Stronger 2025 for NatWest Group (NYSE: NWG) with higher income and 19.2% RoTE
Rhea-AI Filing Summary
NatWest Group plc reports strong full-year 2025 results in its Annual Report on Form 20-F. Total income rose to £16.6 billion, up 13.2% from 2024, with total income excluding notable items at £16.4 billion. Net interest margin improved to 2.34% from 2.13% as higher deposit margins and structural hedge income supported earnings.
Profit attributable to ordinary shareholders increased 21.2% to £5.48 billion, and Return on Tangible Equity reached 19.2%. Customer loans grew to £418.9 billion and deposits to £443.0 billion, while the CET1 ratio strengthened to 14.0%. The bank proposes total 2025 dividends of 32.5 pence per share and plans a £750 million share buyback in the first half of 2026, alongside a net impairment charge of £671 million with ECL coverage steady at 0.83%.
Positive
- Strong earnings growth and profitability: Profit attributable to ordinary shareholders rose 21.2% to £5,479m, with Return on Tangible Equity improving to 19.2% and total income up 13.2% to £16,641m.
- Robust capital and larger distributions: The CET1 ratio increased to 14.0% while NatWest Group proposes total 2025 dividends of 32.5p per share and plans a £750m share buyback, taking total distributions deducted from capital in the year to £4.1bn.
Negative
- Higher credit impairment charges: The net impairment charge rose to £671m from £359m in 2024, and the loan impairment rate increased to 16 basis points, reflecting higher Stage 3 charges and lower good book releases.
Insights
Income, profitability and capital all strengthened in 2025, supporting larger shareholder payouts.
NatWest Group delivered total income of
Operating profit before tax increased to
Credit costs normalised, with a net impairment charge of
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended | |
OR | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Commission file number:
(Exact name of Registrant as specified in its charter)
(Jurisdiction of incorporation)
(Address of principal executive offices)
Tel:
(Name, Telephone, E-mail and/or Facsimile number and Address of Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading | | Name of each exchange |
* Not for trading, but only in connection with the registration of American Depositary Shares representing such ordinary shares pursuant to the requirements of the Securities and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2027 | London Stock Exchange |
Reset Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2028 | London Stock Exchange |
Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2031 | London Stock Exchange |
Reset Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2032 | London Stock Exchange |
Reset Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2033 | London Stock Exchange |
Reset Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2034 | London Stock Exchange |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2025, the close of the period covered by the annual report:
(Title of each class) | | (Number of outstanding shares) |
Ordinary shares of £1.0769* each | ||
11% cumulative preference shares | ||
5½% cumulative preference shares | ||
* Nominal value of Ordinary shares without rounding is £1.076923076923077 |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Accelerated filer ☐ | Non-Accelerated filer ☐ | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ☐
†The term “new or revised financial accounting standard” refers to any update issues by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☐ U.S. GAAP
☒
☐ Other
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes
SEC Form 20-F cross reference guide
Item | | Item Caption | Pages | |||
PART I | | Annual Report on Form 20-F | | Exhibit 15.2: Annual Report and | ||
1 | Identity of Directors, Senior Management and Advisers | Not applicable | Not applicable | |||
2 | Offer Statistics and Expected Timetable | Not applicable | Not applicable | |||
3 | Key Information A. [Reserved] B. Capitalization and indebtedness C. Reasons for the offer and use of proceeds D. Risk factors | Not applicable Not applicable 6-7, 269-289 | Not applicable Not applicable 72-77 | |||
4 | Information on the Company A. History and development of the Company B. Business overview C. Organizational structure D. Property, plant and equipment | 10-12, 175-180, 297-308 1-27, 179-180, 258-267, 290-296 5, Exhibit 8.1 170, 226, 290 | 6-7, 8-10, 15-20, 155-158 1-35, 50-58, 69 155-158 12-13 55-56 | |||
4A | Unresolved Staff Comments | Not applicable | Not applicable | |||
5 | Operating and Financial Review and Prospects A. Operating results B. Liquidity and capital resources C. Research and development, patents, licences etc. D. Trend information E. Critical Accounting Estimates | 1-26, 120-133 10-12, 25-27, 92-134, 154, 158, Not applicable 6-27 Not applicable | 1-35, 49-77 4, 10, 72-77 Not applicable 1-35, 50-58, 69 Not applicable | |||
6 | Directors, Senior Management and Employees A. Directors and senior management B. Compensation C. Board practices D. Employees E. Share ownership F. Disclosure of a registrant’s action to recover erroneously awarded compensation | Not applicable 171-188, 246 Not applicable 171 173-175, 246, 290, 299-300 Not applicable | 79-81, 83, 155-159 123-152 79-81, 83, 85-104, 105-122, 155-158 130 123-152 Not applicable | |||
7 | Major Shareholders and Related Party Transactions A. Major shareholders B. Related party transactions C. Interests of experts and counsel | 290-291, 294-296 247-248, 294-296 Not applicable | 155-158 Not applicable Not applicable | |||
8 | Financial Information A. Consolidated statements and other financial information B. Significant changes | 146-249 5-27, 146-249 | Not applicable Not applicable | |||
9 | The Offer and Listing A. Offer and listing details B. Plan of distribution C. Markets D. Selling shareholders E. Dilution F. Expenses of the issue | 229-230, 299-300 Not applicable 299-300 Not applicable Not applicable Not applicable | 153 Not applicable 153 Not applicable Not applicable Not applicable | |||
10 | Additional information A. Share capital B. Memorandum and articles of association C. Material contracts D. Exchange controls E. Taxation F. Dividends and paying agents G. Statement of experts H. Documents on display I. Subsidiary information J. Annual Report to Security Holders | Not applicable 302-306 294-296 302 300-302 Not applicable Not applicable 306 Not applicable Not applicable | Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable | |||
11 | Quantitative & Qualitative Disclosure about Market Risk | 29-133, 214-224 | 72-77, 117 | |||
12 | Description of Securities other than Equity Securities A. Debt Securities B. Warrants and Rights C. Other Securities D. American Depositary Shares | Exhibit 2.4 Not applicable Not applicable 268, 299-300 | Not applicable Not applicable Not applicable Not applicable Not applicable | |||
SEC Form 20-F cross reference guide continued
Item | Item Caption | | Pages | |||
PART II | | Annual Report on Form 20-F | | Exhibit 15.2: Annual Report and Form 20-F Information | ||
13 | Defaults, Dividend Arrearages and Delinquencies | Not applicable | Not applicable | |||
14 | Material Modifications to the Rights of Security Holders and Use of Proceeds | Not applicable | Not applicable | |||
15 | Controls and Procedures | 151, Exhibits 12.1 and 12.2 | 72-77, 107-113, 152-154 | |||
16 | [Reserved] | |||||
16A | Audit Committee financial expert | Not applicable | 107 | |||
16B | Code of ethics | 292 | 8-10, 64-65 | |||
16C | Principal Accountant Fees and services | 188 | 111 | |||
16D | Exemptions from the Listing Standards | Not applicable | Not applicable | |||
16E | Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 291 | 156-158 | |||
16F | Change in Registrant’s Certifying Accountant | 296, Exhibit 16.1 | 111 | |||
16G | Corporate Governance | Not applicable | 85-112, 153, 159 | |||
16H | Mine Safety Disclosure | Not applicable | Not applicable | |||
16I | Disclosure Regarding Foreign Jurisdictions that Prevent Inspection | Not applicable | Not applicable | |||
16J | Insider Trading Policies | 296 | Not applicable | |||
16K | Cybersecurity | 138-139 | Not applicable | |||
PART III | ||||||
17 | Financial Statements | Not applicable | Not applicable | |||
18 | Financial Statements | 146-249 | Not applicable | |||
19 | Exhibits | 309-310 | Not applicable | |||
Forward-looking statements and important notices
Cautionary statement regarding forward-looking statements
Certain sections in this document contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements with respect to NatWest Group’s financial condition, results of operations and business, including its strategic priorities, financial, investment and capital targets, and climate and sustainability-related targets, commitments and ambitions described herein. Statements that are not historical facts, including statements about NatWest Group’s beliefs and expectations, are forward-looking statements. Words such as ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘commit’, ‘believe’, ‘should’, ‘intend’, ‘will’, ‘plan’, ‘could’, ‘probability’, ‘risk’, ‘target’, ‘goal’, ‘objective’, ‘may’, ‘endeavour’, ‘outlook’, ‘optimistic’, ‘prospects’ and similar expressions or variations on these expressions are intended to identify forward-looking statements. In particular, this document includes forward-looking targets and guidance relating to financial performance measures, such as income growth, operating expense, RoTE, ROE, discretionary capital distribution targets, impairment loss rates, capital generation pre distributions, customer assets and liabilities growth rate, cost: income ratio, balance sheet reduction (including the reduction of RWAs), CET1 ratio (and key drivers of the CET1 ratio including timing, impact and details), Pillar 2 and other regulatory buffer requirements and MREL and non-financial performance measures, such as NatWest Group’s initial area of focus, climate and sustainability-related ambitions, targets and metrics, including in relation to financed emissions and initiatives to transition to a net zero economy, such as our climate and transition finance activities.
Limitations inherent to forward-looking statements
These statements are based on current plans, expectations, estimates, targets and projections, and are subject to significant inherent risks, uncertainties and other factors, both external and relating to NatWest Group’s strategy or operations, which may result in NatWest Group being unable to achieve the current plans, expectations, estimates, targets, projections and other anticipated outcomes expressed or implied by such forward-looking statements. In addition, certain of these disclosures are dependent on choices relying on key model characteristics and assumptions and are subject to various limitations, including assumptions and estimates made by management. By their nature, certain of these disclosures are only estimates and, as a result, actual future results, gains or losses could differ materially from those that have been estimated. Accordingly, undue reliance should not be placed on these statements. The forward-looking statements contained in this document speak only as of the date we make them and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein, whether to reflect any change in our expectations with regard thereto, any change in events, conditions or circumstances on which any such statement is based, or otherwise, except to the extent legally required.
Important factors that could affect the actual outcome of the forward-looking statements
We caution you that a large number of important factors could adversely affect our results or our ability to implement our strategy, cause us to fail to meet our targets, predictions, expectations and other anticipated outcomes or affect the accuracy of forward-looking statements described in this document. These factors include, but are not limited to, those set forth in the risk factors and the other uncertainties described in NatWest Group plc’s 2025 Annual Report on Form 20-F, and its other filings with the US Securities and Exchange Commission. The principal risks and uncertainties that could adversely affect NatWest Group’s future results, its financial condition and/or prospects and cause them to be materially different from what is forecast or expected, include, but are not limited to: economic and political risk (including in respect of: political and economic risks and uncertainty in the UK and global markets, including as a result of inflation and interest rates, supply chain disruption, protectionist policies, and geopolitical developments); and changes in interest rates and foreign currency exchange rates; business change and execution risk (including in respect of the implementation of NatWest Group’s strategy; future acquisitions and divestments, the competitive environment; and the transfer of its EU corporate portfolio); financial resilience risk (including in respect of: NatWest Group’s ability to meet targets and to make discretionary capital distributions; counterparty and borrower risk; liquidity and funding risks; prudential regulatory requirements for capital; reductions in the credit ratings; model risk; sensitivity to accounting policies, judgments, estimates and assumptions (and the economic, climate, competitive and other forward looking information affecting those judgments, estimates and assumptions); changes in applicable accounting standards; the value or effectiveness of credit protection; the requirements of regulatory stress tests and the adequacy of NatWest Group’s future assessments by the Prudential Regulation Authority and the Bank of England; and the application of UK statutory stabilisation or resolution powers); operational and IT resilience risk (including in respect of: operational risks (including reliance on third party suppliers); cyberattacks; the accuracy and effective use of data; artificial intelligence; complex IT systems; attracting, retaining and developing diverse senior management and skilled personnel; NatWest Group’s risk management framework; and reputational risk); legal, regulatory and conduct risk (including in respect of: the impact of substantial regulation and oversight; the outcome of legal, regulatory and governmental actions, investigations and remedial undertakings; and changes in tax legislation or failure to generate future taxable profits); and climate and sustainability-related risks (including in respect of: risks relating to climate change and sustainability-related risks; both the execution and reputational risk relating to NatWest Group’s climate change-related strategy, ambitions, targets and transition plan; climate and sustainability-related data and model risk; increasing levels of climate, environmental, human rights and sustainability-related regulation and oversight; and increasing; climate, environmental and sustainability-related litigation, enforcement proceedings investigations and conduct risk).
NatWest Group Annual Report on Form 20-F 2025 | 1 |
Forward-looking statements and important notices continued
Cautionary statement regarding alternative performance measures
NatWest Group prepares its financial statements in accordance with UK-adopted International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). This document may contain a number of non-IFRS measures, or alternative performance measures, defined under the European Securities and Markets Authority (ESMA) guidance, or non-Generally Accepted Accounting Principles (non-GAAP) financial measures in accordance with the SEC regulations (together, APM). APMs are adjusted for notable and other defined items which management believes are not representative of the underlying performance of the business and which distort period-on-period comparison. APMs provide users of the financial statements with a consistent basis for comparing business performance between financial periods and information on elements of performance that are one-off in nature. Any APMs included in this document, are not measures within the scope of IFRS or GAAP, are based on a number of assumptions that are subject to uncertainties and change and are not a substitute for IFRS or GAAP measures and a reconciliation to the closest IFRS or GAAP measure is presented where appropriate.
The information, statements and opinions contained in this document do not constitute a public offer under any applicable legislation or an offer to sell or a solicitation of an offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.
Additional cautionary statement regarding climate and sustainability-related data, metrics and forward-looking statements.
Climate and sustainability-related statements that are not historical facts, including statements about NatWest Group’s beliefs, expectations, climate and sustainability-related ambitions, targets and commitments are forward-looking statements. Words such as ‘ambition’, ‘achieve’, ‘aim’, ‘anticipate’, ‘believe’, ’continue’, ‘could’, ‘effort’, ‘estimate’, ‘expect’, ‘forecast’, ‘goal’, ‘guidance’, ‘intend’, ‘intention’, ‘may’, ‘objective’, ‘plan’, ‘potential’, ‘projection’, ‘predict’, ‘seek’, ‘should’, ‘target’, ‘will’, ‘would’ or similar expressions, or the negative thereof, other variations thereon or similar expressions are intended to identify forward-looking statements.
This report contains climate and sustainability-related forward-looking statements, including, but not limited to, NatWest Group’s ambition to be net zero across its financed emissions, assets under management and operational value chain by 2050, aligned with the UK’s legal obligation to be net zero by 2050, NatWest Group’s ambition to at least halve the climate impact of its financing activity by 2030, against a 2019 baseline, supported by portfolio-level activity-based targets and NatWest Group’s target to provide £200 billion of transition and climate finance between 1 July 2025 and the end of 2030, (each a ‘Sustainability related forward-looking statement’).
The Sustainability-related forward-looking statements of this report are based on current plans, information, and data. In preparing these, NatWest Group has made a number of key judgments, estimates, assumptions and projections, and relied on information subject to inherent uncertainties.
Readers are cautioned that a number of factors, both external and those specific to NatWest Group, could cause actual achievements, results, performance or other future events or conditions to differ, in some cases significantly, from those stated, implied and/or reflected in any Sustainability-related forward-looking statement or result in revisions to the reported data, including on financed emissions or the classification of sustainable finance and investments, meaning that data outputs may not be reconcilable or comparable year on year due to a variety of risks, uncertainties and other factors (including without limitation those referred to below).
Therefore, no assurance can be given by or on behalf of NatWest Group as to the likelihood of the achievement or reasonableness of any climate or sustainability-related projections, estimates, forecasts, ambitions, targets, commitments or other forward-looking statements contained herein. Therefore, undue reliance should not be placed on these Sustainability-related forward-looking statements. The most important of these uncertainties and factors that could cause actual results and outcomes to differ materially from those expressed or implied in climate and sustainability-related forward-looking statements are summarised in the ‘Risk Factors’ included on pages 269 to 289 of this report (with special regard to the risk factors in relation to ‘Climate and sustainability-related risks’ that describe several particular uncertainties, climate and sustainability-related risks to which NatWest Group is exposed and which may be amended from time to time).
Other uncertainties and factors include, without limitation:
| ● | Factors and uncertainties beyond NatWest Group’s control. The extent and pace of climate change, including the timing and manifestation of physical and transition risks and nature loss; the macroeconomic environment; the effectiveness of actions of governments, legislators, regulators and businesses; changes to government policy direction, legislation, regulation and industry and market practice; the response of wider society, including NatWest Group’s value chain, including its investors, customers, counterparties, suppliers and business partners; changes in customer and societal behaviour and demand; availability of commercially viable opportunities in the sustainable and transition finance markets, competition dynamics, capital markets appetite, investor expectations, and external credit and concentration risk appetites which may constrain the scale or risk profile of opportunities accessible to NatWest Group; developments in available technology; the rollout of low carbon infrastructure; and the availability of accurate, verifiable, reliable, auditable, consistent and comparable data. |
NatWest Group Annual Report on Form 20-F 2025 | 2 |
Forward-looking statements and important notices continued
| ● | Data availability, accuracy, verifiability and data gaps. Our climate and sustainability-related disclosures are limited by the availability of high-quality, verifiable, accurate, reliable, auditable, consistent and comparable data in some areas and our own ability to timely collect and process such data. These limitations affect the accuracy and completeness of climate and sustainability-related disclosures. Users are therefore advised to interpret the disclosures with appropriate caution, taking into account the assumptions, data sources and constraints. |
| ● | Use of proxies or aggregated sector-level data. Significant data gaps persist across sectors and sub-sectors, particularly in industries with a high proportion of small and medium-sized enterprises (SMEs), such as agriculture. Typically, SMEs often have more limited resources, capacity and specialist expertise to collect, validate and report climate and sustainability-related information in a consistent way. Many SMEs also face practical challenges, such as less formalised data-collection processes, fewer dedicated sustainability-related functions, and limited access to digital tools or external assurance, which can result in less comprehensive or less reliable data being available at sector level. When adequate climate and sustainability-related data is not publicly available or cannot be obtained directly from individual counterparties, financial institutions often rely on proxies or aggregated sector-level data provided by third parties. However, this data may be based on varying methodologies, assumptions, or interpretations, which may not accurately reflect underlying climate-related characteristics and can lead to inconsistencies and reduce its accuracy. In addition, there is currently no single global data provider that offers comprehensive, consistent coverage of the data needed to assess emissions and climate-related risks across sectors and portfolios. Climate and sustainability-related reporting frameworks differ in how they define and measure data quality, and customers vary widely in how they collect and disclose climate and sustainability-related data. |
| ● | Reliance on assumptions, scenarios and uncertainty in climate and sustainability-related metrics. The climate and sustainability-related disclosures included in this report are inherently complex and rely on assumptions, scenarios, and forward-looking estimates, all of which involve material risks and uncertainty. Key judgements and estimates used in the preparation of the climate and sustainability-related parts of this report are likely to change over time, and, when coupled with the longer timeframes used in such disclosures, make any assessment of key topics inherently uncertain. The key areas involving significant judgement or complexity include calculation of financed, facilitated and operational emissions and measurement of portfolio alignment and climate-related risk. There is a high risk that these assumptions or estimates may prove inaccurate. |
| ● | Lack of common standards for classification. There is currently no globally recognised or accepted, consistent and comparable standard or definition (legal, regulatory or otherwise) of, nor widespread cross-market consensus as to what (i) constitutes ‘green’, ‘sustainable’, or similarly labelled activities, products, or assets; or (ii) precise attributes are required for a particular activity, product or asset to be defined as ‘green’, or ‘sustainable’ or such other equivalent label. Interpretations vary across markets and institutions, and while several initiatives are working toward harmonisation, a consistent, comparable, and widely accepted framework has yet to emerge. Therefore, users of this report must not assume that NatWest Group’s reporting or description of activities, products or assets will meet those users’ past, present or future expectations or requirements for describing or classifying funding, financing and facilitation activities as ‘green’, or ‘sustainable’ or attributing similar labels (unless a definition or standard is specified in this report). |
| ● | Variation of climate and sustainability-related reporting standards. Climate and sustainability-related reporting standards continue to develop. While internationally recognised standards have been developed, there is no universal standard accepted for institutions like NatWest Group to fully align with and those that exist remain subject to refinement and jurisdictional adoption. |
| ● | Immature systems and controls. Climate and sustainability-related reporting is less mature than traditional financial reporting. Non-financial reporting systems are less developed than financial reporting systems, often involving manual processes and less robust controls, which may affect data quality and consistency. |
The Sustainability-related forward-looking statements contained in this report only speak as of the date they were published. Except to the extent legally required, we expressly disclaim any obligations or undertaking to update or revise any Sustainability-related forward-looking statements in this report, whether to reflect any change in our expectations regarding those Sustainability-related forward-looking statements, any change, events, conditions or circumstances on which any such statement is based, or otherwise. However, NatWest Group reserves the right to update or revise any statement in this report at our discretion.
NatWest Group may also announce other climate and sustainability-related ambitions, targets and commitments, and may withdraw, retire, amend, replace or supersede existing ones from time to time, whether or not they have been achieved, where it considers this to be appropriate having regard to its strategic objectives, or where required or appropriate to do so by applicable law, regulation or supervisory expectations.
Written and/or oral Sustainability-related forward-looking statements may also be made in our periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements (including during management presentations) made by NatWest Group’s directors, officers or employees to third parties, including financial analysts.
NatWest Group Annual Report on Form 20-F 2025 | 3 |
Forward-looking statements and important notices continued
Cautionary statements in relation to the climate and sustainability-related disclosures in this report
Caution on climate and sustainability-related metrics.
The processes we have adopted to define, collect and report data on our climate and sustainability-related performance, as well as the associated metrics and disclosures in this document, are not subject to the same formal processes adopted for financial reporting in accordance with established reporting standards. They involve a higher degree of judgement, assumptions and estimates, including in relation to the classification of climate and sustainability-related (including social, sustainability, sustainability-linked, green, climate and transition) funding, financing and facilitation activities, than is required for our reporting of historical financial information prepared in accordance with established reporting standards. As a result, climate and sustainability-related disclosures may be amended, updated or restated over time. However, NatWest Group does not undertake to restate prior disclosures except where required by applicable law or regulation, even if subsequently available data or methodologies differ from those used at the time of the original disclosure.
Caution about sustainability-related funding, financing and facilitation
Sustainability-related (including social, sustainability, sustainability-linked, green, climate, transition) funding, financing and facilitation currently represents only a relatively small proportion of NatWest Group’s overall funding, financing and facilitation activities. Accordingly, disclosures relating to sustainability-related funding, financing and facilitation should be read in the context of NatWest Group’s broader balance sheet, risk profile and funding, financing and facilitation activities, and should not be interpreted as indicative of NatWest Group’s overall funding, financing or facilitation strategy.
Caution about sustainability-related case studies
The sustainability-related (including climate-related) case studies included in this report are intended for illustrative purposes only and are intended to demonstrate potential outcomes. They should not be construed as definitive evidence. NatWest Group has not independently verified the information contained in the sustainability-related case studies and makes no representations or warranties as to their accuracy or reliability. The content of the sustainability-related case studies, including any opinions, conclusions and views expressed, is the sole responsibility of the individuals or organisations that provided them and do not necessarily reflect the views or policies of NatWest Group. Accordingly, readers should exercise caution, independently assess the relevance and applicability of the sustainability-related case studies, and seek independent verification before relying on them.
Caution about references to websites, reports and other materials.
The climate and sustainability-related disclosures in this report contain references to websites, reports and other materials prepared by third parties that are not affiliated with NatWest Group. Reference to such websites, reports and other materials is made for information purposes only and information available on such websites, in such reports and other materials is not incorporated by reference into this report. Readers should exercise caution and conduct their own due diligence when relying on information from these third-party sources. To the extent permitted by law, NatWest Group makes no representation, warranty or assurance of any kind, express or implied, or takes no responsibility or liability as to the fairness, accuracy, reliability, reasonableness, correctness or completeness with respect to any such websites, reports and materials.
Caution about the use of graphics.
The climate and sustainability-related disclosures in this report contain a number of graphics, infographics and text boxes which aim to give a high-level overview of certain elements of this report and improve accessibility for readers. These elements are all illustrative and should be read with caution and within the context of this report as a whole and should not be relied upon in isolation.
NatWest Group Annual Report on Form 20-F 2025 | 4 |
Presentation of information
In the Annual Report on Form 20-F, unless specified otherwise, ‘parent company’ refers to NatWest Group plc, and ‘NatWest Group’, ‘Group’ or ‘we’ refers to NatWest Group plc and its subsidiaries. The term ‘NWH Group’ refers to NatWest Holdings Limited (‘NWH Limited’) and its subsidiary and associated undertakings. The term ‘NWM Group’ refers to NatWest Markets Plc (‘NWM Plc’) and its subsidiary and associated undertakings. The term 'RBSH N.V.' refers to RBS Holdings N.V. The term ‘NWM N.V.’ refers to NatWest Markets N.V. The term ‘NWM N.V. Group’ refers to NatWest Markets N.V. and its subsidiary and associated undertakings The term ‘NWMSI’ refers to NatWest Markets Securities, Inc. The term ‘RBS plc’ refers to The Royal Bank of Scotland plc. The term ‘NWB Plc’ refers to National Westminster Bank Plc. The term ‘RBSI Ltd’ refers to The Royal Bank of Scotland International Limited. Effective from Q2 2025, the reportable segment Private Banking was renamed Private Banking & Wealth Management. This does not change the financial results of Private Banking & Wealth Management or the consolidated financial results of NatWest Group.
NatWest Group publishes its financial statements in pounds sterling (‘£’ or ‘sterling’). The abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions of pounds sterling (‘GBP’), respectively, and references to ‘pence’ represent pence where amounts are denominated in pounds sterling. 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. The abbreviation ‘€’ represents the ‘euro’, and the abbreviations ‘€m’ and ‘€bn’ represent millions and thousands of millions of euros, respectively.
To aid readability, this document retains references to EU legislative and regulatory provisions in effect in the UK before 1 January 2021 that have now been implemented in UK domestic law. These references should be read and construed as including references to the applicable UK implementation measures with effect from 1 January 2021.
Any information contained on websites linked or reports referenced in this Annual Report on Form 20-F is for information only and will not be deemed to be incorporated by reference herein.
