TIDM83NF
RNS Number : 7886J
Natwest Markets PLC
29 April 2022
NatWest Markets Group
Q1 2022
Interim Management Statement
NWM Group ci.natwest.com
NatWest Markets Group (NWM Group)
Results for Q1 2022
Building for growth
In Q1 2022 we made good progress on delivering growth through
our One Bank initiatives, to meet the financial markets needs of
NatWest Group customers, especially in Currencies and Capital
Markets. We created a new Digital Capital Markets team to focus on
the growing importance of distributed ledger technology as part of
the wider development of digital assets across NatWest Group.
We continued to support NatWest Group's customers with risk
management solutions and capital markets access in volatile and
uncertain markets, driven by the Russian invasion of Ukraine and
Central Banks' responses to inflationary pressures globally. In
Fixed Income, the changes made to the business model in Q4 2021 had
a positive impact in the quarter around risk management, although
more recently the Rates business has been impacted by significant
market volatility as we maintained our commitments to our
customers. We continue to monitor the evolving economic outlook,
including any indirect impacts on NWM Group and our customers from
the Russian invasion of Ukraine, which is having consequences for
geopolitical stability, energy supply and prices, and cross-border
financial transactions, including as a result of economic
sanctions. NWM Group has no material direct exposure to the region
through our operations or material dependencies on suppliers.
Climate and sustainable funding and financing has continued to
perform well, and as at the end of Q1 2022 we had delivered GBP3.8
billion towards the NatWest Group climate and sustainable funding
and financing target of GBP100 billion between 1 July 2021 and the
end of 2025. The creation of NatWest Group's new Commercial &
Institutional franchise announced in January 2022 will further
enhance our plans for sustainable growth and enable us to deepen
our relationships with customers and support their growth
ambitions.
Financial review
NWM Group reported a loss of GBP40 million for Q1 2022, compared
with a loss of GBP208 million in Q4 2021 and a loss of GBP61
million in Q1 2021. Total income increased to GBP219 million in Q1
2022, largely driven by stronger performance in Currencies and
Capital Markets. Operating expenses decreased to GBP291 million,
partly due to higher technology investment spend and one-off costs
(including the annual bank levy charge) recognised in the prior
quarter, and lower litigation and conduct costs.
Financial performance
- Total income was GBP219 million in Q1 2022, compared with GBP13 million
in Q4 2021 and GBP188 million in Q1 2021. Income excluding asset disposals/strategic
risk reduction and own credit adjustments was GBP208 million in Q1
2022, up by GBP186 million from GBP22 million in Q4 2021 and up by
GBP18 million from GBP190 million in Q1 2021, largely reflecting stronger
performance in Currencies, as FX volatility heightened in the quarter,
and in Capital Markets. Fixed Income was up from Q4 2021 but was impacted
by market volatility and subdued customer activity amid the Russian
invasion of Ukraine.
- Operating expenses of GBP291 million in Q1 2022 were down by GBP82
million from GBP373 million in Q4 2021, partly due to higher technology
investment spend and one-off costs (including the annual bank levy
charge) recognised in the prior quarter, and lower litigation and
conduct costs; and up by GBP19 million from GBP272 million in Q1 2021,
largely driven by increased technology investment spend in the current
quarter.
- NWM Group's total assets and liabilities increased by GBP10.8 billion
and GBP11.1 billion to GBP213.8 billion and GBP206.7 billion respectively
at 31 March 2022, compared with 31 December 2021. The increases primarily
reflect higher trading assets and liabilities, driven by customer
trading activity and the management of balance sheet within limits,
and higher settlement balances; partially offset by lower derivative
fair values, largely driven by increases in interest rates across
major currencies.
Capital and leverage
- Total NWM Plc RWAs were GBP24.1 billion at 31 March 2022, compared
with GBP22.7 billion at 31 December 2021 and GBP24.7 billion at 31
March 2021. The increase in the quarter reflects higher levels of
credit, counterparty credit and market risk, partially offset by a
decrease in operational risk. The increase in market risk was largely
driven by back-testing exceptions arising from the increased market
volatility.
- NWM Plc's Common Equity Tier 1 (CET1) ratio was 16.6% at 31 March
2022, compared with 17.9% at 31 December 2021 and 21.1% at 31 March
2021. The decrease in the quarter was largely driven by the increase
in RWAs.
- Total MREL for NWM Plc at 31 March 2022 was GBP8.6 billion, or 35.8%
of RWAs, down from GBP9.6 billion or 42.1% of RWAs at 31 December
2021. The reduction in the quarter was largely due to the redemption
of a EUR1.1 billion internal instrument issued to NatWest Group plc.
- NWM Plc's leverage ratio at 31 March 2022 of 4.7% has been calculated
in accordance with changes to the UK's leverage ratio framework introduced
by the PRA which came into effect from 1 January 2022. As at 31 December
2021, the UK leverage ratio was 4.8%, which was calculated under the
prior year's UK leverage methodology.
