NatWest Markets Group
2023 Annual Results
NatWest Markets
Plc
ci.natwest.com
NatWest Markets Group (NWM
Group)
Results for the year ended 31
December 2023
Financial review
NWM Group reported a loss for the
year ended 31 December 2023 of £98 million compared with a loss of
£264 million for the year ended 31 December 2022. Higher income
largely reflected stronger performances in Fixed Income and Capital
Markets and the impact of a new profit share arrangement with
fellow NatWest Group subsidiaries. Operating expenses for the
current year were slightly higher than in 2022, as a decrease in
litigation and conduct costs was offset by an increase in other
operating expenses.
Highlights
Financial performance
|
-
|
Income of £1,069 million in 2023 was
up by £380 million compared with £689 million in 2022. The increase
was largely driven by stronger performances in Fixed Income and
Capital Markets, the impact of a new profit share arrangement with
fellow NatWest Group subsidiaries and higher income levels in
Capital Management Unit & other; partially offset by weaker
performance in Currencies, which was impacted by lower FX
volatility levels in the current year, and lower own credit
adjustments.
|
|
-
|
Operating expenses of £1,142 million
increased by £14 million compared with £1,128 million in 2022.
Litigation and conduct costs of £60 million reflected ongoing
progress in closing legacy matters and were down by £20 million
compared with £80 million in 2022. Other operating expenses of
£1,082 million were £34 million higher than £1,048 million in 2022,
largely due to lower technology investment costs recognised in the
prior year and the impact of one-off items.
|
|
-
|
Total assets and liabilities
decreased by £11.9 billion and £11.7 billion to £177.9 billion and
£171.5 billion respectively at 31 December 2023, compared with the
prior year. The decreases were mainly driven by lower derivative
fair values, largely reflecting market volatility across major
currencies including the weakening of USD and an overall reduction
in interest rates during the year, following contrasting trends
from the previous year. This was partially offset by higher funded
assets, driven by increases in settlement balances, loans to
customers and other financial assets.
|
Capital and leverage
|
|
-
|
Total NWM Plc RWAs were £22.1
billion at 31 December 2023, compared with £21.4 billion at 31
December 2022. The increase in the year reflected higher levels of
credit risk and counterparty credit risk, partially offset by
decreases in market risk and operational risk.
|
|
-
|
NWM Plc's Common Equity Tier 1
(CET1) ratio was 17.1% at 31 December 2023, compared with 17.2% at
31 December 2022. The decrease in the year was largely driven by
the increase in RWAs, in addition to reserve movements.
|
|
-
|
Total MREL for NWM Plc at 31
December 2023 was £7.6 billion, or 34.5% of RWAs, compared with
£8.7 billion or 40.4% of RWAs at 31 December 2022. The decrease in
total MREL in the current year was largely due to the redemption of
a $0.6 billion internal Tier 2 instrument, decrease in senior
unsecured debt driven by a $0.6 billion instrument now classified
as ineligible, and other reserve movements.
|
|
-
|
NWM Plc's leverage ratio was 5.0% at
31 December 2023, compared with 5.4% at 31 December 2022. The
decrease in 2023 was mainly due to higher leverage exposure, driven
by increases in off-balance sheet exposures, loans to customers and
other financial assets.
|
Liquidity and funding
|
|
-
|
NWM Plc's liquidity portfolio at 31
December 2023 was £14.7 billion with an LCR of 183%, compared with
£19.1 billion and an LCR of 253% at 31 December 2022. Stressed
coverage ratio was 162% at 31 December 2023, compared with 199% at
31 December 2022.
|
|
-
|
NWM Plc issued £2.4 billion of
public benchmark transactions during 2023, comprised of three
issuances under the EMTN programme being €1.5 billion, CHF0.25
billion and £0.5 billion of notes respectively, and an issuance
under the AUD debt issuance programme of AUD0.6 billion of notes.
NWM Plc also raised funding in other formats throughout the year
including, but not limited to, structured note issuance. Issuance
was lower than guidance of £3 billion to £5 billion of public
benchmark issuance for the year, mainly due to higher levels of
customer deposits and optimisation of funding
requirements.
|
|
-
|
NWM Plc 2024 funding plan currently
anticipates £3-5 billion of public benchmark issuance. On 9 January
2024, NWM Plc issued a total of €2.5 billion of notes under the
EMTN programme in benchmark transactions.
|
Outlook
(1,2)
We aim to generate sustainable and
attractive returns over the medium term, with efficient capital
usage.
Medium-term outlook
|
Metric (3)
|
Estimate
|
|
CET1 ratio
|
~14%
|
|
MREL ratio (4)
|
>30%
|
|
Leverage ratio
|
>4%
|
|
(1)
|
This supersedes all prior
guidance.
|
|
(2)
|
The guidance, targets, expectations
and trends discussed in this section represent management's current
expectations and are subject to change, including as a result of
the factors described in the "Risk Factors" section on pages 166 to
187 NatWest Markets Plc 2023 Annual Report and Accounts. These
statements constitute forward-looking statements. Refer to
'Forward-looking statements' in this announcement.
|
|
(3)
|
All metrics presented relate to NWM
Plc.
|
|
(4)
|
Includes total regulatory capital,
non-eligible capital and down streamed internal MREL.
|
Chief Executive's
statement
In 2023, we continued to support our
customers as they navigated macroeconomic uncertainty and
geo-political challenges - from inflation and changing interest
rates to supply-chain disruption.
Delivering on our strategy of
sustainable growth
Our total income was £1,069 million
(55% increase year-on-year) and the operating loss before tax for
the year was £75 million. This reflected a stronger current year
performance compared to 2022, largely driven by Fixed Income and by
growth in our Capital Markets business, in addition to the impact
of a new profit share arrangement with NatWest Group fellow
subsidiaries. The new profit share arrangement was introduced
during the year in relation to NatWest Group Commercial &
Institutional business activity. We have also continued to make
progress in closing legacy matters during the year.
We maintained a robust capital
position and reported a strong CET1 ratio of 17.1% and leverage of
5.0%, with our risk-weighted assets (RWAs) increasing slightly to
£22.1 billion reflecting higher levels of credit risk and
counterparty credit risk, offset partially by decreases in market
and operational risk.
We issued £2.4 billion of public
benchmark transactions during 2023 which is lower than guidance of
£3 billion to £5 billion for the year. This was mainly due to
higher levels of customer deposits and optimisation of funding
requirements.
Being the best bank we can be for
our customers
I'm proud of the way that, as part
of the NatWest Group Commercial & Institutional (C&I)
segment, we are bringing together the best of our products and
services to support customers' needs in a challenging market while
keeping the bank resilient, safe and secure.
Examples include a pan-segment
approach to our customer strategy in corporate rates sales and, in
foreign exchange (FX), we've onboarded over 500 new and existing
Commercial customers. We've continued to grow our Funds business,
providing financing to a range of customers and Fund
strategies. We have ambitious plans for further growth in
2024 and look forward to further supporting our funds customers'
financing and hedging needs.
Our Capital Markets business
continued to deliver for our customers, and we achieved
year-on-year increases in revenue (16%) as well as strong league
table positions in our chosen debt markets. We also made good
progress in our Fixed Income business with income increasing by
£113 million during the year to £153 million.
We've leveraged our global footprint
by working closely with the businesses in the Commercial &
Institutional segment to connect them to the important US market,
as well as supporting US customers to access financing in the UK
and Europe. We've raised funding and financing for our customers
from investors in Asia Pacific (APAC) and have continued to build
and strengthen our European customer business.
Supporting climate
transition
We've continued to support our
customers' transition to a low carbon economy as well as their ESG
ambitions and targets. This included supporting NatWest Group's
social bond issuance linked to women-led enterprises and the Ørsted
blue bond, which represents the world's first blue bond issued by
an energy company.
In 2023, we provided £14.8 billion
of climate and sustainable funding and financing (21% increase
year-on-year), contributing a cumulative £30.3 billion towards the
NatWest Group target of £100 billion aimed to be delivered between
1 July 2021 and the end of 2025.
Our progress has also been
recognised externally with lead manager awards in three categories
at the Environmental Finance Bond Awards.
Developing a strong compliance
culture
We're now a year into our US
Department of Justice-appointed monitorship and are working
together closely to ensure a strong control environment for our
business1.
From 1 January 2024, NatWest Markets
N.V. will be supervised by the European Central Bank (ECB) in
collaboration with De Nederlandsche Bank (DNB). A robust programme
of work has supported this significant transition to ensure
appropriate systems and processes are in place.
Building our inclusive
culture
We've continued to invest in our
team and business capabilities through structured development
opportunities which support skills and capability for the future.
Our Diversity, Equity and Inclusion Action Committee has made
progress on the focus areas of how we attract, develop and retain
more diverse colleagues.
I believe that, in 2024, we will be
in an even stronger position to support the Commercial &
Institutional segment by delivering our products and capabilities
and supporting global connectivity to strengthen customer
relationships. This will build long-term value, support customers'
ambitions and drive sustainable returns for
shareholders.
