Inside this report
| Business performance summary | |
| 2 | H1 2024 performance summary |
| 4 | Performance key metrics and ratios |
| 6 | Chief Financial Officer review |
| 8 | Retail Banking |
| 9 | Private Banking |
| 10 | Commercial & Institutional |
| 11 | Central items & other |
| 12 | Segment performance |
|
|
|
| Risk and capital management | |
| 17 | Credit risk |
| 17 | Economic loss drivers |
| 21 | Governance and post model adjustments |
| 23 | Measurement uncertainty and ECL |
| 25 | Measurement uncertainty and ECL |
| 26 | Credit risk - Banking activities |
| 26 | Financial instruments within the scope of the |
| 27 | Segment analysis - portfolio summary |
| 30 | Segment loans and impairment metrics |
| 31 | Sector analysis - portfolio summary |
| 37 | Wholesale forbearance |
| 39 | Personal portfolio |
| 42 | Commercial real estate |
| 43 | Flow statements |
| Risk and capital management continued | |
| 51 | Stage 2 decomposition by a significant |
| 53 | Asset quality |
| 57 | Credit risk - Trading activities |
| 60 | Capital, liquidity and funding risk |
| 71 | Non-traded market risk |
| 76 | Traded market risk |
| 76 | Pension risk |
| 76 | Compliance and conduct risk |
|
| |
| Financial statements and notes | |
| 77 | Condensed consolidated income statement |
| 78 | Condensed consolidated statement of |
| 79 | Condensed consolidated balance sheet |
| 80 | Condensed consolidated statement of |
| 82 | Condensed consolidated cash flow statement |
| 83 | Presentation of condensed consolidated |
| 83 | Net interest income |
| 84 | Non-interest income |
| 85 | Operating expenses |
| 86 | Segmental analysis |
| 89 | Tax |
| 90 | Financial instruments - classification |
| 92 | Financial instruments - valuation |
| Financial statements and notes continued | |
| 97 | Trading assets and liabilities |
| 98 | Loan impairment provisions |
| 99 | Provisions for liabilities and charges |
| 99 | Dividends |
| 99 | Contingent liabilities and commitments |
| 100 | Litigation and regulatory matters |
| 106 | Related party transactions |
| 106 | Acquisitions |
| 106 | Post balance sheet events |
| 106 | Date of approval |
| 107 | Independent review report to NatWest |
| | |
| Additional information | |
| 108 | NatWest Group plc summary risk factors |
| 110 | Statement of directors' responsibilities |
| 111 | Presentation of information |
| 111 | Statutory accounts |
| 111 | Forward-looking statements |
| 112 | Share information and contacts |
|
| |
| Appendix | |
| 113 | Non-IFRS financial measures |
| 118 | Performance measures not defined |
H1 2024 performance summary
Chief Executive, Paul Thwaite, commented:
"As the UK's leading business bank, and one of the largest retail banks, NatWest Group's strong performance is grounded in the vital role we play in the UK economy and in the lives of our 19 million customers. In the first half of the year, we have delivered an operating profit of £3 billion, a return on tangible equity of 16.4% and a 6 pence interim dividend, up 9% on last year's dividend. We are also pleased with the continued reduction of the Government's stake, which has almost halved this year.
We have made good progress against our strategic priorities, taking decisive action to grow and simplify our business and to manage our capital and costs more efficiently. There has been growth across all three of our businesses, we have attracted over 200,000 new customers and our acquisition from Sainsbury's Bank is expected to add around one million customer accounts on completion. We have also agreed to acquire £2.5 billion of UK prime residential mortgages from Metro Bank plc, adding further scale to our Retail Banking business.
The positive momentum and progress in the first half reflect the ambition across the bank to deliver its full potential. Our customers are beginning to feel more confident, with activity increasing and asset quality remaining strong, and we are well positioned to help unlock growth across the UK through our unrivalled regional network. Fundamentally, if we succeed with our customers, we will succeed for our shareholders and the wider economy."
Strong H1 2024 and Q2 performance
- H1 2024 attributable profit of £2,099 million and a return on tangible equity (RoTE) of 16.4%.
- Q2 2024 total income excluding notable items(1) of £3,590 million was £176 million, or 5.2%, higher than Q1 2024 primarily reflecting increased deposit income whilst H1 2024 was £379 million lower than H1 2023 due to lower average deposit balances and mix changes and lending margin pressure.
- Net interest margin (NIM) of 2.10% was 5 basis points higher than Q1 2024 primarily due to improved deposit margins.
- Q2 2024 other operating expenses were £100 million lower than Q1 2024, or £21 million lower excluding costs in relation to bank levies of £87 million and the potential retail share offering. H1 2024 other operating expenses were £149 million higher than H1 2023, or £42 million, 1.1%, higher excluding costs in relation to the potential retail share offering of £24 million and additional bank levies of £83 million.
- Net impairment charge of £48 million in H1 2024, or 3 basis points of gross customer loans. Levels of default remain stable and at low levels across the portfolio.
Robust balance sheet with strong capital and liquidity levels
- Net loans to customers excluding central items decreased by £1.7 billion in the quarter and decreased £0.3 billion in the first half as growth in Commercial & Institutional was offset by UK Government scheme repayments and lower mortgage balances as customer redemptions offset new lending.
- Up to 30 June 2024 we have provided £78.3 billion against our target to provide £100 billion climate and sustainable funding and financing between 1 July 2021 and the end of 2025.
- Customer deposits excluding central items were up by £6.1 billion in the first half of the year and increased £5.2 billion in Q2 2024. Term balances remained consistent in the quarter at 17% of our book and up from 16% at the end of 2023.
- The loan:deposit ratio (LDR) (excl. repos and reverse repos) was 83% at Q2 2024, with customer deposits exceeding net loans to customers by around £72 billion.
- The liquidity coverage ratio (LCR) of 151%, representing £54.5 billion headroom above 100% minimum requirement was unchanged compared with Q1 2024.
- TNAV per share increased by 12 pence in H1 2024 to 304 pence primarily reflecting the profit for the period, partially offset by the 2023 final ordinary dividend of 11.5 pence.
(1) Refer to the Non-IFRS financial measures appendix for details of notable items.
H1 2024 performance summary continued
Shareholder return supported by strong capital generation
- We are pleased to announce an interim dividend of 6 pence per share which, including the £1.2 billion directed buyback completed in May, brings total distributions announced to £1.7 billion for H1 2024.
- Common Equity Tier 1 (CET1) ratio of 13.6% was 10 basis points higher than Q1 2024 reflecting the attributable profit and reduction in RWAs, partially offset by capital distributions.
- During Q2 2024 we agreed to acquire the outstanding credit card, unsecured personal loans and savings balances of Sainsbury's Bank, subject to court and regulatory approvals. On completion we expect this acquisition to add around one million customer accounts to our Retail Banking business.
- RWAs of £180.8 billion reduced by £5.5 billion in Q2 2024 largely reflecting RWA management of £3.9 billion.
Outlook(1)
We continue to assess the economic outlook and will monitor and react to market conditions and refine our internal forecasts as the economic position evolves. The following statements are based on our current expectations for interest rates and economic activity.
In 2024 we now expect:
- to achieve a return on tangible equity above 14%.
- income excluding notable items to be around £14.0 billion.
- Group operating costs, excluding litigation and conduct costs, to be broadly stable compared with 2023 excluding around £0.1 billion increase in bank levies and £24 million of costs in relation to the potential retail share offering by HM Treasury.
- our loan impairment rate for 2024 to be below 15 basis points.
In 2026 we continue to expect:
- to achieve a return on tangible equity for the Group of greater than 13%.
Capital - we continue to:
- target a CET1 ratio in the range of 13-14%.
- expect RWAs to be around £200 billion at the end of 2025, including the impact of Basel 3.1, however this remains subject to final rules and approval.
- expect to pay ordinary dividends of around 40% of attributable profit and maintain capacity to participate in directed buybacks from the UK Government, recognising that any exercise of this authority would be dependent upon HMT's intentions. We will also consider further on-market buybacks as appropriate.
(1) The guidance, targets, expectations, and trends discussed in this section represent NatWest Group plc management's current expectations and are subject to change, including as a result of the factors described in the NatWest Group plc Risk Factors section in the 2023 Annual Report and Accounts and Form 20-F and the Summary Risk Factors in this announcement. These statements constitute forward-looking statements. Refer to Forward-looking statements in this announcement.
Business performance summary
| | Half year ended |
| Quarter ended | ||||||
| | 30 June | 30 June | | | 30 June | 31 March | | 30 June | |
| | 2024 | 2023 | Variance | | 2024 | 2024 | Variance | 2023 | Variance |
| Summary consolidated income statement | £m | £m | % | | £m | £m | % | £m | % |
| Net interest income | 5,408 | 5,726 | (5.6%) | | 2,757 | 2,651 | 4.0% | 2,824 | (2.4%) |
| Non-interest income | 1,726 | 2,001 | (13.7%) | | 902 | 824 | 9.5% | 1,027 | (12.2%) |
| Total income | 7,134 | 7,727 | (7.7%) | | 3,659 | 3,475 | 5.3% | 3,851 | (5.0%) |
| Litigation and conduct costs | (101) | (108) | (6.5%) | | (77) | (24) | nm | (52) | 48.1% |
| Other operating expenses | (3,956) | (3,807) | 3.9% | | (1,928) | (2,028) | (4.9%) | (1,875) | 2.8% |
| Operating expenses | (4,057) | (3,915) | 3.6% | | (2,005) | (2,052) | (2.3%) | (1,927) | 4.0% |
| Profit before impairment losses/releases | 3,077 | 3,812 | (19.3%) | | 1,654 | 1,423 | 16.2% | 1,924 | (14.0%) |
| Impairment (losses)/releases | (48) | (223) | (78.5%) | | 45 | (93) | (148.4%) | (153) | (129.4%) |
| Operating profit before tax | 3,029 | 3,589 | (15.6%) | | 1,699 | 1,330 | 27.7% | 1,771 | (4.1%) |
| Tax charge | (801) | (1,061) | (24.5%) | | (462) | (339) | 36.3% | (549) | (15.8%) |
| Profit from continuing operations | 2,228 | 2,528 | (11.9%) | | 1,237 | 991 | 24.8% | 1,222 | 1.2% |
| Profit/(loss) from discontinued operations, net of tax | 11 | (108) | (110.2%) | | 15 | (4) | nm | (143) | (110.5%) |
| Profit for the period | 2,239 | 2,420 | (7.5%) | | 1,252 | 987 | 26.8% | 1,079 | 16.0% |
|
|
| | | |
| | | | |
| Performance key metrics and ratios |
| | | |
| | | | |
| Notable items within total income (1) | £130m | £344m | nm | | £69m | £61m | nm | £288m | nm |
| Total income excluding notable items (1) | £7,004m | £7,383m | (5.1%) | | £3,590m | £3,414m | 5.2% | £3,563m | 0.8% |
| Net interest margin (1) | 2.07% | 2.23% | (16bps) | | 2.10% | 2.05% | 5bps | 2.20% | (10bps) |
| Average interest earning assets (1) | £524bn | £518bn | 1.2% | | £528bn | £521bn | 1.3% | £514bn | 2.7% |
| Cost:income ratio (excl. litigation and conduct) (1) | 55.5% | 49.3% | 6.2% | | 52.7% | 58.4% | (5.7%) | 48.7% | 4.0% |
| Loan impairment rate (1) | 3bps | 12bps | (9bps) | | (5bps) | 10bps | (15bps) | 16bps | (21bps) |
| Profit attributable to ordinary shareholders | £2,099m | £2,299m | (8.7%) | | £1,181m | £918m | 28.6% | £1,020m | 15.8% |
| Total earnings per share attributable to ordinary shareholders - basic | 24.2p | 24.3p | (0.1p) | | 13.7p | 10.5p | 3.2p | 11.0p | 2.7p |
| Return on tangible equity (RoTE) (1) | 16.4% | 18.2% | (1.8%) | | 18.5% | 14.2% | 4.3% | 16.4% | 2.1% |
| Climate and sustainable funding and financing (2) | £16.3bn | £16.0bn | 1.9% | | £9.7bn | £6.6bn | 47.0% | £8.4bn | 15.5% |
nm = not meaningful.
For the footnotes to this table refer to the following page.
Business performance summary continued
| |
| | | | As at | ||||
| |
| | | | 30 June | 31 March | | 31 December | |
| |
| | | | 2024 | 2024 | Variance | 2023 | Variance |
| Balance sheet |
| | | | £bn | £bn | % | £bn | % |
| Total assets |
| | | | 690.3 | 697.5 | (1.0%) | 692.7 | (0.3%) |
| Loans to customers - amortised cost |
| | | | 379.3 | 378.0 | 0.3% | 381.4 | (0.6%) |
| Loans to customers excluding central items (1,3) |
| | | | 355.3 | 357.0 | (0.5%) | 355.6 | (0.1%) |
| Loans to customers and banks - amortised cost and FVOCI |
| | | | 388.9 | 387.7 | 0.3% | 392.0 | (0.8%) |
| Total impairment provisions (4) |
| | | | 3.3 | 3.6 | (8.3%) | 3.6 | (8.3%) |
| Expected credit loss (ECL) coverage ratio |
| | | | 0.86% | 0.94% | (8bps) | 0.93% | (7bps) |
| Assets under management and administration (AUMA) (1) |
| | | | 45.1 | 43.1 | 4.6% | 40.8 | 10.5% |
| Customer deposits |
| | | | 433.0 | 432.8 | 0.0% | 431.4 | 0.4% |
| Customer deposits excluding central items (1,3) |
| | | | 425.2 | 420.0 | 1.2% | 419.1 | 1.5% |
| Liquidity and funding |
| | | |
| | | | |
| Liquidity coverage ratio (LCR) |
| | | | 151% | 151% | 0.0% | 144% | 7.0% |
| Liquidity portfolio |
| | | | 227 | 229 | (1.0%) | 223 | 1.8% |
| Net stable funding ratio (NSFR) |
| | | | 139% | 136% | 3.0% | 133% | 6.0% |
| Loan:deposit ratio (excl. repos and reverse repos) (1) |
| | | | 83% | 84% | (1%) | 84% | (1%) |
| Total wholesale funding |
| | | | 83 | 87 | (4.6%) | 80 | 3.8% |
| Short-term wholesale funding |
| | | | 27 | 31 | (12.9%) | 28 | (3.6%) |
| Capital and leverage |
| | | |
| | | | |
| Common Equity Tier 1 (CET1) ratio (5) |
| | | | 13.6% | 13.5% | 10bps | 13.4% | 20bps |
| Total capital ratio (5) |
| | | | 19.5% | 18.8% | 70bps | 18.4% | 110bps |
| Pro forma CET1 ratio (excl. foreseeable items) (6) |
| | | | 14.1% | 14.3% | (20bps) | 14.2% | (10bps) |
| Risk-weighted assets (RWAs) |
| | | | 180.8 | 186.3 | (3.0%) | 183.0 | (1.2%) |
| UK leverage ratio |
| | | | 5.2% | 5.1% | 0.1% | 5.0% | 0.2% |
| Tangible net asset value (TNAV) per ordinary share (1,7) |
| | | | 304p | 302p | 2p | 292p | 12p |
| Number of ordinary shares in issue (millions) (7) |
| | | | 8,307 | 8,727 | (4.8%) | 8,792 | (5.5%) |
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
(2) NatWest Group uses its climate and sustainable funding and financing inclusion (CSFFI) criteria to determine the assets, activities and companies that are eligible to be included within its climate and sustainable funding and financing target. This includes both provision of committed (on and off-balance sheet) funding and financing, including provision of services for underwriting issuances and private placements.
(3) Central items includes Treasury repo activity and Ulster Bank Republic of Ireland.
(4) Includes £0.1 billion relating to off-balance sheet exposures (31 March 2024 - £0.1 billion; 31 December 2023 - £0.1 billion).
(5) Refer to the Capital, liquidity and funding risk section for details of the basis of preparation.
(6) The pro forma CET1 ratio at 30 June 2024 excludes foreseeable items of £889 million: £839 million for ordinary dividends and £50 million foreseeable charges (31 March 2024 excludes foreseeable items of £1,633 million: £1,380 million for ordinary dividends and £253 million foreseeable charges; 31 December 2023 excludes foreseeable items of £1,538 million: £1,013 million for ordinary dividends and £525 million foreseeable charges).
(7) The number of ordinary shares in issue excludes own shares held.
Chief Financial Officer review
We delivered an operating profit of £3,029 million in the first half of the year with a RoTE of 16.4%. Total income excluding notable items of £7.0 billion in H1 2024 was down by 5.1% on the prior year but Q2 2024 was up 5.2% on Q1 2024. We continue to see low levels of default across our portfolio, with a net impairment charge of 3 basis points of gross customer loans for the first half of the year.
In the first half of the year net lending excluding central items decreased by £0.3 billion. Excluding repayment of UK Government schemes of £1.0 billion net lending increased by £0.8 billion, driven by Commercial & Institutional customers which offset lower mortgage balances. Customer deposit balances excluding central items increased by £6.1 billion in the first half. Our robust balance sheet means that we remain in a strong liquidity position, with an LCR of 151% representing £54.5 billion headroom above 100% minimum requirement, and an LDR (excl. repos and reverse repos) of 83%.
Our CET1 ratio remains within our targeted range at 13.6%, with total distributions announced of £1.7 billion in H1 2024. An interim dividend of 6 pence per share compares with 5.5 pence in the prior year.
Strong H1 and Q2 2024 performance
- Total income increased by 5.3% in Q2 2024 to £3,659 million compared with Q1 2024 and decreased 7.7% in H1 2024 compared with H1 2023, impacted by FX recycling gains in the prior year. Total income excluding notable items was £176 million higher than Q1 2024 primarily reflecting increased deposit income and decreased £379 million, or 5.1%, in the first half compared with H1 2023 due to lower average deposit balances and mix changes throughout 2023, as customers moved towards interest bearing and term accounts, and lending margin pressure, which has eased in Q2 2024.
- Q2 2024 NIM of 2.10% was 5 basis points higher than Q1 2024 primarily due to improved deposit margins. H1 2024 NIM was 16 basis points lower than H1 2023 principally reflecting mortgage margin pressure and deposit mix changes, as customers move from non-interest bearing to interest bearing accounts.
- Total operating expenses for Q2 2024 were £47 million lower than Q1 2024 and £142 million higher in the first half of the year compared with H1 2023. Q2 2024 other operating expenses were £100 million lower than Q1 2024, or £21 million lower excluding costs in relation to bank levies of £87 million and the potential retail share offering. H1 2024 other operating expenses were £149 million higher than H1 2023, or £42 million, 1.1%, higher excluding costs in relation to the potential retail share offering of £24 million and additional bank levies of £83 million, reflecting increased staff costs due to inflation and severance costs, partially offset by ongoing simplification of our business and lower costs in relation to our withdrawal from the Republic of Ireland.
We remain committed to deliver on our full year cost guidance, excluding the impact of increased bank levies and costs in relation to the potential retail share offering.
- A net impairment charge of £48 million in H1 2024 principally reflected broadly stable Stage 3 inflows partly offset by good book releases, including post model adjustments. Levels of default remain stable and at low levels across the portfolio despite inflationary pressures and the higher interest rate environment. Compared with Q1 2024, our ECL provision decreased by £0.3 billion to £3.3 billion and our ECL coverage ratio has decreased from 0.94% to 0.86%. We retain post model adjustments of £0.3 billion related to economic uncertainty, or 9.0% of total impairment provisions. Whilst we are comfortable with the strong credit performance of our book, we will continue to assess this position regularly and are closely monitoring the impacts of inflationary pressures, which have eased in the first half, on the UK economy and our customers.
- As a result, we are pleased to report an attributable profit for H1 2024 of £2,099 million, with earnings per share of 24.2 pence and a RoTE of 16.4%. Q2 2024 RoTE was 18.5%.
Robust balance sheet with strong capital and liquidity levels
- Net loans to customers excluding central items decreased by £1.7 billion in the quarter and decreased by £0.3 billion in the first half to £355.3 billion. Growth in Commercial Mid-market and Corporate & Institutions, net of UK Government scheme repayments of £1.0 billion in the first half, largely offset lower mortgage balances.
- Up to 30 June 2024 we have provided £78.3 billion against our target to provide £100 billion climate and sustainable funding and financing between 1 July 2021 and the end of 2025. As part of this we aim to provide at least £10 billion in lending for EPC A and B rated residential properties between 1 January 2023 and the end of 2025. During H1 2024 we provided £16.3 billion climate and sustainable funding and financing, which included £1.4 billion in lending for EPC A and B rated residential properties.
- Customer deposits excluding central items increased £5.2 billion in Q2 2024 and £6.1 billion in the first half of the year reflecting £3.5 billion growth in Retail Banking and £1.8 billion in Private Banking, largely in savings and other interest-bearing balances, and a £0.8 billion increase in Commercial & Institutional primarily within Commercial Mid-market. Term balances remained consistent in the quarter at 17% of our book and up from 16% at the end of 2023.
Chief Financial Officer review continued
- The LCR was unchanged compared with Q1 2024 at 151%, representing £54.5 billion headroom above 100% minimum requirements primarily due to increased customer deposits offset by reduced wholesale funding and capital distributions (share buyback and dividends). Our primary liquidity at H1 2024 was £160.4 billion and £111.8 billion, or 70%, of this was cash and balances at central banks. Total wholesale funding decreased by £3.6 billion in the quarter to £83.0 billion.
- TNAV per share increased by 12 pence in H1 2024 to 304 pence primarily reflecting the profit for the period partially offset by the 2023 final ordinary dividend of 11.5 pence.
Shareholder return supported strong capital generation
- The CET1 ratio of 13.6% was 10 basis points higher than Q1 2024 principally reflecting the attributable profit for the quarter, c.60 basis points and a decrease in RWAs c.40 basis points, partially offset by distributions deducted from capital of c.90 basis points. CET1 was 20 basis points higher than 31 December 2023 largely reflecting the attributable profit and a £2.2 billion decrease in RWAs, partially offset by distributions. NatWest Group's minimum requirement for own funds and eligible liabilities (MREL) was 31.7%.
- RWAs reduced by £5.5 billion in the second quarter of the year to £180.8 billion largely reflecting RWA management of £3.9 billion and decreased by £2.2 billion in the first half primarily due to RWA management of £4.3 billion, partially offset by the annual update to operational risk.
Business performance summary
Retail Banking
| | Half year ended |
| Quarter ended | |||
| | 30 June | 30 June | | 30 June | 31 March | 30 June |
| | 2024 | 2023 | | 2024 | 2024 | 2023 |
| | £m | £m | | £m | £m | £m |
| Total income | 2,690 | 3,120 | | 1,365 | 1,325 | 1,516 |
| Operating expenses | (1,470) | (1,367) | | (697) | (773) | (671) |
| of which: Other operating expenses | (1,457) | (1,343) |
| (690) | (767) | (650) |
| Impairment losses | (122) | (193) | | (59) | (63) | (79) |
| Operating profit | 1,098 | 1,560 | | 609 | 489 | 766 |
| |
| | |
| | |
| Return on equity (1) | 18.4% | 29.1% | | 20.3% | 16.5% | 28.2% |
| Net interest margin (1) | 2.26% | 2.65% | | 2.31% | 2.22% | 2.56% |
| Cost:income ratio |
| | |
| | |
| (excl. litigation and conduct) (1) | 54.2% | 43.0% | | 50.5% | 57.9% | 42.9% |
| Loan impairment rate (1) | 12bps | 19bps | | 12bps | 12bps | 15bps |
| |
| | |
| | |
| |
| | | As at | ||
| |
| | | 30 June | 31 March | 31 December |
| |
| | | 2024 | 2024 | 2023 |
| | | | | £bn | £bn | £bn |
| Net loans to customers (amortised cost) | | | | 203.3 | 203.5 | 205.2 |
| Customer deposits | | | | 191.5 | 190.0 | 188.0 |
| RWAs | | | | 62.3 | 62.5 | 61.6 |
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
During H1 2024, Retail Banking delivered an operating profit of £1.1 billion and a return on equity of 18.4%. Q2 2024 showed positive income momentum with increased net interest margin from deposit margin expansion supporting improved profitability.
Retail Banking provided £1.3 billion of climate and sustainable funding and financing in H1 2024 from lending on properties with an EPC rating of A or B.
H1 2024 performance
- Total income was £430 million, or 13.8%, lower than H1 2023 due to mortgage margin compression and the impact of the deposit balance mix shift from non-interest bearing to interest bearing balances, partly offset by lending growth and the impact of one more day in H1 2024.
- Net interest margin was 39 basis points lower than H1 2023, largely reflecting mortgage margin compression and the impact of deposit balance mix shift.
- Other operating expenses were £114 million, or 8.5%, higher than H1 2023 reflecting the Bank of England Levy, increased severance costs, and branch and property exit costs partly offset by savings from an 8.0% reduction in headcount.
- An impairment charge of £122 million in H1 2024 was £71 million lower than H1 2023. The H1 2024 charge reflects a broadly stable Stage 3 charge, with the good book benefitting from post model adjustment releases.
- Net loans to customers decreased £1.9 billion, or 0.9%, in H1 2024. Mortgage balances decreased by £2.5 billion as customer redemptions more than offset gross new lending. Personal advances decreased by £0.3 billion whilst cards balances increased by £0.7 billion in H1 2024 benefitting from new card issuance, as well as higher customer spend.
- Customer deposits increased by £3.5 billion, or 1.9%, in H1 2024 reflecting growth in savings partly offset by lower current account balances.
- RWAs increased by £0.7 billion, or 1.1%, in H1 2024 primarily due to the annual update for operational risk calculation, book movements and movement in risk parameters.
Q2 2024 performance
- Total income was £40 million, or 3.0%, higher than Q1 2024 reflecting deposit margin expansion partly offset by the impact of the deposit balance mix shift from non-interest bearing to interest bearing balances and asset margin compression.
- Net interest margin was 9 basis points higher than Q1 2024, largely reflecting improved deposit hedge income, partly offset by the impact of the deposit balance mix shift and asset margin compression.
- Other operating expenses were £77 million, or 10.0%, lower than Q1 2024 reflecting the Bank of England Levy in Q1 2024 and lower strategic costs as well as savings from a 3.8% reduction in headcount.
- An impairment charge of £59 million in Q2 2024, reflecting a Stage 3 charge broadly in line with Q1 2024, with the good book benefitting from post model adjustment releases.
- Net loans to customers decreased by £0.2 billion, or 0.1%, lower than Q1 2024, driven by £0.7 billion lower mortgage balances, as redemptions more than offset stronger gross new lending, and personal advances decreased by £0.1 billion in Q2 2024; whilst cards balances increased by £0.4 billion in Q2 2024.
- Customer deposits increased by £1.5 billion, or 0.8%, in Q2 2024 reflecting growth in savings partly offset by lower current account balances.
- RWAs decreased by £0.2 billion, or 0.3%, in Q2 2024 primarily due to book movements.
Business performance summary continued
Private Banking
| | Half year ended |
| Quarter ended | |||
| | 30 June | 30 June | | 30 June | 31 March | 30 June |
| | 2024 | 2023 | | 2024 | 2024 | 2023 |
| | £m | £m | | £m | £m | £m |
| Total income | 444 | 567 | | 236 | 208 | 271 |
| Operating expenses | (356) | (322) | | (175) | (181) | (167) |
| of which: Other operating expenses | (355) | (311) |
| (175) | (180) | (159) |
| Impairment releases/(losses) | 11 | (11) | | 5 | 6 | (3) |
| Operating profit | 99 | 234 | | 66 | 33 | 101 |
| |
| | |
| | |
| Return on equity (1) | 10.5% | 24.7% | | 14.4% | 6.7% | 20.8% |
| Net interest margin (1) | 2.18% | 3.13% | | 2.30% | 2.06% | 2.94% |
| Cost:income ratio |
| | |
| | |
| (excl. litigation and conduct) (1) | 80.0% | 54.9% | | 74.2% | 86.5% | 58.7% |
| Loan impairment rate (1) | (12)bps | 11bps | | (11)bps | (13)bps | 6bps |
| AUM net flows (£bn) (1) | 1.0 | 1.0 | | 0.6 | 0.4 | 0.4 |
| |
| | |
| | |
| |
| | | As at | ||
| |
| | | 30 June | 31 March | 31 December |
| |
| | | 2024 | 2024 | 2023 |
| | | | | £bn | £bn | £bn |
| Net loans to customers (amortised cost) | | | | 18.1 | 18.2 | 18.5 |
| Customer deposits | | | | 39.5 | 37.8 | 37.7 |
| RWAs | | | | 11.0 | 11.3 | 11.2 |
| Assets under management (AUMs) (1) | | | | 34.7 | 33.6 | 31.7 |
| Assets under administration (AUAs) (1) | | | | 10.4 | 9.5 | 9.1 |
| Total assets under management and administration (AUMA) (1) | | 45.1 | 43.1 | 40.8 | ||
(1) Refer to the Non-IFRS financial measures appendix for details of basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
During H1 2024, Private Banking delivered a return on equity of 10.5% and an operating profit of £99 million. Q2 2024 continued to see a positive performance in deposits and AUMA growth supporting improved profitability.
Private Banking provided £0.2 billion of climate and sustainable funding and financing in H1 2024, principally in relation to mortgages on residential properties with an EPC rating of A or B.
H1 2024 performance
- Total income was £123 million, or 21.7% lower than H1 2023 reflecting the change in deposit mix, primarily during the second half of 2023, as customers migrated to savings products offering higher returns combined with a reduction in lending volumes. This was partly offset by an increase in investment income due to higher AUMA balances reflecting net inflows and favourable market movements.
- Net interest margin was 95 basis points lower than H1 2023, largely reflecting a change in deposit mix.
- Other operating expenses were £44 million, or 14.1%, higher than H1 2023 primarily reflecting increased technology and severance costs along with the Bank of England Levy. Staff costs have increased also due to inflationary pressure.
- A net impairment release of £11 million, compared with an £11 million charge in H1 2023, largely reflects good book releases including benefits from post model adjustments with the Stage 3 charge broadly flat and remaining at low levels.
- Net loans to customers decreased by £0.4 billion, or 2.2%, in H1 2024 driven by lower mortgage balances.
- Customer deposits increased by £1.8 billion, or 4.8%, in H1 2024 reflecting strong above-market savings growth and short-term transitory inflows in Q2 2024 offsetting tax outflows in Q1 2024.
- AUMA increased by £4.3 billion in H1 2024 to £45.1 billion, primarily driven by £2.9 billion positive market movements, and £1.0 billion AUM and £0.3 billion AUA net inflows.
Q2 2024 performance
- Total income was £28 million, or 13.5%, higher than Q1 2024 primarily due to higher average deposit and AUMA balances, driving an increase in investment fee income and improved deposit income, partly offset by lower average lending balances.
- Net interest margin was 24 basis points higher than Q1 2024 reflecting higher average deposit balances and improvement in deposit margin.
- Other operating expenses were £5 million, or 2.8%, lower than Q1 2024 primarily due to the non-repeat of higher technology costs and the Bank of England Levy incurred in Q1 2024.
- Net loans to customers decreased by £0.1 billion, or 0.5%, in Q2 2024 primarily due to lower mortgage balances.
- Customer deposits increased by £1.7 billion, or 4.5%, compared with Q1 2024 driven by a strong performance on instant access savings, including short-term transitory inflows, partly offset by a small reduction on current accounts.
- AUMA increased by £2.0 billion in Q2 2024, reflecting positive market movements of £0.9 billion supported by AUM net inflows of £0.6 billion and AUA inflows of £0.4 billion.
