TIDM83NF
RNS Number : 7895X
Natwest Markets PLC
28 April 2023
NatWest Markets Group
Q1 2023
Interim Management Statement
ci.natwest.com
NatWest Markets Group (NWM Group)
Results for Q1 2023
Q1 Overview
Our business performance has been strong over the quarter,
delivering improved income relative to the prior period and we have
continued to contribute to the NatWest Group Commercial &
Institutional (C&I) segment. Through a period of significant
market disruption we have maintained a proactive approach to risk
management and continued to support our customers as they have
navigated macroeconomic uncertainty, including the impacts of
rising interest rates through the quarter.
We continue to make progress against our strategic priorities,
supporting growth with our customers. As at 31 March 2023, we had
provided GBP19.4 billion in total towards the NatWest Group climate
and sustainable funding and financing target of GBP100 billion
between 1 July 2021 and the end of 2025, of which GBP3.9 billion
was provided in Q1 2023.
Financial review
NWM Group reported a loss of GBP10 million for Q1 2023, compared
with a loss of GBP45 million in Q4 2022 and a loss of GBP40 million
in Q1 2022. Total income increased to GBP265 million in Q1 2023,
largely driven by a stronger performance in Fixed Income. Operating
expenses decreased to GBP285 million, principally driven by a
reduction in litigation and conduct costs, partially offset by an
increase in other operating expenses.
Financial performance
- Total income of GBP265 million in Q1 2023 was up by GBP158 million
compared with GBP107 million in Q4 2022 and up by GBP46 million compared
with GBP219 million in Q1 2022, largely reflecting stronger relative
performance in Fixed Income including the impact of challenging market
conditions on the comparative periods. Currencies income levels were
comparable with Q4 2022 but down compared with Q1 2022, a period in
which the business benefitted from heightened FX volatility levels.
- Operating expenses were GBP285 million in Q1 2023, compared with GBP301
million in Q4 2022 and GBP291 million in Q1 2022. The decrease compared
with the prior quarter was driven by lower litigation and conduct
costs, largely reflecting progress made in the previous quarter in
closing legacy matters, partially offset by an increase in other operating
expenses, largely due to the timing of variable staff costs incurred
and one-off items recognised in the prior quarter.
- NWM Group's total assets and liabilities decreased by GBP7.6 billion
and GBP7.5 billion to GBP182.2 billion and GBP175.7 billion respectively
at 31 March 2023, compared with 31 December 2022. The decreases mainly
reflect lower derivative fair values, largely driven by market volatility
including the weakening of USD and decreases in interest rates across
major currencies since year end 2022.
Capital and leverage
- Total NWM Plc RWAs were GBP20.2 billion at 31 March 2023, compared
with GBP21.4 billion at 31 December 2022 and GBP24.1 billion at 31
March 2022. The decrease in the quarter was largely due to lower market
risk, mainly driven by reduction in risk exposures and Value-at-Risk
(VaR) multiplier, in addition to lower counterparty credit risk and
operational risk.
- NWM Plc's Common Equity Tier 1 (CET1) ratio was 18.2% at 31 March
2023, compared with 17.2% at 31 December 2022 and 16.6% at 31 March
2022. The increase in the quarter was mainly due to the decrease in
RWAs.
- Total MREL for NWM Plc at 31 March 2023 was GBP8.5 billion, or 42.4%
of RWAs, compared with GBP8.7 billion or 40.4% of RWAs at 31 December
2022.
- NWM Plc's leverage ratio at 31 March 2023 was 5.6% compared with 5.4%
at 31 December 2022.
Liquidity and funding
- NWM Plc's liquidity portfolio at 31 March 2023 was GBP20.3 billion
with an LCR of 255% (31 December 2022 - GBP18.6 billion with LCR 253%).
- NWM Plc issued public benchmark transactions under the EMTN programme
totalling EUR1.5 billion of notes in the three months ended 31 March
2023. NWM Plc also raised funding in other formats throughout the
quarter including but not limited to structured note issuance.
Outlook (1)
We retain the Outlook guidance provided in the NatWest Markets
Plc 2022 Annual Report and Accounts.