Robert Begbie
Chief Executive Officer
|
(1)
|
You can find more information on
this in the Litigation and regulatory matters section on page 155
of the NatWest Markets Plc 2023 Annual Report and
Accounts.
|
Business performance
summary
The table below presents a segmental
analysis of key lines of NWM Group's income statement. Commentary
refers to the table below as well as the consolidated income
statement shown on page 6.
|
|
Year ended
|
|
Quarter
ended
|
|
|
31 December
|
31 December
|
|
31 December
|
30
September
|
31
December
|
|
|
2023
|
2022
|
|
2023
|
2023
|
2022
|
|
Income statement (1)
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
Net interest income
|
355
|
91
|
|
154
|
123
|
29
|
|
Non-interest income
|
714
|
598
|
|
270
|
92
|
78
|
|
Total income
|
1,069
|
689
|
|
424
|
215
|
107
|
|
Litigation and conduct
costs
|
(60)
|
(80)
|
|
(31)
|
(37)
|
(47)
|
|
Other operating expenses
|
(1,082)
|
(1,048)
|
|
(283)
|
(257)
|
(254)
|
|
Operating expenses
|
(1,142)
|
(1,128)
|
|
(314)
|
(294)
|
(301)
|
|
Operating (loss)/profit before impairment
losses/releases
|
(73)
|
(439)
|
|
110
|
(79)
|
(194)
|
|
Impairment
(losses)/releases
|
(2)
|
(8)
|
|
(5)
|
(2)
|
2
|
|
Operating (loss)/profit before tax
|
(75)
|
(447)
|
|
105
|
(81)
|
(192)
|
|
Tax (charge)/credit
|
(23)
|
183
|
|
2
|
24
|
147
|
|
(Loss)/profit for the period
|
(98)
|
(264)
|
|
107
|
(57)
|
(45)
|
|
|
|
|
|
|
|
|
|
Income (2)
|
|
|
|
|
|
|
|
Fixed Income
|
153
|
40
|
|
16
|
32
|
5
|
|
Currencies
|
496
|
513
|
|
145
|
124
|
119
|
|
Capital Markets
|
463
|
398
|
|
131
|
114
|
93
|
|
Capital Management Unit &
other (3)
|
(7)
|
(113)
|
|
19
|
3
|
(41)
|
|
Income including shared revenue before OCA
|
1,105
|
838
|
|
311
|
273
|
176
|
|
Transfer pricing agreements with
fellow
|
|
|
|
|
|
|
|
NatWest Group
subsidiaries (4)
|
(33)
|
(191)
|
|
118
|
(51)
|
(51)
|
|
Income excluding OCA
|
1,072
|
647
|
|
429
|
222
|
125
|
|
Own credit adjustments
(OCA)
|
(3)
|
42
|
|
(5)
|
(7)
|
(18)
|
|
Total income
|
1,069
|
689
|
|
424
|
215
|
107
|
(1) A
presentational change was made in Q1 2023 whereby NWM Group no
longer separately reports the performance of the NatWest Markets
operating segment and Central items & other.
(2) Product
performance includes gross income earned on a NatWest Group-wide
basis, including amounts contributed to other NatWest Group
subsidiaries. Income including shared revenue before OCA includes
revenue share from other NatWest Group subsidiaries but before
revenue share is paid to or contributed to those
subsidiaries.
(3) Capital
Management Unit was set up in Q3 2020 to manage the capital usage
and optimisation across all parts of NatWest Markets, with the
income materially relating to legacy positions. Other mainly
related to asset disposal/strategic risk reduction costs that were
separately disclosed prior to Q1 2023.
(4) Transfer
pricing arrangements with fellow NatWest Group subsidiaries
includes shared revenue paid to or contributed to those
subsidiaries and a new profit share arrangement with fellow NatWest
Group subsidiaries. The profit share arrangement was introduced
during the year to reward NWM Group on an arm's length basis for
its contribution to the performance of the NatWest Group Commercial
& Institutional business segment, 2023 being the first full
year with the Commercial & Institutional segment in place. The
profit share is not allocated to individual NatWest Markets product
areas.
Year ended 31 December 2023 performance
-
Net interest income was
£355 million for 2023 compared with £91 million in 2022. Net
interest income largely represents interest income from lending
activity and capital hedges, offset by interest expense from the
funding costs of the business. The movement compared with the prior
year largely reflects growth in lending activity, interest rate
movements and other one-off items.
-
Non-interest income of
£714 million in 2023 increased by £116 million compared with £598
million in 2022. This was largely driven by the new profit share
arrangement with fellow NatWest Group subsidiaries of £177 million,
in addition to higher income levels in Capital Management Unit
& other which reflected lower strategic exit activity in 2023
and fair value movements with regard to legacy and funding
positions. This was partially offset by the impact of one-off
items, a weaker performance in Currencies as FX volatility levels
reduced in the current year, and lower own credit adjustments
reflecting the widening of spreads in the prior year.
-
Operating expenses were
£1,142 million in 2023, up by £14 million compared with £1,128
million in 2022. Litigation and conduct costs of £60 million in
2023 reflected ongoing progress in closing legacy matters and were
down by £20 million compared with £80 million in 2022. Other
operating expenses of £1,082 million increased by £34 million
compared with £1,048 million in 2022, largely due to lower
technology investment costs recognised in the prior year and the
impact of one-off items.
-
Impairment losses of £2
million in 2023 were down by £6 million compared with £8 million in
2022.
-
The tax charge of £23
million on the operating loss before tax of £75 million is higher
than the expected UK corporation tax rate of 23.5%, primarily due
to adjustments in respect of prior periods.
Q4
2023 performance
-
Net interest income of
£154 million for Q4 2023 increased by £31 million compared with
£123 million in Q3 2023 and by £125 million
compared with £29 million in Q4 2022, largely reflecting growth in
lending activity, the impact of one-off items and interest rate
movements.
-
Non-interest income of
£270 million in Q4 2023 increased by £178 million compared with £92
million in Q3 2023 and by £192 million compared with £78 million in
Q4 2022, largely driven by the new profit share arrangement with
fellow NatWest Group subsidiaries of £177 million, higher revenues
in Currencies and Capital Markets, and increased income levels in
Capital Management Unit & other which reflected lower strategic
exit activity in 2023 and fair value movements with regard to
legacy and funding positions.
-
Operating expenses were
£314 million in Q4 2023 compared with £294 million in Q3 2023 and
£301 million in Q4 2022. Litigation and conduct costs of £31
million in Q4 2023 reflected ongoing progress in closing legacy
matters and were down by £6 million compared with £37 million in Q3
2023 and by £16 million compared with £47 million in Q4 2022. Other
operating expenses of £283 million were up by £26 million compared
with £257 million in Q3 2023 and up by £29 million compared with
£254 million in Q4 2022, largely due to the impact of one-off costs
recognised in the current quarter.
Business performance summary
continued
Balance sheet profile as at 31 December 2023
NWM Group's balance sheet profile is
summarised below. Commentary refers to the
tables below as well as the consolidated balance sheet on page
7.
|
Assets
|
|
Liabilities
|
|
|
2023
|
2022
|
|
2023
|
2022
|
|
|
|
|
£bn
|
£bn
|
|
£bn
|
£bn
|
|
|
|
Cash and balances at central
banks
|
13.8
|
17.0
|
|
|
|
|
|
|
Securities
|
12.0
|
9.9
|
|
9.8
|
9.5
|
|
Short positions
|
|
Reverse repos (1)
|
23.7
|
21.5
|
|
26.9
|
23.7
|
|
Repos (2)
|
|
Derivative cash collateral posted (3)
|
8.9
|
12.7
|
|
15.1
|
17.7
|
|
Derivative cash collateral received (4)
|
|
Other trading assets
|
0.7
|
1.2
|
|
1.8
|
1.9
|
|
Other trading liabilities
|
|
Total trading assets
|
45.3
|
45.3
|
|
53.6
|
52.8
|
|
Total trading liabilities
|
|
Loans - amortised cost
|
14.2
|
11.3
|
|
9.3
|
6.7
|
|
Deposits - amortised cost
|
|
Settlement balances
|
7.2
|
2.6
|
|
6.6
|
2.0
|
|
Settlement balances
|
|
Amounts due from holding
company
|
|
|
|
|
|
|
Amounts due to holding
company
|
|
and fellow subsidiaries
|
1.7
|
0.7
|
|
5.8
|
6.2
|
|
and fellow subsidiaries
|
|
Other financial assets
|
15.7
|
11.9
|
|
23.6
|
21.1
|
|
Other financial
liabilities
|
|
Other assets
|
0.7
|
0.8
|
|
0.6
|
0.8
|
|
Other liabilities
|
|
Funded assets
|
98.6
|
89.6
|
|
99.5
|
89.6
|
|
Liabilities excluding
derivatives
|
|
Derivative assets
|
79.3
|
100.2
|
|
72.0
|
93.6
|
|
Derivative
liabilities
|
|
Total assets
|
177.9
|
189.8
|
|
171.5
|
183.2
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
of
which:
|
|
|
|
|
|
25.1
|
23.5
|
|
wholesale funding (5)
|
|
|
|
|
|
9.9
|
7.7
|
|
short-term wholesale
funding (5)
|
|
Net derivative assets
|
2.9
|
3.5
|
|
3.6
|
5.6
|
|
Net derivative
liabilities
|
(1) Comprises bank reverse repos of £6.3 billion (2022 - £4.6
billion) and customer reverse repos of £17.4 billion (2022 - £16.9
billion).
