EU Divestment balances from Q2 2021 integrated within business banking (Q4 2020 - £1.1 billion, Q1 2021 - £1.7 billion) and SME & mid corporates (Q4 2020 - £4.8 billion, Q1 2021 - £4.1 billion), as the Incentivised Switching Scheme (ISS) closed at the end of June 2021.
Commercial Banking delivered a solid performance in H1 2021 as business activity increased. The £1,339 million operating profit includes a £568 million impairment release, largely reflecting the improved economic outlook. During H1 2021 Commercial Banking delivered £2.5 billion towards NatWest Group's Climate and Sustainable Funding and Financing 2021 target.
Commercial Banking continues to support its customers with active payment holidays on c.3,000 customer accounts, representing 1% of the lending book by value as at 30 June 2021. c.92% of BBLS customers due to commence loan repayments had begun repayments on, or ahead of, schedule and c.5% of all BBLS customers had repaid in full as at 30 June 2021.
RWAs decreased by £5.6 billion, or 7.5%, in H1 2021 mainly reflecting business movements, excluding active capital management, of £3.0 billion, active capital management of £0.8 billion, a £0.8 billion reduction reflecting a CRR COVID-19 amendment related to a Housing Association supporting factor, £0.2 billion lower risk parameters, and FX movements of £0.4 billion.
Total income increased by £41 million compared with Q1 2021 mainly reflecting tax variable lease repricing and a partial recovery in transactional banking volumes, partially offset by lower lending volumes. In comparison to Q2 2020 total income decreased by £13 million, or 1.3%, primarily reflecting lower deposit returns. Net interest margin increased by 6 basis points compared with Q1 2021 mainly reflecting tax variable lease repricing following the enactment of future corporation tax rate changes. Underlying net interest margin decreased by 2 basis points reflecting lower deposit returns.
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June | 30 June | 31 March | 30 June | |||
| 2021 | 30 June 2020 |
2021 | 2021 | 2020 | ||
| £m | £m | £m | £m | £m | ||
| Total income | 256 | 259 | 133 | 123 | 115 | |
| Operating expenses | (112) | (126) | (55) | (57) | (65) | |
| of which: Other expenses | (104) | (121) | (52) | (52) | (61) | |
| Impairment releases/(losses) | 29 | (46) | 27 | 2 | (31) | |
| Operating profit | 173 | 87 | 105 | 68 | 19 | |
| Return on equity | 22.1% | 11.8% | 26.5% | 17.5% | 4.3% | |
| Net interest margin | 1.04% | 1.30% | 1.02% | 1.06% | 1.15% | |
| Cost:income ratio | 43.8% | 48.6% | 41.4% | 46.3% | 56.5% | |
| Loan impairment rate | (38)bps | 72bps | (71)bps | (5)bps | 97bps |
| As at | ||||
|---|---|---|---|---|
| 30 June | 31 March | 31 December | ||
| 2021 | 2021 | 2020 | ||
| £bn | £bn | £bn | ||
| Net loans to customers (amortised cost) | 15.1 | 14.7 | 13.3 | |
| Customer deposits | 33.9 | 33.3 | 31.3 | |
| RWAs | 7.6 | 7.7 | 7.5 | |
| Depositary assets (1) | 460.4 | 452.0 | 427.5 |
Note:
(1) Assets held by RBSI as an independent trustee and in a depositary service capacity.
During H1 2021 RBSI delivered £256 million of income, supported by customer lending growth and contributed £0.6 billion towards NatWest Group's Climate and Sustainable Funding and Financing 2021 target. RBSI also implemented a range of new payment features on the mobile app for both personal and business customers, including the introduction of face biometrics to authorise payments and the ability to deposit cheques.
As at 30 June 2021, RBSI was supporting 22 mortgage repayment breaks, reflecting a mortgage value of £4.8 million, and was providing 161 business customers with working capital facilities, reflecting a value of £434 million, whilst continuing to suspend some fees.
Depositary assets have increased by £32.9 billion in H1 2021 in both operating jurisdictions, Luxembourg and UK, as a result of increases in fund performance and new business.
Total income was £10 million, or 8.1%, higher than Q1 2021 due to higher average lending and deposit volumes in the Institutional Banking sector and was £18 million, or 15.7%, higher than Q2 2020 principally due to higher depositary and nonutilisation fees. Net interest margin decreased by 4 basis points compared with Q1 2021 largely due to lower returns from higher surplus deposits.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2021 2020 |
2021 | 2021 | 2020 | ||
| £m | £m | £m | £m | £m | |
| Total income | 295 | 816 | 106 | 189 | 273 |
| of which: | |||||
| - Income excluding asset disposals/strategic risk | |||||
| reduction and own credit adjustments | 334 | 826 | 143 | 191 | 438 |
| - Asset disposals/strategic risk reduction (2) | (40) | (63) | (36) | (4) | (63) |
| - Own credit adjustments | 1 | 53 | (1) | 2 | (102) |
| Operating expenses | (560) | (707) | (285) | (275) | (365) |
| of which: Other expenses | (456) | (569) | (216) | (240) | (271) |
| Impairment releases/(losses) | 16 | (40) | 10 | 6 | (45) |
| Operating (loss)/profit | (249) | 69 | (169) | (80) | (137) |
| Return on equity | (9.2%) | 0.8% | (12.1%) | (6.3%) | (7.1%) |
| Cost:income ratio | 189.8% | 86.6% | 268.9% | 145.5% | 133.7% |
| As at | |||||
| 30 June | 31 March | 31 December | |||
| 2021 | 2021 | 2020 | |||
| £bn | £bn | £bn | |||
| Funded assets | 111.8 | 105.7 | 105.9 | ||
| RWAs | 26.9 | 26.5 | 26.9 |
Notes:
(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). 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 continued to support customers with innovative financial solutions and to deliver on plans to become a more sustainable part of NatWest Group. NatWest Markets has further developed its capability to offer better integrated solutions, particularly in foreign exchange and funds financing, targeted to the investment management community. NatWest Markets continued to build momentum in Climate and Sustainable Funding and Financing, with a strong performance during the first half of 2021, delivering £6.3 billion towards NatWest Group's 2021 target.
RWAs were in line with 31 December 2020 however, following the announcement of GBP LIBOR cessation in March 2021, market risk RWAs became elevated by £2.5 billion as a result of including modelled GBP LIBOR basis risk post 4 January 2022. Regulatory approval has been obtained in July 2021 to update the VaR model and this will remove this impact in Q3 2021. If this model approval was back dated to Q2 2021 the reported RWAs would have been £24.4 billion. Underlying levels of market risk were low and progress continues to be made on asset disposals in line with the strategy.
Income excluding asset disposals/strategic risk reduction and OCA decreased by £48 million compared with Q1 2021 reflecting a weaker performance in Fixed Income and a reduction in Currencies as volatility decreased. In comparison to Q2 2020, income excluding asset disposals/strategic risk reduction and OCA decreased by £295 million, or 67.4%, reflecting more normalised levels of customer activity, with the prior period impacted by exceptional levels of market activity generated by the spread of the COVID-19 virus.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2021 | 2020 | 2021 | 2021 | 2020 | |
| €m | €m | €m | €m | €m | |
| Total income | 279 | 285 | 137 | 142 | 135 |
| Operating expenses | (299) | (283) | (156) | (143) | (140) |
| of which: Other expenses | (281) | (271) | (149) | (132) | (134) |
| Impairment releases/(losses) | 13 | (278) | (1) | 14 | (246) |
| Operating (loss)/profit | (7) | (276) | (20) | 13 | (251) |
| Return on equity | (0.7%) | (24.3%) | (4.1%) | 2.6% | (45.5%) |
| Net interest margin | 1.46% | 1.52% | 1.43% | 1.49% | 1.49% |
| Cost:income ratio | 107.2% | 99.3% | 113.9% | 100.7% | 103.7% |
| Loan impairment rate | (13)bps | 260bps | 2bps | (27)bps | 460bps |
| As at | |||||
| 30 June | 31 March | 31 December | |||
| 2021 | 2021 | 2020 | |||
| €bn | €bn | €bn | |||
| Net loans to customers (amortised cost) | 19.4 | 19.8 | 20.0 | ||
| Customer deposits | 21.6 | 21.7 | 21.8 | ||
| RWAs | 12.2 | 13.1 | 13.2 |
In June 2021, UBIDAC entered into a binding agreement with Allied Irish Banks p.l.c. for the sale of around €4.2 billion of gross performing commercial lending and associated undrawn exposures of around €2.8 billion. The timing of completion remains uncertain and the sale is subject to obtaining regulatory and other approvals. In July 2021, NatWest Group plc and UBIDAC entered into a non-binding Memorandum of Understanding with Permanent TSB Group Holdings p.l.c. for the proposed sale of a perimeter comprising performing non-tracker mortgages, performing micro-SME loans, UBIDAC's asset finance business and 25 branch locations. The proposed perimeter included approximately €7.6 billion gross performing loans as at 31 March 2021. Ulster Bank RoI remains focused on supporting its customers as it continues its withdrawal from the Republic of Ireland.
Customer deposits decreased by €0.2 billion, or 0.9%, in H1 2021 due to a large short term placement at the end of 2020 partially offset by increased personal balances.
Total income decreased by €5 million compared with Q1 2021 due to lower lending income and reduced FX gains. Net interest margin decreased by 6 basis points compared with Q1 2021 reflecting lower lending volumes and a stable deposit base, resulting in higher liquid assets in a negative interest rate environment.
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June | 30 June 30 June |
31 March | 30 June | |||
| 2021 | 2020 | 2021 | 2021 | 2020 | ||
| £m | £m | £m | £m | £m | ||
| Central items not allocated | 83 | (216) | 110 | (27) | (146) |
● An £83 million operating profit within central items not allocated mainly reflects a £129 million share of associate profits for the Business Growth Fund, a litigation and conduct release and IFRS volatility, partially offset by a £138 million day one loss on redemption of own debt related to the repurchase of legacy instruments, which will result in annual net interest savings of c.£51 million.
| Half year ended 30 June 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| International Banking & Markets | Central | Total | ||||||
| Retail | Private | Commercial | RBS | NatWest | Ulster | items & | NatWest | |
| Banking | Banking | Banking | International | Markets | Bank RoI | other | Group | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
| Income statement | ||||||||
| Net interest income | 1,976 | 232 | 1,308 | 182 | (3) | 187 | 34 | 3,916 |
| Own credit adjustments | - | - | - | - | 1 | - | (1) | - |
| Other non-interest income | 174 | 136 | 615 | 74 | 297 | 56 | 51 | 1,403 |
| Total income | 2,150 | 368 | 1,923 | 256 | 295 | 243 | 84 | 5,319 |
| Direct expenses - staff costs |
(232) | (67) | (280) | (52) | (188) | (94) | (768) | (1,681) |
| - other costs |
(111) | (20) | (131) | (24) | (64) | (68) | (1,108) | (1,526) |
| Indirect expenses | (759) | (155) | (642) | (28) | (204) | (83) | 1,871 | - |
| Strategic costs - direct |
(16) | (5) | (39) | (6) | (90) | (1) | (175) | (332) |
| - indirect |
(60) | (7) | (23) | (2) | (16) | (2) | 110 | - |
| Litigation and conduct costs | (9) | 5 | (37) | - | 2 | (13) | 70 | 18 |
| Operating expenses | (1,187) | (249) | (1,152) | (112) | (560) | (261) | - | (3,521) |
| Operating profit/(loss) before impairment releases/(losses) | 963 | 119 | 771 | 144 | (265) | (18) | 84 | 1,798 |
| Impairment releases/(losses) | 57 | 27 | 568 | 29 | 16 | 11 | (1) | 707 |
| Operating profit/(loss) | 1,020 | 146 | 1,339 | 173 | (249) | (7) | 83 | 2,505 |
| Additional information | ||||||||
| Return on tangible equity (1) |
na | na | na | na | na | na | na | 11.7% |
| Return on equity (1) |
27.5% | 14.2% | 21.9% | 22.1% | (9.2%) | (0.8%) | nm | na |
| Cost:income ratio (1) |
55.2% | 67.7% | 58.4% | 43.8% | 189.8% | 107.4% | nm | 65.7% |
| 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) |
(6)bps | (30)bps | (107)bps | (38)bps | nm | (13)bps | nm | (38)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) |
2.70% | 2.36% | 2.74% | 2.23% | nm | 2.28% | nm | nm |
| Third party customer funding rate (2) |
(0.07%) | (0.00%) | (0.01%) | 0.07% | nm | 0.01% | nm | nm |
| Average interest earning assets (£bn) (1) |
192.5 | 26.4 | 168.2 | 35.3 | 32.3 | 25.8 | nm | 519.2 |
| Bank net interest margin (1) |
2.07% | 1.77% | 1.57% | 1.04% | na | 1.46% | nm | 1.62% |
nm = not meaningful, na = not applicable.
For the notes to this table, refer to page 18.
| Half year ended 30 June 2020 | ||||||||
|---|---|---|---|---|---|---|---|---|
| International Banking & Markets | Central | Total | ||||||
| Retail | Private | Commercial | RBS | NatWest | Ulster | items & | NatWest | |
| Banking | Banking | Banking | International | Markets | Bank RoI | other | Group | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
| Income statement | ||||||||
| Net interest income | 1,982 | 251 | 1,370 | 201 | (34) | 194 | (112) | 3,852 |
| Own credit adjustments | - | - | - | - | 53 | - | - | 53 |
| Other non -interest income |
203 | 141 | 633 | 58 | 797 | 55 | 46 | 1,933 |
| Total income | 2,185 | 392 | 2,003 | 259 | 816 | 249 | (66) | 5,838 |
| Direct expenses - staff costs |
(268) | (79) | (341) | (65) | (326) | (100) | (617) | (1,796) |
| - other costs |
(103) | (25) | (140) | (27) | (94) | (42) | (1,148) | (1,579) |
| Indirect expenses | (798) | (137) | (658) | (29) | (149) | (92) | 1,863 | - |
| Strategic costs - direct |
(1) | - | (2) | (3) | (120) | (4) | (334) | (464) |
| - indirect |
(103) | (10) | (73) | (5) | (16) | (8) | 215 | - |
| Litigation and conduct costs | 198 | (1) | (7) | 3 | (2) | 1 | (103) | 89 |
| Operating expenses | (1,075) | (252) | (1,221) | (126) | (707) | (245) | (124) | (3,750) |
| Operating profit/(loss) before impairment losses | 1,110 | 140 | 782 | 133 | 109 | 4 | (190) | 2,088 |
| Impairment losses | (657) | (56) | (1,790) | (46) | (40) | (243) | (26) | (2,858) |
| Operating profit/(loss) | 453 | 84 | (1,008) | 87 | 69 | (239) | (216) | (770) |
| Additional information | ||||||||
| Return on tangible equity (1) |
na | na | na | na | na | na | na | (4.4%) |
| Return on equity (1) |
10.7% | 8.2% | (17.9%) | 11.8% | 0.8% | (24.2%) | nm | na |
| Cost:income ratio (1) |
49.2% | 64.3% | 59.5% | 48.6% | 86.6% | 98.4% | nm | 63.8% |
| Total assets (£bn) | 187.1 | 23.9 | 186.0 | 31.5 | 303.8 | 27.6 | 47.0 | 806.9 |
| Funded assets (£bn) (1) |
187.1 | 23.9 | 186.0 | 31.5 | 122.9 | 27.6 | 44.5 | 623.5 |
| Net loans to customers - amortised cost (£bn) |
164.5 | 16.0 | 112.0 | 12.7 | 11.4 | 18.7 | 17.0 | 352.3 |
| Loan impairment rate (1) |
79bps | 70bps | 311bps | 72bps | nm | 248bps | nm | 159bps |
| Impairment provisions (£bn) | (1.9) | (0.1) | (3.0) | - | (0.2) | (0.9) | - | (6.1) |
| Impairment provisions - Stage 3 (£bn) |
(0.9) | - | (1.2) | - | (0.1) | (0.6) | - | (2.8) |
| Customer deposits (£bn) | 161.0 | 29.8 | 159.6 | 29.5 | 5.5 | 20.0 | 2.9 | 408.3 |
| Risk -weighted assets (RWAs) (£bn) |
36.7 | 10.4 | 78.3 | 6.8 | 35.1 | 12.8 | 1.4 | 181.5 |
| RWA equivalent (RWAe) (£bn) | 36.7 | 10.4 | 78.4 | 6.9 | 37.2 | 12.8 | 1.5 | 183.9 |
| Employee numbers (FTEs - thousands) |
17.1 | 1.8 | 9.6 | 1.8 | 5.0 | 2.8 | 24.6 | 62.7 |
| Third party customer asset rate (2) |
2.97% | 2.67% | 3.04% | 2.65% | nm | 2.27% | nm | nm |
| Third party customer funding rate (2) |
(0.28%) | (0.21%) | (0.15%) | (0.05%) | nm | (0.07%) | nm | nm |
| Average interest earning assets (£bn) (1) |
178.6 | 23.0 | 156.5 | 31.2 | 38.0 | 25.7 | nm | 477.9 |
| Bank net interest margin (1) |
2.23% | 2.20% | 1.76% | 1.30% | na | 1.52% | nm | 1.78% |
| nm = not meaningful, na = not applicable. |
For the notes to this table, refer to page 18.
| Quarter ended 30 June 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| International Banking & Markets | Central | Total | ||||||
| Retail | Private | Commercial | RBS | NatWest | Ulster | items & | 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% |
nm = not meaningful, na = not applicable.
For the notes to this table, refer to page 18.
| Quarter ended 31 March 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| International Banking & Markets | Central | Total | ||||||
| Retail Banking |
Private Banking |
Commercial Banking |
RBS International |
NatWest Markets |
Ulster Bank RoI |
items & other |
NatWest Group |
|
| £m | £m | £m | £m | £m | £m | £m | £m | |
| Income statement | ||||||||
| Net interest income | 973 | 115 | 643 | 89 | (7) | 94 | 24 | 1,931 |
| Own credit adjustments | - | - | - | - | 2 | - | - | 2 |
| Other non-interest income | 83 | 70 | 298 | 34 | 194 | 30 | 17 | 726 |
| Total income | 1,056 | 185 | 941 | 123 | 189 | 124 | 41 | 2,659 |
| Direct expenses - staff costs |
(116) | (34) | (141) | (26) | (111) | (47) | (397) | (872) |
| - other costs |
(61) | (9) | (66) | (13) | (29) | (23) | (566) | (767) |
| Indirect expenses | (380) | (79) | (341) | (13) | (100) | (45) | 958 | - |
| Strategic costs - direct |
(11) | - | (26) | (4) | (30) | - | (89) | (160) |
| - indirect |
(17) | (4) | (9) | (1) | (5) | (1) | 37 | - |
| Litigation and conduct costs | (2) | 5 | - | - | - | (9) | (10) | (16) |
| Operating expenses | (587) | (121) | (583) | (57) | (275) | (125) | (67) | (1,815) |
| Operating profit/(loss) before impairment (losses)/releases | 469 | 64 | 358 | 66 | (86) | (1) | (26) | 844 |
| Impairment (losses)/releases | (34) | - | 117 | 2 | 6 | 12 | (1) | 102 |
| Operating profit/(loss) | 435 | 64 | 475 | 68 | (80) | 11 | (27) | 946 |
| Additional information | ||||||||
| Return on tangible equity (1) |
na | na | na | na | na | na | na | 7.9% |
| Return on equity (1) |
23.0% | 12.4% | 14.9% | 17.5% | (6.3%) | 2.5% | nm | na |
| Cost:income ratio (1) |
55.6% | 65.4% | 60.5% | 46.3% | 145.5% | 100.8% | nm | 67.8% |
| Total assets (£bn) | 199.2 | 26.9 | 187.1 | 36.7 | 226.8 | 25.9 | 67.2 | 769.8 |
| Funded assets (£bn) (1) |
199.2 | 26.9 | 187.1 | 36.7 | 105.7 | 25.9 | 65.3 | 646.8 |
| Net loans to customers - amortised cost (£bn) |
174.8 | 17.5 | 106.6 | 14.7 | 7.5 | 16.9 | 20.7 | 358.7 |
| Loan impairment rate (1) |
8bps | - | (43)bps | (5)bps | nm | (27)bps | nm | (11)bps |
| Impairment provisions (£bn) | (1.8) | (0.1) | (2.7) | (0.1) | (0.1) | (0.7) | (0.1) | (5.6) |
| Impairment provisions - Stage 3 (£bn) |
(0.8) | - | (0.9) | - | (0.1) | (0.5) | (0.1) | (2.4) |
| Customer deposits (£bn) | 179.1 | 33.5 | 169.4 | 33.3 | 2.4 | 18.4 | 17.2 | 453.3 |
| Risk-weighted assets (RWAs) (£bn) | 35.0 | 11.2 | 71.6 | 7.7 | 26.5 | 11.1 | 1.6 | 164.7 |
| RWA equivalent (RWAe) (£bn) | 35.0 | 11.2 | 71.7 | 7.7 | 29.2 | 11.1 | 1.7 | 167.6 |
| Employee numbers (FTEs - thousands) |
15.8 | 1.9 | 9.5 | 1.6 | 2.1 | 2.7 | 26.0 | 59.6 |
| Third party customer asset rate (2) |
2.73% | 2.36% | 2.65% | 2.28% | nm | 2.28% | nm | nm |
| Third party customer funding rate (2) |
(0.08%) | (0.00%) | (0.01%) | 0.05% | nm | 0.00% | nm | nm |
| Average interest earning assets (£bn) (1) |
191.2 | 26.0 | 169.4 | 34.1 | 32.4 | 25.8 | nm | 512.2 |
| Bank net interest margin (1) |
2.06% | 1.79% | 1.54% | 1.06% | na | 1.48% | nm | 1.64% |
nm = not meaningful, na = not applicable.
For the notes to this table, refer to the following page.
| Quarter ended 30 June 2020 | ||||||||
|---|---|---|---|---|---|---|---|---|
| International Banking & Markets | Central | Total | ||||||
| Retail | Private | Commercial | RBS | NatWest | Ulster | items & | NatWest | |
| Banking | Banking | Banking | International | Markets | Bank RoI | other | Group | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
| Income statement | ||||||||
| Net interest income | 975 | 124 | 696 | 90 | 6 | 97 | (78) | 1,910 |
| Own credit adjustments | - | - | - | - | (102) | - | - | (102) |
| Other non-interest income | 60 | 67 | 299 | 25 | 369 | 23 | 25 | 868 |
| Total income | 1,035 | 191 | 995 | 115 | 273 | 120 | (53) | 2,676 |
| Direct expenses - staff costs |
(133) | (40) | (167) | (33) | (159) | (52) | (293) | (877) |
| - other costs |
(45) | (9) | (67) | (13) | (37) | (18) | (595) | (784) |
| Indirect expenses | (399) | (74) | (337) | (15) | (75) | (46) | 946 | - |
| Strategic costs - direct |
(1) | - | - | (2) | (86) | (3) | (241) | (333) |
| - indirect |
(69) | (5) | (34) | (2) | (8) | (4) | 122 | - |
| Litigation and conduct costs | 101 | (1) | (6) | - | - | 1 | (10) | 85 |
| Operating expenses | (546) | (129) | (611) | (65) | (365) | (122) | (71) | (1,909) |
| Operating profit/(loss) before impairment losses | 489 | 62 | 384 | 50 | (92) | (2) | (124) | 767 |
| Impairment losses | (360) | (27) | (1,355) | (31) | (45) | (216) | (22) | (2,056) |
| Operating profit/(loss) | 129 | 35 | (971) | 19 | (137) | (218) | (146) | (1,289) |
| Additional information | ||||||||
| Return on tangible equity (1) |
na | na | na | na | na | na | na | (12.4%) |
| Return on equity (1) |
5.7% | 6.6% | (32.5%) | 4.3% | (7.1%) | (44.5%) | nm | na |
| Cost:income ratio (1) |
52.8% | 67.5% | 59.9% | 56.5% | 133.7% | 101.7% | nm | 70.9% |
| Total assets (£bn) | 187.1 | 23.9 | 186.0 | 31.5 | 303.8 | 27.6 | 47.0 | 806.9 |
| Funded assets (£bn) (1) |
187.1 | 23.9 | 186.0 | 31.5 | 122.9 | 27.6 | 44.5 | 623.5 |
| Net loans to customers - amortised cost (£bn) |
164.5 | 16.0 | 112.0 | 12.7 | 11.4 | 18.7 | 17.0 | 352.3 |
| Loan impairment rate (1) |
87bps | 67bps | 472bps | 97bps | nm | 441bps | nm | 229bps |
| Impairment provisions (£bn) | (1.9) | (0.1) | (3.0) | - | (0.2) | (0.9) | - | (6.1) |
| Impairment provisions - Stage 3 (£bn) |
(0.9) | - | (1.2) | - | (0.1) | (0.6) | - | (2.8) |
| Customer deposits (£bn) | 161.0 | 29.8 | 159.6 | 29.5 | 5.5 | 20.0 | 2.9 | 408.3 |
| Risk-weighted assets (RWAs) (£bn) | 36.7 | 10.4 | 78.3 | 6.8 | 35.1 | 12.8 | 1.4 | 181.5 |
| RWA equivalent (RWAe) (£bn) | 36.7 | 10.4 | 78.4 | 6.9 | 37.2 | 12.8 | 1.5 | 183.9 |
| Employee numbers (FTEs - thousands) |
17.1 | 1.8 | 9.6 | 1.8 | 5.0 | 2.8 | 24.6 | 62.7 |
| Third party customer asset rate (2) |
2.88% | 2.53% | 2.88% | 2.58% | nm | 2.27% | nm | nm |
| Third party customer funding rate (2) |
(0.20%) | (0.12%) | (0.13%) | (0.01%) | nm | (0.07%) | nm | nm |
| Average interest earning assets (£bn) (1) |
179.8 | 23.3 | 164.6 | 31.5 | 39.9 | 26.4 | nm | 497.4 |
| Bank net interest margin (1) |
2.18% | 2.14% | 1.70% | 1.15% | na | 1.48% | nm | 1.67% |
nm = not meaningful, na = not applicable.
Notes:
(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 only. Third party customer funding rate reflects interest payable or receivable on third-party customer deposits, including interest bearing and non-interest bearing customer deposits. This excludes intragroup items, loans to banks and liquid asset portfolios. Intragroup items, bank deposits, debt securities in issue and subordinated liabilities are excluded for customer funding rate calculation. Comparatives have been restated. Net interest margin is calculated as net interest income as a percentage of the average interest-earning assets without these exclusions.
| Page | |
|---|---|
| Credit risk | |
| Economic loss drivers | 20 |
| UK economic uncertainty | 22 |
| Measurement uncertainty and ECL sensitivity analysis | 26 |
| Measurement uncertainty and ECL adequacy | 28 |
| Credit risk – Banking activities | |
| Segment analysis | 30 |
| Sector analysis | 35 |
| Wholesale forbearance | 41 |
| Personal portfolio | 43 |
| Commercial real estate | 46 |
| Flow statements | 48 |
| Stage 2 decomposition by a significant increase in credit risk trigger | 57 |
| Asset quality | 59 |
| Credit risk – Trading activities | 63 |
| Capital, liquidity and funding risk | 66 |
| Market risk | |
| Non-traded | 76 |
| Traded | 80 |
| Other risks | 2 |
Certain disclosures in the Risk and capital management section are within the scope of EY's review report and are marked accordingly by a bracket in the right-hand margin.