Liquidity and funding
- NWM Plc's liquidity portfolio at 31 March 2022 was GBP16.3 billion
with an LCR of 216% (31 December 2021 - GBP16.1 billion with LCR 205%).
- NWM Plc issued GBP2.2 billion of public benchmark transactions in
the three months ended 31 March 2022, being a benchmark transaction
under the US MTN programme of $1.5 billion of notes and two benchmark
transactions under the EMTN programme of EUR1.0 billion and CHF0.3
billion of notes respectively, against the full year 2022 guidance
of GBP4-5 billion of public benchmark issuance. NWM Plc also raised
funding in other formats throughout the quarter such as private placements
and secured note transactions.
Outlook (1)
We retain the outlook guidance provided in NatWest Markets Plc
2021 Annual Report and Accounts.
(1) The 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 179 to 200 of NatWest Markets Plc
2021 Annual Report and Accounts. These statements constitute
forward-looking statements. Refer to Forward-looking statements in
this announcement.
Financial review
The table below presents a segmental analysis of key lines of
NWM Group's income statement for the quarter ended 31 March 2022.
Commentary refers to the table below as well as the consolidated
income statement shown on page 6.
Q1 2022 Q4 2021 Q1 2021
----------------------- ----------------------- -----------------------
Central Central Central
NatWest items NatWest items NatWest items
& & &
Markets other Total Markets other Total Markets other Total
Income statement GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Net interest income 14 - 14 13 - 13 (7) - (7)
Non-interest income 208 (3) 205 11 (11) - 195 - 195
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Total income 222 (3) 219 24 (11) 13 188 - 188
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Litigation and conduct costs (2) (6) (8) - (24) (24) - (13) (13)
Other operating expenses
(5) (275) (8) (283) (347) (2) (349) (259) - (259)
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Operating expenses (277) (14) (291) (347) (26) (373) (259) (13) (272)
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Operating loss before impairments (55) (17) (72) (323) (37) (360) (71) (13) (84)
Impairment (losses)/releases (1) - (1) 16 - 16 6 - 6
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Operating loss before tax (56) (17) (73) (307) (37) (344) (65) (13) (78)
Tax credit 33 136 17
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Loss for the period (40) (208) (61)
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Income (4)
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Fixed Income (1) (15) - (15) (69) - (69) 38 - 38
Currencies 158 - 158 121 - 121 118 - 118
Capital Markets 121 - 121 80 - 80 74 - 74
Capital Management Unit
& other (1,2) (14) (3) (17) (55) (11) (66) 8 - 8
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Income including shared
revenue,
before asset disposals
and OCA 250 (3) 247 77 (11) 66 238 - 238
Revenue shared with or paid
to fellow
NatWest Group subsidiaries (39) - (39) (44) - (44) (48) - (48)
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Income excluding asset disposals
and
OCA 211 (3) 208 33 (11) 22 190 - 190
Asset disposals/Strategic
risk reduction (3) (7) - (7) (12) - (12) (4) - (4)
Own credit adjustments (OCA) 18 - 18 3 - 3 2 - 2
---------------------------------- ------- ------- -----
Total income 222 (3) 219 24 (11) 13 188 - 188
---------------------------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
(1) Fixed Income for Q1 2021 includes income of GBP(7) million
relating to miscellaneous balances that from Q2 2021 have been
included in Capital Management Unit & other.
(2) Capital Management Unit was set up in Q3 2020 to manage
capital usage and optimisation across all parts of NatWest Markets.
The income shown here relates to legacy assets and other
miscellaneous balances. Other relates to income booked to the
Central items & other operating segment.
(3) Asset disposals/Strategic risk reduction relates to the
costs of exiting positions, which includes changes in carrying
value to align to the expected exit valuation, and the impact of
risk reduction transactions entered into, in respect of the
strategic announcements of 14 February 2020.
(4) 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
asset disposals and OCA includes revenue share from other NatWest
Group subsidiaries but before revenue share is paid to or
contributed to those subsidiaries.
(5) A presentational change was made in Q1 2022 whereby
strategic costs are included within Other operating expenses and
not reported separately.
- Net interest income was GBP14 million in Q1 2022, compared with net
income of GBP13 million in Q4 2021 and net expense of GBP7 million
in Q1 2021. 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
Q1 2021 primarily reflects reduced funding costs for the business driven
by the ongoing repayment of legacy debt.
- Non-interest income of GBP205 million increased by GBP205 million compared
with nil in Q4 2021 and by GBP10 million compared with GBP195 million
in Q1 2021, largely reflecting stronger performance in Currencies,
as FX volatility heightened in the quarter, and in Capital Markets.
Fixed Income was up from Q4 2021 but was impacted by market volatility
and subdued customer activity amid the Russian invasion of Ukraine.
- Operating expenses were GBP291 million in Q1 2022, compared with GBP373
million in Q4 2021 and GBP272 million in Q1 2021. Litigation and conduct
costs of GBP8 million were down by GBP16 million from GBP24 million
in Q4 2021 and down by GBP5 million from GBP13 million in Q1 2021.