(2) Comprises bank repos of £4.0 billion (2022 - £1.6 billion) and
customer repos of £22.9 billion (2022 - £22.1 billion).
(3) Comprises derivative cash collateral posted relating to banks
of £4.3 billion (2022 - £4.6 billion) and customers of £4.6 billion
(2022 - £8.1 billion).
(4) Comprises derivative cash collateral received relating to
banks of £6.8 billion (2022 - £7.5 billion) and customers of £8.3
billion (2022 - £10.2 billion).
(5) Predominantly comprises bank deposits (excluding repos), debt
securities in issue and third-party subordinated
liabilities.
-
Total assets and liabilities decreased by £11.9 billion and £11.7 billion to £177.9 billion
and £171.5 billion respectively at 31 December 2023, compared with
£189.8 billion and £183.2 billion at 31 December 2022. The
decreases were mainly driven by lower derivative fair values,
largely reflecting market volatility across major currencies and
movements in interest rates. Funded assets, which exclude
derivatives, increased by £9.0 billion to £98.6 billion, largely
driven by higher settlement balances, loans to customers and other
financial assets.
-
Cash and balances at central banks
decreased by £3.2 billion to £13.8 billion at 31
December 2023 compared with £17.0 billion at 31 December 2022,
largely driven by a reduction in excess liquidity and liquidity
buffer optimisation offset by an increase in customer
deposits.
-
Trading assets which
primarily relate to client-led activity as well as derivative cash
collateral posted, were £45.3 billion at 31 December 2023,
consistent with 31 December 2022, as increases in securities and
reverse repos were offset by a decrease in derivative cash
collateral posted. Trading
liabilities increased by £0.8 billion to £53.6 billion at 31
December 2023 from £52.8 billion at 31 December 2022, largely
driven by an increase in repos, partially offset by a decrease in
derivatives cash collateral received.
-
Loans to customers increased by £2.8 billion to £13.0 billion at 31 December 2023
compared with £10.2 billion at 31 December 2022, largely driven by
growth in private financing.
-
Derivative assets and derivative
liabilities were down by £20.9 billion to
£79.3 billion and by £21.6 billion to £72.0 billion respectively
compared with year end 2022. The decreases in mark-to-market values
largely reflected market volatility across major currencies
including the weakening of USD and an overall
reduction in interest rates during the year, following contrasting
trends from the previous year.
-
Other financial assets increased by £3.8 billion to £15.7 billion at 31 December
2023, mainly driven by an increase in held-to-collect securities
purchased to support customer primary issuance.
-
Customer deposits increased by £3.4 billion to £7.0 billion at 31 December 2023,
in line with our strategy to increase customer deposits to match
planned banking book activity.
-
Other financial liabilities of £23.6 billion were up by £2.5 billion from £21.1 billion at
31 December 2022, driven by new issuance partially offset by
maturities. The balance at 31 December 2023 includes £17.6 billion
of medium-term notes issued.
Non-IFRS measures
This document contains a number of
non-IFRS measures. For details of the basis of preparation and
reconciliations, where applicable, refer to the non-IFRS measures
section on page 14.
Capital, liquidity and funding
risk
Introduction
NWM 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 NWM Group operates
within its regulatory requirements and risk appetite.
Capital, RWAs and leverage
Capital resources, RWAs and leverage
based on the PRA transitional arrangements for NWM Plc are set out
below. Regulatory capital is monitored and reported at legal entity level for
large subsidiaries of NatWest Group.
|
|
31 December
|
30
September
|
31
December
|
|
|
2023
|
2023
|
2022
|
|
Capital adequacy
ratios (1,2)
|
%
|
%
|
%
|
|
CET1
|
17.1
|
15.1
|
17.2
|
|
Tier 1
|
20.2
|
18.0
|
20.4
|
|
Total
|
23.0
|
20.6
|
25.7
|
|
Total MREL
|
34.5
|
31.9
|
40.4
|
|
|
|
|
|
|
Capital (1,2)
|
£m
|
£m
|
£m
|
|
CET1
|
3,776
|
3,523
|
3,682
|
|
Tier 1
|
4,455
|
4,202
|
4,361
|
|
Total
|
5,072
|
4,828
|
5,502
|
|
Total MREL (3)
|
7,627
|
7,456
|
8,652
|
|
|
|
|
|
|
Risk-weighted assets
|
|
|
|
|
Credit risk
|
7,895
|
7,444
|
7,110
|
|
Counterparty credit risk
|
6,516
|
6,528
|
5,682
|
|
Market risk
|
6,366
|
8,098
|
7,152
|
|
Operational risk
|
1,322
|
1,322
|
1,478
|
|
Total RWAs
|
22,099
|
23,392
|
21,422
|
(1)
NWM Plc's total capital ratio requirement is 11.5%, comprising the
minimum capital requirement of 8%, supplemented with the capital
conservation buffer of 2.5% and the institution specific
countercyclical buffer ('CCyB') of 1.0%. The minimum CET1 ratio is
8.0%, including the minimum capital requirement of 4.5%. The CCyB
is based on the weighted average of NWM Plc's geographical
exposures.
(2) In
addition, NWM Plc is subject to Pillar 2A requirements for CET1,
AT1 and T2. Refer to the NWM Plc Pillar 3 report for further
details on these additional capital requirements.
(3)
Includes senior debt instruments issued to NatWest Group plc with a
regulatory value of £2.6 billion (30 September 2023 - £2.6 billion,
31 December 2022 - £3.2 billion).
Leverage
The leverage ratio has been
calculated in accordance with the Leverage Ratio (CRR) part of the
PRA rulebook.
|
|
31 December
|
30
September
|
31
December
|
|
|
2023
|
2023
|
2022
|
|
Tier 1 capital (£m)
|
4,455
|
4,202
|
4,361
|
|
Leverage exposure
(£m) (1)
|
89,929
|
85,706
|
81,083
|
|
Leverage ratio
(%)
|
5.0
|
4.9
|
5.4
|
(1) Leverage
exposure is broadly aligned to the accounting value of on and
off-balance sheet exposures albeit subject to specific adjustments
for derivatives, securities financing positions and off-balance
sheet exposures.
Liquidity and funding
|
|
31 December
|
30
September
|
31
December
|
|
|
2023
|
2023
|
2022
|
|
Liquidity coverage ratio (LCR)
(%)
|
183
|
229
|
253
|
|
Liquidity portfolio (£bn)
|
14.7
|
20.1
|
19.1
|
|
Total wholesale funding
(£bn) (1)
|
25.1
|
26.1
|
23.5
|
|
Total funding including repo
(£bn)
|
82.4
|
89.8
|
77.0
|
(1)
Predominantly comprises bank deposits (excluding
repos), debt securities in issue and third-party subordinated
liabilities.