Business performance summary continued
Commercial & Institutional
| | Half year ended |
| Quarter ended | |||
| | 30 June | 30 June | | 30 June | 31 March | 30 June |
| | 2024 | 2023 | | 2024 | 2024 | 2023 |
| | £m | £m | | £m | £m | £m |
| Net interest income | 2,543 | 2,504 | | 1,297 | 1,246 | 1,243 |
| Non-interest income | 1,257 | 1,244 | | 644 | 613 | 552 |
| Total income | 3,800 | 3,748 | | 1,941 | 1,859 | 1,795 |
| |
| | |
| | |
| Operating expenses | (2,150) | (1,987) | | (1,099) | (1,051) | (984) |
| of which: Other operating expenses | (2,073) | (1,893) |
| (1,053) | (1,020) | (934) |
| Impairment releases/(losses) | 57 | (20) | | 96 | (39) | (64) |
| Operating profit | 1,707 | 1,741 | | 938 | 769 | 747 |
| |
| | |
| | |
| Return on equity (1) | 16.2% | 16.9% | | 17.8% | 14.6% | 14.3% |
| Net interest margin (1) | 2.10% | 2.06% | | 2.12% | 2.07% | 2.05% |
| Cost:income ratio |
| | |
| | |
| (excl. litigation and conduct) (1) | 54.6% | 50.5% | | 54.3% | 54.9% | 52.0% |
| Loan impairment rate (1) | (8)bps | 3bps | | (28)bps | 11bps | 20bps |
| |
| | |
| | |
| |
| | | As at | ||
| |
| | | 30 June | 31 March | 31 December |
| |
| | | 2024 | 2024 | 2023 |
| | | | | £bn | £bn | £bn |
| Net loans to customers (amortised cost) | | | | 133.9 | 135.3 | 131.9 |
| Customer deposits | | | | 194.2 | 192.2 | 193.4 |
| Funded assets (1) | | | | 315.5 | 321.7 | 306.9 |
| RWAs | | | | 104.9 | 109.9 | 107.4 |
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
In H1 2024, Commercial & Institutional continued to support customers with an increase in lending of 1.5% and delivered a strong performance in income and operating profit supporting a return on equity of 16.2%. Q2 2024 continued to see good client demand for lending, an increase in customer deposits supported by an improving UK deposit market and disciplined capital management delivering strong income and net interest margin growth supporting overall improved profitability.
Commercial & Institutional provided £14.9 billion of climate and sustainable funding and financing in H1 2024 to support customers investing in the transition to net zero.
H1 2024 performance
- Total income was £52 million, or 1.4%, higher than H1 2023 due to strong client-driven capital markets activity, lending growth in Corporate & Institutions and Commercial Mid-market, partially offset by lower deposit returns reflecting the impact of the lower average volumes and balance mix shift.
- Net interest margin was 4 basis points higher than H1 2023, largely reflecting one-off items partly offset by lower deposit returns.
- Other operating expenses were £180 million, or 9.5%, higher than H1 2023 reflecting increased severance costs, the Bank of England Levy, and increased headcount as we continue to invest in the business.
- An impairment release of £57 million in H1 2024 reflecting good book releases with benefits from the revised economic outlook, post model adjustment releases, and benefits from capital management activity. Stage 3 charge remains at a low level.
- Net loans to customers increased by £2.0 billion, or 1.5%, in H1 2024 largely reflecting a strong performance within Commercial Mid-market and Corporate & Institutions, partly offset by continued UK Government scheme repayments of £1.0 billion.
- Customer deposits increased by £0.8 billion, or 0.4%, in H1 2024 reflecting an increase in Commercial Mid-market.
- RWAs decreased by £2.5 billion, or 2.3%, in H1 2024 primarily due to RWA management of £3.7 billion, decreases in market risk and counterparty credit risk, partially offset by lending book growth and the annual update for operational risk.
Q2 2024 performance
- Total income was £82 million, or 4.4%, higher than Q1 2024 primarily reflecting higher deposit income, average lending growth, and higher lending and payment fees.
- Net interest margin was 5 basis points higher than Q1 2024 reflecting higher deposit returns.
- Other operating expenses were £33 million, or 3.2%, higher than Q1 2024 reflecting increased severance costs, partially offset by the Bank of England Levy in Q1 2024.
- An impairment release of £96 million compared with a £39 million charge in Q1 2024, largely reflecting good book releases driven by benefits from the revised economic outlook, post model adjustment releases, and benefits from capital management activity.
- Net loans to customers decreased by £1.4 billion, or 1.0%, in Q2 2024 as continued growth in Commercial Mid-Market was offset by lower balances in large Corporate & Institutions, with some customers taking advantage of stronger capital markets as well as continued UK Government scheme repayments of £0.5 billion.
- Customer deposits increased by £2.0 billion, or 1.0%, in Q2 2024 reflecting an increase in Commercial Mid-market and Business Banking.
- RWAs decreased by £5.0 billion, or 4.5%, compared with Q1 2024 primarily due to strong RWA management of £3.5 billion, decreases in market risk and counterparty credit risk, partially offset by lending book growth.
Business performance summary continued
Central items & other
| | Half year ended |
| Quarter ended | |||
| | 30 June | 30 June | | 30 June | 31 March | 30 June |
| | 2024 | 2023 | | 2024 | 2024 | 2023 |
| | £m | £m | | £m | £m | £m |
| Continuing operations |
| | |
| | |
| Total income | 200 | 292 | | 117 | 83 | 269 |
| Operating expenses | (81) | (239) | | (34) | (47) | (105) |
| of which: Other operating expenses | (71) | (260) |
| (10) | (61) | (132) |
| of which: Ulster Bank RoI direct expenses | (55) | (163) |
| (30) | (25) | (63) |
| Impairment releases/(losses) | 6 | 1 | | 3 | 3 | (7) |
| Operating profit | 125 | 54 | | 86 | 39 | 157 |
| |
| | |
| As at |
|
| |
| | | 30 June | 31 March | 31 December |
| |
| | | 2024 | 2024 | 2023 |
| |
| | | £bn | £bn | £bn |
| Net loans to customers (amortised cost) | | | 24.0 | 21.0 | 25.8 | |
| Customer deposits |
| | | 7.8 | 12.8 | 12.3 |
| RWAs |
| | | 2.6 | 2.6 | 2.8 |
H1 2024 performance
- Total income was £92 million lower than H1 2023 primarily reflecting £198 million lower notable items which included foreign exchange recycling gains in H1 2023 not repeated in H1 2024 and higher gains on interest and foreign exchange risk management derivatives not in accounting hedge relationships, partially offset with income in relation to our Ulster RoI business.
- Other operating expenses were £189 million, or 72.7%, lower than H1 2023 primarily reflecting lower costs in relation to withdrawal from the Republic of Ireland.
- Customer deposits decreased by £4.5 billion, or 36.6%, compared with Q4 2023 primarily reflecting repo activity in Treasury.
- Net loans to customers decreased £1.8 billion to £24.0 billion in H1 2024 mainly due to reverse repo activity in Treasury.
Q2 2024 performance
- Total income was £34 million higher than Q1 2024 primarily reflecting treasury income, a gain on surrender of a property, and income in relation to our Ulster RoI business.
- Customer deposits decreased by £5.0 billion, or 39.1%, in Q2 2024 primarily reflecting repo activity in Treasury.
- Net loans to customers increased by £3.0 billion in Q2 2024 mainly due to reverse repo activity in Treasury.
Segment performance
|
| Half year ended 30 June 2024 | ||||
| | Retail | Private | Commercial & | Central items | Total NatWest |
| | Banking | Banking | Institutional | & other | Group |
| | £m | £m | £m | £m | £m |
| Continuing operations | | | | | |
| Income statement | | | | | |
| Net interest income | 2,475 | 285 | 2,543 | 105 | 5,408 |
| Own credit adjustments | - | - | (7) | - | (7) |
| Other non-interest income | 215 | 159 | 1,264 | 95 | 1,733 |
| Total income | 2,690 | 444 | 3,800 | 200 | 7,134 |
| Direct expenses | (381) | (126) | (764) | (2,685) | (3,956) |
| Indirect expenses | (1,076) | (229) | (1,309) | 2,614 | - |
| Other operating expenses | (1,457) | (355) | (2,073) | (71) | (3,956) |
| Litigation and conduct costs | (13) | (1) | (77) | (10) | (101) |
| Operating expenses | (1,470) | (356) | (2,150) | (81) | (4,057) |
| Operating profit before impairment losses/releases | 1,220 | 88 | 1,650 | 119 | 3,077 |
| Impairment (losses)/releases | (122) | 11 | 57 | 6 | (48) |
| Operating profit | 1,098 | 99 | 1,707 | 125 | 3,029 |
| |
|
|
|
|
|
| Income excluding notable items (1) | 2,690 | 444 | 3,807 | 63 | 7,004 |
| |
|
|
|
|
|
| Additional information |
|
|
|
|
|
| Return on tangible equity (1) | na | na | na | na | 16.4% |
| Return on equity (1) | 18.4% | 10.5% | 16.2% | nm | na |
| Cost:income ratio (excl. litigation and conduct) (1) | 54.2% | 80.0% | 54.6% | nm | 55.5% |
| Total assets (£bn) | 226.5 | 27.2 | 381.9 | 54.7 | 690.3 |
| Funded assets (£bn) (1) | 226.5 | 27.2 | 315.5 | 53.6 | 622.8 |
| Net loans to customers - amortised cost (£bn) | 203.3 | 18.1 | 133.9 | 24.0 | 379.3 |
| Loan impairment rate (1) | 12bps | (12)bps | (8)bps | nm | 3bps |
| Impairment provisions (£bn) | (1.7) | (0.1) | (1.5) | - | (3.3) |
| Impairment provisions - Stage 3 (£bn) | (1.0) | - | (0.9) | (0.1) | (2.0) |
| Customer deposits (£bn) | 191.5 | 39.5 | 194.2 | 7.8 | 433.0 |
| Risk-weighted assets (RWAs) (£bn) | 62.3 | 11.0 | 104.9 | 2.6 | 180.8 |
| RWA equivalent (RWAe) (£bn) | 63.1 | 11.0 | 106.7 | 3.1 | 183.9 |
| Employee numbers (FTEs - thousands) | 12.6 | 2.2 | 12.8 | 33.0 | 60.6 |
| Third party customer asset rate (1) | 3.88% | 4.99% | 6.77% | nm | nm |
| Third party customer funding rate (1) | (2.08%) | (3.14%) | (1.93%) | nm | nm |
| Average interest earning assets (£bn) (1) | 220.1 | 26.3 | 244.0 | na | 524.4 |
| Net interest margin (1) | 2.26% | 2.18% | 2.10% | na | 2.07% |
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
Segment performance continued
|
| Half year ended 30 June 2023 | ||||
| | Retail | Private | Commercial & | Central items | Total NatWest |
| | Banking | Banking | Institutional | & other | Group |
| | £m | £m | £m | £m | £m |
| Continuing operations | | | | | |
| Income statement | | | | | |
| Net interest income | 2,908 | 428 | 2,504 | (114) | 5,726 |
| Own credit adjustments | - | - | 9 | - | 9 |
| Other non-interest income | 212 | 139 | 1,235 | 406 | 1,992 |
| Total income | 3,120 | 567 | 3,748 | 292 | 7,727 |
| Direct expenses | (398) | (118) | (741) | (2,550) | (3,807) |
| Indirect expenses | (945) | (193) | (1,152) | 2,290 | - |
| Other operating expenses | (1,343) | (311) | (1,893) | (260) | (3,807) |
| Litigation and conduct costs | (24) | (11) | (94) | 21 | (108) |
| Operating expenses | (1,367) | (322) | (1,987) | (239) | (3,915) |
| Operating profit before impairment losses/releases | 1,753 | 245 | 1,761 | 53 | 3,812 |
| Impairment (losses)/releases | (193) | (11) | (20) | 1 | (223) |
| Operating profit | 1,560 | 234 | 1,741 | 54 | 3,589 |
| | | | | | |
| Income excluding notable items (1) | 3,120 | 567 | 3,739 | (43) | 7,383 |
| | | | | | |
| Additional information | | | | | |
| Return on tangible equity (1) | na | na | na | na | 18.2% |
| Return on equity (1) | 29.1% | 24.7% | 16.9% | nm | na |
| Cost:income ratio (excl. litigation and conduct) (1) | 43.0% | 54.9% | 50.5% | nm | 49.3% |
| Total assets (£bn) | 229.1 | 27.3 | 401.5 | 44.7 | 702.6 |
| Funded assets (£bn) (1) | 229.1 | 27.3 | 320.6 | 43.7 | 620.7 |
| Net loans to customers - amortised cost (£bn) | 204.4 | 19.1 | 129.2 | 21.2 | 373.9 |
| Loan impairment rate (1) | 19bps | 11bps | 3bps | nm | 12bps |
| Impairment provisions (£bn) | (1.7) | (0.1) | (1.5) | (0.1) | (3.4) |
| Impairment provisions - Stage 3 (£bn) | (1.0) | - | (0.8) | (0.1) | (1.9) |
| Customer deposits (£bn) | 183.1 | 36.5 | 201.5 | 11.4 | 432.5 |
| Risk-weighted assets (RWAs) (£bn) | 57.3 | 11.5 | 103.6 | 5.1 | 177.5 |
| RWA equivalent (RWAe) (£bn) | 57.3 | 11.5 | 104.9 | 5.8 | 179.5 |
| Employee numbers (FTEs - thousands) | 13.7 | 2.3 | 12.6 | 32.9 | 61.5 |
| Third party customer asset rate (1) | 3.03% | 4.24% | 5.61% | nm | nm |
| Third party customer funding rate (1) | (1.02%) | (1.43%) | (1.03%) | nm | nm |
| Average interest earning assets (£bn) (1) | 220.9 | 27.6 | 244.6 | na | 518.4 |
| Net interest margin (1) | 2.65% | 3.13% | 2.06% | na | 2.23% |
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
Segment performance continued
|
| Quarter ended 30 June 2024 | ||||
| | Retail | Private | Commercial & | Central items | Total NatWest |
| | Banking | Banking | Institutional | & other | Group |
| | £m | £m | £m | £m | £m |
| Continuing operations |
|
|
|
|
|
| Income statement | | | | | |
| Net interest income | 1,259 | 151 | 1,297 | 50 | 2,757 |
| Own credit adjustments | - | - | (2) | - | (2) |
| Other non-interest income | 106 | 85 | 646 | 67 | 904 |
| Total income | 1,365 | 236 | 1,941 | 117 | 3,659 |
| Direct expenses | (192) | (65) | (380) | (1,291) | (1,928) |
| Indirect expenses | (498) | (110) | (673) | 1,281 | - |
| Other operating expenses | (690) | (175) | (1,053) | (10) | (1,928) |
| Litigation and conduct costs | (7) | - | (46) | (24) | (77) |
| Operating expenses | (697) | (175) | (1,099) | (34) | (2,005) |
| Operating profit before impairment losses/releases | 668 | 61 | 842 | 83 | 1,654 |
| Impairment (losses)/releases | (59) | 5 | 96 | 3 | 45 |
| Operating profit | 609 | 66 | 938 | 86 | 1,699 |
| |
|
|
|
|
|
| Income excluding notable items (1) | 1,365 | 236 | 1,943 | 46 | 3,590 |
| |
|
|
|
|
|
| Additional information |
|
|
|
|
|
| Return on tangible equity (1) | na | na | na | na | 18.5% |
| Return on equity (1) | 20.3% | 14.4% | 17.8% | nm | na |
| Cost:income ratio (excl. litigation and conduct) (1) | 50.5% | 74.2% | 54.3% | nm | 52.7% |
| Total assets (£bn) | 226.5 | 27.2 | 381.9 | 54.7 | 690.3 |
| Funded assets (£bn) (1) | 226.5 | 27.2 | 315.5 | 53.6 | 622.8 |
| Net loans to customers - amortised cost (£bn) | 203.3 | 18.1 | 133.9 | 24.0 | 379.3 |
| Loan impairment rate (1) | 12bps | (11)bps | (28)bps | nm | (5)bps |
| Impairment provisions (£bn) | (1.7) | (0.1) | (1.5) | - | (3.3) |
| Impairment provisions - Stage 3 (£bn) | (1.0) | - | (0.9) | (0.1) | (2.0) |
| Customer deposits (£bn) | 191.5 | 39.5 | 194.2 | 7.8 | 433.0 |
| Risk-weighted assets (RWAs) (£bn) | 62.3 | 11.0 | 104.9 | 2.6 | 180.8 |
| RWA equivalent (RWAe) (£bn) | 63.1 | 11.0 | 106.7 | 3.1 | 183.9 |
| Employee numbers (FTEs - thousands) | 12.6 | 2.2 | 12.8 | 33.0 | 60.6 |
| Third party customer asset rate (1) | 3.97% | 5.01% | 6.73% | nm | nm |
| Third party customer funding rate (1) | (2.10%) | (3.15%) | (1.93%) | nm | nm |
| Average interest earning assets (£bn) (1) | 219.6 | 26.5 | 246.0 | na | 527.6 |
| Net interest margin (1) | 2.31% | 2.30% | 2.12% | na | 2.10% |
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
Segment performance continued
|
| Quarter ended 31 March 2024 | ||||
| | Retail | Private | Commercial & | Central items | Total NatWest |
| | Banking | Banking | Institutional | & other | Group |
| | £m | £m | £m | £m | £m |
| Continuing operations | | | | | |
| Income statement | | | | | |
| Net interest income | 1,216 | 134 | 1,246 | 55 | 2,651 |
| Own credit adjustments | - | - | (5) | - | (5) |
| Other non-interest income | 109 | 74 | 618 | 28 | 829 |
| Total income | 1,325 | 208 | 1,859 | 83 | 3,475 |
| Direct expenses | (189) | (61) | (384) | (1,394) | (2,028) |
| Indirect expenses | (578) | (119) | (636) | 1,333 | - |
| Other operating expenses | (767) | (180) | (1,020) | (61) | (2,028) |
| Litigation and conduct costs | (6) | (1) | (31) | 14 | (24) |
| Operating expenses | (773) | (181) | (1,051) | (47) | (2,052) |
| Operating profit before impairment losses/releases | 552 | 27 | 808 | 36 | 1,423 |
| Impairment (losses)/releases | (63) | 6 | (39) | 3 | (93) |
| Operating profit | 489 | 33 | 769 | 39 | 1,330 |
| | | | | | |
| Income excluding notable items (1) | 1,325 | 208 | 1,864 | 17 | 3,414 |
| | | | | | |
| Additional information | | | | | |
| Return on tangible equity (1) | na | na | na | na | 14.2% |
| Return on equity (1) | 16.5% | 6.7% | 14.6% | nm | na |
| Cost:income ratio (excl. litigation and conduct) (1) | 57.9% | 86.5% | 54.9% | nm | 58.4% |
| Total assets (£bn) | 226.4 | 26.5 | 388.8 | 55.8 | 697.5 |
| Funded assets (£bn) (1) | 226.4 | 26.5 | 321.7 | 54.7 | 629.3 |
| Net loans to customers - amortised cost (£bn) | 203.5 | 18.2 | 135.3 | 21.0 | 378.0 |
| Loan impairment rate (1) | 12bps | (13)bps | 11bps | nm | 10bps |
| Impairment provisions (£bn) | (1.9) | (0.1) | (1.5) | (0.1) | (3.6) |
| Impairment provisions - Stage 3 (£bn) | (1.2) | - | (0.8) | - | (2.0) |
| Customer deposits (£bn) | 190.0 | 37.8 | 192.2 | 12.8 | 432.8 |
| Risk-weighted assets (RWAs) (£bn) | 62.5 | 11.3 | 109.9 | 2.6 | 186.3 |
| RWA equivalent (RWAe) (£bn) | 62.6 | 11.3 | 111.1 | 3.1 | 188.1 |
| Employee numbers (FTEs - thousands) | 13.1 | 2.2 | 12.7 | 33.3 | 61.3 |
| Third party customer asset rate (1) | 3.79% | 4.97% | 6.81% | nm | nm |
| Third party customer funding rate (1) | (2.05%) | (3.14%) | (1.93%) | nm | nm |
| Average interest earning assets (£bn) (1) | 220.6 | 26.2 | 241.9 | na | 521.1 |
| Net interest margin (1) | 2.22% | 2.06% | 2.07% | na | 2.05% |
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
Segment performance continued
|
| Quarter ended 30 June 2023 | ||||
| | Retail | Private | Commercial & | Central items | Total NatWest |
| | Banking | Banking | Institutional | & other | Group |
| | £m | £m | £m | £m | £m |
| Continuing operations | | | | | |
| Income statement | | | | | |
| Net interest income | 1,416 | 199 | 1,243 | (34) | 2,824 |
| Own credit adjustments | - | - | 3 | - | 3 |
| Other non-interest income | 100 | 72 | 549 | 303 | 1,024 |
| Total income | 1,516 | 271 | 1,795 | 269 | 3,851 |
| Direct expenses | (187) | (58) | (381) | (1,249) | (1,875) |
| Indirect expenses | (463) | (101) | (553) | 1,117 | - |
| Other operating expenses | (650) | (159) | (934) | (132) | (1,875) |
| Litigation and conduct costs | (21) | (8) | (50) | 27 | (52) |
| Operating expenses | (671) | (167) | (984) | (105) | (1,927) |
| Operating profit before impairment losses | 845 | 104 | 811 | 164 | 1,924 |
| Impairment losses | (79) | (3) | (64) | (7) | (153) |
| Operating profit | 766 | 101 | 747 | 157 | 1,771 |
| | | | | | |
| Income excluding notable items (1) | 1,516 | 271 | 1,792 | (16) | 3,563 |
| | | | | | |
| Additional information | | | | | |
| Return on tangible equity (1) | na | na | na | na | 16.4% |
| Return on equity (1) | 28.2% | 20.8% | 14.3% | nm | na |
| Cost:income ratio (excl. litigation and conduct) (1) | 42.9% | 58.7% | 52.0% | nm | 48.7% |
| Total assets (£bn) | 229.1 | 27.3 | 401.5 | 44.7 | 702.6 |
| Funded assets (£bn) (1) | 229.1 | 27.3 | 320.6 | 43.7 | 620.7 |
| Net loans to customers - amortised cost (£bn) | 204.4 | 19.1 | 129.2 | 21.2 | 373.9 |
| Loan impairment rate (1) | 15bps | 6bps | 20bps | nm | 16bps |
| Impairment provisions (£bn) | (1.7) | (0.1) | (1.5) | (0.1) | (3.4) |
| Impairment provisions - Stage 3 (£bn) | (1.0) | - | (0.8) | (0.1) | (1.9) |
| Customer deposits (£bn) | 183.1 | 36.5 | 201.5 | 11.4 | 432.5 |
| Risk-weighted assets (RWAs) (£bn) | 57.3 | 11.5 | 103.6 | 5.1 | 177.5 |
| RWA equivalent (RWAe) (£bn) | 57.3 | 11.5 | 104.9 | 5.8 | 179.5 |
| Employee numbers (FTEs - thousands) | 13.7 | 2.3 | 12.6 | 32.9 | 61.5 |
| Third party customer asset rate (1) | 3.11% | 4.41% | 5.84% | nm | nm |
| Third party customer funding rate (1) | (1.20%) | (1.71%) | (1.18%) | nm | nm |
| Average interest earning assets (£bn) (1) | 221.5 | 27.1 | 243.2 | na | 514.5 |
| Net interest margin (1) | 2.56% | 2.94% | 2.05% | na | 2.20% |
nm - not meaningful, na - not applicable
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.
Risk and capital management
Certain disclosures in the Risk and capital management section are within the scope of EY's review report and are marked as 'reviewed' in the section header.
Credit risk
Economic loss drivers (reviewed)
Introduction
The portfolio segmentation and selection of economic loss drivers for IFRS 9 follows the approach used in stress testing. To enable robust modelling, the forecasting models for each portfolio segment (defined by product or asset class and where relevant, industry sector and region) are based on a selected, small number of economic variables (typically three to four) that best explain the movements in portfolio loss rates. The process to select economic loss drivers involves empirical analysis and expert judgement.
The most significant economic loss drivers for the most material portfolios are shown in the table below:
|
|
|
| UK Personal mortgages | Unemployment rate, sterling swap rate, house price index, real wage |
| UK Personal unsecured | Unemployment rate, sterling swap rate, real wage |
| UK corporates | Stock price index, gross domestic product (GDP) |
| UK commercial real estate | Stock price index, commercial property price index, GDP |
Economic scenarios
At 30 June 2024, the range of anticipated future economic conditions was defined by a set of four internally developed scenarios and their respective probabilities. In addition to the base case, they comprised upside, downside and extreme downside scenarios. The scenarios primarily reflected the current risks faced by the economy, particularly in relation to the path of inflation and interest rates.
For 30 June 2024, the four scenarios were deemed appropriate in capturing the uncertainty in economic forecasts and the non-linearity in outcomes under different scenarios. These four scenarios were developed to provide sufficient coverage across potential rises in unemployment, inflation, asset price declines and the degree of permanent damage to the economy, around which there remains pronounced levels of uncertainty.
Upside - This scenario assumes robust growth as inflation falls sharply and rates are lowered quicker than expected. Consumer spending is supported by quicker recovery in household income, and further helped by higher consumer confidence, fiscal support and strong business investment. The labour market remains resilient with the unemployment rate falling. The housing market shows robust growth.
Compared to 31 December 2023, the upside scenario remains similarly configured, exploring a more benign set of economic outcomes, including a stronger performing stock market, real estate prices, and supported by a stronger global growth backdrop, relative to the base case view.
Base case - Continued declining inflation allows an easing cycle to start in the second half of 2024. The unemployment rate rises modestly over 2024 but there are no wide-spread job losses. Inflation remains very close to the current level of 2% through the forecast period. Economic output also experiences modest but stable growth in contrast to the stagnation of recent years. The housing market experiences modest nominal price increase. Housing market activity gradually strengthens as interest rates fall and real incomes recover.
Since 31 December 2023, the economic outlook has improved as household income continued to recover, and the labour market remained resilient. The declining inflation trend has continued, albeit the progress was slower than expected. As a result, rates are expected to remain higher-for-longer than previously expected. The unemployment rate still rises but the peak is marginally lower and is underpinned by a resilient labour market. House prices were assumed to decline previously in 2024, but there has been a better-than-expected recovery in early 2024 and prices are now expected to show a modest increase.
Downside - Core inflation remains persistently high leading to resurgent inflation. The economy experiences a recession as consumer confidence weakens due to a fall in real incomes. Interest rates are raised higher than the base case and remain higher-for-longer. High rates are assumed to have a more significant impact on the labour market. Unemployment is higher than the base case scenario while house prices lose approximately ten percent of their value.
Compared to 31 December 2023, the downside scenario is similarly configured and explores risks associated with high inflation and significantly higher interest rates across the period.
Extreme downside - This scenario assumes a significant economic downturn with a loss of consumer confidence leading to a deep economic recession. This results in widespread job losses with the unemployment rate rising above the levels seen during the 2008 financial crisis, further compounding consumer weakness. Rates are cut sharply in response to the demand shock, leading to some support to the recovery. House prices lose approximately a third of their value.
Compared to 31 December 2023, the extreme downside is similarly configured with an extreme set of economic outcomes, low interest rates, very sharp falls in asset prices and a marked deterioration in the labour market.
Risk and capital management continued
Credit risk continued
Economic loss drivers (reviewed)
The main macroeconomic variables for each of the four scenarios used for expected credit loss (ECL) modelling are set out in the main macroeconomic variables table below.
| Main macroeconomic variables | 30 June 2024 |
| 31 December 2023 | ||||||||
| | | | | Extreme | Weighted |
| | | | Extreme | Weighted |
| | Upside | Base case | Downside | downside | average |
| Upside | Base case | Downside | downside | average |
| Five-year summary | % | % | % | % | % |
| % | % | % | % | % |
| GDP | 1.9 | 1.2 | 0.6 | (0.2) | 1.1 | | 1.8 | 1.0 | 0.5 | (0.3) | 0.9 |
| Unemployment rate | 3.5 | 4.3 | 5.4 | 7.1 | 4.7 |
| 3.5 | 4.6 | 5.2 | 6.8 | 4.8 |
| House price index | 5.3 | 3.3 | 1.0 | (4.2) | 2.5 |
| 3.9 | 0.3 | (0.4) | (5.7) | 0.3 |
| Commercial real estate price | 4.4 | 1.2 | (0.7) | (5.1) | 0.8 |
| 3.1 | (0.2) | (2.0) | (6.8) | (0.6) |
| Consumer price index | 1.1 | 2.1 | 4.8 | 1.3 | 2.3 |
| 1.7 | 2.6 | 5.2 | 1.8 | 2.8 |
| Bank of England base rate | 3.3 | 3.7 | 5.7 | 2.6 | 3.8 |
| 3.8 | 3.7 | 5.6 | 2.9 | 4.0 |
| Stock price index | 4.7 | 3.3 | 1.3 | 0.2 | 2.8 |
| 4.8 | 3.3 | 1.2 | (0.4) | 2.8 |
| World GDP | 3.7 | 3.1 | 2.7 | 1.8 | 3.0 |
| 3.7 | 3.2 | 2.7 | 1.8 | 3.0 |
| Probability weight | 22.0 | 45.0 | 19.4 | 13.6 |
| | 21.2 | 45.0 | 20.4 | 13.4 | |
(1) The five-year summary runs from 2024-2028 for 30 June 2024 and from 2023-27 for 31 December 2023.
(2) The table shows compound annual growth rate (CAGR) for GDP, average levels for the unemployment rate and Bank of England base rate and Q4 to Q4 CAGR for other parameters.
Risk and capital management continued
Credit risk continued
Economic loss drivers (reviewed)
Climate transition
In 2023, NatWest Group for the first time explicitly included assumptions about the changes in transition policy, in the base case macroeconomic scenario. Last year, an economy-wide implicit carbon price, consistent with the CCC Balanced Net Zero Scenario, was applied to all sectors. During the first half of 2024, NatWest Group continued to add climate policy and technology related transition assumptions into its base case macroeconomic scenario used for financial planning. As in 2023, this process included an assessment of ECL in this IFRS 9 reporting period. This resulted in climate transition policy contributing £5.4 million to total ECL, compared with an increase in ECL of less than £1 million at the end of 2023.
In 2024, NatWest Group refined the approach. In this reporting period, NatWest Group calculated expected implicit carbon prices associated with specific climate transition policies. NatWest Group has individually assessed 46 active and potential transition policies that will have a significant impact on the cost of emissions and converted them into equivalent sectoral carbon prices, calculated as the cost per tonne of the emissions abated, as a result of each policy. This approach enables NatWest Group to estimate an aggregate macroeconomic impact of the transition policies, and as a result, ECL.
NatWest Group and its customers have a dependency on timely and appropriate government policies to provide the necessary impetus for technology development and customer behaviour changes, to enable the UK's successful transition to net zero. Policy delays and the risks outlined in the UK CCC 2022 and 2023 Progress Reports, if not adequately addressed in a timely manner, put at risk the UK's net zero transition and in turn, that of NatWest Group and its customers.
Probability weightings of scenarios
NatWest Group's quantitative approach to IFRS 9 multiple economic scenarios (MES) involves selecting a suitable set of discrete scenarios to characterise the distribution of risks in the economic outlook and assigning appropriate probability weights. This quantitative approach is used for 30 June 2024.
The approach involves comparing GDP paths for NatWest Group's scenarios against a set of 1,000 model runs, following which, a percentile in the distribution is established that most closely corresponded to the scenario. Probability weight for base case is set first based on judgement, while probability weights for the alternate scenarios are assigned based on these percentiles scores.
The assigned probability weights were judged to be aligned with the subjective assessment of balance of the risks in the economy. The weights were broadly comparable to those used at 31 December 2023 but with slightly less downside skew. This is reasonable as the inflation outturn since then has been encouraging, with inflation continuing to decline and a reduced risk of stagflation. However, the risks of persistent inflation remain elevated and there is considerable uncertainty in the economic outlook, particularly with respect to persistence and the range of outcomes on inflation. Given that backdrop, NatWest Group judges it appropriate that downside-biased scenarios have higher combined probability weights than the upside-biased scenario. It presents good coverage to the range of outcomes assumed in the scenarios, including the potential for a robust recovery on the upside and exceptionally challenging outcomes on the downside. A 22% weighting was applied to the upside scenario, a 45% weighting applied to the base case scenario, a 19.4% weighting applied to the downside scenario and a 13.6% weighting applied to the extreme downside scenario.