Non-IFRS financial information
NatWest Group prepares its financial statements in accordance with UK-adopted International Accounting Standards (IAS), and International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). This document contains a number of non-IFRS measures, or alternative performance measures, defined under the European Securities and Markets Authority (ESMA) guidance, or non-GAAP financial measures in accordance with the Securities and Exchange Commission (SEC) regulations. These measures are adjusted for notable and other defined items which management believes are not representative of the underlying performance of the business and which distort period-on-period comparison.
The non-IFRS measures provide users of the financial statements with a consistent basis for comparing business performance between financial periods and information on elements of performance that are one-off in nature. The non-IFRS measures also include the basis of calculation for metrics that are used throughout the banking industry.
These non-IFRS measures are not a substitute for IFRS measures and a reconciliation to the closest IFRS measure is presented where appropriate. For details of the basis of preparation and reconciliation where appropriate refer to appendix ‘Non-IFRS financial measures’ on page 250.
NatWest Group Annual Report on Form 20-F 2025 | 5 |
Summary risk factors
Principal risks and uncertainties
Set out below is a summary of the principal risks and uncertainties that could adversely affect NatWest Group’s future results, its financial condition and prospects and cause them to be materially different from what is forecast or expected, and directly or indirectly impact the value of its securities in issue. This summary should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties; a fuller description of these and other risk factors is included on pages 269 to 289 of this report on Form 20-F and should be read together with NatWest Group’s other public disclosures. Any of the risks identified may have a material adverse effect on NatWest Group’s business, operations, financial condition or prospects.
Economic and political risk
| ● | NatWest Group, its customers and its counterparties face continued economic and political risks and uncertainties in the UK and global markets, including as a result of inflation and interest rates, supply chain disruption, protectionist policies, and geopolitical developments. |
| ● | Changes in interest rates will continue to affect NatWest Group’s business and results. |
| ● | Fluctuations in currency exchange rates may adversely affect NatWest Group’s results and financial condition. |
Business change and execution risk
| ● | The implementation and execution of NatWest Group’s strategy carries execution and operational risks and it may not achieve its stated aims and targeted outcomes. |
| ● | Acquisitions, divestments, or other transactions by NatWest Group may not be successful. |
| ● | NatWest Group operates in markets that are highly competitive, with evolving competitive pressures and technology disruption. |
| ● | The transfer of NatWest Group’s EU corporate portfolio involves certain risks. |
Financial resilience risk
| ● | NatWest Group may not achieve its ambitions or targets, meet its guidance, or be in a position to continue to make discretionary capital distributions (including dividends to shareholders). |
| ● | NatWest Group has significant exposure to counterparty and borrower risk including credit losses, which may have an adverse effect on NatWest Group. |
| ● | NatWest Group may not meet the prudential regulatory requirements for liquidity and funding or may not be able to adequately access sources of liquidity and funding, which could trigger the execution of certain management actions or recovery options. |
| ● | NatWest Group may not meet the prudential regulatory requirements for regulatory capital and MREL, or manage its capital effectively, which could trigger the execution of certain management actions or recovery options. |
| ● | Any reduction in the credit rating and/or outlooks assigned to NatWest Group plc, any of its subsidiaries or any of their respective debt securities could adversely affect the availability of funding for NatWest Group, reduce NatWest Group’s liquidity and funding position and increase the cost of funding. |
| ● | NatWest Group could incur losses or be required to maintain higher levels of capital as a result of limitations or failure of various models. |
| ● | NatWest Group’s financial statements are sensitive to underlying accounting policies, judgements, estimates and assumptions. |
| ● | Changes in accounting standards may materially impact NatWest Group’s financial results. |
| ● | The value or effectiveness of any credit protection that NatWest Group has acquired depends on the value of the underlying assets and the financial condition of the insurers and counterparties. |
| ● | NatWest Group could be adversely affected if it fails to meet the requirements of regulatory stress tests, or if NatWest Group’s resolution preparations are deemed inadequate. |
| ● | NatWest Group may become subject to the application of UK statutory stabilisation or resolution powers which may result in, for example, the cancellation, transfer or dilution of ordinary shares, or the write-down or conversion of certain other of NatWest Group’s securities. |
NatWest Group Annual Report on Form 20-F 2025 | 6 |
Summary risk factors continued
Principal risks and uncertainties continued
Operational and IT resilience risk
| ● | Operational risks (including reliance on third party suppliers and outsourcing of certain activities) are inherent in NatWest Group’s businesses. |
| ● | NatWest Group is subject to sophisticated and frequent cyberattacks, and compliance with cybersecurity and data protection regulations is becoming increasingly complex. |
| ● | NatWest Group’s operations and strategy are highly dependent on the accuracy and effective use of data. |
| ● | NatWest Group’s operations are highly dependent on its complex IT systems and any IT failure could adversely affect NatWest Group. |
| ● | NatWest Group relies on attracting, retaining and developing diverse senior management and skilled personnel, and is required to maintain good employee relations. |
| ● | A failure in NatWest Group’s risk management framework could adversely affect NatWest Group, including its ability to achieve its strategic objectives. |
| ● | NatWest Group’s operations are subject to inherent reputational risk. |
Legal and regulatory risk
| ● | NatWest Group’s businesses are subject to substantial regulation and oversight, which are constantly evolving and may adversely affect NatWest Group. |
| ● | NatWest Group is exposed to the risks of various litigation matters, regulatory and governmental actions and investigations as well as remedial undertakings, the outcomes of which are inherently difficult to predict, and which could have an adverse effect on NatWest Group. |
| ● | Changes in tax legislation (or application thereof) or failure to generate future taxable profits may impact the recoverability of certain deferred tax assets recognised by NatWest Group. |
Climate and sustainability-related risks
| ● | NatWest Group and its Value Chain face climate and sustainability-related risks that may adversely affect NatWest Group. |
| ● | NatWest Group’s strategy relating to climate and sustainability is subject to execution and reputational risks. NatWest Group’s climate and sustainability-related ambitions, targets and commitments may not be achieved, and its climate transition plan may not be implemented without timely and appropriate government policy, technology developments and suppliers, customers and society supporting the transition. |
| ● | There are significant limitations related to accessing accurate, reliable, verifiable, auditable, consistent and comparable climate and sustainability-related data that contribute to substantial uncertainties in accurately assessing, managing and reporting on climate and sustainability-related information and risks, as well as making informed decisions. |
| ● | NatWest Group is subject to an increasingly complex and evolving landscape of climate and sustainability-related legal, regulatory, and supervisory expectations and there is an increasing risk of regulatory non-compliance, investigations, litigation, and enforcement actions. |
NatWest Group Annual Report on Form 20-F 2025 | 7 |
Group Chief financial officer’s review
‘We delivered a strong performance in 2025. Total income was £16.6 billion with total income excluding notable items of £16.4 billion exceeding our strengthened Q3 2025 guidance. We remained focused on cost discipline, achieving our cost target and with further progress made on simplification. The balance sheet has continued to grow over 2025 and our CET1 ratio for 2025 was within our guided range at 14.0%.’
Strong 2025 financial performance across growth and simplification
We are growing in ways that build and strengthen customer relationships and improve the sustainability of our earnings.
Total income of £16.6 billion increased by 13.2% compared with 2024. Total income excluding notable items was £1.8 billion higher than 2024 reflecting deposit margin expansion, as a result of higher customer balances and strong hedge income, increased customer lending, strong AUMA growth and an increase in FX trading revenue. Full year 2025 net interest margin (NIM) increased by 21 basis points in the year to 2.34%. We would expect total structural hedge income to increase by around £1.5 billion in 2026 compared with 2025 and by a further £1 billion in 2027.(1)
We continued to support our customers as net loans to customers of £418.9 billion increased by £18.6 billion in the year and net loans to customers excluding central items increased by £20.7 billion in the year. Retail Banking mortgage balances increased by £5.1 billion and Commercial & Institutional balances were up by £12.3 billion.
Customer deposits of £443.0 billion increased by £9.5 billion in the year. Customer deposits excluding central items increased £10.4 billion during 2025 to £441.7 billion primarily reflecting £7.8 billion growth in Retail Banking, across Savings and Current accounts, and Commercial & Institutional increased by £2.3 billion largely due to higher balances within Corporate & Institutions and Business Banking. Total business term balances increased to 17% in Q4 2025 compared to 16% of the book at the end of 2024.
AUMA of £58.5 billion increased by £9.6 billion in 2025, reflecting AUM net flows of £3.1 billion, AUA net flows of £0.9 billion, Cushon net flows of £0.6 billion and positive market movements of £5.0 billion.
We continued to make good progress on becoming a simpler, more agile and technology driven bank by delivering efficiencies from our investment programmes, digitising more to deliver faster, simpler, and safer customer journeys and accelerating AI and data transformation.
Total operating expenses were £113 million higher than 2024. Other operating expenses were £241 million, or 3.1%, higher and in line with our guidance. In the year we recognised higher costs of transformation, increased reward through pay and bonus while we also combatted other inflationary pressures. Partially offsetting this we have continued to drive underlying cost savings (delivered through branch transformation and digitisation), further cost reductions as a result of the phased withdrawal from the Republic of Ireland, lower restructuring costs and reduced Bank levies.
We continue to proactively manage risk
A net impairment charge of £671 million, or 16 basis points of gross customer loans, included a charge on the acquisition of balances from Sainsbury’s Bank, higher Stage 3 charges and lower good book releases than the prior year.
Compared with 2024, our ECL provision increased £0.2 billion to £3.6 billion and our ECL coverage ratio remained stable at 0.83%. We retain post model adjustments of £296 million and remain comfortable with the strong credit performance of our diversified prime loan book.
| (1) | The guidance, targets, expectations, and trends discussed in this section represent NatWest Group plc management’s current expectations and are subject to change, including as a result of the factors described in the Risk Factors section. These statements constitute forward-looking statements. Refer to Forward-looking statements in this report. |
NatWest Group Annual Report on Form 20-F 2025 | 8 |
Group Chief financial officer’s review continued
Active balance sheet management supporting robust liquidity levels
RWAs increased by £10.1 billion during 2025 to £193.3 billion principally reflecting franchise lending growth of £10.9 billion, operational risk of £3.8 billion, including an acceleration of c.£1.6 billion from Q1 2026 to align with market practice, £1.3 billion in relation to the balances acquired from Sainsbury’s Bank and an increase of £7.3 billion relating to CRD IV models partially offset by a further £10.9 billion benefit from RWA management actions as we continued to actively manage our balance sheet and create capacity for lending growth.
The average LCR of 147%, representing £50.5 billion headroom above 100% minimum requirement, decreased by 4 percentage points during the year, primarily driven by increased lending partially offset by deposit growth. Our primary liquidity decreased by £3.8 billion to £157.3 billion, of which £81.1 billion, or 52% was cash and balances at central banks.
Shareholder return supported strong capital generation
A final dividend of 23.0 pence per share is proposed, bringing the total for the year to 32.5 pence, up 51% compared to 2024, and we intend to commence a share buyback programme of £750 million in the first half of 2026, taking total distributions deducted from capital in the year to £4.1 billion.
The CET1 ratio of 14.0% increased c.40 basis points in 2025 and included capital generation pre-distributions of 252 basis points, comprising c.300 basis points of profit and c.40 basis points of other capital movements partially offset by the increase in RWAs, c.90 basis points.
Katie Murray
Group Chief Financial Officer
NatWest Group Annual Report on Form 20-F 2025 | 9 |
Financial summary
This section includes a discussion on our operating results for the year ended 31 December 2025, including a comparative discussion on our operating results for the year ended 31 December 2024. For a discussion on our operating results for the year ended 31 December 2024, including a comparative discussion on our operating results for the year ended 31 December 2023, refer to the sections “CFO Review", "Financial Summary" and "Segment Performance" on pages 6 to 21 in our 2024 Annual Report on Form 20-F (File No. 001-10306) filed with the Securities and Exchange Commission on February 21, 2025.
Year ended or as at |
| ||||||
2025 | 2024 | Variance |
| ||||
Performance key metrics and ratios |
| |
| | |||
Total income | £16,641m | £14,703m | 13.2 | % | |||
Notable items within total income (1) |
| £241m |
| £55m | nm | ||
Total income excluding notable items (1) |
| £16,400m |
| £14,648m | 12.0 | % | |
Net interest margin (1) |
| 2.34 | % | 2.13 | % | 21bps | |
Average interest earning assets (1) |
| £547bn | £529bn | 3.4 | % | ||
Cost:income ratio (excl. litigation and conduct) (1) |
| 48.6 | % | 53.4 | % | (4.8) | % |
Loan impairment rate (1) |
| 16bps | 9bps | 7bps | |||
Profit attributable to ordinary shareholders |
| £5,479m | £4,519m | 21.2 | % | ||
Total earnings per share attributable to ordinary shareholders - basic |
| 68.0p | 53.5p | 14.5p | |||
Return on Tangible Equity (RoTE) (1) |
| 19.2 | % | 17.5 | % | 1.7 | % |
Climate and transition finance (2) |
| £19,026m | na | na | |||
Balance sheet | |||||||
Total assets |
| £714.6bn |
| £708.0bn |
| 0.9 | % |
Loans to customers – amortised cost |
| £418.9bn |
| £400.3bn |
| 4.6 | % |
Loans to customers excluding central items (1,3) |
| £389.2bn |
| £368.5bn |
| 5.6 | % |
Loans to customers and banks – amortised cost and FVOCI |
| £429.9bn |
| £410.2bn |
| 4.8 | % |
Total impairment provisions (4) |
| £3.6bn |
| £3.4bn |
| 5.9 | % |
Expected credit loss (ECL) coverage ratio |
| 0.83 | % | 0.83 | % | — | |
Assets under management and administration (AUMA) (1) |
| £58.5bn | £48.9bn |
| 19.6 | % | |
Customer deposits | £443.0bn | £433.5bn | 2.2 | % | |||
Customer deposits excluding central items (1,3) |
| £441.7bn | £431.3bn |
| 2.4 | % | |
Customer assets and liabilities (CAL) (1) |
| £891.7bn | £850.9bn |
| 4.8 | % | |
nm = not meaningful, na = not applicable
NatWest Group Annual Report on Form 20-F 2025 | 10 |
Financial summary continued
Year ended or as at |
| ||||||
2025 | 2024 | Variance |
| ||||
Liquidity and funding |
| | |
| | ||
Average Liquidity Coverage Ratio (LCR) (5) |
| 147 | % | 151 | % | (4) | % |
Liquidity portfolio |
| £238bn | £222bn |
| 7.2 | % | |
Average Net Stable Funding Ratio (NSFR) (5) |
| 135 | % | 137 | % | (2) | % |
Loan:deposit ratio (excl. repos and reverse repos) (1) |
| 88 | % | 85 | % | 3 | % |
Total wholesale funding |
| £88bn | £86bn |
| 2.3 | % | |
Short-term wholesale funding |
| £28bn | £33bn |
| (15.2) | % | |
Capital and leverage |
| | |
| | ||
Common Equity Tier 1 (CET1) ratio (6) |
| 14.0 | % | 13.6 | % | 40bps | |
Total capital ratio (6) |
| 19.3 | % | 19.7 | % | (40bps) | |
Pro forma CET1 ratio (excl. foreseeable items) (7) |
| 15.4 | % | 14.3 | % | 110bps | |
Risk-weighted assets (RWAs) |
| £193.3bn | £183.2bn |
| 5.5 | % | |
UK leverage ratio |
| 4.8 | % | 5.0 | % | (0.2) | % |
Tangible net asset value (TNAV) per ordinary share (1,8) |
| 384p |
| 329p |
| 55p | |
Number of ordinary shares in issue (millions) (8) |
| 7,995 |
| 8,043 |
| (0.6) | % |
| (1) | Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics. |
| (2) | Climate and transition finance represents only a relatively small proportion of our overall financing and facilitation activities. For further details refer to the NatWest Group plc 2025 Climate Transition Plan Report. |
| (3) | Central items includes treasury repo activity. |
| (4) | Includes £0.1 billion relating to off-balance sheet exposures (31 December 2024 – £0.1 billion). |
| (5) | Reported on an average basis in line with supervisory guidelines. The LCR is calculated as the average of the preceding 12 months. The NSFR is calculated as the average of the preceding four quarters. |
| (6) | Refer to the Capital, liquidity and funding risk section for details of the basis of preparation. |
| (7) | The pro forma CET1 ratio at 31 December 2025 excludes foreseeable items of £2,758 million: £1,837 million for ordinary dividends and £921 million foreseeable charges (31 December 2024 excludes foreseeable items of £1,249 million for ordinary dividends). |
| (8) | The number of ordinary shares in issue excludes own shares held. |
NatWest Group Annual Report on Form 20-F 2025 | 11 |
Financial summary continued
2025 | 2024 | Variance | ||||||
Income – continuing operations | | £m | | £m | | £m | | % |
Interest receivable (1) |
| 25,698 |
| 25,187 |
| 511 |
| 2.0 |
Interest payable (1) |
| (12,869) |
| (13,912) |
| 1,043 |
| (7.5) |
Net interest income |
| 12,829 |
| 11,275 |
| 1,554 |
| 13.8 |
Net fees and commissions |
| 2,514 |
| 2,467 |
| 47 |
| 1.9 |
Income from trading activities |
| 1,112 |
| 825 |
| 287 |
| 34.8 |
Other operating income |
| 186 |
| 136 |
| 50 |
| 36.8 |
Non-interest income |
| 3,812 |
| 3,428 |
| 384 |
| 11.2 |
Total income |
| 16,641 |
| 14,703 |
| 1,938 |
| 13.2 |
Total income excluding notable items |
| 16,400 |
| 14,648 |
| 1,752 |
| 12.0 |
Notable items within total income |
| 2025 |
| 2024 |
| | ||
Commercial & Institutional |
| |
| |||||
Own credit adjustments (OCA) |
| 1 |
| (9) | ||||
Dividend received on restructuring of a strategic investment | 51 | — | ||||||
Central items & other |
|
| ||||||
Share of gains of associate - Business Growth Fund |
| 70 |
| 21 | ||||
Interest and foreign exchange management derivatives not in hedge accounting relationships |
| 185 |
| 150 | ||||
Foreign exchange recycling losses | (27) | (76) | ||||||
Loss on reclassification to disposal groups under IFRS 5 |
| (39) |
| — | ||||
Tax interest on prior periods | — | (31) | ||||||
| 241 |
| 55 | |||||
nm = not meaningful
| (1) | Interest receivable and interest payable on trading assets and liabilities are included in income from trading activities. |
| ● | Total income increased by 13.2% to £16,641 million compared with 2024. Total income excluding notable items was £16,400 million, or 12.0%, higher than 2024 driven by deposit margin expansion, as a result of higher customer balances and strong hedge income, increased customer lending, strong AUMA growth and an increase in FX trading revenue. As a result, net interest margin (NIM) of 2.34% was 21 basis points higher than 2024. |
| ● | Interest receivable increased by £511 million compared with 2024 primarily due to higher income on our structural hedge partially offset by the impact of lower rates on our lending book and loans to banks. The decrease in interest payable largely reflects the impact of the reduction in interest rates over the period. |
| ● | Net interest income was £1,554 million higher than 2024 benefitting from customer lending growth, deposit margin expansion and customer balance growth. |
| ● | Net fees and commissions increased £47 million to £2,514 million compared with 2024 largely due to higher AUMA investment fee income and transactional fees including some non-repeatable adjustments in Private Banking & Wealth Management. In addition, Retail Banking net fees and commission were higher, in part reflecting the impact of balances acquired from Sainsbury’s Bank. Commercial & Institutional net fees and commissions were lower due to reduced customer lending volumes and lower Asset Finance operating lease fees. |
| ● | Income from trading activities of £1,112 million increased £287 million, or 34.8%, primarily reflecting income on economic swaps and foreign exchange swaps, and strong customer activity in markets trading. |
| ● | Other operating income was £50 million higher for the year principally reflecting higher Business Growth Fund gains, lower foreign exchange recycling losses, a dividend received on restructuring of a strategic investment partially offset by a loss related to Cushon on reclassification to disposal groups. |
NatWest Group Annual Report on Form 20-F 2025 | 12 |
Financial summary continued
| 2025 | | 2024 | | Variance | |||
Operating expenses – continuing operations | £m | £m | £m | | % | |||
Staff expenses |
| 4,110 |
| 3,997 |
| 113 | 2.8 | |
Premises and equipment |
| 1,285 |
| 1,211 |
| 74 | 6.1 | |
Other administrative expenses |
| 1,546 |
| 1,588 |
| (42) | (2.6) | |
Depreciation and amortisation |
| 1,154 |
| 1,058 |
| 96 | 9.1 | |
Other operating expenses |
| 8,095 |
| 7,854 |
| 241 | 3.1 | |
Litigation and conduct costs |
| 167 |
| 295 |
| (128) | (43.4) | |
Operating expenses |
| 8,262 |
| 8,149 |
| 113 | 1.4 | |
| ● | Staff expenses were £113 million, or 2.8%, higher than 2024 primarily due to investment in our people through increased pay and bonus rewards, driven by continued strong performance. This was partially offset by lower restructuring costs and continued simplification and digitisation. |
| ● | Premises and equipment costs of £1,285 million were £74 million higher than 2024 primarily due to contract price inflation and continued growth in cloud utilisation, partly offset by lower cost of utilities. |
| ● | Other administrative expenses decreased £42 million in 2025 driven by costs incurred on the cancelled Retail share offering in 2024, reduced Republic of Ireland costs due to continued phased withdrawal and a decrease in the Bank levy, and other one-offs, all partly offset by one-time integration costs of balances acquired from Sainsbury’s Bank. |
| ● | Depreciation and amortisation of £1,154 million was £96 million higher than 2024 as we continue to invest in our growth and simplification opportunities which include data transformation to unlock the full potential of AI. |
| ● | Litigation and conduct costs of £167 million represent the net impact of a number of remediation and litigation matters concluding, including existing customer redress programme costs paid during the year. Refer to Note 20 and 25 to the Consolidated financial statements for additional information on other litigation and conduct matters. |
| 2025 | | 2024 |
| |
Tax – continuing operations |
| £m |
| £m | |
Tax charge |
| (1,874) | (1,465) | ||
UK corporation tax rate |
| 25.0 | % | 25.0 | % |
Effective tax rate |
| 24.3 | % | 23.7 | % |
A tax charge of £1,874 million for the year ended 31 December 2025 arises rather than the expected charge of £1,927 million based on the UK corporation tax rate of 25%. The lower tax charge primarily reflects tax credits for AT1 dividends and the re-recognition of previously impaired deferred tax assets on brought forward tax losses in the UK and the Netherlands. These have been partially offset by the UK banking surcharge and various other non-tax deductible expenses. Refer to Note 7 to the consolidated financial statements for further details.
NatWest Group Annual Report on Form 20-F 2025 | 13 |
Financial summary continued
| 2025 | | 2024 | | Variance | |||
Impairments – continuing operations |
| £m |
| £m |
| £m | | % |
Loans - amortised cost and FVOCI | 429,916 | 410,225 | 19,691 | 4.8 | ||||
ECL provisions |
| 3,585 |
| 3,425 |
| 160 |
| 4.7 |
ECL provisions coverage ratio |
| 0.83 | % | 0.83 | % | — | — | |
Impairment (releases)/losses |
|
|
|
| ||||
ECL charge (1) |
| 671 |
| 359 |
| 312 |
| 86.9 |
Amounts written off |
| 579 |
| 654 |
| (75) |
| (11.5) |
(1) | The table above summarises loans and related credit impairment measured on an IFRS 9 basis. Refer to Credit Risk – Banking activities in the Risk and capital management section for further details. |
Compared with 2024, our ECL provision increased £0.2 billion to £3.6 billion and our ECL coverage ratio remained stable at 0.83%. We retain post model adjustments of £296 million and remain comfortable with the strong credit performance of our diversified prime loan book.
A net impairment charge of £671 million, or 16 basis points of gross customer loans, included an £81 million charge on the acquisition of balances from Sainsbury’s Bank, higher Stage 3 charges and lower good book releases than the prior year.
Profit for the year
| 2025 | | 2024 | | Variance | |||
£m | £m | £m | | % | ||||
Operating profit before tax |
| 7,708 |
| 6,195 |
| 1,513 | 24.4 | |
Tax charge |
| (1,874) |
| (1,465) |
| (409) | 27.9 | |
Profit from continuing operations |
| 5,834 |
| 4,730 |
| 1,104 | 23.3 | |
Profit from discontinued operations, net of tax |
| — |
| 81 |
| (81) | 100.0 | |
Profit for the year |
| 5,834 |
| 4,811 |
| 1,023 | 21.3 | |
Attributable to: |
| |
| |
| | | |
Ordinary shareholders |
| 5,479 |
| 4,519 |
| 960 | 21.2 | |
Paid-in equity holders |
| 352 |
| 283 |
| 69 | 24.4 | |
Non-controlling interests |
| 3 |
| 9 |
| (6) | nm | |
nm = not meaningful
Profit attributable to ordinary shareholders of £5,479 million was £960 million, or 21.2%, higher than 2024 primarily due to higher income, driven by deposit margin expansion, customer lending and AUMA growth, partially offset with higher costs largely attributable to inflationary pressures and integration costs alongside a higher impairment charge and tax charge.