Other operating expenses of GBP283 million in Q1 2022 were down by
GBP66 million compared with GBP349 million in Q4 2021, partly due to
higher technology investment spend and one-off costs (including the
annual bank levy charge) recognised in the prior quarter, and up by
GBP24 million compared with GBP259 million in Q1 2021, largely driven
by increased technology investment spend in the current quarter.
- NatWest Markets operating loss before tax was GBP56 million in Q1 2022,
compared with GBP307 million in Q4 2021 and GBP65 million in Q1 2021.
Income excluding asset disposals and own credit adjustments of GBP211
million was up compared with GBP33 million in Q4 2021 and GBP190 million
in Q1 2021, largely reflecting stronger performance in Currencies,
as FX volatility heightened in the quarter, and in Capital Markets.
Operating expenses of GBP277 million in Q1 2022 were lower than GBP347
million in Q4 2021, partly due to higher technology investment spend
and one-off costs (including the annual bank levy charge) recognised
in the prior quarter, and up compared with GBP259 million in Q1 2021.
- Central items & other operating loss before tax was GBP17 million,
compared with a loss of GBP37 million in Q4 2021 and a loss of GBP13
million in Q1 2021.
Financial review
Balance sheet profile as at 31 March 2022
NWM Group's balance sheet profile is summarised below.
Commentary refers to the table below as well as the consolidated
balance sheet on page 7.
Assets Liabilities
-------------------------------------------------- --------------------------------------------------
31 March 31 December 31 March 31 December
2022 2021 2022 2021
GBPbn GBPbn GBPbn GBPbn
--------------------------- -------- ----------- -------- ----------- ---------------------------
Cash and balances at
central banks 15.4 16.6
Securities 26.8 25.0 25.6 25.0 Short positions
Reverse repos (1) 23.6 20.7 26.4 19.4 Repos (2)
Derivative cash collateral Derivative cash collateral
given (3) 13.4 12.0 17.1 17.6 received (4)
Other trading assets 1.0 1.4 2.4 2.5 Other trading liabilities
--------------------------- -------- ----------- -------- ----------- ---------------------------
Total trading assets 64.8 59.1 71.5 64.5 Total trading liabilities
Deposits - amortised
Loans - amortised cost 9.8 8.4 5.5 4.1 cost
Settlement balances 10.1 2.1 9.5 2.1 Settlement balances
Amounts due from holding Amounts due to holding
company company
and fellow subsidiaries 3.0 1.5 5.4 6.1 and fellow subsidiaries
Other financial assets 10.0 8.8 20.0 19.3 Other financial liabilities
Other assets 0.9 0.9 1.0 1.0 Other liabilities
Liabilities excluding
Funded assets 114.0 97.4 112.9 97.1 derivatives
Derivative assets 99.8 105.6 93.8 98.5 Derivative liabilities
--------------------------- -------- ----------- -------- ----------- ---------------------------
Total assets 213.8 203.0 206.7 195.6 Total liabilities
-------- ----------- -------- -----------
of which:
22.0 21.1 wholesale funding (5)
short-term wholesale
8.0 9.2 funding (5)
--------------------------- -------- ----------- -------- ----------- ---------------------------
(1) Comprises bank reverse repos of GBP5.4 billion (31 December 2021
- GBP3.9 billion) and customer reverse repos of GBP18.2 billion
(31 December 2021 - GBP16.8 billion).
(2) Comprises bank repos of GBP2.4 billion (31 December 2021- GBP0.8
billion) and customer repos of GBP24.0 billion (31 December 2021
- GBP18.6 billion).
(3) Comprises derivative cash collateral given relating to banks of
GBP5.1 billion (31 December 2021 - GBP4.3 billion) and customers
of GBP8.3 billion (31 December 2021 - GBP7.7 billion).
(4) Comprises derivative cash collateral received relating to banks
of GBP8.0 billion (31 December 2021 - GBP8.1 billion) and customers
of GBP9.1 billion (31 December 2021 - GBP9.5 billion).
(5) Wholesale funding predominantly comprises bank deposits (excluding
repos), debt securities in issue and third party subordinated liabilities,
of which short-term wholesale funding is the amount with contractual
maturity of one year or less.
- Total assets and liabilities increased by GBP10.8 billion and GBP11.1
billion to GBP213.8 billion and GBP206.7 billion respectively at 31
March 2022, compared with GBP203.0 billion and GBP195.6 billion at
31 December 2021. The increases primarily reflect higher funded assets,
driven by higher trading assets and liabilities and higher settlement
balances; partially offset by decreases in derivative fair values
in the quarter.
- Trading assets were up by GBP5.7 billion to GBP64.8 billion at 31
March 2022, with increases in securities and reverse repos driven
by customer flows and the management of balance sheet within limits,
and an increase in derivative cash collateral posted. Trading liabilities
increased by GBP7.0 billion to GBP71.5 billion, with increases in
repos and short positions partially offset by a decrease in derivative
cash collateral received.