Risk and capital management continued
Credit risk continued
Economic loss drivers (reviewed)
Annual figures
| |
|
|
| Extreme | Weighted |
| | Upside | Base case | Downside | downside | average |
| GDP - annual growth | % | % | % | % | % |
| 2024 | 1.7 | 0.7 | 0.1 | - | 0.7 |
| 2025 | 3.9 | 1.2 | (0.9) | (4.0) | 0.7 |
| 2026 | 1.4 | 1.4 | 1.1 | 0.9 | 1.3 |
| 2027 | 1.2 | 1.4 | 1.3 | 1.2 | 1.3 |
| 2028 | 1.2 | 1.4 | 1.3 | 1.2 | 1.3 |
| 2029 | 1.3 | 1.4 | 1.3 | 1.3 | 1.3 |
| | | | | | |
| Unemployment rate | | | | | |
| - annual average |
|
|
|
|
|
| 2024 | 4.2 | 4.4 | 4.6 | 4.8 | 4.4 |
| 2025 | 3.4 | 4.4 | 5.7 | 7.8 | 4.9 |
| 2026 | 3.2 | 4.3 | 5.7 | 8.3 | 4.9 |
| 2027 | 3.3 | 4.3 | 5.5 | 7.7 | 4.7 |
| 2028 | 3.3 | 4.2 | 5.4 | 7.1 | 4.6 |
| 2029 | 3.3 | 4.2 | 5.3 | 6.8 | 4.6 |
| | | | | | |
| House price index | | | | | |
| - four quarter change |
|
|
|
|
|
| 2024 | 6.8 | 3.1 | (1.2) | (3.3) | 2.2 |
| 2025 | 8.9 | 3.1 | (6.0) | (13.2) | 0.6 |
| 2026 | 4.5 | 3.4 | 1.0 | (14.5) | 1.3 |
| 2027 | 3.1 | 3.4 | 6.6 | 5.4 | 4.1 |
| 2028 | 3.5 | 3.4 | 5.2 | 6.8 | 4.1 |
| 2029 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 |
| | | | | | |
| Commercial real estate price | | | | | |
| - four quarter change |
|
|
|
|
|
| 2024 | 6.2 | (1.3) | (4.2) | (7.7) | (1.1) |
| 2025 | 5.5 | 1.7 | (8.0) | (30.8) | (3.4) |
| 2026 | 4.6 | 2.0 | 3.1 | 3.3 | 3.0 |
| 2027 | 3.8 | 2.2 | 3.4 | 7.8 | 3.3 |
| 2028 | 1.8 | 1.5 | 3.0 | 8.5 | 2.5 |
| 2029 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| |
|
|
| Extreme | Weighted |
| Consumer price index | Upside | Base case | Downside | downside | average |
| - four quarter change | % | % | % | % | % |
| 2024 | 1.4 | 2.1 | 5.7 | 0.1 | 2.4 |
| 2025 | 0.5 | 2.1 | 6.7 | 0.5 | 2.5 |
| 2026 | 1.3 | 2.0 | 4.4 | 2.0 | 2.4 |
| 2027 | 1.2 | 2.0 | 3.8 | 2.0 | 2.2 |
| 2028 | 1.1 | 2.0 | 3.7 | 2.0 | 2.2 |
| 2029 | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 |
| | | | | | |
| Bank of England base rate | | | | | |
| - annual average |
|
|
|
|
|
| 2024 | 4.83 | 5.10 | 5.50 | 4.69 | 5.06 |
| 2025 | 3.46 | 4.06 | 6.35 | 2.38 | 4.14 |
| 2026 | 2.85 | 3.08 | 5.83 | 2.00 | 3.42 |
| 2027 | 2.75 | 3.00 | 5.50 | 2.00 | 3.29 |
| 2028 | 2.75 | 3.00 | 5.19 | 2.06 | 3.24 |
| 2029 | 2.75 | 3.00 | 5.00 | 2.25 | 3.23 |
| | | | | | |
| Stock price index | | | | | |
| - four quarter change |
|
|
|
|
|
| 2024 | 6.8 | 3.3 | (11.0) | (27.7) | (2.9) |
| 2025 | 5.7 | 3.3 | (1.5) | (7.4) | 1.9 |
| 2026 | 4.1 | 3.3 | 8.6 | 21.2 | 6.0 |
| 2027 | 3.6 | 3.3 | 6.5 | 12.9 | 4.9 |
| 2028 | 3.2 | 3.3 | 5.3 | 10.2 | 4.4 |
| 2029 | 3.3 | 3.3 | 3.3 | 3.3 | 3.3 |
Risk and capital management continued
Credit risk continued
Economic loss drivers (reviewed)
Worst points
| |
|
| Extreme |
| Weighted |
| | Downside |
| downside |
| average |
| 30 June 2024 | % | Quarter | % | Quarter | % |
| GDP | (0.9) | Q1 2025 | (4.2) | Q2 2025 | 0.6 |
| Unemployment rate - peak | 5.8 | Q3 2025 | 8.5 | Q4 2025 | 5.0 |
| House price index | (8.0) | Q2 2026 | (28.2) | Q4 2026 | 1.1 |
| Commercial real estate price | (11.9) | Q3 2025 | (36.5) | Q1 2026 | (4.4) |
| Consumer price index |
|
|
|
|
|
| - highest four quarter change | 8.5 | Q2 2025 | 3.5 | Q1 2024 | 3.5 |
| Bank of England base rate |
|
|
|
|
|
| - extreme level | 6.5 | Q2 2025 | 5.3 | Q1 2024 | 5.3 |
| Stock price index | (16.0) | Q2 2025 | (40.5) | Q2 2025 | (4.2) |
|
| | ||||
| 31 December 2023 | | | | | |
| GDP | (1.2) | Q3 2024 | (4.5) | Q4 2024 | 0.3 |
| Unemployment rate - peak | 5.8 | Q1 2025 | 8.5 | Q2 2025 | 5.2 |
| House price index | (12.5) | Q4 2025 | (31.7) | Q2 2026 | (6.5) |
| Commercial real estate price | (16.6) | Q1 2025 | (39.9) | Q3 2025 | (10.2) |
| Consumer price index | | | | | |
| - highest four quarter change | 10.3 | Q1 2023 | 10.3 | Q1 2023 | 10.3 |
| Bank of England base rate | | | | | |
| - extreme level | 6.5 | Q4 2024 | 5.3 | Q4 2023 | 5.3 |
| Stock price index | (14.3) | Q4 2024 | (39.3) | Q4 2024 | (2.4) |
(1) Unless specified otherwise, the figures show falls relative to the starting period. The calculations are performed over five years, with a starting point of Q4 2023 for 30 June 2024 scenarios and Q4 2022 for 31 December 2023 scenarios.
Use of the scenarios in Personal lending
Personal lending follows a discrete scenario approach. The probability of default (PD), exposure at default (EAD), loss given default (LGD) and resultant ECL for each discrete scenario is calculated using product specific economic response models. Probability weighted averages across the suite of economic scenarios are then calculated for each of the model outputs, with the weighted PD being used for staging purposes.
Business Banking utilises the Personal lending methodology rather than the Wholesale lending methodology.
Use of the scenarios in Wholesale lending
Wholesale lending follows a continuous scenario approach to calculate ECL. PD and LGD values arising from multiple economic forecasts (based on the concept of credit cycle indices) are simulated around the central projection. The central projection is a weighted average of economic scenarios with the scenarios translated into credit cycle indices using the Wholesale economic response models.
UK economic uncertainty
The high inflation environment alongside high interest rates are presenting significant headwinds for some businesses and consumers, in many cases compounding. These cost pressures remain a feature of the economic environment, though they are expected to moderate over 2024 and 2025 in the base case scenario. NatWest Group has considered where these are most likely to affect the customer base, with the cost of borrowing during 2023 and 2024 for both businesses and consumers presenting an additional affordability challenge.
The effects of these risks are not expected to be fully captured by forward-looking credit modelling, particularly given the high inflation environment, low unemployment base case outlook. Any incremental ECL effects for these risks will be captured via post model adjustments and are detailed further in the Governance and post model adjustments section.
Governance and post model adjustments (reviewed)
The IFRS 9 PD, EAD and LGD models are subject to NatWest Group's model risk policy that stipulates periodic model monitoring, periodic re-validation and defines approval procedures and authorities according to model materiality. Various post model adjustments were applied where management judged they were necessary to ensure an adequate level of overall ECL provision. All post model adjustments were subject to review, challenge and approval through model or provisioning committees.
Post model adjustments will remain a key focus area of NatWest Group's ongoing ECL adequacy assessment process. A holistic framework has been established including reviewing a range of economic data, external benchmark information and portfolio performance trends with a particular focus on segments of the portfolio (both commercial and consumer) that are likely to be more susceptible to high inflation, high interest rates and supply chain disruption.
Risk and capital management continued
Credit risk continued
Economic loss drivers (reviewed)
ECL post model adjustments
The table below shows ECL post model adjustments.
| | Retail Banking | | Private | Commercial & | Central items |
| |
| | Mortgages | Other |
| Banking | Institutional | & other | Total |
| 30 June 2024 | £m | £m |
| £m | £m | £m | £m |
| Deferred model calibrations | - | - |
| 1 | 16 | - | 17 |
| Economic uncertainty | 79 | 43 |
| 8 | 168 | 4 | 302 |
| Other adjustments | - | - |
| - | 3 | - | 3 |
| Total | 79 | 43 |
| 9 | 187 | 4 | 322 |
| |
|
|
|
|
|
|
|
| Of which: |
|
|
|
|
|
|
|
| - Stage 1 | 36 | 18 |
| 5 | 78 | 4 | 141 |
| - Stage 2 | 33 | 25 |
| 4 | 107 | - | 169 |
| - Stage 3 | 10 | - |
| - | 2 | - | 12 |
|
|
|
|
|
|
|
|
|
| 31 December 2023 |
|
|
|
|
|
|
|
| Deferred model calibrations | - | - | | 1 | 23 | - | 24 |
| Economic uncertainty | 118 | 39 | | 13 | 256 | 3 | 429 |
| Other adjustments | 1 | - | | - | 8 | 23 | 32 |
| Total | 119 | 39 | | 14 | 287 | 26 | 485 |
| Of which: | | |
| | | | |
| - Stage 1 | 75 | 14 |
| 6 | 115 | 10 | 220 |
| - Stage 2 | 31 | 25 |
| 8 | 167 | 9 | 240 |
| - Stage 3 | 13 | - |
| - | 5 | 7 | 25 |
Risk and capital management continued
Credit risk continued
ECL post model adjustments
Post model adjustments decreased significantly since 31 December 2023, reflecting reduced economic uncertainty from inflation, higher-for-longer interest rates and liquidity.
- Retail Banking - The post model adjustment for economic uncertainty decreased to £122 million (31 December 2023 - £157 million). This reduction primarily reflected a revision to the cost of living post model adjustment to £111 million (31 December 2023 - £144 million), supported by back-testing of default outcomes for higher risk segments. The cost of living post model adjustment captures the risk on segments in the Retail Banking portfolio that are more susceptible to the effects of cost of living rises. It focuses on key affordability lenses, including customers with lower income in fuel poverty, over-indebted borrowers and customers vulnerable to a potential mortgage rate shock.
- Commercial & Institutional - The post model adjustment for economic uncertainty decreased to £168 million (31 December 2023 - £256 million). The inflation, supply chain and liquidity post model adjustment of £136 million (31 December 2023 - £206 million) was maintained for lending prior to 1 January 2024, with a sector-level downgrade being applied to the sectors that were considered most at risk from the ongoing pressures from inflation and ongoing concerns around reducing cash reserves across many sectors. The £70 million reduction reflected the reduced risk along with portfolio improvements and exposure reduction.
- A £32 million (31 December 2023 - £50 million) post model adjustment to cover the residual risks from COVID-19 remains for the risks surrounding associated debt to customers that have utilised government support schemes. This adjustment is reducing as customers default or repay.
- The £16 million (31 December 2023 - £23 million) judgemental overlay for deferred model calibrations relates to refinance risk, with the existing mechanistic modelling approach not fully capturing the risk on deteriorated exposures.
- Central items & other - A £23 million post model adjustment in other adjustments was removed in the period, reflecting the withdrawal from the Republic of Ireland.
Measurement uncertainty and ECL sensitivity analysis (reviewed)
The recognition and measurement of ECL is complex and involves the use of significant judgment and estimation, particularly in times of economic volatility and uncertainty. This includes the formulation and incorporation of multiple forward-looking economic conditions into ECL to meet the measurement objective of IFRS 9. The ECL provision is sensitive to the model inputs and economic assumptions underlying the estimate.
The impact arising from the base case, upside, downside and extreme downside scenarios was simulated. These scenarios are used in the methodology for Personal multiple economic scenarios 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 100% probability weighting and therefore serving as a single economic scenario.
These scenarios were applied to all modelled portfolios in the analysis below, with the simulation impacting both PDs and LGDs. Post model adjustments included in the ECL estimates that were modelled were sensitised in line with the modelled ECL movements, but those that were judgmental in nature, primarily those for deferred model calibrations and economic uncertainty, were not (refer to the Governance and post model adjustments section) on the basis these would be re-evaluated by management through ECL governance for any new economic scenario outlook and not be subject to an automated calculation. As expected, the scenarios create differing impacts on ECL by portfolio and the impacts are deemed reasonable. In this simulation, it is assumed that existing modelled relationships between key economic variables and loss drivers hold, but in practice other factors would also have an impact, for example, potential customer behaviour changes and policy changes by lenders that might impact on the wider availability of credit.
The focus of the simulations is on ECL provisioning requirements on performing exposures in Stage 1 and Stage 2. The simulations are run on a stand-alone basis and are independent of each other; the potential ECL impacts reflect the simulated impact at 30 June 2024. Scenario impacts on SICR should be considered when evaluating the ECL movements of Stage 1 and Stage 2. In all scenarios the total exposure was the same but exposure by stage varied in each scenario.
Stage 3 provisions are not subject to the same level of measurement uncertainty - default is an observed event as at the balance sheet date. Stage 3 provisions therefore were not considered in this analysis.
NatWest Group's core criterion to identify a SICR is founded on PD deterioration. Under the simulations, PDs change and result in exposures moving between Stage 1 and Stage 2 contributing to the ECL impact.
Risk and capital management continued
Credit risk continued
Measurement uncertainty and ECL sensitivity analysis (reviewed)
|
|
|
| Moderate | Moderate | Extreme |
|
|
| Base | upside | downside | downside |
| 30 June 2024 | Actual | scenario | scenario | scenario | scenario |
| Stage 1 modelled loans (£m) | | | | | |
| Retail Banking - mortgages | 166,944 | 167,405 | 167,829 | 164,061 | 157,458 |
| Retail Banking - unsecured | 9,941 | 10,025 | 10,142 | 9,696 | 9,019 |
| Wholesale - property | 27,589 | 27,635 | 27,769 | 27,277 | 23,732 |
| Wholesale - non-property | 130,655 | 131,355 | 131,829 | 128,798 | 109,550 |
| | 335,129 | 336,420 | 337,569 | 329,832 | 299,759 |
| Stage 1 modelled ECL (£m) |
|
|
|
|
|
| Retail Banking - mortgages | 47 | 45 | 44 | 46 | 44 |
| Retail Banking - unsecured | 228 | 219 | 202 | 250 | 243 |
| Wholesale - property | 73 | 54 | 41 | 99 | 148 |
| Wholesale - non-property | 219 | 189 | 158 | 268 | 337 |
| | 567 | 507 | 445 | 663 | 772 |
| Stage 1 coverage |
|
|
|
|
|
| Retail Banking - mortgages | 0.03% | 0.03% | 0.03% | 0.03% | 0.03% |
| Retail Banking - unsecured | 2.29% | 2.18% | 1.99% | 2.58% | 2.69% |
| Wholesale - property | 0.26% | 0.20% | 0.15% | 0.36% | 0.62% |
| Wholesale - non-property | 0.17% | 0.14% | 0.12% | 0.21% | 0.31% |
| | 0.17% | 0.15% | 0.13% | 0.20% | 0.26% |
| Stage 2 modelled loans (£m) |
|
|
|
|
|
| Retail Banking - mortgages | 20,315 | 19,854 | 19,430 | 23,198 | 29,801 |
| Retail Banking - unsecured | 3,097 | 3,013 | 2,896 | 3,342 | 4,019 |
| Wholesale - property | 3,052 | 3,006 | 2,872 | 3,364 | 6,909 |
| Wholesale - non-property | 10,983 | 10,283 | 9,809 | 12,840 | 32,088 |
| | 37,447 | 36,156 | 35,007 | 42,744 | 72,817 |
| Stage 2 modelled ECL (£m) |
|
|
|
|
|
| Retail Banking - mortgages | 68 | 61 | 55 | 82 | 123 |
| Retail Banking - unsecured | 390 | 361 | 315 | 455 | 596 |
| Wholesale - property | 64 | 56 | 49 | 80 | 186 |
| Wholesale - non-property | 269 | 233 | 202 | 343 | 641 |
| | 791 | 711 | 621 | 960 | 1,546 |
| Stage 2 coverage |
|
|
|
|
|
| Retail Banking - mortgages | 0.33% | 0.31% | 0.28% | 0.35% | 0.41% |
| Retail Banking - unsecured | 12.59% | 11.98% | 10.88% | 13.61% | 14.83% |
| Wholesale - property | 2.10% | 1.86% | 1.71% | 2.38% | 2.69% |
| Wholesale - non-property | 2.45% | 2.27% | 2.06% | 2.67% | 2.00% |
| | 2.11% | 1.97% | 1.77% | 2.25% | 2.12% |
| Stage 1 and Stage 2 modelled loans (£m) |
|
|
|
|
|
| Retail Banking - mortgages | 187,259 | 187,259 | 187,259 | 187,259 | 187,259 |
| Retail Banking - unsecured | 13,038 | 13,038 | 13,038 | 13,038 | 13,038 |
| Wholesale - property | 30,641 | 30,641 | 30,641 | 30,641 | 30,641 |
| Wholesale - non-property | 141,638 | 141,638 | 141,638 | 141,638 | 141,638 |
| | 372,576 | 372,576 | 372,576 | 372,576 | 372,576 |
|
|
|
| Moderate | Moderate | Extreme |
|
|
| Base | upside | downside | downside |
| 30 June 2024 | Actual | scenario | scenario | scenario | scenario |
| Stage 1 and Stage 2 modelled ECL (£m) |
|
|
|
|
|
| Retail Banking - mortgages | 115 | 106 | 99 | 128 | 167 |
| Retail Banking - unsecured | 618 | 580 | 517 | 705 | 839 |
| Wholesale - property | 137 | 110 | 90 | 179 | 334 |
| Wholesale - non-property | 488 | 422 | 360 | 611 | 978 |
|
| 1,358 | 1,218 | 1,066 | 1,623 | 2,318 |
| Stage 1 and Stage 2 coverage |
|
|
|
|
|
| Retail Banking - mortgages | 0.06% | 0.06% | 0.05% | 0.07% | 0.09% |
| Retail Banking - unsecured | 4.74% | 4.45% | 3.97% | 5.41% | 6.44% |
| Wholesale - property | 0.45% | 0.36% | 0.29% | 0.58% | 1.09% |
| Wholesale - non-property | 0.34% | 0.30% | 0.25% | 0.43% | 0.69% |
| | 0.36% | 0.33% | 0.29% | 0.44% | 0.62% |
| Reconciliation to Stage 1 and |
|
|
|
|
|
| Stage 2 ECL (£m) |
|
|
|
|
|
| ECL on modelled exposures | 1,358 | 1,218 | 1,066 | 1,623 | 2,318 |
| ECL on UBIDAC modelled exposures | - | - | - | - | - |
| ECL on non-modelled exposures | 29 | 29 | 29 | 29 | 29 |
| |
|
|
|
|
|
| Total Stage 1 and Stage 2 ECL (£m) | 1,387 | 1,247 | 1,095 | 1,652 | 2,347 |
| Variance to actual total Stage 1 and |
|
|
|
|
|
| Stage 2 ECL (£m) |
| (140) | (292) | 265 | 960 |
| |
|
|
|
|
|
| Reconciliation to Stage 1 and |
|
|
|
|
|
| Stage 2 flow exposure (£m) |
|
|
|
|
|
| Modelled loans | 372,576 | 372,576 | 372,576 | 372,576 | 372,576 |
| UBIDAC loans | 69 | 69 | 69 | 69 | 69 |
| Non-modelled loans | 18,881 | 18,881 | 18,881 | 18,881 | 18,881 |
| Other asset classes | 145,136 | 145,136 | 145,136 | 145,136 | 145,136 |
(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 2024 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) Exposures related to Ulster Bank RoI continuing operations were not included in the simulations, the current Ulster Bank RoI ECL was included across all scenarios to enable reconciliation to other disclosures.
(4) All simulations were 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 2024. 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.
(5) Refer to the Economic loss drivers section for details of economic scenarios.
(6) Refer to the NatWest Group plc 2023 Annual Report and Accounts for 31 December 2023 comparatives.
Risk and capital management continued
Credit risk continued
Measurement uncertainty and ECL adequacy (reviewed)
- If the economics were as negative as observed in the extreme downside (i.e. 100% probability weighting), total Stage 1 and Stage 2 ECL was simulated to increase by around £1.0 billion (approximately 69%). In this scenario, Stage 2 exposure nearly doubled and was the key driver of the simulated ECL rise. The movement in Stage 2 balances in the other simulations was far less significant and the impact to ECL less material.
- In the Wholesale portfolio, there was a significant increase in ECL under the extreme downside scenario. The Wholesale property ECL increase was mainly due to commercial real estate prices which showed negative growth particularly in 2025 and significant deterioration in the stock index in 2024 and 2025. The non-property increase was mainly due to GDP contraction in 2025 and significant deterioration in the stock index.
- Given that continued uncertainty remained due to persistent inflation, high interest rates and liquidity concerns at H1 2024, NatWest Group utilised a framework of quantitative and qualitative measures to support the levels of ECL coverage. This included economic data, credit performance insights, supply chain contagion analysis and problem debt trends. This was particularly important for consideration of post model adjustments.
- As the effects of these economic risks evolve during 2024, there is a risk of further credit deterioration. However, the income statement effect of this should have been mitigated by the forward-looking provisions retained on the balance sheet at 30 June 2024.
- There are a number of key factors that could drive further downside to impairments, through deteriorating economic and credit metrics and increased stage migration as credit risk increases for more customers. Such factors which could impact the IFRS 9 models, include an adverse deterioration in unemployment and GDP in the economies in which NatWest Group operates.
Movement in ECL provision
The table below shows the main ECL provision movements during H1 2024.
| | ECL provision |
| | £m |
| At 1 January 2024 | 3,645 |
| Transfers to disposal groups and reclassifications | (18) |
| Changes in economic forecasts | (17) |
| Changes in risk metrics and exposure: Stage 1 and Stage 2 | (147) |
| Changes in risk metrics and exposure: Stage 3 | 370 |
| Judgemental changes: changes in post model adjustments for Stage 1, |
|
| Stage 2 and Stage 3 | (140) |
| Write-offs and other | (350) |
| At 30 June 2024 | 3,343 |
- During the first half of the year, overall ECL decreased with increases from Stage 3 inflows more than offset by write-offs, including debt sale activity on Personal unsecured assets (£0.2 billion), reductions in economic uncertainty post-model adjustments, as well as reflecting balance reductions and positive portfolio performance across NatWest Group.
- In the Personal portfolios, Stage 3 default rates reduced during H1 2024 relative to H2 2023 with trends on PDs and Stage 2 either stable or improving.
- For the Wholesale portfolio, Stage 3 defaults increased but are still below historic trends.
- Judgemental ECL post model adjustments, decreased from 31 December 2023 and now representing 10% of total ECL (31 December 2023 - 13%). Refer to the Governance and post model adjustments section for further details.
Risk and capital management continued
Credit risk - Banking activities
Introduction
This section details the credit risk profile of NatWest Group's banking activities.
Financial instruments within the scope of the IFRS 9 ECL framework (reviewed)
Refer to Note 8 to the consolidated financial statements for balance sheet analysis of financial assets that are classified as amortised cost or fair value through other comprehensive income (FVOCI), the starting point for IFRS 9 ECL framework assessment.
| | 30 June 2024 |
| 31 December 2023 | ||||
| | Gross | ECL | Net |
| Gross | ECL | Net |
| | £bn | £bn | £bn |
| £bn | £bn | £bn |
| Balance sheet total gross amortised cost and FVOCI | 562.6 | | |
| 553.8 | | |
| In scope of IFRS 9 ECL framework | 555.1 | | |
| 545.3 | | |
| % in scope | 99% | | |
| 98% | | |
| Loans to customers - in scope - amortised cost | 383.1 | 3.2 | 379.9 |
| 385.3 | 3.6 | 381.7 |
| Loans to customers - in scope - FVOCI | 0.1 | - | 0.1 |
| 0.1 | - | 0.1 |
| Loans to banks - in scope - amortised cost | 5.7 | - | 5.7 |
| 6.7 | - | 6.7 |
| Total loans - in scope | 388.9 | 3.2 | 385.7 |
| 392.1 | 3.6 | 388.5 |
| Stage 1 | 345.8 | 0.5 | 345.3 |
| 348.6 | 0.7 | 347.9 |
| Stage 2 | 37.3 | 0.8 | 36.5 |
| 37.9 | 0.9 | 37.0 |
| Stage 3 | 5.8 | 1.9 | 3.9 |
| 5.6 | 2.0 | 3.6 |
| Other financial assets - in scope - amortised cost | 138.5 | - | 138.5 |
| 124.9 | - | 124.9 |
| Other financial assets - in scope - FVOCI | 27.7 | - | 27.7 |
| 28.3 | - | 28.3 |
| Total other financial assets - in scope | 166.2 | - | 166.2 |
| 153.2 | - | 153.2 |
| Stage 1 | 165.6 | - | 165.6 |
| 152.0 | - | 152.0 |
| Stage 2 | 0.6 | - | 0.6 |
| 1.2 | - | 1.2 |
| Out of scope of IFRS 9 ECL framework | 7.5 | na | 7.5 |
| 8.5 | na | 8.5 |
| Loans to customers - out of scope - amortised cost | (0.6) | na | (0.6) | | (0.4) | na | (0.4) |
| Loans to banks - out of scope - amortised cost | 0.3 | na | 0.3 | | 0.3 | na | 0.3 |
| Other financial assets - out of scope - amortised cost | 7.5 | na | 7.5 | | 8.3 | na | 8.3 |
| Other financial assets - out of scope - FVOCI | 0.3 | na | 0.3 | | 0.3 | na | 0.3 |
na = not applicable
The assets outside the scope of the IFRS 9 ECL framework were as follows:
- Settlement balances, items in the course of collection, cash balances and other non-credit risk assets of £7.4 billion (31 December 2023 - £8.6 billion). These were assessed as having no ECL unless there was evidence that they were defaulted.
- Equity shares of £0.3 billion (31 December 2023 - £0.3 billion) as not within the IFRS 9 ECL framework by definition.
- Fair value adjustments on loans hedged by interest rate swaps, where the underlying loan was within the IFRS 9 ECL scope of £(0.4) billion (31 December 2023 - £(0.3) billion).
Contingent liabilities and commitments
In addition to contingent liabilities and commitments disclosed in Note 13 to the consolidated financial statements, reputationally-committed limits were also included in the scope of the IFRS 9 ECL framework. These were offset by £0.4 billion (31 December 2023 - £0.1 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 £136.2 billion (31 December 2023 - £132.0 billion) comprised Stage 1 £126.3 billion (31 December 2023 - £120.6 billion); Stage 2 £9.2 billion (31 December 2023 - £10.7 billion); and Stage 3 £0.7 billion (31 December 2023 - £0.7 billion).
The ECL relating to off-balance sheet exposures was £0.1 billion (31 December 2023 - £0.1 billion). The total ECL in the remainder of the Credit risk section of £3.3 billion (31 December 2023 - £3.6 billion) included ECL for both on and off-balance sheet exposures for non-disposal groups.
Risk and capital management continued
Credit risk - Banking activities continued
Segment analysis - portfolio summary (reviewed)
The table below shows gross loans and ECL, by segment and stage, within the scope of the IFRS 9 ECL framework.
| | Retail | Private | Commercial & | Central items |
|
| | Banking | Banking | Institutional | & other | Total |
| 30 June 2024 | £m | £m | £m | £m | £m |
| Loans - amortised cost and FVOCI (1,2) |
|
|
|
|
|
| Stage 1 | 178,508 | 17,209 | 123,433 | 26,697 | 345,847 |
| Stage 2 | 23,091 | 744 | 13,453 | - | 37,288 |
| Stage 3 | 3,205 | 294 | 2,313 | - | 5,812 |
| Of which: individual | - | 252 | 964 | - | 1,216 |
| Of which: collective | 3,205 | 42 | 1,349 | - | 4,596 |
| Subtotal excluding disposal group loans | 204,804 | 18,247 | 139,199 | 26,697 | 388,947 |
| Disposal group loans |
|
|
| - | - |
| Total |
|
|
| 26,697 | 388,947 |
| ECL provisions (3) |
|
|
|
|
|
| Stage 1 | 275 | 16 | 275 | 19 | 585 |
| Stage 2 | 456 | 11 | 334 | 1 | 802 |
| Stage 3 | 1,026 | 38 | 892 | - | 1,956 |
| Of which: individual | - | 38 | 328 | - | 366 |
| Of which: collective | 1,026 | - | 564 | - | 1,590 |
| Subtotal excluding ECL provisions on disposal group loans | 1,757 | 65 | 1,501 | 20 | 3,343 |
| ECL provisions on disposal group loans |
|
|
| - | - |
| Total |
|
|
| 20 | 3,343 |
| ECL provisions coverage (4) |
|
|
|
|
|
| Stage 1 (%) | 0.15 | 0.09 | 0.22 | 0.07 | 0.17 |
| Stage 2 (%) | 1.97 | 1.48 | 2.48 | nm | 2.15 |
| Stage 3 (%) | 32.01 | 12.93 | 38.56 | - | 33.65 |
| ECL provisions coverage excluding disposal group loans | 0.86 | 0.36 | 1.08 | 0.07 | 0.86 |
| ECL provisions coverage on disposal group loans | - | - | - | - | - |
| Total | - | - | - | 0.07 | 0.86 |
| Impairment (releases)/losses |
|
|
|
|
|
| ECL charge/(release) (5) | 122 | (11) | (57) | (6) | 48 |
| Stage 1 | (166) | (9) | (182) | (7) | (364) |
| Stage 2 | 178 | (3) | 14 | 1 | 190 |
| Stage 3 | 110 | 1 | 111 | - | 222 |
| Of which: individual | - | 1 | 79 | - | 80 |
| Of which: collective | 110 | - | 32 | - | 142 |
| Continuing operations | 122 | (11) | (57) | (6) | 48 |
| Discontinued operations |
|
|
| - | - |
| Total |
|
|
| (6) | 48 |
| Amounts written-off | 270 | - | 99 | - | 369 |
| Of which: individual | - | - | 64 | - | 64 |
| Of which: collective | 270 | - | 35 | - | 305 |
For the notes to this table refer to the following page.