NatWest Group Annual Report on Form 20-F 2025 | 14 |
Financial summary continued
Summary consolidated balance sheet as at 31 December 2025
2025 | 2024 | Variance |
| ||||||
| £m |
| £m |
| £m | % | |||
Assets | | | | | | | | | |
Cash and balances at central banks |
| 85,182 |
| 92,994 |
| (7,812) |
| (8) | |
Trading assets |
| 46,537 |
| 48,917 |
| (2,380) |
| (5) | |
Derivatives |
| 60,789 |
| 78,406 |
| (17,617) |
| (22) | |
Settlement balances |
| 645 |
| 2,085 |
| (1,440) |
| (69) | |
Loans to banks - amortised cost |
| 6,958 |
| 6,030 |
| 928 |
| 15 | |
Loans to customers - amortised cost |
| 418,881 |
| 400,326 |
| 18,555 |
| 5 | |
Other financial assets |
| 79,770 |
| 63,243 |
| 16,527 |
| 26 | |
Other assets (including intangible assets) |
| 15,791 |
| 15,984 |
| (193) |
| (1) | |
Total assets |
| 714,553 |
| 707,985 |
| 6,568 |
| 1 | |
Liabilities |
|
|
|
| |||||
Bank deposits |
| 44,092 |
| 31,452 |
| 12,640 |
| 40 | |
Customer deposits |
| 442,998 |
| 433,490 |
| 9,508 |
| 2 | |
Settlement balances |
| 942 |
| 1,729 |
| (787) |
| (46) | |
Trading liabilities |
| 49,022 |
| 54,714 |
| (5,692) |
| (10) | |
Derivatives |
| 53,974 |
| 72,082 |
| (18,108) |
| (25) | |
Other financial liabilities |
| 67,599 |
| 61,087 |
| 6,512 |
| 11 | |
Subordinated liabilities |
| 6,123 |
| 6,136 |
| (13) |
| (0) | |
Notes in circulation |
| 3,164 |
| 3,316 |
| (152) |
| (5) | |
Other liabilities |
| 4,026 |
| 4,601 |
| (575) |
| (12) | |
Total liabilities |
| 671,940 |
| 668,607 |
| 3,333 |
| 0 | |
Total equity |
| 42,613 |
| 39,378 |
| 3,235 |
| 8 | |
Total liabilities and equity |
| 714,553 |
| 707,985 |
| 6,568 |
| 1 | |
Tangible net asset value per ordinary share (1,2) |
| 384p |
| 329p |
| 55p |
| 17 | % |
| (1) | Tangible net asset value per ordinary share is tangible equity divided by the number of ordinary shares. |
| (2) | Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics. |
NatWest Group Annual Report on Form 20-F 2025 | 15 |
Financial summary continued
Summary consolidated balance sheet as at 31 December 2025 continued
| ● | NAV per share increased by 52 pence in the year to 476 pence. TNAV per share increased by 55 pence in the year to 384 pence primarily reflecting the attributable profit for the period offset by the impact of distributions. The balance sheet growth was driven by customer lending, while customer deposits increased driven by current account and savings balances predominantly in Retail Banking and in Private Banking & Wealth Management. |
| ● | Total assets of £714.6 billion as at 31 December 2025 increased by £6.6 billion, 1%, compared with 31 December 2024. This was primarily driven by increases in loans to customers and other financial assets partially offset by a decrease in derivative assets and cash and balances at central banks. |
| ● | Cash and balances at central banks decreased by £7.8 billion mainly due to large-scale bond purchases and dividends paid partially offset by increased repo activity. |
| ● | Other financial assets increased by £16.5 billion mainly because of net bonds activity of £13.1 billion and an increase in Commercial & Institutional, £3.7 billion largely driven by an increase in bonds held in the liquid asset buffer. |
| ● | Derivative assets and derivative liabilities were down by £17.6 billion and £18.1 billion respectively. The decreases in fair values largely reflected FX volatility across major currencies including the weakening of USD in the year, following contrasting trends in Q4 2024, and variations in interest rates across different currencies and tenors. |
| ● | Total loans to customers increased by £18.6 billion to £418.9 billion, primarily reflecting £12.3 billion growth in Commercial & Institutional attributable to growth in Corporate & Institutional and Commercial Mid-market offset by UK Government scheme repayments, and a £7.7 billion increase in Retail Banking largely driven by higher mortgage, cards and personal advance balances. This is offset by a decrease in Treasury of £2.3 billion mainly due to lower reverse repos |
| ● | Total loans to banks increased by £0.9 billion, 15%, to £7.0 billion due to increased Treasury reverse repo balances. |
| ● | Customer deposits increased by £9.5 billion primarily reflecting a £7.8 billion increase in Retail Banking due to growth in savings and current account balances, supported by balances acquired from Sainsbury’s Bank. |
| ● | Bank deposits increased by £12.6 billion mainly due to higher repo activity. |
| ● | Other financial liabilities, which includes customer deposits at fair value through profit and loss and debt securities in issue, increased by £6.5 billion, to £67.6 billion. |
| ● | Other liabilities decreased by £0.6 billion, 12%, to £4.0 billion mainly due to lower financial guarantees and provision utilisations. |
| ● | Total equity increased by £3.2 billion, 8%, to £42.6 billion, driven by higher profit for the year of £5.8 billion offset by dividends paid of £2.0 billion and shares repurchased in the year of £0.6 billion. |
NatWest Group Annual Report on Form 20-F 2025 | 16 |
Segment performance
Private Banking | Central | Total |
| ||||||||
Retail | & Wealth | Commercial & | items | NatWest |
| ||||||
Banking | Management | Institutional | & other | Group |
| ||||||
2025 | | £m | | £m | | £m | | £m | | £m |
|
Continuing operations | |||||||||||
Income statement | |||||||||||
Net interest income | 6,064 | 757 | 6,149 | (141) | 12,829 | ||||||
Own credit adjustments | — | — | 1 | — | 1 | ||||||
Other non-interest income |
| 431 |
| 374 |
| 2,659 |
| 347 |
| 3,811 | |
Total income |
| 6,495 |
| 1,131 |
| 8,809 |
| 206 |
| 16,641 | |
Direct expenses |
| (835) |
| (250) |
| (1,633) |
| (5,377) |
| (8,095) | |
Indirect expenses |
| (2,087) |
| (475) |
| (2,714) |
| 5,276 |
| — | |
Other operating expenses |
| (2,922) |
| (725) |
| (4,347) |
| (101) |
| (8,095) | |
Litigation and conduct costs |
| (15) |
| (2) |
| (173) |
| 23 |
| (167) | |
Operating expenses | (2,937) | (727) | (4,520) | (78) | (8,262) | ||||||
Operating profit before impairment losses/releases |
| 3,558 |
| 404 |
| 4,289 |
| 128 |
| 8,379 | |
Impairment (losses)/releases |
| (437) |
| (10) |
| (225) |
| 1 |
| (671) | |
Operating profit | 3,121 | 394 | 4,064 | 129 | 7,708 | ||||||
Total income excluding notable items (1) |
| 6,495 |
| 1,131 |
| 8,757 |
| 17 |
| 16,400 | |
Additional information | |||||||||||
Return on Tangible Equity (1) |
| na |
| na |
| na |
| na |
| 19.2 | % |
Return on equity (1,2) |
| 24.7 | % | 21.7 | % | 19.1 | % | nm |
| na | |
Cost:income ratio (excl. litigation and conduct) (1) |
| 45.0 | % | 64.1 | % | 49.3 | % | nm |
| 48.6 | % |
Net loans to customers - amortised cost (£bn) | 216.1 | 18.9 | 154.2 | 29.7 | 418.9 | ||||||
Loan impairment rate (1) | 20bps | 5bps | 14bps | nm | 16bps | ||||||
Impairment provisions (£bn) | (1.8) | (0.1) | (1.7) | — | (3.6) | ||||||
Impairment provisions - Stage 3 (£bn) | (1.1) | (0.1) | (1.0) | — | (2.2) | ||||||
Customer deposits (£bn) | 202.6 | 42.7 | 196.4 | 1.3 | 443.0 | ||||||
Risk-weighted assets (RWAs) (£bn) | 68.5 | 11.4 | 111.9 | 1.5 | 193.3 | ||||||
Customer assets and liabilities (CAL) (£bn) (1) |
| 420.5 | 119.0 | 352.2 | na |
| 891.7 | ||||
Employee numbers (FTEs - thousands) | 11.5 | 2.1 | 12.3 | 32.8 | 58.7 | ||||||
Third party customer asset rate (1) |
| 4.36 | % | 4.72 | % | 5.94 | % | nm |
| nm | |
Third party customer funding rate (1) | (1.74) | % | (2.68) | % | (1.55) | % | nm | nm | |||
Average interest earning assets (£bn) (1) | 230.9 | 28.8 | 259.4 | nm | 547.4 | ||||||
Net interest margin (1) |
| 2.63 | % | 2.63 | % | 2.37 | % | nm | 2.34 | % |
nm = not meaningful, na = not applicable.
For the notes to this table, refer to the following page.
NatWest Group Annual Report on Form 20-F 2025 | 17 |
Segment performance continued
Private Banking | Central | Total | |||||||||
Retail | & Wealth | Commercial & | items | NatWest | |||||||
Banking | Management | Institutional | & other | Group | |||||||
2024 | | £m | | £m | | £m | | £m | | £m | |
Continuing operations | |||||||||||
Income statement | |||||||||||
Net interest income |
| 5,233 |
| 645 |
| 5,339 |
| 58 |
| 11,275 | |
Own credit adjustments | — | — | (9) | — | (9) | ||||||
Other non-interest income |
| 417 |
| 324 |
| 2,627 |
| 69 |
| 3,437 | |
Total income |
| 5,650 |
| 969 |
| 7,957 |
| 127 |
| 14,703 | |
Direct expenses | (777) | (255) | (1,537) | (5,285) | (7,854) | ||||||
Indirect expenses |
| (2,050) |
| (458) |
| (2,581) |
| 5,089 |
| — | |
Other operating expenses |
| (2,827) |
| (713) |
| (4,118) |
| (196) |
| (7,854) | |
Litigation and conduct costs | (110) | (3) | (156) | (26) | (295) | ||||||
Operating expenses |
| (2,937) |
| (716) |
| (4,274) |
| (222) |
| (8,149) | |
Operating profit before impairment losses/releases |
| 2,713 |
| 253 |
| 3,683 |
| (95) |
| 6,554 | |
Impairment (losses)/releases |
| (282) |
| 11 |
| (98) |
| 10 |
| (359) | |
Operating profit/(loss) |
| 2,431 |
| 264 |
| 3,585 |
| (85) |
| 6,195 | |
Total income excluding notable items (1) |
| 5,650 | 969 | 7,966 | 63 |
| 14,648 | ||||
Additional information | |||||||||||
Return on Tangible Equity (1) | na | na | na | na | 17.5 | % | |||||
Return on equity (1,2) |
| 19.9 | % | 14.2 | % | 17.2 | % | nm |
| na | |
Cost:income ratio (excl. litigation and conduct) (1) | 50.0 | % | 73.6 | % | 51.8 | % | nm | 53.4 | % | ||
Net loans to customers - amortised cost (£bn) | 208.4 | 18.2 | 141.9 | 31.8 | 400.3 | ||||||
Loan impairment rate (1) | 13bps | (6bps) | 7bps | nm | 9bps | ||||||
Impairment provisions (£bn) | (1.8) | (0.1) | (1.5) | — | (3.4) | ||||||
Impairment provisions - Stage 3 (£bn) | (1.1) | — | (0.9) | — | (2.0) | ||||||
Customer deposits (£bn) |
| 194.8 | 42.4 | 194.1 | 2.2 |
| 433.5 | ||||
Risk-weighted assets (RWAs) (£bn) | 65.5 | 11.0 | 104.7 | 2.0 | 183.2 | ||||||
Customer assets and liabilities (CAL) (£bn) (1) | 404.9 | 108.5 | 337.5 | na | 850.9 | ||||||
Employee numbers (FTEs - thousands) |
| 12.0 | 2.1 | 12.8 | 32.3 |
| 59.2 | ||||
Third party customer asset rate (1) |
| 4.02 | % | 5.05 | % | 6.64 | % | nm |
| nm | |
Third party customer funding rate (1) |
| (2.05) | % | (3.13) | % | (1.90) | % | nm |
| nm | |
Average interest earning assets (£bn) (1) | 222.0 | 26.9 | 246.8 | nm | 529.3 | ||||||
Net interest margin (1) |
| 2.36 | % | 2.40 | % | 2.16 | % | nm | 2.13 | % |
nm = not meaningful, na = not applicable.
(1) | Refer to the Non-IFRS financial measures appendix for details of the basis of preparation and reconciliation of non-IFRS financial measures and performance metrics. |
(2) | NatWest Group’s CET1 target is in the range of 13-14% but for the purposes of computing segmental return on equity (ROE), to better reflect the differential drivers of capital usage, segmental operating profit or loss adjusted for preference share dividends and tax, is divided by average notional tangible equity allocated at different rates of 12.8% for Retail Banking (2024 – 13.4%), 11.1% for Private Banking & Wealth Management (2024 – 11.2%), and 13.9% for Commercial & Institutional (2024 – 13.8%), of the period average of segmental risk-weighted assets equivalents (RWAe) incorporating the effect of capital deductions. |
NatWest Group Annual Report on Form 20-F 2025 | 18 |
Segment performance continued
Retail Banking
2025 | 2024 | Variance |
| ||||||
Income statement | | £m | | £m | | £m | | % |
|
Net interest income | 6,064 | 5,233 | 831 | 15.9 | % | ||||
Non-interest income |
| 431 |
| 417 |
| 14 |
| 3.4 | % |
Total income |
| 6,495 |
| 5,650 |
| 845 |
| 15.0 | % |
Other operating expenses |
| (2,922) |
| (2,827) |
| (95) |
| 3.4 | % |
Litigation and conduct costs |
| (15) |
| (110) |
| 95 |
| (86.4) | % |
Operating expenses |
| (2,937) |
| (2,937) |
| — |
| — | |
Impairment losses |
| (437) |
| (282) |
| (155) |
| 55.0 | % |
Operating profit |
| 3,121 |
| 2,431 |
| 690 |
| 28.4 | % |
| |||||||||
Performance ratios (1) |
| |
| |
| |
| | |
Return on equity |
| 24.7 | % | 19.9 | % | 4.8 | % | | |
Net interest margin |
| 2.63 | % | 2.36 | % | 27bps | | ||
Cost:income ratio (excl. litigation and conduct) | 45.0 | % | 50.0 | % | (5.0) | % | |||
Loan impairment rate |
| 20bps | 13bps | 7bps | |||||
2025 | 2024 | Variance |
| ||||||
Capital and balance sheet | | £bn | | £bn | | £bn | | % |
|
Loans to customers (amortised cost) | | | | | |||||
- personal advances |
| 9.4 |
| 8.1 |
| 1.3 |
| 16.0 | % |
- mortgages |
| 200.1 |
| 195.0 |
| 5.1 |
| 2.6 | % |
- cards |
| 8.4 |
| 7.0 |
| 1.4 |
| 20.0 | % |
Total loans to customers (amortised cost) |
| 217.9 |
| 210.1 |
| 7.8 |
| 3.7 | % |
Loan impairment provisions |
| (1.8) |
| (1.7) |
| (0.1) |
| 5.9 | % |
Net loans to customers (amortised cost) |
| 216.1 |
| 208.4 |
| 7.7 |
| 3.7 | % |
Total assets |
| 240.3 |
| 232.8 |
| 7.5 |
| 3.2 | % |
Customer deposits | 202.6 | 194.8 | 7.8 | 4.0 | % | ||||
Customer assets and liabilities (CAL) (1) |
| 420.5 |
| 404.9 |
| 15.6 |
| 3.9 | % |
Risk-weighted assets |
| 68.5 |
| 65.5 |
| 3.0 |
| 4.6 | % |
(1) | Refer to the Non-IFRS financial measures appendix for details of basis of preparation and reconciliation of non-IFRS financial measures and performance metrics. |
(2) | Climate and transition finance represents only a relatively small proportion of our overall financing and facilitation activities. |
NatWest Group Annual Report on Form 20-F 2025 | 19 |
Segment performance continued
Retail Banking continued
In 2025, Retail Banking delivered an operating profit of £3.1 billion and a return on equity of 24.7%, with positive income and net interest margin momentum. We support 19 million customers, including 2.4 million youth customers, along with 529,000 customers within our Premier segment where we have a NPS of 44. We helped more customers achieve their home ownership goals with around 30% of 2025 gross mortgage lending supporting first-time buyers and around £300 million of lending through our Family-Backed Mortgage proposition. We continue to simplify the business and improve customer and colleague experiences. New AI capabilities enabled quicker responses to customer complaints, saving around 90,000 hours per annum through automated summarisation and AI-generated complaint responses.
Retail Banking provided £2.6 billion of climate and transition finance(2) in 2025 from lending on properties with an EPC rating of A or B.
| ● | Total income was £845 million, or 15.0%, higher than 2024 reflecting strong deposit growth and margin expansion as a result of increased hedge income, lending growth and the impact of balances acquired from Sainsbury’s Bank. |
| ● | Net interest margin was 27 basis points higher than 2024 largely reflecting the factors noted above. |
| ● | Non-interest income of £431 million was £14 million, or 3.4%, higher than 2024 including the impact of balances acquired from Sainsbury’s Bank. |
| ● | Operating expenses were £2,937 million, in line with 2024. Other operating expenses were £95 million, or 3.4%, higher than 2024 reflecting costs associated with balances acquired from Sainsbury’s Bank, partially offset by a 4.2% reduction in headcount. |
| ● | An impairment charge of £437 million, compared with a £282 million charge in 2024, largely driven by charges associated with balances acquired from Sainsbury’s Bank along with increased charges driven by growth in our unsecured book. The rate of Stage 3 default flow remains broadly stable. |
| ● | Net loans to customers increased by £7.7 billion, or 3.7%, in 2025 driven by £5.1 billion, or 2.6%, higher mortgage balances. Cards balances increased by £1.4 billion, or 20.0%, and personal advances increased by £1.3 billion, or 16.0%, supported by balances acquired from Sainsbury’s Bank. |
| ● | Customer deposits increased by £7.8 billion, or 4.0%, in 2025 reflecting growth in savings and current account balances, supported by balances acquired from Sainsbury’s Bank. |
| ● | RWAs increased by £3.0 billion, or 4.6%, in 2025 primarily due to book movements including the impact of unsecured balances acquired from Sainsbury’s Bank. |
NatWest Group Annual Report on Form 20-F 2025 | 20 |
Segment performance continued
Private Banking & Wealth Management
2025 | 2024 | Variance |
| ||||||
Income statement | | £m | | £m | | £m | | % |
|
Net interest income | 757 | 645 | 112 | 17.4 | % | ||||
Non-interest income |
| 374 |
| 324 |
| 50 | 15.4 | % | |
Total income |
| 1,131 |
| 969 |
| 162 | 16.7 | % | |
of which: AUMA income (1) | 300 | 270 | 30 | 11.1 | % | ||||
Other operating expenses |
| (725) |
| (713) |
| (12) | 1.7 | % | |
Litigation and conduct costs |
| (2) |
| (3) |
| 1 | (33.3) | % | |
Operating expenses | (727) | (716) | (11) | 1.5 | % | ||||
Impairment (losses)/releases |
| (10) |
| 11 |
| (21) | (190.9) | % | |
Operating profit |
| 394 |
| 264 |
| 130 | 49.2 | % | |
Performance ratios (1) |
| |
| |
| | | ||
Return on equity |
| 21.7 | % | 14.2 | % | 7.5 | % | ||
Net interest margin |
| 2.63 | % | 2.40 | % | 23bps | |||
Cost:income ratio (excl. litigation and conduct) | 64.1 | % | 73.6 | % | (9.5) | % | |||
Loan impairment rate |
| 5bps | (6bps) | 11bps | |||||
AUMA net flows (£bn) |
| 4.6 |
| 3.2 |
| 1.4 | |||
2025 | 2024 | Variance |
| ||||||
Capital and balance sheet | | £bn | | £bn | | £bn | | % |
|
Loans to customers (amortised cost) | | | | ||||||
- personal |
| 2.0 |
| 1.7 | 0.3 | 17.6 | % | ||
- mortgages |
| 12.0 |
| 12.0 | — |
| — | ||
- other |
| 5.0 |
| 4.6 | 0.4 |
| 8.7 | % | |
Total loans to customers (amortised cost) |
| 19.0 |
| 18.3 | 0.7 |
| 3.8 | % | |
Loan impairment provisions |
| (0.1) |
| (0.1) | — |
| — | ||
Net loans to customers (amortised cost) |
| 18.9 |
| 18.2 | 0.7 |
| 3.8 | % | |
|
|
| |||||||
Total assets |
| 30.5 |
| 28.6 | 1.9 |
| 6.6 | % | |
Assets under management (AUM) (1) |
| 43.7 |
| 37.0 | 6.7 |
| 18.1 | % | |
Assets under administration (AUA) (1) |
| 14.8 |
| 11.9 | 2.9 |
| 24.4 | % | |
Total assets under management and administration (AUMA) (1) |
| 58.5 |
| 48.9 | 9.6 |
| 19.6 | % | |
Customer deposits |
| 42.7 |
| 42.4 | 0.3 |
| 0.7 | % | |
Loan:deposit ratio (excl. repos and reverse repos) (1) |
| 44 | % | 43 | % | 1 | % | 2.3 | % |
Customer assets and liabilities (CAL) (1,2) | 119.0 | 108.5 | 10.5 | 9.7 | % | ||||
Risk-weighted assets |
| 11.4 |
| 11.0 | 0.4 |
| 3.6 | % | |
| (1) | Refer to the Non-IFRS financial measures appendix for details of basis of preparation and reconciliation of non-IFRS financial measures and performance metrics. |
| (2) | CAL refers to customer deposits, gross loans to customers – amortised cost and AUMA. To avoid double counting, investment cash is deducted as it is reported within customer deposits and AUMA. |
| (3) | Climate and transition finance represents only a relatively small proportion of our overall financing and facilitation activities. |
NatWest Group Annual Report on Form 20-F 2025 | 21 |
Segment performance continued
Private Banking & Wealth Management continued
In 2025, Private Banking & Wealth Management delivered an operating profit of £394 million and return on equity of 21.7%. As part of our strategy to deepen focus on high net worth and ultra-high net worth segments, we refreshed our visual identity and enhanced our investment insight, including a new Coutts website which delivers a faster and more responsive experience. AI tooling has reduced call summarisation time by more than 70% and we have continued to see strong customer engagement across our propositions, resulting in an increase in CAL of 9.7% in the year with growth in deposits, lending and AUMA.
Private Banking & Wealth Management provided £0.2 billion of climate and transition finance(3) in 2025, principally in relation to mortgages on residential properties with an EPC rating of A or B and wholesale transactions.
| ● | Total income was £162 million, or 16.7%, higher than 2024 primarily reflecting deposit margin expansion as a result of strong hedge income, balance growth across deposits and AUMA, and higher transactional fees including some non-repeatable adjustments. |
| ● | Net interest margin was 23 basis points higher than 2024 largely reflecting the factors noted above. |
| ● | Non-interest income of £374 million was £50 million, or 15.4%, higher than 2024 principally due to higher AUMA balances and higher transactional fees including some non-repeatable adjustments. |
| ● | Operating expenses were £727 million, which were £11 million, or 1.5%, higher than 2024. Other operating expenses were £12 million, or 1.7%, higher reflecting continuing investment in the business and higher pay awards to support our colleagues, partly offset by lower severance costs. |
| ● | An impairment charge of £10 million, compared with an £11 million release in 2024, largely reflecting the non-repeat of 2024 good book releases, and an increase in Stage 3 charges relating to existing exposures. |
| ● | Net loans to customers increased £0.7 billion, or 3.8%, in 2025 largely driven by higher personal lending balances and higher commercial lending balances. |
| ● | Customer deposits increased by £0.3 billion, or 0.7%, in 2025 reflecting growth in current account and savings balances, with progress driven by both deeper engagement with existing customers and new customer acquisition. |
| ● | AUMA of £58.5 billion increased by £9.6 billion in 2025, reflecting AUM net flows of £3.1 billion, AUA net flows of £0.9 billion, Cushon net flows of £0.6 billion and positive market movements of £5.0 billion. AUM net flows as a percentage of opening balances are 8.4%. |
NatWest Group Annual Report on Form 20-F 2025 | 22 |
Segment performance continued
Commercial & Institutional
2025 | 2024 | Variance |
| ||||||
Income statement | | £m | | £m | | £m | | % |
|
Net interest income | 6,149 | 5,339 | 810 | 15.2 | % | ||||
Non-interest income |
| 2,660 |
| 2,618 |
| 42 | 1.6 | % | |
Total income |
| 8,809 |
| 7,957 |
| 852 | 10.7 | % | |
Other operating expenses |
| (4,347) |
| (4,118) |
| (229) | 5.6 | % | |
Litigation and conduct costs |
| (173) |
| (156) |
| (17) | 10.9 | % | |
Operating expenses |
| (4,520) |
| (4,274) |
| (246) | 5.8 | % | |
Impairment losses |
| (225) |
| (98) |
| (127) | 129.6 | % | |
Operating profit |
| 4,064 |
| 3,585 |
| 479 | 13.4 | % | |
| |||||||||
Performance ratios (1) |
|
|
| | |||||
Return on equity |
| 19.1 | % | 17.2 | % | 1.9 | % | | |
Net interest margin |
| 2.37 | % | 2.16 | % | 21bps | | ||
Cost:income ratio (excl. litigation and conduct) |
| 49.3 | % | 51.8 | % | (2.5) | % | | |
Loan impairment rate |
| 14bps | 7bps | 7bps | | ||||
2025 | 2024 | Variance |
| ||||||
Capital and balance sheet | | £bn | | £bn | | £bn | | % |
|
Loans to customers (amortised cost) | | | | ||||||
- Business Banking |
| 3.5 |
| 3.6 | (0.1) |
| (2.8) | % | |
- Commercial Mid-market | 77.7 | 74.0 | 3.7 | 5.0 | % | ||||
- Corporate & Institutions | 74.6 | 65.8 | 8.8 | 13.4 | % | ||||
Total loans to customers (amortised cost) |
| 155.8 |
| 143.4 | 12.4 |
| 8.6 | % | |
Loan impairment provisions |
| (1.6) |
| (1.5) | (0.1) |
| 6.7 | % | |
Net loans to customers (amortised cost) |
| 154.2 |
| 141.9 | 12.3 |
| 8.7 | % | |
|
|
| |||||||
Total assets |
| 391.9 |
| 398.7 | (6.8) |
| (1.7) | % | |
Funded assets | 331.4 | 321.6 | 9.8 | 3.0 | % | ||||
Customer deposits (3) |
| 196.4 |
| 194.1 | 2.3 |
| 1.2 | % | |
Loan:deposit ratio (excl. repos and reverse repos) (1) |
| 77 | % | 72 | % | 5 | % | 6.9 | % |
Customer assets and liabilities (CAL) (1) | 352.2 | 337.5 | 14.7 | 4.4 | % | ||||
Risk-weighted assets |
| 111.9 |
| 104.7 | 7.2 | 6.9 | % | ||
(1) | Refer to the Non-IFRS financial measures appendix for details of basis of preparation and reconciliation of non-IFRS financial measures and performance metrics. |
(2) | Climate and transition finance represents only a relatively small proportion of our overall financing and facilitation activities. |
(3) | Client transfers from Commercial Mid-market to Corporate & Institutions were undertaken in Q1 2025 of £4.9 billion. Balance at the end of Q4 2025 was £2.7 billion (Q4 2024 - £3.3 billion) |
NatWest Group Annual Report on Form 20-F 2025 | 23 |
Segment performance continued
Commercial & Institutional continued
During 2025, Commercial & Institutional continued to support customers with an increase in lending of 8.7% and delivered a strong performance in income and operating profit supporting a return on equity of 19.1%, an increase from 17.2% in 2024. We worked with our customers to unlock growth for key structural and policy priorities in the UK, particularly social housing and infrastructure investment. In 2025, we committed over £4.6 billion of lending into the UK social housing sector, surpassing our upgraded target of £7.5 billion by the end of 2026, with total commitments of £8.7 billion. We prioritised the use of generative AI through AI-driven transcription and summarisation of complaints and complex business banking calls, increasing our relationship managers’ capacity to focus on personalised AI-guided interactions.