Consolidated income
statement
for the period ended 31 December
2023
|
|
Year ended
|
|
Quarter
ended
|
|
|
31 December
|
31
December
|
|
31 December
|
30
September
|
31
December
|
|
|
2023
|
2022
|
|
2023
|
2023
|
2022
|
|
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
Interest receivable
|
2,186
|
745
|
|
677
|
614
|
270
|
|
Interest payable
|
(1,831)
|
(654)
|
|
(523)
|
(491)
|
(241)
|
|
Net
interest income
|
355
|
91
|
|
154
|
123
|
29
|
|
Fees and commissions
receivable
|
377
|
349
|
|
98
|
93
|
89
|
|
Fees and commissions
payable
|
(175)
|
(158)
|
|
(56)
|
(45)
|
(32)
|
|
Income from trading
activities
|
477
|
389
|
|
148
|
78
|
37
|
|
Other operating
income
|
35
|
18
|
|
80
|
(34)
|
(16)
|
|
Non-interest income
|
714
|
598
|
|
270
|
92
|
78
|
|
Total income
|
1,069
|
689
|
|
424
|
215
|
107
|
|
Staff costs
|
(418)
|
(400)
|
|
(102)
|
(94)
|
(92)
|
|
Premises and equipment
|
(66)
|
(60)
|
|
(19)
|
(16)
|
(19)
|
|
Other administrative
expenses
|
(642)
|
(652)
|
|
(187)
|
(181)
|
(187)
|
|
Depreciation and
amortisation
|
(16)
|
(16)
|
|
(6)
|
(3)
|
(3)
|
|
Operating expenses
|
(1,142)
|
(1,128)
|
|
(314)
|
(294)
|
(301)
|
|
Operating (loss)/profit before
impairment
|
|
|
|
|
|
|
|
(losses)/releases
|
(73)
|
(439)
|
|
110
|
(79)
|
(194)
|
|
Impairment
(losses)/releases
|
(2)
|
(8)
|
|
(5)
|
(2)
|
2
|
|
Operating (loss)/profit before tax
|
(75)
|
(447)
|
|
105
|
(81)
|
(192)
|
|
Tax (charge)/credit
|
(23)
|
183
|
|
2
|
24
|
147
|
|
(Loss)/profit for the period
|
(98)
|
(264)
|
|
107
|
(57)
|
(45)
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
Ordinary shareholders
|
(168)
|
(335)
|
|
89
|
(74)
|
(64)
|
|
Paid-in equity holders
|
70
|
70
|
|
18
|
17
|
18
|
|
Non-controlling interests
|
-
|
1
|
|
-
|
-
|
1
|
|
|
(98)
|
(264)
|
|
107
|
(57)
|
(45)
|
Consolidated statement of
comprehensive income
for the period ended 31 December
2023
|
|
Year ended
|
|
Quarter
ended
|
|
|
31 December
|
31
December
|
|
31 December
|
30
September
|
31
December
|
|
|
2023
|
2022
|
|
2023
|
2023
|
2022
|
|
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
(Loss)/profit for the period
|
(98)
|
(264)
|
|
107
|
(57)
|
(45)
|
|
Items that do not qualify for
reclassification
|
|
|
|
|
|
|
|
Remeasurement of retirement benefit
schemes
|
(113)
|
(68)
|
|
(111)
|
(2)
|
(67)
|
|
Change in fair value of credit in
financial liabilities
|
|
|
|
|
|
|
|
designated at
FVTPL
|
(39)
|
50
|
|
(13)
|
(22)
|
(52)
|
|
FVOCI financial assets
|
7
|
(2)
|
|
(2)
|
6
|
1
|
|
Tax
|
42
|
32
|
|
40
|
3
|
42
|
|
|
(103)
|
12
|
|
(86)
|
(15)
|
(76)
|
|
Items that do qualify for reclassification
|
|
|
|
|
|
|
|
FVOCI financial
assets
|
5
|
(31)
|
|
(1)
|
2
|
4
|
|
Cash flow hedges (1)
|
178
|
(475)
|
|
226
|
56
|
100
|
|
Currency translation
|
(132)
|
245
|
|
(56)
|
68
|
(91)
|
|
Tax
|
(48)
|
142
|
|
(15)
|
(17)
|
(32)
|
|
|
3
|
(119)
|
|
154
|
109
|
(19)
|
|
Other comprehensive (loss)/income after tax
|
(100)
|
(107)
|
|
68
|
94
|
(95)
|
|
Total comprehensive (loss)/income for the
period
|
(198)
|
(371)
|
|
175
|
37
|
(140)
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
Ordinary shareholders
|
(268)
|
(442)
|
|
157
|
20
|
(159)
|
|
Paid-in equity holders
|
70
|
70
|
|
18
|
17
|
18
|
|
Non-controlling interests
|
-
|
1
|
|
-
|
-
|
1
|
|
|
(198)
|
(371)
|
|
175
|
37
|
(140)
|
(1) Refer to footnotes 2 and 3 of the statement of changes in
equity.
Consolidated balance sheet as at 31
December 2023
|
|
31 December
|
30
September
|
31
December
|
|
|
2023
|
2023
|
2022
|
|
|
£m
|
£m
|
£m
|
|
Assets
|
|
|
|
|
Cash and balances at central
banks
|
13,831
|
23,086
|
17,007
|
|
Trading assets
|
45,324
|
49,542
|
45,291
|
|
Derivatives
|
79,332
|
88,232
|
100,154
|
|
Settlement balances
|
7,227
|
11,079
|
2,558
|
|
Loans to banks - amortised
cost
|
1,246
|
1,306
|
1,146
|
|
Loans to customers - amortised
cost
|
12,986
|
10,856
|
10,171
|
|
Amounts due from holding companies
and fellow subsidiaries
|
1,730
|
1,722
|
740
|
|
Other financial assets
|
15,723
|
14,508
|
11,870
|
|
Other assets
|
518
|
621
|
832
|
|
Total assets
|
177,917
|
200,952
|
189,769
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Bank deposits
|
2,267
|
2,591
|
3,069
|
|
Customer deposits
|
6,998
|
10,475
|
3,614
|
|
Amounts due to holding companies and
fellow subsidiaries
|
5,802
|
6,256
|
6,217
|
|
Settlement balances
|
6,641
|
11,322
|
2,010
|
|
Trading liabilities
|
53,623
|
58,290
|
52,792
|
|
Derivatives
|
71,981
|
81,084
|
93,585
|
|
Other financial
liabilities
|
23,574
|
24,093
|
21,103
|
|
Other liabilities
|
653
|
607
|
816
|
|
Total liabilities
|
171,539
|
194,718
|
183,206
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Owners' equity
|
6,380
|
6,236
|
6,565
|
|
Non-controlling interests
|
(2)
|
(2)
|
(2)
|
|
Total equity
|
6,378
|
6,234
|
6,563
|
|
Total liabilities and equity
|
177,917
|
200,952
|
189,769
|
Consolidated statement of changes in
equity
for the period ended 31 December
2023
|
|
Year ended
|
|
Quarter
ended
|
|
|
31 December
|
31
December
|
|
31 December
|
30
September
|
31
December
|
|
|
2023
|
2022
|
|
2023
|
2023
|
2022
|
|
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
Called up share capital - at beginning and end of
period
|
400
|
400
|
|
400
|
400
|
400
|
|
|
|
|
|
|
|
|
|
Share premium account - at beginning and end of
period
|
1,946
|
1,946
|
|
1,946
|
1,946
|
1,946
|
|
|
|
|
|
|
|
|
|
Paid-in equity - at beginning and end of
period
|
904
|
904
|
|
904
|
904
|
904
|
|
|
|
|
|
|
|
|
|
Merger reserve - at beginning of period
|
-
|
-
|
|
-
|
-
|
-
|
|
Additions
|
(14)
|
-
|
|
(14)
|
-
|
-
|
|
At end of period
|
(14)
|
-
|
|
(14)
|
-
|
-
|
|
|
|
|
|
|
|
|
|
FVOCI reserve - at beginning of period
|
3
|
33
|
|
16
|
9
|
-
|
|
Unrealised gains/(losses)
|
11
|
(44)
|
|
(4)
|
8
|
1
|
|
Realised losses
|
3
|
5
|
|
3
|
-
|
4
|
|
Tax
|
(4)
|
9
|
|
(2)
|
(1)
|
(2)
|
|
At end of period
|
13
|
3
|
|
13
|
16
|
3
|
|
|
|
|
|
|
|
|
|
Cash flow hedging reserve - at beginning of
period
|
(294)
|
47
|
|
(375)
|
(414)
|
(363)
|
|
Amount recognised in
equity (2)
|
(29)
|
(424)
|
|
148
|
(147)
|
120
|
|
Amount transferred from equity to
earnings (3)
|
207
|
(51)
|
|
78
|
203
|
(20)
|
|
Tax
|
(48)
|
134
|
|
(15)
|
(17)
|
(31)
|
|
At end of period
|
(164)
|
(294)
|
|
(164)
|
(375)
|
(294)
|
|
|
|
|
|
|
|
|
|
Foreign exchange reserve - at beginning of
period
|
232
|
(13)
|
|
156
|
88
|
323
|
|
Retranslation of net
assets
|
(143)
|
325
|
|
(51)
|
89
|
(97)
|
|
Foreign currency gains/(losses) on
hedges of net assets
|
19
|
(75)
|
|
4
|
(21)
|
7
|
|
Recycled to profit or loss on
disposal of businesses
|
(8)
|
(5)
|
|
(9)
|
-
|
(1)
|
|
At end of period
|
100
|
232
|
|
100
|
156
|
232
|
|
|
|
|
|
|
|
|
|
Retained earnings - at beginning of period
|
3,374
|
4,138
|
|
3,189
|
3,264
|
3,506
|
|
(Loss)/profit attributable to
ordinary shareholders and other equity owners
|
(98)
|
(265)
|
|
107
|
(57)
|
(46)
|
|
Ordinary dividends paid
|
-
|
(430)
|
|
-
|
-
|
-
|
|
Paid-in equity dividends
paid
|
(70)
|
(70)
|
|
(18)
|
(17)
|
(18)
|
|
Remeasurement of retirement benefit
schemes
|
|
|
|
|
|
|
|
-
gross
|
(113)
|
(68)
|
|
(111)
|
(2)
|
(67)
|
|
-
tax
|
40
|
23
|
|
39
|
1
|
23
|
|
Realised (losses)/gains on FVOCI
equity shares
|
|
|
|
|
|
|
|
-
gross
|
(2)
|
6
|
|
(2)
|
-
|
-
|
|
-
tax
|
-
|
10
|
|
-
|
-
|
12
|
|
Capital
contributions (1)
|
115
|
-
|
|
-
|
19
|
-
|
|
Changes in fair value of credit in
financial liabilities designated at FVTPL
|
|
|
|
|
|
|
|
-
gross
|
(39)
|
50
|
|
(13)
|
(22)
|
(52)
|
|
-
tax
|
6
|
(2)
|
|
3
|
3
|
8
|
|
Share-based payments
|
|
|
|
|
|
|
|
- gross
|
(14)
|
(18)
|
|
5
|
-
|
7
|
|
- tax
|
(4)
|
-
|
|
(4)
|
-
|
1
|
|
At end of period
|
3,195
|
3,374
|
|
3,195
|
3,189
|
3,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
For the notes to this table refer to
the following page.