Risk and capital management continued
Credit risk - Banking activities continued
Segment analysis - portfolio summary (reviewed)
| | Retail | Private | Commercial & | Central items | |
| | Banking | Banking | Institutional | & other | Total |
| 31 December 2023 | £m | £m | £m | £m | £m |
| Loans - amortised cost and FVOCI (1,2) | | | | | |
| Stage 1 | 182,297 | 17,565 | 119,047 | 29,677 | 348,586 |
| Stage 2 | 21,208 | 906 | 15,771 | 6 | 37,891 |
| Stage 3 | 3,133 | 258 | 2,162 | 10 | 5,563 |
| Of which: individual | - | 186 | 845 | - | 1,031 |
| Of which: collective | 3,133 | 72 | 1,317 | 10 | 4,532 |
| Subtotal excluding disposal group loans | 206,638 | 18,729 | 136,980 | 29,693 | 392,040 |
| Disposal group loans | | | | 67 | 67 |
| Total | | | | 29,760 | 392,107 |
| ECL provisions (3) | | | | | |
| Stage 1 | 306 | 20 | 356 | 27 | 709 |
| Stage 2 | 502 | 20 | 447 | 7 | 976 |
| Stage 3 | 1,097 | 34 | 819 | 10 | 1,960 |
| Of which: individual | - | 34 | 298 | - | 332 |
| Of which: collective | 1,097 | - | 521 | 10 | 1,628 |
| Subtotal excluding ECL provisions on disposal group loans | 1,905 | 74 | 1,622 | 44 | 3,645 |
| ECL provisions on disposal group loans | | | | 36 | 36 |
| Total | | | | 80 | 3,681 |
| ECL provisions coverage (4) | | | | | |
| Stage 1 (%) | 0.17 | 0.11 | 0.30 | 0.09 | 0.20 |
| Stage 2 (%) | 2.37 | 2.21 | 2.83 | nm | 2.58 |
| Stage 3 (%) | 35.01 | 13.18 | 37.88 | 100.00 | 35.23 |
| ECL provisions coverage excluding disposal group loans | 0.92 | 0.40 | 1.18 | 0.15 | 0.93 |
| ECL provisions coverage on disposal group loans | | | | 53.73 | 53.73 |
| Total | | | | 0.27 | 0.94 |
| Half year ended 30 June 2023 | | | | | |
| Impairment (releases)/losses | | | | | |
| ECL (release)/charge (5) | 193 | 11 | 20 | (1) | 223 |
| Stage 1 | (88) | (1) | (124) | 4 | (209) |
| Stage 2 | 188 | 8 | 98 | 2 | 296 |
| Stage 3 | 93 | 4 | 46 | (7) | 136 |
| Of which: individual | - | 4 | 13 | (4) | 13 |
| Of which: collective | 93 | - | 33 | (3) | 123 |
| Continuing operations | 193 | 11 | 20 | (1) | 223 |
| Discontinued operations | | | | (1) | (1) |
| Total | | | | (2) | 222 |
| Amounts written-off | 63 | 1 | 50 | 8 | 122 |
| Of which: individual | - | 1 | 19 | 2 | 22 |
| Of which: collective | 63 | - | 31 | 6 | 100 |
nm = not meaningful
(1) The table shows gross loans only and excludes amounts that were outside the scope of the ECL framework. Other financial assets within the scope of the IFRS 9 ECL framework were cash and balances at central banks totalling £114.8 billion (31 December 2023 - £103.1 billion) and debt securities of £51.4 billion (31 December 2023 - £50.1 billion).
(2) Fair value through other comprehensive income (FVOCI). Includes loans to customers and banks.
(3) Includes £4 million (31 December 2023 - £9 million) related to assets classified as FVOCI and £0.1 billion (31 December 2023 - £0.1 billion) related to off-balance sheet exposures.
(4) ECL provisions coverage is calculated as ECL provisions divided by loans - amortised cost and FVOCI. It is calculated on loans and total ECL provisions, including ECL for other (non-loan) assets and unutilised exposure. Some segments with a high proportion of debt securities or unutilised exposure may result in a not meaningful (nm) coverage ratio.
(5) Includes a £6 million release (30 June 2023 - £5 million release) related to other financial assets, of which £5 million release (30 June 2023 - £1 million charge) related to assets classified as FVOCI and includes a £4 million charge (30 June 2023 - £3 million release) related to contingent liabilities.
Risk and capital management continued
Credit risk - Banking activities continued
Segment loans and impairment metrics (reviewed)
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 2024 | £m | £m | £m | £m | £m | £m | £m |
| £m | £m | £m | £m | £m | £m | £m |
| Retail Banking | 178,508 | 21,836 | 816 | 439 | 23,091 | 3,205 | 204,804 |
| 275 | 398 | 15 | 43 | 456 | 1,026 | 1,757 |
| Private Banking | 17,209 | 653 | 45 | 46 | 744 | 294 | 18,247 |
| 16 | 11 | - | - | 11 | 38 | 65 |
| Personal | 13,865 | 160 | 45 | 30 | 235 | 210 | 14,310 |
| 3 | 1 | - | - | 1 | 23 | 27 |
| Wholesale | 3,344 | 493 | - | 16 | 509 | 84 | 3,937 |
| 13 | 10 | - | - | 10 | 15 | 38 |
| Commercial & Institutional | 123,433 | 12,475 | 649 | 329 | 13,453 | 2,313 | 139,199 |
| 275 | 302 | 21 | 11 | 334 | 892 | 1,501 |
| Personal | 2,238 | 12 | 24 | 10 | 46 | 46 | 2,330 |
| 2 | - | - | - | - | 14 | 16 |
| Wholesale | 121,195 | 12,463 | 625 | 319 | 13,407 | 2,267 | 136,869 |
| 273 | 302 | 21 | 11 | 334 | 878 | 1,485 |
| Central items & other | 26,697 | - | - | - | - | - | 26,697 |
| 19 | 1 | - | - | 1 | - | 20 |
| Personal | - | - | - | - | - | - | - |
| - | - | - | - | - | - | - |
| Wholesale | 26,697 | - | - | - | - | - | 26,697 |
| 19 | 1 | - | - | 1 | - | 20 |
| Total loans | 345,847 | 34,964 | 1,510 | 814 | 37,288 | 5,812 | 388,947 |
| 585 | 712 | 36 | 54 | 802 | 1,956 | 3,343 |
| Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Personal | 194,611 | 22,008 | 885 | 479 | 23,372 | 3,461 | 221,444 |
| 280 | 399 | 15 | 43 | 457 | 1,063 | 1,800 |
| Wholesale | 151,236 | 12,956 | 625 | 335 | 13,916 | 2,351 | 167,503 |
| 305 | 313 | 21 | 11 | 345 | 893 | 1,543 |
| | | | | | | | | | | | | | | | |
| 31 December 2023 | | | | | | | | | | | | | | | |
| Retail Banking | 182,297 | 20,128 | 738 | 342 | 21,208 | 3,133 | 206,638 | | 306 | 453 | 15 | 34 | 502 | 1,097 | 1,905 |
| Private Banking | 17,565 | 772 | 77 | 57 | 906 | 258 | 18,729 | | 20 | 18 | 1 | 1 | 20 | 34 | 74 |
| Personal | 14,296 | 158 | 73 | 24 | 255 | 209 | 14,760 |
| 3 | 2 | - | - | 2 | 20 | 25 |
| Wholesale | 3,269 | 614 | 4 | 33 | 651 | 49 | 3,969 |
| 17 | 16 | 1 | 1 | 18 | 14 | 49 |
| Commercial & Institutional | 119,047 | 14,689 | 657 | 425 | 15,771 | 2,162 | 136,980 | | 356 | 415 | 21 | 11 | 447 | 819 | 1,622 |
| Personal | 2,268 | 15 | 21 | 7 | 43 | 52 | 2,363 |
| 2 | - | - | - | - | 16 | 18 |
| Wholesale | 116,779 | 14,674 | 636 | 418 | 15,728 | 2,110 | 134,617 |
| 354 | 415 | 21 | 11 | 447 | 803 | 1,604 |
| Central items & other | 29,677 | 5 | - | 1 | 6 | 10 | 29,693 | | 27 | 6 | - | 1 | 7 | 10 | 44 |
| Personal | 4 | 2 | - | 1 | 3 | 6 | 13 |
| 5 | 1 | - | 1 | 2 | 9 | 16 |
| Wholesale | 29,673 | 3 | - | - | 3 | 4 | 29,680 |
| 22 | 5 | - | - | 5 | 1 | 28 |
| Total loans | 348,586 | 35,594 | 1,472 | 825 | 37,891 | 5,563 | 392,040 | | 709 | 892 | 37 | 47 | 976 | 1,960 | 3,645 |
| Of which: | | | | | | | | | | | | | | | |
| Personal | 198,865 | 20,303 | 832 | 374 | 21,509 | 3,400 | 223,774 |
| 316 | 456 | 15 | 35 | 506 | 1,142 | 1,964 |
| Wholesale | 149,721 | 15,291 | 640 | 451 | 16,382 | 2,163 | 168,266 |
| 393 | 436 | 22 | 12 | 470 | 818 | 1,681 |
For the notes to this table refer to the following page.
Risk and capital management continued
Credit risk - Banking activities continued
Segment loans and impairment metrics (reviewed)
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 2024 | |||||||
| |
| Stage 2 (1,2) |
|
| ECL | ||||
| |
| Not past |
|
|
|
|
| Total | Amounts |
| | Stage 1 | due | 1-30 DPD | >30 DPD | Total | Stage 3 | Total | (release)/charge | written-off |
| 30 June 2024 | % | % | % | % | % | % | % | £m | £m |
| Retail Banking | 0.15 | 1.82 | 1.84 | 9.79 | 1.97 | 32.01 | 0.86 | 122 | 270 |
| Private Banking | 0.09 | 1.68 | - | - | 1.48 | 12.93 | 0.36 | (11) | - |
| Personal | 0.02 | 0.63 | - | - | 0.43 | 10.95 | 0.19 | 1 | - |
| Wholesale | 0.39 | 2.03 | - | - | 1.96 | 17.86 | 0.97 | (12) | - |
| Commercial & |
|
|
|
|
|
|
|
|
|
| Institutional | 0.22 | 2.42 | 3.24 | 3.34 | 2.48 | 38.56 | 1.08 | (57) | 99 |
| Personal | 0.09 | - | - | - | - | 30.43 | 0.69 | - | 1 |
| Wholesale | 0.23 | 2.42 | 3.36 | 3.45 | 2.49 | 38.73 | 1.08 | (57) | 98 |
| Central items |
|
|
|
|
|
|
|
|
|
| & other | 0.07 | nm | - | - | nm | - | 0.07 | (6) | - |
| Personal | - | - | - | - | - | - | - | - | - |
| Wholesale | 0.07 | nm | - | - | nm | - | 0.07 | (6) | - |
| Total loans | 0.17 | 2.04 | 2.38 | 6.63 | 2.15 | 33.65 | 0.86 | 48 | 369 |
| Of which: |
|
|
|
|
|
|
|
|
|
| Personal | 0.14 | 1.81 | 1.69 | 8.98 | 1.96 | 30.71 | 0.81 | 123 | 271 |
| Wholesale | 0.20 | 2.42 | 3.36 | 3.28 | 2.48 | 37.98 | 0.92 | (75) | 98 |
| | | | | | | | | | |
| 31 December 2023 | | | | | | | | Half year ended 30 June 2023 | |
| Retail Banking | 0.17 | 2.25 | 2.03 | 9.94 | 2.37 | 35.01 | 0.92 | 193 | 63 |
| Private Banking | 0.11 | 2.33 | 1.30 | 1.75 | 2.21 | 13.18 | 0.40 | 11 | 1 |
| Personal | 0.02 | 1.27 | - | - | 0.78 | 9.57 | 0.17 | 4 | 1 |
| Wholesale | 0.52 | 2.61 | 25.00 | 3.03 | 2.76 | 28.57 | 1.23 | 7 | - |
| Commercial & |
|
|
|
|
|
|
|
|
|
| Institutional | 0.30 | 2.83 | 3.20 | 2.59 | 2.83 | 37.88 | 1.18 | 20 | 50 |
| Personal | 0.09 | - | - | - | - | 30.77 | 0.76 | 1 | 1 |
| Wholesale | 0.30 | 2.83 | 3.30 | 2.63 | 2.84 | 38.06 | 1.19 | 19 | 49 |
| Central items |
|
|
|
|
|
|
|
|
|
| & other | 0.09 | nm | - | nm | nm | nm | 0.15 | (1) | 8 |
| Personal | nm | nm | - | nm | nm | nm | nm | 5 | 1 |
| Wholesale | 0.07 | nm | - | - | nm | 25.00 | 0.09 | (6) | 7 |
| Total loans | 0.20 | 2.51 | 2.51 | 5.70 | 2.58 | 35.23 | 0.93 | 223 | 122 |
| Of which: |
|
|
|
|
|
|
|
|
|
| Personal | 0.16 | 2.25 | 1.80 | 9.36 | 2.35 | 33.59 | 0.88 | 203 | 66 |
| Wholesale | 0.26 | 2.85 | 3.44 | 2.66 | 2.87 | 37.82 | 1.00 | 20 | 56 |
- Retail Banking - Loans to customers were lower than Q4 2023, mainly due to a reduction in mortgage balances where higher redemptions were only partly offset by new mortgage lending. Unsecured lending grew overall, driven by growth in credit cards. New lending and portfolio credit quality was maintained with limited increases in arrears in line with expectations. Total ECL coverage decreased during H1 2024 reflective of Q2 2024 debt sale activity on unsecured portfolios (£0.2 billion of assets), reductions in economic uncertainty post model adjustments, and stable underlying portfolio performance. The reduction in good book coverage in the first half of the year was also a result of unsecured probability of default modelling updates alongside an improved view on forward looking economics, underpinning a reduction in Stage 2 balances. Post model adjustments to capture increased affordability pressures on customers due to high inflation and interest rates decreased since Q4 2023, reflecting a revision of portfolio subsegments deemed most at risk, supported by back-testing of default outcomes. Flow rates into Stage 3 reduced during H1 2024.
- Commercial & Institutional - Growth in exposure in Commercial & Institutional was driven by increased exposure to financial institutions and property, and partially offset by an overall reduction to corporate sectors. Sector appetite continues to be reviewed regularly, with particular focus on sector clusters deemed to represent a heightened risk. Total ECL reduced in H1 2024 due to releases in post model adjustments, positive portfolio performance and improved economic scenarios. This was partially offset by an increase in Stage 3 ECL, from flows into default on individually assessed customers. The ECL decrease resulted in a reduction in coverage levels, but coverage on Stage 1 and Stage 2 was still significantly above pre-COVID-19 levels, reflecting that a degree of economic uncertainty remains.
nm = not meaningful
(1) 30 DPD - 30 days past due, the mandatory 30 days past due backstop as prescribed by IFRS 9 for a SICR.
(2) Some segments with a high proportion of debt securities or unutilised exposure may result in a not meaningful (nm) coverage ratio.
Risk and capital management continued
Credit risk - Banking activities continued
Sector analysis - portfolio summary (reviewed)
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 |
|
|
|
| Financial |
|
| |
|
| | Mortgages (1) | cards | personal | Total |
| Property | Corporate | institution | Sovereign | Total | |
|
| 30 June 2024 | £m | £m | £m | £m |
| £m | £m | £m | £m | £m | | £m |
| Loans by geography | 205,486 | 6,381 | 9,577 | 221,444 |
| 32,618 | 76,588 | 56,725 | 1,572 | 167,503 |
| 388,947 |
| - UK | 205,486 | 6,381 | 9,577 | 221,444 |
| 32,200 | 63,611 | 38,600 | 552 | 134,963 |
| 356,407 |
| - RoI | - | - | - | - |
| 10 | 983 | 529 | - | 1,522 |
| 1,522 |
| - Other Europe | - | - | - | - |
| 289 | 5,100 | 8,669 | 701 | 14,759 |
| 14,759 |
| - RoW | - | - | - | - |
| 119 | 6,894 | 8,927 | 319 | 16,259 |
| 16,259 |
| Loans by stage | 205,486 | 6,381 | 9,577 | 221,444 |
| 32,618 | 76,588 | 56,725 | 1,572 | 167,503 |
| 388,947 |
| - Stage 1 | 182,672 | 4,431 | 7,508 | 194,611 |
| 28,872 | 64,974 | 56,103 | 1,287 | 151,236 |
| 345,847 |
| - Stage 2 | 20,368 | 1,792 | 1,212 | 23,372 |
| 3,018 | 10,087 | 548 | 263 | 13,916 |
| 37,288 |
| - Stage 3 | 2,446 | 158 | 857 | 3,461 |
| 728 | 1,527 | 74 | 22 | 2,351 |
| 5,812 |
| - Of which: individual | 150 | - | 22 | 172 |
| 290 | 666 | 66 | 22 | 1,044 |
| 1,216 |
| - Of which: collective | 2,296 | 158 | 835 | 3,289 |
| 438 | 861 | 8 | - | 1,307 |
| 4,596 |
| Loans - past due analysis (2) | 205,486 | 6,381 | 9,577 | 221,444 |
| 32,618 | 76,588 | 56,725 | 1,572 | 167,503 |
| 388,947 |
| - Not past due | 202,398 | 6,198 | 8,677 | 217,273 |
| 31,937 | 74,187 | 56,442 | 1,550 | 164,116 |
| 381,389 |
| - Past due 1-30 days | 1,199 | 44 | 68 | 1,311 |
| 296 | 1,494 | 275 | - | 2,065 |
| 3,376 |
| - Past due 31-90 days | 735 | 44 | 119 | 898 |
| 86 | 287 | 3 | - | 376 |
| 1,274 |
| - Past due 90-180 days | 388 | 38 | 101 | 527 |
| 37 | 33 | - | 22 | 92 |
| 619 |
| - Past due >180 days | 766 | 57 | 612 | 1,435 |
| 262 | 587 | 5 | - | 854 |
| 2,289 |
| Loans - Stage 2 | 20,368 | 1,792 | 1,212 | 23,372 |
| 3,018 | 10,087 | 548 | 263 | 13,916 |
| 37,288 |
| - Not past due | 19,171 | 1,737 | 1,100 | 22,008 |
| 2,820 | 9,331 | 542 | 263 | 12,956 |
| 34,964 |
| - Past due 1-30 days | 822 | 27 | 36 | 885 |
| 116 | 506 | 3 | - | 625 |
| 1,510 |
| - Past due 31-90 days | 375 | 28 | 76 | 479 |
| 82 | 250 | 3 | - | 335 |
| 814 |
| Weighted average life |
|
|
|
|
|
|
|
|
|
|
|
|
| - ECL measurement (years) | 9 | 4 | 6 | 5 |
| 6 | 6 | 2 | 2 | 6 |
| 6 |
| Weighted average 12 months PDs |
|
|
|
|
|
|
|
|
|
|
|
|
| - IFRS 9 (%) | 0.51 | 2.99 | 4.63 | 0.74 |
| 1.14 | 1.36 | 0.17 | 4.38 | 0.94 |
| 0.83 |
| - Basel (%) | 0.67 | 3.51 | 3.32 | 0.85 |
| 0.90 | 1.22 | 0.16 | 4.38 | 0.82 |
| 0.84 |
| ECL provisions by geography | 420 | 376 | 1,004 | 1,800 |
| 371 | 1,063 | 90 | 19 | 1,543 |
| 3,343 |
| - UK | 420 | 376 | 1,004 | 1,800 |
| 361 | 926 | 34 | 13 | 1,334 |
| 3,134 |
| - RoI | - | - | - | - |
| - | 3 | 1 | - | 4 |
| 4 |
| - Other Europe | - | - | - | - |
| 3 | 87 | 8 | - | 98 |
| 98 |
| - RoW | - | - | - | - |
| 7 | 47 | 47 | 6 | 107 |
| 107 |
| ECL provisions by stage | 420 | 376 | 1,004 | 1,800 |
| 371 | 1,063 | 90 | 19 | 1,543 |
| 3,343 |
| - Stage 1 | 49 | 82 | 149 | 280 |
| 73 | 180 | 39 | 13 | 305 |
| 585 |
| - Stage 2 | 69 | 189 | 199 | 457 |
| 66 | 270 | 7 | 2 | 345 |
| 802 |
| - Stage 3 | 302 | 105 | 656 | 1,063 |
| 232 | 613 | 44 | 4 | 893 |
| 1,956 |
| - Of which: individual | 13 | - | 14 | 27 |
| 85 | 211 | 39 | 4 | 339 |
| 366 |
| - Of which: collective | 289 | 105 | 642 | 1,036 |
| 147 | 402 | 5 | - | 554 |
| 1,590 |
For the notes to this table refer to page 34.
Risk and capital management continued
Credit risk - Banking activities continued
Sector analysis - portfolio summary (reviewed)
| | Personal |
| Wholesale | | Total | |||||||
| |
| Credit | Other |
|
|
|
| Financial |
|
| |
|
| | Mortgages (1) | cards | personal | Total |
| Property | Corporate | institution | Sovereign | Total | |
|
| 30 June 2024 | £m | £m | £m | £m |
| £m | £m | £m | £m | £m | | £m |
| ECL provisions coverage (%) | 0.20 | 5.89 | 10.48 | 0.81 |
| 1.14 | 1.39 | 0.16 | 1.21 | 0.92 |
| 0.86 |
| - Stage 1 (%) | 0.03 | 1.85 | 1.98 | 0.14 |
| 0.25 | 0.28 | 0.07 | 1.01 | 0.20 |
| 0.17 |
| - Stage 2 (%) | 0.34 | 10.55 | 16.42 | 1.96 |
| 2.19 | 2.68 | 1.28 | 0.76 | 2.48 |
| 2.15 |
| - Stage 3 (%) | 12.35 | 66.46 | 76.55 | 30.71 |
| 31.87 | 40.14 | 59.46 | 18.18 | 37.98 |
| 33.65 |
| ECL (release)/charge | (19) | 51 | 91 | 123 |
| (12) | (83) | 19 | 1 | (75) |
| 48 |
| - UK | (19) | 51 | 91 | 123 |
| (12) | (70) | (4) | - | (86) |
| 37 |
| - RoI | - | - | - | - |
| 1 | - | - | - | 1 |
| 1 |
| - Other Europe | - | - | - | - |
| (1) | (7) | (6) | - | (14) |
| (14) |
| - RoW | - | - | - | - |
| - | (6) | 29 | 1 | 24 |
| 24 |
| Amounts written-off | 9 | 38 | 224 | 271 |
| 10 | 88 | - | - | 98 |
| 369 |
| Loans by residual maturity | 205,486 | 6,381 | 9,577 | 221,444 |
| 32,618 | 76,588 | 56,725 | 1,572 | 167,503 |
| 388,947 |
| - <1 year | 3,366 | 3,618 | 3,080 | 10,064 |
| 6,665 | 25,856 | 43,220 | 780 | 76,521 |
| 86,585 |
| - 1-5 year | 9,469 | 2,763 | 5,482 | 17,714 |
| 17,687 | 30,632 | 11,242 | 483 | 60,044 |
| 77,758 |
| - >5<15 year | 45,488 | - | 1,009 | 46,497 |
| 5,782 | 14,925 | 2,229 | 309 | 23,245 |
| 69,742 |
| - >15 year | 147,163 | - | 6 | 147,169 |
| 2,484 | 5,175 | 34 | - | 7,693 |
| 154,862 |
| Other financial assets by asset quality (3) | - | - | - | - |
| 1 | 2,583 | 27,058 | 136,516 | 166,158 |
| 166,158 |
| - AQ1-AQ4 | - | - | - | - |
| 1 | 2,581 | 26,507 | 136,516 | 165,605 |
| 165,605 |
| - AQ5-AQ8 | - | - | - | - |
| - | 2 | 551 | - | 553 |
| 553 |
| Off-balance sheet | 12,478 | 18,494 | 8,207 | 39,179 |
| 14,159 | 61,113 | 21,516 | 254 | 97,042 |
| 136,221 |
| - Loan commitments | 12,478 | 18,494 | 8,165 | 39,137 |
| 13,843 | 58,410 | 19,909 | 254 | 92,416 |
| 131,553 |
| - Financial guarantees | - | - | 42 | 42 |
| 316 | 2,703 | 1,607 | - | 4,626 |
| 4,668 |
| Off-balance sheet by asset quality (3) | 12,478 | 18,494 | 8,207 | 39,179 |
| 14,159 | 61,113 | 21,516 | 254 | 97,042 |
| 136,221 |
| - AQ1-AQ4 | 11,659 | 486 | 6,869 | 19,014 |
| 10,970 | 37,302 | 19,902 | 164 | 68,338 |
| 87,352 |
| - AQ5-AQ8 | 797 | 17,681 | 1,301 | 19,779 |
| 3,170 | 23,497 | 1,575 | 27 | 28,269 |
| 48,048 |
| - AQ9 | 7 | 9 | 9 | 25 |
| 2 | 25 | 1 | 63 | 91 |
| 116 |
| - AQ10 | 15 | 318 | 28 | 361 |
| 17 | 289 | 38 | - | 344 |
| 705 |
For the notes to this table refer to page 34.
Risk and capital management continued
Credit risk - Banking activities continued
Sector analysis - portfolio summary (reviewed)
| | Personal | | Wholesale | | Total | |||||||
| | | Credit | Other | | | | | Financial | | | | |
| | Mortgages (1) | cards | personal | Total | | Property | Corporate | institution | Sovereign | Total | | |
| 31 December 2023 | £m | £m | £m | £m | | £m | £m | £m | £m | £m | | £m |
| Loans by geography | 208,275 | 5,904 | 9,595 | 223,774 | | 31,207 | 77,339 | 57,087 | 2,633 | 168,266 | | 392,040 |
| - UK | 208,275 | 5,893 | 9,592 | 223,760 |
| 30,703 | 65,033 | 39,906 | 2,016 | 137,658 |
| 361,418 |
| - RoI | - | 11 | 3 | 14 |
| 9 | 888 | 279 | - | 1,176 |
| 1,190 |
| - Other Europe | - | - | - | - |
| 375 | 5,096 | 7,865 | 399 | 13,735 |
| 13,735 |
| - RoW | - | - | - | - |
| 120 | 6,322 | 9,037 | 218 | 15,697 |
| 15,697 |
| Loans by stage | 208,275 | 5,904 | 9,595 | 223,774 | | 31,207 | 77,339 | 57,087 | 2,633 | 168,266 | | 392,040 |
| - Stage 1 | 188,140 | 3,742 | 6,983 | 198,865 |
| 27,316 | 63,690 | 56,105 | 2,610 | 149,721 |
| 348,586 |
| - Stage 2 | 17,854 | 2,022 | 1,633 | 21,509 |
| 3,270 | 12,145 | 966 | 1 | 16,382 |
| 37,891 |
| - Stage 3 | 2,281 | 140 | 979 | 3,400 |
| 621 | 1,504 | 16 | 22 | 2,163 |
| 5,563 |
| - Of which: individual | 122 | - | 20 | 142 |
| 240 | 625 | 2 | 22 | 889 |
| 1,031 |
| - Of which: collective | 2,159 | 140 | 959 | 3,258 |
| 381 | 879 | 14 | - | 1,274 |
| 4,532 |
| Loans - past due analysis (2) | 208,275 | 5,904 | 9,595 | 223,774 | | 31,207 | 77,339 | 57,087 | 2,633 | 168,266 | | 392,040 |
| - Not past due | 205,405 | 5,743 | 8,578 | 219,726 |
| 30,264 | 74,052 | 56,735 | 2,633 | 163,684 |
| 383,410 |
| - Past due 1-30 days | 1,178 | 41 | 71 | 1,290 |
| 491 | 2,222 | 332 | - | 3,045 |
| 4,335 |
| - Past due 31-90 days | 518 | 38 | 112 | 668 |
| 179 | 437 | 12 | - | 628 |
| 1,296 |
| - Past due 90-180 days | 445 | 32 | 103 | 580 |
| 42 | 71 | 2 | - | 115 |
| 695 |
| - Past due >180 days | 729 | 50 | 731 | 1,510 |
| 231 | 557 | 6 | - | 794 |
| 2,304 |
| Loans - Stage 2 | 17,854 | 2,022 | 1,633 | 21,509 | | 3,270 | 12,145 | 966 | 1 | 16,382 | | 37,891 |
| - Not past due | 16,803 | 1,971 | 1,529 | 20,303 |
| 3,071 | 11,287 | 932 | 1 | 15,291 |
| 35,594 |
| - Past due 1-30 days | 765 | 27 | 40 | 832 |
| 100 | 516 | 24 | - | 640 |
| 1,472 |
| - Past due 31-90 days | 286 | 24 | 64 | 374 |
| 99 | 342 | 10 | - | 451 |
| 825 |
| Weighted average life | | | | | | | | | | | | |
| - ECL measurement (years) | 9 | 3 | 6 | 6 |
| 6 | 6 | 2 | - | 6 |
| 6 |
| Weighted average 12 months PDs | | | | | | | | | | | | |
| - IFRS 9 (%) | 0.50 | 3.45 | 5.29 | 0.75 |
| 1.45 | 1.59 | 0.19 | 0.37 | 1.07 |
| 0.89 |
| - Basel (%) | 0.67 | 3.37 | 3.15 | 0.84 |
| 0.94 | 1.25 | 0.17 | 0.37 | 0.81 |
| 0.83 |
| ECL provisions by geography | 420 | 376 | 1,168 | 1,964 | | 398 | 1,201 | 66 | 16 | 1,681 | | 3,645 |
| - UK | 420 | 365 | 1,163 | 1,948 |
| 384 | 999 | 38 | 13 | 1,434 |
| 3,382 |
| - RoI | - | 11 | 5 | 16 |
| - | 6 | 1 | - | 7 |
| 23 |
| - Other Europe | - | - | - | - |
| 7 | 146 | 12 | - | 165 |
| 165 |
| - RoW | - | - | - | - |
| 7 | 50 | 15 | 3 | 75 |
| 75 |
| ECL provisions by stage | 420 | 376 | 1,168 | 1,964 | | 398 | 1,201 | 66 | 16 | 1,681 | | 3,645 |
| - Stage 1 | 88 | 76 | 152 | 316 |
| 102 | 234 | 44 | 13 | 393 |
| 709 |
| - Stage 2 | 61 | 207 | 238 | 506 |
| 98 | 356 | 15 | 1 | 470 |
| 976 |
| - Stage 3 | 271 | 93 | 778 | 1,142 |
| 198 | 611 | 7 | 2 | 818 |
| 1,960 |
| - Of which: individual | 12 | - | 14 | 26 |
| 60 | 242 | 2 | 2 | 306 |
| 332 |
| - Of which: collective | 259 | 93 | 764 | 1,116 |
| 138 | 369 | 5 | - | 512 |
| 1,628 |
For the notes to this table refer to the following page.
Risk and capital management continued
Credit risk - Banking activities continued
Sector analysis - portfolio summary (reviewed)
| | Personal | | Wholesale | | Total | |||||||
| | | Credit | Other | | | | | Financial | | | | |
| | Mortgages (1) | cards | personal | Total | | Property | Corporate | institution | Sovereign | Total | | |
| 31 December 2023 | £m | £m | £m | £m | | £m | £m | £m | £m | £m | | £m |
| ECL provisions coverage (%) | 0.20 | 6.37 | 12.17 | 0.88 | | 1.28 | 1.55 | 0.12 | 0.61 | 1.00 | | 0.93 |
| - Stage 1 (%) | 0.05 | 2.03 | 2.18 | 0.16 |
| 0.37 | 0.37 | 0.08 | 0.50 | 0.26 |
| 0.20 |
| - Stage 2 (%) | 0.34 | 10.24 | 14.57 | 2.35 |
| 3.00 | 2.93 | 1.55 | 100.00 | 2.87 |
| 2.58 |
| - Stage 3 (%) | 11.88 | 66.43 | 79.47 | 33.59 |
| 31.88 | 40.63 | 43.75 | 9.09 | 37.82 |
| 35.23 |
| | | | | | | | | | | | | |
| Half year ended 30 June 2023 |
|
|
|
|
|
|
|
|
|
|
| |
| ECL (release)/charge (4) | 23 | 70 | 110 | 203 | | 21 | 7 | (6) | (2) | 20 | | 223 |
| - UK | 23 | 68 | 107 | 198 |
| 21 | 37 | (11) | (2) | 45 |
| 243 |
| - RoI | - | 2 | 3 | 5 |
| 5 | (5) | - | - | - |
| 5 |
| - Other Europe | - | - | - | - |
| (5) | 16 | 1 | - | 12 |
| 12 |
| - RoW | - | - | - | - |
| - | (41) | 4 | - | (37) |
| (37) |
| Amounts written-off (4) | 8 | 34 | 24 | 66 | | 19 | 37 | - | - | 56 | | 122 |
| | | | | | | | | | | | | |
| 31 December 2023 | | | | | | | | | | | | |
| Loans by residual maturity | 208,275 | 5,904 | 9,595 | 223,774 | | 31,207 | 77,339 | 57,087 | 2,633 | 168,266 | | 392,040 |
| - <1 year | 3,375 | 3,398 | 3,169 | 9,942 |
| 5,696 | 25,312 | 43,497 | 489 | 74,994 |
| 84,936 |
| - 1-5 year | 9,508 | 2,506 | 5,431 | 17,445 |
| 17,216 | 32,573 | 11616 | 1,872 | 63,277 |
| 80,722 |
| - >5<15 year | 46,453 | - | 993 | 47,446 |
| 5,701 | 14,167 | 1,939 | 199 | 22,006 |
| 69,452 |
| - >15 year | 148,939 | - | 2 | 148,941 |
| 2,594 | 5,287 | 35 | 73 | 7,989 |
| 156,930 |
| Other financial assets by asset quality (3) | - | - | - | - | | 1 | 2,689 | 26,816 | 123,683 | 153,189 | | 153,189 |
| - AQ1-AQ4 | - | - | - | - |
| 1.0 | 2,689 | 26,084 | 123,683 | 152,457 |
| 152,457 |
| - AQ5-AQ8 | - | - | - | - |
| - | - | 732 | - | 732 |
| 732 |
| Off-balance sheet | 9,843 | 17,284 | 8,462 | 35,589 | | 14,205 | 59,716 | 22,221 | 227 | 96,369 | | 131,958 |
| - Loan commitments | 9,843 | 17,284 | 8,417 | 35,544 |
| 13,861 | 57,081 | 20,765 | 227 | 91,934 |
| 127,478 |
| - Financial guarantees | - | - | 45 | 45 |
| 344 | 2,635 | 1,456 | - | 4,435 |
| 4,480 |
| Off-balance sheet by asset quality (3) | 9,843 | 17,284 | 8,462 | 35,589 | | 14,205 | 59,716 | 22,221 | 227 | 96,369 | | 131,958 |
| - AQ1-AQ4 | 9,099 | 448 | 7,271 | 16,818 |
| 10,916 | 36,380 | 20,644 | 165 | 68,105 |
| 84,923 |
| - AQ5-AQ8 | 721 | 16,518 | 1,162 | 18,401 |
| 3,266 | 23,030 | 1,574 | 45 | 27,915 |
| 46,316 |
| - AQ9 | 7 | 6 | 4 | 17 |
| 3 | 12 | - | - | 15 |
| 32 |
| - AQ10 | 16 | 312 | 25 | 353 |
| 20 | 294 | 3 | 17 | 334 |
| 687 |
(1) Includes a portion of Private Banking lending secured against residential real estate, in line with ECL calculation methodology. Private Banking and RBS International mortgages are reported in the UK, reflecting the country of lending origination and includes crown dependencies.