Commercial & Institutional provided £16.2 billion of climate and transition finance(2) in 2025 to support customers investing in the transition to net zero.
| ● | Total income was £852 million, or 10.7%, higher than 2024 principally reflecting deposit margin expansion as a result of higher customer balances and strong hedge income, increased FX trading revenues and lending growth across Corporate & Institutions and Commercial Mid-market. |
| ● | Net interest margin was 21 basis points higher than 2024 largely reflecting deposit margin expansion. |
| ● | Non-interest income was £42 million, or 1.6%, higher than 2024 principally driven by customer activity in markets trading and a dividend received on restructuring of a strategic investment in Corporate & Institutions. |
| ● | Operating expenses were £4,520 million, which were £246 million, or 5.8%, higher than 2024. Other operating expenses were £229 million, or 5.6%, higher than 2024 reflecting the impact of inflationary increases in staff costs and continued business investment spend, partially offset by a 3.9 % reduction in headcount. |
| ● | An impairment charge of £225 million in 2025, compared with a £98 million charge in 2024, reflecting lower good book releases. Stage 3 charge remains broadly stable. |
| ● | Net loans to customers increased by £12.3 billion, or 8.7%, in 2025 principally due to growth in Corporate & Institutions and Commercial Mid-market, partly offset by UK Government scheme repayments of £1.6 billion. |
| ● | Customer deposits increased by £2.3 billion, or 1.2%, in 2025 reflecting growth within Corporate & Institutions and Business Banking. Excluding client transfers, deposit balances in all customer groups grew in the year. (3) |
| ● | RWAs increased by £7.2 billion, or 6.9%, compared with 2024 primarily due to CRD IV, other regulatory increases and increased operational risk, with book growth offset by continued RWA management activity. |
Central items & other
| 2025 | | 2024 | Variance |
| ||||
Income statement - continuing operations | £m | £m | | £m | % | ||||
Total income |
| 206 |
| 127 | 79 |
| 62.2 | % | |
Operating expenses |
| (78) |
| (222) | 144 |
| (64.9) | % | |
of which: Other operating expenses |
| (101) |
| (196) | 95 |
| (48.5) | % | |
Impairment releases |
| 1 |
| 10 | (9) |
| (90.0) | % | |
Operating profit/(loss) |
| 129 |
| (85) | 214 |
| nm | ||
2025 | 2024 | Variance | |||||||
Capital and balance sheet | | £bn | | £bn | £bn | | % | ||
Net loans to customers (amortised cost) | 29.7 | 31.8 | (2.1) | (6.6) | % | ||||
Customer deposits | 1.3 | 2.2 | (0.9) | (40.9) | % | ||||
Risk-weighted assets |
| 1.5 |
| 2.0 | (0.5) |
| (25.0) | % | |
| ● | Total income was £79 million higher than 2024 primarily reflecting higher gains on interest and FX risk management derivatives not in accounting hedge relationships, higher Business Growth Fund profits and lower foreign exchange recycling losses. |
| ● | Operating expenses were £78 million, which were £144 million, or 65%, lower than 2024. Other operating expenses were £95 million lower than 2024 primarily due to lower costs in relation to our withdrawal from our operations in the Republic of Ireland. |
| ● | Net loans to customers decreased by £2.1 billion in 2025 driven by reverse repo activity in Treasury. |
| ● | Customer deposits decreased by £0.9 billion compared with 2024 reflecting repo activity in Treasury. |
NatWest Group Annual Report on Form 20-F 2025 | 24 |
Summary financial statements
Summary consolidated income statement
For the year ended 31 December 2025
| 2025 | | 2024 | | 2023 | |
£m | £m | £m | ||||
Net interest income |
| 12,829 |
| 11,275 |
| 11,049 |
Non-interest income |
| 3,812 |
| 3,428 |
| 3,703 |
Total income |
| 16,641 |
| 14,703 |
| 14,752 |
Operating expenses |
| (8,262) |
| (8,149) |
| (7,996) |
Profit before impairment losses |
| 8,379 |
| 6,554 |
| 6,756 |
Impairment losses |
| (671) |
| (359) |
| (578) |
Operating profit before tax |
| 7,708 |
| 6,195 |
| 6,178 |
Tax charge |
| (1,874) |
| (1,465) |
| (1,434) |
Profit from continuing operations |
| 5,834 |
| 4,730 |
| 4,744 |
Profit/(loss) from discontinued operations, net of tax |
| — |
| 81 |
| (112) |
Profit for the year |
| 5,834 |
| 4,811 |
| 4,632 |
| ||||||
Attributable to: |
|
|
| |||
Ordinary shareholders |
| 5,479 |
| 4,519 |
| 4,394 |
Paid-in equity holders |
| 352 |
| 283 |
| 242 |
Non-controlling interests |
| 3 |
| 9 |
| (4) |
| 5,834 |
| 4,811 |
| 4,632 |
NatWest Group Annual Report on Form 20-F 2025 | 25 |
Summary financial statements continued
Summary consolidated balance sheet
As at 31 December 2025
| 2025 | | 2024 | | 2023 | |
£m | £m | £m | ||||
Cash and balances at central banks |
| 85,182 |
| 92,994 |
| 104,262 |
Trading assets |
| 46,537 |
| 48,917 |
| 45,551 |
Derivatives |
| 60,789 |
| 78,406 |
| 78,904 |
Settlement balances |
| 645 |
| 2,085 |
| 7,231 |
Loans to banks and customers - amortised cost |
| 425,839 |
| 406,356 |
| 388,347 |
Other financial assets |
| 79,770 |
| 63,243 |
| 51,102 |
Other and intangible assets |
| 15,791 |
| 15,984 |
| 17,276 |
Total assets |
| 714,553 |
| 707,985 |
| 692,673 |
| ||||||
Deposits |
| 487,090 |
| 464,942 |
| 453,567 |
Trading liabilities |
| 49,022 |
| 54,714 |
| 53,636 |
Settlement balances, derivatives, other financial liabilities and subordinated liabilities |
| 128,638 |
| 141,034 |
| 139,843 |
Other liabilities |
| 4,026 |
| 4,601 |
| 5,202 |
Owners' equity |
| 42,599 |
| 39,350 |
| 37,157 |
Notes in circulation | 3,164 | 3,316 | 3,237 | |||
Non-controlling interests |
| 14 |
| 28 |
| 31 |
Total liabilities and equity |
| 714,553 |
| 707,985 |
| 692,673 |
NatWest Group’s financial statements are prepared in accordance with UK adopted International Accounting Standards (IAS), and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
NatWest Group Annual Report on Form 20-F 2025 | 26 |
Competition
Introduction
NatWest Group’s ability to attract and manage funding remains a critical competitive advantage. Other key competitive factors include cost management, growing digital sales focus, branch network re-shaping, and product simplification. Cost management remains a key focus, as banks seek to simplify their organisational and IT architectures while at the same time investing to ensure that they can meet customers’ evolving channel preferences. Customers have increasingly focused on the use of internet and mobile as sales and service channels for certain types of products. Therefore, competitive position and performance increasingly depends on the possession of user-friendly, diverse and efficient online solutions.
Retail Banking
In the retail banking business, NatWest Group competes with a range of providers including UK banks and building societies, major retailers and life assurance companies, as well as the UK subsidiaries of major international banks. In the mortgage market, NatWest Group competes with UK banks, building societies and specialist lenders. Increasingly, the ambitions of non-traditional players in the UK market are gaining credibility, with new entrants active and seeking to build their platforms either through organic growth or in some cases by acquiring businesses made available through the restructuring of incumbents.
Entrants with new business models such as peer-to-peer lending platforms, while currently small, continue to grow rapidly and are emerging as significant competitors. Such competitors often target specific elements of the value chain, providing specialised services to particular customer segments.
In the UK credit card market, large retailers and specialist card issuers are active in addition to the UK banks. In addition to physical distribution channels, providers compete through direct marketing activity and digital channels.
NatWest Group distributes life assurance products to banking customers in competition with independent advisors and life assurance companies.
Private Banking & Wealth Management
In the Private Banking & Wealth Management business, NatWest Group serves UK connected high-net-worth individuals and their business interests. The bank competes with UK private banks, international private banks and wealth managers. Competition remains strong as banks maintain their focus on competing for affluent and high net worth customers, supporting customers in need of financial advice. Investment in digital and M&A remain key themes with fee pressure ongoing, in response to Consumer Duty and market competition.
Commercial & Institutional
Commercial & Institutional consists of customer businesses reported under Business Banking, Commercial Mid-market and Corporate & Institutions to support our customers across the full non-personal customer lifecycle, both domestically and internationally, principally customers that trade with and from the UK. Our markets offering provides access to financial markets for NatWest Group customers, with financing and risk management expertise, while our international offering provides full-service banking operations in the Channel Islands, Isle of Man, Gibraltar and Luxembourg.
In the business banking market, the bank competes with other UK banks, specialist finance providers and new entrants, including fin-techs and non-bank challengers. The Commercial Mid-market segment primarily competes with UK Banks and includes an asset finance and invoice finance offering which competes with banks and specialist finance providers, both captive and non-captive. Competition for corporate and institutional customers in the UK is from UK banks, from specialised global investment banks and from large foreign universal banks that offer combined investment and commercial banking capabilities.
Our Corporate & Institutions business also competes with international banks which offer offshore and domestic banking services in the Channel Islands, Gibraltar and the Isle of Man as well as depositary services in UK and Luxembourg. The business also provides financing and risk solutions to large corporates in the UK, Western Europe and the United States. Here we compete with large domestic banks, major international banks and investment banks that offer risk management, trading solutions and debt financing to financial institutions and corporate customers.
Competitors are moving faster, innovating, expanding and increasingly focusing on engaging customers in ways that set new benchmarks. This has intensified competition among banking and financial services providers to capture more growth opportunities and attract and retain existing customers.
NatWest Group Annual Report on Form 20-F 2025 | 27 |
Risk management framework | 29 |
NatWest Group Annual Report on Form 20-F 2025 | 28 |
Risk management framework
Where marked as audited in the section header, certain information in the Risk and capital management section (pages 29 to 145) is within the scope of the Independent auditor’s report.
Introduction
NatWest Group operates an enterprise-wide risk management framework (EWRMF), which is centred on the embedding of a strong risk culture. The framework ensures the governance, capabilities and methods are in place to facilitate risk management and decision-making across the organisation.
The framework ensures that NatWest Group’s principal risks – which are detailed in this section – are appropriately controlled and managed. It sets out the standards and objectives for risk management as well as defining the division of roles and responsibilities. This seeks to ensure a consistent approach to risk management across NatWest Group and its subsidiaries. It aligns risk management with NatWest Group’s overall strategic priorities of growth through better understanding of customers, leveraging simplification and better management of resources. The framework, which is designed and maintained by NatWest Group’s independent Risk function, is owned by the Chief Risk Officer. It is reviewed and approved annually by the NatWest Group Board. The framework incorporates risk governance, the three lines of defence operating model and the Risk function’s mandate.
Risk appetite, supported by a robust set of principles, policies and practices, defines the levels of tolerance for a variety of risks and provides a structured approach to risk-taking within agreed boundaries.
While all NatWest Group colleagues are responsible for managing risk, the Risk function provides oversight and monitoring of risk management activities, including the implementation of the framework and adherence to its supporting policies, standards and operational procedures. The Chief Risk Officer plays an integral role in providing the Board with advice on NatWest Group’s risk profile and the performance of its controls and in providing challenge where a proposed business strategy may exceed risk tolerance.
In addition, there is a process to identify and manage top and emerging risks, which are those that could have a significant negative impact on NatWest Group’s ability to meet its strategic objectives.
Both top and emerging risks may incorporate aspects of – or correlate to – a number of principal risks and are reported alongside them to the Board on a regular basis.
Culture
The approach to risk culture, under the banner of intelligent risk-taking, ensures a focus on robust risk management behaviours and practices. This underpins the strategy across all three lines of defence, enables NatWest Group to support better customer outcomes, develop a stronger and more sustainable business and deliver an improved cost base.
NatWest Group expects leaders to act as role models for strong risk behaviours and practices, building clarity, developing capability and motivating employees to reach the required standards set out in the intelligent risk-taking approach.
Colleagues are expected to:
| ● | Consistently role-model the behaviours in Our Code, based on strong ethical standards. |
| ● | Empower others to take risks aligned to NatWest Group’s strategy, explore issues from a fresh perspective, and tackle challenges in new and better ways across organisational boundaries. |
| ● | Manage risk in line with appropriate risk appetite. |
| ● | Ensure each decision made keeps NatWest Group, colleagues, customers, communities and shareholders safe and secure. |
| ● | Understand their role in managing risk, remaining clear and capable, grounded in knowledge of regulatory obligations. |
| ● | Consider risk in all actions and decisions. |
| ● | Escalate risks and issues early; taking action to mitigate risks and learning from mistakes and near-misses, reporting and communicating these transparently. |
| ● | Challenge others’ attitudes, ideas and actions. |
Target intelligent risk-taking outcomes are embedded in NatWest Group’s behaviours framework, forming a core foundation of NatWest Group’s risk culture and guiding recruitment and selection across the organisation.
NatWest Group Annual Report on Form 20-F 2025 | 29 |
Risk management framework continued
Training
Enabling employees to have the capabilities and confidence to manage risk is core to NatWest Group’s learning strategy. NatWest Group offers a wide range of learning, both technical and behavioural, across the risk disciplines.
This training may be mandatory, role-specific or for personal development. Mandatory learning for all staff is focused on keeping employees, customers and NatWest Group safe. This is easily accessed online and is assigned to each person according to their role and business area. The system allows monitoring at all levels to ensure completion.
Our Code
NatWest Group’s conduct guidance, Our Code, provides direction on expected behaviour and sets out the standards of conduct that support the values. The code explains the effect of decisions that are taken and describes the principles that must be followed.
| ● | These principles cover conduct-related issues as well as wider business activities. They focus on desired outcomes, with practical guidelines to align the values with commercial strategy and actions. The embedding of these principles facilitates sound decision-making and a clear focus on good customer outcomes. |
| ● | Any employee falling short of the expected standards will be subject to internal disciplinary policies and procedures and where appropriate, the relevant authorities will be notified. Variable pay for eligible colleagues will reflect overall performance, including the impact of any conduct issues. Adjustments may be made through the performance management process, or where necessary, via the accountability review process for the individuals concerned (for more information on this process refer to page 126 of Exhibit 15.2). The NatWest Group remuneration policy ensures that the remuneration arrangements for all employees reflect the principles and standards prescribed by the PRA rulebook and the FCA handbook. |
NatWest Group Annual Report on Form 20-F 2025 | 30 |
Risk management framework continued
Governance
Committee structure
The diagram shows NatWest Group’s governance structure in 2025 and the main purposes of each committee.
NatWest Group Annual Report on Form 20-F 2025 | 31 |
Risk management framework continued
Risk management structure
The diagram shows NatWest Group’s risk management structure in 2025.
NatWest Group Annual Report on Form 20-F 2025 | 32 |
Risk management framework continued
Three lines of defence
NatWest Group uses the industry-standard three lines of defence model to articulate accountabilities and responsibilities for managing risk. This supports the embedding of effective risk management throughout the organisation. All roles below the CEO sit within one of the three lines. The CEO ensures the efficient use of resources and the effective management of risks as stipulated in the risk management framework and is therefore considered to be outside the three lines of defence principles.
First line of defence
The first line of defence incorporates most roles in NatWest Group, including those in the customer-facing businesses, Technology and Services as well as support functions such as People, Legal and Finance.
The first line of defence is empowered to take risks within the constraints of the risk management framework, policies, risk appetite statements and measures set by the Board.
The first line of defence is responsible for managing its direct risks, and with the support of specialist functions, it is also responsible for managing its consequential risks, by identifying, assessing, mitigating, monitoring and reporting risks.
Second line of defence
The second line of defence comprises the Risk function and is independent of the first line.
The second line of defence is empowered to design and maintain the risk management framework and its components. It undertakes proactive risk oversight and continuous monitoring activities to confirm that NatWest Group engages in permissible and sustainable risk-taking activities.
The second line of defence advises on, monitors, challenges, approves and escalates where required and reports on the risk-taking activities of the first line of defence, ensuring that these are within the constraints of the risk management framework, policies, risk appetite statements and measures set by the Board.
Third line of defence
The third line of defence is the Internal Audit function and is independent of the first and second lines.
The third line of defence is responsible for providing independent assurance to the Board, its subsidiary legal entity boards and executive management on the overall design and operating effectiveness of the risk management framework and its components. This includes the adequacy and effectiveness of key internal controls, governance and the risk management in place to monitor, manage and mitigate the principal risks to NatWest Group and its subsidiary companies.
The third line of defence executes its duties freely and objectively in accordance with the Chartered Institute of Internal Auditors’ Code of Ethics and International Standards on independence and objectivity.
Risk appetite
Risk appetite defines the type and aggregate level of risk NatWest Group is willing to accept in pursuit of its strategic objectives and business plans. Risk appetite supports sound risk-taking, the promotion of robust risk practices and risk behaviours, and is calibrated at least annually.
For certain principal risks, risk capacity defines the maximum level of risk NatWest Group can assume before breaching constraints determined by regulatory capital and liquidity requirements, the operational environment, and from a conduct perspective. Establishing risk capacity helps determine where risk appetite should be set, ensuring there is a buffer between internal risk appetite and NatWest Group’s ultimate capacity to absorb losses.
NatWest Group Annual Report on Form 20-F 2025 | 33 |
Risk management framework continued
Risk appetite continued
Risk appetite framework
The risk appetite framework supports effective risk management by promoting sound risk-taking through a structured approach, within agreed boundaries. It also ensures emerging risks and risk-taking activities that might be outside appetite are identified, assessed, escalated and addressed in a timely manner.
To facilitate this, a detailed review of the framework is carried out annually which is approved by the Board. The review includes:
| ● | Assessing the adequacy of the framework compared to internal and external expectations. |
| ● | Ensuring the framework remains effective and acts as a strong control environment for risk appetite. |
| ● | Assessing the level of embedding of risk appetite across the organisation. |
Establishing risk appetite
In line with the risk appetite framework, risk appetite is maintained across NatWest Group through risk appetite statements. These are in place for all principal risks and describe the extent and type of activities that can be undertaken.
The financial and non-financial risks that NatWest Group faces are detailed in its risk directory. This provides a common risk language to ensure consistent terminology is used across NatWest Group. The risk directory is subject to annual review to ensure it continues to fully reflect the risks that NatWest Group faces.
Risk appetite statements consist of qualitative statements of appetite supported by risk limits and triggers that operate as a defence against excessive risk-taking. Risk measures and their associated limits are an integral part of the risk appetite approach and a key part of embedding risk appetite in day-to-day risk management decisions. A clear tolerance for each principal risk is set in alignment with business activities.
The Board sets risk appetite for all principal risks to help ensure NatWest Group is well placed to meet its priorities and long-term targets, even in challenging economic environments. This supports NatWest Group in remaining resilient and secure as it pursues its strategic business objectives.
The process of reviewing and updating risk appetite statements is completed alongside the business and financial planning process. This ensures that plans and risk appetite are appropriately aligned.
Risk appetite is approved at least annually by the Board on the Board Risk Committee’s recommendation to ensure it remains appropriate and aligned to strategy.
NatWest Group’s risk profile is continually monitored and frequently reviewed. Management focus is concentrated on all principal risks as well as the top and emerging risks that may correlate to them. Performance against risk appetite for all principal risks is reported regularly to the Executive Risk Committee, the Board Risk Committee and the Board.
NatWest Group’s key risk policies define at a high level the qualitative expectations, guidance and standards that stipulate the nature and extent of permissible risk - taking across all principal risks. They form part of the qualitative expression of risk appetite and are consistently applied across NatWest Group and its subsidiaries. Key risk policies are reviewed and approved by the Board Risk Committee at least annually.
Identification and measurement
Identification and measurement within the risk management process comprises:
| ● | Regular assessment of the overall risk profile, incorporating market developments and trends, as well as external and internal factors. |
| ● | Monitoring of the risks associated with lending and credit exposures. |
| ● | Assessment of trading and non-trading portfolios. |
| ● | Review of potential risks in new business activities and processes. |
| ● | Analysis of potential risks in any complex and unusual business transactions. |
NatWest Group Annual Report on Form 20-F 2025 | 34 |
Risk management framework continued
Mitigation
Mitigation is a critical aspect of ensuring that risk profile remains within risk appetite. Risk mitigation strategies are discussed and agreed within NatWest Group.
When evaluating possible strategies, costs and benefits, residual risks (risks that are retained) and secondary risks (those that arise from risk mitigation actions themselves) are also considered. Monitoring and review processes are in place to evaluate results. Early identification, and effective management of changes in legislation and regulation are critical to the successful mitigation of principal risks. The effects of all changes are managed to ensure the timely achievement of compliance. Those changes assessed as having a high or medium-high impact are managed more closely. Action is taken to mitigate potential risks as and when required. Further in-depth analysis, including the stress testing of exposures, is also carried out.
NatWest Group’s control framework is a vital system ensuring effective risk management, compliance, and operational efficiency. Central to this framework is the implementation of various control types, including preventive, detective and directive controls, which address diverse risks.
Control recording is essential, involving detailed documentation of control activities to evaluate their adequacy and effectiveness. This serves as valuable evidence during audits and regulatory reviews.
The risk and control self-assessment (RCSA) process enhances the framework by enabling teams to identify potential risks and assess the adequacy of controls.
Regular independent adequacy and effectiveness testing of controls within the first line of defence and internal audits ensure controls function as intended. Continuous monitoring and reporting provide real-time insights into control effectiveness, fostering accountability and responsiveness to evolving risks. By emphasising control recording, RCSAs and testing, banks can maintain a resilient control environment that supports operational integrity and regulatory compliance.
Monitoring
The primary tool used to provide regular monitoring of the risk and control environment across NatWest Group is the risk and control performance assessment (RCPA). Each business area self-assesses using a set of consistent indicators and providing qualitative context to arrive at an RCPA outcome of met, partially met or not met. The assessment is completed annually and the indicators are regularly monitored. The indicators support an understanding of: the strength of the control environment to manage risk exposure within appetite; adequacy and effectiveness of the day-to-day management of risk and control; adherence with applicable components of the EWRMF; and a culture of intelligent risk-taking.
Emerging risks that could affect future results and performance are also closely monitored.
Specific activities relating to compliance and conduct, credit, financial crime and operational risks are subject to testing and monitoring by the Risk function. This confirms to both internal and external stakeholders – including the Board, senior management, the customer-facing businesses, Internal Audit and NatWest Group’s regulators – that risk policies and procedures are being correctly implemented and that they are operating adequately and effectively. Thematic reviews and targeted reviews are also carried out where relevant to ensure appropriate customer outcomes.
The Risk Testing & Monitoring Forum assesses and validates the annual plan as well as the ongoing programme of reviews.
NatWest Group Annual Report on Form 20-F 2025 | 35 |
Risk management framework continued
Stress testing
Stress testing – capital management
Stress testing is a key risk management tool and a fundamental component of NatWest Group’s approach to capital management. It is used to quantify and evaluate the potential impact of specified changes to risk factors on the financial strength of NatWest Group, including its capital position.
Stress testing includes:
| ● | Scenario testing, which examines the impact of a hypothetical future state to define changes in risk factors. |
| ● | Sensitivity testing, which examines the impact of an incremental change to one or more risk factors. |
The process for stress testing consists of four broad stages:
Define scenarios | ● Identify macro and NatWest Group - specific vulnerabilities and risks. ● Define and calibrate scenarios to examine risks and vulnerabilities. ● Formal governance process to agree scenarios. |
Assess impact | ● Translate scenarios into risk drivers. ● Assess impact on current and projected profit and loss and balance sheet across NatWest Group. |
Calculate results and assess implications | ● Aggregate impacts into overall results. ● Results form part of the risk management process. ● Scenario results are used to inform business and capital plans. |
Develop and agree management actions | ● Scenario results are analysed by subject matter experts. Appropriate management actions are then developed. ● Scenario results and management actions are reviewed by the relevant Executive Risk Committees and Board Risk Committees. Approval of scenarios is delegated to the NatWest Group Board Risk Committee by the NatWest Group Board. |
Stress testing is used widely across NatWest Group. The diagram below summarises key areas of focus.
Stress testing usage | Strategic financial and capital planning | Capital adequacy |
Risk appetite | Sector review and credit limit setting | |
Business vulnerabilities analysis | ||
Risk monitoring | Tail risk assessment | |
Early warning indicators | ||
Risk mitigation | Contingency planning and management actions | |
Assess financial performance |
NatWest Group Annual Report on Form 20-F 2025 | 36 |
Risk management framework continued
Specific areas that involve capital management include:
| ● | Strategic financial and capital planning – by assessing the impact of sensitivities and scenarios on the capital plan and capital ratios. |
| ● | Risk appetite – by gaining a better understanding of the drivers of, and the underlying risks associated with, risk appetite. |
| ● | Risk monitoring – by monitoring the risks and horizon-scanning events that could potentially affect NatWest Group’s financial strength and capital position. |
| ● | Risk mitigation – by identifying actions to mitigate risks, or those that could be taken, in the event of adverse changes to the business or economic environment. Principal risk-mitigating actions are documented in NatWest Group’s recovery plan. |
Reverse stress testing is also carried out in order to identify and assess scenarios that would cause NatWest Group’s business model to become unviable. Reverse stress testing allows potential vulnerabilities in the business model to be examined more fully.