- Derivative assets and derivative liabilities were down by GBP5.8 billion
to GBP99.8 billion and GBP4.7 billion to GBP93.8 billion respectively
at 31 March 2022, largely driven by increases in interest rates across
major currencies, partially offset by the impact of USD strengthening,
since year end 2021.
- Settlement balance assets and liabilities were up by GBP8.0 billion
and GBP7.4 billion to GBP10.1 billion and GBP9.5 billion respectively,
due to increased trading compared with the seasonally lower levels
of customer activity leading up to 31 December 2021.
- Loans to customers - amortised cost were up by GBP1.1 billion to GBP8.6
billion, largely reflecting new lending in the quarter.
- Other financial liabilities increased by GBP0.7 billion to GBP20.0
billion ( 31 December 2021 - GBP19.3 billion), driven by new issuance
in the quarter, partially offset by maturities. The balance at 31
March 2022 includes GBP13.4 billion of medium-term notes issued.
- Owners' equity was down by GBP0.4 billion to GBP7.1 billion ( 31 December
2021 - GBP7.5 billion), driven by the interim dividend payment to
NatWest Group plc of GBP0.25 billion on 18 February 2022, and other
reserve movements in the period.
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 12.
Capital, liquidity and funding risk
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 March 31 December 31 March
2022 2021 2021
Capital adequacy ratios % % %
------------------------- -------- ----------- --------
CET1 16.6 17.9 21.1
Tier 1 19.5 21.0 24.7
Total 24.0 25.9 29.8
Total MREL 35.8 42.1 44.8
------------------------- -------- ----------- --------
Capital (1) GBPm GBPm GBPm
------------------------- -------- ----------- --------
CET1 4,005 4,072 5,208
Tier 1 4,686 4,755 6,105
Total 5,764 5,870 7,356
Total MREL (2) 8,612 9,555 11,067
------------------------- -------- ----------- --------
Risk-weighted assets
------------------------- -------- ----------- --------
Credit risk 7,635 6,878 6,344
Counterparty credit risk 7,652 6,854 7,576
Market risk 7,298 6,934 8,750
Operational risk 1,478 2,020 2,020
------------------------- -------- ----------- --------
Total RWAs 24,063 22,686 24,690
------------------------- -------- ----------- --------
Leverage
The leverage ratio for March 2022 has been calculated in
accordance with the Leverage Ratio (CRR) part of the PRA rulebook.
The comparatives reflect the previous CRR framework which was
applicable prior to 1 January 2022.
31 March 31 December 31 March
2022 2021 2021
----------------------------- -------- ----------- --------
Leverage exposure (GBPm) (3) 100,712 110,603 123,431
Tier 1 capital (GBPm) 4,686 4,755 6,105
Leverage ratio (%) (4) 4.7 4.3 4.9
----------------------------- -------- ----------- --------
(1) CRR end-point for UK banks set by the PRA is 10.5% minimum
total capital ratio, with a minimum CET1 ratio of 7.0%, of which
the minimum capital requirement is 4.5% and capital conservation
buffer is 2.5%.
(2) Includes senior internal debt instruments issued to NatWest
Group plc with a regulatory value of GBP2.9 billion (31 December
2021 - GBP3.7 billion, 31 March 2021 - GBP3.7 billion).
(3) 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.
(4) Following the Financial Policy Committee's planned review of
the UK's leverage ratio framework, the PRA has introduced changes
to the framework from 1 January 2022. The leverage ratio for 31
March 2022 in the above table reflects the UK leverage ratio for
NWM Plc, as per the new framework. As at 31 December 2021, the UK
leverage ratio was 4.8%, which was calculated under the prior
year's PRA UK leverage methodology.
Liquidity and funding
31 March 31 December 31 March
2022 2021 2021
------------------------------------- -------- ----------- --------
Liquidity coverage ratio (LCR) (%) 216 205 233
Liquidity portfolio (GBPbn) 16.3 16.1 16.5
Total wholesale funding (GBPbn) (1) 22.0 21.1 18.8
Total funding including repo (GBPbn) 76.6 68.8 67.9
------------------------------------- -------- ----------- --------
(1) Predominantly comprises bank deposits (excluding repos),
debt securities in issue and third party subordinated liabilities
.
