# Natwest Group reports a full year operating loss of £351 million

- Link: https://www.directorstalkinterviews.com/natwest-group-reports-a-full-year-operating-loss-of-351-million/412962193
- Published: 2021-02-19T07:33:30+00:00
- Author: Amilia Stone

**[Natwest Group plc](https://www.directorstalkinterviews.com/ftse-company/natwest-group-plc/nwg.l)**(
LON:NWG) has announced its annual results for the year ended 31 December 2020.

**Financial performance in a challenging environment**

● Full year 2020 operating loss of £351 million and an attributable loss of £753
million. Q4 2020 operating profit before tax of £64 million and an attributable 
loss of £109 million.

● Full year 2020 net impairment losses of £3,242 million, or 88 basis points of 
gross customer loans, resulted in an expected credit loss (ECL) coverage ratio of
1.66%.

● In comparison to 2019, income across the retail and commercial businesses, excluding
notable items, decreased by 10.0% as the lower yield curve, subdued business activity
and lower consumer spending were partially offset by strong balance growth.

● 2020 Bank net interest margin (NIM) of 1.71% decreased by 28 basis points compared
with 2019. Q4 2020 Bank NIM of 1.66% increased by 1 basis point in comparison to
Q3 2020 as lower average central liquidity and improved asset margins more than 
offset reduced structural hedge income as a result of lower swap rates.

● A cost reduction of £277 million was achieved during 2020, ahead of our £250 million
target for the year.

**Robust balance sheet with strong capital and liquidity levels**

● CET1 ratio of 18.5%, was 230 basis points higher than 2019, including c.100 basis
points related to IFRS 9 transitional relief. The CET1 ratio increased by 30 basis
points in comparison to Q3 2020 as the £3.6 billion reduction in RWAs and a 23 basis
point software intangible benefit were partially offset by the 3 pence proposed 
final dividend, 21 basis points, and linked pension contribution, 16 basis points.

● The liquidity coverage ratio (LCR) of 165%, representing £72.1 billion headroom
above 100%, increased by 13 percentage points in comparison to 2019. In comparison
to Q3 2020 LCR increased by 8 percentage points reflecting the continued growth 
in customer deposits.

● Net lending across the retail and commercial businesses increased by £20.9 billion
in 2020 supported by £12.9 billion drawdowns against UK Government lending schemes
and £16.2 billion mortgage lending, including £3.0 billion related to the Metro 
Bank plc mortgage portfolio acquisition. This growth has been partially offset by
lower unsecured balances, which were impacted by lower spend and higher repayments,
subdued business activity and increased loan provisions. In Q4 2020, net lending
across the retail and commercial businesses increased by £4.5 billion as mortgage
growth of £6.2 billion and £1.6 billion of lending against UK Government lending
schemes more than offset £2.4 billion net revolving credit facility (RCF) repayments.

● Customer deposits increased by £62.5 billion in comparison to 2019, with retail
and commercial balances £60.5 billion higher as consumer spending was impacted by
government restrictions and customers retained liquidity. In Q4 2020, customer deposits
increased by £13.3 billion.

● RWAs decreased by £8.9 billion in comparison to 2019, including an £11.0 billion
reduction in NatWest Markets to £26.9 billion, partially offset by volume growth
across the retail and commercial businesses with minimal levels of procyclical credit
risk inflation. RWAs reduced by £3.6 billion in Q4 2020, largely in NatWest Markets.

**Our Purpose in action – we champion potential, helping people, families and businesses
to thrive**

**Helping our customers, colleagues and communities through the impacts of COVID-
19**

**Provided lending support to our customers with a disciplined approach to risk:**

·   Approved £14.1 billion through the government lending initiatives.^((1))

·   Facilitated approximately £9.5 billion of COVID-19 Corporate Financing Facilities(
CCFF) issuances.^((2))

**Supported the financial health of our customers:**

·   Helped customers with approximately 258,000 mortgage repayment holidays and 
provided payment holidays on over 74,000 business customer accounts.^((3))

·   95% of branches have been kept open during the pandemic and a new ‘virtual queuing
system’ developed, with software developer Qudini, so customers who need to visit
one of our branches can do so as safely as possible.

**Long-term investment plan is powering our operational effectiveness:**

·   Increased digital adoption with 9.4 million active digital users (2019 – 8.7
million), and with video banking now available across our entire network, interactions
have increased from fewer than 100 per week in January 2020 to almost 9,000 per 
week by the end of 2020.