The portfolio segmentation and selection of economic loss drivers for IFRS 9 follow closely the approach used in stress testing. To enable robust modelling the forecasting models for each portfolio segment (defined by product or asset class and where relevant, industry sector and region) are based on a selected, small number of economic factors, (typically three to four) that best explain the temporal variations in portfolio loss rates. The process to select economic loss drivers involves empirical analysis and expert judgement.
The most material economic loss drivers are shown in the table below.
| Portfolio | Economic loss drivers |
|---|---|
| UK retail mortgages | UK unemployment rate, sterling swap rate, UK house price index, UK household debt to |
| income | |
| UK retail unsecured | UK unemployment rate, sterling swap rate, UK household debt to income |
| UK large corporates | World GDP, UK unemployment rate, sterling swap rate, stock price index |
| UK commercial | UK GDP, UK unemployment rate, sterling swap rate |
| UK commercial real estate | UK GDP, UK property price indices, sterling swap rate |
| RoI retail mortgages | RoI unemployment rate, European Central Bank base rate, RoI house price index |
Note:
(1) This is not an exhaustive list of economic loss drivers but shows the most material drivers for the most material models/portfolios.
There was improvement in the economic outlook for the UK since 31 December 2020, which was reflected in a more optimistic base case scenario as at 30 June 2021. The main drivers of the improvement were as follows:
The range of anticipated future economic conditions was defined by a set of four internally developed scenarios and their respective probabilities. In addition to the base case, they comprised upside, downside and extreme downside scenarios. The scenarios primarily reflect a range of outcomes for the path of COVID-19 as well as recovery, and the associated effects on labour and asset markets.
The four scenarios were deemed appropriate in capturing the uncertainty in economic forecasts and the non-linearity in outcomes under different scenarios. The scenarios were developed to provide sufficient coverage across potential changes in unemployment, asset price and the degree of permanent damage to the economy, around which there are pronounced levels of uncertainty at this stage.
The tables below provide details of the key economic parameters under the four scenarios.
The main macroeconomic variables for each of the four scenarios used for expected credit loss (ECL) modelling are set out in the table below. The compound annual growth rate (CAGR) for GDP is shown. It also shows the five-year average for unemployment and the Bank of England base rate. The House Price Index and commercial real estate figures show the total change in each asset over five years.
| Main macroeconomic variables | 30 June 2021 | 31 December 2020 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Upside | Base case | Downside | Extreme downside |
Upside | Base case | Downside | Extreme downside |
||
| Five-year summary | % | % | % | % | % | % | % | % | |
| UK | |||||||||
| GDP - CAGR | 3.9 | 3.5 | 2.9 | 2.5 | 3.6 | 3.1 | 2.8 | 1.3 | |
| Unemployment - average | 4.1 | 4.6 | 5.8 | 8.1 | 4.4 | 5.7 | 7.1 | 9.7 | |
| House price index - total change | 23.4 | 14.2 | 4.9 | (0.8) | 12.5 | 7.6 | 4.4 | (19.0) | |
| Bank of England base rate - average | 0.9 | 0.4 | - | (0.5) | 0.2 | - | (0.1) | (0.5) | |
| Commercial real estate price - total change | 13.6 | 4.7 | 0.1 | (8.7) | 4.3 | 0.7 | (12.0) | (31.5) | |
| Republic of Ireland | |||||||||
| GDP - CAGR | 3.8 | 3.2 | 2.5 | 1.8 | 4.2 | 3.5 | 3.0 | 1.6 | |
| Unemployment - average | 5.1 | 6.8 | 9.1 | 10.9 | 5.6 | 7.5 | 9.3 | 11.2 | |
| House price index - total change | 25.4 | 18.0 | 11.3 | 2.6 | 21.0 | 13.3 | 6.8 | (7.0) | |
| European Central Bank base rate - average | 0.2 | 0.1 | - | - | 0.1 | - | - | - | |
| World GDP - CAGR | 3.8 | 3.5 | 2.7 | 1.8 | 3.5 | 3.4 | 2.9 | 2.8 | |
| Probability weight | 35.0 | 40.0 | 20.0 | 5.0 | 20.0 | 40.0 | 30.0 | 10.0 |
Notes:
(1) The five year period starts at Q1 2021 for 30 June 2021 and Q3 2020 for 31 December 2020.
(2) The Republic of Ireland unemployment rate in table above and following tables corresponds to the mid-point of the Irish Central Statistics Office lower and upper bound unemployment rate measures.
Annual figures
| Base | Extreme | Base | Extreme | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Upside | case Downside | downside | Upside | case Downside | downside | ||||
| UK | % | % | % | % Republic of Ireland | % | % | % | % | |
| 2021 | 10.1 | 7.3 | 2.7 | 0.1 2021 | 9.1 | 4.8 | 1.8 | (0.3) | |
| 2022 | 5.4 | 5.8 | 4.3 | - 2022 | 5.0 | 4.9 | 2.2 | (3.7) | |
| 2023 | 1.6 | 1.6 | 4.4 | 7.7 2023 | 3.0 | 3.6 | 5.4 | 7.5 | |
| 2024 | 1.6 | 1.6 | 2.2 | 3.7 2024 | 2.6 | 3.0 | 3.2 | 5.2 | |
| 2025 | 1.6 | 1.6 | 1.5 | 1.7 2025 | 2.7 | 2.9 | 2.8 | 3.1 |
Unemployment rate - annual average
| Base | Extreme | Base | Extreme | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Upside | case Downside | downside | Upside | case Downside | downside | ||||
| UK | % | % | % | % Republic of Ireland | % | % | % | % | |
| 2021 | 4.7 | 5.3 | 5.4 | 5.9 2021 | 9.0 | 11.7 | 14.2 | 14.9 | |
| 2022 | 4.3 | 4.8 | 7.0 | 11.8 2022 | 5.8 | 7.5 | 12.7 | 13.9 | |
| 2023 | 4.0 | 4.5 | 6.5 | 10.4 2023 | 4.7 | 6.1 | 7.6 | 12.4 | |
| 2024 | 3.8 | 4.5 | 5.4 | 7.1 2024 | 4.4 | 5.7 | 7.0 | 9.0 | |
| 2025 | 3.8 | 4.3 | 4.8 | 5.2 2025 | 4.2 | 5.4 | 6.3 | 6.6 |
House price index - four quarter growth
| Base | Extreme | Base | Extreme | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Upside | case Downside | downside | Upside | case Downside | downside | ||||
| UK | % | % | % | % Republic of Ireland | % | % | % | % | |
| 2021 | 8.0 | 2.0 | (2.4) | (5.4) 2021 | 10.9 | 3.6 | (4.7) | (3.5) | |
| 2022 | 1.7 | 0.5 | (3.0) | (27.0) 2022 | 4.9 | 3.6 | 1.3 | (21.4) | |
| 2023 | 2.8 | 1.9 | 1.3 | 12.2 2023 | 2.4 | 3.3 | 4.0 | 10.3 | |
| 2024 | 4.8 | 4.8 | 4.8 | 19.5 2024 | 2.8 | 3.5 | 5.8 | 17.6 | |
| 2025 | 4.0 | 4.0 | 4.0 | 6.2 2025 | 3.2 | 3.4 | 5.3 | 4.7 |
| Base | Extreme | |||
|---|---|---|---|---|
| Upside | case Downside | downside | ||
| UK | % | % | % | % |
| 2021 | 7.0 | (1.4) | (8.4) | (13.4) |
| 2022 | 2.1 | 2.0 | (1.3) | (18.2) |
| 2023 | 1.7 | 1.7 | 5.8 | 15.7 |
| 2024 | 1.3 | 1.3 | 2.3 | 5.4 |
| 2025 | 1.2 | 1.2 | 2.3 | 5.1 |
| Worst points | 30 June 2021 | 31 December 2020 | ||||||
|---|---|---|---|---|---|---|---|---|
| Extreme | Extreme | |||||||
| Upside | Base case | Downside | downside | Upside | Base case | Downside | downside | |
| UK | % | % | % | % | % | % | % | % |
| GDP | - | - | - | (10.2) | - | (1.8) | (5.1) | (10.4) |
| Unemployment rate (peak) | 5.0 | 5.5 | 7.0 | 11.9 | 5.9 | 7.0 | 9.4 | 13.9 |
| House price index | - | - | (6.1) | (33.1) | - | (3.6) | (11.2) | (32.0) |
| Commercial real estate price | - | (2.1) | (14.1) | (33.1) | (3.4) | (10.1) | (28.9) | (40.4) |
| Republic of Ireland | ||||||||
| GDP | - | - | (5.3) | (13.3) | (0.6) | (3.0) | (5.5) | (13.8) |
| Unemployment rate (peak) | 15.0 | 15.0 | 15.0 | 17.2 | 16.5 | 16.5 | 16.5 | 18.1 |
| House price index | - | - | (10.1) | (26.5) | - | (4.2) | (13.3) | (27.0) |
Note:
(1) For the unemployment rate, the figures show the peak levels between 2021 and 2026 for 30 June 2021, and between 2020 and 2025 for 31 December 2020. For the other parameters, the figures show falls relative to the starting periods mentioned under the five-year summary table above.
NatWest Group's approach to IFRS 9 multiple economic scenarios (MES) involves selecting a suitable set of discrete scenarios to characterise the distribution of risks in the economic outlook and assigning appropriate probability weights. The scale of the economic impact of COVID-19 and the range of recovery paths necessitates a change of approach to assigning probability weights from that used in recent updates. Prior to 2020, GDP paths for NatWest Group's scenarios were compared against a set of 1,000 model runs, following which a percentile in the distribution was established that most closely corresponded to the scenario.
Instead, NatWest Group has subjectively applied probability weights, reflecting expert views within NatWest Group. The probability weight assignment was judged to present good coverage to the central scenarios and the potential for a robust recovery on the upside and exceptionally challenging outcomes on the downside. A 35% weighting was applied to the upside scenario, a 40% weighting applied to the base case scenario, a 20% weighting applied to the downside scenario and a 5% weighting applied to the extreme downside scenario. NatWest Group assessed the downside risk posed by COVID-19 to be diminishing over the course of 2021, with the vaccination roll-out and positive economic data being observed since the gradual relaxing of lockdown restrictions. NatWest Group therefore judged it was appropriate to apply a higher probability to upside-biased scenarios than at December 2020.
Personal lending follows a discrete scenario approach. The probability of default (PD) and loss given default (LGD) values for each discrete scenario are calculated using product specific econometric models. Each account has a PD and LGD calculated as probability weighted averages across the suite of economic scenarios.
The Wholesale lending ECL methodology is based on the concept of credit cycle indices (CCIs). The CCIs represent, similar to the exogenous component in Personal, all relevant economic loss drivers for a region/industry segment aggregated into a single index value that describes the loss rate conditions in the respective segment relative to its long-run average. A CCI value of zero corresponds to loss rates at long-run average levels, a positive CCI value corresponds to loss rates below longrun average levels and a negative CCI value corresponds to loss rates above long-run average levels.
The four economic scenarios are translated into forward-looking projections of CCIs using a set of econometric models. Subsequently the CCI projections for the individual scenarios are averaged into a single central CCI projection according to the given scenario probabilities. The central CCI projection is then overlaid with an additional mean reversion assumption, i.e. that after one to two years into the forecast horizon the CCIs gradually revert to their long-run average of zero.
Finally, ECL is calculated using a Monte Carlo approach by averaging PD and LGD values arising from many CCI paths simulated around the central CCI projection.
The rationale for the Wholesale approach is the long-standing observation that loss rates in Wholesale portfolios tend to follow regular cycles. This allows NatWest Group to enrich the range and depth of future economic conditions embedded in the final ECL beyond what would be obtained from using the discrete macro-economic scenarios alone.
Business banking, while part of the Wholesale segment, for reporting purposes, utilises the Personal lending rather than the Wholesale lending methodology.
Use of COVID-19 relief mechanisms (for example, payment holidays, Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS)) does not automatically merit identification of significant increase in credit risk (SICR) and trigger a Stage 2 classification in isolation. However, a subset of Personal customers who had accessed payment holiday support, and where their risk profile has been identified as relatively high risk continue to be collectively migrated to Stage 2 (if not already captured by other SICR criteria).
For Wholesale customers, NatWest Group continues to provide support, where appropriate, to existing customers. Those who are deemed either (a) to require a prolonged timescale to return to within NatWest Group's risk appetite, (b) not to have been viable pre-COVID-19, or (c) not to be able to sustain their debt once COVID-19 is over, will trigger a SICR and, if concessions are sought, be categorised as forborne, in line with regulatory guidance. Payment holiday extensions beyond an aggregate of 12 months in an 18 month period to cover continuing COVID-19 business interruption are categorised as forbearance, including for customers where no other SICR triggers are present.
In February 2021, the British Business Bank announced details of Pay As You Grow (PAYG) options for borrowers of BBLS. The scheme options include the extension of lending terms, periods of reduced repayments and six month payment holidays. PAYG options are a feature of BBLS rather than a concession granted by NatWest Group. It is therefore not automatically considered significant credit deterioration and a Stage 2 trigger. NatWest Group relies on both customer attestations and existing credit monitoring procedures to identify significant financial difficulty. Should signs of financial stress be identified, a review is performed. If credit deterioration is confirmed, existing problem debt management journeys are followed and forbearance (if a concession is granted) is marked in line with existing processes. This will result in Stage 2 transfer.
The abrupt and prolonged interruption of a wide range of economic activities due to COVID-19 and the subsequent government interventions to support businesses and individuals, has resulted in patterns in the data of key economic loss drivers and loss outcomes, that are markedly different from those that NatWest Group's models have been built on. To account for these structural changes, model adjustments have been applied and model changes have been implemented.
All in-model adjustments described have been applied by correcting the PD and LGD estimates within the core ECL calculation process and therefore consistently and systematically inform SICR identification and ECL measurement.
Most notably as a result of various government support measures, model-projected default rates in Wholesale and Personal have been adjusted by introducing lags between 6 to 12 months. These lags are based partly on objective empirical data (i.e. the absence of increases in realised default rates by the reporting date) and partly judgmental, based on remaining government support measures and their expected effectiveness.
Due to the specific nature of COVID-19, GDP year-on-year movements in both directions are extremely sharp, many multiples of their respective extremes observed previously.
This creates a risk of overstretched, invalid extrapolations in statistical models. Therefore, all Wholesale econometric models were updated to make them robust against extreme GDP movements by capping projected CCI values at levels corresponding to three times the default rates observed at the peak of the global financial crisis and using quarterly averages rather than spot values for CCI projections.
For the Personal lending portfolio, the forward-looking components of the IFRS 9 PD models were modified, leveraging existing econometric models used in stress testing to ensure that PDs appropriately reflect the forecasts for unemployment and house prices in particular.
Additionally, post model ECL adjustments were made in Personal to ensure that the ECL was adjusted for known model over and underpredictions pre-dating COVID-19, pending the systematic recalibration of the underlying models.
The IFRS 9 PD, exposure at default and LGD models are subject to NatWest Group's model risk policy that stipulates periodic model monitoring, periodic re-validation and defines approval procedures and authorities according to model materiality. Various post model adjustments (PMAs) were applied where management judged they were necessary to ensure an adequate level of overall ECL provision. All PMAs were subject to formal approval through provisioning governance, and were categorised as follows:
PMAs will remain a key focus area of NatWest Group's ongoing ECL adequacy assessment process. A holistic framework has been established including reviewing a range of economic data, external benchmark information and portfolio performance trends, particularly with more observable outcomes from the unwinding of COVID-19 support mechanisms during the remainder of 2021.
| ECL post model adjustments | Retail | Commercial | Ulster | ||
|---|---|---|---|---|---|
| Banking | Banking | Bank RoI | Other | Total | |
| 30 June 2021 | £m | £m | £m | £m | £m |
| 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 |
Retail Banking – The PMA for deferred model calibrations increased to £103 million from £34 million at 31 December 2020. This reflected management's judgement that the implied ECL decreases that continued to manifest themselves through the standard PD model monitoring process during H1 2021, were not fully supportable as they were viewed as being temporarily distorted by government support mechanisms. Management retained this view on the basis that underlying portfolio performance had been influenced by the various customer support mechanisms and further outcome data is required.
The PMA for economic uncertainty increased to £197 million from £158 million at 31 December 2020. This was primarily due to the addition of a further £47 million of post model adjustments to hold back modelled LGD reductions on certain unsecured portfolio segments. The total included an ECL uplift of £55 million (a reduction from £63 million at 31 December 2020 due to PD improvements) on a subset of customers who had accessed payment holiday support where their risk profile was identified as relatively high risk. 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 customer support mechanisms (£15 million related to mortgages and £54 million related to unsecured lending). The H1 2021 overlay also included an ECL uplift on buyto-let mortgages of £14 million (31 December 2020 – £15 million) to mitigate the risk of a disproportionate credit deterioration in challenging economic circumstances.
Other judgmental overlays included £15 million (31 December 2020 – £13 million) in respect of the repayment risk not captured in the models, that a proportion of customers on interest-only mortgages would not be able to repay the capital element of their loan at the end of term, as well as a £7 million overlay for an identified weakness in the mortgage PD model pending remediation.
Commercial Banking – The PMA 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. It also included an overlay of £23 million in respect of elevated concerns around borrowers' ability to refinance facilities at the end of the contractual term. Additionally, it included overlays to address the effects of customer support mechanisms.
There was also a PMA for deferred model calibrations on the business banking portfolio reflecting management's judgement that the beneficial modelling impact, and implied ECL decrease, was not supportable again while portfolio performance was being under-pinned by the various support mechanisms. Other adjustments included an overlay of £19 million to mitigate the effect of operational timing delays in the identification and flagging of a SICR.
Ulster Bank RoI – The PMA for economic uncertainty included an adjustment of £49 million in the mortgage portfolio reflecting concerns that losses arising from defaults during 2021 would be higher than modelled. There was a PMA of £30 million in the Wholesale portfolio, reflecting concern that the unprecedented nature of COVID-19 could result in longer debt recovery periods and lower recovery values than history suggested. It also included PMAs of £9 million in respect of high risk payment break mortgage customers and £23 million in the SME portfolio reflective of the elevated risk for this sector. The increase in other PMAs reflects the judgment that continuing actions on the phased withdrawal of Ulster Bank RoI from the Irish market will lead to higher/earlier crystallisation of losses.
In April 2021, the UK government launched the Recovery Loan Scheme, replacing previous support schemes which are now closed. Consistent with CBILS and the Coronavirus Large Business Interruption Loan Scheme (CLBILS), the government guarantee is 80%. NatWest Group recognises lower LGDs for these lending products as a result, with 0% applied to the government-guaranteed part of the exposure. NatWest Group does not directly adjust the measurement of PD due to the government guarantee and continues to move exposures to Stage 2 and Stage 3 where a significant deterioration in credit risk or a default is identified.
The table below shows the uptake of BBLS, CBILS and CLBILS by Wholesale customers, by sector, which ended for new applications on 31 March 2021.
| BBLS | CBILS | CLBILS | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Approved | Drawdown | % of BBLS to | Approved | Drawdown | % of CBILS to | Approved | Drawdown | % of CLBILS to | |
| 30 June 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 | 0.93% |
| Automotive | 12,839 | 409 | 6.78% | 578 | 143 | 2.37% | 26 | 44 | 0.73% |
| Education | 2,050 | 52 | 3.36% | 121 | 76 | 4.91% | 10 | 32 | 2.07% |
| Health | 10,248 | 302 | 5.46% | 630 | 101 | 1.82% | 3 | 19 | 0.34% |
| Land transport and logistics | 8,996 | 255 | 5.35% | 399 | 99 | 2.08% | 1 | 5 | 0.10% |
| Leisure | 32,721 | 982 | 10.74% | 2,182 | 568 | 6.21% | 39 | 228 | 2.49% |
| Oil and gas | 329 | 9 | 0.61% | 15 | 7 | 0.47% | - | - | - |
| Retail | 32,652 | 1,060 | 12.29% | 1,655 | 399 | 4.63% | 26 | 115 | 1.33% |
| Property | 71,422 | 1,993 | 5.55% | 2,491 | 676 | 1.88% | 37 | 81 | 0.23% |
| Other (including Business | |||||||||
| Banking) | 127,787 | 3,181 | 3.49% | 8,918 | 1,844 | 2.02% | 84 | 328 | 0.36% |
| Total | 299,304 | 8,249 | 4.97% | 17,007 | 3,922 | 2.36% | 230 | 868 | 0.52% |
Notes:
(1) The table contains some cases which as at 30 June 2021 were approved but not yet drawn down. Approved limits as at 30 June 2021 were as follows: BBLS £9.2 billion (90% drawn); CBILS – £4.2 billion (93% drawn); and CLBILS – £1.3 billion (66% drawn).
(2) The Recovery Loan Scheme, a successor to the now closed BBLS, CBILS, and CLBILS was launched on 6 April 2021. Uptake of the new scheme was minimal with 192 customers having drawn down £13.7 million as at 2 July 2021.
The recognition and measurement of ECL is complex and involves the use of significant judgement and estimation, particularly in times of economic volatility and uncertainty. This includes the formulation and incorporation of multiple forwardlooking economic conditions into ECL to meet the measurement objective of IFRS 9. The ECL provision is sensitive to the model inputs and economic assumptions underlying the estimate.
The focus of the simulations is on ECL provisioning requirements on performing exposures in Stage 1 and Stage 2. The simulations are run on a stand-alone basis and are independent of each other; the potential ECL impacts reflect the simulated impact as at 30 June 2021. Scenario impacts on a SICR should be considered when evaluating the ECL movements of Stage 1 and Stage 2. In all scenarios the total exposure was the same but exposure by stage varied in each scenario.
Stage 3 provisions are not subject to the same level of measurement uncertainty – default is an observed event as at the balance sheet date. Stage 3 provisions therefore have not been considered in this analysis.
The impact arising from the upside, downside and extreme downside scenarios has been simulated. These scenarios are three of the four discrete scenarios used in the methodology for Personal MES as described in the Economic loss drivers section. In the simulations, NatWest Group has assumed that the economic macro variables associated with these scenarios replace the existing base case economic assumptions, giving them a combined total 100% probability weighting and therefore serving as a single economic scenario.
These scenarios have been applied to all modelled portfolios in the analysis below, with the simulation impacting both PDs and LGDs. Modelled PMAs present in the underlying ECL estimates are also sensitised in line with the modelled ECL movements, but those that were judgmental in nature, primarily those for economic uncertainty, were not (refer to the Governance and post model adjustments section). As expected, the scenarios create differing impacts on ECL by portfolio and the impacts are deemed reasonable. In this simulation, it is assumed that existing modelled relationships between key economic variables and loss drivers hold, but in practice other factors would also have an impact, for example, potential customer behaviour changes and policy changes by lenders that might impact on the wider availability of credit.
NatWest Group's core criterion to identify a SICR is founded on PD deterioration, as discussed above. Under the simulations, PDs change and result in exposures moving between Stage 1 and Stage 2 contributing to the ECL impact.
| Extreme | |||||
|---|---|---|---|---|---|
| 30 June 2021 | Actual | Base case | Upside | Downside | downside |
| Stage 1 modelled exposure (£m) | |||||
| Retail Banking | 152,428 | 152,412 | 152,510 | 152,128 | 141,758 |
| Ulster Bank RoI Personal & Business Banking | 10,989 | 10,989 | 11,022 | 10,556 | 10,373 |
| Wholesale | 113,315 | 115,403 | 116,189 | 113,405 | 98,561 |
| 276,732 | 278,804 | 279,721 | 276,089 | 250,692 | |
| Stage 1 modelled ECL (£m) | |||||
| Retail Banking | 110 | 112 | 112 | 113 | 113 |
| Ulster Bank RoI Personal & Business Banking | 25 | 24 | 22 | 27 | 27 |
| Wholesale | 262 | 269 | 269 | 273 | 287 |
| 397 | 405 | 403 | 413 | 427 | |
| Stage 1 coverage (%) | |||||
| Retail Banking | 0.07% | 0.07% | 0.07% | 0.07% | 0.08% |
| Ulster Bank RoI Personal & Business Banking | 0.22% | 0.22% | 0.20% | 0.26% | 0.26% |
| Wholesale | 0.23% | 0.23% | 0.23% | 0.24% | 0.29% |
| 0.14% | 0.15% | 0.14% | 0.15% | 0.17% | |
| Stage 2 modelled exposure (£m) | |||||
| Retail Banking | 19,435 | 19,451 | 19,353 | 19,735 | 30,105 |
| Ulster Bank RoI Personal & Business Banking | 1,387 | 1,387 | 1,354 | 1,820 | 2,003 |
| Wholesale | 33,405 | 31,317 | 30,531 | 33,315 | 48,159 |
| 54,227 | 52,155 | 51,238 | 54,870 | 80,267 | |
| Stage 2 modelled ECL (£m) | |||||
| Retail Banking | 710 | 722 | 671 | 799 | 1,042 |
| Ulster Bank RoI Personal & Business Banking | 76 | 76 | 71 | 93 | 107 |
| Wholesale | 1,479 | 1,368 | 1,316 | 1,485 | 2,347 |
| 2,265 | 2,166 | 2,058 | 2,377 | 3,496 | |
| Stage 2 coverage (%) | |||||
| Retail Banking | 3.65% | 3.71% | 3.46% | 4.05% | 3.46% |
| Ulster Bank RoI Personal & Business Banking | 5.51% | 5.49% | 5.22% | 5.10% | 5.32% |
| Wholesale | 4.43% | 4.37% | 4.31% | 4.46% | 4.87% |
| 4.18% | 4.15% | 4.01% | 4.33% | 4.35% | |
| Stage 1 and Stage 2 modelled exposure (£m) | |||||
| Retail Banking | 171,863 | 171,863 | 171,863 | 171,863 | 171,863 |
| Ulster Bank RoI Personal & Business Banking | 12,376 | 12,376 | 12,376 | 12,376 | 12,376 |
| Wholesale | 146,720 | 146,720 | 146,720 | 146,720 | 146,720 |
| 330,959 | 330,959 | 330,959 | 330,959 | 330,959 | |
| Stage 1 and Stage 2 modelled ECL (£m) | |||||
| Retail Banking | 820 | 834 | 783 | 912 | 1,155 |
| Ulster Bank RoI Personal & Business Banking | 101 | 100 | 93 | 120 | 134 |
| Wholesale | 1,741 | 1,637 | 1,584 | 1,758 | 2,635 |
| 2,662 | 2,571 | 2,460 | 2,790 | 3,924 | |
| Stage 1 and Stage 2 coverage (%) | |||||
| Retail Banking | 0.48% | 0.49% | 0.46% | 0.53% | 0.67% |
| Ulster Bank RoI Personal & Business Banking | 0.82% | 0.81% | 0.75% | 0.97% | 1.08% |
| Wholesale | 1.19% | 1.12% | 1.08% | 1.20% | 1.80% |
| 0.80% | 0.78% | 0.74% | 0.84% | 1.19% | |
| Reconciliation to Stage 1 and Stage 2 ECL (£m) | |||||
| ECL on modelled exposures | 2,662 | 2,571 | 2,461 | 2,790 | 3,923 |
| ECL on non-modelled exposures | 70 | 70 | 70 | 70 | 70 |
| Total Stage 1 and Stage 2 ECL | 2,732 | 2,641 | 2,530 | 2,860 | 3,994 |
| Variance – (lower)/higher to actual total Stage 1 and Stage 2 ECL | (91) | (202) | 128 | 1,262 |
Notes:
(1) Variations in future undrawn exposure values across the scenarios are modelled, however the exposure position reported is that used to calculate modelled ECL as at 30 June 2021 and therefore does not include variation in future undrawn exposure values.