Capital sufficiency – going concern forward-looking view
Going concern capital requirements are examined on a forward-looking basis – including as part of the annual budgeting process – by assessing the resilience of capital adequacy and leverage ratios under hypothetical future states. These assessments include assumptions about regulatory and accounting factors (such as IFRS 9). They incorporate economic variables and key assumptions on balance sheet and profit and loss drivers, such as impairments, to demonstrate that NatWest Group and its operating subsidiaries maintain sufficient capital. A range of future states are tested. In particular, capital requirements are assessed:
| ● | Based on a forecast of future business performance, given expectations of economic and market conditions over the forecast period. |
| ● | Based on a forecast of future business performance under adverse economic and market conditions over the forecast period. Scenarios of different severity may be examined. |
The potential impact of normal and adverse economic and market conditions on capital requirements is assessed through stress testing, the results of which are not only used widely across NatWest Group but also by the regulators to set specific capital buffers. NatWest Group takes part in stress tests run by regulatory authorities to test industry-wide vulnerabilities under crystallising global and domestic systemic risks.
Stress and peak-to-trough movements are used to help assess the amount of capital NatWest Group needs to hold in stress conditions in accordance with the capital risk appetite framework.
Internal assessment of capital adequacy
An internal assessment of material risks is carried out annually to enable an evaluation of the amount, type and distribution of capital required to cover these risks. This is referred to as the Internal Capital Adequacy Assessment Process (ICAAP). The ICAAP consists of a point-in-time assessment of exposures and risks at the end of the financial year together with a forward-looking stress capital assessment. The ICAAP is approved by the Board Risk Committee under Board - delegated authority and submitted to the PRA.
The ICAAP is used to form a view of capital adequacy separately to the minimum regulatory requirements. The ICAAP is used by the PRA to assess NatWest Group’s specific capital requirements through the Pillar 2 framework.
Capital allocation
NatWest Group has mechanisms to allocate capital across its legal entities and businesses. These aim to optimise the use of capital resources taking into account applicable regulatory requirements, strategic and business objectives and risk appetite.
Governance
Capital management is subject to substantial review and governance. The Board approves the capital plans, including those for key legal entities and businesses as well as the results of the stress tests relating to those capital plans.
NatWest Group Annual Report on Form 20-F 2025 | 37 |
Risk management framework continued
Stress testing – liquidity
Liquidity risk monitoring and contingency planning
A suite of tools is used to monitor, limit and stress-test the liquidity and funding risks on the balance sheet. Limit frameworks are in place to control the level of liquidity risk, asset and liability mismatches and funding concentrations. Liquidity and funding risks are reviewed at significant legal entity and business levels daily, with performance reported to the Asset & Liability Management Committee on a regular basis. Liquidity condition indicators are monitored daily.
This ensures any build-up of stress is detected early and the response escalated appropriately through recovery planning.
Internal assessment of liquidity
Under the liquidity risk management framework, NatWest Group maintains the Internal Liquidity Adequacy Assessment Process. This includes assessment of net stressed liquidity outflows under a range of severe but plausible stress scenarios. Each scenario evaluates either an idiosyncratic, market-wide or combined stress event as described in the table.
Type | Description |
Idiosyncratic scenario | The market perceives NatWest Group to be suffering from a severe stress event, which results in an immediate assumption of increased credit risk or concerns over solvency. |
Market-wide scenario | A market stress event affecting all participants in a market through contagion, potential counterparty failure and other market risks. NatWest Group is affected under this scenario but no more severely than any other participants with equivalent exposure. |
Combined scenario | This scenario models the combined impact of an idiosyncratic and market stress occurring at once, severely affecting funding markets and the liquidity of some assets. |
NatWest Group uses the most severe outcome to set the internal stress testing scenario which underpins its internal liquidity risk appetite. This complements the regulatory liquidity coverage ratio requirement.
Stress testing – recovery and resolution planning
The NatWest Group recovery plan explains how NatWest Group and its subsidiaries – as a consolidated group – would identify and respond to a financial stress event and restore its financial position so that it remains viable on an ongoing basis.
The recovery plan ensures risks that could delay the implementation of a recovery strategy are highlighted and preparations are made to minimise the impact of these risks. Preparations include:
| ● | Developing a series of recovery indicators to provide early warning of potential stress events. |
| ● | Clarifying roles, responsibilities and escalation routes to minimise uncertainty or delay. |
| ● | Developing a recovery playbook to provide a concise description of the actions required during recovery. |
| ● | Detailing a range of options to address different stress conditions. |
| ● | Appointing dedicated option owners to reduce the risk of delay and capacity concerns. |
The plan is intended to enable NatWest Group to maintain critical services and products it provides to its customers, maintain its core business lines and operate within risk appetite while restoring NatWest Group’s financial condition. It is assessed for appropriateness on an ongoing basis and reviewed and approved by the Board prior to submission to the PRA on a biennial basis. Individual recovery plans are also prepared for NatWest Holdings Limited, NatWest Markets Plc, RBS International Limited and RBSH N.V.. These plans detail the recovery options, recovery indicators and escalation routes for each entity.
Fire drill simulations of possible recovery events are used to test the effectiveness of NatWest Group and individual legal entity recovery plans. The fire drills are designed to replicate possible financial stress conditions and allow senior management to rehearse the responses and decisions that may be required in an actual stress event. The results and lessons learnt from the fire drills are used to enhance NatWest Group’s approach to recovery planning.
NatWest Group Annual Report on Form 20-F 2025 | 38 |
Risk management framework continued
Under the resolution assessment part of the PRA rulebook, NatWest Group is required to carry out an assessment of its preparations for resolution, submit a report of the assessment to the PRA and publish a summary of this report.
Resolution would be implemented if NatWest Group were assessed by the UK authorities to have failed and the appropriate regulator put it into resolution. The process of resolution is owned and implemented by the Bank of England (as the UK resolution authority). NatWest Group ensures ongoing maintenance and enhancements of its resolution capabilities, in line with regulatory requirements.
Stress testing – market risk
Non-traded market risk
Non-traded exposures are reported to the PRA on a quarterly basis. This provides the regulator with an overview of NatWest Group’s banking book interest rate exposure. The report includes detailed product information analysed by interest rate driver and other characteristics, including accounting classification, currency and counterparty type.
Scenario analysis based on hypothetical adverse scenarios is performed on non-traded exposures as part of the Bank of England and European Banking Authority stress test exercises. NatWest Group also produces an internal scenario analysis as part of its financial planning cycles.
Non-traded exposures are capitalised through the ICAAP. This covers gap risk, basis risk, credit spread risk, pipeline risk, structural foreign exchange risk, prepayment risk, equity risk and accounting volatility risk. The ICAAP is completed with a combination of value and earnings measures. The total non-traded market risk capital requirement is determined by adding the different charges for each sub risk type. The ICAAP methodology captures at least ten years of historical volatility, produced with a 99% confidence level. Methodologies are reviewed by NatWest Group Model Risk and the results are approved by the NatWest Group Balance Sheet Management Committee.
Non-traded market risk stress test results are combined with those for other risks into the capital plan presented to the Board. The cross-risk capital planning process is conducted once a year, with a planning horizon of five years.
The scenario narratives cover both regulatory scenarios and macroeconomic scenarios identified by NatWest Group.
Vulnerability-based stress testing begins with the analysis of a portfolio and expresses its key vulnerabilities in terms of plausible vulnerability scenarios under which the portfolio would suffer material losses. These scenarios can be historical, macroeconomic or forward-looking/hypothetical. Vulnerability-based stress testing is used for internal management information and is not subject to limits. The results for relevant scenarios are reported to senior management.
Traded market risk
NatWest Group carries out regular market risk stress testing to identify vulnerabilities and potential losses in excess of, or not captured in, value-at-risk. The calculated stresses measure the impact of changes in risk factors on the fair values of the trading portfolios.
NatWest Group conducts historical, macroeconomic and vulnerability-based stress testing. Historical stress testing is a measure that is used for internal management. Using the historical simulation framework employed for value-at-risk, the current portfolio is stressed using historical data since 1 January 2005. This methodology simulates the impact of the 99.9 percentile loss that would be incurred by historical risk factor movements over the period, assuming variable holding periods specific to the risk factors and the businesses.
Historical stress tests form part of the market risk limit framework and their results are reported regularly to senior management.
NatWest Group Annual Report on Form 20-F 2025 | 39 |
Risk management framework continued
Macroeconomic stress tests are carried out periodically as part of the bank-wide, cross-risk capital planning process. The scenario narratives are translated into risk factor shocks using historical events and insights by economists, risk managers and the first line of defence.
Market risk stress test results are combined with those for other risks into the capital plan presented to the Board. The cross-risk capital planning process is conducted at least once a year, with a planning horizon of five years. The scenario narratives cover both regulatory scenarios and macroeconomic scenarios identified by NatWest Group.
Vulnerability-based stress testing begins with the analysis of a portfolio and expresses its key vulnerabilities in terms of plausible, vulnerability scenarios under which the portfolio would suffer material losses. These scenarios can be historical, macroeconomic or forward-looking/hypothetical. Vulnerability-based stress testing is used for internal management information and is not subject to limits. The results for relevant scenarios are reported to senior management.
Stress testing – climate risk
NatWest Group continued to enhance its in-house climate risk modelling capabilities, supporting the ongoing integration of climate risk within its capital adequacy (ICAAP), impairment (IFRS 9) and risk management processes, for example, sharing insights with sector and front-line teams to support the financial budget and climate transition plan processes. In particular, internal physical risk modelling capabilities were developed during 2025.
Specific internal-run exercises in 2025 included:
| ● | A credit-risk focused exercise covering both physical and transition risk scenarios for both the Corporate & Institutional portfolio and the Retail Banking residential mortgage portfolio. |
| ● | A non-financial risk scenario for climate focused on external communications which could omit or contain incorrect information and mislead on NatWest Group activities. |
There are various challenges with quantitative climate scenario analysis, including in relation to the immaturity of modelling techniques and limitations surrounding data on climate-related risks. In addition, there is significant uncertainty as to how the climate will evolve over time, how and when governments, regulators, businesses, investors and customers respond and how those responses impact the economy, asset valuations, economic systems, policy and wider society. These risks and uncertainties, coupled with significantly long timeframes, make the outputs of climate-related risk modelling with respect to the potential use cases identified inherently more uncertain than outputs modelled for traditional financial planning cycles based on historical financial information.
Regulatory stress testing
The Bank of England updated its approach to stress testing. The Bank Capital Stress Test (BCST) is the successor to the Annual Cyclical Stress scenario and will be run biennially. NatWest Group was selected by the Bank of England to be one of the participants in the 2025 BCST. The results were published in December 2025 and NatWest Group remained above its CET1 capital and Tier 1 leverage ratio hurdle rates in stress and was not required to strengthen its capital position. The results of this stress test, and other relevant information, will be used by the Bank of England to help inform NatWest Group capital buffers (both the UK countercyclical capital buffer rate and PRA buffers).
The 2025 stress test aimed to assess the impact of a UK and global macroeconomic stress on UK banks, spanning a five-year period from Q4 2025 to Q4 2030. It was a coherent ‘tail risk’ scenario, designed to be severe and broad enough to assess the resilience of UK banks to a range of adverse shocks. The stress scenario is similar to the 2022/23 Annual Cyclical Stress with weaker UK consumer price index inflation offset by more severe financial markets stresses and economic shocks in some jurisdictions.
The stress test was based on an end-of-December 2024 balance sheet position.
Further details can be found at:
https://www.bankofengland.co.uk/stress-testing/2025/key-elements-bank-capital
NatWest Group Annual Report on Form 20-F 2025 | 40 |
Credit risk
Page | |
Credit risk | |
Movement in ECL provision | 42 |
Key metrics | 42 |
Definition and sources of risk | 43 |
Governance and risk appetite | 43 |
Identification and measurement | 43 |
Assessment and monitoring | 44 |
Mitigation | 44 |
Problem debt management | 45 |
Forbearance | 46 |
IFRS 9 models | 46 |
Economic drivers | 47 |
Impairment, provisioning and write-offs | 53 |
Measurement uncertainty and ECL sensitivity analysis | 54 |
ECL post model adjustments | 57 |
Credit risk – Banking activities | |
Financial instruments within the scope of the IFRS 9 ECL framework | 58 |
Segment analysis – portfolio summary | 60 |
Segmental loans and impairment metrics | 62 |
Sector analysis – portfolio summary | 62 |
Non-Personal forbearance | 67 |
Credit risk enhancement and mitigation | 68 |
Personal portfolio | 69 |
Commercial real estate | 73 |
Flow statements | 74 |
Stage 2 decomposition – by a significant increase in credit risk trigger | 81 |
Stage 3 vintage analysis | 83 |
Asset quality | 84 |
Credit risk – Trading activities | |
Securities financing transactions and collateral | 88 |
Derivatives | 89 |
Debt securities | 90 |
Cross border exposure | 91 |
NatWest Group Annual Report on Form 20-F 2025 | 41 |
Credit risk continued
Movement in expected credit loss (ECL) provision(1)
The table below shows the main ECL provision movements during the year.
| ECL provision | |
| £m | |
At 1 January 2025 |
| 3,425 |
Acquisitions |
| 81 |
Changes in economic forecasts |
| 54 |
Changes in risk metrics and exposure: Stage 1 and Stage 2 |
| (75) |
Changes in risk metrics and exposure: Stage 3 |
| 705 |
Judgemental changes: |
| |
Changes in post model adjustments for Stage 1, Stage 2 and Stage 3 |
| (40) |
Write-offs and other |
| (565) |
At 31 December 2025 |
| 3,585 |
At 1 January 2024 |
| 3,645 |
2024 movements |
| (220) |
At 31 December 2024 |
| 3,425 |
| (1) | The above table is not within the scope of the Independent auditors’ report. |
Key metrics
Loans £429.9bn (2024 – £410.2bn) | | ECL provisions coverage 0.83 % (2024 – 0.83%) |
Growth in 2025 was a result of continuing organic demand across Personal as well as the acquisition and integration of Sainsbury’s Bank unsecured portfolios. In Non-Personal, growth was mainly across strategic areas including financial institutions and corporates. | ECL coverage remained broadly consistent with 2024, reflecting stability in arrears trends and the ongoing resilience of NatWest Group’s portfolios, alongside balance sheet management actions in Personal portfolios. |
Impairments £671m (2024 – £359m) | | Stage 3 1.09 % (2024 – 1.45%) |
The impairment charge of £671 million, or 16 basis points of gross customer loans, reflected broadly stable default rates on growing Personal unsecured portfolios, combined with lower reductions in post model adjustments compared to 2024. | Stage 3 assets reduced as a result of balance sheet management actions in Personal coupled with lower defaults in Non-Personal. |
NatWest Group Annual Report on Form 20-F 2025 | 42 |
Credit risk continued
Definition (audited)
Credit risk is the risk that customers, counterparties or issuers fail to meet a contractual obligation to settle outstanding amounts. For the purposes of the credit risk section, Personal refers to lending to individuals and Non-Personal refers to lending to small and medium-sized enterprises, corporates, banks and other financial institutions.
Sources of risk (audited)
The principal sources of credit risk for NatWest Group are lending, off-balance sheet products, derivatives and securities financing, and debt securities. NatWest Group is also exposed to settlement risk through foreign exchange, trade finance and payments activities.
Governance (audited)
Risk governance for credit risk is in line with the approach outlined in the Risk management framework section.
The Credit Risk function provides oversight and challenge of frontline credit risk management activities:
| ● | Establishing credit risk policy, standards and toolkits which set out the mandatory limits and parameters required to ensure that credit risk is managed within risk appetite and which provide the minimum standards for the identification, assessment, management, monitoring and reporting of credit risk. |
| ● | Oversight of the first line of defence to ensure that credit risk remains within the appetite set by the Board and that it is being managed adequately and effectively. |
| ● | Assessing the adequacy of ECL provisions including approving key IFRS 9 inputs (such as significant increase in credit risk (SICR) thresholds) and any necessary in-model and post model adjustments through NatWest Group and business unit provisions and model committees. |
Risk appetite (audited)
Risk appetite for credit risk is in line with the approach outlined in the Risk management framework section.
Credit risk appetite is monitored through risk appetite frameworks tailored to NatWest Group’s Personal and Non-Personal segments.
Personal
The Personal credit risk appetite framework sets limits that control the quality and concentration of both existing and new business for each relevant business segment. Risk appetite measures consider the segments’ ability to grow sustainably and the level of losses expected under stress. Credit risk is further controlled through operational limits specific to customer or product characteristics.
Non-Personal
The Non-Personal credit risk appetite framework has been designed to reflect factors that influence the ability to operate within risk appetite. Tools such as stress testing and economic capital are used to measure credit risk volatility and develop links between the framework and risk appetite limits.
The framework is used to manage concentrations of risk which may arise across four lenses – single name, sector, country and product and asset classes. The framework is supported by a suite of transactional acceptance standards that set out the risk parameters within which businesses should operate.
Identification and measurement
Risks are identified through relationship management and credit stewardship of customers and portfolios. Credit stewardship takes place throughout the customer relationship, beginning with the initial approval. It includes the application of credit assessment standards, credit risk mitigation, ensuring that credit documentation is complete and appropriate, carrying out regular portfolio or customer reviews and problem debt identification and management.
NatWest Group Annual Report on Form 20-F 2025 | 43 |
Credit risk continued
Assessment and monitoring
Personal
Personal lending mainly comprises a high volume of lower-value transactions supported by automated decision-making. To maintain consistency in lending decisions and monitor performance, NatWest Group reviews both internal credit data and external information from credit reference agencies, developing and applying lending rules according to product type.
For higher-value, more complex personal loans, such as certain residential mortgage lending, specialist credit managers are responsible for final lending decisions within defined delegated authority limits based on their experience.
Underwriting standards and portfolio performance are monitored on an ongoing basis to ensure they remain appropriate for the current market environment. Management information and higher-risk segment monitoring are produced for portfolio monitoring. Portfolio performance is measured against operational limits related to various credit risk measures including projected default rates and mortgage loan-to-value (LTV) ratios. If operational limits identify areas of concern, management may adjust credit or business strategy accordingly.
Non-Personal
Non-Personal customers, which include small and medium-sized enterprises, corporates, banks and other financial institutions, are typically managed on an individual basis. Customers are aggregated as a single risk when sufficiently interconnected to the extent that a failure of one could lead to the failure of another.
A risk-based credit assessment is carried out before credit facilities are made available to customers. The assessment process depends on the complexity of the transaction.
For lower-risk transactions below specific thresholds, credit decisions can be approved through a combination of fully automated or relationship manager self-sanctioning within the business. This process is facilitated through an auto-decision system, which utilises scorecards, strategies and policy rules. For other transactions, both business approval and credit approval are required.
Credit quality and loss given default (LGD) are reviewed at least annually. The review process assesses borrower performance, the adequacy of security, compliance with terms and conditions, and refinancing risk.
Mitigation
Mitigation techniques outlined in the credit risk toolkits and transactional acceptance standards are applied in managing credit portfolios across NatWest Group. These techniques mitigate credit concentrations related to individual customers, borrower groups or a collection of related borrowers. Where possible, customer credit balances are netted against obligations. Mitigation tools may involve structuring security interests in physical or financial assets, using credit derivatives such as credit default swaps, credit-linked debt instruments and securitisation structures, and utilising guarantees or similar instruments (including credit insurance) from related and third parties. Property is used to mitigate credit risk across a number of portfolios, in particular residential mortgage lending and commercial real estate.
Residential mortgages
NatWest Group uses residential property as collateral to reduce credit risk arising from mortgages. The value of the property is determined during loan underwriting, either from a qualified appraiser, such as one registered with the Royal Institution of Chartered Surveyors (RICS), or by applying a statistically valid model. Periodically, a sample of these valuations is reviewed by an independent RICS-qualified appraiser. Retail Banking UK updates residential property values quarterly based on country-specific (Scotland, Wales and Northern Ireland) or English region specific Office for National Statistics House Price indices.
Commercial real estate
For commercial real estate valuations, NatWest Group works with a managed panel of chartered surveying firms that cover relevant geographic and property sectors in which NatWest Group takes collateral. RICS-registered valuers are contracted for specific assets under service agreements to ensure consistency of quality and advice. In the UK, an independent third-party market indexation is applied to update external valuations for commercial property, once they are more than a year old. For loan obligations in excess of £2.5 million and where the charged property has a book value in excess of £0.5 million, a formal valuation review is typically commissioned at least every three years.
NatWest Group Annual Report on Form 20-F 2025 | 44 |
Credit risk continued
Problem debt management (audited)
When stress or financial difficulties are identified, NatWest Group collaborates closely with customers to support them.
Personal
Pre-emptive triggers, based on both NatWest Group and credit reference agency data, are used to identify customers that may be at risk of financial difficulty. NatWest Group proactively contacts these customers to offer support with the aim of preventing further deterioration of their financial position.
Financial Health and Support
When a customer exceeds an agreed limit or misses a regular monthly payment, the customer is contacted by NatWest Group and requested to remedy the position. If the situation is not resolved then, where appropriate, the Financial Health and Support team become involved and the customer is supported by skilled debt management staff who endeavour to provide customers with bespoke solutions.
If appropriate, a notice of intention to default and/or a formal demand may be issued to the customer. The account may also be registered with credit reference agencies. Subsequently, the customer’s debt may be referred to a third-party debt collection agency or solicitor, to agree an affordable repayment plan. The sale of unsecured debt may also be considered as an option.
Non-Personal
NatWest Group uses a range of early warning indicators to identify customers that may be exposed to emerging risks, including financial stress, allowing for increased monitoring where necessary. Early warning indicators may be internal, such as a customer’s bank account activity, or external, such as the share price of a publicly listed customer. When these indicators suggest that a customer is experiencing potential or actual difficulty, or if relationship managers or credit officers observe other signs of financial difficulty, the customer may be classified within the Wholesale Problem Debt Management framework.
Wholesale Problem Debt Management framework
This framework focuses on Non-Personal customers and is designed to provide early identification of credit deterioration, support intelligent risk-taking, ensure fair and consistent customer outcomes and provide key insights into Non-Personal lending portfolios.
There are two classifications in the framework that apply to non-defaulted customers that are in financial stress – Heightened Monitoring and Risk of Credit Loss. For the purposes of provisioning, all exposures categorised as Heightened Monitoring or Risk of Credit Loss are categorised as Stage 2 and subject to a lifetime loss assessment.
The framework also applies to those customers that have met NatWest Group’s default criteria (AQ10 exposures). Defaulted exposures are categorised as Stage 3 impaired for provisioning purposes.
Heightened Monitoring customers are performing customers that have met certain characteristics, which have led to significant credit deterioration. Characteristics include trading issues, covenant breaches, material probability of default (PD) downgrades and past due facilities.
Heightened Monitoring customers require pre-emptive actions (outside the customer’s normal trading patterns) to return or maintain their facilities within NatWest Group’s current risk appetite.
Risk of Credit Loss customers are performing customers that have met the criteria for Heightened Monitoring and also pose a risk of credit loss to NatWest Group in the next 12 months should mitigating action not be taken or not be successful.
The Wholesale Problem Debt Management framework does not apply to problem debt management for small and medium-sized enterprise retail customers. These customers are, where necessary, managed by specialist problem debt management teams, depending on the size of exposure or by the Financial Health and Support team where a loan has been impaired.
NatWest Group Annual Report on Form 20-F 2025 | 45 |
Credit risk continued
Problem debt management (audited) continued
Customer Lending Support
Where customers meet specific referral criteria, relationships are supported by the Customer Lending Support team.
Customer Lending Support works with corporate and commercial customers in financial difficulty to help them understand their options and how their restructuring or repayment strategies can be delivered.
Helping viable customers return to financial health and restoring a normal banking relationship is always the preferred outcome. However, where this is not possible, NatWest Group works with customers to achieve a solvent outcome.
Forbearance (audited)
Forbearance occurs when a concession is made on the contractual terms of a debt in response to a customer’s financial difficulties.
The aim of forbearance is to help the customer regain financial stability while reducing risk. To ensure that forbearance is appropriate for the customer, minimum standards are applied when assessing, recording, monitoring and reporting forbearance.
Personal
Forbearance options include payment concessions, loan rescheduling (such as extending contractual maturity), switching to interest-only payments, suspending interest or capitalising arrears. This support can be provided for both mortgages and unsecured lending.
Non-Personal
Forbearance may involve covenant waivers, amendments to margins, payment concessions and loan rescheduling (including extensions in contractual maturity), capitalisation of arrears, and debt forgiveness or debt-for-equity swaps.
Customer PD and facility loss given default (LGD) are reassessed prior to finalising any forbearance arrangement. The ultimate outcome of a forbearance strategy is highly dependent on the co-operation of the borrower and a viable business or repayment outcome. If forbearance becomes unsuitable or is unsuccessful, NatWest Group may pursue repayment, enforcement of security or insolvency proceedings, although these are options of last resort.
IFRS 9 models (audited)
IFRS 9 models provide PD, exposure at default (EAD) and LGD for the purpose of calculating ECL.
Model build
Risk ranking is normally the same as for internal ratings based (IRB) models to maintain consistency in risk measurement. Economic drivers are incorporated, normally by using stress models. Term structures are used to assess the risk of loss beyond 12 months that will affect lifetime loss for exposures which have significantly deteriorated (Stage 2) or defaulted (Stage 3).
Model application
Model application involves selecting forward-looking economic scenarios and assigning appropriate probability weights.
Model design principles
The modelling of ECL under IFRS 9 adopts the standard approach of breaking down credit loss estimation into its component parts of PD, LGD and EAD. To comply with IFRS 9, these model parameters are designed with the following characteristics:
| ● | Unbiased – provide a best estimate. |
| ● | Point-in-time – reflecting current economic conditions as opposed to through-the-cycle. |
| ● | Economic forecasts – IFRS 9 PD estimates and, where appropriate, EAD and LGD estimates reflecting economic forecasts. |
| ● | Lifetime measurement – parameters are provided as multi-period term structures up to behavioural lifetimes. |
NatWest Group Annual Report on Form 20-F 2025 | 46 |
Credit risk continued
IFRS 9 models (audited) continued
PD
Personal
Personal PD models follow a discrete multi-horizon survival approach, predicting quarterly PDs up to lifetime at account level. A key driver is the score from related IRB PD models, with economic forecasts incorporated through the stress models.