Condensed consolidated income statement for the period ended 31 March 2022 (unaudited)
Quarter ended
31 March 31 December 31 March
2022 2021 2021
GBPm GBPm GBPm
Interest receivable 101 85 98
Interest payable (87) (72) (105)
------------------------------------------ -------- ----------- --------
Net interest income 14 13 (7)
------------------------------------------ -------- ----------- --------
Fees and commissions receivable 96 68 77
Fees and commissions payable (41) (23) (36)
Income from trading activities 141 (37) 173
Other operating income 9 (8) (19)
Non-interest income 205 - 195
------------------------------------------ -------- ----------- --------
Total income 219 13 188
------------------------------------------ -------- ----------- --------
Staff costs (133) (128) (134)
Premises and equipment (24) (51) (19)
Other administrative expenses (130) (189) (114)
Depreciation and amortisation (4) (5) (5)
Operating expenses (291) (373) (272)
------------------------------------------ -------- ----------- --------
Loss before impairment (losses)/releases (72) (360) (84)
Impairment (losses)/releases (1) 16 6
------------------------------------------ -------- ----------- --------
Operating loss before tax (73) (344) (78)
Tax credit 33 136 17
------------------------------------------
Loss for the period (40) (208) (61)
------------------------------------------ -------- ----------- --------
Attributable to:
Ordinary shareholders (56) (224) (77)
Paid-in equity holders 16 16 16
(40) (208) (61)
----------------------------------------- -------- ----------- --------
Condensed consolidated statement of comprehensive income
for the period ended 31 March 2022 (unaudited)
Quarter ended
31 March 31 December 31 March
2022 2021 2021
GBPm GBPm GBPm
-------- ----------- --------
Loss for the period (40) (208) (61)
------------------------------------------------ ----------- --------
Items that do not qualify for reclassification
Remeasurement of retirement benefit schemes (1) 36 (1)
Changes in fair value of credit in financial
liabilities
designated at fair value through profit
or loss (FVTPL)
due to own credit risk 39 - (7)
Fair value through other comprehensive income
(FVOCI)
financial assets 3 4 3
Tax (5) (15) (1)
36 25 (6)
----------------------------------------------- ----------- --------
Items that do qualify for reclassification
FVOCI financial assets (15) 1 -
Cash flow hedges (153) (49) (90)
Currency translation 36 (31) (138)
Tax 49 24 23
(83) (55) (205)
----------------------------------------------- ----------- --------
Other comprehensive loss after tax (47) (30) (211)
Total comprehensive loss for the period (87) (238) (272)
------------------------------------------------ ----------- --------
Attributable to:
Ordinary shareholders (103) (254) (288)
Paid-in equity holders 16 16 16
(87) (238) (272)
----------------------------------------------- -------- ----------- --------
Condensed consolidated balance sheet as at 31 March 2022
(unaudited)
31 March 31 December
2022 2021
GBPm GBPm
Assets
Cash and balances at central banks 15,389 16,645
Trading assets 64,797 59,101
Derivatives 99,780 105,550
Settlement balances 10,133 2,139
Loans to banks - amortised cost 1,153 962
Loans to customers - amortised cost 8,609 7,471
Amounts due from holding company and fellow subsidiaries 3,044 1,479
Other financial assets 9,973 8,786
Other assets 875 878
--------------------------------------------------------- -----------
Total assets 213,753 203,011
Liabilities
Bank deposits 2,005 1,808
Customer deposits 3,458 2,268
Amounts due to holding company and fellow subsidiaries 5,396 6,126
Settlement balances 9,541 2,068
Trading liabilities 71,466 64,482
Derivatives 93,826 98,497
Other financial liabilities 20,042 19,255
Other liabilities 936 1,055
--------------------------------------------------------- -----------
Total liabilities 206,670 195,559
Equity
--------------------------------------------------------- -----------
Owners' equity 7,086 7,455
Non-controlling interests (3) (3)
Total equity 7,083 7,452
--------------------------------------------------------- -------- -----------
Total liabilities and equity 213,753 203,011
--------------------------------------------------------- -------- -----------
Condensed consolidated statement of changes in equity
for the period ended 31 March 2022 (unaudited)
Share
capital Total Non
and
share Paid-in Retained Other owners' controlling Total
premium equity earnings reserves* equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ------- -------- --------- ------- ----------- ------
At 1 January 2022 2,346 904 4,138 67 7,455 (3) 7,452
Loss attributable to ordinary
shareholders and paid-in
equity holders (40) (40) - (40)
Other comprehensive income
- Changes in fair value
of credit in
financial liabilities designated
at FVTPL
due to own credit risk 39 39 39
- Unrealised losses: FVOCI (12) (12) (12)
- Remeasurement of retirement
benefit schemes (1) (1) (1)
- Amounts recognised in
equity: cash flow hedges (146) (146) (146)
- Foreign exchange reserve
movement 36 36 - 36
- Amounts transferred from
equity to
earnings (7) (7) (7)
- Tax (3) 47 44 44
Ordinary share dividends
paid (250) (250) - (250)
Paid-in equity dividends
paid (16) (16) (16)
Share-based payments (16) (16) (16)
-------------------------------------- ------- ------- -------- --------- ------- ----------- ------
At 31 March 2022 2,346 904 3,851 (15) 7,086 (3) 7,083
31 March
2022
Attributable to: GBPm
-------------------------------------------------------- -------- --------- ------- -----------
Ordinary shareholders 6,182
Paid-in equity holders 904
Non-controlling interests (3)
-------------------------------------- ------- -------
7,083
------
*Other reserves consist of:
FVOCI reserve 22
Cash flow hedging reserve (60)
Foreign exchange reserve 23
-------------------------------------- ------- ------- -------- --------- ------- ----------- ------
(15)
------
Notes
1. Presentation of condensed consolidated financial
statements
The condensed consolidated financial statements should be read
in conjunction with NatWest Markets Plc's 2021 Annual Report and
Accounts which has been prepared in accordance with UK adopted
International Accounting Standards (IAS), International Financial
Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB) and IFRS as adopted by the
European Union.