(2) Reflects ECL for all modelled exposure in scope for IFRS 9. The analysis excludes non-modelled portfolios and exposure relating to bonds and cash.
(3) All simulations are run on a stand-alone basis and are independent of each other, with the potential ECL impact reflecting the simulated impact as at 30 June 2021. The simulations change the composition of Stage 1 and Stage 2 exposure but total exposure is unchanged under each scenario as the loan population is static.
(4) Refer to the Economic loss drivers section for details of economic scenarios.
(5) Refer to the NatWest Group 2020 Annual Report and Accounts for 31 December 2020 comparatives.
Key points
The improvement in the economic outlook and scenarios used in the IFRS 9 MES framework at H1 2021 resulted in a release of modelled ECL. Given continued uncertainty remains due to COVID-19 despite the improved economic outlook, NatWest Group utilised a framework of quantitative and qualitative measures to support the directional change and levels of ECL coverage, including economic data, credit performance insights and problem debt trends. This was particularly important for consideration of post model adjustments.
As government support mechanisms continue to conclude during 2021, NatWest Group anticipates further credit deterioration in the portfolios. However, the income statement effect of this will be mitigated by the forward-looking provisions retained on the balance sheet as at 30 June 2021.
There are a number of key factors that could drive further downside to impairments, through deteriorating economic and credit metrics and increased stage migration as credit risk increases for more customers. A key factor would be a more adverse deterioration in GDP and unemployment in the economies in which NatWest Group operates, but also, among others:
The table below shows the main ECL provision movements during H1 2021.
| 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 | (483) |
| Changes in risk metrics and exposure: Stage 3 | 43 |
| Judgemental changes: changes in post model adjustments for Stage 1, Stage 2 and Stage 3 | 155 |
| Write-offs and other | (613) |
| At 30 June 2021 | 4,925 |
This section details the credit risk profile of NatWest Group's banking activities.
Refer to Note 8 for balance sheet analysis of financial assets that are classified as amortised cost or fair value through other comprehensive income (FVOCI), the starting point for IFRS 9 ECL framework assessment.
| 30 June 2021 | 31 December 2020 | |||||
|---|---|---|---|---|---|---|
| Gross | ECL | Net | Gross | ECL | Net | |
| £bn | £bn | £bn | £bn | £bn | £bn | |
| Balance sheet total gross amortised cost and FVOCI | 586.1 | 555.0 | ||||
| In scope of IFRS 9 ECL framework | 575.9 | 548.8 | ||||
| % in scope | 98% | 99% | ||||
| Loans to customers - in scope - amortised cost | 367.0 | 4.7 | 362.3 | 365.5 | 6.0 | 359.5 |
| Loans to customers - in scope - FVOCI | 0.7 | - | 0.7 | - | - | - |
| Loans to banks - in scope - amortised cost | 7.9 | - | 7.9 | 6.8 | - | 6.8 |
| Total loans - in scope | 375.6 | 4.7 | 370.9 | 372.3 | 6.0 | 366.3 |
| Stage 1 | 316.7 | 0.4 | 316.3 | 287.1 | 0.5 | 286.6 |
| Stage 2 | 53.2 | 2.2 | 51.0 | 78.9 | 3.0 | 75.9 |
| Stage 3 | 5.7 | 2.1 | 3.6 | 6.3 | 2.5 | 3.8 |
| Other financial assets - in scope - amortised cost | 159.2 | - | 159.2 | 132.1 | - | 132.1 |
| Other financial assets - in scope - FVOCI | 41.1 | - | 41.1 | 44.4 | - | 44.4 |
| Total other financial assets - in scope | 200.3 | - | 200.3 | 176.5 | - | 176.5 |
| Stage 1 | 199.5 | - | 199.5 | 175.5 | - | 175.5 |
| Stage 2 | 0.8 | - | 0.8 | 1.0 | - | 1.0 |
| Out of scope of IFRS 9 ECL framework | 10.2 | na | 10.2 | 6.2 | na | 6.2 |
| Loans to customers - out of scope - amortised cost | 0.4 | na | 0.4 | 1.0 | na | 1.0 |
| Loans to banks - out of scope - amortised cost | 0.3 | na | 0.3 | 0.1 | na | 0.1 |
| Other financial assets - out of scope - amortised cost | 9.2 | na | 9.2 | 4.6 | na | 4.6 |
| Other financial assets - out of scope - FVOCI | 0.3 | na | 0.3 | 0.5 | na | 0.5 |
| na = not applicable |
The assets outside the IFRS 9 ECL framework were as follows:
In addition to contingent liabilities and commitments disclosed in Note 11, reputationally-committed limits, are also included in the scope of the IFRS 9 ECL framework. These are offset by nil (31 December 2020 – £0.2 billion) out of scope balances primarily related to facilities that, if drawn, would not be classified as amortised cost or FVOCI, or undrawn limits relating to financial assets exclusions. Total contingent liabilities (including financial guarantees) and commitments within IFRS 9 ECL scope of £127.6 billion (31 December 2020 – £133.6 billion) comprised Stage 1 £110.6 billion (31 December 2020 – £107.4 billion); Stage 2 £16.2 billion (31 December 2020 – £25.2 billion); and Stage 3 £0.8 billion (31 December 2020 – £1.0 billion).
The ECL relating to contingent liabilities is £0.2 billion (31 December 2020 - £0.2 billion). The total ECL in the remainder of the credit risk section of £4.9 billion includes ECL for both balance sheet exposure and contingent liabilities.
Segment analysis – portfolio summary
The table below shows gross loans and related credit impairment measures, within the scope of the IFRS 9 ECL framework.
| International Banking & Markets | ||||||||
|---|---|---|---|---|---|---|---|---|
| Retail | Private | Commercial | RBS | NatWest | Ulster | Central items | ||
| Banking | Banking | Banking | International | Markets | Bank RoI | & other | Total | |
| 30 June 2021 | £m | £m | £m | £m | £m | £m | £m | £m |
| Loans - amortised cost and FVOCI | ||||||||
| 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 (1) | ||||||||
| 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 (2,3) | ||||||||
| 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 | |
| Half year ended 30 June 2021 | ||||||||
| Impairment losses | ||||||||
| ECL (release)/charge (4) | (57) | (27) | (568) | (29) | (16) | (11) | 1 | (707) |
| Stage 1 | (195) | (27) | (405) | (23) | (8) | (43) | - | (701) |
| Stage 2 | 45 | (4) | (141) | (4) | (5) | 8 | 1 | (100) |
| Stage 3 | 93 | 4 | (22) | (2) | (3) | 24 | - | 94 |
| Of which: individual | - | 4 | (29) | (2) | 1 | 1 | - | (25) |
| Of which: collective | 93 | - | 7 | - | (4) | 23 | - | 119 |
| ECL loss rate - annualised | ||||||||
| (basis points) (3) | (6) | (29) | (107) | (35) | (41) | (13) | 1 | (38) |
| Amounts written-off | 138 | 5 | 257 | 1 | 40 | 76 | - | 517 |
| Of which: individual | - | 5 | 210 | 1 | 40 | - | - | 256 |
| Of which: collective | 138 | - | 47 | - | - | 76 | - | 261 |
For the notes to this table refer to the following page.
| International Banking & Markets | ||||||||
|---|---|---|---|---|---|---|---|---|
| Retail | Private | Commercial | RBS | NatWest | Ulster | Central items | ||
| 31 December 2020 | Banking £m |
Banking £m |
Banking £m |
International £m |
Markets £m |
Bank RoI £m |
& other £m |
Total £m |
| Loans - amortised cost and FVOCI | ||||||||
| 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 (1) | ||||||||
| 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 (2,3) | ||||||||
| 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 | |
| Half year ended 30 June 2020 | ||||||||
| Impairment losses | ||||||||
| ECL charge (4) | 657 | 56 | 1,790 | 46 | 40 | 243 | 26 | 2,858 |
| Stage 1 | 24 | 16 | 231 | 4 | 10 | 12 | 11 | 308 |
| Stage 2 | 524 | 39 | 1,323 | 20 | 43 | 186 | 15 | 2,150 |
| Stage 3 | 109 | 1 | 236 | 22 | (13) | 45 | - | 400 |
| Of which: individual | - | 1 | 114 | 22 | (4) | (2) | - | 131 |
| Of which: collective | 109 | - | 122 | - | (9) | 47 | - | 269 |
| ECL loss rate - annualised | ||||||||
| (basis points) (3) | 79 | 69 | 312 | 63 | 63 | 197 | 25 | 154 |
| Amounts written-off | 117 | 1 | 120 | 2 | 4 | 164 | - | 408 |
| Of which: individual | - | 1 | 34 | 2 | 4 | - | - | 41 |
| Of which: collective | 117 | - | 86 | - | - | 164 | - | 367 |
Notes:
(1) Includes £6 million (31 December 2020 – £6 million) related to assets classified as FVOCI.
(2) ECL provisions coverage is calculated as ECL provisions divided by loans – amortised cost and FVOCI.
(3) ECL provisions coverage and ECL loss rates are calculated on third party loans and related ECL provisions and charge respectively. ECL loss rate is calculated as annualised third party ECL charge divided by loans – amortised cost and FVOCI. The half year ECL charge is annualised by multiplying by two.
(4) Includes a £4 million charge (30 June 2020 – £5 million) related to other financial assets, of which nil (30 June 2020 – £4 million) related to assets classified as FVOCI; and £2 million (30 June 2020 – £8 million) related to contingent liabilities.
(5) The table shows gross loans only and excludes amounts that are outside the scope of the ECL framework. Refer to page 29 for Financial instruments within the scope of the IFRS 9 ECL framework for further details. Other financial assets within the scope of the IFRS 9 ECL framework were cash and balances at central banks totalling £150.5 billion (31 December 2020 – £122.7 billion) and debt securities of £49.8 billion (31 December 2020 – £53.8 billion).
(6) The stage allocation of the ECL charge was aligned to the stage transition approach that underpins the analysis in the Flow statement section.
● ECL reduced significantly on Stage 1 and Stage 2 exposures, reflecting a more positive economic outlook, commensurate with reduced levels of uncertainty due to vaccination progress and economic rebound as lockdown eases.
● The various customer support mechanisms which continue to be available mitigate against flows to default in the short-term. Hence, there was a limited effect on Stage 3 ECL requirements during H1 2021.
● Reflecting the improved economic environment and resultant ECL releases across all key businesses, the annualised loss rate has reduced to negative 38bps.
The table below shows gross loans and ECL provisions, by days past due, by segment and stage, within the scope of the ECL framework.
| Gross loans | ECL provisions (2) | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Stage 2 (1) | Stage 2 (1) | |||||||||||||
| Not past | 1-30 | >30 | Not past | 1-30 | >30 | |||||||||
| Stage 1 | due | DPD | DPD | Total | Stage 3 | Total | Stage 1 | due | DPD | DPD | Total | Stage 3 | Total | |
| 30 June 2021 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Retail Banking | 158,989 | 17,478 | 895 | 493 18,866 | 1,921 179,776 | 120 | 626 | 44 | 39 | 709 | 811 | 1,640 | ||
| Private Banking | 16,728 | 1,376 | 38 | 30 | 1,444 | 307 | 18,479 | 21 | 49 | - | - | 49 | 36 | 106 |
| Personal | 13,783 | 114 | 38 | 27 | 179 | 267 | 14,229 | 6 | 2 | - | - | 2 | 17 | 25 |
| Wholesale | 2,945 | 1,262 | - | 3 | 1,265 | 40 | 4,250 | 15 | 47 | - | - | 47 | 19 | 81 |
| Commercial Banking | 75,713 | 26,569 | 876 | 450 27,895 | 2,226 105,834 | 208 | 1,155 | 49 | 18 1,222 | 812 | 2,242 | |||
| International Banking | ||||||||||||||
| & Markets | ||||||||||||||
| RBS International | 15,027 | 1,311 | 17 | 14 | 1,342 | 206 | 16,575 | 15 | 45 | - | 1 | 46 | 47 | 108 |
| Personal | 2,686 | 19 | 14 | 7 | 40 | 68 | 2,794 | 2 | 1 | - | 1 | 2 | 12 | 16 |
| Wholesale | 12,341 | 1,292 | 3 | 7 | 1,302 | 138 | 13,781 | 13 | 44 | - | - | 44 | 35 | 92 |
| NatWest Markets | 7,019 | 709 | - | 12 | 721 | 108 | 7,848 | 10 | 36 | - | - | 36 | 88 | 134 |
| Ulster Bank RoI | 13,732 | 2,636 | 85 | 100 | 2,821 | 935 | 17,488 | 44 | 205 | 9 | 11 | 225 | 398 | 667 |
| Personal | 10,798 | 1,166 | 78 | 85 | 1,329 | 773 | 12,900 | 24 | 59 | 6 | 8 | 73 | 301 | 398 |
| Wholesale | 2,934 | 1,470 | 7 | 15 | 1,492 | 162 | 4,588 | 20 | 146 | 3 | 3 | 152 | 97 | 269 |
| Central items & other | 29,493 | 99 | - | - | 99 | - | 29,592 | 15 | 13 | - | - | 13 | - | 28 |
| Total loans | 316,701 | 50,178 | 1,911 | 1,099 53,188 | 5,703 375,592 | 433 | 2,129 | 102 | 69 2,300 | 2,192 | 4,925 | |||
| Of which: | ||||||||||||||
| Personal | 186,256 | 18,777 | 1,025 | 612 20,414 | 3,029 209,699 | 152 | 688 | 50 | 48 | 786 | 1,141 | 2,079 | ||
| Wholesale | 130,445 | 31,401 | 886 | 487 32,774 | 2,674 165,893 | 281 | 1,441 | 52 | 21 1,514 | 1,051 | 2,846 | |||
| 31 December 2020 | ||||||||||||||
| Retail Banking | 139,956 | 30,714 | 1,080 | 620 32,414 | 1,891 174,261 | 134 | 762 | 70 | 65 | 897 | 806 | 1,837 | ||
| Private Banking | 15,321 | 1,908 | 17 | 14 | 1,939 | 298 | 17,558 | 31 | 67 | - | 1 | 68 | 39 | 138 |
| Personal | 12,799 | 116 | 17 | 11 | 144 | 263 | 13,206 | 7 | 2 | - | - | 2 | 19 | 28 |
| Wholesale | 2,522 | 1,792 | - | 3 | 1,795 | 35 | 4,352 | 24 | 65 | - | 1 | 66 | 20 | 110 |
| Commercial Banking | 70,685 | 36,451 | 589 | 304 37,344 | 2,551 110,580 | 270 | 1,648 | 44 | 21 1,713 | 1,069 | 3,052 | |||
| International Banking | ||||||||||||||
| & Markets | ||||||||||||||
| RBS International | 12,143 | 2,176 | 46 | 20 | 2,242 | 211 | 14,596 | 14 | 72 | 1 | 1 | 74 | 48 | 136 |
| Personal | 2,676 | 18 | 17 | 14 | 49 | 70 | 2,795 | 3 | 1 | - | - | 1 | 11 | 15 |
| Wholesale | 9,467 | 2,158 | 29 | 6 | 2,193 | 141 | 11,801 | 11 | 71 | 1 | 1 | 73 | 37 | 121 |
| NatWest Markets | 7,780 | 1,457 | - | 109 | 1,566 | 171 | 9,517 | 12 | 49 | - | - | 49 | 132 | 193 |
| Ulster Bank RoI | 14,380 | 2,964 | 144 | 194 | 3,302 | 1,236 | 18,918 | 45 | 227 | 15 | 23 | 265 | 492 | 802 |
| Personal | 11,117 | 1,500 | 115 | 130 | 1,745 | 1,064 | 13,926 | 27 | 74 | 9 | 13 | 96 | 392 | 515 |
| Wholesale | 3,263 | 1,464 | 29 | 64 | 1,557 | 172 | 4,992 | 18 | 153 | 6 | 10 | 169 | 100 | 287 |
| Central items & other | 26,859 | 110 | - | - | 110 | - | 26,969 | 13 | 15 | - | - | 15 | - | 28 |
| Total loans | 287,124 | 75,780 | 1,876 | 1,261 78,917 | 6,358 372,399 | 519 | 2,840 | 130 | 111 3,081 | 2,586 | 6,186 | |||
| Of which: | ||||||||||||||
| Personal | 166,548 | 32,348 | 1,229 | 775 34,352 | 3,288 204,188 | 171 | 839 | 79 | 78 | 996 | 1,228 | 2,395 | ||
| Wholesale | 120,576 | 43,432 | 647 | 486 44,565 | 3,070 168,211 | 348 | 2,001 | 51 | 33 2,085 | 1,358 | 3,791 |
For the notes to this table refer to the following page.
The table below shows ECL and ECL provisions coverage, by days past due, by segment and stage, within the scope of the ECL framework.
| ECL provisions coverage | Half year ended 30 June 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Stage 2 (1,2) | ECL | |||||||||
| Not past | Total | Amounts | ||||||||
| Stage 1 | due | 1-30 DPD | >30 DPD | Total | Stage 3 | Total (release)/charge | Loss rate | written-off | ||
| 30 June 2021 | % | % | % | % | % | % | % | £m | basis points | £m |
| Retail Banking | 0.08 | 3.58 | 4.92 | 7.91 | 3.76 | 42.22 | 0.91 | (57) | (6) | 138 |
| Private Banking | 0.13 | 3.56 | - | - | 3.39 | 11.73 | 0.57 | (27) | (29) | 5 |
| Personal | 0.04 | 1.75 | - | - | 1.12 | 6.37 | 0.18 | (4) | (6) | (1) |
| Wholesale | 0.51 | 3.72 | - | - | 3.72 | 47.50 | 1.91 | (23) | (108) | 6 |
| Commercial Banking | 0.27 | 4.35 | 5.59 | 4.00 | 4.38 | 36.48 | 2.12 | (568) | (107) | 257 |
| International Banking & Markets |
||||||||||
| RBS International | 0.10 | 3.43 | - | 7.14 | 3.43 | 22.82 | 0.65 | (29) | (35) | 1 |
| Personal | 0.07 | 5.26 | - | 14.29 | 5.00 | 17.65 | 0.57 | - | - | - |
| Wholesale | 0.11 | 3.41 | - | - | 3.38 | 25.36 | 0.67 | (29) | (42) | 1 |
| NatWest Markets | 0.14 | 5.08 | - | - | 4.99 | 81.48 | 1.71 | (16) | (41) | 40 |
| Ulster Bank RoI | 0.32 | 7.78 | 10.59 | 11.00 | 7.98 | 42.57 | 3.81 | (11) | (13) | 76 |
| Personal | 0.22 | 5.06 | 7.69 | 9.41 | 5.49 | 38.94 | 3.09 | (11) | (17) | 71 |
| Wholesale | 0.68 | 9.93 | 42.86 | 20.00 | 10.19 | 59.88 | 5.86 | - | - | 5 |
| Central items & other | 0.05 | 13.13 | - | - | 13.13 | - | 0.09 | 1 | 1 | - |
| Total loans | 0.14 | 4.24 | 5.34 | 6.28 | 4.32 | 38.44 | 1.31 | (707) | (38) | 517 |
| Of which: | ||||||||||
| Personal | 0.08 | 3.66 | 4.88 | 7.84 | 3.85 | 37.67 | 0.99 | (72) | (7) | 208 |
| Wholesale | 0.22 | 4.59 | 5.87 | 4.31 | 4.62 | 39.30 | 1.72 | (635) | (77) | 309 |
| ECL provisions coverage | Half year ended 30 June 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Stage 2 (1,2) | ECL | |||||||||
| Not past | Total | Amounts | ||||||||
| Stage 1 | due | 1-30 DPD | >30 DPD | Total | Stage 3 | Total | charge/ (release) |
Loss rate | written-off | |
| 31 December 2020 | % | % | % | % | % | % | % | £m | basis points | £m |
| Retail Banking | 0.10 | 2.48 | 6.48 | 10.48 | 2.77 | 42.62 | 1.05 | 657 | 79 | 117 |
| Private Banking | 0.20 | 3.51 | - | 7.14 | 3.51 | 13.09 | 0.79 | 56 | 69 | 1 |
| Personal | 0.05 | 1.72 | - | - | 1.39 | 7.22 | 0.21 | 3 | 5 | - |
| Wholesale | 0.95 | 3.63 | - | 33.33 | 3.68 | 57.14 | 2.53 | 53 | 273 | 1 |
| Commercial Banking | 0.38 | 4.52 | 7.47 | 6.91 | 4.59 | 41.91 | 2.76 | 1,790 | 312 | 120 |
| International Banking & Markets |
||||||||||
| RBS International | 0.12 | 3.31 | 2.17 | 5.00 | 3.30 | 22.75 | 0.93 | 46 | 63 | 2 |
| Personal | 0.11 | 5.56 | - | - | 2.04 | 15.71 | 0.54 | (3) | (21) | 2 |
| Wholesale | 0.12 | 3.29 | 3.45 | 16.67 | 3.33 | 26.24 | 1.03 | 49 | 83 | - |
| NatWest Markets | 0.15 | 3.36 | - | - | 3.13 | 77.19 | 2.03 | 40 | 63 | 4 |
| Ulster Bank RoI | 0.31 | 7.66 | 10.42 | 11.86 | 8.03 | 39.81 | 4.24 | 243 | 197 | 164 |
| Personal | 0.24 | 4.93 | 7.83 | 10.00 | 5.50 | 36.84 | 3.70 | 120 | 168 | 162 |
| Wholesale | 0.55 | 10.45 | 20.69 | 15.63 | 10.85 | 58.14 | 5.75 | 123 | 236 | 2 |
| Central items & other | 0.05 | 13.64 | - | - | 13.64 | - | 0.10 | 26 | 25 | - |
| Total loans | 0.18 | 3.75 | 6.93 | 8.80 | 3.90 | 40.67 | 1.66 | 2,858 | 154 | 408 |
| Of which: | ||||||||||
| Personal | 0.10 | 2.59 | 6.43 | 10.06 | 2.90 | 37.35 | 1.17 | 777 | 79 | 281 |
| Wholesale | 0.29 | 4.61 | 7.88 | 6.79 | 4.68 | 44.23 | 2.25 | 2,081 | 238 | 127 |
Notes:
(1) 30 DPD – 30 days past due, the mandatory 30 days past due backstop is prescribed by IFRS 9 for a SICR.
(2) ECL provisions on contingent liabilities and commitments are included within the Financial assets section so as not to distort ECL coverage ratios.
Sector analysis – portfolio summary
The table below shows financial assets and off-balance sheet exposures gross of ECL and related ECL provisions, impairment and past due by sector, asset quality and geographical region.
| Personal | Wholesale | Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Credit | Other | |||||||||
| Mortgages (1) | cards personal | Total | Property | Corporate | FI Sovereign | Total | ||||
| 30 June 2021 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Loans by geography | 196,708 | 3,727 | 9,264 209,699 | 35,941 | 74,122 | 50,072 | 5,758 165,893 | 375,592 | ||
| - UK | 184,046 | 3,660 | 9,093 196,799 | 33,825 | 63,855 | 36,774 | 4,223 138,677 | 335,476 | ||
| - RoI | 12,662 | 67 | 171 | 12,900 | 1,137 | 3,677 | 321 | 27 | 5,162 | 18,062 |
| - Other Europe | - | - | - | - | 621 | 3,759 | 4,799 | 878 | 10,057 | 10,057 |
| - RoW | - | - | - | - | 358 | 2,831 | 8,178 | 630 | 11,997 | 11,997 |
| Loans by stage | 196,708 | 3,727 | 9,264 209,699 | 35,941 | 74,122 | 50,072 | 5,758 165,893 | 375,592 | ||
| - Stage 1 | 177,630 | 2,562 | 6,064 186,256 | 28,105 | 49,050 | 47,694 | 5,596 130,445 | 316,701 | ||
| - Stage 2 | 16,750 | 1,083 | 2,581 | 20,414 | 6,782 | 23,478 | 2,361 | 153 | 32,774 | 53,188 |
| - Stage 3 | 2,328 | 82 | 619 | 3,029 | 1,054 | 1,594 | 17 | 9 | 2,674 | 5,703 |
| - Of which: individual | 315 | - | 20 | 335 | 706 | 791 | 10 | 9 | 1,516 | 1,851 |
| - Of which: collective | 2,013 | 82 | 599 | 2,694 | 348 | 803 | 7 | - | 1,158 | 3,852 |
| Loans - past due analysis (2,3) | 196,708 | 3,727 | 9,264 209,699 | 35,941 | 74,122 | 50,072 | 5,758 165,893 | 375,592 | ||
| - Not past due | 193,185 | 3,618 | 8,457 205,260 | 34,889 | 71,810 | 48,943 | 5,488 161,130 | 366,390 | ||
| - Past due 1-30 days | 1,317 | 25 | 129 | 1,471 | 398 | 1,495 | 1,110 | 269 | 3,272 | 4,743 |
| - Past due 30-90 days | 697 | 24 | 93 | 814 | 251 | 250 | 13 | 1 | 515 | 1,329 |
| - Past due 90-180 days | 433 | 23 | 72 | 528 | 39 | 41 | - | - | 80 | 608 |
| - Past due >180 days | 1,076 | 37 | 513 | 1,626 | 364 | 526 | 6 | - | 896 | 2,522 |
| Loans - Stage 2 | 16,750 | 1,083 | 2,581 | 20,414 | 6,782 | 23,478 | 2,361 | 153 | 32,774 | 53,188 |
| - Not past due | 15,331 | 1,053 | 2,393 | 18,777 | 6,330 | 22,599 | 2,320 | 152 | 31,401 | 50,178 |
| - Past due 1-30 days | 903 | 14 | 108 | 1,025 | 211 | 647 | 28 | - | 886 | 1,911 |
| - Past due 30-90 days | 516 | 16 | 80 | 612 | 241 | 232 | 13 | 1 | 487 | 1,099 |
| Weighted average life* | ||||||||||
| - ECL measurement (years) | 9 | 2 | 5 | 6 | 4 | 6 | 3 | 1 | 5 | 5 |
| Weighted average 12 months PDs* |
||||||||||
| - IFRS 9 (%) | 0.34 | 5.94 | 3.51 | 0.56 | 2.31 | 2.91 | 0.41 | 0.13 | 1.91 | 1.18 |
| - Basel (%) | 0.77 | 3.33 | 3.22 | 0.91 | 1.23 | 1.87 | 0.27 | 0.14 | 1.18 | 1.03 |
| ECL provisions by geography | 853 | 289 | 937 | 2,079 | 797 | 1,885 | 143 | 21 | 2,846 | 4,925 |
| - UK | 469 | 287 | 925 | 1,681 | 678 | 1,482 | 86 | 15 | 2,261 | 3,942 |
| - RoI | 384 | 2 | 12 | 398 | 73 | 187 | 13 | 2 | 275 | 673 |
| - Other Europe | - | - | - | - | 38 | 97 | 38 | 1 | 174 | 174 |
| - RoW | - | - | - | - | 8 | 119 | 6 | 3 | 136 | 136 |
| ECL provisions by stage | 853 | 289 | 937 | 2,079 | 797 | 1,885 | 143 | 21 | 2,846 | 4,925 |
| - Stage 1 | 43 | 47 | 62 | 152 | 93 | 149 | 21 | 18 | 281 | 433 |
| - Stage 2 | 249 | 183 | 354 | 786 | 313 | 1,085 | 115 | 1 | 1,514 | 2,300 |
| - Stage 3 | 561 | 59 | 521 | 1,141 | 391 | 651 | 7 | 2 | 1,051 | 2,192 |
| - Of which: individual | 19 | - | 10 | 29 | 222 | 304 | 3 | 2 | 531 | 560 |
| - Of which: collective | 542 | 59 | 511 | 1,112 | 169 | 347 | 4 | - | 520 | 1,632 |
| ECL provisions coverage (%) | 0.43 | 7.75 | 10.11 | 0.99 | 2.22 | 2.54 | 0.29 | 0.36 | 1.72 | 1.31 |
| - Stage 1 (%) | 0.02 | 1.83 | 1.02 | 0.08 | 0.33 | 0.30 | 0.04 | 0.32 | 0.22 | 0.14 |
| - Stage 2 (%) | 1.49 | 16.90 | 13.72 | 3.85 | 4.62 | 4.62 | 4.87 | 0.65 | 4.62 | 4.32 |
| - Stage 3 (%) | 24.10 | 71.95 | 84.17 | 37.67 | 37.10 | 40.84 | 41.18 | 22.22 | 39.30 | 38.44 |
| ECL (release)/charge | (53) | (17) | (2) | (72) | (195) | (465) | 22 | 3 | (635) | (707) |
| - UK | (40) | (17) | (3) | (60) | (224) | (373) | 28 | 2 | (567) | (627) |
| - RoI | (13) | - | 1 | (12) | 40 | (49) | 9 | 1 | 1 | (11) |
| - Other Europe | - | - | - | - | (20) | (10) | (8) | - | (38) | (38) |
| - RoW | - | - | - | - | 9 | (33) | (7) | - | (31) | (31) |
| ECL loss rate (%) | (0.05) | (0.91) | (0.04) | (0.07) | (1.09) | (1.25) | 0.09 | 0.10 | (0.77) | (0.38) |
| Amounts written-off | 74 | 45 | 89 | 208 | 120 | 187 | 2 | - | 309 | 517 |
*Not within the scope of EY's review report.