(2) 30 DPD - 30 days past due, the mandatory 30 days past due backstop as prescribed by the IFRS 9 guidance for a SICR (significant increase in credit risk).
(3) AQ bandings are based on Basel PDs and mapping is as follows:
| Internal asset quality band | Probability of default range | Indicative S&P rating | | Internal asset quality band | Probability of default range | Indicative S&P rating |
| AQ1 | 0% - 0.034% | AAA to AA | | AQ6 | 1.076% - 2.153% | BB- to B+ |
| AQ2 | 0.034% - 0.048% | AA to AA- | | AQ7 | 2.153% - 6.089% | B+ to B |
| AQ3 | 0.048% - 0.095% | A+ to A | | AQ8 | 6.089% - 17.222% | B- to CCC+ |
| AQ4 | 0.095% - 0.381% | BBB+ to BBB- | | AQ9 | 17.222% - 100% | CCC to C |
| AQ5 | 0.381% - 1.076% | BB+ to BB | | AQ10 | 100% | D |
£0.3 billion (31 December 2023 - £0.3 billion) of AQ10 Personal balances primarily relate to loan commitments, the drawdown of which is effectively prohibited.
(4) Previously published sectors for the Wholesale portfolio have been re-presented to reflect updated internal sector reporting.
Risk and capital management continued
Credit risk - Banking activities continued
Sector analysis - portfolio summary (reviewed)
The table below shows ECL by stage, for the Personal portfolio and selected sectors of the Wholesale portfolio including those that contain an element of exposure classified as heightened climate-related risk.
| | Loans - amortised cost and FVOCI |
| Off-balance sheet |
| ECL provisions | |||||||
| |
|
| Loan | Contingent |
|
| ||||||
| | Stage 1 | Stage 2 | Stage 3 | Total |
| commitments | liabilities |
| Stage 1 | Stage 2 | Stage 3 | Total |
| 30 June 2024 | £m | £m | £m | £m |
| £m | £m |
| £m | £m | £m | £m |
| Personal | 194,611 | 23,372 | 3,461 | 221,444 |
| 39,137 | 42 |
| 280 | 457 | 1,063 | 1,800 |
| Mortgages (1) | 182,672 | 20,368 | 2,446 | 205,486 |
| 12,478 | - |
| 49 | 69 | 302 | 420 |
| Credit cards | 4,431 | 1,792 | 158 | 6,381 |
| 18,494 | - |
| 82 | 189 | 105 | 376 |
| Other personal | 7,508 | 1,212 | 857 | 9,577 |
| 8,165 | 42 |
| 149 | 199 | 656 | 1,004 |
| Wholesale | 151,236 | 13,916 | 2,351 | 167,503 |
| 92,416 | 4,626 |
| 305 | 345 | 893 | 1,543 |
| Property | 28,872 | 3,018 | 728 | 32,618 |
| 13,843 | 316 |
| 73 | 66 | 232 | 371 |
| Financial institutions (2) | 56,103 | 548 | 74 | 56,725 |
| 19,909 | 1,607 |
| 39 | 7 | 44 | 90 |
| Sovereigns | 1,287 | 263 | 22 | 1,572 |
| 254 | - |
| 13 | 2 | 4 | 19 |
| Corporate | 64,974 | 10,087 | 1,527 | 76,588 |
| 58,410 | 2,703 |
| 180 | 270 | 613 | 1,063 |
| Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
| Agriculture | 3,933 | 873 | 122 | 4,928 |
| 947 | 21 |
| 13 | 29 | 37 | 79 |
| Airlines and aerospace | 2,103 | 286 | 4 | 2,393 |
| 2,087 | 232 |
| 3 | 3 | 3 | 9 |
| Automotive | 7,041 | 653 | 55 | 7,749 |
| 4,090 | 136 |
| 14 | 12 | 18 | 44 |
| Building materials | 1,447 | 257 | 18 | 1,722 |
| 1,441 | 64 |
| 4 | 7 | 7 | 18 |
| Chemicals | 362 | 76 | 1 | 439 |
| 722 | 14 |
| 1 | 1 | 1 | 3 |
| Industrials | 2,066 | 405 | 74 | 2,545 |
| 2,725 | 140 |
| 7 | 12 | 29 | 48 |
| Land transport and logistics | 4,485 | 300 | 85 | 4,870 |
| 3,033 | 253 |
| 8 | 11 | 22 | 41 |
| Leisure | 4,576 | 1,866 | 284 | 6,726 |
| 2,140 | 116 |
| 24 | 60 | 98 | 182 |
| Mining and metals | 296 | 23 | 4 | 323 |
| 315 | 6 |
| - | - | 4 | 4 |
| Oil and gas | 626 | 26 | 70 | 722 |
| 1,932 | 189 |
| 2 | 1 | 49 | 52 |
| Power utilities | 5,811 | 301 | 79 | 6,191 |
| 7,757 | 585 |
| 12 | 7 | 32 | 51 |
| Retail | 6,083 | 1,119 | 164 | 7,366 |
| 4,522 | 385 |
| 14 | 25 | 72 | 111 |
| Shipping | 205 | 10 | 25 | 240 |
| 76 | 27 |
| - | 1 | 9 | 10 |
| Water and waste | 3,513 | 362 | 20 | 3,895 |
| 1,813 | 121 |
| 3 | 3 | 6 | 12 |
| Total | 345,847 | 37,288 | 5,812 | 388,947 |
| 131,553 | 4,668 |
| 585 | 802 | 1,956 | 3,343 |
For the notes to this table refer to the following page.
Risk and capital management continued
Credit risk - Banking activities continued
Sector analysis - portfolio summary (reviewed)
| | Loans - amortised cost and FVOCI | | Off-balance sheet | | ECL provisions | |||||||
| | | | Loan | Contingent | | | ||||||
| | Stage 1 | Stage 2 | Stage 3 | Total | | commitments | liabilities | | Stage 1 | Stage 2 | Stage 3 | Total |
| 31 December 2023 | £m | £m | £m | £m | | £m | £m | | £m | £m | £m | £m |
| Personal | 198,865 | 21,509 | 3,400 | 223,774 | | 35,544 | 45 | | 316 | 506 | 1,142 | 1,964 |
| Mortgages (1) | 188,140 | 17,854 | 2,281 | 208,275 | | 9,843 | - | | 88 | 61 | 271 | 420 |
| Credit cards | 3,742 | 2,022 | 140 | 5,904 | | 17,284 | - | | 76 | 207 | 93 | 376 |
| Other personal | 6,983 | 1,633 | 979 | 9,595 | | 8,417 | 45 | | 152 | 238 | 778 | 1,168 |
| Wholesale | 149,721 | 16,382 | 2,163 | 168,266 | | 91,934 | 4,435 | | 393 | 470 | 818 | 1,681 |
| Property | 27,316 | 3,270 | 621 | 31,207 | | 13,861 | 344 | | 102 | 98 | 198 | 398 |
| Financial institutions (2) | 56,105 | 966 | 16 | 57,087 | | 20,765 | 1,456 | | 44 | 15 | 7 | 66 |
| Sovereigns | 2,610 | 1 | 22 | 2,633 | | 227 | - | | 13 | 1 | 2 | 16 |
| Corporate | 63,690 | 12,145 | 1,504 | 77,339 | | 57,081 | 2,635 | | 234 | 356 | 611 | 1,201 |
| Of which: | | | | | | | | | | | | |
| Agriculture | 3,851 | 1,011 | 90 | 4,952 |
| 950 | 21 |
| 19 | 35 | 34 | 88 |
| Airlines and aerospace | 1,525 | 454 | 3 | 1,982 |
| 1,788 | 178 |
| 4 | 7 | 2 | 13 |
| Automotive | 7,223 | 1,008 | 76 | 8,307 |
| 3,844 | 103 |
| 18 | 18 | 26 | 62 |
| Building materials | 1,204 | 282 | 72 | 1,558 |
| 1,475 | 72 |
| 6 | 9 | 8 | 23 |
| Chemicals | 354 | 62 | 4 | 420 |
| 785 | 13 |
| 1 | 9 | 1 | 11 |
| Industrials | 2,269 | 543 | 70 | 2,882 |
| 2,896 | 148 |
| 10 | 18 | 23 | 51 |
| Land transport and logistics | 4,231 | 578 | 61 | 4,870 |
| 3,025 | 184 |
| 11 | 14 | 18 | 43 |
| Leisure | 4,394 | 2,245 | 288 | 6,927 |
| 1,887 | 145 |
| 31 | 74 | 91 | 196 |
| Mining and metals | 241 | 32 | 4 | 277 |
| 545 | 7 |
| - | - | 4 | 4 |
| Oil and gas | 915 | 125 | 27 | 1,067 |
| 1,959 | 237 |
| 3 | 2 | 29 | 34 |
| Power utilities | 5,604 | 418 | 40 | 6,062 |
| 8,257 | 554 |
| 13 | 13 | 24 | 50 |
| Retail | 5,846 | 1,318 | 224 | 7,388 |
| 4,717 | 429 |
| 23 | 35 | 118 | 176 |
| Shipping | 207 | 35 | 3 | 245 |
| 71 | 31 |
| - | 1 | 2 | 3 |
| Water and waste | 3,536 | 173 | 13 | 3,722 |
| 1,904 | 84 |
| 4 | 5 | 4 | 13 |
| Total | 348,586 | 37,891 | 5,563 | 392,040 | | 127,478 | 4,480 | | 709 | 976 | 1,960 | 3,645 |
(1) As at 30 June 2024, £136.5 billion, 66.4%, of the total residential mortgages portfolio had Energy Performance Certificate (EPC) data available (31 December 2023 - £140.8 billion, 67.6%). Of which, 45.2% were rated as EPC A to C (31 December 2023 - 44.1%).
(2) Includes transactions, such as securitisations, where the underlying risk may be in other sectors.
Risk and capital management continued
Credit risk - Banking activities continued
Wholesale forbearance (reviewed)
The table below shows Wholesale forbearance, Heightened Monitoring and Risk of Credit Loss by sector. This table shows current exposure but reflects risk transfers where there is a guarantee by another customer.
| |
| Financial |
| Other |
|
| | Property | institution | Sovereign | corporate | Total |
| 30 June 2024 | £m | £m | £m | £m | £m |
| Forbearance (flow) | 495 | 101 | - | 1,876 | 2,472 |
| Forbearance (stock) | 1,081 | 122 | 20 | 3,751 | 4,974 |
| Heightened Monitoring and Risk of Credit Loss | 1,231 | 183 | - | 4,299 | 5,713 |
| |
|
|
|
|
|
| 31 December 2023 | | | | | |
| Forbearance (flow) | 916 | 56 | 22 | 2,568 | 3,562 |
| Forbearance (stock) | 1,071 | 70 | 22 | 3,752 | 4,915 |
| Heightened Monitoring and Risk of Credit Loss | 1,089 | 276 | - | 4,119 | 5,484 |
Risk and capital management continued
Credit risk - Banking activities continued
- Loans by geography and sector - In line with NatWest Group's strategic focus, exposures continued to be mainly in the UK.
- Loans by stage - The reduction in Stage 1 mirrored the reduction in balances since Q4 2023, primarily driven by personal mortgages. The reduction in Stage 2 was reflective of portfolio performance and PD modelling updates in Personal unsecured portfolios. The modest increase in Stage 3 balance was mitigated by debt sale activity on Personal unsecured assets.
- Loans - Past due analysis - In Personal, there were limited increases in the value of arrears during H1 2024. The increases were in line with expectations, mainly in mortgages given the higher interest rate environment, following portfolio growth in recent years and adjustments to lending criteria following COVID-19. The reduction in arrears in unsecured portfolios was due to Q2 2024 debt sale activity. In Wholesale, past due profile was stable.
- Weighted average 12 months PDs - Both IFRS 9 and Basel PDs remained broadly stable in the first half of the year overall. In Personal portfolios, there was a notable reduction in unsecured portfolios due to PD modelling updates. In Wholesale, some reductions were observed in PDs in the corporate and property portfolios due to economic and portfolio improvements. PDs in sovereigns increased significantly due to lending backed by government guarantees.
- ECL provisions by stage and ECL provisions coverage - Overall provisions coverage reduced since 31 December 2023. On the performing book, this was mainly a result of positive portfolio performance, reduced economic uncertainty post model adjustments and PD reductions across a number of portfolios. Furthermore, Stage 3 and total book coverage reduced supported by the reduction of balances from debt sale activity on Personal unsecured portfolios.
- The ECL charge - The year-to-date impairment charge for 2024 of £48 million primarily reflected impairment releases on Wholesale portfolios driven by the reduction in economic uncertainty post model adjustments alongside positive portfolio performance and reduced PD levels.
- Loans by residual maturity - The maturity profile of the portfolios remained consistent with prior periods. In mortgages, as expected, the vast majority of exposures were greater than five years. In unsecured lending, cards and other, exposures were concentrated in less than five years. In Wholesale, more than 80% of the exposures mature in less than five years.
- Other financial assets by asset quality - Consisting almost entirely of cash and balances at central banks and debt securities held in the course of treasury related management activities, these assets were mainly within the AQ1-AQ4 bands.
- Off-balance sheet exposures by asset quality - In Personal, undrawn exposures were reflective of available credit lines in credit cards and current accounts. Additionally, the mortgage portfolio had undrawn exposures, where a formal offer had been made to a customer but had not yet drawn down; the value increased in line with the pipeline of offers. There was also a legacy portfolio of flexible mortgages where a customer had the right and ability to draw down further funds. The asset quality was aligned to the wider portfolio. In Wholesale, off-balance sheet exposures increased in sovereigns, and in the asset quality band AQ9. In general, asset quality was stable, and in line with the overall portfolio.
- Wholesale problem debt - Exposures classified as Heightened Monitoring and Risk of Credit Loss within the Wholesale Problem Debt Management framework (formerly known as the Aligned Risk of Credit Loss and Viability framework) increased in H1 2024, driven by a small volume of customers. NatWest Group continued to closely monitor this portfolio and no sector themes or concerns were observed during H1 2024. Retail SME customers do not form part of this framework, customers in financial difficulty within this group are managed by specialist problem debt management teams. For these customers inflows slowed in H1 2024, collections were stable and recoveries balances continued to be driven by BBLs.
- Wholesale forbearance - Decreased levels of new forbearance were observed in H1 2024 compared to H1 2023, by both value and volume. The CRE sector cluster was the largest beneficiary by value in H1 2024, closely followed by the consumer industries sector cluster. Payment holidays and covenant waivers were the most common forms of forbearance granted.
Risk and capital management continued
Credit risk - Banking activities continued
Personal portfolio (reviewed)
Disclosures in the Personal portfolio section include drawn exposure (gross of provisions).
| | 30 June 2024 |
| 31 December 2023 | ||||||||
| |
|
|
| Central |
|
| | | | Central | |
| | Retail | Private | Commercial & | items |
|
| Retail | Private | Commercial & | items | |
| | Banking | Banking | Institutional | & other | Total |
| Banking | Banking | Institutional | & other | Total |
| Personal lending | £m | £m | £m | £m | £m |
| £m | £m | £m | £m | £m |
| Mortgages | 190,510 | 12,873 | 2,169 | - | 205,552 | | 192,915 | 13,222 | 2,200 | - | 208,337 |
| Of which: |
|
|
|
|
| | | | | | |
| Owner occupied | 172,220 | 11,370 | 1,458 | - | 185,048 | | 174,167 | 11,629 | 1,464 | - | 187,260 |
| Buy-to-let | 18,290 | 1,503 | 711 | - | 20,504 | | 18,748 | 1,593 | 736 | - | 21,077 |
| Interest only | 22,487 | 11,276 | 439 | - | 34,202 | | 25,805 | 11,631 | 461 | - | 37,897 |
| Mixed (1) | 10,191 | 33 | 8 | - | 10,232 | | 10,068 | 25 | 10 | - | 10,103 |
| ECL provisions (2) | 398 | 14 | 8 | - | 420 | | 397 | 12 | 6 | - | 415 |
| Other personal lending (3) | 14,334 | 1,293 | 253 | - | 15,880 | | 13,758 | 1,395 | 222 | 13 | 15,388 |
| ECL provisions (2) | 1,360 | 14 | 3 | - | 1,377 | | 1,508 | 12 | 2 | 16 | 1,538 |
| Total personal lending | 204,844 | 14,166 | 2,422 | - | 221,432 | | 206,673 | 14,617 | 2,422 | 13 | 223,725 |
| Mortgage LTV ratios |
|
|
|
|
| | | | | | |
| Owner occupied | 57% | 59% | 55% | - | 57% | | 55% | 59% | 56% | - | 55% |
| - Stage 1 | 57% | 59% | 55% | - | 57% |
| 55% | 59% | 54% | - | 55% |
| - Stage 2 | 57% | 61% | 56% | - | 57% |
| 54% | 63% | 54% | - | 54% |
| - Stage 3 | 50% | 64% | 76% | - | 51% |
| 48% | 61% | 72% | - | 49% |
| Buy-to-let | 55% | 59% | 52% | - | 55% | | 52% | 59% | 52% | - | 53% |
| - Stage 1 | 55% | 60% | 51% | - | 55% |
| 52% | 60% | 52% | - | 53% |
| - Stage 2 | 53% | 59% | 53% | - | 53% |
| 50% | 57% | 49% | - | 50% |
| - Stage 3 | 52% | 53% | 60% | - | 53% |
| 50% | 53% | 58% | - | 51% |
| Gross new mortgage lending | 11,026 | 675 | 114 | - | 11,815 | | 29,664 | 1,400 | 180 | - | 31,244 |
| Of which: |
|
|
|
|
| | | | | | |
| Owner occupied | 10,655 | 607 | 86 | - | 11,348 | | 27,718 | 1,267 | 136 | - | 29,121 |
| - LTV > 90% | 364 | - | - | - | 364 | | 1,173 | - | - | - | 1,173 |
| Weighted average LTV (4) | 69% | 63% | 71% | - | 69% | | 70% | 63% | 69% | - | 70% |
| Buy-to-let | 371 | 68 | 28 | - | 467 | | 1,946 | 133 | 44 | - | 2,123 |
| Weighted average LTV (4) | 59% | 60% | 55% | - | 59% | | 58% | 65% | 52% | - | 58% |
| Interest only | 633 | 613 | 15 | - | 1,261 | | 2,680 | 1,224 | 23 | - | 3,927 |
| Mixed (1) | 574 | - | - | - | 574 | | 1,568 | 2 | - | - | 1,570 |
For the notes to this table refer to the following page.
Risk and capital management continued
Credit risk - Banking activities continued
Personal portfolio (reviewed) continued
| | 30 June 2024 |
| 31 December 2023 | ||||||||
| |
|
|
| Central |
|
| | | | Central | |
| | Retail | Private | Commercial & | items |
|
| Retail | Private | Commercial & | items | |
| | Banking | Banking | Institutional | & other | Total |
| Banking | Banking | Institutional | & other | Total |
| Mortgage forbearance | £m | £m | £m | £m | £m |
| £m | £m | £m | £m | £m |
| Forbearance flow (5) | 280 | 21 | 3 | - | 304 | | 569 | 22 | 9 | - | 600 |
| Forbearance stock | 1,584 | 34 | 14 | - | 1,632 | | 1,416 | 28 | 15 | - | 1,459 |
| Current | 1,066 | 22 | 5 | - | 1,093 |
| 950 | 10 | 6 | - | 966 |
| 1-3 months in arrears | 175 | 3 | - | - | 178 |
| 116 | 2 | 2 | - | 120 |
| > 3 months in arrears | 343 | 9 | 9 | - | 361 |
| 350 | 16 | 7 | - | 373 |
(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 lending and 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) New mortgage lending LTV reflects the LTV at the time of lending.
(5) Forbearance flows only include an account once per year, although some accounts may be subject to multiple forbearance deals. Forbearance deals post default are excluded from these flows.
- Mortgage balances reduced during H1 2024 where higher redemptions were only partly offset by new mortgage lending. Unsecured lending grew overall, driven by growth in credit cards.
- Mortgage portfolio LTV increased in H1 2024, as a result of easing of house prices reflected in the Office for National Statistics house price indices.
- The proportion of overall interest only mortgage balances decreased in H1 2024. Higher levels of interest only at year end 2023 were driven by the implementation of the Mortgage Charter, however, applications for Mortgage Charter support decreased during H1 2024 and customers have rolled-off from interest only periods.
- Portfolios and new business were closely monitored against agreed operating limits. These included loan-to-value ratios, buy-to-let concentrations, new-build concentrations and credit quality. Lending criteria, affordability calculations and assumptions for new lending were adjusted during the year, to maintain credit quality in line with appetite and to ensure customers are assessed fairly as economic conditions change.
- The flow of mortgage forbearance was stable in H1 2024 compared to H2 2023. The reported forbearance values included customers who used Mortgage Charter support if indicators of financial stress were already present before Mortgage Charter support was taken.
- Other personal lending balances increased in H1 2024 with continued growth in credit card new business. Lending criteria were carefully managed and the credit quality (based on new business PD) of the new business written remained stable.
- As noted previously, ECL provisions decreased. For further details on the movements in ECL provisions at product level, refer to the Flow statements section.
Risk and capital management continued
Credit risk - Banking activities continued
Personal portfolio (reviewed)
Mortgage LTV distribution by stage
The table below shows gross mortgage lending and related ECL by LTV band for the Retail Banking portfolio.
| | Mortgages |
| 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 2024 | £m | £m | £m | £m |
| £m | £m | £m | £m |
| % | % | % | % |
| ≤50% | 60,006 | 7,459 | 1,112 | 68,577 |
| 12 | 17 | 136 | 165 |
| 0.0 | 0.2 | 12.2 | 0.2 |
| >50% and ≤70% | 60,845 | 7,727 | 856 | 69,428 |
| 18 | 26 | 99 | 143 |
| 0.0 | 0.3 | 11.6 | 0.2 |
| >70% and ≤80% | 25,290 | 2,341 | 173 | 27,804 |
| 8 | 10 | 21 | 39 |
| 0.0 | 0.4 | 12.1 | 0.1 |
| >80% and ≤90% | 14,951 | 1,613 | 86 | 16,650 |
| 6 | 9 | 12 | 27 |
| 0.0 | 0.6 | 14.0 | 0.2 |
| >90% and ≤100% | 6,661 | 968 | 29 | 7,658 |
| 3 | 6 | 5 | 14 |
| 0.0 | 0.6 | 17.2 | 0.2 |
| >100% | 69 | 27 | 14 | 110 |
| - | - | 6 | 6 |
| - | - | 42.9 | 5.5 |
| Total with LTVs | 167,822 | 20,135 | 2,270 | 190,227 |
| 47 | 68 | 279 | 394 |
| 0.0 | 0.3 | 12.3 | 0.2 |
| Other | 279 | 1 | 3 | 283 |
| 1 | - | 1 | 2 |
| 0.4 | - | 33.3 | 0.7 |
| Total | 168,101 | 20,136 | 2,273 | 190,510 |
| 48 | 68 | 280 | 396 |
| 0.0 | 0.3 | 12.3 | 0.2 |
| | | | | | | | | | | | | | | |
| 31 December 2023 | | | | | | | | | | | | | | |
| ≤50% | 68,092 | 7,447 | 1,145 | 76,684 | | 27 | 18 | 134 | 179 | | 0.0 | 0.2 | 11.7 | 0.2 |
| >50% and ≤70% | 65,777 | 7,011 | 767 | 73,555 | | 35 | 26 | 85 | 146 | | 0.1 | 0.4 | 11.1 | 0.2 |
| >70% and ≤80% | 22,537 | 1,633 | 113 | 24,283 | | 13 | 7 | 15 | 35 | | 0.1 | 0.4 | 13.3 | 0.1 |
| >80% and ≤90% | 13,583 | 1,143 | 47 | 14,773 | | 9 | 6 | 7 | 22 | | 0.1 | 0.5 | 14.9 | 0.1 |
| >90% and ≤100% | 3,008 | 370 | 14 | 3,392 | | 2 | 3.0 | 3 | 8 | | 0.1 | 0.8 | 21.4 | 0.2 |
| >100% | 22 | 6 | 11 | 39 | | - | - | 5 | 5 | | - | - | 45.5 | 12.8 |
| Total with LTVs | 173,019 | 17,610 | 2,097 | 192,726 | | 86 | 60 | 249 | 395 | | 0.1 | 0.3 | 11.9 | 0.2 |
| Other | 186 | 1 | 2 | 189 | | 1 | - | 1 | 2 | | 0.5 | - | 50.0 | 1.1 |
| Total | 173,205 | 17,611 | 2,099 | 192,915 | | 87 | 60 | 250 | 397 | | 0.1 | 0.3 | 11.9 | 0.2 |
Retail Banking fixed rate mortgages by roll-off date
The table below shows gross fixed rate mortgage lending for Retail Banking, by roll-off date.
|
| 30 June 2024 |
| 31 December 2023 | ||||||
| Retail Banking mortgages - gross exposure | Stage 1 | Stage 2 | Stage 3 | Total |
| Stage 1 | Stage 2 | Stage 3 | Total |
| £m | £m | £m | £m |
| £m | £m | £m | £m | |
| Fixed rate roll-off |
|
|
|
|
| | | | |
| <=1 year | 30,357 | 3,882 | 306 | 34,545 |
| 30,867 | 3,670 | 295 | 34,832 |
| >1<=2 years | 43,204 | 4,766 | 359 | 48,329 |
| 39,013 | 3,513 | 290 | 42,816 |
| >2 years | 81,501 | 8,640 | 688 | 90,829 |
| 87,402 | 7,461 | 590 | 95,453 |
| Total | 155,062 | 17,288 | 1,353 | 173,703 |
| 157,282 | 14,644 | 1,175 | 173,101 |
| | | | | | | | | | |
Risk and capital management continued
Credit risk - Banking activities continued
Commercial real estate (CRE) (reviewed)
CRE LTV distribution by stage
The table below shows CRE current exposure and related ECL by LTV band.
|
| 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 2024 | £m | £m | £m |
| £m |
| £m | £m | £m | £m |
| % | % | % | % |
| ≤50% | 7,899 | 275 | 45 |
| 8,219 |
| 25 | 7 | 8 | 40 |
| 0.3 | 2.5 | 17.8 | 0.5 |
| >50% and ≤70% | 3,692 | 496 | 120 |
| 4,308 |
| 18 | 15 | 24 | 57 |
| 0.5 | 3.0 | 20.0 | 1.3 |
| >70% and ≤100% | 319 | 45 | 87 |
| 451 |
| 2 | 2 | 26 | 30 |
| 0.6 | 4.4 | 29.9 | 6.7 |
| >100% | 205 | 3 | 65 |
| 273 |
| 1 | - | 38 | 39 |
| 0.5 | - | 58.5 | 14.3 |
| Total with LTVs | 12,115 | 819 | 317 |
| 13,251 |
| 46 | 24 | 96 | 166 |
| 0.4 | 2.9 | 30.3 | 1.3 |
| Total portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| average LTV | 46% | 52% | 98% |
| 48% |
|
|
|
|
|
|
|
|
|
|
| Other (1) | 2,205 | 295 | 39 |
| 2,539 |
| 5 | 6 | 16 | 27 |
| 0.2 | 2.0 | 41.0 | 1.1 |
| Investment | 14,320 | 1,114 | 356 |
| 15,790 |
| 51 | 30 | 112 | 193 |
| 0.4 | 2.7 | 31.5 | 1.2 |
| Development (2) | 1,825 | 201 | 50 |
| 2,076 |
| 8 | 2 | 25 | 35 |
| 0.4 | 1.0 | 50.0 | 1.7 |
| Total | 16,145 | 1,315 | 406 |
| 17,866 |
| 59 | 32 | 137 | 228 |
| 0.4 | 2.4 | 33.7 | 1.3 |
| | | | | | | | | | | | | | | | |
| 31 December 2023 | | | | | | | | | | | | | | | |
| ≤50% | 7,173 | 664 | 61 | | 7,898 | | 38 | 15 | 9 | 62 | | 0.5 | 2.3 | 14.8 | 0.8 |
| >50% and ≤70% | 3,165 | 619 | 94 | | 3,878 | | 22 | 21 | 18 | 61 | | 0.7 | 3.4 | 19.1 | 1.6 |
| >70% and ≤100% | 319 | 112 | 84 | | 515 | | 3 | 6 | 21 | 30 | | 0.9 | 5.4 | 25.0 | 5.8 |
| >100% | 241 | 6 | 26 | | 273 | | 1 | 1 | 16 | 18 | | 0.4 | 16.7 | 61.5 | 6.6 |
| Total with LTVs | 10,898 | 1,401 | 265 | | 12,564 | | 64 | 43 | 64 | 171 | | 0.6 | 3.1 | 24.2 | 1.4 |
| Total portfolio | | | | | | | | | | | | | | | |
| average LTV | 47% | 51% | 72% | | 48% | | | | | | | | | | |
| Other (1) | 2,189 | 390 | 45 | | 2,624 | | 10 | 7 | 19 | 36 | | 0.5 | 1.8 | 42.2 | 1.4 |
| Investment | 13,087 | 1,791 | 310 | | 15,188 | | 74 | 50 | 83 | 207 | | 0.6 | 2.8 | 26.8 | 1.4 |
| Development (2) | 1,717 | 147 | 49 | | 1,913 | | 12 | 5 | 25 | 42 | | 0.7 | 3.4 | 51.0 | 2.2 |
| Total | 14,804 | 1,938 | 359 | | 17,101 | | 86 | 55 | 108 | 249 | | 0.6 | 2.8 | 30.1 | 1.5 |
- Overall - The majority of the CRE portfolio was located and managed in the UK. Business appetite and strategy was aligned across NatWest Group.
- 2024 trends - In H1 2024, conditions enabled growth, particularly in Q1 2024, as investors/customers gained more confidence in the economic outlook. Key growth was in the favoured sectors of residential and industrial. The office sector remains challenging. NatWest Group remains comfortable with exposures held in this sub-sector but continues to subject them to detailed scrutiny.
- Credit quality - Credit quality remained stable with very limited instances of specific cases deteriorating.