(1) The guidance, targets, expectations and trends discussed in this section
represent management's current expectations and are subject to change,
including as a result of the factors described in the 'Risk Factors'
section in the NatWest Markets Plc 2022 Annual Report and Accounts.
These statements constitute forward-looking statements. Refer to 'Forward-looking
statements' in this announcement.
Financial review
The table below presents an analysis of key lines of NWM Group's
income statement for the quarter ended 31 March 2023. Commentary
refers to the tables below as well as the consolidated income
statement shown on page 6.
Quarter ended
-------------------------------
31 March 31 December 31 March
2023 2022 2022
Income statement (1) GBPm GBPm GBPm
------------------------------------------------- -------- ----------- --------
Net interest income 35 29 14
Non-interest income 230 78 205
------------------------------------------------- -------- ----------- --------
Total income 265 107 219
------------------------------------------------- -------- ----------- --------
Litigation and conduct costs (8) (47) (8)
Other operating expenses (277) (254) (283)
------------------------------------------------- -------- ----------- --------
Operating expenses (285) (301) (291)
------------------------------------------------- -------- ----------- --------
Operating loss before impairment releases/losses (20) (194) (72)
Impairment releases/(losses) 2 2 (1)
------------------------------------------------- -------- ----------- --------
Operating loss before tax (18) (192) (73)
Tax credit 8 147 33
------------------------------------------------- -------- ----------- --------
Loss for the period (10) (45) (40)
------------------------------------------------- -------- ----------- --------
Income (2)
------------------------------------------------- -------- ----------- --------
Fixed Income 70 5 (15)
Currencies 118 119 158
Capital Markets 111 93 121
Capital Management Unit & other (3) 8 (41) (24)
------------------------------------------------- -------- ----------- --------
Income including shared revenue before OCA 307 176 240
Revenue shared with or paid to fellow NatWest
Group subsidiaries (48) (51) (39)
------------------------------------------------- -------- ----------- --------
Income excluding OCA 259 125 201
Own credit adjustments (OCA) 6 (18) 18
-------------------------------------------------
Total income 265 107 219
------------------------------------------------- -------- ----------- --------
(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 capital usage
and optimisation across all parts of NatWest Markets, with the income
materially relating to legacy positions. Other mainly relates to
asset disposal/strategic risk reduction costs that were separately
disclosed prior to Q1 2023.
- Net interest income was GBP35 million in Q1 2023, compared
with GBP29 million in Q4 2022 and GBP14 million in Q1 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 increase compared with Q1 2022
largely reflects growth in lending activity.
- Non-interest income of GBP230 million in Q1 2023 increased by
GBP152 million compared with GBP78 million in Q4 2022 and by GBP25
million compared with GBP205 million in Q1 2022, largely driven by
stronger relative performance in Fixed Income, including the impact
of challenging market conditions in the comparative periods.
Currencies income levels were comparable with the previous quarter
but were down compared with Q1 2022, a period in which the business
benefitted from heightened levels of FX volatility. The increase in
Capital Management Unit & other income levels largely reflects
fair value movements with regard to legacy and funding positions.
Own credit adjustments of GBP6 million in Q1 2023 reflected the
widening of credit spreads, and were up by GBP24 million compared
with GBP(18) million in Q4 2022.
- Operating expenses were GBP285 million in Q1 2023, compared
with GBP301 million in Q4 2022 and GBP291 million in Q1 2022.
Litigation and conduct costs of GBP8 million in Q1 2023 were down
by GBP39 million compared with GBP47 million in Q4 2022, largely
reflecting progress made in the previous quarter in closing legacy
matters, and in line with GBP8 million in Q1 2022. Other operating
expenses of GBP277 million in Q1 2023 increased by GBP23 million
compared with GBP254 million in Q4 2022, largely due to the timing
of variable staff costs incurred and one-off items recognised in
the prior quarter, and decreased by GBP6 million compared with
GBP283 million in Q1 2022.
Financial review
Balance sheet profile as at 31 March 2023
NWM Group's balance sheet profile is summarised below.
Commentary refers to the table below as well as the consolidated
balance sheet on page 8.