Going concern
Having reviewed NWM Group's principal risks, forecasts,
projections and other relevant evidence, the directors have a
reasonable expectation that NWM Group will continue in operational
existence for a period of twelve months from the date the condensed
consolidated financial statements are approved. Accordingly, the
results for the period ended 31 March 2022 have been prepared on a
going concern basis.
2. Accounting policies
NWM Group's principal accounting policies are as set out on
pages 110 to 114 of NatWest Markets Plc's 2021 Annual Report and
Accounts. Amendments to IFRS effective from 1 January 2022 had no
material effect on the condensed consolidated financial
statements.
Critical accounting policies and key sources of estimation
uncertainty
The judgements and assumptions that are considered to be the
most important to the portrayal of NWM Group's financial condition
are those relating to deferred tax, fair value of financial
instruments, loan impairment provisions and provisions for
liabilities and charges. These critical accounting policies and
judgements are noted on pages 113 and 114 of NatWest Markets Plc's
2021 Annual Report and Accounts.
Information used for significant estimates
Uncertainty with respect to the prolonged financial effect of
the COVID-19 pandemic and the Russian invasion of Ukraine continues
to cause significant economic and social disruption. Specifically,
there continues to be uncertainty as to the indirect impacts on NWM
Group due to the Russian invasion of Ukraine and related
consequences for geopolitical stability, energy supply and prices,
and cross-border financial transactions, including as a result of
economic sanctions. Key financial estimates are based on
management's latest five-year revenue and cost forecasts.
Measurement of deferred tax and expected credit losses are highly
sensitive to reasonably possible changes in those anticipated
conditions. Other reasonably possible assumptions about the future
include a prolonged financial effect of the COVID-19 pandemic on
the economy of the UK and other countries or greater economic
effect as countries and companies implement plans to counter
climate risks. Changes in judgements and assumptions could result
in a material adjustment to those estimates in future reporting
periods. (Refer to the Risk factors in NatWest Markets Plc's 2021
Annual Report and Accounts).
Notes
3. Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities
held at fair value in trading portfolios.
31 March 31 December
2022 2021
Assets GBPm GBPm
-------- -----------
Loans
- Reverse repos 23,636 20,742
- Collateral given 13,386 11,990
- Other loans 952 1,414
--------------------------------------- -------- -----------
Total loans 37,974 34,146
--------------------------------------- -------- -----------
Securities
Central and local government
- UK 9,073 6,919
- US 4,286 3,329
- Other 9,897 10,929
Financial institutions and Corporate 3,567 3,778
Total securities 26,823 24,955
--------------------------------------- -------- -----------
Total 64,797 59,101
Liabilities
--------------------------------------- -------- -----------
Deposits
- Repos 26,405 19,389
- Collateral received 17,143 17,619
- Other deposits 1,465 1,536
Total deposits 45,013 38,544
--------------------------------------- -------- -----------
Debt securities in issue 883 974
Short positions 25,570 24,964
Total 71,466 64,482
--------------------------------------- -------- -----------
4. Other financial liabilities
31 March 31 December
2022 2021
GBPm GBPm
Customer deposits - designated as at FVTPL 565 568
Debt securities in issue
- designated as at FVTPL 1,051 1,103
- amortised cost 17,526 16,621
Subordinated liabilities
- designated as at FVTPL 655 703
- amortised cost 245 260
------------------------------------------- -------- -----------
Total 20,042 19,255
------------------------------------------- -------- -----------
5. Amounts due to holding company and fellow subsidiaries
31 March 31 December
2022 2021
Liabilities GBPm GBPm
Bank deposits - amortised cost 367 120
Customer deposits - amortised cost 79 155
Trading liabilities 451 348
Other financial liabilities - subordinated liabilities 1,437 1,464
MREL instruments issued to NatWest Group plc 2,880 3,858
Other liabilities 182 181
------------------------------------------------------- -------- -----------
Total 5,396 6,126
------------------------------------------------------- -------- -----------
Notes
6. Litigation and regulatory matters
NatWest Markets Plc's 2021 Annual Report and Accounts, issued on
18 February 2022, included disclosures about NWM
Group's litigation and regulatory matters in Note 25. Set out
below are the material developments in those matters (which have
all been previously disclosed) since publication of the 2021 Annual
Report and Accounts .