For the notes to this table refer to page 38.
| Personal | Wholesale | Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Mortgages (1) | Credit | Other cards personal |
Total | Property | Corporate | FI Sovereign | Total | |||
| 30 June 2021 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Loans by residual maturity | 196,708 | 3,727 | 9,264 209,699 | 35,941 | 74,122 | 50,072 | 5,758 165,893 | 375,592 | ||
| - <1 year | 3,761 | 2,420 | 3,080 | 9,261 | 9,876 | 22,159 | 39,865 | 2,713 | 74,613 | 83,874 |
| - 1-5 year | 12,075 | 1,307 | 5,286 | 18,668 | 17,145 | 35,795 | 9,147 | 1,714 | 63,801 | 82,469 |
| - 5 year | 180,872 | - | 898 181,770 | 8,920 | 16,168 | 1,060 | 1,331 | 27,479 | 209,249 | |
| Other financial assets by asset | ||||||||||
| quality (4) | - | - | - | - | 93 | 12 | 10,764 | 189,412 200,281 | 200,281 | |
| - AQ1-AQ4 | - | - | - | - | - | 12 | 10,263 | 189,375 199,650 | 199,650 | |
| - AQ5-AQ8 | - | - | - | - | 93 | - | 501 | 37 | 631 | 631 |
| Off-balance sheet | 12,825 | 14,470 | 10,251 | 37,546 | 17,591 | 55,538 | 15,585 | 1,358 | 90,072 | 127,618 |
| - Loan commitments | 12,822 | 14,470 | 10,212 | 37,504 | 17,083 | 52,626 | 14,659 | 1,356 | 85,724 | 123,228 |
| - Financial guarantees | 3 | - | 39 | 42 | 508 | 2,912 | 926 | 2 | 4,348 | 4,390 |
| Off-balance sheet by asset | ||||||||||
| quality (4) | 12,825 | 14,470 | 10,251 | 37,546 | 17,591 | 55,538 | 15,585 | 1,358 | 90,072 | 127,618 |
| - AQ1-AQ4 | 12,021 | 185 | 8,514 | 20,720 | 13,130 | 30,984 | 14,148 | 1,212 | 59,474 | 80,194 |
| - AQ5-AQ8 | 795 | 13,991 | 1,718 | 16,504 | 4,368 | 24,071 | 1,434 | 146 | 30,019 | 46,523 |
| - AQ9 | - | 9 | 7 | 16 | 8 | 38 | - | - | 46 | 62 |
| - AQ10 | 9 | 285 | 12 | 306 | 85 | 445 | 3 | - | 533 | 839 |
For the notes to this table refer to page 38.
| Personal | Wholesale | Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Credit | Other | |||||||||
| 31 December 2020 | Mortgages (1) £m |
£m | cards personal £m |
Total £m |
Property £m |
Corporate £m |
£m | FI Sovereign £m |
Total £m |
£m |
| Loans by geography | 190,516 | 3,895 | 9,777 204,188 | 38,076 | 77,533 | 47,643 | 4,959 168,211 | 372,399 | ||
| - UK | 176,866 | 3,816 | 9,580 190,262 | 35,617 | 65,968 | 34,847 | 3,776 140,208 | 330,470 | ||
| - RoI | 13,650 | 79 | 197 | 13,926 | 1,241 | 4,056 | 348 | 30 | 5,675 | 19,601 |
| - Other Europe | - | - | - | - | 772 | 4,132 | 4,535 | 538 | 9,977 | 9,977 |
| - RoW | - | - | - | - | 446 | 3,377 | 7,913 | 615 | 12,351 | 12,351 |
| Loans by stage | 190,516 | 3,895 | 9,777 204,188 | 38,076 | 77,533 | 47,643 | 4,959 168,211 | 372,399 | ||
| - Stage 1 | 158,387 | 2,411 | 5,750 166,548 | 23,733 | 48,090 | 44,002 | 4,751 120,576 | 287,124 | ||
| - Stage 2 | 29,571 | 1,375 | 3,406 | 34,352 | 13,021 | 27,716 | 3,624 | 204 | 44,565 | 78,917 |
| - Stage 3 | 2,558 | 109 | 621 | 3,288 | 1,322 | 1,727 | 17 | 4 | 3,070 | 6,358 |
| - Of which: individual | 308 | - | 26 | 334 | 987 | 958 | 9 | 4 | 1,958 | 2,292 |
| - Of which: collective | 2,250 | 109 | 595 | 2,954 | 335 | 769 | 8 | - | 1,112 | 4,066 |
| Loans - past due analysis (2,3) | 190,516 | 3,895 | 9,777 204,188 | 38,076 | 77,533 | 47,643 | 4,959 168,211 | 372,399 | ||
| - Not past due | 186,592 | 3,770 | 8,868 199,230 | 36,818 | 75,690 | 47,195 | 4,689 164,392 | 363,622 | ||
| - Past due 1-30 days | 1,482 | 29 | 192 | 1,703 | 348 | 990 | 328 | 270 | 1,936 | 3,639 |
| - Past due 30-90 days | 863 | 26 | 135 | 1,024 | 260 | 251 | 113 | - | 624 | 1,648 |
| - Past due 90-180 days | 456 | 20 | 66 | 542 | 161 | 67 | - | - | 228 | 770 |
| - Past due >180 days | 1,123 | 50 | 516 | 1,689 | 489 | 535 | 7 | - | 1,031 | 2,720 |
| Loans - Stage 2 | 29,571 | 1,375 | 3,406 | 34,352 | 13,021 | 27,716 | 3,624 | 204 | 44,565 | 78,917 |
| - Not past due | 27,893 | 1,340 | 3,115 | 32,348 | 12,708 | 27,036 | 3,484 | 204 | 43,432 | 75,780 |
| - Past due 1-30 days | 1,038 | 18 | 173 | 1,229 | 160 | 457 | 30 | - | 647 | 1,876 |
| - Past due 30-90 days | 640 | 17 | 118 | 775 | 153 | 223 | 110 | - | 486 | 1,261 |
| Weighted average life* | ||||||||||
| - ECL measurement (years) | 9 | 2 | 5 | 6 | 4 | 6 | 4 | - | 5 | 5 |
| Weighted average 12 months PDs* |
||||||||||
| - IFRS 9 (%) | 0.72 | 6.17 | 4.82 | 1.03 | 3.99 | 3.70 | 0.51 | 0.13 | 2.73 | 1.81 |
| - Basel (%) | 0.85 | 3.40 | 3.82 | 1.03 | 1.66 | 2.51 | 0.32 | 0.15 | 1.54 | 1.25 |
| ECL provisions by geography | 1,005 | 354 | 1,036 | 2,395 | 1,175 | 2,478 | 121 | 17 | 3,791 | 6,186 |
| - UK | 506 | 351 | 1,024 | 1,881 | 1,069 | 1,907 | 60 | 12 | 3,048 | 4,929 |
| - RoI | 499 | 3 | 12 | 514 | 41 | 277 | 3 | 1 | 322 | 836 |
| - Other Europe | - | - | - | - | 53 | 125 | 46 | 1 | 225 | 225 |
| - RoW | - | - | - | - | 12 | 169 | 12 | 3 | 196 | 196 |
| ECL provisions by stage | 1,005 | 354 | 1,036 | 2,395 | 1,175 | 2,478 | 121 | 17 | 3,791 | 6,186 |
| - Stage 1 | 51 | 53 | 67 | 171 | 123 | 188 | 23 | 14 | 348 | 519 |
| - Stage 2 | 319 | 225 | 452 | 996 | 507 | 1,487 | 90 | 1 | 2,085 | 3,081 |
| - Stage 3 | 635 | 76 | 517 | 1,228 | 545 | 803 | 8 | 2 | 1,358 | 2,586 |
| - Of which: individual | 18 | - | 12 | 30 | 360 | 436 | 3 | 2 | 801 | 831 |
| - Of which: collective | 617 | 76 | 505 | 1,198 | 185 | 367 | 5 | - | 557 | 1,755 |
| ECL provisions coverage (%) | 0.53 | 9.09 | 10.60 | 1.17 | 3.09 | 3.20 | 0.25 | 0.34 | 2.25 | 1.66 |
| - Stage 1 (%) | 0.03 | 2.20 | 1.17 | 0.10 | 0.52 | 0.39 | 0.05 | 0.29 | 0.29 | 0.18 |
| - Stage 2 (%) | 1.08 | 16.36 | 13.27 | 2.90 | 3.89 | 5.37 | 2.48 | 0.49 | 4.68 | 3.90 |
| - Stage 3 (%) | 24.82 | 69.72 | 83.25 | 37.35 | 41.23 | 46.50 | 47.06 | 50.00 | 44.23 | 40.67 |
| Half year ended 30 June 2020 | ||||||||||
| ECL charge | 243 | 164 | 370 | 777 | 568 | 1,439 | 73 | 1 | 2,081 | 2,858 |
| - UK | 136 | 163 | 358 | 657 | 501 | 1,238 | 26 | 1 | 1,766 | 2,423 |
| - RoI | 107 | 1 | 12 | 120 | 47 | 77 | 1 | - | 125 | 245 |
| - Other Europe | - | - | - | - | 16 | 50 | 36 | - | 102 | 102 |
| - RoW | - | - | - | - | 4 | 74 | 10 | - | 88 | 88 |
| ECL loss rate (%) | 0.27 | 8.59 | 7.40 | 0.79 | 2.81 | 3.52 | 0.34 | 0.02 | 2.38 | 1.54 |
| Amounts written-off | 169 | 49 | 63 | 281 | 21 | 104 | 2 | - | 127 | 408 |
*Not within the scope of EY's review report.
For the notes to this table refer to the following page.
| Personal | Wholesale | Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Credit | Other | |||||||||
| Mortgages (1) | cards personal | Total | Property | Corporate | FI Sovereign | Total | ||||
| 31 December 2020 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Loans by residual maturity | 190,516 | 3,895 | 9,777 204,188 | 38,076 | 77,533 | 47,643 | 4,959 168,211 | 372,399 | ||
| - <1 year | 3,831 | 2,557 | 3,249 | 9,637 | 8,669 | 23,015 | 38,203 | 2,196 | 72,083 | 81,720 |
| - 1-5 year | 12,193 | 1,338 | 5,509 | 19,040 | 20,029 | 36,640 | 8,340 | 1,590 | 66,599 | 85,639 |
| - 5 year | 174,492 | - | 1,019 175,511 | 9,378 | 17,878 | 1,100 | 1,173 | 29,529 | 205,040 | |
| Other financial assets by asset | - | - | - | - | 98 | 116 | 11,093 | 165,209 176,516 | 176,516 | |
| quality (4) | ||||||||||
| - AQ1-AQ4 | - | - | - | - | - | 116 | 10,734 | 165,184 176,034 | 176,034 | |
| - AQ5-AQ8 | - | - | - | - | 98 | - | 359 | 25 | 482 | 482 |
| Off-balance sheet | 14,557 | 14,262 | 10,186 | 39,005 | 17,397 | 58,635 | 17,011 | 1,587 | 94,630 | 133,635 |
| - Loan commitments | 14,554 | 14,262 | 10,144 | 38,960 | 16,829 | 55,496 | 15,935 | 1,585 | 89,845 | 128,805 |
| - Financial guarantees | 3 | - | 42 | 45 | 568 | 3,139 | 1,076 | 2 | 4,785 | 4,830 |
| Off-balance sheet by asset | 14,557 | 14,262 | 10,186 | 39,005 | 17,397 | 58,635 | 17,011 | 1,587 | 94,630 | 133,635 |
| quality (4) | ||||||||||
| - AQ1-AQ4 | 13,610 | 148 | 8,008 | 21,766 | 12,917 | 33,939 | 15,460 | 1,404 | 63,720 | 85,486 |
| - AQ5-AQ8 | 937 | 13,809 | 2,152 | 16,898 | 4,372 | 24,065 | 1,544 | 183 | 30,164 | 47,062 |
| - AQ9 | 1 | 8 | 9 | 18 | 13 | 76 | 1 | - | 90 | 108 |
| - AQ10 | 9 | 297 | 17 | 323 | 95 | 555 | 6 | - | 656 | 979 |
Notes:
(1) Includes a portion of secured lending in Private Banking, in line with ECL calculation methodology. Private Banking and RBS International mortgages are reported in UK, which includes crown dependencies, reflecting the country of lending origination.
(2) 30 DPD – 30 days past due, the mandatory 30 days past due backstop as prescribed by the IFRS 9 guidance for a SICR.
(3) Days past due – Personal products: at a high level, for amortising products, the number of days past due is derived from the arrears amount outstanding and the monthly repayment instalment. For credit cards, it is based on payments missed, and for current accounts the number of continual days in excess of borrowing limit. Wholesale products: the number of days past due for all products is the number of continual days in excess of borrowing limit.
(4) AQ bandings are based on Basel PDs and the mapping is as follows:
| Internal asset quality | Indicative S&P | |
|---|---|---|
| band | Probability of default range | rating |
| AQ1 | 0% - 0.034% | AAA to AA |
| AQ2 | 0.034% - 0.048% | AA to AA |
| AQ3 | 0.048% - 0.095% | A+ to A |
| AQ4 | 0.095% - 0.381% | BBB+ to BBB |
| AQ5 | 0.381% - 1.076% | BB+ to BB |
| AQ6 | 1.076% - 2.153% | BB- to B+ |
| AQ7 | 2.153% - 6.089% | B+ to B |
| AQ8 | 6.089% - 17.222% | B- to CCC+ |
| AQ9 | 17.222% - 100% | CCC to C |
| AQ10 | 100% | D |
£0.3 billion (31 December 2020 – £0.3 billion) of AQ10 Personal balances primarily relate to loan commitments, the drawdown of which is effectively prohibited. AQ10 includes £0.3 billion (31 December 2020 – £0.4 billion) of RoI mortgages which are not currently considered defaulted for capital calculation purposes for RoI but are included in Stage 3.
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 June 2021 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| 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 |
| Education | 864 | 616 | 68 | 1,548 | 1,144 | 17 | 2 | 22 | 18 | 42 |
| 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 |
| Education | 821 | 754 | 63 | 1,638 | 1,016 | 16 | 2 | 41 | 17 | 60 |
| 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 | ||
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. It also includes 2019 data to allow a pre-COVID19 comparison.
| ECL provisions | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 June 2021 31 December 2020 31 December 2019 |
||||||||||||
| Stage 1 Stage 2 Stage 3 | Total | Stage 1 Stage 2 Stage 3 | Total | Stage 1 Stage 2 Stage 3 | Total | |||||||
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Personal | 152 | 786 | 1,141 | 2,079 | 171 | 996 | 1,228 2,395 | 130 | 503 | 1,449 2,082 | ||
| Mortgages | 43 | 249 | 561 | 853 | 51 | 319 | 635 1,005 | 25 | 118 | 821 | 964 | |
| Cards | 47 | 183 | 59 | 289 | 53 | 225 | 76 | 354 | 40 | 132 | 89 | 261 |
| Other Personal | 62 | 354 | 521 | 937 | 67 | 452 | 517 1,036 | 65 | 253 | 539 | 857 | |
| Wholesale | 281 | 1,514 | 1,051 | 2,846 | 348 | 2,085 | 1,358 3,791 | 192 | 249 | 1,269 1,710 | ||
| Property | 93 | 313 | 391 | 797 | 123 | 507 | 545 1,175 | 45 | 47 | 402 | 494 | |
| Financial institutions | 21 | 115 | 7 | 143 | 23 | 90 | 8 | 121 | 16 | 4 | 8 | 28 |
| Sovereigns | 18 | 1 | 2 | 21 | 14 | 1 | 2 | 17 | 7 | - | - | 7 |
| Corporate | 149 | 1,085 | 651 | 1,885 | 188 | 1,487 | 803 2,478 | 124 | 198 | 859 1,181 | ||
| Of which: | ||||||||||||
| Airlines and aerospace (1) | 2 | 33 | 27 | 62 | 2 | 42 | 25 | 69 | 2 | 3 | 55 | 60 |
| Automotive | 15 | 60 | 14 | 89 | 17 | 63 | 17 | 97 | 12 | 11 | 15 | 38 |
| Education | 2 | 22 | 18 | 42 | 2 | 41 | 17 | 60 | 2 | 4 | 1 | 7 |
| Health | 12 | 116 | 47 | 175 | 13 | 164 | 48 | 225 | 9 | 16 | 52 | 77 |
| Land transport & logistics | 7 | 83 | 30 | 120 | 8 | 98 | 32 | 138 | 6 | 12 | 21 | 39 |
| Leisure | 15 | 323 | 142 | 480 | 22 | 439 | 204 | 665 | 25 | 27 | 175 | 227 |
| Oil and gas | 3 | 11 | 31 | 45 | 4 | 20 | 59 | 83 | 5 | 3 | 55 | 63 |
| Retail | 13 | 112 | 80 | 205 | 18 | 112 | 101 | 231 | 13 | 16 | 180 | 209 |
| Total | 433 | 2,300 | 2,192 | 4,925 | 519 | 3,081 | 2,586 6,186 | 322 | 752 | 2,718 3,792 |
The table below shows ECL provisions coverage, by stage, for the Personal portfolio and key sectors of the Wholesale portfolio, that continue to be affected by COVID-19. It also includes 2019 data to allow a pre-COVID19 comparison.
| ECL provisions coverage | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 June 2021 | 31 December 2020 | 31 December 2019 | |||||||||||
| Stage 1 Stage 2 Stage 3 | Total | Stage 1 Stage 2 Stage 3 | Total | Stage 1 Stage 2 Stage 3 | Total | ||||||||
| % | % | % | % | % | % | % | % | % | % | % | % | ||
| Personal | 0.08 | 3.85 | 37.67 | 0.99 | 0.10 | 2.90 | 37.35 | 1.17 | 0.08 | 3.35 | 35.90 | 1.10 | |
| Mortgages | 0.02 | 1.49 | 24.10 | 0.43 | 0.03 | 1.08 | 24.82 | 0.53 | 0.02 | 1.03 | 25.05 | 0.55 | |
| Cards | 1.83 | 16.90 | 71.95 | 7.75 | 2.20 | 16.36 | 69.72 | 9.09 | 1.29 | 10.48 | 76.72 | 5.83 | |
| Other Personal | 1.02 | 13.72 | 84.17 | 10.11 | 1.17 | 13.27 | 83.25 10.60 | 0.87 | 10.95 | 83.83 | 8.25 | ||
| Wholesale | 0.22 | 4.62 | 39.30 | 1.72 | 0.29 | 4.68 | 44.23 | 2.25 | 0.14 | 1.94 | 49.53 | 1.16 | |
| Property | 0.33 | 4.62 | 37.10 | 2.22 | 0.52 | 3.89 | 41.23 | 3.09 | 0.14 | 1.82 | 44.92 | 1.36 | |
| Financial institutions | 0.04 | 4.87 | 41.18 | 0.29 | 0.05 | 2.48 | 47.06 | 0.25 | 0.04 | 0.73 | 61.54 | 0.08 | |
| Sovereigns | 0.32 | 0.65 | 22.22 | 0.36 | 0.29 | 0.49 | 50.00 | 0.34 | 0.16 | - | - | 0.16 | |
| Corporate | 0.30 | 4.62 | 40.84 | 2.54 | 0.39 | 5.37 | 46.50 | 3.20 | 0.21 | 2.04 | 52.09 | 1.66 | |
| Of which: | |||||||||||||
| Airlines and aerospace | 0.31 | 3.24 | 45.00 | 3.62 | 0.27 | 3.46 | 60.98 | 3.44 | 0.14 | 1.15 | 137.50 | 3.50 | |
| Automotive | 0.36 | 3.71 | 6.97 | 1.48 | 0.39 | 3.58 | 10.56 | 1.54 | 0.24 | 0.96 | 75.00 | 0.61 | |
| Education | 0.23 | 3.57 | 26.47 | 2.71 | 0.24 | 5.44 | 26.98 | 3.66 | 0.14 | 2.60 | 8.33 | 0.44 | |
| Health | 0.38 | 5.10 | 38.21 | 3.16 | 0.48 | 5.50 | 36.64 | 3.87 | 0.19 | 1.90 | 31.14 | 1.35 | |
| Land transport & logistics | 0.22 | 5.26 | 56.60 | 2.52 | 0.28 | 5.38 | 28.83 | 2.87 | 0.17 | 3.80 | 39.62 | 1.01 | |
| Leisure | 0.46 | 5.79 | 46.56 | 5.25 | 0.67 | 7.16 | 52.99 | 6.77 | 0.40 | 2.15 | 46.42 | 2.85 | |
| Oil and gas | 0.30 | 2.65 | 51.67 | 3.04 | 0.34 | 6.67 | 71.08 | 5.32 | 0.26 | 2.14 | 63.95 | 2.93 | |
| Retail | 0.21 | 4.86 | 41.88 | 2.38 | 0.27 | 4.91 | 54.01 | 2.52 | 0.20 | 1.25 | 83.69 | 2.65 | |
| Total | 0.14 | 4.32 | 38.44 | 1.31 | 0.18 | 3.90 | 40.67 | 1.66 | 0.11 | 2.70 | 41.19 | 1.13 |
Note:
(1) Airlines and aerospace Stage 3 ECL as at 31 December 2019 included £27 million of ECL related to contingent liabilities.
The table below shows Wholesale forbearance, Heightened Monitoring and Risk of Credit Loss by sector. Personal forbearance is disclosed on page 43.
The exposure in this section is based on current exposure gross of provisions but reflecting risk transfer where exposure is guaranteed by a third party. Current exposure is defined as: loans; the amount drawn under a credit facility plus accrued interest; contingent obligations; the issued amount of the guarantee or letter of credit; derivatives – the mark-to-market value; netted where netting agreements exist and net of legally enforceable collateral. Where exposure is guaranteed by a third party not in forbearance, heightened monitoring, or risk of credit loss it will not feature in the table.
| Property | FI | Other corporate | Total | |
|---|---|---|---|---|
| 30 June 2021 | £m | £m | £m | £m |
| Forbearance (flow) | 974 | 41 | 3,290 | 4,305 |
| Forbearance (stock) | 1,466 | 60 | 5,868 | 7,394 |
| Heightened Monitoring and Risk of Credit Loss | 1,542 | 206 | 5,816 | 7,564 |
| 31 December 2020 | ||||
| Forbearance (flow) | 1,597 | 68 | 4,201 | 5,866 |
| Forbearance (stock) | 1,744 | 92 | 4,983 | 6,819 |
| Heightened Monitoring and Risk of Credit Loss | 1,600 | 155 | 5,771 | 7,526 |
Disclosures in the Personal portfolio section include drawn exposure (gross of provisions).
| 30 June 2021 | 31 December 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Retail | Private | RBS | Ulster | Retail | Private | RBS | Ulster | |||
| Banking | Banking | International | Bank RoI | Total | Banking | Banking | International | Bank RoI | Total | |
| Personal lending | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Mortgages | 169,300 | 11,838 | 2,508 | 12,688 | 196,334 | 163,107 | 10,910 | 2,517 | 13,678 190,212 | |
| Of which: | ||||||||||
| Owner occupied | 155,136 | 10,469 | 1,645 | 11,887 | 179,137 | 148,614 | 9,601 | 1,676 | 12,781 172,672 | |
| Buy-to-let | 14,164 | 1,369 | 863 | 801 | 17,197 | 14,493 | 1,309 | 841 | 897 | 17,540 |
| Interest only - variable | 4,534 | 4,575 | 357 | 151 | 9,617 | 5,135 | 4,375 | 347 | 159 | 10,016 |
| Interest only - fixed | 13,729 | 5,337 | 225 | 10 | 19,301 | 13,776 | 4,758 | 233 | 10 | 18,777 |
| Mixed (1) | 8,039 | 1 | 18 | 43 | 8,101 | 7,321 | 1 | 20 | 56 | 7,398 |
| Impairment provisions (2) | 445 | 5 | 8 | 384 | 842 | 483 | 5 | 9 | 499 | 996 |
| Other personal lending (3) | 10,542 | 1,722 | 280 | 238 | 12,782 | 11,116 | 1,613 | 279 | 276 | 13,284 |
| Impairment provisions (2) | 1,188 | 17 | 3 | 14 | 1,222 | 1,348 | 20 | 1 | 15 | 1,384 |
| Total personal lending | 179,842 | 13,560 | 2,788 | 12,926 | 209,116 | 174,223 | 12,523 | 2,796 | 13,954 203,496 | |
| Mortgage LTV ratios | ||||||||||
| Total portfolio | 55% | 59% | 57% | 56% | 55% | 56% | 58% | 57% | 59% | 57% |
| - Stage 1 | 55% | 59% | 56% | 55% | 55% | 55% | 58% | 57% | 57% | 55% |
| - Stage 2 | 58% | 58% | 62% | 61% | 58% | 66% | 61% | 64% | 65% | 66% |
| - Stage 3 | 50% | 65% | 76% | 62% | 56% | 53% | 64% | 75% | 67% | 60% |
| Buy-to-let | 51% | 57% | 53% | 56% | 52% | 52% | 56% | 53% | 59% | 53% |
| - Stage 1 | 51% | 57% | 53% | 53% | 52% | 51% | 56% | 53% | 55% | 52% |
| - Stage 2 | 54% | 56% | 50% | 65% | 55% | 60% | 59% | 53% | 69% | 61% |
| - Stage 3 | 53% | 57% | 59% | 69% | 59% | 56% | 54% | 61% | 74% | 62% |
| Gross new mortgage lending (4) | 18,862 | 1,692 | 197 | 338 | 21,089 | 30,551 | 2,148 | 249 | 910 | 33,858 |
| Of which: | ||||||||||
| Owner occupied | 18,289 | 1,528 | 111 | 335 | 20,263 | 29,608 | 1,922 | 167 | 908 | 32,605 |
| Weighted average LTV | 69% | 67% | 67% | 73% | 68% | 69% | 66% | 66% | 74% | 69% |
| Buy-to-let | 573 | 164 | 86 | 3 | 826 | 943 | 227 | 82 | 2 | 1,254 |
| Weighted average LTV | 63% | 65% | 63% | 58% | 63% | 62% | 62% | 63% | 54% | 62% |
| Interest only - variable rate | 15 | 551 | - | - | 566 | 81 | 1,082 | 7 | - | 1,170 |
| Interest only - fixed rate | 984 | 826 | 45 | - | 1,855 | 1,501 | 695 | 35 | - | 2,231 |
| Mixed (1) | 1,193 | - | 1 | - | 1,194 | 1,630 | - | 2 | - | 1,632 |
| Forbearance flow | 284 | 7 | 4 | 40 | 335 | 550 | 50 | 10 | 127 | 737 |
| Forbearance stock | 1,273 | 3 | 10 | 1,326 | 2,612 | 1,293 | 18 | 10 | 1,627 | 2,948 |
| Current | 651 | 1 | 6 | 939 | 1,597 | 648 | 13 | 9 | 1,070 | 1,740 |
| 1-3 months in arrears | 292 | 2 | 1 | 70 | 365 | 360 | 3 | - | 105 | 468 |
| > 3 months in arrears | 330 | - | 3 | 317 | 650 | 285 | 2 | 1 | 452 | 740 |
Notes:
(1) Includes accounts which have an interest only sub-account and a capital and interest sub-account to provide a more comprehensive view of interest only exposures.