Consolidated statement of changes in
equity
for the period ended 31 December
2023 continued
|
|
Year ended
|
|
Quarter
ended
|
|
|
31 December
|
31
December
|
|
31 December
|
30
September
|
31
December
|
|
|
2023
|
2022
|
|
2023
|
2023
|
2022
|
|
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
Owners' equity at end of period
|
6,380
|
6,565
|
|
6,380
|
6,236
|
6,565
|
|
|
|
|
|
|
|
|
|
Non-controlling interests - at beginning of
period
|
(2)
|
(3)
|
|
(2)
|
(2)
|
(3)
|
|
Profit attributable to
non-controlling interests
|
-
|
1
|
|
-
|
-
|
1
|
|
At end of period
|
(2)
|
(2)
|
|
(2)
|
(2)
|
(2)
|
|
|
|
|
|
|
|
|
|
Total equity at end of period
|
6,378
|
6,563
|
|
6,378
|
6,234
|
6,563
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
Ordinary shareholders
|
5,476
|
5,661
|
|
5,476
|
5,332
|
5,661
|
|
Paid-in equity holders
|
904
|
904
|
|
904
|
904
|
904
|
|
Non-controlling interests
|
(2)
|
(2)
|
|
(2)
|
(2)
|
(2)
|
|
|
6,378
|
6,563
|
|
6,378
|
6,234
|
6,563
|
(1) During H1 2023, NatWest Markets invoked a claim against the
parent, NatWest Group plc, in respect of a legacy (non-trading)
matter which was covered by an indemnity agreement. This resulted
in a capital contribution
(2) The change in the cash
flow hedging reserve is driven by realised accrued interest
transferred into the income statement and a decrease in swap rates
compared to prior periods where they rose. The portfolio of hedging
instruments is predominantly received fixed swaps.
(3) The amount transferred
from equity to the income statement is mostly recorded within net
interest income mainly in loans to customers, balances at central
banks and customer deposits.
Consolidated cash flow
statement
for the year ended 31 December
2023
|
|
31 December
|
31
December
|
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Cash flows from operating activities
|
|
|
|
Operating loss before tax
|
(75)
|
(447)
|
|
Adjustments for non-cash
items
|
173
|
(488)
|
|
Net
cash flows from trading activities
|
98
|
(935)
|
|
Changes in operating assets and
liabilities
|
2,617
|
6,293
|
|
Net
cash flows from operating activities before tax
|
2,715
|
5,358
|
|
Income taxes received
|
99
|
135
|
|
Net
cash flows from operating activities
|
2,814
|
5,493
|
|
Net
cash flows from investing activities
|
(3,251)
|
(2,905)
|
|
Net
cash flows from financing activities
|
(922)
|
(2,100)
|
|
Effects of exchange rate on cash and
cash equivalents
|
(526)
|
1,090
|
|
Net
(decrease)/increase in cash and cash equivalents
|
(1,885)
|
1,578
|
|
Cash and cash equivalents at 1
January
|
26,828
|
25,250
|
|
Cash and cash equivalents at 31 December
|
24,943
|
26,828
|
Notes
1.
Presentation of condensed consolidated financial
statements
The condensed consolidated financial statements should be read in
conjunction with NatWest Markets Plc's 2023 Annual Report and
Accounts. The critical and material
accounting policies are the same as those applied in the
consolidated financial statements.
The directors have prepared the
condensed consolidated financial statements on a going concern
basis after assessing the principal risks, forecasts, projections
and other relevant evidence over the twelve months from the date
they are approved.
2. Trading assets and
liabilities
Trading assets and liabilities
comprise assets and liabilities held at fair value in trading
portfolios.
|
|
31 December
|
31
December
|
|
|
2023
|
2022
|
|
Assets
|
£m
|
£m
|
|
Loans
|
|
|
|
- Reverse
repos
|
23,694
|
21,537
|
|
- Collateral
given
|
8,914
|
12,719
|
|
- other
loans
|
762
|
1,113
|
|
Total loans
|
33,370
|
35,369
|
|
Securities
|
|
|
|
Central and local
government
|
|
|
|
-
UK
|
2,729
|
2,205
|
|
-
US
|
2,600
|
2,345
|
|
-
other
|
3,062
|
2,799
|
|
Financial
institutions and Corporate
|
3,563
|
2,573
|
|
Total securities
|
11,954
|
9,922
|
|
Total
|
45,324
|
45,291
|
|
|
|
|
|
Liabilities
|
|
|
|
Deposits
|
|
|
|
- Repos
|
26,902
|
23,740
|
|
- Collateral
received
|
15,062
|
17,663
|
|
- other
deposits
|
1,150
|
1,068
|
|
Total deposits
|
43,114
|
42,471
|
|
Debt securities in issue
|
706
|
797
|
|
Short positions
|
9,803
|
9,524
|
|
Total
|
53,623
|
52,792
|
Notes
3. Other financial
liabilities
|
|
31 December
|
31
December
|
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Customer deposits - designated as at
fair value through profit or loss (FVTPL)
|
1,259
|
1,050
|
|
Debt securities in issue
|
|
|
|
- Medium term
notes
|
17,608
|
16,418
|
|
- Commercial paper
and certificates of deposit
|
4,433
|
3,169
|
|
Subordinated liabilities
|
|
|
|
- Designated as at
FVTPL
|
238
|
345
|
|
- Amortised
cost
|
36
|
121
|
|
Total
|
23,574
|
21,103
|
4. Amounts due to holding company
and fellow subsidiaries
|
|
31 December
|
31
December
|
|
|
2023
|
2022
|
|
Liabilities
|
£m
|
£m
|
|
|
|
|
|
Bank deposits - amortised
cost
|
537
|
108
|
|
Customer deposits - amortised
cost
|
55
|
51
|
|
Trading liabilities
|
1,028
|
1,129
|
|
Settlement balances
|
-
|
26
|
|
Other financial liabilities -
subordinated liabilities
|
1,022
|
1,519
|
|
MREL instruments issued to NatWest
Group plc
|
3,070
|
3,173
|
|
Other liabilities
|
90
|
211
|
|
Total
|
5,802
|
6,217
|
5. Related parties
UK Government
The UK Government, bodies controlled
or jointly controlled by the UK Government and bodies over which it
has significant influence are related parties of NWM Group. NWM
Group enters into transactions with many of these bodies. NWM
Group's other transactions with the UK Government include the
payment of taxes, principally UK corporation tax and value added
tax; national insurance contributions; local authority rates; and
regulatory fees and levies (including the bank levy and FSCS
levies).
Bank of England
facilities
In the ordinary course of business,
NWM Group may from time-to-time access market-wide facilities
provided by the Bank of England.
Other related parties
(a) In
their roles as providers of finance, NWM Group companies provide
development and other types of capital support to businesses. In
some instances, the investment may extend to ownership or control
over 20% or more of the voting rights of the investee
company.
(b) In
accordance with IAS 24, transactions or balances between NWM Group
entities that have been eliminated on consolidation are not
reported.
(c) NWM Group is recharged from other NatWest Group entities,
mainly NWB Plc which provides the majority of shared services
(including technology) and operational processes.
(d) The
primary financial statements include transactions and balances with
its subsidiaries which have been further disclosed in the relevant
parent company notes.
Full details of NWM Group's related
party transactions for year ended 31 December 2023 are included in
NatWest Markets Plc 2023 Annual Report and Accounts.
Notes
6. Litigation and regulatory
matters
NWM Plc and certain members of NWM
Group are party to various legal proceedings and are involved in,
or subject to, various regulatory matters, including as the subject
of investigations and other regulatory and governmental action
(Matters) in the United Kingdom (UK), the United States (US), the
European Union (EU) and other jurisdictions. Note 25 in the NatWest
Markets Plc 2023 Annual Report and Accounts, issued on 16 February
2024 and available at nwm.com (Note 25), discusses the Matters in
which NWM Group is currently involved and material developments.
Other than the Matters discussed in Note 25, no member of NWM Group
is or has been involved in governmental, legal, or regulatory
proceedings (including those which are pending or threatened) that
are expected to be material, individually or in aggregate. Recent
developments in the Matters identified in Note 25 that have
occurred since the Q3 2023 Interim Management Statement was issued
on 27 October 2023, include, but are not limited to, those set out
below.
Litigation
London Interbank Offered Rate
(LIBOR) and other rates litigation
In August 2020, a complaint was
filed in the United States District Court for the Northern District
of California by several United States retail borrowers against the
USD ICE LIBOR panel banks and their affiliates (including NatWest
Group plc, NWM Plc, NatWest Markets Securities Inc. (NWMSI) and NWB
Plc), alleging (i) that the very process of setting USD ICE LIBOR
amounts to illegal price-fixing; and (ii) that banks in the United
States have illegally agreed to use LIBOR as a component of price
in variable retail loans. In September 2022, the district court
dismissed the complaint. The plaintiffs filed an amended complaint
but in October 2023, the district court dismissed that complaint as
well, and indicated that further amendment would not be permitted.
The plaintiffs have commenced an appeal to the United States Court
of Appeals for the Ninth Circuit which is currently
pending.
