NatWest Group plc (LON:NWG) has announced its Q3 2021 Interim Management Statement.
Financial performance in a challenging environment
● Q3 2021 operating profit before tax of £1,074 million, attributable profit of £674 million and a return on tangible equity (RoTE) of 8.5%.
● Income across the UK and RBSI retail and commercial businesses, excluding notable items, increased by £103 million, or 4.4%, compared with Q3 2020 principally reflecting balance sheet growth. NatWest Markets (NWM) income, excluding asset disposals/strategic risk reduction and OCA, decreased by £175 million, or 62.5%, compared with Q3 2020 reflecting continued weakness in Fixed Income which was impacted by subdued levels of customer activity and ongoing reshaping of the business.
● Bank net interest margin (NIM) excluding Liquid Asset Buffer (LAB) decreased by 6 basis points to 2.34% compared with Q2 2021 principally reflecting the Q2 2021 tax variable lease repricing in Commercial Banking. Bank NIM of 1.54% decreased by 7 basis points.
● Other expenses, excluding operating lease depreciation (OLD) and Ulster Bank RoI direct costs, were £198 million, or 4.3% lower for the year to date.
● A net impairment release of £242 million in Q3 2021 mainly reflects releases in non-default portfolios, principally in Commercial Banking.
Robust balance sheet with strong capital and liquidity levels
● CET1 ratio of 18.7% was 50 basis points higher than Q2 2021 largely reflecting the attributable profit and reduction in RWAs partially offset by the foreseeable dividend accrual.
● The liquidity coverage ratio (LCR) of 166%, representing £78.6 billion headroom above 100% minimum requirement, increased by 2 percentage points compared with Q2 2021, reflecting continued growth in customer deposits.
● Net lending decreased by £1.7 billion to £361.0 billion during Q3 2021. Across the UK and RBSI retail and commercial businesses, net lending excluding UK Government support schemes increased by £2.9 billion, including £2.5 billion related to mortgage growth, with year to date annualised growth of 3.1%.
● Customer deposits increased by £9.1 billion compared with Q2 2021 to £476.3 billion. Across the UK and RBSI retail and commercial businesses customer deposits increased by £8.5 billion, or 2.0%, largely due to customers continuing to build and retain liquidity and higher short term placements in RBS International (RBSI).
● RWAs decreased by £3.2 billion to £159.8 billion during Q3 2021 mainly reflecting business movements in Commercial Banking and unwinding of the Q2 2021 increase in NWM following regulatory approval to update the VaR model to remove the impact of GBP LIBOR cessation.
Outlook(2)
We retain the outlook guidance provided in the 2021 Interim Results document, except:
· We no longer expect to achieve the majority of the remaining RWA reduction towards the medium term target in NWM of £20 billion this year; and
· We now expect Group RWAs to be below our previously guided range of £185-195 billion on 1 January 2022.
(1) At 27 October 2021.
(2) The guidance, targets, expectations and trends discussed in this section represent NatWest Group plc management’s current expectations and are subject to change, including as a result of the factors described in the NatWest Group plc Risk Factors section on pages 345 to 362 of the 2020 Annual Report and Accounts, pages 112 and 113 of the NatWest Group plc 2021 Interim Results, pages 156 to 172 of the NatWest Markets Plc 2020 Annual Report and Accounts and on pages 48 and 49 of the NatWest Markets Plc 2021 Interim Results. These statements constitute forward-looking statements. Refer to Forward-looking statements in this announcement.
Our Purpose in action
We champion potential, helping people, families and businesses to thrive. If they succeed, so will we. By being relevant to our customers and communities and by supporting our colleagues, we will deliver long-term value and drive sustainable returns to our shareholders. Some key achievements for the nine months ended 30 September 2021 are:
People and families
● Supported customers with five million financial capability interactions including 750,000 financial health checks.
● Retail Banking personalised messaging to customers has grown from 72 million messages in the first nine months of 2020 to 318 million in the same period of 2021. The personalisation of messages has resulted in a 41% increase in customer engagement.
● As part of our strategy to help families and young people manage their money more effectively, we acquired the fintech business RoosterMoney, whose pocket money app aims to build money confidence and financial capability from an early age.
● Launched Housemate, an app designed to help young renters manage shared bills and help build a history with the bank’s data partner Experian.
Businesses
● Announced a target to provide an additional £100 billion Climate and Sustainable Funding and Financing (CSFF) to customers between the 1 July 2021 and the end of 2025 as well as plans to launch a new green loan product for Small to Medium-sized Enterprise (SME) customers.
● Relaunched our entrepreneurship proposition and refocused 11 of our 12 Entrepreneur Accelerator hubs to support high growth, female led, black and minority ethnic led and B Corp focused businesses.
● Coutts collaborated with the Business Growth Fund to provide additional funding and growth capital, and to support small and medium-sized enterprises (SMEs).
Colleagues
● Recognised as a top ten UK employer by the work-life balance charity Working Families.
● Introduced a framework for NatWest Group’s new hybrid working model, balancing the needs of our customers, communities and colleagues.
● Named by LinkedIn as one of the top 25 workplaces in the UK to grow a career and recognised in The Times Top 50 Employers for Women for the 11th year running.
Communities
● Retail Banking completed Green Mortgages with a value of £565 million during the nine months ended 30 September 2021.
● Teamed up with the manufacturer of one of Britain’s best-known childhood games, Top Trumps, to launch a new MoneySense Climate Savers competition for primary school pupils across the UK as part of our principal sponsorship of the UN Climate Change conference COP26.
● Launched a ‘Sustainable Homes and Buildings’ Coalition’ with British Gas, Worcester Bosch, and Shelter to improve UK buildings energy efficiency. The Coalition aims to address the key blockers to meeting net zero in the UK buildings environment.
● Issued a €1 billion affordable housing social bond, the first of its kind by a UK bank. The proceeds will support lending to not-for-profit, UK housing associations as part of our commitment to provide £3 billion of funding to the UK’s affordable housing sector by the end of 2022.
● Coutts became the first major UK Private Bank and Wealth Manager to be certified as a B Corp, demonstrating its commitment to meeting the highest standards of verifiable social and environmental performance, public transparency and legal accountability.
For further detail refer to the Climate, Purpose and ESG measures supplement Q3 2021.
Alison Rose, NatWest Group Chief Executive Officer, commented:
“Throughout Q3 2021, NatWest continued to deliver a strong operating performance; growing in key areas and accelerating our digital transformation to improve customer experience and make our business more efficient. Our robust capital position means that we have been able to buy back £402 million of our shares to date(1) whilst also investing for growth as we support our customers and drive sustainable returns to our shareholders.
Although we are seeing challenges in the economy and for our customers – especially around supply chains and the cost of living – a number of key indicators remain positive; growth is good, unemployment is low and there are limited signs of default across our book. We have a vital role to play in helping the 19 million people, families and businesses we serve in communities throughout the UK to thrive. Because when they thrive, so do we.
NatWest Group has made addressing the climate challenge and supporting our customers through the transition a key strategic priority. We recently announced a new target to deliver an additional £100 billion of Climate and Sustainable Funding and Financing between 1 July 2021 and the end of 2025, having exceeded our initial two-year target of £20 billion in less than 18 months.”