(2) Retail Banking excludes a non-material amount of provisions held on relatively small legacy portfolios.
(3) Comprises unsecured lending except for Private Banking, which includes both secured and unsecured lending. It excludes loans that are commercial in nature.
(4) Retail Banking excludes additional lending to existing customers.
Mortgage LTV distribution by stage
The table below shows gross mortgage lending and related ECL by LTV band. Mortgage lending not within the scope of IFRS 9 ECL reflected portfolios carried at fair value.
| Mortgages | ECL provisions | ECL provisions coverage (2) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Retail Banking | Not within | Of which: | ||||||||||||
| Stage 1 | Stage 2 | Stage 3 | IFRS 9 ECL scope |
Total | gross new lending |
Stage 1 Stage 2 Stage 3 | Total (1) | Stage 1 Stage 2 Stage 3 | Total | |||||
| 30 June 2021 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % |
| ≤50% | 54,791 | 4,808 | 604 | 66 | 60,269 | 2,493 | 4 | 60 | 129 | 193 | - | 1.2 | 21.4 | 0.3 |
| >50% and ≤70% | 63,017 | 5,772 | 509 | 13 | 69,311 | 5,105 | 6 | 74 | 89 | 169 | - | 1.3 | 17.6 | 0.2 |
| >70% and ≤80% | 27,713 | 2,869 | 121 | 1 | 30,704 | 7,544 | 6 | 31 | 21 | 58 | - | 1.1 | 17.1 | 0.2 |
| >80% and ≤90% | 6,854 | 1,581 | 35 | 1 | 8,471 | 3,565 | 2 | 14 | 6 | 22 | - | 0.9 | 18.0 | 0.3 |
| >90% and ≤100% | 474 | 22 | 5 | - | 501 | 29 | - | - | 1 | 1 | - | 1.5 | 27.3 | 0.3 |
| >100% and ≤110% | 4 | 6 | 1 | - | 11 | - | - | - | - | - | - | 2.9 | 32.0 | 5.0 |
| >110% and ≤130% | 4 | 4 | 1 | - | 9 | - | - | - | - | - | - | 4.4 | 32.0 | 4.0 |
| >130% and ≤150% | 3 | 2 | - | - | 5 | - | - | - | - | - | - | 2.1 | 45.2 | 4.3 |
| Total with LTVs | 152,860 15,064 | 1,276 | 81 169,281 | 18,736 | 18 | 179 | 246 | 443 | - | 1.2 | 19.4 | 0.3 | ||
| Other | 16 | 2 | 1 | - | 19 | 126 | - | - | 1 | 1 | 0.1 | 8.5 | 100.0 | 6.0 |
| Total | 152,876 15,066 | 1,277 | 81 169,300 | 18,862 | 18 | 179 | 247 | 444 | - | 1.2 | 19.5 | 0.3 | ||
| 31 December 2020 | ||||||||||||||
| ≤50% | 50,170 | 5,009 | 554 | 124 | 55,857 | 4,207 | 4 | 43 | 107 | 154 | - | 0.8 | 19.4 | 0.3 |
| >50% and ≤70% | 55,263 | 7,416 | 488 | 35 | 63,202 | 9,083 | 7 | 66 | 81 | 154 | - | 0.9 | 16.5 | 0.2 |
| >70% and ≤80% | 19,994 | 9,555 | 141 | 8 | 29,698 | 11,060 | 7 | 56 | 26 | 89 | - | 0.6 | 18.5 | 0.3 |
| >80% and ≤90% | 8,029 | 5,552 | 52 | 6 | 13,639 | 5,175 | 3 | 52 | 11 | 66 | - | 0.9 | 20.3 | 0.5 |
| >90% and ≤100% | 368 | 137 | 13 | 2 | 520 | 865 | - | 5 | 3 | 8 | 0.1 | 3.4 | 26.8 | 1.6 |
| >100% and ≤110% | 19 | 31 | 6 | 1 | 57 | - | - | 2 | 1 | 3 | 0.1 | 6.2 | 22.1 | 5.6 |
| >110% and ≤130% | 23 | 45 | 6 | 1 | 75 | - | - | 3 | 2 | 5 | 0.3 | 7.6 | 31.1 | 7.3 |
| >130% and ≤150% | 5 | 20 | 5 | - | 30 | - | - | 1 | 1 | 2 | - | 7.2 | 23.0 | 8.5 |
| >150% | 1 | 3 | 3 | - | 7 | - | - | - | 1 | 1 | 0.1 | 9.4 | 44.4 | 22.6 |
| Total with LTVs | 133,872 27,768 | 1,268 | 177 163,085 | 30,390 | 21 | 228 | 233 | 482 | - | 0.8 | 18.5 | 0.3 | ||
| Other | 17 | 4 | 1 | - | 22 | 161 | - | - | 1 | 1 | 0.1 | 3.6 | 71.9 | 3.3 |
| Total | 133,889 27,772 | 1,269 | 177 163,107 | 30,551 | 21 | 228 | 234 | 483 | - | 0.8 | 18.5 | 0.3 |
For the notes to this table refer to the following page.
| Mortgages | ECL provisions | ECL provisions coverage (2) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Ulster Bank RoI | Of which: | ||||||||||||
| Stage 1 | Stage 2 | Stage 3 | Total | gross new lending |
Stage 1 Stage 2 Stage 3 Total (1) | Stage 1 Stage 2 Stage 3 | Total | ||||||
| 30 June 2021 | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % |
| ≤50% | 4,266 | 429 | 306 | 5,001 | 33 | 9 | 22 | 118 | 149 | 0.2 | 5.0 | 38.7 | 3.0 |
| >50% and ≤70% | 3,435 | 375 | 163 | 3,973 | 81 | 8 | 20 | 55 | 83 | 0.2 | 5.3 | 34.1 | 2.1 |
| >70% and ≤80% | 1,521 | 172 | 81 | 1,774 | 146 | 3 | 9 | 31 | 43 | 0.2 | 5.5 | 37.8 | 2.4 |
| >80% and ≤90% | 1,060 | 131 | 67 | 1,258 | 76 | 2 | 8 | 25 | 35 | 0.2 | 5.6 | 38.3 | 2.8 |
| >90% and ≤100% | 240 | 81 | 58 | 379 | - | 1 | 5 | 23 | 29 | 0.3 | 6.0 | 40.0 | 7.6 |
| >100% and ≤110% | 87 | 50 | 41 | 178 | 1 | - | 3 | 18 | 21 | 0.3 | 6.4 | 43.1 | 11.8 |
| >110% and ≤130% | 37 | 30 | 28 | 95 | - | - | 2 | 14 | 16 | 0.4 | 7.4 | 47.1 | 16.5 |
| >130% and ≤150% | 4 | 3 | 11 | 18 | - | - | - | 5 | 5 | 0.4 | 7.8 | 50.1 | 31.2 |
| >150% | 6 | 2 | 4 | 12 | 1 | - | - | 3 | 3 | 0.4 | 8.0 | 62.6 | 23.0 |
| Total | 10,656 | 1,273 | 759 | 12,688 | 338 | 23 | 69 | 292 | 384 | 0.2 | 5.4 | 38.5 | 3.0 |
| 31 December 2020 | |||||||||||||
| ≤50% | 4,156 | 504 | 354 | 5,014 | 78 | 10 | 24 | 105 | 139 | 0.2 | 4.8 | 29.7 | 2.8 |
| >50% and ≤70% | 3,453 | 453 | 230 | 4,136 | 194 | 8 | 23 | 66 | 97 | 0.2 | 5.1 | 28.7 | 2.3 |
| >70% and ≤80% | 1,569 | 232 | 114 | 1,915 | 346 | 4 | 12 | 40 | 56 | 0.3 | 5.2 | 35.1 | 2.9 |
| >80% and ≤90% | 1,214 | 190 | 105 | 1,509 | 286 | 3 | 11 | 40 | 54 | 0.2 | 5.8 | 38.1 | 3.6 |
| >90% and ≤100% | 372 | 145 | 88 | 605 | 1 | 1 | 9 | 40 | 50 | 0.3 | 6.2 | 45.5 | 8.3 |
| >100% and ≤110% | 119 | 76 | 74 | 269 | 4 | 1 | 5 | 37 | 43 | 0.8 | 6.6 | 50.0 | 16.0 |
| >110% and ≤130% | 53 | 63 | 64 | 180 | 1 | - | 5 | 35 | 40 | - | 7.9 | 54.7 | 22.2 |
| >130% and ≤150% | 6 | 8 | 17 | 31 | - | - | 1 | 10 | 11 | - | 12.5 | 58.8 | 35.5 |
| >150% | 5 | 4 | 10 | 19 | - | - | 1 | 8 | 9 | - | 25.0 | 80.0 | 47.4 |
| Total with LTVs | 10,947 | 1,675 | 1,056 | 13,678 | 910 | 27 | 91 | 381 | 499 | 0.2 | 5.4 | 36.1 | 3.6 |
Notes:
(1) Excludes a non-material amount of provisions held on relatively small legacy portfolios.
(2) ECL provisions coverage is ECL provisions divided by mortgages.
The CRE portfolio comprises exposures to entities involved in the development of, or investment in, commercial and residential properties (including house builders but excluding housing associations, construction and the building materials sub-sector). The sector is reviewed regularly by senior executive committees. Reviews include portfolio credit quality, capital consumption and control frameworks. All disclosures in the CRE section are based on current exposure (gross of provisions and risk transfer). Current exposure is defined as: loans; the amount drawn under a credit facility plus accrued interest; contingent obligations; the issued amount of the guarantee or letter of credit; derivatives – the mark-to-market value; netted where netting agreements exist and net of legally enforceable collateral.
| 30 June 2021 | 31 December 2020 | |||||||
|---|---|---|---|---|---|---|---|---|
| UK | RoI | Other | Total | UK | RoI | Other | Total | |
| By geography and sub sector (1) | £m | £m | £m | £m | £m | £m | £m | £m |
| Investment | ||||||||
| Residential (2) | 4,360 | 372 | 20 | 4,752 | 4,507 | 360 | 14 | 4,881 |
| Office (3) | 3,152 | 210 | 35 | 3,397 | 3,386 | 226 | 28 | 3,640 |
| Retail (4) | 4,903 | 78 | 87 | 5,068 | 5,423 | 68 | 118 | 5,609 |
| Industrial (5) | 2,604 | 14 | 154 | 2,772 | 2,773 | 18 | 202 | 2,993 |
| Mixed/other (6) | 2,101 | 131 | 80 | 2,312 | 2,688 | 154 | 74 | 2,916 |
| 17,120 | 805 | 376 | 18,301 | 18,777 | 826 | 436 | 20,039 | |
| Development | ||||||||
| Residential (2) | 2,151 | 103 | 2 | 2,256 | 2,685 | 200 | 3 | 2,888 |
| Office (3) | 83 | 31 | - | 114 | 123 | 30 | - | 153 |
| Retail (4) | 64 | - | - | 64 | 126 | - | - | 126 |
| Industrial (5) | 100 | 1 | - | 101 | 125 | 2 | - | 127 |
| Mixed/other (6) | 24 | 2 | - | 26 | 24 | 2 | - | 26 |
| 2,422 | 137 | 2 | 2,561 | 3,083 | 234 | 3 | 3,320 | |
| Total | 19,542 | 942 | 378 | 20,862 | 21,860 | 1,060 | 439 | 23,359 |
Notes:
(1) Geographical splits are based on country of collateral risk.
(2) Properties including houses, flats and student accommodation.
(3) Properties including offices in central business districts, regional headquarters and business parks.
(4) Properties including high street retail, shopping centres, restaurants, bars and gyms.
(5) Properties including distribution centres, manufacturing and warehouses.
(6) Properties that do not fall within the other categories above. Mixed generally relates to a mixture of retail/office with residential.
The table below shows CRE current exposure and related ECL by LTV band.
| Current exposure (gross of provisions) (1,2) | ECL provisions | ECL provisions coverage (4) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Not within IFRS 9 ECL |
|||||||||||||
| Stage 1 | Stage 2 | Stage 3 | scope (3) | Total | Stage 1 | Stage 2 | Stage 3 | Total (1) | Stage 1 | Stage 2 | Stage 3 | Total | |
| 30 June 2021 | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % |
| ≤50% | 7,099 | 1,230 | 143 | - | 8,472 | 26 | 46 | 26 | 98 | 0.4 | 3.7 | 18.2 | 1.2 |
| >50% and ≤70% | 4,345 | 1,189 | 176 | - | 5,710 | 21 | 54 | 56 | 131 | 0.5 | 4.5 | 31.8 | 2.3 |
| >70% and ≤80% | 245 | 309 | 21 | - | 575 | 2 | 26 | 3 | 31 | 0.8 | 8.4 | 14.3 | 5.4 |
| >80% and ≤90% | 30 | 37 | 36 | - | 103 | - | 3 | 12 | 15 | - | 8.1 | 33.3 | 14.6 |
| >90% and ≤100% | 71 | 14 | 51 | - | 136 | - | 2 | 19 | 21 | - | 14.3 | 37.3 | 15.4 |
| >100% and ≤110% | 10 | 2 | 60 | - | 72 | - | - | 7 | 7 | - | - | 11.7 | 9.7 |
| >110% and ≤130% | 24 | 23 | 31 | - | 78 | - | 1 | 10 | 11 | - | 4.3 | 32.3 | 14.1 |
| >130% and ≤150% | 7 | 2 | 8 | - | 17 | - | - | 3 | 3 | - | - | 37.5 | 17.6 |
| >150% | 75 | 10 | 140 | - | 225 | 1 | 2 | 61 | 64 | 1.3 | 20.0 | 43.6 | 28.4 |
| Total with LTVs | 11,906 | 2,816 | 666 | - | 15,388 | 50 | 134 | 197 | 381 | 0.4 | 4.8 | 29.6 | 2.5 |
| Total portfolio average LTV | 45% | 49% | 101% | - | 47% | ||||||||
| Other (5) | 1,771 | 739 | 101 | 302 | 2,913 | 6 | 53 | 42 | 101 | 0.3 | 7.2 | 41.6 | 3.9 |
| Development (6) | 1,699 | 757 | 91 | 14 | 2,561 | 16 | 22 | 53 | 91 | 0.9 | 2.9 | 58.2 | 3.6 |
| Total | 15,376 | 4,312 | 858 | 316 | 20,862 | 72 | 209 | 292 | 573 | 0.5 | 4.8 | 34.0 | 2.8 |
| ≤50% | 4,918 | 4,538 | 138 | - | 9,594 | 46 | 145 | 24 | 215 | 0.9 | 3.2 | 17.4 | 2.2 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| >50% and ≤70% | 2,815 | 3,266 | 226 | - | 6,307 | 32 | 112 | 63 | 207 | 1.1 | 3.4 | 27.9 | 3.3 |
| >70% and ≤80% | 39 | 222 | 23 | - | 284 | 1 | 17 | 7 | 25 | 2.6 | 7.7 | 30.4 | 8.8 |
| >80% and ≤90% | 84 | 35 | 36 | - | 155 | 2 | 4 | 11 | 17 | 2.4 | 11.4 | 30.6 | 11 |
| >90% and ≤100% | 46 | 26 | 65 | - | 137 | - | 2 | 33 | 35 | - | 7.7 | 50.8 | 25.5 |
| >100% and ≤110% | 6 | 6 | 63 | - | 75 | - | 1 | 10 | 11 | - | 16.7 | 15.9 | 14.7 |
| >110% and ≤130% | 9 | 22 | 117 | - | 148 | - | 2 | 45 | 47 | - | 9.1 | 38.5 | 31.8 |
| >130% and ≤150% | 12 | 12 | 10 | - | 34 | - | 1 | 5 | 6 | - | 8.3 | 50.0 | 17.6 |
| >150% | 23 | 24 | 105 | - | 152 | - | 2 | 53 | 55 | - | 8.3 | 50.5 | 36.2 |
| Total with LTVs | 7,952 | 8,151 | 783 | - | 16,886 | 81 | 286 | 251 | 618 | 1.0 | 3.5 | 32.1 | 3.7 |
| Total portfolio average LTV | 45% | 47% | 93% | - | 48% | ||||||||
| Other (5) | 1,776 | 511 | 159 | 707 | 3,153 | 6 | 40 | 93 | 139 | 0.3 | 7.8 | 58.5 | 5.7 |
| Development (6) | 1,362 | 1,767 | 161 | 30 | 3,320 | 15 | 58 | 70 | 143 | 1.1 | 3.3 | 43.5 | 4.3 |
| Total | 11,090 10,429 | 1,103 | 737 | 23,359 | 102 | 384 | 414 | 900 | 0.9 | 3.7 | 37.5 | 4.0 | |
(1) Comprises gross lending, interest rate hedging derivatives and other assets carried at fair value that are managed as part of the overall CRE portfolio.
(2) The exposure in Stage 3 mainly relates to legacy assets.
(3) Includes exposures relating to non-modelled portfolios and other exposures carried at fair value, including derivatives.
(4) ECL provisions coverage is ECL provisions divided by current exposure.
(5) Relates mainly to business banking, rate risk management products and unsecured corporate lending.
(6) Relates to the development of commercial and residential properties. LTV is not a meaningful measure for this type of lending activity.
The flow statements that follow show the main ECL and related income statement movements. They also show the changes in ECL as well as the changes in related financial assets used in determining ECL. Due to differences in scope, exposures may differ from those reported in other tables, principally in relation to exposures in Stage 1 and Stage 2. These differences do not have a material ECL affect. Other points to note:
| Stage 1 | Stage 2 | Stage 3 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| Financial | Financial | Financial | Financial | |||||
| assets | ECL | assets | ECL | assets | ECL | assets | ECL | |
| NatWest Group total | £m | £m | £m | £m | £m | £m | £m | £m |
| At 1 January 2021 | 446,666 | 519 | 81,667 | 3,081 | 6,524 | 2,586 | 534,857 | 6,186 |
| Currency translation and other adjustments | (3,369) | (2) | (302) | (12) | 67 | (52) | (3,604) | (66) |
| Transfers from Stage 1 to Stage 2 | (21,925) | (104) | 21,925 | 104 | - | - | - | - |
| Transfers from Stage 2 to Stage 1 | 36,688 | 712 | (36,688) | (712) | - | - | - | - |
| Transfers to Stage 3 | (256) | (1) | (1,211) | (165) | 1,467 | 166 | - | - |
| Transfers from Stage 3 | 155 | 13 | 654 | 107 | (809) | (120) | - | - |
| Net re-measurement of ECL on stage transfer | (585) | 524 | 154 | 93 | ||||
| Changes in risk parameters (model inputs) | (174) | (345) | 89 | (430) | ||||
| Other changes in net exposure | 34,739 | 55 | (10,546) | (281) | (875) | (74) | 23,318 | (300) |
| Other (P&L only items) | 3 | 2 | (75) | (70) | ||||
| Income statement (releases)/charges | (701) | (100) | 94 | (707) | ||||
| Amounts written-off | - | - | (1) | (1) | (516) | (516) | (517) | (517) |
| Unwinding of discount | - | - | (41) | (41) | ||||
| At 30 June 2021 | 492,698 | 433 | 55,498 | 2,300 | 5,858 | 2,192 | 554,054 | 4,925 |
| Net carrying amount | 492,265 | 53,198 | 3,666 | 549,129 | ||||
| At 1 January 2020 | 428,604 | 322 | 28,630 | 752 | 7,135 | 2,718 | 464,369 | 3,792 |
| 2020 movements | (16,119) | 147 | 72,132 | 2,273 | 257 | 142 | 56,270 | 2,562 |
| At 30 June 2020 | 412,485 | 469 | 100,762 | 3,025 | 7,392 | 2,860 | 520,639 | 6,354 |
| Net carrying amount | 412,016 | 97,737 | 4,532 | 514,285 |
| Stage 1 | Stage 2 | Stage 3 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| Financial | Financial | Financial | Financial | |||||
| assets | ECL | assets | ECL | assets | ECL | assets | ECL | |
| Retail Banking - mortgages | £m | £m | £m | £m | £m | £m | £m | £m |
| At 1 January 2021 | 132,390 | 23 | 28,079 | 227 | 1,291 | 236 | 161,760 | 486 |
| Currency translation and other adjustments | - | - | - | - | 7 | 7 | 7 | 7 |
| Transfers from Stage 1 to Stage 2 | (6,168) | (1) | 6,168 | 1 | - | - | - | - |
| Transfers from Stage 2 to Stage 1 | 16,906 | 80 | (16,906) | (80) | - | - | - | - |
| Transfers to Stage 3 | (9) | - | (337) | (13) | 346 | 13 | - | - |
| Transfers from Stage 3 | 6 | - | 157 | 11 | (163) | (11) | - | - |
| Net re-measurement of ECL on stage transfer | (77) | 64 | 4 | (9) | ||||
| Changes in risk parameters (model inputs) | (6) | (16) | 27 | 5 | ||||
| Other changes in net exposure | 6,180 | - | (1,592) | (14) | (126) | (8) | 4,462 | (22) |
| Other (P&L only items) | - | - | (13) | (13) | ||||
| Income statement (releases)/charges | (83) | 34 | 10 | (39) | ||||
| Amounts written-off | - | - | - | - | (3) | (3) | (3) | (3) |
| Unwinding of discount | - | - | (15) | (15) | ||||
| At 30 June 2021 | 149,305 | 19 | 15,569 | 180 | 1,352 | 250 | 166,226 | 449 |
| Net carrying amount | 149,286 | 15,389 | 1,102 | 165,777 | ||||
| At 1 January 2020 | 135,625 | 12 | 10,283 | 86 | 1,289 | 215 | 147,197 | 313 |
| 2020 movements | (7,420) | 5 | 13,789 | 106 | 52 | 15 | 6,421 | 126 |
| At 30 June 2020 | 128,205 | 17 | 24,072 | 192 | 1,341 | 230 | 153,618 | 439 |
| Net carrying amount | 128,188 | 23,880 | 1,111 | 153,179 |
● Despite the strong portfolio growth during H1 2021, ECL levels for mortgages reduced during the same period. The decrease in ECL was primarily a result of reduced PDs and LGDs reflecting the improved economic outlook and stable portfolio performance, resulting in lower levels of SICR identification and ECL requirement.