Assets Liabilities
-------------------------------------------------- --------------------------------------------------
31 March 31 December 31 March 31 December
2023 2022 2023 2022
GBPbn GBPbn GBPbn GBPbn
--------------------------- -------- ----------- -------- ----------- ---------------------------
Cash and balances at
central banks 19.1 17.0
Securities 13.9 9.9 9.6 9.5 Short positions
Reverse repos (1) 25.8 21.5 30.9 23.7 Repos (2)
Derivative cash collateral Derivative cash collateral
given (3) 9.8 12.7 15.3 17.7 received (4)
Other trading assets 0.8 1.2 1.9 1.9 Other trading liabilities
--------------------------- -------- ----------- -------- ----------- ---------------------------
Total trading assets 50.3 45.3 57.7 52.8 Total trading liabilities
Deposits - amortised
Loans - amortised cost 11.4 11.3 7.9 6.7 cost
Settlement balances 6.6 2.6 6.5 2.0 Settlement balances
Amounts due from holding Amounts due to holding
company company
and fellow subsidiaries 1.0 0.7 6.7 6.2 and fellow subsidiaries
Other financial assets 13.0 11.9 22.7 21.1 Other financial liabilities
Other assets 0.8 0.8 0.7 0.8 Other liabilities
Liabilities excluding
Funded assets 102.2 89.6 102.2 89.6 derivatives
Derivative assets 80.0 100.2 73.5 93.6 Derivative liabilities
--------------------------- -------- ----------- -------- ----------- ---------------------------
Total assets 182.2 189.8 175.7 183.2 Total liabilities
-------- ----------- -------- -----------
of which:
25.1 23.5 wholesale funding (5)
short-term wholesale
7.9 7.7 funding (5)
--------------------------- -------- ----------- -------- ----------- ---------------------------
(1) Comprises bank reverse repos of GBP5.3 billion (31 December 2022
- GBP4.6 billion) and customer reverse repos of GBP20.5 billion
(31 December 2022 - GBP16.9 billion).
(2) Comprises bank repos of GBP1.4 billion (31 December 2022- GBP1.6
billion) and customer repos of GBP29.5 billion (31 December 2022
- GBP22.1 billion).
(3) Comprises derivative cash collateral given relating to banks of
GBP3.5 billion (31 December 2022 - GBP4.6 billion) and customers
of GBP6.3 billion (31 December 2022 - GBP8.1 billion).
(4) Comprises derivative cash collateral received relating to banks
of GBP6.6 billion (31 December 2022 - GBP7.5 billion) and customers
of GBP8.7 billion (31 December 2022 - GBP10.2 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 decreased by GBP7.6 billion and GBP7.5
billion to GBP182.2 billion and GBP175.7 billion respectively at 31
March 2023, compared with GBP189.8 billion and GBP183.2 billion at
31 December 2022. The decreases primarily reflect lower derivative
fair values, largely driven by market volatility including the weakening
of USD and decreases in interest rates across major currencies since
year end 2022. Funded assets, which exclude derivatives, increased
by GBP12.6 billion to GBP102.2 billion.
- Cash and balances at central banks increased by GBP2.1 billion to
GBP19.1 billion at 31 March 2023, largely driven by increased net
funding across portfolios partially offset by banking book activity.
- Trading assets were up by GBP5.0 billion to GBP50.3 billion at 31
March 2023, driven by increases in securities and reverse repos partially
offset by a decrease in derivative cash collateral posted. Trading
liabilities were up by GBP4.9 billion to GBP57.7 billion, driven by
an increase in repos partially offset by a decrease in derivative
cash collateral received.
- Derivative assets and derivative liabilities were down by GBP20.2
billion to GBP80.0 billion and GBP20.1 billion to GBP73.5 billion
respectively at 31 March 2023, largely driven by market volatility
including the weakening of USD and decreases in interest rates across
major currencies since year end 2022.
- Settlement balance assets and liabilities were up by GBP4.0 billion
and GBP4.5 billion to GBP6.6 billion and GBP6.5 billion respectively
at 31 March 2023, principally due to increased trading compared with
the seasonally lower levels of customer activity leading up to 31
December 2022 .