Non-Personal
Non-Personal PD models use a point-in-time/through-the-cycle framework to provide point-in-time estimates that reflect economic conditions at the reporting date. A key driver is the score from related IRB PD models, with economic forecasts incorporated through the stress models.
LGD
Personal
Economic forecasts are incorporated for the secured portfolios, where changes in property prices can be readily accommodated. Analysis has shown limited sensitivity to economic conditions on LGDs for the other Personal portfolios.
Non-Personal
Economic forecasts are incorporated into LGD estimates using the existing point-in-time/through-the-cycle framework. However, for some portfolios, including low-default, sovereigns and banks, there is insufficient loss data to substantiate estimates that vary with economic conditions.
EAD
Personal
Revolving products employ existing IRB models as a foundation, with appropriate adjustments incorporating a term structure based on time to default. Amortising products use an amortisation schedule, where a formula is used to calculate the expected balance based on remaining terms and interest rates.
Non-Personal
EAD values rely on product-specific credit conversion factors (CCFs), closely mirroring the product segmentation and approach of the respective IRB model, but without conservative or downturn assumptions. These CCFs are estimated over multi-year time horizons.
Economic drivers (audited)
Introduction
The portfolio segmentation and selection of economic drivers for IFRS 9 follows the approach used in stress testing. The stress models for each portfolio segment (defined by product or asset class and where relevant, industry sector and region) are based on a selected, small number of economic variables that best explain the movements in portfolio loss rates. The process to select economic drivers uses empirical analysis and expert judgement.
The most significant economic drivers for material portfolios are shown in the table below:
Portfolio | Economic drivers |
Personal mortgages | Unemployment rate, sterling swap rate, house price index, real wage |
Personal unsecured | Unemployment rate, sterling swap rate, real wage |
Corporates | Stock price index, gross domestic product (GDP) |
Commercial real estate | Stock price index, commercial property price index, GDP |
NatWest Group Annual Report on Form 20-F 2025 | 47 |
Credit risk continued
Economic drivers (audited) continued
Economic scenarios
At 31 December 2025, the range of anticipated future economic conditions was defined by a set of four internally developed scenarios and their respective probabilities. In addition to the base case, they comprised upside, downside and extreme downside scenarios.
For 31 December 2025, the four scenarios were deemed appropriate in capturing the uncertainty in economic forecasts and the non-linearity in outcomes under different scenarios. These four scenarios were developed to provide sufficient coverage to current risks faced by the economy and consider varying outcomes across the labour market, inflation, interest rate, asset price and economic growth, around which there remains pronounced levels of uncertainty.
Since 31 December 2024, the near-term economic growth outlook weakened, with growth in the second half of 2025 losing momentum. Inflation rose to nearly double the target level of 2% in 2025, with underlying price pressures remaining firm. However, there are tentative signs of easing inflationary pressures and inflation is assumed to fall back close to the target by the end of 2026. The peak unemployment rate is higher than at 31 December 2024. The unemployment rate is assumed to continue to rise in the near-term, albeit at a slower pace. The Bank of England is expected to continue cutting interest rates in a ‘gradual and careful’ manner with an assumed terminal rate in the base case of 3.25%, marginally lower compared to 3.5% assumed at 31 December 2024. Housing market activities remained resilient in 2025, with prices expected to grow modestly.
High-level narrative – potential developments, vulnerabilities and risks | |||
Growth | Outperformance sustained – above trend growth as consumer sentiment recovers | Upside | |
Steady growth – staying close to trend pace | Base case | ||
Stalling – cautious consumer and policy uncertainty weighs on activity | Downside | ||
Extreme stress – extreme fall in GDP, with policy support to facilitate sharp recovery | Extreme downside | ||
Inflation | Sticky – strong growth and/or wage policies keep services inflation above target in medium term | Upside | |
Battle won – beyond near-term volatility, services inflation continues to ease, 2% target is met on a sustained basis | Base case | ||
Slow – above target inflation in 2026 but swiftly falls to lower levels | Downside | ||
Close to deflation – inflationary pressures diminish amidst pronounced weakness in demand | Extreme downside | ||
Labour market | Recovery – job growth rebounds strongly, reversing much of the recent rise in unemployment rate | Upside | |
Cooling continues – gradual loosening continues into 2026, before improving | Base case | ||
Job shedding – redundancies, reduced hours, building slack | Downside | ||
Depression – unemployment hits levels close to previous peaks amid severe stress | Extreme downside | ||
Rates | Limited cuts – higher growth and inflation keep the Monetary Policy Committee cautious | Upside | |
Steady – rate cutting cycle largely done, two further rate cuts | Base case | ||
Supportive – sharp declines to support recovery | Downside | ||
Sharp drop – drastic easing in policy to support a sharp deterioration in the economy | Extreme downside | ||
Rates long-term | Above consensus – 4% | Upside | |
Middle – 3.25% | Base case | ||
Low – 2.5% and below | Downside/Extreme downside | ||
NatWest Group Annual Report on Form 20-F 2025 | 48 |
Credit risk continued
Economic drivers (audited) continued
Main macroeconomic variables
The main macroeconomic variables for each of the four scenarios used for ECL modelling are set out in the table below.
| 2025 | | 2024 | |||||||||||||||||
Extreme | Weighted | Extreme | Weighted | |||||||||||||||||
Upside | Base case | Downside | downside | average | Upside | Base case | Downside | downside | average | |||||||||||
Five-year summary | % | % | % | % | % | % | % | % | % | % | ||||||||||
GDP |
| 2.1 |
| 1.4 |
| 0.5 |
| 0.1 |
| 1.2 |
| 2.0 |
| 1.3 |
| 0.5 |
| (0.2) |
| 1.1 |
Unemployment rate |
| 4.3 |
| 5.1 |
| 5.6 |
| 7.0 |
| 5.3 |
| 3.6 |
| 4.3 |
| 5.0 |
| 6.7 |
| 4.6 |
House price index |
| 5.7 |
| 3.3 |
| 0.6 |
| (3.8) |
| 2.6 |
| 5.8 |
| 3.5 |
| 0.8 |
| (4.3) |
| 2.7 |
Commercial real estate price |
| 6.1 |
| 2.2 |
| (0.3) |
| (5.0) |
| 1.9 |
| 5.4 |
| 1.2 |
| (1.0) |
| (5.7) |
| 1.1 |
Consumer price index |
| 2.6 |
| 2.4 |
| 2.4 |
| 1.8 |
| 2.3 |
| 2.4 |
| 2.2 |
| 3.5 |
| 1.6 |
| 2.4 |
Bank of England base rate |
| 4.0 |
| 3.5 |
| 2.6 |
| 1.4 |
| 3.2 |
| 4.4 |
| 4.0 |
| 3.0 |
| 1.6 |
| 3.6 |
Stock price index |
| 6.2 |
| 4.8 |
| 2.8 |
| 1.1 |
| 4.3 |
| 6.3 |
| 5.0 |
| 3.4 |
| 1.1 |
| 4.5 |
World GDP |
| 3.7 |
| 3.1 |
| 2.5 |
| 2.2 |
| 3.0 |
| 3.8 |
| 3.2 |
| 2.5 |
| 1.6 |
| 3.0 |
Probability weight |
| 22.4 |
| 45.0 |
| 19.5 |
| 13.1 |
| 23.2 |
| 45.0 |
| 19.1 |
| 12.7 |
| |||
| (1) | The five-year summary runs from 2025-2029 for 31 December 2025 and from 2024-2028 for 31 December 2024. |
| (2) | The table shows compound annual growth rate (CAGR) for GDP, average levels for the unemployment rate and Bank of England base rate and Q4 to Q4 CAGR for other parameters. |
| (3) | An implicit carbon price is an additional cost related to greenhouse gas emissions as a result of climate transition policy. |
Climate transition
Since 2023, NatWest Group has assessed the implicit contribution to its base case macroeconomic scenario from changes in UK transition policy, expressed as an additional implicit sectoral carbon price(3). Climate transition policy contribution to the total ECL was immaterial at the end of 2025.
In 2025, NatWest Group individually assessed 50 active and potential UK transition policies that had a significant impact on the cost of emissions – for example, the Emissions Trading Scheme and Renewables Obligation – and converted them into equivalent implicit sectoral carbon prices. The prices were calculated as the cost per tonne of emissions abated by each policy. Using an internally developed model, NatWest Group estimated the impact of sector carbon prices on key macroeconomic variables such as GDP and unemployment. Using this analysis, NatWest Group created two scenarios, the baseline, which incorporates climate transition related impacts, and an alternative scenario, which excludes them. Comparing ECL under these two scenarios allowed NatWest Group to estimate an aggregate macroeconomic impact of the analysed transition policies and their contribution to ECL.
The current approach does not include physical risks and transition risks, beyond the assessed transition policies. NatWest Group will continue to enhance and develop the approach as reliable data and methodology become available.
Probability weightings of scenarios
NatWest Group applies a quantitative approach for IFRS 9 multiple economic scenarios by selecting specific discrete scenarios that represent the range of risks in the economic outlook and assigning appropriate probability weights.
The approach involves comparing GDP paths for NatWest Group’s scenarios against a set of 1,000 model simulations to determine the percentile in the distribution that aligns most closely with each scenario. The probability weight for the base case is determined first using judgement, while probability weights for the alternative scenarios are then assigned based on these percentiles scores.
The weights were broadly comparable to those used at 31 December 2024 but with slightly more downside skew. The assigned probability weights were judged to be aligned with the subjective assessment of balance of the risks in the economy. Given the balance of risks that the economies in which NatWest Group operates are exposed to, NatWest Group judges it appropriate that downside-biased scenarios have higher combined probability weights than the upside-biased scenario.
It presents good coverage to the range of outcomes assumed in the scenarios, including the potential for a robust recovery on the upside and exceptionally challenging outcomes on the downside. A 22.4% weighting was applied to the upside scenario, a 45.0% weighting applied to the base case scenario, a 19.5% weighting applied to the downside scenario and a 13.1% weighting applied to the extreme downside scenario.
NatWest Group Annual Report on Form 20-F 2025 | 49 |
Credit risk continued
Economic drivers (audited) continued
NatWest Group Annual Report on Form 20-F 2025 | 50 |
Credit risk continued
Economic drivers (audited) continued
Annual figures
| GDP - annual growth | |||||||||
| Upside % | | Base case % | | Downside % | | Extreme downside % | | Weighted average % | |
2025 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | |||||
2026 |
| 1.9 |
| 1.0 |
| 0.3 |
| (3.7) |
| 0.5 |
2027 |
| 3.2 |
| 1.5 |
| (0.6) |
| (0.2) |
| 1.3 |
2028 |
| 2.3 |
| 1.4 |
| 0.2 |
| 1.4 |
| 1.4 |
2029 |
| 1.6 |
| 1.4 |
| 1.4 |
| 1.4 |
| 1.5 |
2030 |
| 1.6 |
| 1.4 |
| 1.7 |
| 1.4 |
| 1.5 |
| Unemployment rate - annual average | |||||||||
| Upside % | | Base case % | | Downside % | | Extreme downside % | | Weighted average % | |
2025 | 4.8 | 4.8 | 4.8 | 4.8 | 4.8 | |||||
2026 |
| 4.7 |
| 5.4 |
| 5.5 |
| 6.1 |
| 5.3 |
2027 |
| 4.1 |
| 5.2 |
| 6.1 |
| 8.1 |
| 5.5 |
2028 |
| 4.1 |
| 5.1 |
| 6.0 |
| 8.3 |
| 5.4 |
2029 |
| 4.0 |
| 4.9 |
| 5.7 |
| 7.6 |
| 5.2 |
2030 |
| 4.0 |
| 4.8 |
| 5.5 |
| 6.9 |
| 5.1 |
| House price index - four quarter change | |||||||||
| Upside % | | Base case % | | Downside % | | Extreme downside % | | Weighted average % | |
2025 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | |||||
2026 |
| 7.8 |
| 3.4 |
| (1.2) |
| (13.1) |
| 1.3 |
2027 |
| 7.2 |
| 3.4 |
| (2.8) |
| (14.1) |
| 1.2 |
2028 |
| 5.1 |
| 3.4 |
| 0.1 |
| (0.2) |
| 2.9 |
2029 |
| 5.4 |
| 3.4 |
| 4.4 |
| 7.2 |
| 4.5 |
2030 |
| 5.6 |
| 3.4 |
| 4.2 |
| 6.6 |
| 4.4 |
| Commercial real estate price - four quarter change | |||||||||
| Upside % | | Base case % | | Downside % | | Extreme downside % | | Weighted average % | |
2025 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | |||||
2026 |
| 14.1 |
| 2.9 |
| (6.8) |
| (24.1) |
| — |
2027 |
| 4.4 |
| 2.6 |
| (2.5) |
| (13.0) |
| 0.6 |
2028 |
| 5.5 |
| 1.5 |
| 2.8 |
| 7.0 |
| 3.3 |
2029 |
| 4.2 |
| 1.6 |
| 2.6 |
| 6.8 |
| 2.9 |
2030 |
| 2.7 |
| 1.6 |
| 2.5 |
| 6.5 |
| 2.5 |
| Consumer price index - four quarter change | |||||||||
| Upside % | | Base case % | | Downside % | | Extreme downside % | | Weighted average % | |
2025 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | |||||
2026 |
| 2.7 |
| 2.3 |
| 2.7 |
| 0.6 |
| 2.3 |
2027 |
| 2.4 |
| 2.0 |
| 1.8 |
| 1.1 |
| 1.9 |
2028 |
| 2.1 |
| 2.0 |
| 1.7 |
| 1.8 |
| 1.9 |
2029 |
| 2.0 |
| 2.0 |
| 2.0 |
| 2.0 |
| 2.0 |
2030 |
| 2.0 |
| 2.0 |
| 2.0 |
| 2.0 |
| 2.0 |
NatWest Group Annual Report on Form 20-F 2025 | 51 |
Credit risk continued
Economic drivers (audited) continued
| Bank of England base rate - annual average | |||||||||
| Upside % | | Base case % | | Downside % | | Extreme downside % | | Weighted average % | |
2025 | 4.24 | 4.24 | 4.24 | 4.24 | 4.24 | |||||
2026 |
| 4.00 |
| 3.52 |
| 2.94 |
| 1.14 |
| 3.20 |
2027 |
| 4.00 |
| 3.25 |
| 2.00 |
| 0.17 |
| 2.77 |
2028 |
| 4.00 |
| 3.25 |
| 2.00 |
| 0.39 |
| 2.80 |
2029 |
| 4.00 |
| 3.25 |
| 2.00 |
| 1.02 |
| 2.88 |
2030 |
| 4.00 |
| 3.25 |
| 2.15 |
| 1.82 |
| 3.02 |
| Stock price index - four quarter change | |||||||||
| Upside % | | Base case % | | Downside % | | Extreme downside % | | Weighted average % | |
2025 | 11.1 | 11.1 | 11.1 | 11.1 | 11.1 | |||||
2026 |
| 8.1 |
| 3.3 |
| (16.0) |
| (52.9) |
| (6.7) |
2027 |
| 5.1 |
| 3.3 |
| 7.2 |
| 33.9 |
| 6.5 |
2028 |
| 3.5 |
| 3.3 |
| 7.2 |
| 25.3 |
| 5.9 |
2029 |
| 3.5 |
| 3.3 |
| 7.2 |
| 20.2 |
| 5.7 |
2030 |
| 3.0 |
| 3.3 |
| 7.2 |
| 16.8 |
| 5.5 |
Worst points
| 2025 | | 2024 | |||||||||||||||||
Extreme | Weighted | Extreme | Weighted | |||||||||||||||||
Downside | downside | average | Downside | downside | average | |||||||||||||||
% | | Quarter | | % | | Quarter | | % | % | | Quarter | | % | | Quarter | | % | |||
GDP | — | Q4 2027 | (3.8) | Q4 2026 | — | — | Q1 2024 | (4.1) | Q4 2025 | — | ||||||||||
Unemployment rate - peak | 6.2 | Q4 2027 | 8.5 | Q4 2027 | 5.6 | 5.6 | Q4 2026 | 8.5 | Q1 2027 | 4.9 | ||||||||||
House price index | (2.4) | Q2 2028 | (25.9) | Q2 2028 | — | (1.9) | Q2 2027 | (25.6) | Q3 2027 | — | ||||||||||
Commercial real estate price | (7.3) | Q2 2027 | (33.3) | Q3 2027 | — | (10.5) | Q2 2026 | (35.0) | Q3 2026 | (1.8) | ||||||||||
Consumer price index - highest four quarter change | 3.8 | Q3 2025 | 3.8 | Q3 2025 | 3.8 | 6.1 | Q1 2026 | 3.5 | Q1 2024 | 3.5 | ||||||||||
Bank of England base rate - extreme level | 2.0 | Q1 2025 | 0.1 | Q1 2025 | 2.8 | 2.0 | Q1 2024 | 0.1 | Q1 2024 | 2.9 | ||||||||||
Stock price index |
| (6.7) |
| Q4 2026 |
| (47.7) |
| Q4 2026 |
| — |
| (0.2) |
| Q4 2025 |
| (27.4) |
| Q4 2025 |
| — |
| (1) | The figures show falls relative to the starting period for GDP, house price index, commercial real estate price and stock price index. For unemployment rate, it shows highest value through the scenario horizon. For consumer price index, it shows highest annual percentage change. For Bank of England base rate, it shows highest or lowest value through the horizon. The calculations are performed over five years, with a starting point of Q4 2024 for 31 December 2025 scenarios and Q4 2023 for 31 December 2024 scenarios. |
NatWest Group Annual Report on Form 20-F 2025 | 52 |
Credit risk continued
Impairment, provisioning and write-offs (audited)
In the overall assessment of credit risk, impairment provisioning and write-offs are used as key indicators of credit quality.
SICR
Defaulted exposures are classified in Stage 3 and subject to lifetime ECL measurement. Remaining exposures are assessed for SICR since initial recognition. Where exposures are identified with SICR, they are classified in Stage 2 and assessed using a lifetime ECL measurement. Exposures not considered deteriorated are assessed with a 12-month ECL. NatWest Group applies a framework to identify deterioration, primarily based on changes in lifetime PD, supported by additional qualitative high-risk backstops.
| ● | IFRS 9 lifetime PD assessment (the primary driver) – relies on measuring the relative deterioration in forward-looking lifetime PD and is assessed monthly. SICR is determined by comparing the residual lifetime PD at the balance sheet date with the lifetime PD at the date of initial recognition (DOIR). If the current lifetime PD exceeds the origination PD by more than a defined threshold, SICR is assumed to have occurred and the exposure moved into Stage 2 for a lifetime ECL assessment. For Non-Personal, a doubling of PD would indicate a SICR, subject to a minimum PD uplift of 0.1%. For Personal portfolios and small and medium-sized enterprise retail, the criteria vary by risk band, as detailed in the following table: |
Personal risk bands | PD bandings (based on residual lifetime PD calculated at DOIR) | PD deterioration threshold criteria |
A | <0.762% | PD@DOIR + 1% |
B | <4.306% | PD@DOIR + 3% |
C | >=4.306% | 1.7 x PD@DOIR |
| ● | Qualitative high-risk backstop assessment – supplements the PD assessment to evaluate whether significant deterioration in lifetime risk of default occurred. This included the mandatory 30+ days past due backstop, as prescribed by IFRS 9 guidance, as well as other elements such as forbearance support, Non-Personal exposures managed within the Wholesale Problem Debt Management framework, and adverse credit bureau results for Personal customers. |
| ● | Persistence (Personal and small and medium-sized enterprise retail customers only) – the persistence rule ensures that accounts which have met the criteria for PD driven deterioration are still considered to be significantly deteriorated for three months thereafter. This additional rule enhances the timeliness of capture into Stage 2. The persistence rule is applied to PD driven deterioration only. |
Lifetime
The definitions of initial recognition and asset lifetime are important considerations when determining the amount of lifetime losses to be applied.
| ● | Initial recognition refers to the date that a transaction (or account) is first recognised on the balance sheet, with the PD at that point serving as the basis for subsequent determination of SICR, as detailed above. |
| ● | For asset lifetime, the approach is aligned with IFRS 9 requirements: |
| o | Term lending – the contractual maturity date is used and adjusted for behavioural trends where applicable, such as expected prepayment and amortisation. |
| o | Revolving facilities – for Personal portfolios (excluding credit cards), asset duration is determined by behavioural life, which was typically greater than contractual life. For the Non-Personal portfolios, asset duration is based on annual customer review schedules. |
Governance
The IFRS 9 PD, EAD and LGD models are subject to NatWest Group’s model risk policy,which stipulates periodic model monitoring and, re-validation and defines approval procedures and authorities according to model materiality. Post model adjustments are applied where management deemed them necessary to ensure an adequate level of overall ECL provision. All post model adjustments undergo review, challenge and approval by the relevant model or provisioning committees.
Post model adjustments will remain a key focus area of NatWest Group’s ongoing ECL adequacy assessment process. A comprehensive framework has been established that incorporates analysis of diverse economic data, external benchmarks and portfolio performance trends with a particular focus on segments (across both Personal and Non-Personal portfolios) that may be more susceptible to specific risk factors.
NatWest Group Annual Report on Form 20-F 2025 | 53 |
Credit risk continued
Measurement uncertainty and ECL sensitivity analysis (audited)
The recognition and measurement of ECL is complex and requires significant judgement and estimation, especially during times of economic volatility and uncertainty. This includes the formulation and incorporation of multiple forward-looking economic conditions into ECL to meet the measurement objectives of IFRS 9. The ECL provision is sensitive to the model inputs and economic assumptions used in the estimation.
Simulations were conducted to assess the impact of various economic scenarios, including base case, upside, downside and extreme downside scenarios. The potential ECL impacts reflected the simulated impact as at 31 December 2025. In the simulations, NatWest Group assumed that the economic macro variables associated with each scenario would replace the existing base case economic assumptions, giving them a 100% probability weighting and therefore serving as a single economic scenario.
These scenarios were applied to all modelled portfolios in the table, with the simulation affecting both PDs and LGDs. Post model adjustments included in the ECL estimates were adjusted in line with the modelled ECL movements. However, adjustments that were judgemental in nature, such as those for deferred model calibrations and economic uncertainty, were not automatically recalculated. Instead, they will be re-evaluated by management through ECL governance for any new economic scenario outlook.
As expected, the scenarios created varying impacts on ECL by portfolio, and these impacts were deemed reasonable. The simulations assumed that existing modelled relationships between key economic variables and drivers would hold. However, in practice, other factors such as potential changes in customer behaviour and policy changes could also impact the wider availability of credit.
The focus of the simulations was on ECL provisioning requirements for performing exposures in Stage 1 and Stage 2. The simulations were run on a stand-alone basis and were independent of each other. Scenario impacts on SICR were considered when evaluating the ECL movements of Stage 1 and Stage 2. In all scenarios, the total exposure remained the same, but exposure by stage varied.
Stage 3 provisions are not subject to the same level of measurement uncertainty, as default is an observed event as at the balance sheet date and defaulted LGD is typically more impacted by borrower specific factors rather than economics. Therefore, Stage 3 provisions were not considered in this analysis. NatWest Group’s core criterion for identifying a SICR is based on PD deterioration. Under the simulations, changes in PDs resulted in exposures moving between Stage 1 and Stage 2, contributing to the ECL impact.
NatWest Group Annual Report on Form 20-F 2025 | 54 |
Credit risk continued
Measurement uncertainty and ECL sensitivity analysis (audited)
| | | Moderate | | Moderate | | Extreme |
| |||
Base | upside | downside | downside |
| |||||||
2025 | Actual | scenario | scenario | scenario | | scenario |
| ||||
Stage 1 modelled loans (£m) | | | | | |
| |||||
Retail Banking - mortgages | 181,869 | 182,357 | 183,665 | 181,119 | 176,988 |
| |||||
Retail Banking - unsecured |
| 12,761 |
| 12,858 |
| 13,232 |
| 12,601 |
| 11,683 | |
Non-Personal - property |
| 31,809 |
| 31,924 |
| 31,995 |
| 31,764 |
| 23,027 | |
Non-Personal - non-property |
| 141,924 |
| 142,660 |
| 142,972 |
| 141,841 |
| 118,828 | |
| 368,363 |
| 369,799 |
| 371,864 |
| 367,325 |
| 330,526 | ||
Stage 1 modelled ECL (£m) |
| |
| |
| |
| |
| | |
Retail Banking - mortgages |
| 42 |
| 42 |
| 41 |
| 42 |
| 43 | |
Retail Banking - unsecured |
| 293 |
| 300 |
| 288 |
| 291 |
| 278 | |
Non-Personal - property |
| 66 |
| 46 |
| 38 |
| 71 |
| 148 | |
Non-Personal - non-property |
| 189 |
| 156 |
| 144 |
| 202 |
| 353 | |
| 590 |
| 544 |
| 511 |
| 606 |
| 822 | ||
Stage 1 coverage (%) |
| |
| |
| |
| |
| | |
Retail Banking - mortgages |
| 0.02 | % | 0.02 | % | 0.02 | % | 0.02 | % | 0.02 | % |
Retail Banking - unsecured |
| 2.30 | % | 2.33 | % | 2.18 | % | 2.31 | % | 2.38 | % |
Non-Personal - property |
| 0.21 | % | 0.14 | % | 0.12 | % | 0.22 | % | 0.64 | % |
Non-Personal - non-property |
| 0.13 | % | 0.11 | % | 0.10 | % | 0.14 | % | 0.30 | % |
| 0.16 | % | 0.15 | % | 0.14 | % | 0.16 | % | 0.25 | % | |
Stage 2 modelled loans (£m) |
| |
| |
| |
| |
| | |
Retail Banking - mortgages |
| 15,821 |
| 15,333 |
| 14,025 |
| 16,571 |
| 20,702 | |
Retail Banking - unsecured |
| 3,621 |
| 3,524 |
| 3,150 |
| 3,781 |
| 4,699 | |
Non-Personal - property |
| 3,072 |
| 2,957 |
| 2,886 |
| 3,117 |
| 11,854 | |
Non-Personal - non-property |
| 15,721 |
| 14,985 |
| 14,673 |
| 15,804 |
| 38,817 | |
| 38,235 |
| 36,799 |
| 34,734 |
| 39,273 |
| 76,072 | ||
Stage 2 modelled ECL (£m) |
| |
| |
| |
| |
| | |
Retail Banking - mortgages |
| 36 |
| 33 |
| 29 |
| 38 |
| 55 | |
Retail Banking - unsecured |
| 388 |
| 378 |
| 326 |
| 408 |
| 516 | |
Non-Personal - property |
| 55 |
| 47 |
| 42 |
| 59 |
| 351 | |
Non-Personal - non-property |
| 305 |
| 263 |
| 242 |
| 317 |
| 880 | |
| 784 |
| 721 |
| 639 |
| 822 |
| 1,802 | ||
Stage 2 coverage (%) |
| |
| |
| |
| |
| | |
Retail Banking - mortgages |
| 0.23 | % | 0.22 | % | 0.21 | % | 0.23 | % | 0.27 | % |
Retail Banking - unsecured |
| 10.72 | % | 10.73 | % | 10.35 | % | 10.79 | % | 10.98 | % |
Non-Personal - property |
| 1.79 | % | 1.59 | % | 1.46 | % | 1.89 | % | 2.96 | % |
Non-Personal - non-property |
| 1.94 | % | 1.76 | % | 1.65 | % | 2.01 | % | 2.27 | % |
| 2.05 | % | 1.96 | % | 1.84 | % | 2.09 | % | 2.37 | % |
For the notes to this table refer to the following page.