FX litigation
In July and December 2019, two
separate applications seeking opt-out collective proceedings orders
were filed in the UK Competition Appeal Tribunal (CAT) against
NatWest Group plc, NWM Plc and other banks. Both applications were brought on behalf of persons who,
between 18 December 2007 and 31 January 2013, entered into a
relevant FX spot or outright forward transaction in the EEA with a
relevant financial institution or on an electronic communications
network. In March 2022, the CAT declined to
certify as collective proceedings either of the applications, which
was appealed by the applicants, and the subject of an application
for judicial review.
In its amended judgment in November
2023, the Court of Appeal allowed the appeal and decided that the
claims should proceed on an opt-out basis. Separately, the court
determined which of the two competing applicants can proceed as
class representative, and dismissed the application for judicial
review of the CAT's decision. The case has been remitted to the CAT
for further case management and the banks have sought permission to
appeal directly to the UK Supreme Court.
In December 2021, a summons was
served in the Netherlands against NatWest Group plc, NWM Plc and
NWM N.V. by Stichting FX Claims on behalf of a number of parties,
seeking declarations from the court concerning liability for
anti-competitive FX market conduct described in decisions of the
European Commission (EC) of 16 May 2019, along with unspecified
damages. The claimant amended its claim to also refer to a 2
December 2021 decision by the EC, which described anti-competitive
FX market conduct. NatWest Group plc, NWM Plc and other defendants
contested the jurisdiction of the Dutch court. In March 2023, the
district court in Amsterdam accepted that it has jurisdiction to
hear claims against NWM N.V. but refused jurisdiction to hear any
claims against the other defendant banks (including NatWest Group
plc and NWM Plc) brought on behalf of the parties represented by
the claimant that are domiciled outside of the Netherlands. The
claimant is appealing that decision and the defendant banks have
brought cross-appeals which seek a ruling that the Dutch court has
no jurisdiction to hear any claims against the defendant banks
domiciled outside of the Netherlands, including claims brought on
behalf of the parties represented by the claimant that are
domiciled in the Netherlands.
In September 2023, second summonses
were served by Stichting FX Claims on NWM N.V., NatWest Group plc
and NWM Plc, for claims on behalf of a new group of parties that
have now been brought before the district court in Amsterdam. The
summonses seek declarations from the Dutch court concerning
liability for anti-competitive FX market conduct described in the
above referenced decisions of the EC of 16 May 2019 and 2 December
2021, along with unspecified damages.
Government securities antitrust
litigation
NWMSI and certain other US
broker-dealers are defendants in a consolidated antitrust class
action in the United States District Court for the Southern
District of New York (SDNY) on behalf of persons who transacted in US Treasury
securities or derivatives based on such instruments, including
futures and options. The plaintiffs allege that the defendants
rigged the US Treasury securities auction bidding process to
deflate prices at which they bought such securities and colluded to
increase the prices at which they sold such securities to the
plaintiffs. In March 2022, the SDNY dismissed the complaint,
without leave to re-plead. In February 2024, the United States
Court of Appeals for the Second Circuit affirmed the SDNY's
decision dismissing the complaint.
Swaps antitrust
litigation
NWM Plc and other members of NatWest
Group, including NatWest Group plc, as well as a number of other
interest rate swap dealers, are defendants in several cases pending
in the SDNY alleging violations of the US antitrust laws in the
market for interest rate swaps. There is a consolidated class
action complaint on behalf of persons who entered into interest
rate swaps with the defendants, as well as non-class action claims
by three swap execution facilities (TeraExchange, Javelin, and
trueEx). The plaintiffs allege that the swap execution facilities
would have successfully established exchange-like trading of
interest rate swaps if the defendants had not unlawfully conspired
to prevent that from happening through boycotts and other means.
Discovery in these cases is complete. In December 2023, the SDNY
denied the plaintiffs' motion for class certification. The
plaintiffs have filed a petition requesting that the United States
Court of Appeals for the Second Circuit review the denial of class
certification.
In June 2021, a class action
antitrust complaint was filed against a number of credit default
swap dealers, in New Mexico federal court on behalf of persons who,
from 2005 onwards, settled credit default swaps in the United
States by reference to the ISDA credit default swap auction
protocol. The complaint alleges that the defendants conspired to
manipulate that benchmark through various means in violation of the
antitrust laws and the Commodity Exchange Act. The defendants filed
a motion to dismiss the complaint and, in June 2023, such motion
was denied as regards NWMSI and other financial institutions, but
granted as regards to NWM Plc on the ground
Notes
Litigation and regulatory matters continued
that the court lacks jurisdiction
over that entity. As a result, the case entered the discovery phase
as against the non-dismissed defendants. In January 2024, the SDNY
issued an order barring the plaintiffs in the New Mexico case from
pursuing claims based on conduct occurring before 30 June 2014 on
the ground that such claims were extinguished by a 2015 settlement
agreement that resolved a prior class action relating to credit
default swaps.
EUA trading litigation
NWM Plc was a named defendant in
civil proceedings before the High Court of Justice of England and
Wales brought in 2015 by ten companies (all in liquidation)
(the 'Liquidated Companies') and their respective liquidators
(together, 'the Claimants'). The Liquidated Companies previously
traded in European Union Allowances (EUAs) in 2009 and were alleged
to be VAT defaulting traders within (or otherwise connected to) EUA
supply chains of which NWM Plc was a party. In March 2020, the
court held that NWM Plc and Mercuria Energy Europe Trading Limited
('Mercuria') were liable for dishonestly assisting and knowingly
being a party to fraudulent trading during a seven business day
period in 2009.
In October 2020, the High Court
quantified total damages against NWM Plc and Mercuria at £45
million plus interest and costs, and permitted the defendants to
appeal to the Court of Appeal. In May 2021 the Court of Appeal set
aside the High Court's judgment and ordered that a retrial take
place before a different High Court judge. In January 2024, NWM Plc
entered into an agreement to resolve the claim against it. The
settlement amount paid by NWM Plc was covered in full by an
existing provision.
1MDB litigation
A Malaysian court claim was served
in Switzerland in November 2022 by 1MDB, a Sovereign Wealth Fund,
in which Coutts & Co Ltd was named, along with six others, as a
defendant in respect of losses allegedly incurred by 1MDB. It is
claimed that Coutts & Co Ltd is liable as a constructive
trustee for having dishonestly assisted the directors of 1MDB in
the breach of their fiduciary duties by failing (amongst other
alleged claims) to undertake due diligence in relation to a
customer of Coutts & Co Ltd, through which funds totalling
c.US$1 billion were received and paid out between 2009 and 2011.
The claimant seeks the return of that amount plus interest. Coutts
& Co Ltd filed an application in January 2023 challenging the
validity of service and the Malaysian court's jurisdiction to hear
the claim. Before that application was heard, in April 2023, the
claimant filed a notice of discontinuance of its claim against
certain defendants including Coutts & Co Ltd. The claimant
subsequently indicated that it intended to issue further
replacement proceedings. Coutts & Co Ltd challenged the
claimant's ability to take that step. In August 2023, the court
disallowed the discontinuation of the claim by the claimant (a
decision that the claimant has appealed) and directed that the
application by Coutts & Co Ltd challenging the validity of the
proceedings should proceed to a hearing, which took place in
February 2024. Judgment is awaited.
Coutts & Co Ltd (a subsidiary of
RBS Netherlands Holdings B.V., which in turn is a subsidiary of NWM
Plc) is a company registered in Switzerland and is in wind-down
following the announced sale of its business assets in
2015.
7. Post balance sheet
events
On 9 January 2024, NWM Plc issued a
total of €2.5 billion of notes under the EMTN programme in
benchmark transactions. There has been no adjustment to the 31
December 2023 statutory financial statements.
Other than as disclosed in the
accounts, there have been no other significant events between 31
December 2023 and the date of approval of these accounts which
would require a change to or additional
disclosure.
Non-IFRS financial
measures
NWM Group prepares its financial
statements in accordance with IFRS as issued by the IASB which
constitutes a body of generally accepted accounting principles
(GAAP). This document contains a number of adjusted or alternative
performance measures, also known as non-GAAP or non-IFRS
performance measures. These measures are adjusted for certain items
which management believe are not representative of the underlying
performance of the business and which distort period-on-period
comparison. These non-IFRS measures are not measures within the
scope of IFRS and are not a substitute for IFRS measures. These
measures include:
-
Management analysis of operating expenses shows
litigation and conduct costs on a separate line. These amounts are
included within staff costs and other administrative expenses in
the statutory analysis. Other operating expenses excludes
litigation and conduct costs which are more volatile and may
distort comparisons with prior periods.
-
Funded assets are defined as total assets less
derivative assets. This measure allows review of balance sheet
trends exclusive of the volatility associated with derivative fair
values.
-
Management view of income by business including
shared revenue and before own credit adjustments. This measure is
used to show underlying income generation in NatWest Markets
excluding the impact of own credit adjustments.
-
Revenue share refers to income generated by
NatWest Markets products from customers that have their primary
relationship with other NatWest Group subsidiaries, a proportion of
which is shared between NatWest Markets and those
subsidiaries.