- Other financial liabilities increased by GBP1.6 billion to GBP22.7
billion (31 December 2022 - GBP21.1 billion), driven largely by new
issuance in the period partially offset by maturities. The balance
at 31 March 2023 includes GBP17.6 billion of medium-term notes issued.
- Owners' equity was down by GBP0.1 billion to GBP6.5 billion ( 31 December
2022 - GBP6.6 billion), largely driven by 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
Introduction
Recent banking sector events (including those resulting from the
rapid rise in global interest rates) have caused macroeconomic and
market uncertainty. The future impacts remain uncertain. 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 NWM
Plc.
31 March 31 December 31 March
2023 2022 2022
Capital adequacy ratios (1) % % %
---------------------------- -------- ----------- --------
CET1 18.2 17.2 16.6
Tier 1 21.6 20.4 19.5
Total 27.1 25.7 24.0
Total MREL 42.4 40.4 35.8
----------------------------
Capital GBPm GBPm GBPm
---------------------------- -------- ----------- --------
CET1 3,676 3,682 4,005
Tier 1 4,355 4,361 4,686
Total 5,475 5,502 5,764
Total MREL (2) 8,546 8,652 8,612
----------------------------
Risk-weighted assets
---------------------------- -------- ----------- --------
Credit risk 7,131 7,110 7,635
Counterparty credit risk 5,442 5,682 7,652
Market risk 6,278 7,152 7,298
Operational risk 1,322 1,478 1,478
---------------------------- -----------
Total RWAs 20,173 21,422 24,063
---------------------------- -------- ----------- --------
(1) NWM Plc's total capital ratio requirement is 11.1%, comprising the
minimum capital requirement of 8%, supplemented with the capital
conservation buffer of 2.5% and the institution specific countercyclical
buffer ('CCyB') of 0.6%. The minimum CET1 ratio is 7.5%, including
the minimum capital requirement of 4.5%. The CCyB is based on the
weighted average of NWM Plc's geographical exposures.
(2) Includes senior debt instruments issued to NatWest Group plc with
a regulatory value of GBP3.1 billion (31 December 2022 - GBP3.2 billion,
31 March 2022 - GBP2.9 billion).
Leverage
The leverage ratio has been calculated in accordance with the
Leverage Ratio (CRR) part of the PRA rulebook.
31 March 31 December 31 March
2023 2022 2022
Leverage exposure (GBPm) (1) 77,259 81,083 100,712
Tier 1 capital (GBPm) 4,355 4,361 4,686
Leverage ratio (%) 5.6 5.4 4.7
----------------------------- -------- ----------- --------
(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 March 31 December 31 March
2023 2022 2022
Liquidity coverage ratio (LCR) (%) 255 253 216
Liquidity portfolio (GBPbn) 20.3 18.6 16.3
Total wholesale funding (GBPbn) (1) 25.1 23.5 22.0
Total funding including repo (GBPbn) 84.6 77.0 76.6
------------------------------------- -------- ----------- --------
(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 2023 (unaudited)
Quarter ended
31 March 31 December 31 March
2023 2022 2022
GBPm GBPm GBPm
Interest receivable 413 270 101
Interest payable (378) (241) (87)
Net interest income 35 29 14
--------------------------------------- -------- ----------- --------
Fees and commissions receivable 100 89 96
Fees and commissions payable (37) (32) (41)
Income from trading activities 168 37 141
Other operating income (1) (16) 9
Non-interest income 230 78 205
---------------------------------------
Total income 265 107 219
---------------------------------------
Staff costs (113) (92) (133)
Premises and equipment (15) (19) (24)
Other administrative expenses (154) (187) (130)
Depreciation and amortisation (3) (3) (4)
Operating expenses (285) (301) (291)
---------------------------------------
Loss before impairment releases/losses (20) (194) (72)
Impairment releases/(losses) 2 2 (1)
---------------------------------------
Operating loss before tax (18) (192) (73)
Tax credit 8 147 33
Loss for the period (10) (45) (40)
--------------------------------------- -------- ----------- --------
Attributable to:
Ordinary shareholders (28) (64) (56)
Paid-in equity holders 18 18 16
Non-controlling interests - 1 -
(10) (45) (40)
--------------------------------------- -------- ----------- --------
Condensed consolidated statement of comprehensive income
for the period ended 31 March 2023 (unaudited)
Quarter ended
31 March 31 December 31 March