NatWest Group Annual Report on Form 20-F 2025 | 55 |
Credit risk continued
Measurement uncertainty and ECL sensitivity analysis (audited)
| | | Moderate | | Moderate | | Extreme |
| |||
Base | upside | downside | downside |
| |||||||
2025 | Actual | scenario | scenario | scenario | | scenario |
| ||||
Stage 1 and Stage 2 modelled loans (£m) | | | | | |
| |||||
Retail Banking - mortgages | 197,690 | 197,690 | 197,690 | 197,690 | 197,690 |
| |||||
Retail Banking - unsecured |
| 16,382 |
| 16,382 |
| 16,382 |
| 16,382 |
| 16,382 | |
Non-Personal - property |
| 34,881 |
| 34,881 |
| 34,881 |
| 34,881 |
| 34,881 | |
Non-Personal - non-property |
| 157,645 |
| 157,645 |
| 157,645 |
| 157,645 |
| 157,645 | |
| 406,598 |
| 406,598 |
| 406,598 |
| 406,598 |
| 406,598 | ||
Stage 1 and Stage 2 modelled ECL (£m) |
| |
| |
| |
| |
| | |
Retail Banking - mortgages |
| 78 |
| 75 |
| 70 |
| 80 |
| 98 | |
Retail Banking - unsecured |
| 681 |
| 678 |
| 614 |
| 699 |
| 794 | |
Non-Personal - property |
| 121 |
| 93 |
| 80 |
| 130 |
| 499 | |
Non-Personal - non-property |
| 494 |
| 419 |
| 386 |
| 519 |
| 1,233 | |
| 1,374 |
| 1,265 |
| 1,150 |
| 1,428 |
| 2,624 | ||
Stage 1 and Stage 2 coverage (%) |
| |
| |
| |
| |
| | |
Retail Banking - mortgages |
| 0.04 | % | 0.04 | % | 0.04 | % | 0.04 | % | 0.05 | % |
Retail Banking - unsecured |
| 4.16 | % | 4.14 | % | 3.75 | % | 4.27 | % | 4.85 | % |
Non-Personal - property |
| 0.35 | % | 0.27 | % | 0.23 | % | 0.37 | % | 1.43 | % |
Non-Personal - non-property |
| 0.31 | % | 0.27 | % | 0.24 | % | 0.33 | % | 0.78 | % |
| 0.34 | % | 0.31 | % | 0.28 | % | 0.35 | % | 0.65 | % | |
Reconciliation to Stage 1 and Stage 2 ECL (£m) |
| |
| |
| |
| |
| | |
ECL on modelled exposures |
| 1,374 |
| 1,265 |
| 1,150 |
| 1,428 |
| 2,624 | |
ECL on non-modelled exposures |
| 36 |
| 36 |
| 36 |
| 36 |
| 36 | |
Total Stage 1 and Stage 2 ECL (£m) |
| 1,410 |
| 1,301 |
| 1,186 |
| 1,464 |
| 2,660 | |
| |
| |
| |
| |
| | ||
Variance to actual total Stage 1 and Stage 2 ECL (£m) |
| — |
| (109) |
| (224) |
| 54 |
| 1,250 | |
Reconciliation to Stage 1 and Stage 2 flow exposures (£m) |
| |
| |
| |
| |
| | |
Modelled loans |
| 406,598 | 406,598 |
| 406,598 |
| 406,598 |
| 406,598 | ||
Non-modelled loans |
| 19,264 | 19,264 |
| 19,264 |
| 19,264 |
| 19,264 | ||
Other asset classes |
| 160,130 | 160,130 |
| 160,130 |
| 160,130 |
| 160,130 |
| (1) | Reflects ECL for all modelled exposure in scope for IFRS 9. The analysis excludes non-modelled portfolios and exposure relating to bonds and cash. |
| (2) | All simulations are run on a stand-alone basis and are independent of each other, with the potential ECL impact reflecting the simulated impact as at 31 December 2025. The simulations change the composition of Stage 1 and Stage 2 exposure but total exposure was unchanged under each scenario as the loan population was static. |
| (3) | Refer to the Economic drivers section for details of economic scenarios. |
| (4) | Refer to the NatWest Group 2024 Annual Report and Accounts for 2024 comparatives. |
| ● | If the economics were as negative as observed in the extreme downside (i.e. 100% probability weighting), total Stage 1 and Stage 2 ECL was simulated to increase by £1.3 billion (approximately 90%). In this scenario, Stage 2 exposure increased significantly and was the key driver of the simulated ECL rise. The movement in Stage 2 balances in the other simulations was less significant. |
| ● | In the Non-Personal portfolio, there was a significant increase in ECL under the extreme downside scenario on non-property portfolios, driven by a significant deterioration in the stock index. |
| ● | Given the continued economic uncertainty, NatWest Group utilised a framework of quantitative and qualitative measures to support the levels of ECL coverage. This included economic data, credit performance insights and problem debt trends. This was particularly important for consideration of post model adjustments. |
NatWest Group Annual Report on Form 20-F 2025 | 56 |
Credit risk continued
ECL post model adjustments (audited)
The table below shows ECL post model adjustments.
| Private Banking | | | | ||||||
Retail Banking | & Wealth | Commercial | ||||||||
Mortgages | | Other | Management | & Institutional | Total | |||||
2025 | £m | £m | £m | £m | £m | |||||
Deferred model calibrations |
| — |
| — |
| 1 |
| 14 |
| 15 |
Economic uncertainty |
| 44 |
| 42 |
| 11 |
| 149 |
| 246 |
Other adjustments |
| — |
| 19 |
| — |
| 16 |
| 35 |
Total |
| 44 |
| 61 |
| 12 |
| 179 |
| 296 |
Of which: |
|
|
|
|
| |||||
- Stage 1 |
| 33 |
| 38 |
| 4 |
| 73 |
| 148 |
- Stage 2 |
| 11 |
| 20 |
| 8 |
| 106 |
| 145 |
- Stage 3 |
| — |
| 3 |
| — |
| — |
| 3 |
2024 |
| |
| |
| |
| |
| |
Deferred model calibrations |
| — |
| — |
| 1 |
| 18 |
| 19 |
Economic uncertainty |
| 90 |
| 22 |
| 8 |
| 179 |
| 299 |
Other adjustments |
| — |
| — |
| — |
| 18 |
| 18 |
Total |
| 90 |
| 22 |
| 9 |
| 215 |
| 336 |
Of which: |
| |
| |
| |
| |
| |
- Stage 1 |
| 58 |
| 9 |
| 5 |
| 94 |
| 166 |
- Stage 2 |
| 26 |
| 13 |
| 4 |
| 119 |
| 162 |
- Stage 3 |
| 6 |
| — |
| — |
| 2 |
| 8 |
Post model adjustments reduced since 31 December 2024, reflecting the removal of COVID-19 post model adjustments combined with updates to parameters.
| ● | Retail Banking – As at 31 December 2025, the post model adjustment for economic uncertainty decreased to £86 million (2024 – £112 million). This reduction was driven by a revision to the cost of living post model adjustment, standing at £86 million (2024 – £105 million), and was the sole remaining economic uncertainty post model adjustment. This change was based on a review of back-testing. Despite ongoing economic and geopolitical uncertainty, the Retail Banking portfolios demonstrated resilience, supported by a robust risk appetite. The cost of living post model adjustment continued to address the risk in segments of the Retail Banking portfolio that were more susceptible to affordability challenges. It focused on key affordability factors, including over-indebted borrowers, poor credit card affordability status and lower income customers in fuel poverty. |
| ● | A £19 million post model adjustment was recognised as a judgemental measure while additional loss data is accumulated on the recently migrated Sainsbury’s Bank lending portfolio. |
| ● | Commercial & Institutional – As at 31 December 2025, the post model adjustment for economic uncertainty decreased to £149 million (2024 – £179 million). The reduction was driven by the retirement of COVID-19 post model adjustments which were associated with government scheme lending (2024 – £29 million). The continued economic uncertainty post model adjustments reflected downgrades to risk profile that were applied to the sectors that were considered most at risk from the current economic and geopolitical headwinds. |
| ● | The remaining £30 million (2024 – £36 million) of post model adjustments were for deferred model calibrations relating to refinance risk and to mitigate the effect of operational timing delays in the identification and flagging of a significant increase in credit risk. |
NatWest Group Annual Report on Form 20-F 2025 | 57 |
Credit risk – Banking activities
Introduction
This section details the credit risk profile of NatWest Group’s banking activities. Refer to Accounting policy 2.3 and Note 14 to the consolidated financial statements for policies and critical judgements relating to impairment loss determination.
Financial instruments within the scope of the IFRS 9 ECL framework (audited)
Refer to Note 9 to the consolidated financial statements for balance sheet analysis of financial assets that are classified as amortised cost or fair value through other comprehensive income (FVOCI), the starting point for IFRS 9 ECL framework assessment.
| 31 December 2025 | | 31 December 2024 | |||||||||
Gross | ECL | Net | Gross | ECL | Net | |||||||
£bn | | £bn | | £bn | | £bn | | £bn | | £bn | ||
Balance sheet total gross amortised cost and FVOCI | 593.9 | 567.2 | ||||||||||
In scope of IFRS 9 ECL framework | 592.4 | 564.4 | ||||||||||
% in scope | 100 | % | 100 | % | ||||||||
Loans to customers - in scope - amortised cost |
| 422.9 |
| 3.6 |
| 419.3 |
| 404.2 |
| 3.4 |
| 400.8 |
Loans to customers - in scope - FVOCI |
| 0.2 |
| — |
| 0.2 |
| — |
| — |
| — |
Loans to banks - in scope - amortised cost |
| 6.8 |
| — |
| 6.8 |
| 6.0 |
| — |
| 6.0 |
Total loans - in scope |
| 429.9 |
| 3.6 |
| 426.3 |
| 410.2 |
| 3.4 |
| 406.8 |
Stage 1 |
| 386.6 |
| 0.6 |
| 386.0 |
| 363.8 |
| 0.6 |
| 363.2 |
Stage 2 |
| 38.6 |
| 0.8 |
| 37.8 |
| 40.5 |
| 0.8 |
| 39.7 |
Stage 3 |
| 4.7 |
| 2.2 |
| 2.5 |
| 5.9 |
| 2.0 |
| 3.9 |
Other financial assets - in scope - amortised cost |
| 120.7 |
| — |
| 120.7 |
| 116.4 |
| — |
| 116.4 |
Other financial assets - in scope - FVOCI |
| 41.8 |
| — |
| 41.8 |
| 37.8 |
| — |
| 37.8 |
Total other financial assets - in scope |
| 162.5 |
| — |
| 162.5 |
| 154.2 |
| — |
| 154.2 |
Stage 1 |
| 161.5 |
| — |
| 161.5 |
| 153.4 |
| — |
| 153.4 |
Stage 2 |
| 1.0 |
| — |
| 1.0 |
| 0.8 |
| — |
| 0.8 |
Out of scope of IFRS 9 ECL framework |
| 1.5 |
| na |
| 1.5 |
| 2.8 |
| na |
| 2.8 |
Loans to customers - out of scope - amortised cost |
| (0.6) |
| na |
| (0.6) |
| (0.5) |
| na |
| (0.5) |
Loans to banks - out of scope - amortised cost |
| 0.2 |
| na |
| 0.2 |
| 0.1 |
| na |
| 0.1 |
Other financial assets - out of scope - amortised cost |
| 1.7 |
| na |
| 1.7 |
| 3.2 |
| na |
| 3.2 |
Other financial assets - out of scope - FVOCI |
| 0.2 |
| na |
| 0.2 |
| — |
| na |
| — |
na = not applicable |
| |
| |
| |
| |
| |
| |
NatWest Group Annual Report on Form 20-F 2025 | 58 |
Credit risk – Banking activities continued
Financial instruments within the scope of the IFRS 9 ECL framework (audited) continued
The assets outside the scope of IFRS 9 ECL framework were as follows:
| ● | Settlement balances, items in the course of collection, cash balances and other non-credit risk assets of £1.8 billion (2024 – £3.3 billion). These were assessed as having no ECL unless there was evidence that they were defaulted. |
| ● | Equity shares of £0.1 billion (2024 – £0.2 billion) as not within the IFRS 9 ECL framework by definition. |
| ● | Fair value adjustments on loans hedged by interest rate swaps, where the underlying loan was within the IFRS 9 ECL scope of £(0.3) billion (2024 – £(0.5) billion). |
Contingent liabilities and commitments
Total contingent liabilities (including financial guarantees) and commitments within IFRS 9 ECL scope of £147.2 billion (2024 – £140.0 billion) comprised Stage 1 £135.8 billion (2024 – £129.8 billion); Stage 2 £10.8 billion (2024 – £9.4 billion); and Stage 3 £0.6 billion (2024 – £0.8 billion). The ECL relating to off-balance sheet exposures was £0.1 billion (2024 – £0.1 billion). The total ECL in the remainder of the Credit risk section of £3.6 billion (2024 – £3.4 billion) included ECL for both on and off-balance sheet exposures.
NatWest Group Annual Report on Form 20-F 2025 | 59 |
Credit risk – Banking activities continued
Segment analysis – portfolio summary (audited)
The table below shows gross loans and ECL, by segment and stage, within the scope of the IFRS 9 ECL framework.
Of which: | ||||||||||||||||||||||||
Personal | Non-Personal | |||||||||||||||||||||||
Private | Private | Private | ||||||||||||||||||||||
Banking & | Banking & | Banking & | ||||||||||||||||||||||
Retail | Wealth | Commercial & | Central items | Retail | Wealth | Commercial & | Central items | Wealth | Commercial & | Central items | ||||||||||||||
Banking | Management | Institutional | & other | Total | Banking | Management | Institutional | & other | Management | Institutional | & other | |||||||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
Loans - amortised cost and FVOCI (1,2) |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Stage 1 |
| 196,325 |
| 17,552 |
| 138,769 |
| 34,005 |
| 386,651 |
| 196,325 |
| 14,140 |
| 2,355 |
| 84 |
| 3,412 |
| 136,414 |
| 33,921 |
Stage 2 |
| 19,113 |
| 1,115 |
| 18,289 |
| 65 |
| 38,582 |
| 19,113 |
| 337 |
| 32 |
| 18 |
| 778 |
| 18,257 |
| 47 |
Stage 3 |
| 2,231 |
| 348 |
| 2,102 |
| 2 |
| 4,683 |
| 2,231 |
| 260 |
| 44 |
| 2 |
| 88 |
| 2,058 |
| — |
Of which: individual |
| — |
| 276 |
| 1,180 |
| — |
| 1,456 |
| — |
| 188 |
| 5 |
| — |
| 88 |
| 1,175 |
| — |
Of which: collective |
| 2,231 |
| 72 |
| 922 |
| 2 |
| 3,227 |
| 2,231 |
| 72 |
| 39 |
| 2 |
| — |
| 883 |
| — |
Total |
| 217,669 |
| 19,015 |
| 159,160 |
| 34,072 |
| 429,916 |
| 217,669 |
| 14,737 |
| 2,431 |
| 104 |
| 4,278 |
| 156,729 |
| 33,968 |
ECL provisions (3) |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Stage 1 |
| 335 |
| 13 |
| 256 |
| 10 |
| 614 |
| 335 |
| 3 |
| 1 |
| 3 |
| 10 |
| 255 |
| 7 |
Stage 2 |
| 424 |
| 13 |
| 357 |
| 2 |
| 796 |
| 424 |
| 1 |
| — |
| 1 |
| 12 |
| 357 |
| 1 |
Stage 3 |
| 1,075 |
| 50 |
| 1,048 |
| 2 |
| 2,175 |
| 1,075 |
| 24 |
| 11 |
| 2 |
| 26 |
| 1,037 |
| — |
Of which: individual |
| — |
| 50 |
| 548 |
| — |
| 598 |
| — |
| 24 |
| 5 |
| — |
| 26 |
| 543 |
| — |
Of which: collective |
| 1,075 |
| — |
| 500 |
| 2 |
| 1,577 |
| 1,075 |
| — |
| 6 |
| 2 |
| — |
| 494 |
| — |
Total | 1,834 | 76 | 1,661 | 14 | 3,585 | 1,834 | 28 | 12 | 6 | 48 | 1,649 | 8 | ||||||||||||
ECL provisions coverage (4) |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Stage 1 (%) |
| 0.17 | 0.07 | 0.18 | 0.03 | 0.16 | 0.17 | 0.02 | 0.04 | 3.57 | 0.29 | 0.19 | 0.02 | |||||||||||
Stage 2 (%) |
| 2.22 | 1.17 | 1.95 | 3.08 | 2.06 | 2.22 | 0.30 | — | 5.56 | 1.54 | 1.96 | 2.13 | |||||||||||
Stage 3 (%) |
| 48.18 | 14.37 | 49.86 | 100.00 | 46.44 | 48.18 | 9.23 | 25.00 | 100.00 | 29.55 | 50.39 | — | |||||||||||
Total |
| 0.84 | 0.40 | 1.04 | 0.04 | 0.83 | 0.84 | 0.19 | 0.49 | 5.77 | 1.12 | 1.05 | 0.02 | |||||||||||
Impairment (releases)/losses |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
ECL (release)/charge (5) |
| 437 | 10 | 225 | (1) | 671 | 437 | 5 | 1 | 7 | 5 | 224 | (8) | |||||||||||
Stage 1 |
| (67) | (9) | (124) | (4) | (204) | (67) | (1) | (1) | 4 | (8) | (123) | (8) | |||||||||||
Stage 2 |
| 295 | 9 | 116 | 1 | 421 | 295 | 2 | 1 | 1 | 7 | 115 | — | |||||||||||
Stage 3 |
| 209 | 10 | 233 | 2 | 454 | 209 | 4 | 1 | 2 | 6 | 232 | — | |||||||||||
Of which: individual |
| — | 10 | 178 | — | 188 | — | 4 | — | — | 6 | 178 | — | |||||||||||
Of which: collective |
| 209 | — | 55 | 2 | 266 | 209 | — | 1 | 2 | — | 54 | — | |||||||||||
Total |
| 437 | 10 | 225 | (1) | 671 | 437 | 5 | 1 | 7 | 5 | 224 | (8) | |||||||||||
Amounts written-off |
| 373 | 1 | 205 | — | 579 | 373 | 1 | 6 | — | — | 199 | — | |||||||||||
Of which: individual |
| — | 1 | 136 | — | 137 | — | 1 | — | — | — | 136 | — | |||||||||||
Of which: collective |
| 373 | — | 69 | — | 442 | 373 | — | 6 | — | — | 63 | — | |||||||||||
For the notes to this table refer to the following page.
NatWest Group Annual Report on Form 20-F 2025 | 60 |
Credit risk – Banking activities continued
Segment analysis – portfolio summary (audited) continued
Of which: | ||||||||||||||||||||||||
Personal | Non-Personal | |||||||||||||||||||||||
Private | Private | Private | ||||||||||||||||||||||
Banking & | Banking & | Banking & | ||||||||||||||||||||||
Retail | Wealth | Commercial & | Central items | Retail | Wealth | Commercial & | Central items | Wealth | Commercial & | Central items | ||||||||||||||
Banking | Management | Institutional | & other | Total | Banking | Management | Institutional | & other | Management | Institutional | & other | |||||||||||||
2024 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
Loans - amortised cost and FVOCI (1,2) |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Stage 1 |
| 182,366 |
| 17,155 |
| 128,988 |
| 35,312 |
| 363,821 |
| 182,366 |
| 13,726 |
| 2,226 |
| — |
| 3,429 |
| 126,762 |
| 35,312 |
Stage 2 |
| 24,242 |
| 844 |
| 15,339 |
| 49 |
| 40,474 |
| 24,242 |
| 352 |
| 42 |
| — |
| 492 |
| 15,297 |
| 49 |
Stage 3 |
| 3,268 |
| 322 |
| 2,340 |
| — |
| 5,930 |
| 3,268 |
| 251 |
| 52 |
| — |
| 71 |
| 2,288 |
| — |
Of which: individual |
| — |
| 233 |
| 1,052 |
| — |
| 1,285 |
| — |
| 162 |
| 5 |
| — |
| 71 |
| 1,047 |
| — |
Of which: collective |
| 3,268 |
| 89 |
| 1,288 |
| — |
| 4,645 |
| 3,268 |
| 89 |
| 47 |
| — |
| — |
| 1,241 |
| — |
Total |
| 209,876 |
| 18,321 |
| 146,667 |
| 35,361 |
| 410,225 |
| 209,876 |
| 14,329 |
| 2,320 |
| — |
| 3,992 |
| 144,347 |
| 35,361 |
ECL provisions (3) |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Stage 1 |
| 279 |
| 16 |
| 289 |
| 14 |
| 598 |
| 279 |
| 2 |
| 3 |
| — |
| 14 |
| 286 |
| 14 |
Stage 2 |
| 428 |
| 12 |
| 346 |
| 1 |
| 787 |
| 428 |
| 1 |
| — |
| — |
| 11 |
| 346 |
| 1 |
Stage 3 |
| 1,063 |
| 36 |
| 941 |
| — |
| 2,040 |
| 1,063 |
| 21 |
| 15 |
| — |
| 15 |
| 926 |
| — |
Of which: individual |
| — |
| 36 |
| 415 |
| — |
| 451 |
| — |
| 21 |
| 7 |
| — |
| 15 |
| 408 |
| — |
Of which: collective |
| 1,063 |
| — |
| 526 |
| — |
| 1,589 |
| 1,063 |
| — |
| 8 |
| — |
| — |
| 518 |
| — |
Total | 1,770 | 64 | 1,576 | 15 | 3,425 | 1,770 | 24 | 18 | — | 40 | 1,558 | 15 | ||||||||||||
ECL provisions coverage (4) |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Stage 1 (%) |
| 0.15 |
| 0.09 |
| 0.22 |
| 0.04 |
| 0.16 |
| 0.15 |
| 0.01 |
| 0.13 |
| — |
| 0.41 |
| 0.23 |
| 0.04 |
Stage 2 (%) |
| 1.77 |
| 1.42 |
| 2.26 |
| 2.04 |
| 1.94 |
| 1.77 |
| 0.28 |
| — |
| — |
| 2.24 |
| 2.26 |
| 2.04 |
Stage 3 (%) |
| 32.53 |
| 11.18 |
| 40.21 |
| — |
| 34.40 |
| 32.53 |
| 8.37 |
| 28.85 |
| — |
| 21.13 |
| 40.47 |
| — |
Total |
| 0.84 |
| 0.35 |
| 1.07 |
| 0.04 |
| 0.83 |
| 0.84 |
| 0.17 |
| 0.78 |
| — |
| 1.00 |
| 1.08 |
| 0.04 |
Impairment (releases)/losses |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
ECL (release)/charge (5) |
| 282 |
| (11) |
| 98 |
| (10) |
| 359 |
| 282 |
| 1 |
| 1 |
| — |
| (12) |
| 97 |
| (10) |
Stage 1 |
| (208) |
| (11) |
| (205) |
| (14) |
| (438) |
| (208) |
| (2) |
| (1) |
| — |
| (9) |
| (204) |
| (14) |
Stage 2 |
| 278 |
| (1) |
| 79 |
| 4 |
| 360 |
| 278 |
| 2 |
| 1 |
| — |
| (3) |
| 78 |
| 4 |
Stage 3 |
| 212 |
| 1 |
| 224 |
| — |
| 437 |
| 212 |
| 1 |
| 1 |
| — |
| — |
| 223 |
| — |
Of which: individual |
| — |
| 1 |
| 191 |
| — |
| 192 |
| — |
| 1 |
| (1) |
| — |
| — |
| 192 |
| — |
Of which: collective |
| 212 |
| — |
| 33 |
| — |
| 245 |
| 212 |
| — |
| 2 |
| — |
| — |
| 31 |
| — |
Total |
| 282 |
| (11) |
| 98 |
| (10) |
| 359 |
| 282 |
| 1 |
| 1 |
| — |
| (12) |
| 97 |
| (10) |
Amounts written-off |
| 430 |
| 1 |
| 223 |
| — |
| 654 |
| 430 |
| 1 |
| 2 |
| — |
| — |
| 221 |
| — |
Of which: individual |
| — |
| 1 |
| 143 |
| — |
| 144 |
| — |
| 1 |
| — |
| — |
| — |
| 143 |
| — |
Of which: collective |
| 430 |
| — |
| 80 |
| — |
| 510 |
| 430 |
| — |
| 2 |
| — |
| — |
| 78 |
| — |
| (1) | The table shows gross loans only and excludes amounts that were outside the scope of the ECL framework. Other financial assets within the scope of the IFRS 9 ECL framework were cash and balances at central banks totalling £84.1 billion (2024 – £91.8 billion) and debt securities of £78.4 billion (2024 – £62.4 billion). |
| (2) | Includes loans to customers and banks. |
| (3) | Includes £6 million (2024 – £4 million) related to assets classified as FVOCI and £0.1 billion (2024 – £0.1 billion) related to off-balance sheet exposures. |
| (4) | ECL provisions coverage is calculated as ECL provisions, including ECL for other non-loan assets and unutilised exposure, divided by loans – amortised cost and FVOCI. Some segments with a high proportion of debt securities or unutilised exposure may result in a not meaningful (nm) coverage ratio. |
| (5) | Includes a £6 million release (2024 - £12 million release) related to other financial assets, of which £1 million charge (2024 - £4 million release) related to assets classified as FVOCI and includes a £3 million charge (2024 - £5 million release) related to contingent liabilities. |
NatWest Group Annual Report on Form 20-F 2025 | 61 |
Credit risk – Banking activities continued
Segmental loans and impairment metrics (audited)
| ● | Retail Banking – Balance sheet growth during the year was mainly due to mortgages. Within the Unsecured portfolios, alongside organic growth in the credit cards and personal loans portfolios, the acquisition of the Sainsbury’s Bank portfolios further contributed to the balance sheet growth. Asset quality was maintained during the year, reflecting ongoing customer resilience and robust risk appetite. Alongside steady portfolio performance, good book and total ECL coverage for Retail Banking remained broadly consistent with 31 December 2024. Underlying ECL coverage increased due to growth in unsecured lending, including the acquisition of the Sainsbury’s Bank portfolio earlier in 2025, but this was offset by balance sheet management actions, including a mortgage securitisation transaction and unsecured debt sales. The proportion of Stage 3 loans declined over the year, mainly as a result of the balance sheet management actions described above, notably the mortgage securitisation, which reduced Stage 3 loans by £0.8 billion. Furthermore, there was an enhancement to the mortgage definition of default systems and process, resulting in approximately £0.4 billion of loans migrating from Stage 3 back to the good book. While default performance was broadly stable overall, unsecured flows into Stage 3 increased year-on-year, driven by strategic growth and seasoning of credit card balances since 2022. |
| ● | Commercial & Institutional – Balance sheet growth in the year was primarily in corporates and institutions and was reflected in Stage 1. Despite the increase in performing book exposures, performing book provisions decreased, driven by reductions in post model adjustments for economic uncertainty. Total provision balance growth primarily reflected the impact of a small number of individual charges in Stage 3. Despite the increase in Stage 3 ECL, loan balances flowing into Stage 3 were lower than the prior year. The combination of increased Stage 3 charges combined with lower inflows into Stage 3 drove the increase in Stage 3 ECL provisions coverage. Total book coverage remained broadly similar year-on-year, as the increase in Stage 3 ECL provisions coverage was more than offset by reductions in performing book coverage. The full year 2025 total charge was higher compared to 2024, primarily as the good book release in 2025 was notably lower than the release in 2024. The lower release in 2025 reflected lower reductions in post model adjustments compared to 2024. |
Sector analysis – portfolio summary (audited)
The table below shows financial assets and off-balance sheet exposures gross of ECL and related ECL provisions, impairment and past due by sector, asset quality and geographical region.