-
Transfer Pricing arrangements with fellow NatWest
Group subsidiaries includes revenue share and a new profit share
arrangement with fellow NatWest Group subsidiaries. The profit
share arrangement was introduced during the year to reward NWM
Group on an arm's length basis for its contribution to the
performance of the NatWest Group Commercial & Institutional
business segment, 2023 being the first full year with the
Commercial & Institutional segment in place. The profit share
is not allocated to individual NatWest Markets product
areas.
-
Own credit adjustments are applied to positions
where it is believed that the counterparties would consider NWM
Group's creditworthiness when pricing trades. The fair value of
certain issued debt securities, including structured notes, is
adjusted to reflect the changes in own credit spreads and the
resulting gain or loss recognised in income.
Operating expenses analysis - management
view
|
|
Year ended
|
|
|
31 December
2023
|
|
31
December 2022
|
|
|
Litigation
|
Other
|
Statutory
|
|
Litigation
|
Other
|
Statutory
|
|
|
and conduct
|
operating
|
operating
|
|
and
conduct
|
operating
|
operating
|
|
|
costs
|
expenses
|
expenses
|
|
costs
|
expenses
|
expenses
|
|
Staff costs
|
12
|
406
|
418
|
|
5
|
395
|
400
|
|
Premises and equipment
|
-
|
66
|
66
|
|
-
|
60
|
60
|
|
Depreciation and
amortisation
|
-
|
16
|
16
|
|
-
|
16
|
16
|
|
Other administrative
expenses
|
48
|
594
|
642
|
|
75
|
577
|
652
|
|
Total
|
60
|
1,082
|
1,142
|
|
80
|
1,048
|
1,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
31 December
2023
|
|
|
|
|
|
|
Litigation
|
Other
|
Statutory
|
|
|
|
|
|
|
and conduct
|
operating
|
operating
|
|
|
|
|
|
|
costs
|
expenses
|
expenses
|
|
Staff costs
|
|
|
|
|
4
|
98
|
102
|
|
Premises and equipment
|
|
|
|
|
-
|
19
|
19
|
|
Depreciation and
amortisation
|
|
|
|
|
-
|
6
|
6
|
|
Other administrative
expenses
|
|
|
|
|
27
|
160
|
187
|
|
Total
|
|
|
|
|
31
|
283
|
314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
30
September 2023
|
|
|
|
|
|
|
Litigation
|
Other
|
Statutory
|
|
|
|
|
|
|
and
conduct
|
operating
|
operating
|
|
|
|
|
|
|
costs
|
expenses
|
expenses
|
|
Staff costs
|
|
|
|
|
4
|
90
|
94
|
|
Premises and equipment
|
|
|
|
|
-
|
16
|
16
|
|
Depreciation and
amortisation
|
|
|
|
|
-
|
3
|
3
|
|
Other administrative
expenses
|
|
|
|
|
33
|
148
|
181
|
|
Total
|
|
|
|
|
37
|
257
|
294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
31
December 2022
|
|
|
|
|
|
|
Litigation
|
Other
|
Statutory
|
|
|
|
|
|
|
and
conduct
|
operating
|
operating
|
|
|
|
|
|
|
costs
|
expenses
|
expenses
|
|
Staff costs
|
|
|
|
|
2
|
90
|
92
|
|
Premises and equipment
|
|
|
|
|
-
|
19
|
19
|
|
Depreciation and
amortisation
|
|
|
|
|
-
|
3
|
3
|
|
Other administrative
expenses
|
|
|
|
|
45
|
142
|
187
|
|
Total
|
|
|
|
|
47
|
254
|
301
|
Statement of directors'
responsibilities
The responsibility statement below
has been prepared in connection with NWM Group's full Annual Report
and Accounts for the year ended 31 December 2023.
We, the directors listed below,
confirm that to the best of our knowledge:
- The financial statements, prepared in accordance with UK
adopted International Accounting Standards, International Financial
Reporting Standards (IFRS) as issued by the International
Accounting Standards Board and IFRS as adopted European Union, give
a true and fair view of the assets, liabilities, financial position
and profit or loss of NWM Plc and the undertakings included in the
consolidation taken as a whole; and
- The Strategic Report and Report of the directors
(incorporating the Financial review) include a fair review of the
development and performance of the business and the position of NWM
Plc, and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and
uncertainties that they face.
|
By order of the Board
Frank Dangeard
|
Robert Begbie
|
Simon Lowe
|
|
Chairman
|
Chief Executive Officer
|
Chief Financial Officer
|
15 February 2024
|
Board of directors
Chairman
|
Executive directors
|
Non-executive directors
|
|
Frank Dangeard
|
Robert Begbie
Simon Lowe
|
Vivek Ahuja
Tamsin Rowe
Anne Simpson
Sabrina Wilson
|
Presentation of
information
NatWest Markets Plc ('NWM Plc') is a
wholly owned subsidiary of NatWest Group plc or 'the ultimate
holding company'. The NatWest Markets Group ('NWM Group') or 'we'
comprises NWM Plc and its subsidiary and associated undertakings.
The term 'NatWest Group' comprises NatWest Group plc and its
subsidiaries.
NWM Plc publishes its financial
statements in pounds sterling ('£' or 'sterling'). The
abbreviations '£m' and '£bn' represent millions and thousands of
millions of pounds sterling ('GBP'), respectively, and references
to 'pence' represent pence in the United Kingdom ('UK'). Reference
to 'dollars' or '$' are to United States of America ('US') dollars.
The abbreviations '$m' and '$bn' represent millions and thousands
of millions of dollars, respectively, and references to 'cents'
represent cents in the US. The abbreviation '€' represents the
'euro', and the abbreviations '€m' and '€bn' represent millions and
thousands of millions of euros, respectively, and references to
'cents' represent cents in the European Union ('EU').
Change in immediate parent company
Under Article 21b of the EU Capital
Requirements Directive, NatWest Group, as a third-country group
with two or more subsidiary banking institutions in the EU, was
required to establish a single intermediate parent entity or
'intermediate EU parent undertaking' (IPU) structure. To remain
compliant with UK ring-fencing rules, NatWest Group was approved by
the European Central Bank ('ECB') to establish a dual IPU structure
on behalf of its European subsidiaries. As a result, RBS Holdings N.V.
('RBSH N.V.'), a wholly-owned subsidiary of NatWest Markets
Plc ('NWM
Plc'), will act as the ring-fenced IPU and became subject to ECB
supervision from 1 January 2024. On 1 December 2023, RBS
International Depositary Services S.A.'s ('RBSI DS') immediate
parent company changed from Royal Bank of Scotland International
(Holdings) Limited ('RBSIH') to RBSH N.V. following supervisory
approval.
NatWest Markets Group legal entity
disclosures
There is a distinction between the
disclosure of the NatWest Markets operating segment performance in
the NatWest Group's Annual Report and Accounts and the NatWest
Markets Group's results presented in this document, with
differences primarily as follows:
- NatWest Markets Group's results include its part of the
Central items & other segment.
- NatWest Group's 2023 results reports the NatWest Markets
segment excluding Central items & other.
MAR
- Inside Information
This announcement contains
information that qualified or may have qualified as inside
information for NatWest Markets Plc, for the purposes of Article 7
of the Market Abuse Regulation (EU) 596/2014 (MAR) as it forms part
of domestic law by virtue of the European Union (Withdrawal) Act
2018 for NatWest Markets Plc. This announcement is made by Paul
Pybus, Head of Investor Relations for NatWest Markets
Plc.
Statutory results
Financial information contained in
this document does not constitute statutory accounts within the
meaning of section 434 of the Companies Act 2006 ("the Act"). The
statutory accounts for the year ended 31 December 2023 will be
filed with the Registrar of Companies. The report of the auditor on
those statutory accounts was unqualified, did not draw attention to
any matters by way of emphasis and did not contain a statement
under section 498(2) or (3) of the Act.
|
Contact
|
|
|
|
Paul Pybus
|
NatWest Group Investor
Relations
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+44 (0) 7769161183
|
Forward-looking
statements
Cautionary statement regarding forward-looking
statements
Certain sections in this document
contain 'forward-looking statements' as that term is defined in the
United States Private Securities Litigation Reform Act of 1995,
such as statements that include the words 'expect', 'estimate',
'project', 'anticipate', 'commit', 'believe', 'should', 'intend',
'will', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk
(VaR)', 'target', 'goal', 'objective', 'may', 'endeavour',
'outlook', 'optimistic', 'prospects' and similar expressions or
variations on these expressions. In particular, this document
includes forward-looking targets and guidance relating to financial
performance measures, such as income growth, operating expense,
cost reductions, impairment loss rates, balance sheet reduction,
including the reduction of RWAs, CET1 ratio (and key drivers of the
CET1 ratio, including timing, impact and details), Pillar 2 and
other regulatory buffer requirements and MREL and non-financial
performance measures, such as climate and sustainability-related
performance ambitions, targets and metrics, including in relation
to initiatives to transition to a net zero economy, Climate and
Sustainable Funding and Financing (CSFF) and financed emissions. In
addition, this document includes forward-looking statements
relating, but not limited to: planned cost reductions, disposal
losses and strategic costs; implementation of NatWest Group's and
NWM Group's strategy (including in relation to investment
programmes relating to digital transformation of their operations
and services and inorganic opportunities); the timing and outcome
of litigation and government and regulatory investigations; funding
plans and credit risk profile; managing its capital position;
liquidity ratio; portfolios; net interest margin; and drivers
related thereto; lending and income growth, product share and
growth in target segments; impairments and write-downs;
restructuring and remediation costs and charges; NWM Group's
exposure to political risk, economic assumptions and risk, climate,
environmental and sustainability risk, operational risk, conduct
risk, financial crime risk, cyber, data and IT risk and credit
rating risk and to various types of market risk, including interest
rate risk, foreign exchange rate risk and commodity and equity
price risk; customer experience, including our Net Promotor Score
(NPS); employee engagement and gender balance in leadership
positions.