2023 2022 2022
GBPm GBPm GBPm
-------- ----------- --------
Loss for the period (10) (45) (40)
---------------------------------------------------- ----------- --------
Items that do not qualify for reclassification
Remeasurement of retirement benefit schemes - (67) (1)
Changes in fair value of credit in financial
liabilities
designated at fair value through profit or loss
(FVTPL) (6) (52) 39
Fair value through other comprehensive income
(FVOCI) financial assets 2 1 3
Tax - 42 (5)
(4) (76) 36
---------------------------------------------------- ----------- --------
Items that do qualify for reclassification
FVOCI financial assets 2 4 (15)
Cash flow hedges 54 100 (153)
Currency translation (53) (91) 36
Tax (14) (32) 49
(11) (19) (83)
---------------------------------------------------- ----------- --------
Other comprehensive loss after tax (15) (95) (47)
Total comprehensive loss for the period (25) (140) (87)
---------------------------------------------------- ----------- --------
Attributable to:
Ordinary shareholders (43) (159) (103)
Paid-in equity holders 18 18 16
Non-controlling interests - 1 -
---------------------------------------------------- -------- -----------
(25) (140) (87)
---------------------------------------------------- -------- ----------- --------
Condensed consolidated balance sheet as at 31 March 2023
(unaudited)
31 March 31 December
2023 2022
GBPm GBPm
Assets
Cash and balances at central banks 19,149 17,007
Trading assets 50,256 45,291
Derivatives 80,042 100,154
Settlement balances 6,589 2,558
Loans to banks - amortised cost 1,159 1,146
Loans to customers - amortised cost 10,266 10,171
Amounts due from holding company and fellow subsidiaries 1,007 740
Other financial assets 12,980 11,870
Other assets 744 832
Total assets 182,192 189,769
--------------------------------------------------------- -------- -----------
Liabilities
Bank deposits 3,062 3,069
Customer deposits 4,801 3,614
Amounts due to holding company and fellow subsidiaries 6,653 6,217
Settlement balances 6,520 2,010
Trading liabilities 57,710 52,792
Derivatives 73,507 93,585
Other financial liabilities 22,670 21,103
Other liabilities 756 816
Total liabilities 175,679 183,206
--------------------------------------------------------- -------- -----------
Equity
--------------------------------------------------------- -----------
Owners' equity 6,515 6,565
Non-controlling interests (2) (2)
Total equity 6,513 6,563
--------------------------------------------------------- -------- -----------
Total liabilities and equity 182,192 189,769
--------------------------------------------------------- -------- -----------
Condensed consolidated statement of changes in equity
for the period ended 31 March 2023 (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 2023 2,346 904 3,374 (59) 6,565 (2) 6,563
Loss attributable to ordinary
shareholders and paid-in
equity holders (10) (10) - (10)
Other comprehensive income
- Changes in fair value of
credit in
financial liabilities designated
at FVTPL
due to own credit risk (6) (6) (6)
- Unrealised gains: FVOCI 5 5 5
- Amounts recognised in equity:
cash flow hedges 59 59 59
- Foreign exchange reserve
movement (53) (53) - (53)
- Amounts transferred from
equity to
earnings (6) (6) (6)
- Tax - (14) (14) (14)
Paid-in equity dividends paid (18) (18) (18)
Share-based payments (7) (7) (7)
---------------------------------------- ------- ------- -------- --------- ------- ----------- --------
At 31 March 2023 2,346 904 3,333 (68) 6,515 (2) 6,513
At
31 March
2023
Attributable to: GBPm
---------------------------------------------------------- -------- --------- ------- -----------
Ordinary shareholders 5,611
Paid-in equity holders 904
Non-controlling interests (2)
---------------------------------------- ------- -------
6,513
--------
*Other reserves consist of:
FVOCI reserve 7
Cash flow hedging reserve (254)
Foreign exchange reserve 179
---------------------------------------- ------- ------- -------- --------- ------- ----------- --------
(68)
--------
Notes
1. Presentation of condensed consolidated financial
statements
The condensed consolidated financial statements should be read
in conjunction with NatWest Markets Plc's 2022 Annual Report and
Accounts. The 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.