- Risk appetite - Lending appetite is subject to regular review.
| (1) | Relates mainly to business banking and unsecured corporate lending. |
| (2) | Relates to the development of commercial and residential properties. LTV is not a meaningful measure for this type of lending activity. |
Risk and capital management continued
Credit risk - Banking activities continued
Flow statements (reviewed)
The flow statements that follow show the main ECL and related income statement movements. They also show the changes in ECL as well as the changes in related financial assets used in determining ECL. Due to differences in scope, exposures may differ from those reported in other tables, principally in relation to exposures in Stage 1 and Stage 2. These differences do not have a material ECL effect. Other points to note:
- Financial assets include treasury liquidity portfolios, comprising balances at central banks and debt securities, as well as loans. Both modelled and non-modelled portfolios are included.
- Stage transfers (for example, exposures moving from Stage 1 into Stage 2) are a key feature of the ECL movements, with the net re-measurement cost of transitioning to a worse stage being a primary driver of income statement charges. Similarly, there is an ECL benefit for accounts improving stage.
- Changes in risk parameters shows the reassessment of the ECL within a given stage, including any ECL overlays and residual income statement gains or losses at the point of write-off or accounting write-down.
- Other (P&L only items) includes any subsequent changes in the value of written-down assets (for example, fortuitous recoveries) along with other direct write-off items such as direct recovery costs. Other (P&L only items) affects the income statement but does not affect balance sheet ECL movements.
- Amounts written-off represent the gross asset written-down against accounts with ECL, including the net asset write-down for any debt sale activity.
- There were some flows from Stage 1 into Stage 3 including transfers due to unexpected default events with a post model adjustment in place for Commercial & Institutional to account for this risk.
- The effect of any change in post model adjustments during the year is typically reported under changes in risk parameters, as are any effects arising from changes to the underlying models. Refer to the section on Governance and post model adjustments for further details.
- All movements are captured monthly and aggregated. Interest suspended post default is included within Stage 3 ECL, with the movement in the value of suspended interest during the year reported under currency translation and other adjustments.
| | 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 2024 | 504,345 | 709 |
| 40,294 | 976 |
| 5,621 | 1,960 |
| 550,260 | 3,645 |
| Currency translation and other adjustments | (907) | - |
| (29) | - |
| 73 | 93 |
| (863) | 93 |
| Transfers from Stage 1 to Stage 2 | (20,089) | (104) |
| 20,089 | 104 |
| - | - |
| - | - |
| Transfers from Stage 2 to Stage 1 | 15,305 | 341 |
| (15,305) | (341) |
| - | - |
| - | - |
| Transfers to Stage 3 | (126) | (2) |
| (1,643) | (145) |
| 1,769 | 147 |
| - | - |
| Transfers from Stage 3 | 175 | 9 |
| 277 | 18 |
| (452) | (27) |
| - | - |
| Net re-measurement of ECL on stage transfer |
| (242) |
|
| 328 |
|
| 157 |
|
| 243 |
| Changes in risk parameters |
| (195) |
|
| (46) |
|
| 165 |
|
| (76) |
| Other changes in net exposure | (396) | 74 |
| (5,024) | (89) |
| (918) | (85) |
| (6,338) | (100) |
| Other (P&L only items) |
| (1) |
|
| (3) |
|
| (15) |
|
| (19) |
| Income statement (releases)/charges |
| (364) |
|
| 190 |
|
| 222 |
|
| 48 |
| Transfers to disposal groups and fair value | (296) | (5) |
| (8) | (3) |
| (13) | (10) |
| (317) | (18) |
| Amounts written-off | - | - |
| - | - |
| (369) | (369) |
| (369) | (369) |
| Unwinding of discount | - | - |
|
| - |
|
| (75) |
|
| (75) |
| At 30 June 2024 | 498,011 | 585 |
| 38,651 | 802 |
| 5,711 | 1,956 |
| 542,373 | 3,343 |
| Net carrying amount | 497,426 |
|
| 37,849 |
|
| 3,755 |
|
| 539,030 |
|
| At 1 January 2023 | 507,539 | 632 | | 48,482 | 1,043 | | 5,231 | 1,759 | | 561,252 | 3,434 |
| 2023 movements | (26,623) | 29 | | (3,867) | (52) | | 314 | 146 | | (30,176) | 123 |
| At 30 June 2023 | 480,916 | 661 | | 44,615 | 991 | | 5,545 | 1,905 | | 531,076 | 3,557 |
| Net carrying amount | 480,255 | | | 43,624 | | | 3,640 | | | 527,519 | |
Risk and capital management continued
Credit risk - Banking activities continued
Flow statements (reviewed)
| | 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 2024 | 174,038 | 87 |
| 17,827 | 60 |
| 2,068 | 250 |
| 193,933 | 397 |
| Currency translation and other adjustments | - | 1 |
| - | (1) |
| 53 | 53 |
| 53 | 53 |
| Transfers from Stage 1 to Stage 2 | (9,955) | (12) |
| 9,955 | 12 |
| - | - |
| - | - |
| Transfers from Stage 2 to Stage 1 | 5,702 | 12 |
| (5,702) | (12) |
| - | - |
| - | - |
| Transfers to Stage 3 | (33) | - |
| (531) | (4) |
| 564 | 4 |
| - | - |
| Transfers from Stage 3 | 16 | - |
| 155 | 4 |
| (171) | (4) |
| - | - |
| Net re-measurement of ECL on stage transfer |
| (7) |
|
| 14 |
|
| 3 |
|
| 10 |
| Changes in risk parameters |
| (28) |
|
| (1) |
|
| 48 |
|
| 19 |
| Other changes in net exposure | (2,775) | (4) |
| (1,387) | (4) |
| (265) | (35) |
| (4,427) | (43) |
| Other (P&L only items) |
| (1) |
|
| - |
|
| (2) |
|
| (3) |
| Income statement (releases)/charges |
| (40) |
|
| 9 |
|
| 14 |
|
| (17) |
| Amounts written-off | - | - |
| - | - |
| (8) | (8) |
| (8) | (8) |
| Unwinding of discount |
| - |
|
| - |
|
| (31) |
|
| (31) |
| At 30 June 2024 | 166,993 | 49 |
| 20,317 | 68 |
| 2,241 | 280 |
| 189,551 | 397 |
| Net carrying amount | 166,944 |
|
| 20,249 |
|
| 1,961 |
|
| 189,154 |
|
| At 1 January 2023 | 165,264 | 79 | | 18,831 | 61 | | 1,762 | 215 | | 185,857 | 355 |
| 2023 movements | 4,527 | 12 | | 834 | 3 | | 85 | 19 | | 5,446 | 34 |
| At 30 June 2023 | 169,791 | 91 | | 19,665 | 64 | | 1,847 | 234 | | 191,303 | 389 |
| Net carrying amount | 169,700 | | | 19,601 | | | 1,613 | | | 190,914 | |
| - | ECL levels for mortgages remained stable overall during H1 2024, with growth in Stage 3 ECL offset by a reduction in good book ECL, primarily driven by the reduction in economic uncertainty post model adjustment levels. |
| - | As well as a net reduction in book size, aligned to trends in the UK mortgage market, the decrease in Stage 1 ECL was also driven by the cost of living post model adjustment reduction, which proportionately allocated more ECL to Stage 1 given the forward-looking nature of the affordability threat. Refer to the Governance and post model adjustments section for further details. |
| - | The Stage 3 inflows remained broadly stable, with signs of improvement in default rates in recent months. Default rates had been increasing during 2023 reflecting slightly poorer arrears performance on mortgages recently rolled-off onto higher product rates. The increase in Stage 3 ECL primarily reflected increases in ECL for post-default interest alongside lower levels of write-offs. |
| - | There were net flows into Stage 2 from Stage 1 with an upward trend in early arrears coupled with the collective migration into Stage 2 of higher risk customers utilising new Mortgage Charter treatments (approximately £0.9 billion exposure). |
| - | The relatively small ECL cost for net re-measurement on stage transfer included the effect of risk targeted ECL adjustments, when previously in the good book. Refer to the Governance and post model adjustments section for further details. |
-
Risk and capital management continued
Credit risk - Banking activities continued
Flow statements (reviewed)
| | 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 2024 | 3,475 | 70 |
| 2,046 | 204 |
| 146 | 89 |
| 5,667 | 363 |
| Currency translation and other adjustments | - | - |
| - | - |
| 2 | 2 |
| 2 | 2 |
| Transfers from Stage 1 to Stage 2 | (814) | (16) |
| 814 | 16 |
| - | - |
| - | - |
| Transfers from Stage 2 to Stage 1 | 746 | 52 |
| (746) | (52) |
| - | - |
| - | - |
| Transfers to Stage 3 | (11) | - |
| (77) | (29) |
| 88 | 29 |
| - | - |
| Transfers from Stage 3 | 1 | - |
| 4 | 2 |
| (5) | (2) |
| - | - |
| Net re-measurement of ECL on stage transfer |
| (31) |
|
| 74 |
|
| 21 |
|
| 64 |
| Changes in risk parameters |
| 1 |
|
| 3 |
|
| 9 |
|
| 13 |
| Other changes in net exposure | 726 | 5 |
| (219) | (30) |
| (24) | (1) |
| 483 | (26) |
| Other (P&L only items) |
| - |
|
| 1 |
|
| - |
|
| 1 |
| Income statement (releases)/charges |
| (25) |
|
| 48 |
|
| 29 |
|
| 52 |
| Amounts written-off | - | - |
| - | - |
| (38) | (38) |
| (38) | (38) |
| Unwinding of discount |
| - |
|
| - |
|
| (4) |
|
| (4) |
| At 30 June 2024 | 4,123 | 81 |
| 1,822 | 188 |
| 169 | 105 |
| 6,114 | 374 |
| Net carrying amount | 4,042 |
|
| 1,634 |
|
| 64 |
|
| 5,740 |
|
| At 1 January 2023 | 3,062 | 61 | | 1,098 | 120 | | 113 | 71 | | 4,273 | 252 |
| 2023 movements | 118 | (2) | | 422 | 25 | | 13 | 12 | | 553 | 35 |
| At 30 June 2023 | 3,180 | 59 | | 1,520 | 145 | | 126 | 83 | | 4,826 | 287 |
| Net carrying amount | 3,121 | | | 1,375 | | | 43 | | | 4,539 | |
- Overall ECL for cards remained broadly in-line with the 2023 year-end, with portfolio growth mitigated by stable portfolio performance and PD trends.
- While portfolio performance remained stable, a net flow into Stage 2 from Stage 1 was observed in Q1 2024 with the typical maturation of lending after a period of strong growth in recent years albeit Stage 2 reduced during the second quarter as PDs reduced after PD modelling updates.
- Credit card balances continued to grow during 2024, reflecting continued customer demand whilst remaining within risk appetite.
- Flow rates into Stage 3 reduced in H1 2024, in line with broader portfolio performance.
Risk and capital management continued
Credit risk - Banking activities continued
Flow statements (reviewed)
| | 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 2024 | 5,240 | 149 |
| 1,657 | 238 |
| 963 | 758 |
| 7,860 | 1,145 |
| Currency translation and other adjustments | - | - |
| - | 1 |
| 8 | 8 |
| 8 | 9 |
| Transfers from Stage 1 to Stage 2 | (854) | (40) |
| 854 | 40 |
| - | - |
| - | - |
| Transfers from Stage 2 to Stage 1 | 953 | 137 |
| (953) | (137) |
| - | - |
| - | - |
| Transfers to Stage 3 | (37) | (1) |
| (157) | (68) |
| 194 | 69 |
| - | - |
| Transfers from Stage 3 | 4 | 1 |
| 12 | 5 |
| (16) | (6) |
| - | - |
| Net re-measurement of ECL on stage transfer |
| (99) |
|
| 133 |
|
| 13 |
|
| 47 |
| Changes in risk parameters |
| (42) |
|
| 7 |
|
| 63 |
|
| 28 |
| Other changes in net exposure | 411 | 40 |
| (188) | (19) |
| (80) | (22) |
| 143 | (1) |
| Other (P&L only items) |
| - |
|
| (1) |
|
| 14 |
|
| 13 |
| Income statement (releases)/charges |
| (101) |
|
| 120 |
|
| 68 |
|
| 87 |
| Amounts written-off | - | - |
| - | - |
| (224) | (224) |
| (224) | (224) |
| Unwinding of discount |
| - |
|
| - |
|
| (18) |
|
| (18) |
| At 30 June 2024 | 5,717 | 145 |
| 1,225 | 200 |
| 845 | 641 |
| 7,787 | 986 |
| Net carrying amount | 5,572 |
|
| 1,025 |
|
| 204 |
|
| 6,801 |
|
| At 1 January 2023 | 4,784 | 111 | | 2,028 | 269 | | 779 | 631 | | 7,591 | 1,011 |
| 2023 movements | 292 | 21 | | (147) | (39) | | 111 | 90 | | 256 | 72 |
| At 30 June 2023 | 5,076 | 132 | | 1,881 | 230 | | 890 | 721 | | 7,847 | 1,083 |
| Net carrying amount | 4,944 | | | 1,651 | | | 169 | | | 6,764 | |
- Total ECL decreased, mainly in Stage 3 due to the reduction of balances from debt sale activity on Personal unsecured portfolios of £0.2 billion.
- Stable portfolio performance and updates to PD modelling resulted in a net migration from Stage 2 into Stage 1 with performing book ECL and coverage levels showing a modest reduction since the 2023 year-end, supported by an improved economic outlook.
- Flow rates into Stage 3 reduced in H1 2024, in line with broader portfolio performance.
- Unsecured retail performing balances grew steadily during H1 2024, largely in line with industry trends.
Risk and capital management continued
Credit risk - Banking activities continued
Flow statements (reviewed)
| | Stage 1 | | Stage 2 |
| Stage 3 | | Total | ||||
| | Financial |
|
| Financial |
|
| Financial |
|
| Financial |
|
|
| assets | ECL |
| assets | ECL |
| assets | ECL |
| assets | ECL |
| Commercial & Institutional total | £m | £m |
| £m | £m |
| £m | £m |
| £m | £m |
| At 1 January 2024 | 176,302 | 356 |
| 17,029 | 447 |
| 2,161 | 819 |
| 195,492 | 1,622 |
| Currency translation and other adjustments | (436) | (1) |
| (29) | 1 |
| 12 | 27 |
| (453) | 27 |
| Inter-group transfers | - | - |
| - | - |
| - | - |
| - | - |
| Transfers from Stage 1 to Stage 2 | (7,758) | (35) |
| 7,758 | 35 |
| - | - |
| - | - |
| Transfers from Stage 2 to Stage 1 | 6,940 | 130 |
| (6,940) | (130) |
| - | - |
| - | - |
| Transfers to Stage 3 | (34) | - |
| (761) | (44) |
| 795 | 44 |
| - | - |
| Transfers from Stage 3 | 125 | 7 |
| 93 | 8 |
| (218) | (15) |
| - | - |
| Net re-measurement of ECL on stage transfer |
| (98) |
|
| 102 |
|
| 121 |
|
| 125 |
| Changes in risk parameters |
| (114) |
|
| (49) |
|
| 42 |
|
| (121) |
| Other changes in net exposure | 4,452 | 30 |
| (3,109) | (36) |
| (493) | (28) |
| 850 | (34) |
| Other (P&L only items) |
| - |
|
| (3) |
|
| (24) |
|
| (27) |
| Income statement (releases)/charges |
| (182) |
|
| 14 |
|
| 111 |
|
| (57) |
| Amounts written-off | - | - |
| - | - |
| (99) | (99) |
| (99) | (99) |
| Unwinding of discount |
| - |
|
| - |
|
| (19) |
|
| (19) |
| At 30 June 2024 | 179,591 | 275 |
| 14,041 | 334 |
| 2,158 | 892 |
| 195,790 | 1,501 |
| Net carrying amount | 179,316 |
|
| 13,707 |
|
| 1,266 |
|
| 194,289 |
|
| At 1 January 2023 | 160,352 | 342 | | 24,711 | 534 | | 2,198 | 747 | | 187,261 | 1,623 |
| 2023 movements | 1,819 | (9) | | (4,368) | (27) | | 75 | 18 | | (2,474) | (18) |
| At 30 June 2023 | 162,171 | 333 | | 20,343 | 507 | | 2,273 | 765 | | 184,787 | 1,605 |
| Net carrying amount | 161,838 | | | 19,836 | | | 1,508 | | | 183,182 | |
- ECL levels decreased during H1 2024 with significant reductions in Stage 1 and Stage 2 partially offset by increases in Stage 3. Improved economic variables and risk metrics reduced Stage 1 and Stage 2 ECL, with lower PDs contributing to reductions in modelled ECL and post model adjustments.
- A reduction in post model adjustments led to a £97 million reduction across Stage 1 and Stage 2.
- Stage 3 ECL and exposure increased, mainly due to transfers into Stage 3 and the re-measurement of ECL at the point of transfer. This was partially offset by write-offs.
- Exposure levels in Stage 1 and 2 remained broadly consistent with new exposures captured in Stage 1 offset by repayments in Stage 2.
Risk and capital management continued
Credit risk - Banking activities continued
Flow statements (reviewed)
| | Stage 1 |
| Stage 2 |
| Stage 3 |
| Total | ||||
| | Financial |
|
| Financial |
|
| Financial |
|
| Financial |
|
| | assets | ECL |
| assets | ECL |
| assets | ECL |
| assets | ECL |
| Commercial & Institutional - corporate | £m | £m |
| £m | £m |
| £m | £m |
| £m | £m |
| At 1 January 2024 | 61,402 | 226 |
| 12,275 | 344 |
| 1,454 | 602 |
| 75,131 | 1,172 |
| Currency translation and other adjustments | (88) | (1) |
| (21) | 1 |
| 11 | 22 |
| (98) | 22 |
| Inter-group transfers | 86 | - |
| 35 | 2 |
| 2 | 1 |
| 123 | 3 |
| Transfers from Stage 1 to Stage 2 | (5,045) | (26) |
| 5,045 | 26 |
| - | - |
| - | - |
| Transfers from Stage 2 to Stage 1 | 4,772 | 98 |
| (4,772) | (98) |
| - | - |
| - | - |
| Transfers to Stage 3 | (30) | - |
| (530) | (30) |
| 560 | 30 |
| - | - |
| Transfers from Stage 3 | 100 | 5 |
| 66 | 6 |
| (166) | (11) |
| - | - |
| Net re-measurement of ECL on stage transfer |
| (75) |
|
| 76 |
|
| 60 |
|
| 61 |
| Changes in risk parameters |
| (67) |
|
| (39) |
|
| 28 |
|
| (78) |
| Other changes in net exposure | 2,119 | 14 |
| (2,003) | (25) |
| (313) | (20) |
| (197) | (31) |
| Other (P&L only items) |
| - |
|
| (4) |
|
| (21) |
|
| (25) |
| Income statement (releases)/charges |
| (128) |
|
| 8 |
|
| 47 |
|
| (73) |
| Amounts written-off | - | - |
| - | - |
| (88) | (88) |
| (88) | (88) |
| Unwinding of discount |
| - |
|
| - |
|
| (13) |
|
| (13) |
| At 30 June 2024 | 63,316 | 174 |
| 10,095 | 263 |
| 1,460 | 611 |
| 74,871 | 1,048 |
| Net carrying amount | 63,142 |
|
| 9,832 |
|
| 849 |
|
| 73,823 |
|
- ECL levels decreased during H1 2024 with significant reductions in Stage 1 and Stage 2. Improved economic variables and risk metrics reduced Stage 1 and Stage 2 ECL, with lower PDs contributing to reductions in modelled ECL and post model adjustments.
- Stage 3 exposure increased due to transfers into Stage 3, partially offset by repayments and write-offs. Stage 3 ECL marginally increased with the impact from transfers and the re-measurement of ECL at the point of transfer, largely offset by write-offs.
- Exposure levels in the performing portfolio, Stage 1 and Stage 2, remained broadly consistent with new exposures captured in Stage 1 offset by repayments in Stage 2.
Risk and capital management continued
Credit risk - Banking activities continued
Flow statements (reviewed)
| | Stage 1 | | Stage 2 |
| Stage 3 | | Total | ||||
| | Financial |
|
| Financial |
|
| Financial |
|
| Financial |
|
| | assets | ECL |
| assets | ECL |
| assets | ECL |
| assets | ECL |
| Commercial & Institutional - property | £m | £m |
| £m | £m |
| £m | £m |
| £m | £m |
| At 1 January 2024 | 26,040 | 94 |
| 3,155 | 89 |
| 606 | 195 |
| 29,801 | 378 |
| Currency translation and other adjustments | (5) | - |
| (2) | (1) |
| - | 7 |
| (7) | 6 |
| Inter-group transfers | (30) | - |
| (23) | (2) |
| (2) | - |
| (55) | (2) |
| Transfers from Stage 1 to Stage 2 | (1,869) | (7) |
| 1,869 | 7 |
| - | - |
| - | - |
| Transfers from Stage 2 to Stage 1 | 1,622 | 27 |
| (1,622) | (27) |
| - | - |
| - | - |
| Transfers to Stage 3 | (4) | - |
| (160) | (9) |
| 164 | 9 |
| - | - |
| Transfers from Stage 3 | 21 | 2 |
| 24 | 2 |
| (45) | (4) |
| - | - |
| Net re-measurement of ECL on stage transfer |
| (19) |
|
| 22 |
|
| 30 |
|
| 33 |
| Changes in risk parameters |
| (38) |
|
| (12) |
|
| 11 |
|
| (39) |
| Other changes in net exposure | 751 | 9 |
| (266) | (7) |
| (150) | (6) |
| 335 | (4) |
| Other (P&L only items) |
| - |
|
| - |
|
| - |
|
| - |
| Income statement (releases)/charges |
| (48) |
|
| 3 |
|
| 35 |
|
| (10) |
| Amounts written-off | - | - |
| - | - |
| (10) | (10) |
| (10) | (10) |
| Unwinding of discount |
| - |
|
| - |
|
| (5) |
|
| (5) |
| At 30 June 2024 | 26,526 | 68 |
| 2,975 | 62 |
| 563 | 227 |
| 30,064 | 357 |
| Net carrying amount | 26,458 |
|
| 2,913 |
|
| 336 |
|
| 29,707 |
|
- There was a small reduction in ECL during H1 2024 with decreases in Stage 1 and Stage 2 partially offset by increases in Stage 3.
- Improved economic variables and risk metrics reduced Stage 1 and Stage 2 ECL, with lower PDs contributing to reductions in modelled ECL and post model adjustments.
- Stage 3 exposure reduced with the primary driver being repayments on the collective portfolio. The increase in Stage 3 ECL was largely attributable to one commercial real estate customer.
- Exposure levels in the performing portfolio, Stage 1 and Stage 2, increased with new exposures captured in Stage 1 more than offsetting repayments in Stage 2.
Risk and capital management continued
Credit risk - Banking activities continued
Flow statements (reviewed)
| | Stage 1 | | Stage 2 |
| Stage 3 | | Total | ||||
| | Financial |
|
| Financial |
|
| Financial |
|
| Financial |
|
| | assets | ECL |
| assets | ECL |
| assets | ECL |
| assets | ECL |
| Commercial & Institutional - other | £m | £m |
| £m | £m |
| £m | £m |
| £m | £m |
| At 1 January 2024 | 88,860 | 36 |
| 1,599 | 14 |
| 101 | 22 |
| 90,560 | 72 |
| Currency translation and other adjustments | (344) | - |
| (5) | 1 |
| 1 | (1) |
| (348) | - |
| Inter-group transfers | (56) | - |
| (12) | - |
| - | - |
| (68) | - |
| Transfers from Stage 1 to Stage 2 | (844) | (2) |
| 844 | 2 |
| - | - |
| - | - |
| Transfers from Stage 2 to Stage 1 | 547 | 5 |
| (547) | (5) |
| - | - |
| - | - |
| Transfers to Stage 3 | - | - |
| (71) | (6) |
| 71 | 6 |
| - | - |
| Transfers from Stage 3 | 4 | - |
| 3 | - |
| (7) | - |
| - | - |
| Net re-measurement of ECL on stage transfer |
| (3) |
|
| 4 |
|
| 30 |
|
| 31 |
| Changes in risk parameters |
| (8) |
|
| 2 |
|
| 2 |
|
| (4) |
| Other changes in net exposure | 1,582 | 5 |
| (840) | (3) |
| (30) | (1) |
| 712 | 1 |
| Other (P&L only items) |
| - |
|
| - |
|
| (2) |
|
| (2) |
| Income statement (releases)/charges |
| (6) |
|
| 3 |
|
| 29 |
|
| 26 |
| Amounts written-off | - | - |
| - | - |
| (1) | (1) |
| (1) | (1) |
| Unwinding of discount |
| - |
|
| - |
|
| (1) |
|
| (1) |
| At 30 June 2024 | 89,749 | 33 |
| 971 | 9 |
| 135 | 54 |
| 90,855 | 96 |
| Net carrying amount | 89,716 |
|
| 962 |
|
| 81 |
|
| 90,759 |
|
- ECL levels increased during H1 2024 with a rise in Stage 3 only partially offset by reductions in Stage 1 and Stage 2.
- Stage 3 exposure and ECL increased mainly related to an increase in ECL on newly defaulted individually assessed customers. These defaults also contributed to a reduction in Stage 2 as the ECL was transferred to Stage 3 at the point of default.
Risk and capital management continued
Credit risk - Banking activities continued
Stage 2 decomposition by a significant increase in credit risk trigger
The tables that follow show decomposition for the Personal and Wholesale portfolios.
| | UK mortgages |
| Credit cards |
| Other |
| Total | ||||
| 30 June 2024 | £m | % |
| £m | % |
| £m | % |
| £m | % |
| Personal trigger (1) |
|
| |
|
| |
|
| |
|
|
| PD movement | 13,825 | 67.8 |
| 1,303 | 72.6 |
| 623 | 51.3 |
| 15,751 | 67.5 |
| PD persistence | 3,964 | 19.5 |
| 406 | 22.7 |
| 230 | 19.0 |
| 4,600 | 19.7 |
| Adverse credit bureau recorded with credit reference agency | 969 | 4.8 |
| 64 | 3.6 |
| 121 | 10.0 |
| 1,154 | 4.9 |
| Forbearance support provided | 162 | 0.8 |
| 1 | 0.1 |
| 11 | 0.9 |
| 174 | 0.7 |
| Customers in collections | 173 | 0.8 |
| 2 | 0.1 |
| 14 | 1.2 |
| 189 | 0.8 |
| Collective SICR and other reasons (2) | 1,141 | 5.6 |
| 16 | 0.9 |
| 200 | 16.5 |
| 1,357 | 5.8 |
| Days past due >30 | 134 | 0.7 |
| - | - |
| 13 | 1.1 |
| 147 | 0.6 |
| | 20,368 | 100.0 |
| 1,792 | 100.0 |
| 1,212 | 100.0 |
| 23,372 | 100.0 |
| |
|
|
|
|
|
|
|
|
|
|
|
| 31 December 2023 |
|
|
|
|
|
|
|
|
|
|
|
| Personal trigger (1) | | | | | | | | | | | |
| PD movement | 12,969 | 72.5 | | 1,469 | 72.7 | | 866 | 52.9 | | 15,304 | 71.1 |
| PD persistence | 2,317 | 13.0 | | 481 | 23.8 | | 374 | 22.9 | | 3,172 | 14.7 |
| Adverse credit bureau recorded with credit reference agency | 1,047 | 5.9 | | 49 | 2.4 | | 99 | 6.1 | | 1,195 | 5.6 |
| Forbearance support provided | 137 | 0.8 | | 1 | - | | 11 | 0.7 | | 149 | 0.7 |
| Customers in collections | 178 | 1.0 | | 2 | 0.1 | | 8 | 0.5 | | 188 | 0.9 |
| Collective SICR and other reasons (2) | 1,087 | 6.1 | | 20 | 1.0 | | 266 | 16.3 | | 1,373 | 6.4 |
| Days past due >30 | 119 | 0.7 | | - | - | | 9 | 0.6 | | 128 | 0.6 |
| | 17,854 | 100.0 | | 2,022 | 100.0 | | 1,633 | 100.0 | | 21,509 | 100.0 |
For the notes to the table refer to the following page.
- The level of PD driven deterioration increased in the first half of 2024, mainly in the mortgage portfolio, reflecting some increases in the early arrears level and PD modelling updates. The modelling updates on unsecured portfolios at Q1 2024 resulted in a reduction in lifetime PDs. This drove a segment of lower risk cases out of PD deterioration at Q1 2024, with many now exited from Stage 2 after the PD persistence period of three months.
- Higher risk mortgage customers who utilised the new Mortgage Charter measures continue to be collectively migrated into Stage 2, approximately £0.9 billion of exposures, and were captured in the collective SICR and other reasons category.
- Accounts that were less than 30 days past due continued to represent the vast majority of the Stage 2 population.
Risk and capital management continued
Credit risk - Banking activities continued
Stage 2 decomposition by a significant increase in credit risk trigger
| | Property |
| Corporate |
| Financial institutions |
| Sovereign |
| Total | |||||
| 30 June 2024 | £m | % |
| £m | % |
| £m | % |
| £m | % |
| £m | % |
| Wholesale trigger (1) | | | | | | | | | |
|
|
|
|
|
| PD movement | 1,742 | 57.6 |
| 6,664 | 66.1 |
| 422 | 77.0 |
| - | - |
| 8,828 | 63.5 |
| PD persistence | 68 | 2.3 |
| 248 | 2.5 |
| 3 | 0.5 |
| - | - |
| 319 | 2.3 |
| Heightened Monitoring and Risk of Credit Loss | 1,008 | 33.4 |
| 2,116 | 21.0 |
| 109 | 19.9 |
| 262 | 99.6 |
| 3,495 | 25.1 |
| Forbearance support provided | 45 | 1.5 |
| 386 | 3.8 |
| 6 | 1.1 |
| - | - |
| 437 | 3.1 |
| Customers in collections | 8 | 0.3 |
| 25 | 0.2 |
| - | - |
| - | - |
| 33 | 0.2 |
| Collective SICR and other reasons (2) | 112 | 3.7 |
| 522 | 5.2 |
| 7 | 1.3 |
| 1 | 0.4 |
| 642 | 4.6 |
| Days past due >30 | 35 | 1.2 |
| 126 | 1.2 |
| 1 | 0.2 |
| - | - |
| 162 | 1.2 |
| | 3,018 | 100.0 |
| 10,087 | 100.0 |
| 548 | 100.0 |
| 263 | 100.0 |
| 13,916 | 100.0 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 31 December 2023 | | | | | | | | | |
|
|
|
|
|
| Wholesale trigger (1) | | | | | | | | | | | | | | |
| PD movement | 2,211 | 67.6 | | 7,611 | 62.5 | | 760 | 78.7 | | - | - | | 10,582 | 64.6 |
| PD persistence | 223 | 6.8 | | 847 | 7.0 | | 13 | 1.3 | | - | - | | 1,083 | 6.6 |
| Heightened Monitoring and Risk of Credit Loss | 563 | 17.2 | | 2,630 | 21.7 | | 120 | 12.4 | | - | - | | 3,313 | 20.2 |
| Forbearance support provided | 49 | 1.6 | | 373 | 3.1 | | - | - | | - | - | | 422 | 2.6 |
| Customers in collections | 7 | 0.2 | | 23 | 0.2 | | - | - | | - | - | | 30 | 0.2 |
| Collective SICR and other reasons (2) | 70 | 2.1 | | 457 | 3.8 | | 72 | 7.5 | | 1 | 100.0 | | 600 | 3.7 |
| Days past due >30 | 147 | 4.5 | | 204 | 1.7 | | 1 | 0.1 | | - | - | | 352 | 2.1 |
| | 3,270 | 100.0 | | 12,145 | 100.0 | | 966 | 100.0 | | 1 | 100.0 | | 16,382 | 100.0 |
(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 cases where a PD assessment cannot be made and accounts where the PD has deteriorated beyond a prescribed backstop threshold aligned to risk management practices.
- PD deterioration continued to be the primary trigger of migration of exposures from Stage 1 into Stage 2. As the economic outlook improved, there was a reduction in cases triggering Stage 2.
- Moving exposures to Heightened Monitoring or Risk of Credit Loss remains an important backstop indicator of a significant increase in credit risk. The exposures classified under this Stage 2 trigger increased over the year, mainly in property, where improved PDs meant less exposures were captured under the PD deterioration Stage 2 trigger.