Litigation
Residential mortgage-backed securities (RMBS) litigation in the
US
NatWest Markets Securities Inc. (NWMSI) agreed to settle a
purported RMBS class action entitled New Jersey Carpenters Health
Fund v. Novastar Mortgage Inc. et al. for US$55.3 million. This was
paid into escrow pending court approval of the settlement, which
was granted in March 2019, but which then became the subject of an
appeal by a class member who wanted to exit the settlement. On 14
March 2022, the United States Court of Appeals for the Second
Circuit rejected that class member's appeal.
London Interbank Offered Rate (LIBOR) and other rates
litigation
NatWest Group plc is a defendant in a class action pending in
the United States District Court for the Southern District of New
York (SDNY) on behalf of lender plaintiffs who allege that NatWest
Group plc and other defendants engaged in fraud by artificially
suppressing USD LIBOR. On 25 February 2022, the United States Court
of Appeals for the Second Circuit reversed the SDNY's prior
dismissal of the case, holding that the plaintiffs have adequately
alleged the court's jurisdiction over the defendants. The claim
will now proceed in the SDNY.
NatWest Group companies are defendants in class actions pending
in the SDNY relating to alleged manipulation of the Singapore
Interbank Offered Rate and Singapore Swap Offer Rate ('SIBOR /
SOR') and the Australian Bank Bill Swap Reference Rate. In March
2022, agreements in principle were reached to settle both cases.
The amounts of the settlements, which remain subject to final
documentation and court approval, are covered by existing
provisions.
FX litigation
An FX-related class action, on behalf of 'consumers and end-user
businesses', is pending in the SDNY against NWM Plc and others. On
18 March 2022, the SDNY denied the plaintiffs' motion for class
certification. Plaintiffs are seeking to appeal the decision.
Two separate FX-related 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. On 31
March 2022, the CAT declined to certify as collective proceedings
either of the applications, ruling that the opt-out basis on which
they were brought was inappropriate. The CAT granted each applicant
three months to revise their application for certification on an
opt-in basis, if they wish to proceed. The applicants have stated
that they intend to appeal the judgment.
Government securities antitrust litigation
NWMSI and certain other US broker-dealers are defendants in a
consolidated antitrust class action in the 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 defendants rigged the US Treasury securities
auction bidding process to deflate the prices at which they bought
such securities and colluded to increase the prices at which they
sold such securities to plaintiffs. On 31 March 2022, the SDNY
dismissed the operative complaint, without leave to re-plead. The
dismissal is subject to appeal.
NWM Plc, NWMSI and other banks are defendants in a class action
antitrust case in the SDNY in respect of Euro-denominated bonds
issued by European central banks (EGBs). The complaint alleges a
conspiracy among dealers of EGBs, between 2007 and 2012, to widen
the bid-ask spreads they quoted to customers, thereby increasing
the prices customers paid for the EGBs or decreasing the prices at
which customers sold the bonds. On 14 March 2022, the SDNY
dismissed the claims against NWM Plc and NWMSI in the operative
complaint on the ground that the complaint's conspiracy allegations
are insufficient. The plaintiffs have indicated that they intend to
file an amended complaint.
Regulatory matters
Systematic Anti-Money Laundering Programme assessment
In January 2022, NatWest Group received the Skilled Person's
final report in connection with governance arrangements for two
financial crime change programmes in respect of which the Skilled
Person had been appointed under section 166 of the Financial
Services and Markets Act 2000 to provide assurance. The FCA
confirmed in March 2022 that the section 166 review has now
concluded.
7. Post balance sheet events
Other than as disclosed in the accounts, there have been no
other significant events between 31 March 2022 and the date of
approval of these accounts that would require a change to or
additional disclosure in the condensed consolidated financial
statements.
Non-IFRS measures
NWM Group prepares its financial statements in accordance with
generally accepted accounting principles (GAAP). This document
contains a number of adjusted or alternative performance measures,
also known as non-GAAP or non-IFRS performance measures. These
measures are adjusted for 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 the operating expenses shows litigation
and conduct costs on a separate line on page 3. These amounts are
included in other administrative expenses in the statutory
analysis. The use of the other expenses performance measure in
non-statutory analysis aims to remove more volatile items within
litigation and conduct costs.
- 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 asset disposals/strategic risk reduction and own credit
adjustments. This measure is used to show underlying income
generation in NatWest Markets excluding the impact of disposal
losses and 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.
- Asset disposals/strategic risk reduction includes the costs of
exiting positions, which includes changes in carrying value to
align to the expected exit valuation, and the impact of risk
reduction transactions entered into as part of the optimisation of
the entity's capital usage, following the strategic announcements
of 14 February 2020.