Amendments to IFRS effective from 1 January 2023 had no material
effect on the condensed consolidated financial statements.
2. Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities
held at fair value in trading portfolios.
31 March 31 December
2023 2022
Assets GBPm GBPm
-------- -----------
Loans
- Reverse repos 25,780 21,537
- Collateral given 9,766 12,719
- Other loans 783 1,113
Total loans 36,329 35,369
--------------------------------------- -------- -----------
Securities
Central and local government
- UK 2,278 2,205
- US 4,767 2,345
- Other 3,302 2,799
Financial institutions and Corporate 3,580 2,573
Total securities 13,927 9,922
Total 50,256 45,291
--------------------------------------- -------- -----------
Liabilities
--------------------------------------- -------- -----------
Deposits
- Repos 30,922 23,740
- Collateral received 15,322 17,663
- Other deposits 1,122 1,068
Total deposits 47,366 42,471
--------------------------------------- -------- -----------
Debt securities in issue 788 797
Short positions 9,556 9,524
Total 57,710 52,792
--------------------------------------- -------- -----------
3. Other financial liabilities
31 March 31 December
2023 2022
GBPm GBPm
Customer deposits - designated as at fair value through
profit or loss (FVTPL) 990 1,050
Debt securities in issue
- Medium term notes 17,574 16,418
- Commercial paper and certificates of deposit 3,635 3,169
Subordinated liabilities
- Designated as at FVTPL 350 345
- Amortised cost 121 121
Total 22,670 21,103
-------------------------------------------------------- -------- -----------
4. Amounts due to holding company and fellow subsidiaries
31 March 31 December
2023 2022
Liabilities GBPm GBPm
Bank deposits - amortised cost 241 108
Customer deposits - amortised cost 80 51
Settlement balances 549 26
Trading liabilities 997 1,129
Other financial liabilities - subordinated liabilities 1,478 1,519
MREL instruments issued to NatWest Group plc 3,118 3,173
Other liabilities 190 211
Total 6,653 6,217
------------------------------------------------------- -------- -----------
Notes
5. Litigation and regulatory matters
NatWest Markets Plc's 2022 Annual Report and Accounts, issued on
17 February 2023, included disclosures about NWM Group's litigation
and regulatory matters in Note 25. Set out below are the material
developments in those matters (all of which have been previously
disclosed) since publication of the 2022 Annual Report and Accounts
.
Litigation
FX litigation
NWM Plc, NatWest Markets Securities Inc. (NWMSI) and/or NatWest
Group plc are defendants in several cases relating to NWM Plc's
foreign exchange (FX) business. In 2015, NWM Plc paid US$255
million to settle the consolidated antitrust class action filed in
the United States District Court for the Southern District of New
York (SDNY) on behalf of persons who entered into over-the-counter
FX transactions with defendants or who traded FX instruments on
exchanges. In 2018, some members of the settlement class who opted
out of that class action settlement filed their own non-class
complaint in the SDNY asserting antitrust claims against NWM Plc,
NWMSI and other banks.
In April 2019, some of the claimants in the opt-out case
described above, as well as others, served proceedings in the High
Court of Justice of England and Wales, asserting competition claims
against NWM Plc and several other banks. The claim was transferred
from the High Court of Justice of England and Wales in December
2021 and registered in the UK Competition Appeal Tribunal (CAT) in
January 2022. In March 2023, NWM Plc entered into an agreement to
resolve both the SDNY and CAT cases. The settlement amount paid by
NWM Plc was covered by an existing provision.
In the FX-related class action in the SDNY on behalf of
'consumers and end-user businesses', the court granted the
defendants' motion for summary judgment on 30 March 2023,
dismissing the plaintiffs' claims. The court's decision granting
summary judgment, as well as a prior decision denying class
certification in the case, are subject to appeal by the
plaintiffs.