Risk and capital management continued
Credit risk - Banking activities continued
Asset quality (reviewed)
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 2024 | £m | £m | £m | £m |
| £m | £m | £m | £m |
| % | % | % | % |
| UK mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AQ1-AQ4 | 100,746 | 8,061 | - | 108,807 |
| 20 | 20 | - | 40 |
| 0.0 | 0.3 | - | 0.0 |
| AQ5-AQ8 | 81,760 | 11,399 | - | 93,159 |
| 29 | 43 | - | 72 |
| 0.0 | 0.4 | - | 0.1 |
| AQ9 | 166 | 908 | - | 1,074 |
| - | 6 | - | 6 |
| - | 0.7 | - | 0.6 |
| AQ10 | - | - | 2,446 | 2,446 |
| - | - | 302 | 302 |
| - | - | 12.4 | 12.4 |
| | 182,672 | 20,368 | 2,446 | 205,486 |
| 49 | 69 | 302 | 420 |
| 0.0 | 0.3 | 12.4 | 0.2 |
| Credit cards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AQ1-AQ4 | 126 | - | - | 126 |
| 1 | - | - | 1 |
| 0.8 | - | - | 0.8 |
| AQ5-AQ8 | 4,292 | 1,718 | - | 6,010 |
| 80 | 173 | - | 253 |
| 1.9 | 10.1 | - | 4.2 |
| AQ9 | 13 | 74 | - | 87 |
| 1 | 16 | - | 17 |
| 7.7 | 21.6 | - | 19.5 |
| AQ10 | - | - | 158 | 158 |
| - | - | 105 | 105 |
| - | - | 66.5 | 66.5 |
| | 4,431 | 1,792 | 158 | 6,381 |
| 82 | 189 | 105 | 376 |
| 1.9 | 10.6 | 66.5 | 5.9 |
| Other personal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AQ1-AQ4 | 708 | 107 | - | 815 |
| 8 | 14 | - | 22 |
| 1.1 | 13.1 | - | 2.7 |
| AQ5-AQ8 | 6,729 | 972 | - | 7,701 |
| 135 | 140 | - | 275 |
| 2.0 | 14.4 | - | 3.6 |
| AQ9 | 71 | 133 | - | 204 |
| 6 | 45 | - | 51 |
| 8.5 | 33.8 | - | 25.0 |
| AQ10 | - | - | 857 | 857 |
| - | - | 656 | 656 |
| - | - | 76.6 | 76.6 |
| | 7,508 | 1,212 | 857 | 9,577 |
| 149 | 199 | 656 | 1,004 |
| 2.0 | 16.4 | 76.6 | 10.5 |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AQ1-AQ4 | 101,580 | 8,168 | - | 109,748 |
| 29 | 34 | - | 63 |
| 0.0 | 0.4 | - | 0.1 |
| AQ5-AQ8 | 92,781 | 14,089 | - | 106,870 |
| 244 | 356 | - | 600 |
| 0.3 | 2.5 | - | 0.6 |
| AQ9 | 250 | 1,115 | - | 1,365 |
| 7 | 67 | - | 74 |
| 2.8 | 6.0 | - | 5.4 |
| AQ10 | - | - | 3,461 | 3,461 |
| - | - | 1,063 | 1,063 |
| - | - | 30.7 | 30.7 |
| | 194,611 | 23,372 | 3,461 | 221,444 |
| 280 | 457 | 1,063 | 1,800 | | 0.1 | 2.0 | 30.7 | 0.8 |
Risk and capital management continued
Credit risk - Banking activities continued
Asset quality (reviewed)
| | 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 2023 | £m | £m | £m | £m | | £m | £m | £m | £m | | % | % | % | % |
| UK mortgages | | | | | | | | | | | | | | |
| AQ1-AQ4 | 110,694 | 7,572 | - | 118,266 | | 51 | 20 | - | 71 | | 0.1 | 0.3 | - | 0.1 |
| AQ5-AQ8 | 77,290 | 9,578 | - | 86,868 | | 37 | 37 | - | 74 | | 0.1 | 0.4 | - | 0.1 |
| AQ9 | 156 | 704 | - | 860 | | - | 4 | - | 4 | | - | 0.6 | - | 0.5 |
| AQ10 | - | - | 2,281 | 2,281 | | - | - | 271 | 271 | | - | - | 11.9 | 11.9 |
| | 188,140 | 17,854 | 2,281 | 208,275 | | 88 | 61 | 271 | 420 | | 0.1 | 0.3 | 11.9 | 0.2 |
| Credit cards | | | | | | | | | | | | | | |
| AQ1-AQ4 | 124 | - | - | 124 | | 1 | - | - | 1 | | 0.8 | - | - | 0.8 |
| AQ5-AQ8 | 3,612 | 1,965 | - | 5,577 | | 75 | 193 | - | 268 | | 2.1 | 9.8 | - | 4.8 |
| AQ9 | 6 | 57 | - | 63 | | - | 14 | - | 14 | | - | 24.6 | - | 22.2 |
| AQ10 | - | - | 140 | 140 | | - | - | 93 | 93 | | - | - | 66.4 | 66.4 |
| | 3,742 | 2,022 | 140 | 5,904 | | 76 | 207 | 93 | 376 | | 2.0 | 10.2 | 66.4 | 6.4 |
| Other personal | | | | | | | | | | | | | | |
| AQ1-AQ4 | 764 | 150 | - | 914 | | 11 | 23 | - | 34 | | 1.4 | 15.3 | - | 3.7 |
| AQ5-AQ8 | 6,178 | 1,374 | - | 7,552 | | 138 | 180 | - | 318 | | 2.2 | 13.1 | - | 4.2 |
| AQ9 | 41 | 109 | - | 150 | | 3 | 35 | - | 38 | | 7.3 | 32.1 | - | 25.3 |
| AQ10 | - | - | 979 | 979 | | - | - | 778 | 778 | | - | - | 79.5 | 79.5 |
| | 6,983 | 1,633 | 979 | 9,595 | | 152 | 238 | 778 | 1,168 | | 2.2 | 14.6 | 79.5 | 12.2 |
| Total | | | | | | | | | | | | | | |
| AQ1-AQ4 | 111,582 | 7,722 | - | 119,304 | | 63 | 43 | - | 106 | | 0.1 | 0.6 | - | 0.1 |
| AQ5-AQ8 | 87,080 | 12,917 | - | 99,997 | | 250 | 410 | - | 660 | | 0.3 | 3.2 | - | 0.7 |
| AQ9 | 203 | 870 | - | 1,073 | | 3 | 53 | - | 56 | | 1.5 | 6.1 | - | 5.2 |
| AQ10 | - | - | 3,400 | 3,400 | | - | - | 1,142 | 1,142 | | - | - | 33.6 | 33.6 |
| | 198,865 | 21,509 | 3,400 | 223,774 | | 316 | 506 | 1,142 | 1,964 | | 0.2 | 2.4 | 33.6 | 0.9 |
- In the Personal portfolio, the majority of exposures were in the AQ4 and AQ5 bands and were within mortgages.
- In other personal, the relatively high level of exposures in AQ10 reflected that impaired assets can be held on the balance sheet, with commensurate ECL provision, for up to six years.
Risk and capital management continued
Credit risk - Banking activities continued
Asset quality (reviewed)
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 2024 | £m | £m | £m | £m |
| £m | £m | £m | £m |
| % | % | % | % |
| Property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AQ1-AQ4 | 15,257 | 1,000 | - | 16,257 |
| 13 | 8 | - | 21 |
| 0.1 | 0.8 | - | 0.1 |
| AQ5-AQ8 | 13,607 | 1,955 | - | 15,562 |
| 60 | 54 | - | 114 |
| 0.4 | 2.8 | - | 0.7 |
| AQ9 | 8 | 63 | - | 71 |
| - | 4 | - | 4 |
| - | 6.4 | - | 5.6 |
| AQ10 | - | - | 728 | 728 |
| - | - | 232 | 232 |
| - | - | 31.9 | 31.9 |
| | 28,872 | 3,018 | 728 | 32,618 |
| 73 | 66 | 232 | 371 |
| 0.3 | 2.2 | 31.9 | 1.1 |
| Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AQ1-AQ4 | 25,616 | 1,040 | - | 26,656 |
| 18 | 12 | - | 30 |
| 0.1 | 1.2 | - | 0.1 |
| AQ5-AQ8 | 39,331 | 8,797 | - | 48,128 |
| 162 | 239 | - | 401 |
| 0.4 | 2.7 | - | 0.8 |
| AQ9 | 27 | 250 | - | 277 |
| - | 19 | - | 19 |
| - | 7.6 | - | 6.9 |
| AQ10 | - | - | 1,527 | 1,527 |
| - | - | 613 | 613 |
| - | - | 40.1 | 40.1 |
| | 64,974 | 10,087 | 1,527 | 76,588 |
| 180 | 270 | 613 | 1,063 |
| 0.3 | 2.7 | 40.1 | 1.4 |
| Financial institutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AQ1-AQ4 | 52,008 | 413 | - | 52,421 |
| 24 | 1 | - | 25 |
| 0.1 | 0.2 | - | 0.1 |
| AQ5-AQ8 | 4,093 | 123 | - | 4,216 |
| 15 | 5 | - | 20 |
| 0.4 | 4.1 | - | 0.5 |
| AQ9 | 2 | 12 | - | 14 |
| - | 1 | - | 1 |
| - | 8.3 | - | 7.1 |
| AQ10 | - | - | 74 | 74 |
| - | - | 44 | 44 |
| - | - | 59.5 | 59.5 |
| | 56,103 | 548 | 74 | 56,725 |
| 39 | 7 | 44 | 90 |
| 0.1 | 1.3 | 59.5 | 0.2 |
| Sovereign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AQ1-AQ4 | 1,287 | 1 | - | 1,288 |
| 13 | 1 | - | 14 |
| 1.0 | 100.0 | - | 1.1 |
| AQ5-AQ8 | - | 130 | - | 130 |
| - | 1 | - | 1 |
| - | 0.8 | - | 0.8 |
| AQ 9 | - | 132 | - | 132 |
| - | - | - | - |
| - | - | - | - |
| AQ10 | - | - | 22 | 22 |
| - | - | 4 | 4 |
| - | - | 18.2 | 18.2 |
| | 1,287 | 263 | 22 | 1,572 |
| 13 | 2 | 4 | 19 |
| 1.0 | 0.8 | 18.2 | 1.2 |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AQ1-AQ4 | 94,168 | 2,454 | - | 96,622 |
| 68 | 22 | - | 90 |
| 0.1 | 0.9 | - | 0.1 |
| AQ5-AQ8 | 57,031 | 11,005 | - | 68,036 |
| 237 | 299 | - | 536 |
| 0.4 | 2.7 | - | 0.8 |
| AQ9 | 37 | 457 | - | 494 |
| - | 24 | - | 24 |
| - | 5.3 | - | 4.9 |
| AQ10 | - | - | 2,351 | 2,351 |
| - | - | 893 | 893 |
| - | - | 38.0 | 38.0 |
| | 151,236 | 13,916 | 2,351 | 167,503 |
| 305 | 345 | 893 | 1,543 |
| 0.2 | 2.5 | 38.0 | 0.9 |
- Asset quality was stable in property, other wholesale and financial institutions. There was a deterioration in sovereigns.
- Customer credit grades are reassessed as and when a request for financing is made, a scheduled customer credit review performed or a material credit event specific to that customer occurred. Credit grades are reassessed for all customers at least annually.
Risk and capital management continued
Credit risk - Banking activities continued
Asset quality (reviewed)
| | 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 2023 | £m | £m | £m | £m | | £m | £m | £m | £m | | % | % | % | % |
| Property | | | | | | | | | | | | | | |
| AQ1-AQ4 | 14,961 | 405 | - | 15,366 | | 16 | 5 | - | 21 | | 0.1 | 1.2 | - | 0.1 |
| AQ5-AQ8 | 12,346 | 2,799 | - | 15,145 | | 86 | 88 | - | 174 | | 0.7 | 3.1 | - | 1.2 |
| AQ9 | 9 | 66 | - | 75 | | - | 5 | - | 5 | | - | 7.6 | - | 6.7 |
| AQ10 | - | - | 621 | 621 | | - | - | 198 | 198 | | - | - | 31.9 | 31.9 |
| | 27,316 | 3,270 | 621 | 31,207 | | 102 | 98 | 198 | 398 | | 0.4 | 3.0 | 31.9 | 1.3 |
| Corporate | | | | | | | | | | | | | | |
| AQ1-AQ4 | 25,914 | 937 | - | 26,851 | | 27 | 13 | - | 40 | | 0.1 | 1.4 | - | 0.2 |
| AQ5-AQ8 | 37,738 | 10,935 | - | 48,673 | | 207 | 323 | - | 530 | | 0.6 | 3.0 | - | 1.1 |
| AQ9 | 38 | 273 | - | 311 | | - | 20 | - | 20 | | - | 7.3 | - | 6.4 |
| AQ10 | - | - | 1,504 | 1,504 | | - | - | 611 | 611 | | - | - | 40.6 | 40.6 |
| | 63,690 | 12,145 | 1,504 | 77,339 | | 234 | 356 | 611 | 1,201 | | 0.4 | 2.9 | 40.6 | 1.6 |
| Financial institutions | | | | | | | | | | | | | | |
| AQ1-AQ4 | 52,702 | 665 | - | 53,367 | | 28 | 6 | - | 34 | | 0.1 | 0.9 | - | 0.1 |
| AQ5-AQ8 | 3,402 | 284 | - | 3,686 | | 16 | 9 | - | 25 | | 0.5 | 3.2 | - | 0.7 |
| AQ9 | 1 | 17 | - | 18 | | - | - | - | - | | - | - | - | - |
| AQ10 | - | - | 16 | 16 | | - | - | 7 | 7 | | - | - | 43.8 | 43.8 |
| | 56,105 | 966 | 16 | 57,087 | | 44 | 15 | 7 | 66 | | 0.1 | 1.6 | 43.8 | 0.1 |
| Sovereign | | | | | | | | | | | | | | |
| AQ1-AQ4 | 2,487 | 1 | - | 2,488 | | 13 | 1 | - | 14 | | 0.5 | nm | - | 0.6 |
| AQ5-AQ8 | 123 | - | - | 123 | | - | - | - | - | | - | - | - | - |
| AQ9 | - | - | - | - | | - | - | - | - | | - | - | - | - |
| AQ10 | - | - | 22 | 22 | | - | - | 2 | 2 | | - | - | 9.1 | 9.1 |
| | 2,610 | 1 | 22 | 2,633 | | 13 | 1 | 2 | 16 | | 0.5 | nm | 9.1 | 0.6 |
| Total | | | | | | | | | | | | | | |
| AQ1-AQ4 | 96,064 | 2,008 | - | 98,072 | | 84 | 25 | - | 109 | | 0.1 | 1.3 | - | 0.1 |
| AQ5-AQ8 | 53,609 | 14,018 | - | 67,627 | | 309 | 420 | - | 729 | | 0.6 | 3.0 | - | 1.1 |
| AQ9 | 48 | 356 | - | 404 | | - | 25 | - | 25 | | - | 7.0 | - | 6.2 |
| AQ10 | - | - | 2,163 | 2,163 | | - | - | 818 | 818 | | - | - | 37.8 | 37.8 |
| | 149,721 | 16,382 | 2,163 | 168,266 | | 393 | 470 | 818 | 1,681 | | 0.3 | 2.9 | 37.8 | 1.0 |
Risk and capital management continued
Credit risk - Trading activities
This section details the credit risk profile of NatWest Group's trading activities.
Securities financing transactions and collateral (reviewed)
The table below shows securities financing transactions in Commercial & Institutional and Central items & other. Balance sheet captions include balances held at all classifications under IFRS.
| | Reverse repos |
| Repos | ||||
| |
| Of which: | Outside netting |
|
| Of which: | Outside netting |
| | Total | can be offset | arrangements |
| Total | can be offset | arrangements |
| 30 June 2024 | £m | £m | £m |
| £m | £m | £m |
| Gross | 77,085 | 77,000 | 85 |
| 74,623 | 73,535 | 1,088 |
| IFRS offset | (32,309) | (32,309) | - |
| (32,309) | (32,309) | - |
| Carrying value | 44,776 | 44,691 | 85 |
| 42,314 | 41,226 | 1,088 |
| |
|
|
|
|
|
|
|
| Master netting arrangements | (1,454) | (1,454) | - |
| (1,454) | (1,454) | - |
| Securities collateral | (42,965) | (42,965) | - |
| (39,772) | (39,772) | - |
| Potential for offset not recognised under IFRS | (44,419) | (44,419) | - |
| (41,226) | (41,226) | - |
| Net | 357 | 272 | 85 |
| 1,088 | - | 1,088 |
| | | | | | | | |
| 31 December 2023 | | | | | | | |
| Gross | 77,508 | 77,050 | 458 | | 66,767 | 66,047 | 720 |
| IFRS offset | (25,903) | (25,903) | - | | (25,903) | (25,903) | - |
| Carrying value | 51,605 | 51,147 | 458 | | 40,864 | 40,144 | 720 |
| Master netting arrangements | (669) | (669) | - | | (669) | (669) | - |
| Securities collateral | (50,287) | (50,287) | - | | (39,475) | (39,475) | - |
| Potential for offset not recognised under IFRS | (50,956) | (50,956) | - | | (40,144) | (40,144) | - |
| Net | 649 | 191 | 458 | | 720 | - | 720 |
Risk and capital management continued
Credit risk - Trading activities continued
Derivatives (reviewed)
The table below shows derivatives by type of contract. The master netting agreements and collateral shown do not result in a net presentation on the balance sheet under IFRS. A significant proportion of the derivatives relate to trading activities in Commercial & Institutional. The table also includes hedging derivatives in Central items & other.
| | 30 June 2024 | | 31 December 2023 | ||||||||
| | Notional |
|
|
| | | | | |||
| | GBP | USD | EUR | Other | Total | Assets | Liabilities | | Notional | Assets | Liabilities |
| | £bn | £bn | £bn | £bn | £bn | £m | £m | | £bn | £m | £m |
| Gross exposure |
|
|
|
|
| 86,136 | 82,013 | | | 99,501 | 96,264 |
| IFRS offset |
|
|
|
|
| (18,622) | (21,164) | | | (20,597) | (23,869) |
| Carrying value | 3,378 | 3,188 | 5,651 | 1,191 | 13,408 | 67,514 | 60,849 | | 13,403 | 78,904 | 72,395 |
| Of which: |
|
|
|
|
|
|
| | | | |
| Interest rate (1) | 3,046 | 1,705 | 5,004 | 268 | 10,023 | 40,925 | 35,137 | | 10,268 | 44,563 | 38,483 |
| Exchange rate | 331 | 1,478 | 637 | 923 | 3,369 | 26,446 | 25,442 | | 3,120 | 34,161 | 33,586 |
| Credit | 1 | 5 | 10 | - | 16 | 143 | 270 | | 15 | 180 | 326 |
| Carrying value |
|
|
|
| 13,408 | 67,514 | 60,849 | | 13,403 | 78,904 | 72,395 |
| Counterparty mark-to-market netting |
|
|
|
|
| (50,530) | (50,530) | | | (60,355) | (60,355) |
| Cash collateral |
|
|
|
|
| (11,296) | (5,650) | | | (12,284) | (6,788) |
| Securities collateral |
|
|
|
|
| (3,503) | (1,142) | | | (3,408) | (1,664) |
| Net exposure |
|
|
|
|
| 2,185 | 3,527 | | | 2,857 | 3,588 |
| Banks (2) |
|
|
|
|
| 217 | 441 | | | 335 | 555 |
| Other financial institutions (3) |
|
|
|
|
| 1,117 | 1,260 | | | 1,422 | 1,304 |
| Corporate (4) |
|
|
|
|
| 815 | 1,808 | | | 1,063 | 1,690 |
| Government (5) |
|
|
|
|
| 36 | 18 | | | 37 | 39 |
| Net exposure |
|
|
|
|
| 2,185 | 3,527 | | | 2,857 | 3,588 |
| UK |
|
|
|
|
| 1,148 | 1,871 | | | 1,283 | 1,912 |
| Europe |
|
|
|
|
| 551 | 1,085 | | | 800 | 1,209 |
| US |
|
|
|
|
| 404 | 383 | | | 607 | 381 |
| RoW |
|
|
|
|
| 82 | 188 | | | 167 | 86 |
| Net exposure |
|
|
|
|
| 2,185 | 3,527 | | | 2,857 | 3,588 |
| | | | | | | | | | | | |
| Asset quality of uncollateralised derivative assets | | | | | | | | | | | |
| AQ1-AQ4 |
|
|
|
|
| 1,871 | | | | 2,382 | |
| AQ5-AQ8 |
|
|
|
|
| 312 | | | | 471 | |
| AQ9-AQ10 |
|
|
|
|
| 2 | | | | 4 | |
| Net exposure |
|
|
|
|
| 2,185 | | | | 2,857 | |
(1) The notional amount of interest rate derivatives included £6,950 billion (31 December 2023 - £7,280 billion) in respect of contracts cleared through central clearing counterparties.
(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 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.
Risk and capital management continued
Credit risk - Trading activities continued
Debt securities (reviewed)
The table below shows debt securities held at mandatory fair value through profit or loss by issuer as well as ratings based on the lowest of Standard & Poor's, Moody's and Fitch. Refer to Note 9 Trading assets and liabilities for details on short positions.
| | Central and local government | Financial |
|
| ||
| | UK | US | Other | institutions | Corporate | Total |
| 30 June 2024 | £m | £m | £m | £m | £m | £m |
| AAA | - | - | 1,302 | 1,406 | - | 2,708 |
| AA to AA+ | - | 5,507 | 45 | 672 | 12 | 6,236 |
| A to AA- | 5,170 | - | 2,049 | 504 | 378 | 8,101 |
| BBB- to A- | - | - | 1,250 | 465 | 645 | 2,360 |
| Non-investment grade | - | - | - | 153 | 178 | 331 |
| Total | 5,170 | 5,507 | 4,646 | 3,200 | 1,213 | 19,736 |
| | | | | | | |
| 31 December 2023 | | | | | | |
| AAA | - | - | 1,333 | 1,132 | - | 2,465 |
| AA to AA+ | - | 2,600 | 19 | 762 | 4 | 3,385 |
| A to AA- | 2,729 | - | 1,017 | 251 | 283 | 4,280 |
| BBB- to A- | - | - | 693 | 295 | 489 | 1,477 |
| Non-investment grade | - | - | - | 198 | 149 | 347 |
| Total | 2,729 | 2,600 | 3,062 | 2,638 | 925 | 11,954 |
Risk and capital management continued
Capital, liquidity and funding risk
Introduction
NatWest Group takes a comprehensive approach 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.
Key developments since 31 December 2023
| CET1 ratio 13.6% (as at 31 December 2023 - 13.4%) |
| MREL £57.3bn (as at 31 December 2023 - £55.8bn) |
| RWAs £180.8bn (as at 31 December 2023 - £183.0bn) |
| The CET1 ratio increased by 20 basis points to 13.6%. The increase in the CET1 ratio was due to a £2.2 billion decrease in RWAs and a £0.2 billion increase in CET1 capital. The CET1 capital increase was mainly driven by an attributable profit to ordinary shareholders of £2.1 billion and other movements on reserves and regulatory adjustments of £0.1 billion partially offset by a directed buyback of £1.2 billion and a foreseeable ordinary dividend accrual of £0.8 billion. |
| Minimum Requirements of own funds and Eligible Liabilities increased by £1.5 billion to £57.3 billion driven by a £1.0 billion increase in Tier 1 capital and a £0.6 billion increase in MREL eligible Tier 2 capital. The increase in capital was driven by issuance of $1.0 billion Additional Tier 1 capital and $1.0 billion Tier 2 capital in the period. There was an immaterial decrease in senior unsecured debt following redemption of a €0.8 billion debt instrument and a $2 billion debt instrument offset by the issuance of USD debt instruments totalling $2.8 billion. |
| Total RWAs decreased by £2.2 billion to £180.8 billion during H1 2024 reflecting:
- a decrease in credit risk RWAs of £2.7 billion, primarily due to active RWA management partially offset by drawdowns and new facilities within Commercial & Institutional. - a decrease of £0.7 billion in counterparty credit risk driven by reduced over-the-counter exposures and securities financing transactions. - a decrease in market risk RWAs of £0.4 billion, predominantly driven by risk reduction activity. - an increase of £1.6 billion in operational risk RWAs following the annual recalculation as a result of higher income compared to 2020.
|
| UK leverage ratio 5.2% (as at 31 December 2023 - 5.0%) |
| Liquidity portfolio £227.0bn (as at 31 December 2023 - £222.8bn) |
| LCR 151% (as at 31 December 2023 - 144%) |
| NSFR 139% (as at 31 December 2023 - 133%) |
| The leverage ratio increased by 20 basis points to 5.2%, driven by a £1.0 billion increase in Tier 1 capital partially offset by a £2.9 billion increase in leverage exposure. The key drivers in the leverage exposure were an increase in other off- balance sheet items partially offset by a decrease in other financial assets. |
| The liquidity portfolio increased by £4.2 billion to £227.0 billion. Primary liquidity increased by £12.3 billion to £160.4 billion, driven by an increase in customer deposits and wholesale funding partly offset by capital distributions (share buyback and dividends). Secondary liquidity decreased £8.1 billion due to a decrease in pre-positioned collateral at the Bank of England. |
| The Liquidity Coverage Ratio (LCR) increased by 7 percentage points to 151%, during H1 2024, driven by an increase in customer deposits partly offset by capital distributions (share buyback and dividends).
| | The Net Stable Funding Ratio (NSFR) increased 6% to 139% driven by increased customer deposits and increased wholesale funding. |
Risk and capital management continued
Capital, liquidity and funding risk continued
Maximum Distributable Amount (MDA) and Minimum Capital Requirements
NatWest Group is subject to minimum capital requirements relative to RWAs. The table below summarises the minimum capital requirements (the sum of Pillar 1 and Pillar 2A), and the additional capital buffers which are held in excess of the regulatory minimum requirements and are usable in stress.
Where the CET1 ratio falls below the sum of the minimum capital and the combined buffer requirement, there is a subsequent automatic restriction on the amount available to service discretionary payments (including AT1 coupons), known as the MDA. Note that different 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 NatWest Group's minimum requirements and its MDA threshold requirements.
| Type | CET1 | Total Tier 1 | Total capital | ||
| Pillar 1 requirements | 4.5% | 6.0% | 8.0% | ||
| Pillar 2A requirements | 1.8% | 2.4% | 3.2% | ||
| Minimum Capital Requirements | 6.3% | 8.4% | 11.2% | ||
| Capital conservation buffer | 2.5% | 2.5% | 2.5% | ||
| Countercyclical capital buffer (1) | 1.7% | 1.7% | 1.7% | ||
| MDA threshold (2) | 10.5% |
| n/a |
| n/a |
| Overall capital requirement | 10.5% | 12.6% | 15.4% | ||
| Capital ratios at 30 June 2024 | 13.6% | 16.2% | 19.5% | ||
| Headroom (3,4) | 3.1% | 3.6% | 4.1% | ||
(1) The UK countercyclical buffer (CCyB) rate is currently being maintained at 2%. This may vary in either direction in the future subject to how risks develop. Foreign exposures may be subject to different CCyB rates depending on the rate set in those jurisdictions.
(2) Pillar 2A requirements for NatWest Group are set as a variable amount with the exception of some fixed add-ons.
(3) The headroom does not reflect excess distributable capital and may vary over time.
(4) Headroom as at 31 December 2023 was CET1 2.9%, Total Tier 1 2.9% and Total Capital 3.0%.
Leverage ratios
The table below summarises the minimum ratios of capital to leverage exposure under the binding PRA UK leverage framework applicable for NatWest Group.
| Type | CET1 | Total Tier 1 |
| Minimum ratio | 2.44% | 3.25% |
| Countercyclical leverage ratio buffer (1) | 0.6% | 0.6% |
| Total | 3.04% | 3.85% |
(1) The countercyclical leverage ratio buffer is set at 35% of NatWest Group's CCyB.
Risk and capital management continued
Capital, liquidity and funding risk continued
Capital and leverage ratios
The table below sets out the key capital and leverage ratios. NatWest Group is subject to the requirements set out in the UK CRR therefore the capital and leverage ratios are presented under these frameworks on a transitional basis.
| | 30 June | 31 December |
| | 2024 | 2023 |
| Capital adequacy ratios (1) | % | % |
| CET1 | 13.6 | 13.4 |
| Tier 1 | 16.2 | 15.5 |
| Total | 19.5 | 18.4 |
| | | |
| Capital | £m | £m |
| Tangible equity | 25,241 | 25,653 |
| |
| |
| Expected loss less impairment | (34) | - |
| Prudential valuation adjustment | (233) | (279) |
| Deferred tax assets | (822) | (979) |
| Own credit adjustments | 19 | (10) |
| Pension fund assets | (161) | (143) |
| Cash flow hedging reserve | 1,812 | 1,899 |
| Foreseeable ordinary dividends | (839) | (1,013) |
| Adjustment for trust assets (2) | (365) | (365) |
| Foreseeable charges | (50) | (525) |
| Adjustments under IFRS 9 transitional arrangements | 39 | 202 |
| Total regulatory adjustments | (634) | (1,213) |
| |
| |
| CET1 capital | 24,607 | 24,440 |
| |
| |
| Additional AT1 capital | 4,670 | 3,875 |
| Tier 1 capital | 29,277 | 28,315 |
| |
| |
| End-point Tier 2 capital | 5,924 | 5,317 |
| Tier 2 capital | 5,924 | 5,317 |
| Total regulatory capital | 35,201 | 33,632 |
| |
| |
| Risk-weighted assets |
| |
| Credit risk | 144,852 | 147,598 |
| Counterparty credit risk | 7,139 | 7,830 |
| Market risk | 6,956 | 7,363 |
| Operational risk | 21,821 | 20,198 |
| Total RWAs | 180,768 | 182,989 |
(1) Based on current PRA rules, includes the transitional arrangements for the capital impact of IFRS 9 expected credit loss (ECL) accounting. The impact of the IFRS 9 transitional adjustments at 30 June 2024 was £39 million for CET1 capital, £39 million for total capital and £1 million RWAs (31 December 2023 - £0.2 billion CET1 capital, £54 million total capital and £17 million RWAs). Excluding this adjustment, the CET1 ratio would be 13.6% (31 December 2023 - 13.2%). Tier 1 capital ratio would be 16.2% (31 December 2023 - 15.4%) and the Total capital ratio would be 19.5% (31 December 2023 - 18.4%).
(2) Prudent deduction in respect of agreement with the pension fund.
Risk and capital management continued
Capital, liquidity and funding risk continued
Capital and leverage ratios continued
|
| 30 June | 31 December |
|
| 2024 | 2023 |
| Leverage | £m | £m |
| Cash and balances at central banks | 115,833 | 104,262 |
| Trading assets | 45,974 | 45,551 |
| Derivatives | 67,514 | 78,904 |
| Financial assets | 437,909 | 439,449 |
| Other assets | 22,116 | 23,605 |
| Assets of disposal groups | 992 | 902 |
| Total assets | 690,338 | 692,673 |
| Derivatives |
| |
| - netting and variation margin | (66,846) | (79,299) |
| - potential future exposures | 16,829 | 17,212 |
| Securities financing transactions gross up | 1,645 | 1,868 |
| Other off balance sheet items | 55,003 | 50,961 |
| Regulatory deductions and other adjustments | (15,782) | (16,043) |
| Claims on central banks | (112,377) | (100,735) |
| Exclusion of bounce back loans | (3,084) | (3,794) |
| UK leverage exposure | 565,726 | 562,843 |
| UK leverage ratio (%) (1) | 5.2 | 5.0 |
(1) The UK leverage exposure and transitional Tier 1 capital are calculated in accordance with current PRA rules. Excluding the IFRS 9 transitional adjustment, the UK leverage ratio would be 5.2% (31 December 2023 - 5.0%).