Limitations inherent to forward-looking
statements
These statements are based on
current plans, expectations, estimates, targets and projections,
and are subject to significant inherent risks, uncertainties and
other factors, both external and relating to NatWest Group's and
NWM Group's strategy or operations, which may result in NWM Group
being unable to achieve the current plans, expectations, estimates,
targets, projections and other anticipated outcomes expressed or
implied by such forward-looking statements. In addition, certain of
these disclosures are dependent on choices relying on key model
characteristics and assumptions and are subject to various
limitations, including assumptions and estimates made by
management. By their nature, certain of these disclosures are only
estimates and, as a result, actual future results, gains or losses
could differ materially from those that have been estimated.
Accordingly, undue reliance should not be placed on these
statements. The forward-looking statements contained in this
document speak only as of the date we make them and we expressly
disclaim any obligation or undertaking to update or revise any
forward-looking statements contained herein, whether to reflect any
change in our expectations with regard thereto, any change in
events, conditions or circumstances on which any such statement is
based, or otherwise, except to the extent legally
required.
Important factors that could affect the actual outcome of the
forward-looking statements
We caution you that a large number
of important factors could adversely affect our results or our
ability to implement our strategy, cause us to fail to meet our
targets, predictions, expectations and other anticipated outcomes
or affect the accuracy of forward-looking statements described in
this document. These factors include, but are not limited to, those
set forth in the risk factors and the other uncertainties described
in NatWest Markets Plc's Annual Report and its other public
filings. The principal risks and uncertainties that could adversely
affect NWM Group's future results, its financial condition and/or
prospects and cause them to be materially different from what is
forecast or expected, include, but are not limited to: economic and
political risk (including in respect of: economic and political
risks and uncertainties in the UK and global markets, including as
a result of GDP growth, inflation and interest rates, supply chain
disruption, and geopolitical developments; changes in interest
rates and foreign currency exchange rates; uncertainty regarding
the effects of Brexit; and HM Treasury's ownership of NatWest Group
plc); strategic risk (including in respect of: NatWest Group's
strategy and NatWest Group's creation of its Commercial &
Institutional segment (of which NWM Group forms part); financial
resilience risk (including in respect of: NWM Group's ability to
meet targets, generate returns or implement its strategy
effectively; prudential regulatory requirements for capital and
MREL; NWM Group's reliance on access to capital markets directly or
indirectly through its parent (NatWest Group); capital, funding and
liquidity risk; reductions in the credit ratings; the competitive
environment; the requirements of regulatory stress tests;
counterparty and borrower risk; model risk; sensitivity to
accounting policies, judgements, estimates and assumptions
(and the economic, climate, competitive and
other forward looking information affecting those judgements,
estimates and assumptions); changes in
applicable accounting standards; the adequacy of NatWest Group's
resolution plans; and the application of UK statutory stabilisation
or resolution powers to NatWest Group); climate and sustainability
risk (including in respect of: risks relating to climate change and
sustainability-related risks; both the execution and reputational
risk relating to NatWest Group's climate change-related strategy,
ambitions, targets and transition plan; climate and
sustainability-related data and model risk; the failure to
implement climate change resilient governance, procedures, systems
and controls; increasing levels of climate, environmental, human
rights and other sustainability-related laws, regulation and
oversight; climate, environmental, human rights and other
sustainability-related litigation, enforcement proceedings,
investigations and conduct risk; and reductions in ESG ratings);
operational and IT resilience risk (including in respect of:
operational risks (including reliance on third party suppliers);
cyberattacks; the accuracy and effective use of data; attracting,
retaining and developing senior management and skilled personnel;
complex IT systems; NWM Group's risk management framework; and NWM
Group's reputational risk); and legal, regulatory and conduct risk
(including in respect of: the impact of substantial regulation and
oversight; the outcome of legal, regulatory and governmental
actions and investigations as well as remedial undertakings; and
changes in tax legislation or failure to generate future taxable
profits).
Forward-looking statements
continued
Climate and sustainability-related
disclosures
Climate and sustainability-related
disclosures in this document are not measures within the scope of
International Financial Reporting Standards ('IFRS'), use a greater
number and level of judgements, assumptions and estimates,
including with respect to the classification of climate and
sustainable funding and financing activities, than our reporting of
historical financial information in accordance with IFRS. These
judgements, assumptions and estimates are highly likely to change
materially over time, and, when coupled with the longer time frames
used in these disclosures, make any assessment of materiality
inherently uncertain. In addition, our climate risk analysis, net
zero strategy, including the implementation of our climate
transition plan, remain under development, and the data underlying
our analysis and strategy remain subject to evolution over time.
The process we have adopted to define, gather and report data on
our performance on climate and sustainability-related measures is
not subject to the formal processes adopted for financial reporting
in accordance with IFRS and there are currently limited industry
standards or globally recognised established practices for
measuring and defining climate and sustainability-related metrics.
As a result, we expect that certain climate and
sustainability-related disclosures made in this document are likely
to be amended, updated, recalculated or restated in the future.
Please also refer to the cautionary statement in the section
entitled 'Climate-related and other forward-looking statements and
metrics' of the NatWest Group 2023 Climate-related Disclosures
Report published by NatWest Group plc for the consolidated group,
including NatWest Markets Plc.
Cautionary statement regarding Non-IFRS financial measures and
APMs
NWM Group prepares its financial
statements in accordance with generally accepted accounting
principles (GAAP). This document may contain financial measures and
ratios not specifically defined under GAAP or IFRS ('Non-IFRS')
and/or alternative performance measures ('APMs') as defined in
European Securities and Markets Authority ('ESMA') guidelines.
Non-IFRS measures and APMs are adjusted for notable and other
defined items which management believes are not representative of
the underlying performance of the business and which distort
period-on-period comparison. Non-IFRS measures provide users of the
financial statements with a consistent basis for comparing business
performance between financial periods and information on elements
of performance that are one-off in nature. Any Non-IFRS measures
and/or APMs included in this document, are not measures within the
scope of IFRS, are based on a number of assumptions that are
subject to uncertainties and change, and are not a substitute for
IFRS measures.
The information, statements and
opinions contained in this document do not constitute a public
offer under any applicable legislation or an offer to sell or a
solicitation of an offer to buy any securities or financial
instruments or any advice or recommendation with respect to such
securities or other financial instruments.
Climate and ESG
disclosures
Climate and ESG disclosures in this
document are not measures within the scope of International
Financial Reporting Standards ('IFRS'), use a greater number and
level of judgements, assumptions and estimates, including with
respect to the classification of climate and sustainable funding
and financing activities, than our reporting of historical
financial information in accordance with IFRS. These judgements,
assumptions and estimates are highly likely to change over time,
and, when coupled with the longer time frames used in these
disclosures, make any assessment of materiality inherently
uncertain. In addition, our climate risk analysis, net zero
strategy, including the implementation of our climate transition
plan, remain under development, and the data underlying our
analysis and strategy remain subject to evolution over time. The
process we have adopted to define, gather and report data on our
performance on climate and ESG measures is not subject to the
formal processes adopted for financial reporting in accordance with
IFRS and there are currently limited industry standards or globally
recognised established practices for measuring and defining climate
and ESG related metrics. As a result, we expect that certain
climate and ESG disclosures made in this document are likely to be
amended, updated, recalculated or restated in the future. Please
also refer to the cautionary statement in the section entitled
'Climate-related and other forward-looking statements and metrics'
of the NatWest Group 2022 Climate-related Disclosures
Report.
Cautionary statement regarding Non-IFRS financial measures and
APMs
NWM Group prepares its financial
statements in accordance with generally accepted accounting
principles (GAAP). This document may contain financial measures and
ratios not specifically defined under GAAP or IFRS ('Non-IFRS')
and/or alternative performance measures ('APMs') as defined in
European Securities and Markets Authority ('ESMA') guidelines. APMs
are adjusted for notable and other defined items which management
believes are not representative of the underlying performance of
the business and which distort period-on-period comparison.
Non-IFRS measures provide users of the financial statements with a
consistent basis for comparing business performance between
financial periods and information on elements of performance that
are one-off in nature. Any Non-IFRS measures and/or APMs included
in this document, are not measures within the scope of IFRS, are
based on a number of assumptions that are subject to uncertainties
and change, and are not a substitute for IFRS measures.
The information, statements and
opinions contained in this document do not constitute a public
offer under any applicable legislation or an offer to sell or a
solicitation of an offer to buy any securities or financial
instruments or any advice or recommendation with respect to such
securities or other financial instruments.
Legal Entity Identifier:
RR3QWICWWIPCS8A4S074