In December 2021, a claim was issued in the Netherlands against
NatWest Group plc, NWM Plc and NWM N.V. by Stichting FX Claims on
behalf of a number of claimants, seeking a declaration from the
court that anti-competitive FX market conduct described in
decisions of the European Commission (EC) of 16 May 2019 is
unlawful, along with unspecified damages. The claimants amended
their claim to also refer to a December 2021 decision by the EC,
which also described anti-competitive FX market conduct. The
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) unless the claimants are
domiciled in the Netherlands. Only certain of the claimants are so
domiciled and are therefore permitted to continue with their claims
against all defendants, including NatWest Group plc and NWM Plc.
The claimants have until the end of June 2023 to appeal that
decision.
Madoff
NWM N.V. was named as a defendant in two actions filed by the
trustee for the bankrupt estates of Bernard L. Madoff and Bernard
L. Madoff Investment Securities LLC, in bankruptcy court in New
York, which together seek to clawback more than US$298 million that
NWM N.V. allegedly received from certain Madoff feeder funds and
certain swap counterparties. The claims were previously dismissed,
but as a result of an August 2021 decision by the United States
Court of Appeals for the Second Circuit, they will now proceed in
the bankruptcy court, where they have been consolidated into one
action, subject to NWM N.V.'s legal and factual defences. In May
2022, NWM N.V. filed a motion to dismiss the amended complaint in
the consolidated action and such motion was denied in March 2023.
As a result, the claims will now enter the discovery phase.
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 was 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 sought 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.
On 20 April 2023, the claimant filed a notice of discontinuance
of its claim against certain defendants including Coutts & Co
Ltd. The claimant has subsequently indicated that it intends to
issue further replacement proceedings. In that event, Coutts &
Co Ltd will challenge the claimant's ability to take that step and
the Malaysian Court has provisionally scheduled a hearing on 15
June 2023 to consider the validity of any new proceedings.
Coutts & Co Ltd is a company registered in Switzerland and
is in wind-down following the announced sale of its business assets
in 2015.
6. Post balance sheet events
Other than as disclosed, there have been no other significant
events between 31 March 2023 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 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.
- 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 - management view
Quarter ended
---------------------------------
31 March 2023
---------------------------------
Litigation Other Statutory
and conduct operating operating
costs expenses expenses
GBPm GBPm GBPm
------------------------------ ----------- --------- ---------
Staff costs 1 112 113
Premises and equipment - 15 15
Other administrative expenses 7 147 154
Depreciation and amortisation - 3 3
Total 8 277 285
---------------------------------- ----------- --------- ---------
Quarter ended
---------------------------------
31 December 2022
---------------------------------
Litigation Other Statutory
and conduct operating operating
costs expenses expenses
GBPm GBPm GBPm
------------------------------ ----------- --------- ---------
Staff costs 2 90 92
Premises and equipment - 19 19
Other administrative expenses 45 142 187
Depreciation and amortisation - 3 3
Total 47 254 301
---------------------------------- ----------- --------- ---------
Quarter ended
---------------------------------
31 March 2022
---------------------------------
Litigation Other Statutory
and conduct operating operating
costs expenses 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
---------------------------------- ----------- --------- ---------
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' or 'we'
refers to 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
('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 'EUR' represents the 'euro', and the abbreviations
'EURm' and 'EURbn' represent millions and thousands of millions of
euros, respectively, and references to 'cents' represent cents in
the European Union ('EU').
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 2022 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 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: its economic and political risks (including due to
high inflation, supply chain disruption and the Russian invasion of
Ukraine), its regulatory capital position and related requirements,
its financial position, profitability and financial performance
(including financial, capital, cost savings and operational
targets), implementation of NWM Group's strategy and NatWest
Group's purpose-led strategy and NatWest Group's recent creation of
its Commercial & Institutional franchise (of which NWM Group
forms part), 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 other IBOR rates to replacement risk free
rates and NWM Group's exposure to operational risk, conduct risk,
financial crime risk, cyber, data and IT 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
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, 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 2022 Annual Report and Accounts (ARA),
NWM Group's Interim Management Statement for Q1 2023 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
QRFSEIEEWEDSEEL
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April 28, 2023 02:01 ET (06:01 GMT)
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