| Stage 1 | Stage 2 | Stage 3 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| Financial | Financial | Financial | Financial | |||||
| assets | ECL | assets | ECL | assets | ECL | assets | ECL | |
| Retail Banking - credit cards | £m | £m | £m | £m | £m | £m | £m | £m |
| At 1 January 2021 | 2,250 | 52 | 1,384 | 220 | 114 | 75 | 3,748 | 347 |
| Currency translation and other adjustments | - | (1) | - | 2 | (1) | (1) | (1) | - |
| Transfers from Stage 1 to Stage 2 | (460) | (25) | 460 | 25 | - | - | - | - |
| Transfers from Stage 2 to Stage 1 | 565 | 70 | (565) | (70) | - | - | - | - |
| Transfers to Stage 3 | (8) | - | (44) | (18) | 52 | 18 | - | - |
| Transfers from Stage 3 | - | - | 4 | 2 | (4) | (2) | - | - |
| Net re-measurement of ECL on stage transfer | (43) | 89 | 15 | 61 | ||||
| Changes in risk parameters (model inputs) | (15) | (33) | 2 | (46) | ||||
| Other changes in net exposure | (5) | 8 | (148) | (36) | (27) | (2) | (180) | (30) |
| Other (P&L only items) | - | - | (2) | (2) | ||||
| Income statement (releases)/charges | (50) | 20 | 13 | (17) | ||||
| Amounts written-off | - | - | - | - | (45) | (45) | (45) | (45) |
| Unwinding of discount | - | - | (3) | (3) | ||||
| At 30 June 2021 | 2,342 | 46 | 1,091 | 181 | 89 | 57 | 3,522 | 284 |
| Net carrying amount | 2,296 | 910 | 32 | 3,238 | ||||
| At 1 January 2020 | 2,804 | 38 | 1,246 | 131 | 127 | 88 | 4,177 | 257 |
| 2020 movements | (627) | 7 | 74 | 109 | - | (3) | (553) | 113 |
| At 30 June 2020 | 2,177 | 45 | 1,320 | 240 | 127 | 85 | 3,624 | 370 |
| Net carrying amount | 2,132 | 1,080 | 42 | 3,254 |
| Stage 1 | Stage 2 | Stage 3 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| Financial | Financial | Financial | Financial | |||||
| assets | ECL | assets | ECL | assets | ECL | assets | ECL | |
| Retail Banking - other personal unsecured | £m | £m | £m | £m | £m | £m | £m | £m |
| At 1 January 2021 | 3,385 | 59 | 3,487 | 450 | 596 | 495 | 7,468 | 1,004 |
| Currency translation and other adjustments | - | - | - | (1) | - | 2 | - | 1 |
| Transfers from Stage 1 to Stage 2 | (876) | (21) | 876 | 21 | - | - | - | - |
| Transfers from Stage 2 to Stage 1 | 1,109 | 75 | (1,109) | (75) | - | - | - | - |
| Transfers to Stage 3 | (5) | - | (194) | (73) | 199 | 73 | - | - |
| Transfers from Stage 3 | 3 | 4 | 57 | 35 | (60) | (39) | - | - |
| Net re-measurement of ECL on stage transfer | (58) | 74 | 53 | 69 | ||||
| Changes in risk parameters (model inputs) | (9) | (38) | 39 | (8) | ||||
| Other changes in net exposure | 204 | 5 | (593) | (45) | (52) | (21) | (441) | (61) |
| Other (P&L only items) | - | - | (1) | (1) | ||||
| Income statement (releases)/charges | (62) | (9) | 70 | (1) | ||||
| Amounts written-off | - | - | - | - | (90) | (90) | (90) | (90) |
| Unwinding of discount | - | - | (8) | (8) | ||||
| At 30 June 2021 | 3,820 | 55 | 2,524 | 348 | 593 | 504 | 6,937 | 907 |
| Net carrying amount | 3,765 | 2,176 | 89 | 6,030 | ||||
| At 1 January 2020 | 5,417 | 63 | 2,250 | 252 | 608 | 518 | 8,275 | 833 |
| 2020 movements | (1,272) | 30 | 942 | 217 | 94 | 68 | (236) | 315 |
| At 30 June 2020 | 4,145 | 93 | 3,192 | 469 | 702 | 586 | 8,039 | 1,148 |
| Net carrying amount | 4,052 | 2,723 | 116 | 6,891 |
| Stage 1 | Stage 2 | Stage 3 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| Financial | Financial | Financial | Financial | |||||
| Commercial Banking | assets | ECL | assets | ECL | assets | ECL | assets | ECL |
| - commercial real estate | £m | £m | £m | £m | £m | £m | £m | £m |
| At 1 January 2021 | 17,269 | 90 | 10,380 | 364 | 1,118 | 428 | 28,767 | 882 |
| Currency translation and other adjustments | (8) | - | (3) | - | (1) | 3 | (12) | 3 |
| Inter-group transfers | - | - | - | - | - | - | - | - |
| Transfers from Stage 1 to Stage 2 | (1,832) | (15) | 1,832 | 15 | - | - | - | - |
| Transfers from Stage 2 to Stage 1 | 5,366 | 147 | (5,366) | (147) | - | - | - | - |
| Transfers to Stage 3 | (6) | - | (95) | (4) | 101 | 4 | - | - |
| Transfers from Stage 3 | 5 | - | 74 | 7 | (79) | (7) | - | - |
| Net re-measurement of ECL on stage transfer | (109) | 25 | 5 | (79) | ||||
| Changes in risk parameters (model inputs) | (65) | - | (36) | (101) | ||||
| Other changes in net exposure | 356 | 16 | (1,654) | (45) | (175) | (1) | (1,473) | (30) |
| Other (P&L only items) | (1) | 2 | 1 | 2 | ||||
| Income statement releases | (159) | (18) | (31) | (208) | ||||
| Amounts written-off | - | - | - | - | (115) | (115) | (115) | (115) |
| Unwinding of discount | - | - | (2) | (2) | ||||
| At 30 June 2021 | 21,150 | 64 | 5,168 | 215 | 849 | 279 | 27,167 | 558 |
| Net carrying amount | 21,086 | 4,953 | 570 | 26,609 | ||||
| At 1 January 2020 | 25,556 | 31 | 2,218 | 28 | 895 | 306 | 28,669 | 365 |
| 2020 movements | (5,896) | 66 | 8,136 | 246 | 181 | 95 | 2,421 | 407 |
| At 30 June 2020 | 19,660 | 97 | 10,354 | 274 | 1,076 | 401 | 31,090 | 772 |
| Net carrying amount | 19,563 | 10,080 | 675 | 30,318 |
| Stage 1 | Stage 2 | Stage 3 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| Financial | Financial | Financial | Financial | |||||
| assets | ECL | assets | ECL | assets | ECL | assets | ECL | |
| Commercial Banking - business banking | £m | £m | £m | £m | £m | £m | £m | £m |
| At 1 January 2021 | 12,122 | 41 | 2,184 | 145 | 250 | 173 | 14,556 | 359 |
| Currency translation and other adjustments | - | - | - | - | (7) | (5) | (7) | (5) |
| Transfers from Stage 1 to Stage 2 | (2,250) | (9) | 2,250 | 9 | - | - | - | - |
| Transfers from Stage 2 to Stage 1 | 1,200 | 60 | (1,200) | (60) | - | - | - | - |
| Transfers to Stage 3 | (46) | - | (79) | (16) | 125 | 16 | - | - |
| Transfers from Stage 3 | 6 | 1 | 15 | 4 | (21) | (5) | - | - |
| Net re-measurement of ECL on stage transfer | (57) | 119 | 10 | 72 | ||||
| Changes in risk parameters (model inputs) | (4) | (46) | 3 | (47) | ||||
| Other changes in net exposure | 710 | (3) | (199) | (13) | (19) | (2) | 492 | (18) |
| Other (P&L only items) | - | 1 | (17) | (16) | ||||
| Income statement (releases)/charges | (64) | 61 | (6) | (9) | ||||
| Amounts written-off | - | - | - | - | (21) | (21) | (21) | (21) |
| Unwinding of discount | - | - | (3) | (3) | ||||
| At 30 June 2021 | 11,742 | 29 | 2,971 | 142 | 307 | 166 | 15,020 | 337 |
| Net carrying amount | 11,713 | 2,829 | 141 | 14,683 | ||||
| At 1 January 2020 | 6,338 | 28 | 767 | 45 | 257 | 200 | 7,362 | 273 |
| 2020 movements | 2,862 | 4 | 832 | 53 | (5) | (10) | 3,689 | 47 |
| At 30 June 2020 | 9,200 | 32 | 1,599 | 98 | 252 | 190 | 11,051 | 320 |
| Net carrying amount | 9,168 | 1,501 | 62 | 10,731 |
| Stage 1 | Stage 2 | Stage 3 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| Financial | Financial | Financial | Financial | |||||
| assets | ECL | assets | ECL | assets | ECL | assets | ECL | |
| Commercial Banking - other | £m | £m | £m | £m | £m | £m | £m | £m |
| At 1 January 2021 | 39,279 | 139 | 25,981 | 1,204 | 1,249 | 468 | 66,509 | 1,811 |
| Currency translation and other adjustments | (257) | 1 | (88) | - | 76 | 3 | (269) | 4 |
| Inter-group transfers | - | - | - | - | - | - | - | - |
| Transfers from Stage 1 to Stage 2 | (4,447) | (21) | 4,447 | 21 | - | - | - | - |
| Transfers from Stage 2 to Stage 1 | 6,076 | 174 | (6,076) | (174) | - | - | - | - |
| Transfers to Stage 3 | (43) | - | (343) | (29) | 386 | 29 | - | - |
| Transfers from Stage 3 | 19 | 5 | 190 | 27 | (209) | (32) | - | - |
| Net re-measurement of ECL on stage transfer | (152) | 98 | 60 | 6 | ||||
| Changes in risk parameters (model inputs) | (51) | (173) | (15) | (239) | ||||
| Other changes in net exposure | 300 | 20 | (3,372) | (109) | (249) | (22) | (3,321) | (111) |
| Other (P&L only items) | 1 | - | (8) | (7) | ||||
| Income statement (releases)/charges | (182) | (184) | 15 | (351) | ||||
| Amounts written-off | - | - | - | - | (121) | (121) | (121) | (121) |
| Unwinding of discount | - | - | (3) | (3) | ||||
| At 30 June 2021 | 40,927 | 115 | 20,739 | 865 | 1,132 | 367 | 62,798 | 1,347 |
| Net carrying amount | 40,812 | 19,874 | 765 | 61,451 | ||||
| At 1 January 2020 | 53,722 | 94 | 8,788 | 143 | 1,386 | 516 | 63,896 | 753 |
| 2020 movements | (32,838) | (7) | 39,333 | 1,200 | 202 | 83 | 6,697 | 1,276 |
| At 30 June 2020 | 20,884 | 87 | 48,121 | 1,343 | 1,588 | 599 | 70,593 | 2,029 |
| Net carrying amount | 20,797 | 46,778 | 989 | 68,564 |
| Stage 1 | Stage 2 | Stage 3 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| Financial | Financial | Financial | Financial | |||||
| assets | ECL | assets | ECL | assets | ECL | assets | ECL | |
| NatWest Markets (1) | £m | £m | £m | £m | £m | £m | £m | £m |
| At 1 January 2021 | 33,327 | 12 | 1,671 | 49 | 168 | 132 | 35,166 | 193 |
| Currency translation and other adjustments | (700) | - | (36) | - | (3) | (1) | (739) | (1) |
| Inter-group transfers | (3) | - | - | - | - | - | (3) | - |
| Transfers from Stage 1 to Stage 2 | (484) | (1) | 484 | 1 | - | - | - | - |
| Transfers from Stage 2 to Stage 1 | 1,150 | 7 | (1,150) | (7) | - | - | - | - |
| Transfers to Stage 3 | - | - | - | - | - | - | - | - |
| Net re-measurement of ECL on stage transfer | (5) | 3 | - | (2) | ||||
| Changes in risk parameters (model inputs) | (3) | (8) | (1) | (12) | ||||
| Other changes in net exposure | (1,978) | - | (226) | (2) | (23) | (2) | (2,227) | (4) |
| Other (P&L only items) | - | 2 | - | 2 | ||||
| Income statement (releases)/charges | (8) | (5) | (3) | (16) | ||||
| Amounts written-off | - | - | - | - | (40) | (40) | (40) | (40) |
| Unwinding of discount | - | - | - | - | ||||
| At 30 June 2021 | 31,312 | 10 | 743 | 36 | 102 | 88 | 32,157 | 134 |
| Net carrying amount | 31,302 | 707 | 14 | 32,023 | ||||
| At 1 January 2020 | 32,892 | 10 | 188 | 5 | 183 | 131 | 33,263 | 146 |
| 2020 movements | 5,355 | 8 | 2,609 | 48 | (1) | 5 | 7,963 | 61 |
| At 30 June 2020 | 38,247 | 18 | 2,797 | 53 | 182 | 136 | 41,226 | 207 |
| Net carrying amount | 38,229 | 2,744 | 46 | 41,019 |
Note:
(1) Reflects the NatWest Markets segment and includes NWM N.V..
| Stage 1 | Stage 2 | Stage 3 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| Financial | Financial | Financial | Financial | |||||
| assets | ECL | assets | ECL | assets | ECL | assets | ECL | |
| Ulster Bank RoI - mortgages | £m | £m | £m | £m | £m | £m | £m | £m |
| At 1 January 2021 | 10,919 | 27 | 1,682 | 91 | 1,061 | 381 | 13,662 | 499 |
| Currency translation and other adjustments | (489) | (1) | (71) | (4) | (44) | (37) | (604) | (42) |
| Transfers from Stage 1 to Stage 2 | (473) | (1) | 473 | 1 | - | - | - | - |
| Transfers from Stage 2 to Stage 1 | 827 | 34 | (827) | (34) | - | - | - | - |
| Transfers to Stage 3 | (2) | - | (43) | (5) | 45 | 5 | - | - |
| Transfers from Stage 3 | 13 | - | 136 | 19 | (149) | (19) | - | - |
| Net re-measurement of ECL on stage transfer | (31) | 8 | 4 | (19) | ||||
| Changes in risk parameters (model inputs) | (4) | (6) | 33 | 23 | ||||
| Other changes in net exposure | (147) | (1) | (73) | - | (81) | (2) | (301) | (3) |
| Other (P&L only items) | - | (1) | (13) | (14) | ||||
| Income statement (releases)/charges | (36) | 1 | 22 | (13) | ||||
| Amounts written-off | - | - | (1) | (1) | (68) | (68) | (69) | (69) |
| Unwinding of discount | - | - | (5) | (5) | ||||
| At 30 June 2021 | 10,648 | 23 | 1,276 | 69 | 764 | 292 | 12,688 | 384 |
| Net carrying amount | 10,625 | 1,207 | 472 | 12,304 | ||||
| At 1 January 2020 | 10,603 | 11 | 1,084 | 30 | 1,875 | 581 | 13,562 | 622 |
| 2020 movements | (238) | 5 | 1,134 | 68 | (500) | (124) | 396 | (51) |
| At 30 June 2020 | 10,365 | 16 | 2,218 | 98 | 1,375 | 457 | 13,958 | 571 |
| Net carrying amount | 10,349 | 2,120 | 918 | 13,387 |
● The decrease in ECL reflected ongoing deleveraging of the non-performing mortgage portfolio through the execution of the final tranche of a 2019 debt sale.
Stage 2 decomposition by a significant increase in credit risk trigger
| UK mortgages | RoI mortgages | Credit cards | Other | Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 June 2021 | £m | % | £m | % | £m | % | £m | % | £m | % |
| Personal trigger (1) | ||||||||||
| PD movement | 3,412 | 22.0 | 185 | 14.6 | 583 | 53.8 | 1,520 | 58.9 | 5,700 | 27.9 |
| PD persistence | 6,458 | 41.8 | 55 | 4.3 | 404 | 37.3 | 842 | 32.6 | 7,759 | 38.0 |
| Adverse credit bureau recorded with credit | ||||||||||
| reference agency | 3,449 | 22.3 | - | - | 54 | 5.0 | 60 | 2.3 | 3,563 | 17.5 |
| Forbearance support provided | 147 | 0.9 | 12 | 0.9 | 1 | 0.1 | 22 | 0.9 | 182 | 0.9 |
| Customers in collections | 50 | 0.3 | 44 | 3.5 | 4 | 0.4 | 9 | 0.3 | 107 | 0.5 |
| Collective SICR and other reasons (2) | 1,877 | 12.1 | 970 | 76.5 | 37 | 3.4 | 121 | 4.7 | 3,005 | 14.7 |
| Days past due >30 | 89 | 0.6 | 2 | 0.2 | - | - | 7 | 0.3 | 98 | 0.5 |
| 15,482 | 100 | 1,268 | 100 | 1,083 | 100 | 2,581 | 100 | 20,414 | 100 | |
| 31 December 2020 | ||||||||||
| Personal trigger (1) | ||||||||||
| PD movement | 13,520 | 48.4 | 751 | 45.0 | 911 | 66.2 | 2,310 | 67.8 | 17,492 | 51.0 |
| PD persistence | 9,977 | 35.8 | 46 | 2.8 | 350 | 25.5 | 968 | 28.4 | 11,341 | 33.0 |
| Adverse credit bureau recorded with credit | ||||||||||
| reference agency | 2,936 | 10.5 | - | - | 51 | 3.7 | 46 | 1.4 | 3,033 | 8.8 |
| Forbearance support provided | 138 | 0.5 | 7 | 0.4 | 1 | 0.1 | 9 | 0.3 | 155 | 0.5 |
| Customers in collections | 131 | 0.5 | 30 | 1.8 | 2 | 0.1 | 14 | 0.4 | 177 | 0.5 |
| Collective SICR and other reasons (2) | 1,165 | 4.2 | 832 | 49.9 | 60 | 4.4 | 55 | 1.6 | 2,112 | 6.1 |
| Days past due >30 | 36 | 0.1 | 2 | 0.1 | - | - | 4 | 0.1 | 42 | 0.1 |
| 27,903 | 100 | 1,668 | 100 | 1,375 | 100 | 3,406 | 100 | 34,352 | 100 |
For the notes to the table refer to the following page.
Stage 2 decomposition by a significant increase in credit risk trigger
| Property | Corporate | FI | Other | Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Loans | ECL | Loans | ECL | Loans | ECL | Loans | ECL | Loans | ECL | |
| 30 June 2021 | £m | % | £m | % | £m | % | £m | % | £m | % |
| Wholesale trigger (1) | ||||||||||
| PD movement | 4,619 | 68.1 | 17,782 | 75.8 | 2,246 | 95.2 | 89 | 58.1 | 24,736 | 75.4 |
| PD persistence | 278 | 4.1 | 1,122 | 4.8 | 10 | 0.4 | 2 | 1.3 | 1,412 | 4.3 |
| Risk of Credit Loss | 651 | 9.6 | 2,493 | 10.6 | 53 | 2.2 | 56 | 36.6 | 3,253 | 9.9 |
| Forbearance support provided | 93 | 1.4 | 288 | 1.2 | 5 | 0.2 | - | - | 386 | 1.2 |
| Customers in collections | 20 | 0.3 | 63 | 0.3 | - | - | - | - | 83 | 0.3 |
| Collective SICR and other reasons (2) | 908 | 13.4 | 1,677 | 7.1 | 35 | 1.5 | 5 | 3.3 | 2,625 | 8.0 |
| Days past due >30 | 213 | 3.1 | 53 | 0.2 | 12 | 0.5 | 1 | 0.7 | 279 | 0.9 |
| 6,782 | 100 | 23,478 | 100 | 2,361 | 100 | 153 | 100 | 32,774 | 100 | |
| 31 December 2020 | ||||||||||
| Wholesale trigger (1) | ||||||||||
| PD movement | 11,849 | 91.1 | 23,403 | 84.3 | 3,183 | 87.9 | 97 | 47.6 | 38,532 | 86.6 |
| PD persistence | 162 | 1.2 | 624 | 2.3 | 7 | 0.2 | - | - | 793 | 1.8 |
| Risk of Credit Loss | 394 | 3.0 | 2,106 | 7.6 | 66 | 1.8 | 39 | 19.1 | 2,605 | 5.8 |
| Forbearance support provided | 73 | 0.6 | 133 | 0.5 | 27 | 0.7 | - | - | 233 | 0.5 |
| Customers in collections | 30 | 0.2 | 115 | 0.4 | 1 | - | - | - | 146 | 0.3 |
| Collective SICR and other reasons (2) | 462 | 3.5 | 1,262 | 4.6 | 231 | 6.4 | 68 | 33.3 | 2,023 | 4.5 |
| Days past due >30 | 51 | 0.4 | 73 | 0.3 | 109 | 3.0 | - | - | 233 | 0.5 |
| 13,021 | 100 | 27,716 | 100 | 3,624 | 100 | 204 | 100 | 44,565 | 100 |
Notes:
(1) The table is prepared on a hierarchical basis from top to bottom, for example, accounts with PD deterioration may also trigger backstop(s) but are only reported under PD deterioration.
(2) Includes customers where a PD assessment cannot be undertaken due to missing PDs.
The table below shows asset quality bands of gross loans and ECL, by stage, for the Personal portfolio.
| Gross loans | ECL provisions | ECL provisions coverage | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
| 30 June 2021 | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % |
| UK mortgages | ||||||||||||
| AQ1-AQ4 | 118,191 | 6,163 | - 124,354 | 7 | 64 | - | 71 | 0.01 | 1.04 | - | 0.06 | |
| AQ5-AQ8 | 48,554 | 8,543 | - | 57,097 | 13 | 94 | - | 107 | 0.03 | 1.10 | - | 0.19 |
| AQ9 | 251 | 776 | - | 1,027 | - | 22 | - | 22 | - | 2.84 | - | 2.14 |
| AQ10 | - | - | 1,568 | 1,568 | - | - | 269 | 269 | - | - | 17.16 | 17.16 |
| 166,996 | 15,482 | 1,568 184,046 | 20 | 180 | 269 | 469 | 0.01 | 1.16 | 17.16 | 0.25 | ||
| RoI mortgages | ||||||||||||
| AQ1-AQ4 | 8,134 | 615 | - | 8,749 | 17 | 31 | - | 48 | 0.21 | 5.04 | - | 0.55 |
| AQ5-AQ8 | 2,492 | 371 | - | 2,863 | 6 | 22 | - | 28 | 0.24 | 5.93 | - | 0.98 |
| AQ9 | 8 | 282 | - | 290 | - | 16 | - | 16 | - | 5.67 | - | 5.52 |
| AQ10 | - | - | 760 | 760 | - | - | 292 | 292 | - | - | 38.42 | 38.42 |
| 10,634 | 1,268 | 760 | 12,662 | 23 | 69 | 292 | 384 | 0.22 | 5.44 | 38.42 | 3.03 | |
| Credit cards | ||||||||||||
| AQ1-AQ4 | 25 | 9 | - | 34 | 1 | 2 | - | 3 | 4.00 | 22.22 | - | 8.82 |
| AQ5-AQ8 | 2,532 | 1,040 | - | 3,572 | 46 | 169 | - | 215 | 1.82 | 16.25 | - | 6.02 |
| AQ9 | 5 | 34 | - | 39 | - | 12 | - | 12 | - | 35.29 | - | 30.77 |
| AQ10 | - | - | 82 | 82 | - | - | 59 | 59 | - | - | 71.95 | 71.95 |
| 2,562 | 1,083 | 82 | 3,727 | 47 | 183 | 59 | 289 | 1.83 | 16.90 | 71.95 | 7.75 | |
| Other Personal | ||||||||||||
| AQ1-AQ4 | 1,035 | 105 | - | 1,140 | 8 | 25 | - | 33 | 0.77 | 23.81 | - | 2.89 |
| AQ5-AQ8 | 4,997 | 2,301 | - | 7,298 | 53 | 279 | - | 332 | 1.06 | 12.13 | - | 4.55 |
| AQ9 | 32 | 175 | - | 207 | 1 | 50 | - | 51 | 3.13 | 28.57 | - | 24.64 |
| AQ10 | - | - | 619 | 619 | - | - | 521 | 521 | - | - | 84.17 | 84.17 |
| 6,064 | 2,581 | 619 | 9,264 | 62 | 354 | 521 | 937 | 1.02 | 13.72 | 84.17 | 10.11 | |
| Total | ||||||||||||
| AQ1-AQ4 | 127,385 | 6,892 | - 134,277 | 33 | 122 | - | 155 | 0.03 | 1.77 | - | 0.12 | |
| AQ5-AQ8 | 58,575 | 12,255 | - | 70,830 | 118 | 564 | - | 682 | 0.20 | 4.60 | - | 0.96 |
| AQ9 | 296 | 1,267 | - | 1,563 | 1 | 100 | - | 101 | 0.34 | 7.89 | - | 6.46 |
| AQ10 | - | - | 3,029 | 3,029 | - | - | 1,141 | 1,141 | - | - | 37.67 | 37.67 |
| 186,256 | 20,414 | 3,029 209,699 | 152 | 786 | 1,141 | 2,079 | 0.08 | 3.85 | 37.67 | 0.99 |
| Gross loans | ECL provisions | ECL provisions coverage | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | ||
| 31 December 2020 | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | |
| UK mortgages | |||||||||||||
| AQ1-AQ4 | 108,869 | 6,634 | - 115,503 | 10 | 33 | - | 43 | 0.01 | 0.50 | - | 0.04 | ||
| AQ5-AQ8 | 38,347 | 20,254 | - | 58,601 | 14 | 146 | - | 160 | 0.04 | 0.72 | - | 0.27 | |
| AQ9 | 240 | 1,015 | - | 1,255 | - | 49 | - | 49 | - | 4.83 | - | 3.90 | |
| AQ10 | - | - | 1,507 | 1,507 | - | - | 254 | 254 | - | - | 16.85 | 16.85 | |
| 147,456 | 27,903 | 1,507 176,866 | 24 | 228 | 254 | 506 | 0.02 | 0.82 | 16.85 | 0.29 | |||
| RoI mortgages | |||||||||||||
| AQ1-AQ4 | 8,247 | 777 | - | 9,024 | 20 | 38 | - | 58 | 0.24 | 4.89 | - | 0.64 | |
| AQ5-AQ8 | 2,677 | 560 | - | 3,237 | 7 | 34 | - | 41 | 0.26 | 6.07 | - | 1.27 | |
| AQ9 | 7 | 331 | - | 338 | - | 19 | - | 19 | - | 5.74 | - | 5.62 | |
| AQ10 | - | - | 1,051 | 1,051 | - | - | 381 | 381 | - | - | 36.25 | 36.25 | |
| 10,931 | 1,668 | 1,051 | 13,650 | 27 | 91 | 381 | 499 | 0.25 | 5.46 | 36.25 | 3.66 | ||
| Credit cards | |||||||||||||
| AQ1-AQ4 | 23 | 4 | - | 27 | 1 | 2 | - | 3 | 4.35 | 50.00 | - | 11.11 | |
| AQ5-AQ8 | 2,384 | 1,329 | - | 3,713 | 52 | 208 | - | 260 | 2.18 | 15.65 | - | 7.00 | |
| AQ9 | 4 | 42 | - | 46 | - | 15 | - | 15 | - | 35.71 | - | 32.61 | |
| AQ10 | - | - | 109 | 109 | - | - | 76 | 76 | - | - | 69.72 | 69.72 | |
| 2,411 | 1,375 | 109 | 3,895 | 53 | 225 | 76 | 354 | 2.20 | 16.36 | 69.72 | 9.09 | ||
| Other Personal | |||||||||||||
| AQ1-AQ4 | 1,234 | 59 | - | 1,293 | 8 | 9 | - | 17 | 0.65 | 15.25 | - | 1.31 | |
| AQ5-AQ8 | 4,461 | 3,020 | - | 7,481 | 58 | 336 | - | 394 | 1.30 | 11.13 | - | 5.27 | |
| AQ9 | 55 | 327 | - | 382 | 1 | 107 | - | 108 | 1.82 | 32.72 | - | 28.27 | |
| AQ10 | - | - | 621 | 621 | - | - | 517 | 517 | - | - | 83.25 | 83.25 | |
| 5,750 | 3,406 | 621 | 9,777 | 67 | 452 | 517 | 1,036 | 1.17 | 13.27 | 83.25 | 10.6 | ||
| Total | |||||||||||||
| AQ1-AQ4 | 118,373 | 7,474 | - 125,847 | 39 | 82 | - | 121 | 0.03 | 1.1 | - | 0.10 | ||
| AQ5-AQ8 | 47,869 | 25,163 | - | 73,032 | 131 | 724 | - | 855 | 0.27 | 2.88 | - | 1.17 | |
| AQ9 | 306 | 1,715 | - | 2,021 | 1 | 190 | - | 191 | 0.33 | 11.08 | - | 9.45 | |
| AQ10 | - | - | 3,288 | 3,288 | - | - | 1,228 | 1,228 | - | - | 37.35 | 37.35 | |
| 166,548 | 34,352 | 3,288 204,188 | 171 | 996 | 1,228 | 2,395 | 0.10 | 2.90 | 37.35 | 1.17 |
The table below shows asset quality bands of gross loans and ECL, by stage, for the Wholesale portfolio.