Risk and capital management continued
Capital, liquidity and funding risk continued
Capital flow statement
The table below analyses the movement in CET1, AT1 and Tier 2 capital for the half year ended 30 June 2024. It is presented on a transitional basis based on current PRA rules.
| | CET1 | AT1 | Tier 2 | Total |
| | £m | £m | £m | £m |
| At 31 December 2023 | 24,440 | 3,875 | 5,317 | 33,632 |
| Attributable profit for the period | 2,099 | - | - | 2,099 |
| Directed buyback | (1,241) | - | - | (1,241) |
| Foreseeable ordinary dividends | (839) | - | - | (839) |
| Foreign exchange reserve | (53) | - | - | (53) |
| FVOCI reserve | 6 | - | - | 6 |
| Own credit | 29 | - | - | 29 |
| Share capital and reserve movements in respect of employee share schemes | 143 | - | - | 143 |
| Goodwill and intangibles deduction | 24 | - | - | 24 |
| Deferred tax assets | 157 | - | - | 157 |
| Prudential valuation adjustments | 46 | - | - | 46 |
| New issues of capital instruments | - | 795 | 788 | 1,583 |
| Redemption of capital instruments | - | - | (34) | (34) |
| Foreign exchange movements | - | - | (19) | (19) |
| Adjustment under IFRS 9 transitional arrangements | (163) |
|
| (163) |
| Expected loss less impairment | (34) |
|
| (34) |
| Other movements | (7) | - | (128) | (135) |
| At 30 June 2024 | 24,607 | 4,670 | 5,924 | 35,201 |
- For CET1 movements refer to the key points on page 60.
- AT1 movements reflects the £0.8 billion in relation to $1.0 billion 8.125% Reset Perpetual Subordinated Contingent Convertible Notes issued in May 2024.
- Tier 2 instrument movements include £0.8 billion in relation to $1.0 billion 6.475% Fixed to Fixed Reset Tier 2 Notes 2034 issued in March 2024, partially offset by the £0.1 billion redemption of 5.125% Subordinated Tier 2 Notes 2024 in May 2024 and foreign exchange movements.
- Within Tier 2, there was also a decrease in the Tier 2 surplus provisions.
Risk and capital management continued
Capital, liquidity and funding risk
Capital resources (reviewed)
NatWest Group's regulatory capital is assessed against minimum requirements that are set out under the UK CRR to determine the strength of its capital base. This note shows a reconciliation of shareholders' equity to regulatory capital.
| | 30 June | 31 December |
| | 2024 | 2023 |
| | £m | £m |
| Shareholders' equity (excluding non-controlling interests) | | |
| Shareholders' equity | 37,521 | 37,157 |
| Other equity instruments | (4,690) | (3,890) |
| | 32,831 | 33,267 |
| Regulatory adjustments and deductions |
| |
| Own credit | 19 | (10) |
| Defined benefit pension fund adjustment | (161) | (143) |
| Cash flow hedging reserve | 1,812 | 1,899 |
| Deferred tax assets | (822) | (979) |
| Prudential valuation adjustments | (233) | (279) |
| Goodwill and other intangible assets | (7,590) | (7,614) |
| Foreseeable ordinary dividends | (839) | (1,013) |
| Adjustment for trust assets (1) | (365) | (365) |
| Foreseeable charges | (50) | (525) |
| Adjustment under IFRS 9 transitional arrangements | 39 | 202 |
| Expected loss less impairment | (34) | - |
| | (8,224) | (8,827) |
| CET1 capital | 24,607 | 24,440 |
| Additional Tier 1 (AT1) capital |
| |
| Qualifying instruments and related share premium | 4,670 | 3,875 |
| AT1 capital | 4,670 | 3,875 |
| Tier 1 capital | 29,277 | 28,315 |
| Qualifying Tier 2 capital |
| |
| Qualifying instruments and related share premium | 5,924 | 5,189 |
| Other regulatory adjustments | - | 128 |
| Tier 2 capital | 5,924 | 5,317 |
| Total regulatory capital | 35,201 | 33,632 |
(1) Prudent deduction in respect of agreement with the pension fund to establish legal structure to remove dividend linked contribution.
Risk and capital management continued
Capital, liquidity and funding risk continued
Minimum requirements of own funds and eligible liabilities (MREL)
The following table illustrates the components of estimated MREL in NatWest Group and operating subsidiaries and includes external issuances only.
| | 30 June 2024 |
| 31 December 2023 | ||||||
| |
| Balance | Regulatory | MREL |
| | Balance | Regulatory | MREL |
| | Par value (1) | sheet value | value | value (2) |
| Par value | sheet value | value | value |
| | £bn | £bn | £bn | £bn |
| £bn | £bn | £bn | £bn |
| CET1 capital (3) | 24.6 | 24.6 | 24.6 | 24.6 | | 24.4 | 24.4 | 24.4 | 24.4 |
| Tier 1 capital: end-point CRR compliant AT1 |
|
|
|
|
| | | | |
| of which: NatWest Group plc (holdco) | 4.7 | 4.7 | 4.7 | 4.7 |
| 3.9 | 3.9 | 3.9 | 3.9 |
| of which: NatWest Group plc operating subsidiaries (opcos) | - | - | - | - |
| - | - | - | - |
| | 4.7 | 4.7 | 4.7 | 4.7 |
| 3.9 | 3.9 | 3.9 | 3.9 |
| Tier 1 capital: end-point CRR non-compliant |
|
|
|
|
| | | | |
| of which: holdco | - | - | - | - |
| - | - | - | - |
| of which: opcos | 0.1 | 0.1 | - | - |
| 0.1 | 0.1 | - | - |
| | 0.1 | 0.1 | - | - |
| 0.1 | 0.1 | - | - |
| Tier 2 capital: end-point CRR compliant |
|
|
|
|
| | | | |
| of which: holdco | 5.9 | 5.6 | 5.9 | 5.9 |
| 5.6 | 5.3 | 5.2 | 5.2 |
| of which: opcos | - | - | - | - |
| - | - | - | - |
| | 5.9 | 5.6 | 5.9 | 5.9 |
| 5.6 | 5.3 | 5.2 | 5.2 |
| Tier 2 capital: end-point CRR non-compliant |
|
|
|
|
| | | | |
| of which: holdco | - | - | - | - |
| - | - | - | - |
| of which: opcos | 0.2 | 0.3 | - | - |
| 0.2 | 0.3 | - | - |
| | 0.2 | 0.3 | - | - |
| 0.2 | 0.3 | - | - |
| Senior unsecured debt securities |
|
|
|
|
| | | | |
| of which: holdco | 22.1 | 21.4 | - | 22.1 |
| 22.2 | 21.7 | - | 22.2 |
| of which: opcos (4) | 34.0 | 33.5 | - | - | | 33.4 | 29.9 | - | - |
| | 56.1 | 54.9 | - | 22.1 | | 55.6 | 51.6 | - | 22.2 |
| Tier 2 capital |
|
|
|
|
| | | | |
| Other regulatory adjustments | - | - | - | - | | - | - | 0.1 | 0.1 |
| |
|
|
|
| | | | | |
| Total | 91.6 | 90.2 | 35.2 | 57.3 | | 89.8 | 85.6 | 33.6 | 55.8 |
| RWAs |
|
|
| 180.8 | | | | | 183.0 |
| UK leverage exposure |
|
|
| 565.7 | | | | | 562.8 |
| MREL as a ratio of RWAs |
|
|
| 31.7% | | | | | 30.5% |
| MREL as a ratio of UK leverage exposure |
|
|
| 10.1% | | | | | 9.9% |
| (1) | Par value reflects the nominal value of securities issued. |
| (2) | MREL value reflects NatWest Group's interpretation of the Bank of England's approach to setting a MREL, published in December 2021 (Updating June 2018). Liabilities excluded from MREL 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 MREL calculation includes Tier 1 and Tier 2 securities before the application of any regulatory caps or adjustments. |
| (3) | Shareholders' equity was £37.5 billion (2023 - £37.2 billion). |
| (4) | As per 2023, Intra group issuances were reported in "Par value" but on further clarification from Bank of England, it has been excluded from reporting in 2024. |
Risk and capital management continued
Capital, liquidity and funding risk continued
Minimum requirements of own funds and eligible liabilities (MREL)
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 |
|
|
| NatWest | NWM | RBS |
| | | NatWest | Holdings | NWB | RBS | NWM | Markets | Securities | International |
| | | Group plc | Limited | Plc | plc | Plc | N.V. | Inc. | Limited |
| | | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn |
| Additional Tier 1 | Externally issued | 4.7 | - | 0.1 | - | - | - | - | - |
| Additional Tier 1 | Internally issued | - | 3.9 | 3.3 | 0.5 | 0.9 | 0.2 | - | 0.3 |
| | | 4.7 | 3.9 | 3.4 | 0.5 | 0.9 | 0.2 | - | 0.3 |
| Tier 2 | Externally issued | 5.6 | - | - | - | 0.0 | 0.2 | - | - |
| Tier 2 | Internally issued | 0.0 | 5.2 | 3.6 | 0.9 | 1.1 | 0.1 | 0.3 | - |
| | | 5.6 | 5.2 | 3.6 | 0.9 | 1.1 | 0.3 | 0.3 | - |
| Senior unsecured | Externally issued | 21.4 | - | - | - | - | - | - | - |
| Senior unsecured | Internally issued | - | 11.0 | 6.5 | 1.1 | 3.5 | - | - | 0.3 |
| | | 21.4 | 11.0 | 6.5 | 1.1 | 3.5 | - | - | 0.3 |
| Total outstanding issuance | 31.7 | 20.1 | 13.5 | 2.5 | 5.5 | 0.5 | 0.3 | 0.6 | |
(1) For AT1 and Tier 2, 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, while 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 and Tier 2 instruments are before grandfathering restrictions imposed by CRR.
(3) Internal issuance for NWB Plc and RBS plc represents AT1, Tier 2 or Senior unsecured issuance to NWH Ltd and for NWM N.V. and NWM SI to NWM Plc.
(4) The balances are the IFRS balance sheet carrying amounts for Senior unsecured debt category and it does not include CP, CD and short term/medium notes issued from NatWest Group operating subsidiaries.
(5) The above table does not include CET 1 numbers.
(6) NWM Securities Inc is regulated under US broker dealer rules.
(7) RBSI Ltd - MREL resolution rules are under development in Jersey.
Risk and capital management continued
Capital, liquidity and funding risk continued
Risk-weighted assets
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 31 December 2023 | 147.6 | 7.8 | 7.4 | 20.2 | 183.0 |
| Foreign exchange movement | (0.2) | - | - | - | (0.2) |
| Business movement | (2.2) | (0.6) | (0.4) | 1.6 | (1.6) |
| Risk parameter changes | (0.1) | (0.1) | - | - | (0.2) |
| Model updates | (0.2) | - | - | - | (0.2) |
| Other changes | - | - | - | - | - |
| At 30 June 2024 | 144.9 | 7.1 | 7.0 | 21.8 | 180.8 |
The table below analyses segmental RWAs.
| |
|
|
|
| Total |
| | Retail | Private | Commercial & | Central items | NatWest |
| | Banking | Banking | Institutional | & other (1) | Group |
| Total RWAs | £bn | £bn | £bn | £bn | £bn |
| At 31 December 2023 | 61.6 | 11.2 | 107.4 | 2.8 | 183.0 |
| Foreign exchange movement | - | - | (0.2) | - | (0.2) |
| Business movement | 0.7 | (0.2) | (1.9) | (0.2) | (1.6) |
| Risk parameter changes | 0.2 | - | (0.4) | - | (0.2) |
| Model updates | (0.2) | - | - | - | (0.2) |
| At 30 June 2024 | 62.3 | 11.0 | 104.9 | 2.6 | 180.8 |
| | - | - | - | - | - |
| Credit risk | 53.9 | 9.5 | 79.4 | 2.1 | 144.9 |
| Counterparty credit risk | 0.2 | - | 6.9 | - | 7.1 |
| Market risk | 0.1 | - | 6.9 | - | 7.0 |
| Operational risk | 8.1 | 1.5 | 11.7 | 0.5 | 21.8 |
| Total RWAs | 62.3 | 11.0 | 104.9 | 2.6 | 180.8 |
| | | | | | |
(1) £0.9 billion of Central items & other relates to Ulster Bank RoI.
Total RWAs decreased by £2.2 billion to £180.8 billion during the period mainly reflecting:
- A decrease in Business movements totalling £1.6 billion, primarily driven by active RWA management of £4.3 billion partially offset by increased RWAs following annual recalculation of operational risk as a result of higher income when compared to 2020 and an increase in drawdowns and new facilities within Commercial & Institutional.
- A decrease in Risk parameters of £0.2 billion, primarily driven by customers moving into default within Commercial & Institutional.
- A decrease in model updates of £0.2 billion, driven by IRB Temporary Model Adjustment related to mortgages within Retail Banking.
Risk and capital management continued
Capital, liquidity and funding risk continued
Funding sources (reviewed)
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 2024 |
| 31 December 2023 | ||||
| | Short-term | Long-term |
|
| Short-term | Long-term | |
| | less than | more than |
|
| less than | more than | |
| | 1 year | 1 year | Total |
| 1 year | 1 year | Total |
| | £m | £m | £m |
| £m | £m | £m |
| Bank deposits |
|
|
| | | | |
| Repos | 5,897 | - | 5,897 |
| 3,118 | - | 3,118 |
| Other bank deposits (1) | 5,965 | 13,764 | 19,729 |
| 5,836 | 13,236 | 19,072 |
| | 11,862 | 13,764 | 25,626 |
| 8,954 | 13,236 | 22,190 |
| Customer deposits |
|
|
|
| | | |
| Repos | 6,846 | - | 6,846 |
| 10,844 | - | 10,844 |
| Non-bank financial institutions | 48,784 | 34 | 48,818 |
| 46,875 | 13 | 46,888 |
| Personal | 221,498 | 6,255 | 227,753 |
| 216,456 | 6,436 | 222,892 |
| Corporate | 149,448 | 110 | 149,558 |
| 150,718 | 35 | 150,753 |
| | 426,576 | 6,399 | 432,975 |
| 424,893 | 6,484 | 431,377 |
| Trading liabilities (2) |
|
|
|
| | | |
| Repos (3) | 29,021 | 300 | 29,321 |
| 26,634 | 268 | 26,902 |
| Derivative collateral | 14,030 | - | 14,030 |
| 15,075 | - | 15,075 |
| Other bank customer deposits | 478 | 322 | 800 |
| 768 | 382 | 1,150 |
| Debt securities in issue - Medium term notes | 80 | 227 | 307 |
| 418 | 288 | 706 |
| | 43,609 | 849 | 44,458 |
| 42,895 | 938 | 43,833 |
| Other financial liabilities |
|
|
|
| | | |
| Customer deposits | 461 | 1,188 | 1,649 |
| 194 | 1,086 | 1,280 |
| Debt securities in issue: | - | - | - |
| | | |
| Commercial paper and certificates of deposit | 12,023 | 362 | 12,385 |
| 11,116 | 205 | 11,321 |
| Medium term notes | 6,811 | 35,459 | 42,270 |
| 6,878 | 32,625 | 39,503 |
| Covered bonds | - | 749 | 749 |
| 2,122 | - | 2,122 |
| Securitisation (5) | - | 1,222 | 1,222 |
| - | 863 | 863 |
| | 19,295 | 38,980 | 58,275 |
| 20,310 | 34,779 | 55,089 |
| Subordinated liabilities | 1,593 | 4,439 | 6,032 |
| 1,047 | 4,667 | 5,714 |
| Total funding | 502,935 | 64,431 | 567,366 |
| 498,099 | 60,104 | 558,203 |
| Of which: available in resolution (4) |
|
| 27,061 | | | | 26,561 |
(1) Includes £12.0 billion (31 December 2023 - £12.0 billion) relating to Term Funding Scheme with additional incentives for Small and Medium-sized Enterprises participation.
(2) Excludes short positions of £9.7 billion (31 December 2023 - £9.8 billion).
(3) Comprises central & other bank repos of £6.4 billion (31 December 2023 - £4.0 billion), other financial institution repos of £20.0 billion (31 December 2023 - £20.4 billion) and other corporate repos of £2.9 billion (31 December 2023 - £2.5 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 December 2021 (updating June 2018). The balance consists of £21.4 billion (31 December 2023 - £21.7 billion) under debt securities in issue (senior MREL) and £5.6 billion (31 December 2023 - £4.9 billion) under subordinated liabilities.
(5) NatWest Group transfers credit risk on originated loans and mortgages without the transfer of assets to a structured entity, whereby it enters credit derivative and financial guarantee contracts with consolidated structured entities and they in turn issue debt securities to investors. This funding is legally ringfenced in the structured entity and is restricted to specifically cover investor credit protection claim payments in respect of the associated loans and mortgages.
Risk and capital management continued
Capital, liquidity and funding risk continued
Liquidity portfolio (reviewed)
The table below shows the composition of the liquidity portfolio with primary liquidity aligned to high-quality liquid assets on a regulatory LCR basis. Secondary liquidity comprises of assets which are eligible as collateral for local central bank liquidity facilities and do not form part of the LCR eligible high-quality liquid assets.
| | Liquidity value | ||||||
| | 30 June 2024 |
| 31 December 2023 | ||||
| | NatWest | NWH | UK DoL |
| NatWest | NWH | UK DoL |
| | Group (1) | Group (2) | Sub |
| Group (1) | Group (2) | Sub |
| | £m | £m | £m |
| £m | £m | £m |
| Cash and balances at central banks | 111,763 | 73,408 | 72,895 |
| 99,855 | 68,495 | 67,954 |
| High quality government/MDB/PSE and GSE bonds (4) | 35,616 | 26,253 | 26,253 |
| 36,250 | 26,510 | 26,510 |
| Extremely high quality covered bonds | 3,892 | 3,892 | 3,892 |
| 4,164 | 4,164 | 4,164 |
| LCR level 1 assets | 151,271 | 103,553 | 103,040 |
| 140,269 | 99,169 | 98,628 |
| LCR level 2 Eligible Assets (5) | 9,124 | 7,897 | 7,897 |
| 7,796 | 7,320 | 7,320 |
| Primary liquidity (HQLA) (6) | 160,395 | 111,450 | 110,937 |
| 148,065 | 106,489 | 105,948 |
| Secondary liquidity | 66,589 | 66,559 | 66,559 |
| 74,722 | 74,683 | 74,683 |
| Total liquidity value | 226,984 | 178,009 | 177,496 |
| 222,787 | 181,172 | 180,631 |
(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 RBSI Ltd and NWM N.V. who hold managed portfolios that comply with local regulations that may differ from PRA rules.
(2) NWH Group comprises UK DoLSub and NatWest Bank Europe GmbH who hold managed portfolios that comply with local regulations that may differ from PRA rules.
(3) NatWest Markets Plc liquidity portfolio is reported in the NatWest Markets Plc 2023 Annual Report and Accounts.
(4) Multilateral development bank abbreviated to MDB, public sector entities abbreviated to PSE and government sponsored entities abbreviated to GSE.
(5) Includes Level 2A and Level 2B.
(6) High-quality liquid assets abbreviated to HQLA.
Risk and capital management continued
Non-traded market risk
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.
Key developments
- In the UK, the base rate remained unchanged at 5.25% between 31 December 2023 and 30 June 2024.
- At 30 June 2024, longer-term interest rates continued to anticipate future reductions in the UK base rate, but by less than expected at 31 December 2023. As a result, the five-year sterling swap rate increased to 3.99% at the end of June 2024 from 3.38% at the end of December 2023. The ten-year sterling swap rate also increased, to 3.88% from 3.29%.
- The structural hedge notional decreased by £10 billion to £197 billion from £207 billion, partly reflecting recent changes in the deposit mix with higher volumes of term deposits and lower volumes of sight deposits.
- The one-year positive sensitivity of net interest earnings to an upward 25-basis-point parallel shift in all yield curves reduced slightly, to £135 million at 30 June 2024 from £164 million at 31 December 2023, partly reflecting changes to customer pass-through assumptions. The adverse sensitivity to a downward 25-basis-point parallel shift was broadly stable at £167 million at 30 June 2024 compared to £169 million at 31 December 2023.
- Sterling was broadly stable against both the US dollar and the euro over the period. Against the dollar, sterling was 1.26 at 30 June 2024 compared to 1.27 at 31 December 2023. Against the euro, it was 1.18 at 30 June 2024 compared to 1.15 at 31 December 2023. Structural foreign currency exposures (excluding additional tier 1 economic hedges) were stable, in sterling-equivalent nominal terms, at £3,375 million at 30 June 2024 compared to £3,381 million at 31 December 2023.
Non-traded internal VaR (1-day 99%) (reviewed)
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 2024 |
| 30 June 2023 |
| 31 December 2023 | |||||||||
| |
|
|
| 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 | 24.1 | 28.2 | 17.6 | 17.6 | | 40.5 | 63.2 | 30.1 | 63.2 | | 38.0 | 63.2 | 24.6 | 24.6 |
| Credit spread | 55.6 | 60.2 | 50.7 | 50.7 |
| 23.6 | 29.7 | 20.9 | 29.7 |
| 33.1 | 54.2 | 20.9 | 54.2 |
| Structural foreign |
|
|
|
|
| | | | |
| | | | |
| exchange rate | 9.2 | 12.3 | 7.1 | 12.3 |
| 11.3 | 13.6 | 8.4 | 12.3 |
| 11.2 | 13.6 | 8.4 | 12.1 |
| Equity | 9.3 | 10.3 | 8.2 | 8.2 |
| 16.7 | 19.0 | 13.0 | 13.0 |
| 14.2 | 19.0 | 10.4 | 10.4 |
| Pipeline risk (1) | 5.9 | 12.7 | 3.4 | 12.7 |
| 3.1 | 4.4 | 1.4 | 3.4 |
| 3.3 | 7.1 | 1.4 | 7.1 |
| Diversification (2) | (41.1) |
|
| (39.7) |
| (35.3) | | | (38.1) |
| (34.4) | | | (29.9) |
| Total | 63.0 | 73.8 | 52.9 | 61.8 | | 59.9 | 83.5 | 52.1 | 83.5 | | 65.4 | 83.4 | 52.1 | 78.5 |
(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.
- On an average basis, total non-traded VaR for H1 2024 was broadly similar to H1 2023 and H2 2023.
- Interest rate VaR fell at the end of H1 2024, reflecting action taken to manage down interest rate repricing mismatches across customer products.
- After increasing significantly during H2 2023, credit spread VaR reduced towards the end of H1 2024. This was mainly driven by earlier loss events falling out of the VaR calculation window.
- Pipeline VaR increased, partly reflecting hedging modifications related to recent changes in customer behaviour through the fixed-rate mortgage application process.
Risk and capital management continued
Non-traded market risk continued
Structural hedging
NatWest Group has a significant pool of stable, non and low interest-bearing liabilities, principally comprising current accounts and instant access savings, as well as its equity and reserves. A proportion of these balances are hedged, either by investing directly in longer-term fixed-rate assets (such as fixed-rate mortgages) 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, 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 for management purposes, to products and interest rate returns. The programme aims to track a time series of medium-term swap rates, but the yield will be affected by changes in NatWest Group's equity capital.
The table below shows hedge income, total yield, incremental income and the period-end and average notional balances allocated to equity and products in respect of the structural hedges managed by NatWest Group. Hedge income represents the fixed leg of the hedge. Incremental income represents the difference between hedge income and short-term cash rates. For example, the sterling overnight index average (SONIA) is used to estimate incremental income from sterling structural hedges.
| | Half year ended | ||||||||||||||||
| | 30 June 2024 |
| 30 June 2023 | | 31 December 2023 | ||||||||||||
| |
|
| Period |
|
|
| | | Period | | | | | | Period | | |
| | Incremental | Hedge | -end | Average | Total |
| Incremental | Hedge | -end | Average | Total | | Incremental | Hedge | -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 | (364) | 218 | 22 | 22 | 1.95 | | (246) | 204 | 23 | 22 | 1.83 | | (365) | 214 | 22 | 23 | 1.91 |
| Product | (3,184) | 1,392 | 175 | 176 | 1.58 |
| (2,773) | 1,362 | 202 | 205 | 1.33 | | (3,548) | 1,460 | 185 | 193 | 1.51 |
| Total | (3,548) | 1,610 | 197 | 198 | 1.62 | | (3,019) | 1,566 | 225 | 227 | 1.38 | | (3,913) | 1,674 | 207 | 216 | 1.56 |
For commentary, refer to the following page.
Equity structural hedges refer to income allocated primarily to equity and reserves. At 30 June 2024, the equity structural hedge notional was allocated between NWH Group and NWM Group in a ratio of approximately 78/22 respectively.
Product structural hedges refer to income allocated to customer products, mainly current accounts and customer deposits in Commercial & Institutional, Retail Banking and Private Banking.
At 30 June 2024, approximately 94% by notional of total structural hedges were sterling-denominated.
Risk and capital management continued
Non-traded market risk continued
The following table presents the incremental income associated with product structural hedges at segment level.
| | Half year ended | ||
| | 30 June | 30 June | 31 December |
| | 2024 | 2023 | 2023 |
| | £m | £m | £m |
| Retail Banking | (1,354) | (1,156) | (1,488) |
| Commercial & Institutional | (1,617) | (1,415) | (1,798) |
| Private Banking & Other | (212) | (202) | (262) |
| Total | (3,184) | (2,773) | (3,548) |
- The structural hedge notional fell, mainly reflecting recent changes in the deposit mix, including migration to term deposits.
- The five-year sterling swap rate rose to 3.99% at 30 June 2024 from 3.38% at 31 December 2023. The ten-year sterling swap rate also rose, to 3.88% from 3.29%. The structural hedge yield also rose to 1.62% in H1 2024 from 1.56% in H2 2023 and from 1.38% in H1 2023.
- Incremental income remained negative in H1 2024. Compared to the total yield of 1.62% in H1 2024, the sterling overnight cash rate (i.e. SONIA) in H1 2024 was 5.19% on average.
Sensitivity of net interest earnings
Net interest earnings are sensitive to changes in the level of interest rates, mainly because maturing structural hedges are replaced at higher or lower rates and changes to coupons on managed rate customer products do not always match changes in market rates of interest or central bank policy rates.
Earnings sensitivity is derived from a market-implied forward rate curve, which will incorporate expected changes in central bank policy rates such as the Bank of England base rate. A simple scenario is shown that projects forward earnings based on the 30 June 2024 balance sheet, which is assumed to remain constant. An earnings projection is derived from the market-implied curve, which is then subject to interest rate shocks. The difference between the market-implied projection and the shock gives an indication of underlying sensitivity to interest rate movements.
Reported sensitivities should not be considered a forecast of future performance in these rate scenarios. Actions that could reduce interest earnings sensitivity include changes in pricing strategies on customer loans and deposits as well as hedging. Management action may also be taken to stabilise total income also taking into account non-interest income.
Risk and capital management continued
Non-traded market risk continued
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.
| | +25 basis points upward shift |
| -25 basis points downward shift | ||||
| | Year 1 | Year 2 | Year 3 |
| Year 1 | Year 2 | Year 3 |
| 30 June 2024 | £m | £m | £m |
| £m | £m | £m |
| Structural hedges | 42 | 129 | 216 |
| (42) | (129) | (216) |
| Managed margin | 93 | 97 | 110 |
| (125) | (107) | (110) |
| Total | 135 | 226 | 326 |
| (167) | (236) | (326) |
| |
|
|
|
|
|
|
|
| 31 December 2023 |
|
|
|
|
|
|
|
| Structural hedges | 44 | 138 | 227 | | (44) | (138) | (227) |
| Managed margin | 120 | 117 | 114 | | (125) | (121) | (105) |
| Total | 164 | 255 | 341 | | (169) | (259) | (332) |
| (1) | Earnings sensitivity considers only the main drivers, namely structural hedging and margin management. |
The following table presents the one-year sensitivity to upward and downward 25-basis-point and 100-basis-point shifts in the yield curve, analysed by currency.
| | Shifts in yield curve | ||||||||
| | 30 June 2024 |
| 31 December 2023 | ||||||
| | +25 basis | -25 basis | +100 basis | -100 basis |
| +25 basis | -25 basis | +100 basis | -100 basis |
| | points | points | points | points |
| points | points | points | points |
|
| £m | £m | £m | £m |
| £m | £m | £m | £m |
| Euro | 1 | (5) | 5 | (16) | | 7 | (11) | 38 | (45) |
| Sterling | 121 | (149) | 487 | (614) | | 138 | (139) | 504 | (577) |
| US dollar | 10 | (9) | 46 | (47) | | 14 | (14) | 54 | (56) |
| Other | 3 | (4) | 13 | (15) | | 5 | (5) | 21 | (22) |
| Total | 135 | (167) | 551 | (692) | | 164 | (169) | 617 | (700) |
- Changes in pass-through assumptions for managed-rate savings products contributed to the reduced sensitivity.
Risk and capital management continued
Non-traded market risk continued
Foreign exchange risk (reviewed)
The table below shows structural foreign currency exposures.
| |
|
| Structural foreign |
| Residual |
| | Net investments in | Net investment | currency exposures | Economic | structural foreign |
| | foreign operations | in hedges | pre-economic hedges | hedges (1) | currency exposures |
| 30 June 2024 | £m | £m | £m | £m | £m |
| US dollar | 1,201 | - | 1,201 | (1,201) | - |
| Euro | 4,345 | (2,649) | 1,696 | - | 1,696 |
| Other non-sterling | 864 | (386) | 478 | - | 478 |
| Total | 6,410 | (3,035) | 3,375 | (1,201) | 2,174 |
| |
|
|
|
|
|
| 31 December 2023 |
|
|
|
|
|
| US dollar | 1,185 | (228) | 957 | (957) | - |
| Euro | 4,475 | (2,585) | 1,890 | - | 1,890 |
| Other non-sterling | 963 | (429) | 534 | - | 534 |
| Total | 6,623 | (3,242) | 3,381 | (957) | 2,424 |
(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.
- 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 £159 million in equity, respectively.
Risk and capital management continued
Traded market risk
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.
Traded VaR (1-day 99%) (reviewed)
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 2024 |
| 30 June 2023 |
| 31 December 2023 | |||||||||
| |
|
|
| 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 | 6.7 | 12.0 | 3.6 | 6.6 | | 9.0 | 19.3 | 4.3 | 16.5 | | 10.5 | 17.3 | 4.4 | 7.4 |
| Credit spread | 8.1 | 10.1 | 6.7 | 7.6 |
| 5.9 | 6.9 | 4.9 | 6.1 |
| 6.4 | 7.1 | 5.3 | 6.8 |
| Currency | 2.1 | 6.7 | 0.8 | 1.9 |
| 2.1 | 4.9 | 1.0 | 1.5 |
| 2.4 | 7.0 | 0.9 | 1.8 |
| Equity | 0.1 | 0.1 | 0.1 | 0.1 |
| - | 0.1 | - | - |
| - | 0.1 | - | 0.1 |
| Diversification (1) | (6.8) |
|
| (5.5) |
| (6.8) | | | (6.3) |
| (6.9) | | | (7.2) |
| Total | 10.2 | 16.2 | 7.0 | 10.7 | | 10.2 | 17.8 | 6.6 | 17.8 | | 12.4 | 20.0 | 8.4 | 8.9 |
(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 decrease in average interest rate VaR and total VaR, compared to 2023, reflected a decrease in yield curve risk in sterling and euro flow trading.
- The increase in average credit spread VaR mainly reflected a net longer credit profile over the period.
Pension risk
On 31 May 2024, the Trustee of the Group Pension Fund entered into a buy-in transaction with a third-party insurer for some of the liabilities of the Main section. This is an insurance policy that gives the Fund protection against demographic and investment risks, so improves the security of member benefits. The transaction has not affected the 2024 statement of comprehensive income because the net pension asset is limited to zero due to the impact of the asset ceiling.
Compliance and conduct risk
A ring-fencing attestation was completed and submitted to the PRA on 29 March 2024. The annual Board Consumer Duty assessment concluded that NatWest Group is meeting its obligations. Following the second phase of Consumer Duty rules coming into force on 31 July 2024, planning is centred around embedding and enhancing ongoing work, including reporting on good customer outcomes, and Group-wide communications.
NatWest Markets has a programme in place to review, remediate and enhance certain areas of its business. The results of this will be shared with the Department of Justice Monitor and other regulators, with the ongoing work plan continuing to be assessed for potential impact.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.