·   Announced an integration with global small business platform Xero, allowing 
its users to apply for NatWest Rapid Cash, a flexible line of credit based on outstanding
invoices up to the value of £300,000, providing simple, swift support to a number
of key businesses during the pandemic. 

**Prioritised the wellbeing of our colleagues:**

·   Continued to support more than 50,000 colleagues to work from home. The timing
of a phased return to our offices will be led by UK Government guidance and factors
such as the progress of vaccinations.

·   Introduced a new digital physiotherapy offering, giving colleagues free access
to physiotherapy advice, complementing existing resources to maintain and enhance
colleague health, such as virtual GPs and the SilverCloud wellbeing platform.

**Partnered and responded proactively to support UK communities:**

·   Extended our support for vulnerable customers through a joint referral service
with Citizens Advice, offering support to customers who need assistance to address
the root cause of their financial vulnerability.

·   Launched the Winter Sparkle campaign, sending food, clothes, basic home supplies
and toys from the Gogarburn food bank and charity distribution centres to people
experiencing winter poverty across the UK.

**Progress against areas of focus**

**Enterprise – addressing barriers to enterprise and business creation:**

·   Launched an SME Transformation Taskforce, co-chaired by NatWest Group and the
Federation of Small Businesses, bringing together policymakers, business groups 
and other stakeholders to share insights and discuss recommendations of support 
to spark growth back into this crucial part of the UK economy.

·   In January 2020, we announced £1 billion of funding for female entrepreneurs,
which has all been committed, we have now doubled this funding to £2 billion to 
help support female-led businesses to recover from the disruption caused by the 
coronavirus.

**Learning – skill building, particularly around financial confidence:**

·   Reached 2.9 million people through financial capability interactions in 2020.

·   Launched Financial Flex campaign to encourage Brits – especially younger generations–
to start talking more openly and honestly about their finances to combat growing
worries around money.

**Climate – supporting the necessary transition to a low carbon economy:**

·   Supported our customers with £12.0 billion of Climate and Sustainable Funding
and Financing in 2020.

·   Launched Green Mortgages offering a preferential interest rate to new or existing
customers who are purchasing an energy efficient property.

·   Announced we will be the banking sponsor of the 26th UN Climate Change Conference
of the Parties (COP26).

Diversity and inclusion – building an open and inclusive bank where everyone can
thrive:

·   At the end of 2020 we have, on aggregate, 39% women in our top three leadership
layers, an increase of 10% since targets were introduced in 2015.

·   As at the 31 December 2020 we have on aggregate 10% Black, Asian and Minority
Ethnic colleagues in our top four leadership layers in the UK, representing a 2%
increase since targets were introduced to improve representation to at least 14%
by 2025.

**Notes:**

_(1)   As at 31 December 2020, inclusive of Commercial Banking and Private Banking:
Bounce Back Loan Scheme (BBLS) – £8.6 billion; Coronavirus Business Interruption
Loan Scheme (CBILS) – £4.2 billion, Coronavirus Large Business Interruption Loan
Scheme (CLBILS) – £1.3 billion._

_(2)   As at 31 December 2020._

_(3)   For the year ended 31 December 2020 in Retail Banking and since 22 March 
2020 in Commercial Banking, there were c.16,000 active mortgage repayment holidays
and c.11,000 active payment holidays on business customer accounts._

> **Alison Rose, Chief Executive Officer:**
> “The past year presented some extraordinary challenges for our customers, colleagues
> and communities. We provided exceptional levels of support to those who needed
> it, including the approval of over £14 billion of lending under UK Government 
> schemes, demonstrating that we have truly put Our Purpose at the heart of this
> business. Being purpose-led isn’t just the right thing to do, it has a powerful
> commercial imperative and is fundamental to building sustainable value in our 
> business.
> Despite reporting a loss for the year, NatWest Group delivered a resilient underlying
> performance in a challenging operating environment. The bank continued to grow
> in key areas such as mortgages and commercial lending and our balance sheet remains
> strong, with one of the highest capital ratios amongst our UK and European peers.
> We have today announced our intention to pay a final dividend whilst reaffirming
> our commitment to regular capital returns for shareholders in the future.
> We made strong progress in executing the strategy we set out in February 2020 
> as we build a relationship bank for a digital world; a bank that will meet the
> rapidly evolving needs of our customers at different stages of their lives through
> an ever-increasing focus on digital and transformation. In turn, this will drive
> sustainable, long-term returns to our shareholders.
> We cannot be certain of the long-term impact of the pandemic. But we can be certain
> that our bank will continue to support those who need it most as we build back
> better. By championing potential and helping people, families and businesses to
> rebuild and thrive, we will succeed together.”

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