| Gross loans | ECL provisions | ECL provisions coverage | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
| 30 June 2021 | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % |
| Property | ||||||||||||
| AQ1-AQ4 | 13,097 | 721 | - | 13,818 | 11 | 11 | - | 22 | 0.08 | 1.53 | - | 0.16 |
| AQ5-AQ8 | 14,966 | 5,953 | - | 20,919 | 82 | 292 | - | 374 | 0.55 | 4.91 | - | 1.79 |
| AQ9 | 42 | 108 | - | 150 | - | 10 | - | 10 | - | 9.26 | - | 6.67 |
| AQ10 | - | - | 1,054 | 1,054 | - | - | 391 | 391 | - | - | 37.10 | 37.10 |
| 28,105 | 6,782 | 1,054 | 35,941 | 93 | 313 | 391 | 797 | 0.33 | 4.62 | 37.10 | 2.22 | |
| Corporate | ||||||||||||
| AQ1-AQ4 | 17,252 | 1,710 | - | 18,962 | 15 | 34 | - | 49 | 0.09 | 1.99 | - | 0.26 |
| AQ5-AQ8 | 31,542 | 21,388 | - | 52,930 | 134 | 1,014 | - | 1,148 | 0.42 | 4.74 | - | 2.17 |
| AQ9 | 256 | 380 | - | 636 | - | 37 | - | 37 | - | 9.74 | - | 5.82 |
| AQ10 | - | - | 1,594 | 1,594 | - | - | 651 | 651 | - | - | 40.84 | 40.84 |
| 49,050 | 23,478 | 1,594 | 74,122 | 149 | 1,085 | 651 | 1,885 | 0.30 | 4.62 | 40.84 | 2.54 | |
| Financial institutions | ||||||||||||
| AQ1-AQ4 | 46,160 | 1,050 | - | 47,210 | 13 | 9 | - | 22 | 0.03 | 0.86 | - | 0.05 |
| AQ5-AQ8 | 1,533 | 1,146 | - | 2,679 | 8 | 76 | - | 84 | 0.52 | 6.63 | - | 3.14 |
| AQ9 | 1 | 165 | - | 166 | - | 30 | - | 30 | - | 18.18 | - | 18.07 |
| AQ10 | - | - | 17 | 17 | - | - | 7 | 7 | - | - | 41.18 | 41.18 |
| 47,694 | 2,361 | 17 | 50,072 | 21 | 115 | 7 | 143 | 0.04 | 4.87 | 41.18 | 0.29 | |
| Sovereign | ||||||||||||
| AQ1-AQ4 | 5,582 | 58 | - | 5,640 | 18 | - | - | 18 | 0.32 | - | - | 0.32 |
| AQ5-AQ8 | 14 | 95 | - | 109 | - | 1 | - | 1 | - | 1.05 | - | 0.92 |
| AQ 9 | - | - | - | - | - | - | - | - | - | - | - | - |
| AQ10 | - | - | 9 | 9 | - | - | 2 | 2 | - | - | 22.22 | 22.22 |
| 5,596 | 153 | 9 | 5,758 | 18 | 1 | 2 | 21 | 0.32 | 0.65 | 22.22 | 0.36 | |
| Total | ||||||||||||
| AQ1-AQ4 | 82,091 | 3,539 | - | 85,630 | 57 | 54 | - | 111 | 0.07 | 1.53 | - | 0.13 |
| AQ5-AQ8 | 48,055 | 28,582 | - | 76,637 | 224 | 1,383 | - | 1,607 | 0.47 | 4.84 | - | 2.10 |
| AQ9 | 299 | 653 | - | 952 | - | 77 | - | 77 | - | 11.79 | - | 8.09 |
| AQ10 | - | - | 2,674 | 2,674 | - | - | 1,051 | 1,051 | - | - | 39.30 | 39.30 |
| 130,445 | 32,774 | 2,674 165,893 | 281 | 1,514 | 1,051 | 2,846 | 0.22 | 4.62 | 39.30 | 1.72 |
| Gross loans | ECL provisions | ECL provisions coverage | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
| 31 December 2020 | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % |
| Property | ||||||||||||
| AQ1-AQ4 | 12,694 | 2,079 | - | 14,773 | 20 | 40 | - | 60 | 0.16 | 1.92 | - | 0.41 |
| AQ5-AQ8 | 10,785 | 10,780 | - | 21,565 | 103 | 450 | - | 553 | 0.96 | 4.17 | - | 2.56 |
| AQ9 | 254 | 162 | - | 416 | - | 17 | - | 17 | - | 10.49 | - | 4.09 |
| AQ10 | - | - | 1,322 | 1,322 | - | - | 545 | 545 | - | - | 41.23 | 41.23 |
| 23,733 | 13,021 | 1,322 | 38,076 | 123 | 507 | 545 | 1,175 | 0.52 | 3.89 | 41.23 | 3.09 | |
| Corporate | ||||||||||||
| AQ1-AQ4 | 17,757 | 2,726 | - | 20,483 | 20 | 51 | - | 71 | 0.11 | 1.87 | - | 0.35 |
| AQ5-AQ8 | 29,405 | 24,430 | - | 53,835 | 167 | 1,374 | - | 1,541 | 0.57 | 5.62 | - | 2.86 |
| AQ9 | 928 | 560 | - | 1,488 | 1 | 62 | - | 63 | 0.11 | 11.07 | - | 4.23 |
| AQ10 | - | - | 1,727 | 1,727 | - | - | 803 | 803 | - | - | 46.5 | 46.5 |
| 48,090 | 27,716 | 1,727 | 77,533 | 188 | 1,487 | 803 | 2,478 | 0.39 | 5.37 | 46.5 | 3.20 | |
| Financial institutions | ||||||||||||
| AQ1-AQ4 | 42,222 | 1,985 | - | 44,207 | 13 | 13 | - | 26 | 0.03 | 0.65 | - | 0.06 |
| AQ5-AQ8 | 1,776 | 1,453 | - | 3,229 | 10 | 39 | - | 49 | 0.56 | 2.68 | - | 1.52 |
| AQ9 | 4 | 186 | - | 190 | - | 38 | - | 38 | - | 20.43 | - | 20.00 |
| AQ10 | - | - | 17 | 17 | - | - | 8 | 8 | - | - | 47.06 | 47.06 |
| 44,002 | 3,624 | 17 | 47,643 | 23 | 90 | 8 | 121 | 0.05 | 2.48 | 47.06 | 0.25 | |
| Sovereign | ||||||||||||
| AQ1-AQ4 | 4,731 | 106 | - | 4,837 | 14 | 1 | - | 15 | 0.30 | 0.94 | - | 0.31 |
| AQ5-AQ8 | 17 | 98 | - | 115 | - | - | - | - | - | - | - | - |
| AQ9 | 3 | - | - | 3 | - | - | - | - | - | - | - | - |
| AQ10 | - | - | 4 | 4 | - | - | 2 | 2 | - | - | 50.00 | 50.00 |
| 4,751 | 204 | 4 | 4,959 | 14 | 1 | 2 | 17 | 0.29 | 0.49 | 50.00 | 0.34 | |
| Total | ||||||||||||
| AQ1-AQ4 | 77,404 | 6,896 | - | 84,300 | 67 | 105 | - | 172 | 0.09 | 1.52 | - | 0.20 |
| AQ5-AQ8 | 41,983 | 36,761 | - | 78,744 | 280 | 1,863 | - | 2,143 | 0.67 | 5.07 | - | 2.72 |
| AQ9 | 1,189 | 908 | - | 2,097 | 1 | 117 | - | 118 | 0.08 | 12.89 | - | 5.63 |
| AQ10 | - | - | 3,070 | 3,070 | - | - | 1,358 | 1,358 | - | - | 44.23 | 44.23 |
| 120,576 | 44,565 | 3,070 168,211 | 348 | 2,085 | 1,358 | 3,791 | 0.29 | 4.68 | 44.23 | 2.25 |
● Across the Wholesale portfolio, the asset quality band distribution differed, reflecting the diverse nature of the sectors. However, improvements were observed across the portfolio consistent with the improvement in the economic outlook for the UK since the 2020 year end.
● Increased exposure in the AQ1-AQ4 band in financial institutions was related to repo transactions as part of treasury activities.
● Remaining government support measures in relation to COVID-19 continued to mitigate against flows to default in the shortterm.
● Within the Wholesale portfolio, customer credit grades were reassessed as and when a request for financing was made, a scheduled customer credit review was performed or a material event specific to that customer occurred.
● As previously noted, a request for support using one of the government-backed COVID-19 support schemes would prompt credit grades to be reassessed but was not, in itself, a reason for a customer's credit grade to be amended.
● ECL provisions coverage showed the expected trend with increased coverage in the poorer asset quality bands, and also by stage. Overall provisions coverage reduced, mainly due to the improvement in economic outlook and scenario weightings. The base economic scenario improved compared with H2 2020 reflecting the faster than expected vaccination roll-out, better than expected actual economic data and the persisting strong government support.
● The lower provision coverage for Stage 3 loans in the Property sector reflected the secured nature of the exposures.
This section details the credit risk profile of NatWest Group's trading activities.
The table below shows securities financing transactions in NatWest Markets and Treasury. Balance sheet captions include balances held at all classifications under IFRS 9.
| Reverse repos | Repos | |||||
|---|---|---|---|---|---|---|
| Outside | Outside | |||||
| Of which: | netting | Of which: | netting | |||
| Total | can be offset | arrangements | Total | can be offset | arrangements | |
| 30 June 2021 | £m | £m | £m | £m | £m | £m |
| Gross | 86,079 | 85,070 | 1,009 | 83,005 | 81,873 | 1,132 |
| IFRS offset | (38,273) | (38,273) | - | (38,273) | (38,273) | - |
| Carrying value | 47,806 | 46,797 | 1,009 | 44,732 | 43,600 | 1,132 |
| Master netting arrangements | (2,838) | (2,838) | - | (2,838) | (2,838) | - |
| Securities collateral | (43,440) | (43,440) | - | (40,694) | (40,694) | - |
| Potential for offset not recognised under IFRS | (46,278) | (46,278) | - | (43,532) | (43,532) | - |
| Net | 1,528 | 519 | 1,009 | 1,200 | 68 | 1,132 |
| 31 December 2020 | ||||||
| Gross | 80,388 | 80,025 | 363 | 66,493 | 64,793 | 1,700 |
| IFRS offset | (35,820) | (35,820) | - | (35,820) | (35,820) | - |
| Carrying value | 44,568 | 44,205 | 363 | 30,673 | 28,973 | 1,700 |
| Master netting arrangements | (929) | (929) | - | (929) | (929) | - |
| Securities collateral | (43,204) | (43,204) | - | (28,044) | (28,044) | - |
| Potential for offset not recognised under IFRS | (44,133) | (44,133) | - | (28,973) | (28,973) | - |
| Net | 435 | 72 | 363 | 1,700 | - | 1,700 |
● Reverse repos and repos increased on both gross and carrying value basis when compared to 2020. These trends are consistent with trading assets and liabilities having been managed within limits at 31 December 2020.
● Reverse repo and repo transactions are primarily backed by highly-rated sovereign, supranational and agency collateral.
The table below shows derivatives by type of contract. The master netting agreements and collateral shown do not result in a net presentation on the balance sheet under IFRS. A significant proportion (more than 90%) of the derivatives relate to trading activities in NatWest Markets. The table also includes hedging derivatives in Treasury.
| 30 June 2021 | 31 December 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Notional | ||||||||||
| GBP £bn |
USD £bn |
Euro £bn |
Other £bn |
Total £bn |
Assets £m |
Liabilities £m |
Notional £bn |
Assets £m |
Liabilities £m |
|
| Gross exposure | 117,434 | 112,464 | 177,330 172,245 | |||||||
| IFRS offset | (7,878) | (8,472) | (10,807) (11,540) | |||||||
| Carrying value | 3,835 | 3,843 | 4,930 | 1,413 | 14,021 | 109,556 | 103,992 | 14,047 166,523 160,705 | ||
| Of which: | ||||||||||
| Interest rate (1) | ||||||||||
| Interest rate swaps | 60,918 | 53,667 | 93,587 | 85,022 | ||||||
| Options purchased | 14,664 | - | 20,527 | - | ||||||
| Options written | - | 14,804 | - | 20,190 | ||||||
| Futures and forwards | - | - | 1 | 2 | ||||||
| Total | 3,472 | 2,304 | 4,304 | 425 | 10,505 | 75,582 | 68,471 | 10,703 114,115 105,214 | ||
| Exchange rate | ||||||||||
| Spot, forwards and futures | 22,260 | 22,148 | 34,924 | 35,309 | ||||||
| Currency swaps | 6,931 | 8,116 | 10,038 | 12,136 | ||||||
| Options purchased | 4,562 | - | 7,277 | - | ||||||
| Options written | - | 4,825 | - | 7,662 | ||||||
| Total | 361 | 1,535 | 615 | 988 | 3,499 | 33,753 | 35,089 | 3,328 | 52,239 | 55,107 |
| Credit | 2 | 4 | 11 | - | 17 | 221 | 431 | 15 | 161 | 376 |
| Equity and commodity | - | - | - | - | - | - | 1 | 1 | 8 | 8 |
| Carrying value | 14,021 | 109,556 | 103,992 | 14,047 166,523 160,705 | ||||||
| Counterparty mark-to-market netting | (87,322) | (87,322) | (137,086)(137,086) | |||||||
| Cash collateral | (14,009) | (10,368) | (19,608) (15,034) | |||||||
| Securities collateral | (4,170) | (3,125) | (5,053) | (4,921) | ||||||
| Net exposure | 4,055 | 3,177 | 4,776 | 3,664 | ||||||
| Of which outside netting arrangements | 999 | 962 | 905 | 631 | ||||||
| Banks (2) | 311 | 683 | 206 | 557 | ||||||
| Other financial institutions (3) | 1,647 | 1,371 | 1,436 | 1,931 | ||||||
| Corporate (4) | 1,993 | 957 | 2,985 | 1,082 | ||||||
| Government (5) | 104 | 166 | 149 | 94 | ||||||
| Net exposure | 4,055 | 3,177 | 4,776 | 3,664 | ||||||
| UK | 2,445 | 780 | 2,914 | 1,627 | ||||||
| Europe | 822 | 1,188 | 1,091 | 1,118 | ||||||
| US | 573 | 945 | 470 | 644 | ||||||
| RoW | 215 | 264 | 301 | 275 | ||||||
| Net exposure | 4,055 | 3,177 | 4,776 | 3,664 | ||||||
| Asset quality of uncollateralised derivative assets | ||||||||||
| AQ1-AQ4 | 3,150 | 3,464 | ||||||||
| AQ5-AQ8 | 847 | 1,283 | ||||||||
| AQ9-AQ10 | 58 | 29 |
Notes:
(1) The notional amount of interest rate derivatives included £7,330 billion (31 December 2020 – £7,390 billion) in respect of contracts cleared through central clearing counterparties.
Net exposure 4,055 4,776
(2) Transactions with certain counterparties with whom NatWest Group has netting arrangements but collateral is not posted on a daily basis; certain transactions with specific terms that may not fall within netting and collateral arrangements; derivative positions in certain jurisdictions, for example China, where the collateral agreements are not deemed to be legally enforceable.
(3) Includes transactions with securitisation vehicles and funds where collateral posting is contingent on NatWest Group's external rating.
(4) Mainly large corporates with whom NatWest Group may have netting arrangements in place, but operational capability does not support collateral posting. (5) Sovereigns and supranational entities with no collateral arrangements, collateral arrangements that are not considered enforceable, or one-way collateral
agreements in their favour.
The table below shows debt securities held at mandatory fair value through profit or loss by issuer as well as ratings based on the lowest of Standard & Poor's, Moody's and Fitch. A significant proportion (more than 95%) of these positions are trading securities in NatWest Markets.
| Central and local government | Financial | |||||
|---|---|---|---|---|---|---|
| UK | US | Other | institutions | Corporate | Total | |
| 30 June 2021 | £m | £m | £m | £m | £m | £m |
| AAA | - | - | 2,469 | 1,013 | - | 3,482 |
| AA to AA+ | - | 4,088 | 4,829 | 1,010 | 44 | 9,971 |
| A to AA- | 5,121 | - | 1,781 | 397 | 75 | 7,374 |
| BBB- to A- | - | - | 9,235 | 386 | 518 | 10,139 |
| Non-investment grade | - | - | 33 | 252 | 105 | 390 |
| Unrated | - | - | - | 10 | 4 | 14 |
| Total | 5,121 | 4,088 | 18,347 | 3,068 | 746 | 31,370 |
| Short positions | (5,487) | (2,303) | (22,185) | (2,030) | (106) | (32,111) |
| 31 December 2020 | ||||||
| AAA | - | - | 3,114 | 1,113 | - | 4,227 |
| AA to AA+ | - | 5,149 | 3,651 | 576 | 49 | 9,425 |
| A to AA- | 4,184 | - | 1,358 | 272 | 81 | 5,895 |
| BBB- to A- | - | - | 8,277 | 444 | 656 | 9,377 |
| Non-investment grade | - | - | 36 | 127 | 53 | 216 |
| Unrated | - | - | - | 150 | 5 | 155 |
| Total | 4,184 | 5,149 | 16,436 | 2,682 | 844 | 29,295 |
| Short positions | (5,704) | (1,123) | (18,135) | (1,761) | (56) | (26,779) |
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 back to 50% from 66%. This has increased NatWest Group's PVA deduction by c.£120 million.
| Key developments | |
|---|---|
| CET1 (CRR end-point) |
In the first half of 2021, the CET1 ratio decreased by 30 basis points to 18.2%. The CET1 decrease is primarily due to the impact of the directed buy back and associated pension contribution of £1.2 billion (72 bps), foreseeable dividend accrual of £0.5 billion (33 bps) and foreseeable charges and pension contributions of £0.9 billion (58 bps). The attributable profit in the period of £1.8 billion has been partially utilised by the foreseeable dividends and charges. There was a £0.5 billion decrease in the IFRS 9 transitional arrangements on expected credit losses however this offset the impact of impairment releases. |
| LAC (MREL) | LAC (MREL) ratio as percentage of risk weighted assets increased to 38.9% from 37.5% primarily due to the £7.3 billion decrease in RWAs and remains well above the minimum of 23%. |
| In the first half of 2021, there were new issuances of \$1.5 billion and €1.0 billion Senior debt, AT1 issuances of \$0.75 billion and £0.4 billion and Tier 2 issuances of £1.0 billion. These were partially offset by the redemption of \$2.1 billion, \$0.2 billion and €0.2 billion Tier 2 instruments. |
|
| Total RWAs | RWAs reduced by £7.3 billion in H1 2021, primarily reflecting reductions in credit risk RWAs of £7.4 billion due to repayments and expired facilities of c.£4 billion in Commercial Banking, a reduction of c.£0.8 billion due to improved risk metrics in Retail Banking and reduced exposures in Ulster Bank RoI in line with the current exit strategy. The decreases in credit risk also included a £0.8 billion benefit as a result of the CRR COVID-19 amendment for Infrastructure Supporting factor. Operational risk RWAs reduced by £0.9 billion following the annual recalculation in Q1 2021. Counterparty credit risk RWAs reduced by £0.5 billion as a result of lower exposures in NatWest Markets. There were offsetting increases in market risk RWAs of £1.5 billion, mainly reflecting an increase in modelled market risk following the announcement of GBP LIBOR cessation in March 2021 as a result of including modelled GBP LIBOR basis risk post 4 January 2022. Regulatory approval has been obtained in July 2021 to update the VaR model and this will remove this impact in Q3 2021. |
| UK leverage ratio |
The UK leverage ratio decreased by c.20 basis points from 6.4% to 6.2% predominantly driven by a decrease in Tier 1 capital. |
| Liquidity portfolio |
The liquidity portfolio increased by £15 billion in H1 2021 to £277 billion, with primary liquidity increasing by £17 billion to £187 billion. The increase in primary liquidity was mainly driven by customer deposits, cash proceeds from new issuance and the methodology change to include UBIDAC cash at central banks. This is offset by the TFSME repayment, buyback of shares owned by UK Government, pension fund contributions, liability management exercise and the purchase of additional mortgages. Secondary liquidity is lower due to monthly repayments on underlying assets. |
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, known as the MDA. Note that different capital 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 June 2021 | 18.2% | 21.8% | 24.9% |
| Headroom (3) | 9.2% | 10.6% | 10.8% |
Notes:
(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 in 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.
| 30 June | 31 December | |
|---|---|---|
| 2021 | 2020 | |
| Capital adequacy ratios (1) | % | % |
| CET1 | 18.2 | 18.5 |
| Tier 1 | 21.8 | 21.4 |
| Total | 24.9 | 24.5 |
| Capital | £m | £m |
| Tangible equity | 30,751 | 31,712 |
| Prudential valuation adjustment | (285) | (286) |
| Deferred tax assets | (832) | (760) |
| Own credit adjustments | 22 | (1) |
| Pension fund assets | (384) | (579) |
| Cash flow hedging reserve | 77 | (229) |
| Foreseeable ordinary dividends | (500) | (364) |
| Foreseeable charges | (750) | - |
| Foreseeable pension contributions | (174) | (266) |
| Prudential amortisation of software development costs | 537 | 473 |
| Adjustments under IFRS 9 transitional arrangements | 1,198 | 1,747 |
| Total deductions | (1,091) | (265) |
| CET1 capital | 29,660 | 31,447 |
| AT1 capital | 5,916 | 4,983 |
| Tier 1 capital | 35,576 | 36,430 |
| Tier 2 capital | 4,973 | 5,255 |
| Total regulatory capital | 40,549 | 41,685 |
| Risk-weighted assets | ||
| Credit risk | 122,475 | 129,914 |
| Counterparty credit risk | 8,619 | 9,104 |
| Market risk | 10,845 | 9,362 |
| Operational risk | 21,031 | 21,930 |
| Total RWAs | 162,970 | 170,310 |
| Leverage | ||
| Cash and balances at central banks | 151,511 | 124,489 |
| Trading assets | 70,195 | 68,990 |
| Derivatives | 109,556 | 166,523 |
| Financial assets | 422,356 | 422,647 |
| Other assets | 22,240 | 16,842 |
| Total assets | 775,858 | 799,491 |
| Derivatives | ||
| - netting and variation margin | (112,441) | (172,658) |
| - potential future exposures | 37,468 | 38,171 |
| Securities financing transactions gross up | 1,486 | 1,179 |
| Other off balance sheet items | 43,979 | 45,853 |
| Regulatory deductions and other adjustments | (13,831) | (8,943) |
| Claims on central banks | (148,644) | (122,252) |
| Exclusion of bounce back loans | (8,239) | (8,283) |
| UK leverage exposure | 575,636 | 572,558 |
| UK leverage ratio % (2) | 6.2 | 6.4 |
Notes:
(1) Based on CRR end-point including an IFRS 9 transitional adjustment of £1.2 billion (31 December 2020 - £1.7 billion). Excluding this adjustment, the CET1 ratio would be 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 June 2021 would be 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 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 June 2021 would be 6.1% (31 December 2020 – 6.3%).
The table below analyses the movement in CET1, AT1 and Tier 2 capital for the half year ended 30 June 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 | 1,842 | - | - | 1,842 |
| Own credit | 23 | - | - | 23 |
| Share capital and reserve movements in respect of employee share schemes | 23 | - | - | 23 |
| Directed buyback | (1,231) | - | - | (1,231) |
| Foreign exchange reserve | (304) | - | - | (304) |
| FVOCI reserve | (121) | - | - | (121) |
| Goodwill and intangibles deduction | 25 | - | - | 25 |
| Deferred tax assets | (72) | - | - | (72) |
| Prudential valuation adjustments | 1 | - | - | 1 |
| New issues of capital instruments | - | 933 | 996 | 1,929 |
| Redemption of capital instruments | - | - | (1,456) | (1,456) |
| Net dated subordinated debt instruments | - | - | 292 | 292 |
| Foreign exchange movements | - | - | (77) | (77) |
| Foreseeable ordinary dividends | (500) | - | - | (500) |
| Foreseeable charges | (750) | - | - | (750) |
| Foreseeable pension contributions | (174) | - | - | (174) |
| Adjustment under IFRS 9 transitional arrangements | (549) | - | - | (549) |
| Other movements | - | - | (37) | (37) |
| At 30 June 2021 | 29,660 | 5,916 | 4,973 | 40,549 |
• The CET1 decrease is primarily due to the impact of the directed buy back and associated pension contribution of £1.2 billion, foreseeable dividend accrual of £0.5 billion and foreseeable charges and pension contributions of £0.9 billion offset by an increase in attributable profit.
| PRA transitional basis | ||
|---|---|---|
| 30 June | 31 December | |
| 2021 | 2020 | |
| £m | £m | |
| Shareholders' equity (excluding non-controlling interests) | ||
| Shareholders' equity | 43,875 | 43,860 |
| Preference shares - equity | (494) | (494) |
| Other equity instruments | (5,936) | (4,999) |
| 37,445 | 38,367 | |
| Regulatory adjustments and deductions | ||
| Own credit | 22 | (1) |
| Defined benefit pension fund adjustment | (384) | (579) |
| Cash flow hedging reserve | 77 | (229) |
| Deferred tax assets | (832) | (760) |
| Prudential valuation adjustments | (285) | (286) |
| Goodwill and other intangible assets | (6,157) | (6,182) |
| Foreseeable ordinary and special dividends | (500) | (364) |
| Foreseeable charges | (750) | - |
| Foreseeable pension contributions | (174) | (266) |
| Adjustment under IFRS 9 transitional arrangements | 1,198 | 1,747 |
| (7,785) | (6,920) | |
| CET1 capital | 29,660 | 31,447 |
| Additional Tier (AT1) capital | ||
| Qualifying instruments and related share premium | 5,916 | 4,983 |
| Qualifying instruments and related share premium to phase out | 569 | 690 |
| Qualifying instruments issued by subsidiaries and held by third parties subject to phase out | - | 140 |
| AT1 capital | 6,485 | 5,813 |
| Tier 1 capital | 36,145 | 37,260 |
| Qualifying Tier 2 capital | ||
| Qualifying instruments and related share premium | 4,570 | 4,882 |
| Qualifying instruments issued by subsidiaries and held by third parties | 581 | 1,191 |
| Other regulatory adjustments | 362 | 400 |
| Tier 2 capital | 5,513 | 6,473 |
| Total regulatory capital | 41,658 | 43,733 |
The following table illustrates the components of estimated loss absorbing capital (LAC) in NatWest Group plc and operating subsidiaries and includes external issuances only. The table is prepared on a transitional basis, including the benefit of regulatory capital instruments issued from operating companies, to the extent they meet the current MREL criteria.
| 30 June 2021 | 31 December 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Balance | Balance | |||||||||
| Par | sheet | Regulatory | LAC | Par | sheet Regulatory | LAC | ||||
| value (1) | value | value (2) | value (3) | value | value | value | value | |||
| £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | |||
| CET1 capital (4) | 29.7 | 29.7 | 29.7 | 29.7 | 31.4 | 31.4 | 31.4 | 31.4 | ||
| Tier 1 capital: end-point CRR compliant AT1 | ||||||||||
| of which: NatWest Group plc (holdco) | 6.0 | 5.9 | 5.9 | 5.9 | 5.0 | 5.0 | 5.0 | 5.0 | ||
| of which: NatWest Group plc operating | ||||||||||
| subsidiaries (opcos) | - | - | - | - | - | - | - | - | ||
| 6.0 | 5.9 | 5.9 | 5.9 | 5.0 | 5.0 | 5.0 | 5.0 | |||
| Tier 1 capital: end-point CRR non-compliant | ||||||||||
| of which: holdco | 0.6 | 0.6 | 0.5 | 0.5 | 0.7 | 0.7 | 0.7 | 0.5 | ||
| of which: opcos | 0.1 | 0.1 | - | - | 0.1 | 0.1 | 0.1 | 0.1 | ||
| 0.7 | 0.7 | 0.5 | 0.5 | 0.8 | 0.8 | 0.8 | 0.6 | |||
| Tier 2 capital: end-point CRR compliant | ||||||||||
| of which: holdco | 6.3 | 6.5 | 4.6 | 5.4 | 6.9 | 7.2 | 4.8 | 5.7 | ||
| of which: opcos | 0.4 | 0.4 | 0.1 | - | 0.4 | 0.4 | 0.1 | 0.1 | ||
| 6.7 | 6.9 | 4.7 | 5.4 | 7.3 | 7.6 | 4.9 | 5.8 | |||
| Tier 2 capital: end-point CRR non-compliant | ||||||||||
| of which: holdco | - | - | - | - | 0.1 | 0.1 | 0.1 | 0.1 | ||
| of which: opcos | 1.3 | 1.6 | 0.4 | 0.2 | 1.6 | 1.9 | 1.1 | 1.0 | ||
| 1.3 | 1.6 | 0.4 | 0.2 | 1.7 | 2.0 | 1.2 | 1.1 | |||
| Senior unsecured debt securities | ||||||||||
| of which: holdco | 21.2 | 22.0 | - | 21.2 | 19.6 | 20.9 | - | 19.6 | ||
| of which: opcos | 20.7 | 20.7 | - | - | 20.9 | 21.5 | - | - | ||
| 41.9 | 42.7 | - | 21.2 | 40.5 | 42.4 | - | 19.6 | |||
| Tier 2 capital: | ||||||||||
| Other regulatory adjustments | - | - | 0.4 | 0.4 | - | - | 0.4 | 0.4 | ||
| - | - | 0.4 | 0.4 | - | - | 0.4 | 0.4 | |||
| Total | 86.3 | 87.5 | 41.6 | 63.3 | 86.7 | 89.2 | 43.7 | 63.9 | ||
| RWAs | 163.0 | 170.3 | ||||||||
| UK leverage exposure | 575.6 | 572.6 | ||||||||
| LAC as a ratio of RWAs | 38.9% | 37.5% | ||||||||
| LAC as a ratio of UK leverage exposure | 11.0% | 11.2% |
Notes:
(1) Par value reflects the nominal value of securities issued.