- 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
Non-statutory analysis
Quarter ended
---------------------------------
31 March 2022
---------------------------------
Litigation Other Statutory
and conduct operating operating
costs expenses expenses
Operating expenses GBPm GBPm GBPm
------------------------------ ----------- --------- ---------
Staff costs - 133 133
Premises and equipment - 24 24
Other administrative expenses 8 122 130
Depreciation and amortisation - 4 4
Total 8 283 291
------------------------------ ----------- --------- ---------
Quarter ended
---------------------------------
31 December 2021
---------------------------------
Litigation Other Statutory
and conduct operating operating
costs expenses expenses
Operating expenses GBPm GBPm GBPm
------------------------------ ----------- --------- ---------
Staff costs - 128 128
Premises and equipment - 51 51
Other administrative expenses 24 165 189
Depreciation and amortisation - 5 5
Total 24 349 373
------------------------------ ----------- --------- ---------
Quarter ended
---------------------------------
31 March 2021
---------------------------------
Litigation Other Statutory
and conduct operating operating
costs expenses expenses
Operating expenses GBPm GBPm GBPm
------------------------------ ----------- --------- ---------
Staff costs - 134 134
Premises and equipment - 19 19
Other administrative expenses 13 101 114
Depreciation and amortisation - 5 5
Total 13 259 272
------------------------------ ----------- --------- ---------
Additional information
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') comprises NWM Plc and its subsidiary
and associated undertakings. The term 'NatWest Group' comprises
NatWest Group plc and its subsidiary and associated undertakings.
The term 'NWH Group' refers to NatWest Holdings Limited ('NWH') and
its subsidiary and associated
undertakings. The term 'NatWest Bank Plc' or 'NWB Plc' refers to National Westminster Bank Plc.
NWM Plc publishes its financial statements in pounds sterling
('GBP' or 'sterling'). The abbreviations 'GBPm' and 'GBPbn'
represent millions and thousands of millions of pounds sterling,
respectively, and references to 'pence' or 'p' represent pence in
the United Kingdom ('UK'). References to 'dollars' or '$' are to
United States of America ('US') dollars. The abbreviations '$m' and
'$bn' represent millions and thousands of millions of dollars,
respectively. The abbreviation 'EUR' represents the 'euro', and the
abbreviations 'EURm' and 'EURbn' represent millions and thousands
of millions of euros, respectively.
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
NWM 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 2021 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 Markets Investor Relations +44 (0) 7769161183
----------- ----------------------------------- ------------------
Forward-looking statements
This document contains forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995, such as statements that include, without limitation,
the words 'expect', 'estimate', 'project', 'anticipate', 'commit',
'believe', 'should', 'intend', 'will', 'plan', 'could',
'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal',
'objective', 'may', 'endeavour', 'outlook', 'optimistic',
'prospects' and similar expressions or variations on these
expressions. These statements concern or may affect future matters,
such as NWM Group's future economic results, business plans and
strategies. In particular, this document may include
forward-looking statements relating to NWM Group in respect of, but
not limited to: the impact of the COVID-19 pandemic, its regulatory
capital position and related requirements, its financial position,
profitability and financial performance (including financial,
capital, cost savings and operational targets), the NWM Group
refocusing and implementation of
NatWest Group's purpose-led strategy, its ESG and
climate-related targets, its access to adequate sources of
liquidity and funding, increasing competition from new incumbents
and disruptive technologies, its exposure to third party risks, its
ongoing compliance with the UK ring-fencing regime and ensuring
operational continuity in resolution, its impairment losses and
credit exposures under certain specified scenarios, substantial
regulation and oversight, ongoing legal, regulatory and
governmental actions and investigations, the transition of LIBOR
and IBOR rates to alternative risk free rates and NWM Group's
exposure to economic and political risks (including with respect to
terms surrounding Brexit and climate change), operational risk,
conduct risk, cyber, data and IT risk, financial crime risk, key
person risk and credit rating risk. Forward-looking statements are
subject to a number of risks and uncertainties that might cause
actual results and performance to differ materially from any
expected future results or performance expressed or implied by the
forward-looking statements. Factors that could cause or contribute
to differences in current expectations include, but are not limited
to, the impact of the COVID-19 pandemic, the outcome of legal,
regulatory and governmental actions and investigations, the level
and extent of future impairments and write-downs, legislative,
political, fiscal and regulatory developments, accounting
standards, competitive conditions, technological developments,
interest and exchange rate fluctuations, general economic and
political conditions and the impact of climate-related risks and
the transitioning to a net zero economy. These and other factors,
risks and uncertainties that may impact any forward-looking
statement or NWM Group's actual results are discussed in NWM Plc's
2021 Annual Report and Accounts (ARA), NWM Plc's Interim Results
for Q1 2022 and other public filings. The forward-looking
statements contained in this document speak only as of the date of
this document and NWM Group does not assume or undertake any
obligation or responsibility to update any of the forward-looking
statements contained in this document, whether as a result of new
information, future events or otherwise, except to the extent
legally required.
Legal Entity Identifier: RR3QWICWWIPCS8A4S074
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END
QRFSEMEFAEESEEL
(END) Dow Jones Newswires
April 29, 2022 02:01 ET (06:01 GMT)
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