(2) Regulatory capital instruments issued from operating companies are included in the transitional LAC calculation, to the extent they meet the current MREL criteria.
(3) LAC value reflects NatWest Group's interpretation of the Bank of England's approach to setting a minimum requirement for own funds and eligible liabilities (MREL), published in June 2018. MREL policy and requirements remain subject to further potential development, as such NatWest Group's estimated position remains subject to potential change. Liabilities excluded from LAC include instruments with less than one year remaining to maturity, structured debt, operating company senior debt, and other instruments that do not meet the MREL criteria. The LAC calculation includes Tier 1 and Tier 2 securities before the application of any regulatory caps or adjustments.
(4) Corresponding shareholders' equity was £43.9 billion (31 December 2020 - £43.9 billion).
(5) Regulatory amounts reported for AT1, Tier 1 and Tier 2 instruments are before grandfathering restrictions imposed by CRR.
The following table illustrates the components of the stock of outstanding issuance in NatWest Group plc and its operating subsidiaries including external and internal issuances.
| NatWest Holdings Group plc £bn |
NatWest Limited £bn |
NWB Plc £bn |
RBS plc £bn |
UBI DAC £bn |
NWM Plc £bn |
NatWest Markets N.V. £bn |
NWM Inc. £bn |
RBS Securities International Limited £bn |
||
|---|---|---|---|---|---|---|---|---|---|---|
| Tier 1 (Inclusive of AT1) | Externally issued | 6.5 | - | 0.1 | - | - | - | - | - | - |
| Tier 1 (Inclusive of AT1) | Internally issued | - | 3.7 | 2.4 | 1.0 | - | 1.1 | 0.2 | - | 0.3 |
| 6.5 | 3.7 | 2.5 | 1.0 | - | 1.1 | 0.2 | - | 0.3 | ||
| Tier 2 | Externally issued | 6.5 | - | 0.9 | - | 0.1 | 0.5 | 0.6 | - | - |
| Tier 2 | Internally issued | - | 4.7 | 3.1 | 1.4 | 0.5 | 1.5 | 0.1 | 0.3 | - |
| 6.5 | 4.7 | 4.0 | 1.4 | 0.6 | 2.0 | 0.7 | 0.3 | - | ||
| Senior unsecured | Externally issued | 22.0 | - | - | - | - | - | - | - | - |
| Senior unsecured | Internally issued | - | 10.5 | 5.7 | 0.4 | 0.5 | 3.9 | - | - | - |
| 22.0 | 10.5 | 5.7 | 0.4 | 0.5 | 3.9 | - | - | - | ||
| Total outstanding issuance | 35.0 | 18.9 | 12.2 | 2.8 | 1.1 | 7.0 | 0.9 | 0.3 | 0.3 |
Notes:
(1) The balances are the IFRS balance sheet carrying amounts, which may differ from the amount which the instrument contributes to regulatory capital. Regulatory balances exclude, for example, issuance costs and fair value movements, whilst dated capital is required to be amortised on a straight-line basis over the final five years of maturity.
(2) Balance sheet amounts reported for AT1, Tier 1 and Tier 2 instruments are before grandfathering restrictions imposed by CRR.
(3) Internal issuance for NWB Plc, RBS plc and UBIDAC represents AT1, Tier 2 or Senior unsecured issuance to NatWest Holdings Limited and for NWM N.V. and NWM SI to NWM Plc.
(4) Senior unsecured debt does not include CP, CD and short/medium term notes issued from NatWest Group operating subsidiaries.
(5) Tier 1 (inclusive of AT1) does not include CET1 numbers.
The table below analyses the movement in RWAs during the half year, by key drivers.
| Counterparty | Operational | |||||
|---|---|---|---|---|---|---|
| Credit risk | credit risk | Market risk | risk | Total | ||
| £bn | £bn | £bn | £bn | £bn | ||
| At 1 January 2021 | 129.9 | 9.1 | 9.4 | 21.9 | 170.3 | |
| Foreign exchange movement | (1.0) | (0.2) | - | - | (1.2) | |
| Business movement | (3.4) | (0.2) | 1.8 | (0.9) | (2.7) | |
| Risk parameter changes (1) | (1.3) | (0.1) | - | - | (1.4) | |
| Model updates | (0.7) | - | (0.3) | - | (1.0) | |
| Other movements (2) | (0.8) | - | - | - | (0.8) | |
| Acquisitions & Disposals (3) | (0.2) | - | - | - | (0.2) | |
| At 30 June 2021 | 122.5 | 8.6 | 10.9 | 21.0 | 163.0 |
The table below analyses segmental RWAs.
| International Banking & Markets |
Central | |||||||
|---|---|---|---|---|---|---|---|---|
| Retail | Private | Commercial | RBS | NatWest | Ulster | 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 | - | - | (0.4) | (0.1) | (0.3) | (0.4) | - | (1.2) |
| Business movement | (0.3) | 0.3 | (3.6) | 0.2 | 0.8 | (0.3) | 0.2 | (2.7) |
| Risk parameter changes (1) | (0.8) | - | (0.2) | - | (0.1) | (0.4) | 0.1 | (1.4) |
| Model updates | - | - | (0.7) | - | (0.3) | - | - | (1.0) |
| Other movements (2) | - | - | (0.7) | - | (0.1) | - | - | (0.8) |
| Acquisitions & Disposals (3) | - | - | - | - | - | (0.2) | - | (0.2) |
| At 30 June 2021 | 35.6 | 11.2 | 69.5 | 7.6 | 26.9 | 10.5 | 1.7 | 163.0 |
| Credit risk | 28.2 | 9.8 | 60.8 | 6.6 | 5.9 | 9.5 | 1.7 | 122.5 |
| Counterparty credit risk | 0.2 | 0.1 | 0.3 | - | 8.0 | - | - | 8.6 |
| Market risk | 0.2 | - | 0.4 | - | 10.2 | 0.1 | - | 10.9 |
| Operational risk | 7.0 | 1.3 | 8.0 | 1.0 | 2.8 | 0.9 | - | 21.0 |
| Total RWAs | 35.6 | 11.2 | 69.5 | 7.6 | 26.9 | 10.5 | 1.7 | 163.0 |
Notes:
(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 by £7.3 billion during the period due to the following:
The table below shows the carrying values of the principal funding sources based on contractual maturity. Balance sheet captions include balances held at all classifications under IFRS 9.
| 30 June 2021 | 31 December 2020 | ||||||
|---|---|---|---|---|---|---|---|
| Short-term less than |
Long-term more than |
Short-term less than |
Long-term more than |
||||
| 1 year | 1 year | Total | 1 year | 1 year | Total | ||
| £m | £m | £m | £m | £m | £m | ||
| Bank deposits | |||||||
| Repos | 4,261 | - | 4,261 | 6,470 | - | 6,470 | |
| Other bank deposits (1) | 7,156 | 2,977 | 10,133 | 5,845 | 8,291 | 14,136 | |
| 11,417 | 2,977 | 14,394 | 12,315 | 8,291 | 20,606 | ||
| Customer deposits | |||||||
| Repos | 16,750 | - | 16,750 | 5,167 | - | 5,167 | |
| Non-bank financial institutions | 56,430 | 115 | 56,545 | 53,475 | 147 | 53,622 | |
| Personal | 221,480 | 1,042 | 222,522 | 208,046 | 1,183 | 209,229 | |
| Corporate | 171,327 | 70 | 171,397 | 163,595 | 126 | 163,721 | |
| 465,987 | 1,227 | 467,214 | 430,283 | 1,456 | 431,739 | ||
| Trading liabilities (2) | |||||||
| Repos (3) | 23,720 | - | 23,720 | 19,036 | - | 19,036 | |
| Derivative collateral | 17,165 | - | 17,165 | 23,229 | - | 23,229 | |
| Other bank customer deposits | 920 | 726 | 1,646 | 819 | 985 | 1,804 | |
| Debt securities in issue - Medium term notes | 378 | 827 | 1,205 | 527 | 881 | 1,408 | |
| 42,183 | 1,553 | 43,736 | 43,611 | 1,866 | 45,477 | ||
| Other financial liabilities | |||||||
| Customer deposits | 546 | 172 | 718 | 616 | 180 | 796 | |
| Debt securities in issue: | |||||||
| Commercial papers and certificates of deposit | 7,327 | 143 | 7,470 | 7,086 | 168 | 7,254 | |
| Medium term notes | 6,492 | 27,605 | 34,097 | 4,648 | 29,078 | 33,726 | |
| Covered bonds | 25 | 2,890 | 2,915 | 53 | 2,967 | 3,020 | |
| Securitisation | - | 918 | 918 | - | 1,015 | 1,015 | |
| 14,390 | 31,728 | 46,118 | 12,403 | 33,408 | 45,811 | ||
| Subordinated liabilities | 1,106 | 7,590 | 8,696 | 365 | 9,597 | 9,962 | |
| Total funding | 535,083 | 45,075 | 580,158 | 498,977 | 54,618 | 553,595 | |
| Of which: available in resolution (4) | - | 28,412 | 28,412 | - | 28,823 | 28,823 |
Notes:
(1) Includes nil (31 December 2020 – £5.0 billion) relating to Term Funding Scheme with additional incentives for Small and Medium-sized Enterprises participation and £2.6 billion (31 December 2020 - £2.8 billion) relating to NatWest Group's participation in central bank financing operations under the European Central Bank's targeted Long-term financing operations.
(2) Excludes short positions of £32.1 billion (31 December 2020 - £26.8 billion).
(3) Comprises central & other bank repos of £1.3 billion (31 December 2020 - £1.0 billion), other financial institution repos of £20.5 billion (31 December 2020 - £16.0 billion) and other corporate repos of £1.9 billion (31 December 2020 - £2.0 billion).
(4) Eligible liabilities (as defined in the Banking Act 2009 as amended from time to time) that meet the eligibility criteria set out in the regulations, rules, policies, guidelines, or statements of the Bank of England including the Statement of Policy published by the Bank of England in June 2018. The balance consists of £22.0 billion (31 December 2020 - £20.9 billion) under debt securities in issue (senior MREL) and £6.4 billion (31 December 2020 - £7.9 billion) under subordinated liabilities.
The table below shows the liquidity portfolio by product, with primary liquidity aligned to internal stressed outflow coverage and regulatory 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 purposes.
| Liquidity value | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2021 | 31 December 2020 | |||||||
| NatWest | NWH | UK DoL | NatWest | NWH | UK DoL | |||
| Group (1) | Group (2) | Sub (3) | Group | Group | Sub | |||
| £m | £m | £m | £m | £m | £m | |||
| Cash and balances at central banks | 148,904 | 117,162 | 111,310 | 115,820 | 86,575 | 86,575 | ||
| AAA to AA- rated governments | 34,639 | 25,254 | 24,490 | 50,901 | 37,086 | 35,875 | ||
| A+ and lower rated governments | 38 | - | - | 79 | - | - | ||
| Government guaranteed issuers, Public sector entities and | ||||||||
| Government sponsored entities | 265 | 265 | 140 | 272 | 272 | 141 | ||
| International organisations and multilateral development | ||||||||
| banks | 3,175 | 2,247 | 1,874 | 3,140 | 2,579 | 2,154 | ||
| LCR level 1 bonds | 38,117 | 27,766 | 26,504 | 54,392 | 39,937 | 38,170 | ||
| LCR level 1 assets | 187,021 | 144,928 | 137,814 | 170,212 | 126,512 | 124,745 | ||
| LCR level 2 assets | 116 | - | - | 124 | - | - | ||
| Non-LCR eligible assets | - | - | - | - | - | - | ||
| Primary liquidity | 187,137 | 144,928 | 137,814 | 170,336 | 126,512 | 124,745 | ||
| Secondary liquidity (4) | 89,909 | 89,685 | 86,445 | 91,985 | 91,761 | 88,774 | ||
| Total liquidity value | 277,046 | 234,613 | 224,259 | 262,321 | 218,273 | 213,519 |
Notes:
(1) NatWest Group includes the UK Domestic Liquidity Sub-Group (UK DoLSub), 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) NWH Group comprises UK DoLSub & Ulster Bank Ireland DAC who hold managed portfolios that comply with local regulations that may differ from PRA rules.
(3) UK DoLSub comprises NatWest Group's four licensed deposit-taking UK banks within the ring-fenced bank: NWB Plc, RBS plc, Coutts & Company and Ulster Bank Limited.
(4) Comprises assets eligible for discounting at the Bank of England and other central banks.
(5) NatWest Markets Plc liquidity portfolio is reported in the NatWest Markets Plc Company Announcement.
(6) 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.
Non-traded market risk is the risk to the value of assets or liabilities outside the trading book, or the risk to income, that arises from changes in market prices such as interest rates, foreign exchange rates and equity prices, or from changes in managed rates.
The following table shows one-day internal banking book Value-at-Risk (VaR) at a 99% confidence level, split by risk type.
| Half year ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 June 2021 | 30 June 2020 | 31 December 2020 | ||||||||||
| Period | Period | Period | ||||||||||
| Average | Maximum | Minimum | end | Average | Maximum | Minimum | end | Average | Maximum | Minimum | end | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Interest rate | 11.7 | 13.0 | 9.2 | 12.8 | 12.8 | 16.9 | 8.0 | 16.9 | 15.5 | 17.7 | 12.3 | 12.3 |
| Credit spread | 103.6 | 113.5 | 99.6 | 99.6 | 99.6 | 121.1 | 63.7 | 114.7 | 106.7 | 111.7 | 103.1 | 111.5 |
| Structural foreign | ||||||||||||
| exchange rate | 11.0 | 12.8 | 9.2 | 12.8 | 11.9 | 14.7 | 9.8 | 14.7 | 9.6 | 10.5 | 9.1 | 8.9 |
| Equity | 11.3 | 11.7 | 11.1 | 11.7 | 30.6 | 33.5 | 25.3 | 31.6 | 26.3 | 35.4 | 24.9 | 11.6 |
| Pipeline risk (1) | 0.3 | 0.4 | 0.3 | 0.4 | 0.5 | 0.7 | 0.3 | 0.5 | 0.4 | 0.7 | 0.3 | 0.3 |
| Diversification (2) | (3.4) | (8.5) | (28.6) | (25.8) | (20.3) | 4.2 | ||||||
| Total | 134.5 | 147.1 | 128.8 | 128.8 | 126.8 | 159.9 | 70.8 | 152.6 | 138.2 | 159.9 | 70.8 | 148.8 |
Notes:
(1) Pipeline risk is the risk of loss arising from Personal customers owning an option to draw down a loan – typically a mortgage – at a committed rate, where interest rate changes may result in greater or fewer customers than anticipated taking up the committed offer.
(2) NatWest Group benefits from diversification across various financial instrument types, currencies and markets. The extent of the diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
● Non-traded VaR was broadly constant over H1 2021 compared to the prior period, reflecting a largely stable portfolio.
● The decrease in equity VaR, on an average basis, reflected the disposal of SABB during Q4 2020.
NatWest Group has a significant pool of stable, non and low interest-bearing liabilities, principally comprising equity and money transmission accounts. These balances are usually hedged, either by investing directly in longer-term fixed-rate assets (such as fixed-rate mortgages or UK Government gilts) or by using interest rate swaps, which are generally booked as cash flow hedges of floating rate assets, in order to provide a consistent and predictable revenue stream.
After hedging the net interest rate exposure externally, NatWest Group allocates income to equity or products in structural hedges by reference to the relevant interest rate swap curve. Over time, this approach has provided a basis for stable income attribution to products and interest rate returns. The programme aims to track a time series of medium-term swap rates, but the yield will be affected by changes in product volumes and NatWest Group's capital composition.
The table below shows the total income and total yield, incremental income relative to short-term cash rates, and the period-end and average notional balances associated with structural hedges in NatWest Group.
| Half year ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 June 2021 | 30 June 2020 | 31 December 2020 | |||||||||||||
| Period | Period | Period | |||||||||||||
| Incremental | Total | -end Average | Total Incremental | Total | -end Average | Total Incremental | Total | -end Average | Total | ||||||
| income | income notional notional | yield | income | income notional notional | yield | income | income notional notional | yield | |||||||
| £m | £m | £bn | £bn | % | £m | £m | £bn | £bn | % | £m | £m | £bn | £bn | % | |
| Equity structural | |||||||||||||||
| hedging | 235 | 244 | 23 | 23 | 2.13 | 209 | 294 | 24 | 25 | 2.39 | 269 | 286 | 23 | 23 | 2.46 |
| Product structural | |||||||||||||||
| hedging | 360 | 412 | 146 | 135 | 0.61 | 146 | 503 | 114 | 112 | 0.90 | 397 | 455 | 125 | 118 | 0.77 |
| Other structural | |||||||||||||||
| hedging | 74 | 62 | 21 | 22 | 0.56 | 42 | 78 | 20 | 20 | 0.78 | 77 | 72 | 21 | 21 | 0.69 |
| Total | 669 | 718 | 190 | 180 | 0.80 | 397 | 875 | 158 | 157 | 1.12 | 743 | 813 | 169 | 162 | 1.00 |
Equity structural hedges refer to income allocated primarily to equity and reserves. At 30 June 2021, the equity structural hedge notional was allocated between NWH Group and NWM Plc in a ratio of approximately 80/20 respectively.
Product structural hedges refer to income allocated to customer products by NWH Treasury, mainly current accounts and customer deposits in Commercial Banking and UK Retail Banking. Other structural hedges refer to hedges managed by UBIDAC, Private Banking and RBS International. Hedges associated with Ulster Bank Limited were moved from other structural hedges to product hedges in H1 2021 as Ulster Bank Limited products migrated to NatWest Bank Plc.
At 30 June 2021, approximately 93% by notional of total structural hedges were sterling-denominated.
The following table presents the incremental income associated with product structural hedges at segment level.
| Half year ended | |||
|---|---|---|---|
| 30 June | 30 June 31 December | ||
| 2021 | 2020 | 2020 | |
| £m | £m | £m | |
| Retail Banking | 168 | 66 | 185 |
| Commercial Banking | 192 | 80 | 212 |
| Total | 360 | 146 | 397 |
Net interest earnings are sensitive to changes in the level of interest rates, mainly because maturing structural hedges are replaced at higher or lower rates and changes to coupons on managed rate customer products do not always match changes in market rates of interest or central bank policy rates.
Earnings sensitivity is derived from a market-implied forward rate curve. A simple scenario is shown that projects forward earnings based on the 30 June 2021 balance sheet, which is assumed to remain constant. A base-case earnings forecast is derived from the market-implied curve, which is then subject to interest rate shocks. The difference between the base-case forecast and the shock gives an indication of underlying sensitivity to interest rate movements.
Reported sensitivities should not be considered a forecast of future performance in these rate scenarios. Actions that could reduce interest earnings sensitivity include changes in pricing strategies on customer loans and deposits as well as hedging. Management action may also be taken to stabilise total income also taking into account non-interest income.
The table below shows the sensitivity of net interest earnings - for both structural hedges and managed rate accounts - on a one, two and three-year forward-looking basis to an upward or downward interest rate shift of 25 basis points.
In the upward rate scenario, yield curves were assumed to move in parallel, at both year-ends.
The downward rate scenarios at both 30 June 2021 and 31 December 2020 allow interest rates to fall to negative rates.
| +25 basis points upward shift | -25 basis points downward shift | |||||
|---|---|---|---|---|---|---|
| Year 1 | Year 2 (1) | Year 3 (1) | Year 1 | Year 2 (1) | Year 3 (1) | |
| 30 June 2021 | £m | £m | £m | £m | £m | £m |
| Structural hedges | 39 | 127 | 215 | (39) | (127) | (215) |
| Managed margin | 414 | 365 | 287 | (374) | (420) | (395) |
| Other | (3) | 7 | ||||
| Total | 450 | 492 | 502 | (406) | (547) | (610) |
| 31 December 2020 | ||||||
| Structural hedges | 37 | 118 | 199 | (37) | (118) | (199) |
| Managed margin | 319 | 380 | 387 | (258) | (285) | (292) |
| Other | 15 | (20) | ||||
| Total | 371 | 498 | 586 | (315) | (403) | (491) |
Note:
(1) The projections for Year 2 and Year 3 consider only the main drivers of earnings sensitivity, namely structural hedging and margin management.
The following table analyses the one-year scenarios by currency and, in addition, shows the impact over one year of a 100 basis-point upward shift in all interest rates.
| Shifts in yield curve | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2021 | 31 December 2020 | |||||||
| +25 basis -25 basis +100 basis |
+25 basis | -25 basis | +100 basis | |||||
| points | points | points | points | points | points | |||
| £m | £m | £m | £m | £m | £m | |||
| Euro | 6 | (11) | 97 | 7 | (6) | 99 | ||
| Sterling | 405 | (358) | 1,253 | 336 | (287) | 1,109 | ||
| US dollar | 37 | (35) | 147 | 26 | (22) | 102 | ||
| Other | 2 | (2) | 14 | 2 | - | 7 | ||
| Total | 450 | (406) | 1,511 | 371 | (315) | 1,317 |
Foreign exchange risk
The table below shows structural foreign currency exposures.
| Structural | ||||||
|---|---|---|---|---|---|---|
| Net | foreign currency | Residual | ||||
| investments | Net | exposures | structural | |||
| in foreign | investment | pre-economic | Economic | foreign currency | ||
| operations | hedges | hedges | hedges (1) | exposures | ||
| 30 June 2021 | £m | £m | £m | £m | £m | |
| US dollar | 1,291 | - | 1,291 | (1,291) | - | |
| Euro | 6,286 | (1,022) | 5,264 | - | 5,264 | |
| Other non-sterling | 996 | (331) | 665 | - | 665 | |
| Total | 8,573 | (1,353) | 7,220 | (1,291) | 5,929 | |
| 31 December 2020 | ||||||
| US dollar | 1,299 | (3) | 1,296 | (1,296) | - | |
| Euro | 6,485 | (829) | 5,656 | - | 5,656 | |
| Other non-sterling | 1,077 | (350) | 727 | - | 727 | |
| Total | 8,861 | (1,182) | 7,679 | (1,296) | 6,383 |
Note:
(1) Economic hedges of US dollar net investments in foreign operations represent US dollar equity securities that do not qualify as net investment hedges for accounting purposes. They provide an offset to structural foreign exchange exposures to the extent that there are net assets in overseas operations available. Economic hedges of other currency net investments in foreign operations represent monetary liabilities that are not booked as net investment hedges.
● Sterling strengthened against the US dollar and the euro over the period.
● The increase in euro hedging related to NatWest Bank's investment in its German branch.
● Changes in foreign currency exchange rates affect equity in proportion to structural foreign currency exposure. For example, a 5% strengthening or weakening in foreign currencies against sterling would result in a gain or loss of £0.4 billion in equity respectively.
Traded market risk is the risk arising from changes in fair value on positions, assets, liabilities or commitments in trading portfolios as a result of fluctuations in market prices.
The table below shows one-day internal value-at-risk (VaR) for NatWest Group's trading portfolios, split by exposure type.
| Half year ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 June 2021 | 30 June 2020 | 31 December 2020 | ||||||||||
| Period | Period | Period | ||||||||||
| Average | Maximum | Minimum | end | Average | Maximum | Minimum | end | Average | Maximum | Minimum | end | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Interest rate | 11.3 | 19.0 | 4.5 | 17.4 | 10.1 | 20.2 | 6.1 | 6.1 | 7.3 | 11.4 | 4.8 | 6.3 |
| Credit spread | 11.0 | 13.4 | 9.4 | 11.2 | 16.3 | 27.2 | 8.7 | 17.7 | 14.4 | 18.8 | 10.0 | 10.3 |
| Currency | 3.9 | 9.4 | 2.0 | 2.4 | 4.2 | 8.4 | 2.1 | 3.9 | 4.1 | 7.0 | 2.1 | 3.0 |
| Equity | 0.5 | 0.8 | 0.2 | 0.2 | 0.8 | 2.0 | 0.3 | 0.3 | 0.4 | 0.8 | 0.2 | 0.7 |
| Commodity | 0.2 | 0.5 | - | - | 0.1 | 0.3 | - | 0.1 | 0.2 | 0.6 | - | 0.2 |
| Diversification (1) | (13.5) | (15.5) | (14.8) | (9.6) | (10.9) | (10.3) | ||||||
| Total | 13.4 | 23.9 | 9.5 | 15.7 | 16.7 | 25.7 | 10.1 | 18.5 | 15.5 | 22.2 | 10.2 | 10.2 |
Note:
(1) NatWest Group benefits from diversification across various financial instrument types, currencies and markets. The extent of the diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
● The increase in average interest rate VaR, compared to the prior period, reflected a rise in tenor basis risk in sterling flow trading. This related to the transition from LIBOR to alternative risk-free rates. The regulator has approved an update of the VaR model, which will remove this impact during Q3 2021.
● The decrease in average credit spread VaR mostly reflected a tightening of credit spreads over the period.
● Traded VaR remained within appetite throughout the period.
Operational risk
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