Personal | Non-Personal | |||||||||||||||||
Mortgages (1) | Credit cards | Other personal | Total | Corporate and other | Financial institutions | Sovereign | Total | Total | ||||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
Loans by geography | 215,229 | 8,311 | 11,401 | 234,941 | 118,229 | 74,456 | 2,290 | 194,975 | 429,916 | |||||||||
- UK | 215,220 | 8,311 | 11,401 | 234,932 | 101,441 | 45,700 | 1,477 | 148,618 | 383,550 | |||||||||
- Other Europe |
| 9 |
| — |
| — |
| 9 |
| 7,010 |
| 14,059 |
| 351 |
| 21,420 |
| 21,429 |
- RoW |
| — |
| — |
| — |
| — |
| 9,778 |
| 14,697 |
| 462 |
| 24,937 |
| 24,937 |
Loans by stage |
| 215,229 |
| 8,311 |
| 11,401 |
| 234,941 |
| 118,229 |
| 74,456 |
| 2,290 |
| 194,975 |
| 429,916 |
- Stage 1 |
| 197,939 |
| 5,988 |
| 8,977 |
| 212,904 |
| 97,779 |
| 73,959 |
| 2,009 |
| 173,747 |
| 386,651 |
- Stage 2 |
| 15,951 |
| 2,081 |
| 1,468 |
| 19,500 |
| 18,460 |
| 356 |
| 266 |
| 19,082 |
| 38,582 |
- Stage 3 |
| 1,339 |
| 242 |
| 956 |
| 2,537 |
| 1,990 |
| 141 |
| 15 |
| 2,146 |
| 4,683 |
- Of which: individual |
| 167 |
| 1 |
| 25 |
| 193 |
| 1,112 |
| 136 |
| 15 |
| 1,263 |
| 1,456 |
- Of which: collective |
| 1,172 |
| 241 |
| 931 |
| 2,344 |
| 878 |
| 5 |
| — |
| 883 |
| 3,227 |
Loans - past due analysis |
| 215,229 |
| 8,311 |
| 11,401 |
| 234,941 |
| 118,229 |
| 74,456 |
| 2,290 |
| 194,975 |
| 429,916 |
- Not past due |
| 212,492 |
| 7,993 |
| 10,388 |
| 230,873 |
| 114,895 |
| 74,257 |
| 2,275 |
| 191,427 |
| 422,300 |
- Past due 1-30 days |
| 1,510 |
| 71 |
| 92 |
| 1,673 |
| 2,261 |
| 137 |
| — |
| 2,398 |
| 4,071 |
- Past due 31-90 days |
| 469 |
| 86 |
| 130 |
| 685 |
| 274 |
| 8 |
| — |
| 282 |
| 967 |
- Past due 91-180 days |
| 275 |
| 62 |
| 104 |
| 441 |
| 110 |
| 6 |
| — |
| 116 |
| 557 |
- Past due >180 days |
| 483 |
| 99 |
| 687 |
| 1,269 |
| 689 |
| 48 |
| 15 |
| 752 |
| 2,021 |
Loans - Stage 2 |
| 15,951 |
| 2,081 |
| 1,468 |
| 19,500 |
| 18,460 |
| 356 |
| 266 |
| 19,082 |
| 38,582 |
- Not past due |
| 14,521 |
| 1,979 |
| 1,335 |
| 17,835 |
| 17,605 |
| 343 |
| 266 |
| 18,214 |
| 36,049 |
- Past due 1-30 days |
| 1,138 |
| 41 |
| 48 |
| 1,227 |
| 610 |
| 5 |
| — |
| 615 |
| 1,842 |
- Past due 31-90 days |
| 292 |
| 61 |
| 85 |
| 438 |
| 245 |
| 8 |
| — |
| 253 |
| 691 |
Weighted average life (2) |
| |
| |
| |
| |
| |
| |
| |
| |
| |
- ECL measurement (years) |
| 9 |
| 4 |
| 6 |
| 5 |
| 7 |
| 4 |
| nm |
| 6 |
| 6 |
Weighted average 12 months PDs (2) |
| |
| |
| |
| |
| |
| |
| |
| |
| |
- IFRS 9 (%) |
| 0.46 |
| 3.68 |
| 5.05 |
| 0.77 |
| 1.18 |
| 0.14 |
| 5.40 |
| 0.83 |
| 0.80 |
- Basel (%) |
| 0.62 |
| 3.91 |
| 3.52 |
| 0.85 |
| 1.04 |
| 0.15 |
| 5.40 |
| 0.75 |
| 0.80 |
ECL provisions by geography |
| 272 |
| 520 |
| 1,088 |
| 1,880 |
| 1,532 |
| 155 |
| 18 |
| 1,705 |
| 3,585 |
- UK |
| 270 |
| 520 |
| 1,088 |
| 1,878 |
| 1,367 |
| 103 |
| 5 |
| 1,475 |
| 3,353 |
- Other Europe |
| 2 |
| — |
| — |
| 2 |
| 104 |
| 10 |
| 1 |
| 115 |
| 117 |
- RoW |
| — |
| — |
| — |
| — |
| 61 |
| 42 |
| 12 |
| 115 |
| 115 |
For the notes to this table refer to page 65.
NatWest Group Annual Report on Form 20-F 2025 | 62 |
Credit risk – Banking activities continued
Sector analysis – portfolio summary (audited) continued
Personal | Non-Personal | |||||||||||||||||
Mortgages (1) | Credit cards | Other personal | Total | Corporate and other (2) | Financial institutions | Sovereign | Total | Total | ||||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
ECL provisions by stage |
| 272 |
| 520 |
| 1,088 |
| 1,880 |
| 1,532 |
| 155 |
| 18 |
| 1,705 |
| 3,585 |
- Stage 1 |
| 45 |
| 125 |
| 172 |
| 342 |
| 228 |
| 37 |
| 7 |
| 272 |
| 614 |
- Stage 2 |
| 36 |
| 205 |
| 185 |
| 426 |
| 360 |
| 5 |
| 5 |
| 370 |
| 796 |
- Stage 3 |
| 191 |
| 190 |
| 731 |
| 1,112 |
| 944 |
| 113 |
| 6 |
| 1,063 |
| 2,175 |
- Of which: individual |
| 16 |
| 1 |
| 12 |
| 29 |
| 453 |
| 110 |
| 6 |
| 569 |
| 598 |
- Of which: collective |
| 175 |
| 189 |
| 719 |
| 1,083 |
| 491 |
| 3 |
| — |
| 494 |
| 1,577 |
ECL provisions coverage (%) |
| 0.13 |
| 6.26 |
| 9.54 |
| 0.80 |
| 1.30 |
| 0.21 |
| 0.79 |
| 0.87 |
| 0.83 |
- Stage 1 (%) |
| 0.02 |
| 2.09 |
| 1.92 |
| 0.16 |
| 0.23 |
| 0.05 |
| 0.35 |
| 0.16 |
| 0.16 |
- Stage 2 (%) |
| 0.23 |
| 9.85 |
| 12.60 |
| 2.18 |
| 1.95 |
| 1.40 |
| 1.88 |
| 1.94 |
| 2.06 |
- Stage 3 (%) |
| 14.26 |
| 78.51 |
| 76.46 |
| 43.83 |
| 47.44 |
| 80.14 |
| 40.00 |
| 49.53 |
| 46.44 |
ECL (release)/charge |
| (142) |
| 263 |
| 329 |
| 450 |
| 168 |
| 56 |
| (3) |
| 221 |
| 671 |
- UK |
| (144) |
| 263 |
| 329 |
| 448 |
| 148 |
| 60 |
| (6) |
| 202 |
| 650 |
- Other Europe |
| 2 |
| — |
| — |
| 2 |
| 18 |
| 1 |
| — |
| 19 |
| 21 |
- RoW |
| — |
| — |
| — |
| — |
| 2 |
| (5) |
| 3 |
| — |
| — |
Amounts written-off |
| 92 |
| 118 |
| 170 |
| 380 |
| 199 |
| — |
| — |
| 199 |
| 579 |
Loans by residual maturity |
| 215,229 |
| 8,311 |
| 11,401 |
| 234,941 |
| 118,229 |
| 74,456 |
| 2,290 |
| 194,975 |
| 429,916 |
- ≤1 year |
| 2,764 |
| 1,856 |
| 2,736 |
| 7,356 |
| 33,768 |
| 52,130 |
| 1,765 |
| 87,663 |
| 95,019 |
- >1 and ≤ 5 year |
| 8,332 |
| 6,452 |
| 6,898 |
| 21,682 |
| 51,723 |
| 18,262 |
| 77 |
| 70,062 |
| 91,744 |
- > 5 and ≤ 15 year |
| 42,759 |
| 3 |
| 1,772 |
| 44,534 |
| 24,136 |
| 4,016 |
| 290 |
| 28,442 |
| 72,976 |
- > 15 year |
| 161,374 |
| — |
| (5) |
| 161,369 |
| 8,602 |
| 48 |
| 158 |
| 8,808 |
| 170,177 |
Other financial assets by asset quality (3) |
| — |
| — |
| — |
| — |
| 4,513 |
| 28,490 |
| 129,532 |
| 162,535 |
| 162,535 |
- AQ1-AQ4 |
| — |
| — |
| — |
| — |
| 4,506 |
| 28,301 |
| 129,532 |
| 162,339 |
| 162,339 |
- AQ5-AQ8 |
| — |
| — |
| — |
| — |
| 7 |
| 189 |
| — |
| 196 |
| 196 |
Off-balance sheet |
| 14,799 |
| 22,696 |
| 7,550 |
| 45,045 |
| 78,604 |
| 23,031 |
| 501 |
| 102,136 |
| 147,181 |
- Loan commitments |
| 14,799 |
| 22,696 |
| 7,514 |
| 45,009 |
| 75,723 |
| 21,555 |
| 501 |
| 97,779 |
| 142,788 |
- Contingent liabilities |
| — |
| — |
| 36 |
| 36 |
| 2,881 |
| 1,476 |
| — |
| 4,357 |
| 4,393 |
Off-balance sheet by asset quality (3) |
| 14,799 |
| 22,696 |
| 7,550 |
| 45,045 |
| 78,604 |
| 23,031 |
| 501 |
| 102,136 |
| 147,181 |
- AQ1-AQ4 |
| 13,926 |
| 415 |
| 6,140 |
| 20,481 |
| 50,709 |
| 21,030 |
| 114 |
| 71,853 |
| 92,334 |
- AQ5-AQ8 |
| 859 |
| 22,205 |
| 1,283 |
| 24,347 |
| 27,525 |
| 1,924 |
| 12 |
| 29,461 |
| 53,808 |
- AQ9 |
| 4 |
| 11 |
| 12 |
| 27 |
| 61 |
| — |
| 375 |
| 436 |
| 463 |
- AQ10 |
| 10 |
| 65 |
| 115 |
| 190 |
| 309 |
| 77 |
| — |
| 386 |
| 576 |
For the notes to this table refer to page 65.
NatWest Group Annual Report on Form 20-F 2025 | 63 |
Credit risk – Banking activities continued
Sector analysis – portfolio summary (audited) continued
Personal | | Non-Personal | | | ||||||||||||||
Mortgages (1) | Credit cards | Other personal | Total | Corporate and other | Financial institutions | Sovereign | Total | Total | ||||||||||
2024 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
Loans by geography |
| 209,846 | 6,930 | 9,749 | 226,525 | 111,734 | 70,321 | 1,645 | 183,700 | 410,225 | ||||||||
- UK |
| 209,846 | 6,930 | 9,749 | 226,525 | 97,409 | 43,412 | 562 | 141,383 | 367,908 | ||||||||
- Other Europe |
| — |
| — |
| — |
| — |
| 6,311 |
| 14,747 |
| 766 |
| 21,824 |
| 21,824 |
- RoW |
| — |
| — |
| — |
| — |
| 8,014 |
| 12,162 |
| 317 |
| 20,493 |
| 20,493 |
Loans by stage |
| 209,846 |
| 6,930 |
| 9,749 |
| 226,525 |
| 111,734 |
| 70,321 |
| 1,645 |
| 183,700 |
| 410,225 |
- Stage 1 |
| 186,250 |
| 4,801 |
| 7,267 |
| 198,318 |
| 94,991 |
| 69,021 |
| 1,491 |
| 165,503 |
| 363,821 |
- Stage 2 |
| 21,061 |
| 1,953 |
| 1,622 |
| 24,636 |
| 14,464 |
| 1,241 |
| 133 |
| 15,838 |
| 40,474 |
- Stage 3 |
| 2,535 |
| 176 |
| 860 |
| 3,571 |
| 2,279 |
| 59 |
| 21 |
| 2,359 |
| 5,930 |
- Of which: individual |
| 141 |
| — |
| 26 |
| 167 |
| 1,046 |
| 51 |
| 21 |
| 1,118 |
| 1,285 |
- Of which: collective |
| 2,394 |
| 176 |
| 834 |
| 3,404 |
| 1,233 |
| 8 |
| — |
| 1,241 |
| 4,645 |
Loans - past due analysis |
| 209,846 |
| 6,930 |
| 9,749 |
| 226,525 |
| 111,734 |
| 70,321 |
| 1,645 |
| 183,700 |
| 410,225 |
- Not past due |
| 206,739 |
| 6,721 |
| 8,865 |
| 222,325 |
| 107,855 |
| 70,055 |
| 1,627 |
| 179,537 |
| 401,862 |
- Past due 1-30 days |
| 1,404 |
| 50 |
| 70 |
| 1,524 |
| 2,530 |
| 211 |
| — |
| 2,741 |
| 4,265 |
- Past due 31-90 days |
| 580 |
| 51 |
| 99 |
| 730 |
| 398 |
| 2 |
| 18 |
| 418 |
| 1,148 |
- Past due 91-180 days |
| 408 |
| 41 |
| 96 |
| 545 |
| 139 |
| 49 |
| — |
| 188 |
| 733 |
- Past due >180 days |
| 715 |
| 67 |
| 619 |
| 1,401 |
| 812 |
| 4 |
| — |
| 816 |
| 2,217 |
Loans - Stage 2 |
| 21,061 |
| 1,953 |
| 1,622 |
| 24,636 |
| 14,464 |
| 1,241 |
| 133 |
| 15,838 |
| 40,474 |
- Not past due |
| 19,939 |
| 1,889 |
| 1,521 |
| 23,349 |
| 13,485 |
| 1,228 |
| 133 |
| 14,846 |
| 38,195 |
- Past due 1-30 days |
| 853 |
| 31 |
| 37 |
| 921 |
| 640 |
| 11 |
| — |
| 651 |
| 1,572 |
- Past due 31-90 days |
| 269 |
| 33 |
| 64 |
| 366 |
| 339 |
| 2 |
| — |
| 341 |
| 707 |
Weighted average life (2) |
| |
| |
| |
| |
| |
| |
| |
| |
| |
- ECL measurement (years) |
| 8 |
| 4 |
| 6 |
| 6 |
| 6 |
| 2 |
| nm |
| 6 |
| 6 |
Weighted average 12 months PDs (2) |
| |
| |
| |
| |
| |
| |
| |
| |
| |
- IFRS 9 (%) |
| 0.51 |
| 3.23 |
| 4.59 |
| 0.76 |
| 1.24 |
| 0.16 |
| 5.51 |
| 0.86 |
| 0.80 |
- Basel (%) |
| 0.68 |
| 3.65 |
| 3.18 |
| 0.87 |
| 1.11 |
| 0.15 |
| 4.16 |
| 0.76 |
| 0.82 |
ECL provisions by geography |
| 462 |
| 381 |
| 969 |
| 1,812 |
| 1,504 |
| 90 |
| 19 |
| 1,613 |
| 3,425 |
- UK |
| 462 |
| 381 |
| 969 |
| 1,812 |
| 1,335 |
| 37 |
| 12 |
| 1,384 |
| 3,196 |
- Other Europe |
| — |
| — |
| — |
| — |
| 109 |
| 9 |
| — |
| 118 |
| 118 |
- RoW |
| — |
| — |
| — |
| — |
| 60 |
| 44 |
| 7 |
| 111 |
| 111 |
For the notes to this table refer to the following page.
NatWest Group Annual Report on Form 20-F 2025 | 64 |
Credit risk – Banking activities continued
Sector analysis – portfolio summary (audited) continued
Personal | Non-Personal | |||||||||||||||||
Mortgages (1) | Credit cards | Other personal | Total | Corporate and other (2) | Financial institutions | Sovereign | Total | Total | ||||||||||
2024 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
ECL provisions by stage |
| 462 |
| 381 |
| 969 |
| 1,812 |
| 1,504 |
| 90 |
| 19 |
| 1,613 |
| 3,425 |
- Stage 1 |
| 77 |
| 77 |
| 130 |
| 284 |
| 264 |
| 38 |
| 12 |
| 314 |
| 598 |
- Stage 2 |
| 60 |
| 186 |
| 183 |
| 429 |
| 344 |
| 12 |
| 2 |
| 358 |
| 787 |
- Stage 3 |
| 325 |
| 118 |
| 656 |
| 1,099 |
| 896 |
| 40 |
| 5 |
| 941 |
| 2,040 |
- Of which: individual |
| 11 |
| — |
| 17 |
| 28 |
| 382 |
| 36 |
| 5 |
| 423 |
| 451 |
- Of which: collective |
| 314 |
| 118 |
| 639 |
| 1,071 |
| 514 |
| 4 |
| — |
| 518 |
| 1,589 |
ECL provisions coverage (%) |
| 0.22 |
| 5.50 |
| 9.94 |
| 0.80 |
| 1.35 |
| 0.13 |
| 1.16 |
| 0.88 |
| 0.83 |
- Stage 1 (%) |
| 0.04 |
| 1.60 |
| 1.79 |
| 0.14 |
| 0.28 |
| 0.06 |
| 0.80 |
| 0.19 |
| 0.16 |
- Stage 2 (%) |
| 0.28 |
| 9.52 |
| 11.28 |
| 1.74 |
| 2.38 |
| 0.97 |
| 1.50 |
| 2.26 |
| 1.94 |
- Stage 3 (%) |
| 12.82 |
| 67.05 |
| 76.28 |
| 30.78 |
| 39.32 |
| 67.80 |
| 23.81 |
| 39.89 |
| 34.40 |
ECL (release)/charge |
| 8 |
| 115 |
| 161 |
| 284 |
| 55 |
| 19 |
| 1 |
| 75 |
| 359 |
- UK |
| 8 |
| 115 |
| 161 |
| 284 |
| 43 |
| 1 |
| — |
| 44 |
| 328 |
- Other Europe |
| — |
| — |
| — |
| — |
| 17 |
| (7) |
| — |
| 10 |
| 10 |
- RoW |
| — |
| — |
| — |
| — |
| (5) |
| 25 |
| 1 |
| 21 |
| 21 |
Amounts written-off |
| 18 |
| 102 |
| 313 |
| 433 |
| 221 |
| — |
| — |
| 221 |
| 654 |
Loans by residual maturity |
| 209,846 |
| 6,930 |
| 9,749 |
| 226,525 |
| 111,734 |
| 70,321 |
| 1,645 |
| 183,700 |
| 410,225 |
- ≤1 year |
| 3,367 |
| 3,903 |
| 3,186 |
| 10,456 |
| 34,929 |
| 54,971 |
| 822 |
| 90,722 |
| 101,178 |
- >1 and ≤ 5 year |
| 11,651 |
| 3,027 |
| 5,551 |
| 20,229 |
| 48,075 |
| 10,967 |
| 488 |
| 59,530 |
| 79,759 |
- > 5 and ≤ 15 year |
| 45,454 |
| — |
| 1,006 |
| 46,460 |
| 20,623 |
| 4,270 |
| 298 |
| 25,191 |
| 71,651 |
- > 15 year |
| 149,374 |
| — |
| 6 |
| 149,380 |
| 8,107 |
| 113 |
| 37 |
| 8,257 |
| 157,637 |
Other financial assets by asset quality (3) |
| — |
| — |
| — |
| — |
| 3,644 |
| 31,102 |
| 119,502 |
| 154,248 |
| 154,248 |
- AQ1-AQ4 |
| — |
| — |
| — |
| — |
| 3,639 |
| 30,743 |
| 119,502 |
| 153,884 |
| 153,884 |
- AQ5-AQ8 |
| — |
| — |
| — |
| — |
| 5 |
| 359 |
| — |
| 364 |
| 364 |
Off-balance sheet |
| 13,806 |
| 20,135 |
| 7,947 |
| 41,888 |
| 75,964 |
| 21,925 |
| 239 |
| 98,128 |
| 140,016 |
- Loan commitments |
| 13,806 |
| 20,135 |
| 7,906 |
| 41,847 |
| 72,940 |
| 20,341 |
| 239 |
| 93,520 |
| 135,367 |
- Contingent liabilities |
| — |
| — |
| 41 |
| 41 |
| 3,024 |
| 1,584 |
| — |
| 4,608 |
| 4,649 |
Off-balance sheet by asset quality (3) |
| 13,806 |
| 20,135 |
| 7,947 |
| 41,888 |
| 75,964 |
| 21,925 |
| 239 |
| 98,128 |
| 140,016 |
- AQ1-AQ4 |
| 12,951 |
| 510 |
| 6,568 |
| 20,029 |
| 47,896 |
| 20,063 |
| 155 |
| 68,114 |
| 88,143 |
- AQ5-AQ8 |
| 839 |
| 19,276 |
| 1,336 |
| 21,451 |
| 27,657 |
| 1,813 |
| 21 |
| 29,491 |
| 50,942 |
- AQ9 |
| 1 |
| 12 |
| 17 |
| 30 |
| 19 |
| — |
| 63 |
| 82 |
| 112 |
- AQ10 |
| 15 |
| 337 |
| 26 |
| 378 |
| 392 |
| 49 |
| — |
| 441 |
| 819 |
| (1) | Includes a portion of Private Banking & Wealth Management lending secured against residential real estate, in line with ECL calculation methodology. Private Banking & Wealth Management and RBS International mortgages are reported in the UK, reflecting the country of lending origination and includes crown dependencies. |
| (2) | Not within the scope of the Independent auditors’ report. |
| (3) | AQ bandings are based on Basel PDs and mapping is as per the table on the following page. |
NatWest Group Annual Report on Form 20-F 2025 | 65 |
Credit risk – Banking activities continued
Sector analysis – portfolio summary (audited) continued
Internal asset quality band | | Probability of default range | | Indicative S&P rating | | Internal asset quality band | | Probability of default range | | Indicative S&P rating |
AQ1 |
| 0% - 0.034% | AAA to AA |
| AQ6 |
| 1.076% - 2.153% | BB- to B+ | ||
AQ2 |
| 0.034% - 0.048% | AA to AA- |
| AQ7 |
| 2.153% - 6.089% | B+ to B | ||
AQ3 |
| 0.048% - 0.095% | A+ to A |
| AQ8 |
| 6.089% - 17.222% | B- to CCC+ | ||
AQ4 |
| 0.095% - 0.381% | BBB+ to BBB- |
| AQ9 |
| 17.222% - 100% | CCC to C | ||
AQ5 |
| 0.381% - 1.076% | BB+ to BB |
| AQ10 |
| 100% | D |
The table below shows ECL by stage, for the Personal portfolio and Non-Personal portfolio, including the three largest borrowing sector clusters included in corporate and other.
Loans - amortised cost and FVOCI | Off-balance sheet | ECL provisions | ||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Loan commitments | Contingent liabilities | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
Personal |
| 212,904 |
| 19,500 |
| 2,537 |
| 234,941 |
| 45,009 |
| 36 |
| 342 |
| 426 |
| 1,112 |
| 1,880 |
Mortgages (1) |
| 197,939 |
| 15,951 |
| 1,339 |
| 215,229 |
| 14,799 |
| — |
| 45 |
| 36 |
| 191 |
| 272 |
Credit cards |
| 5,988 |
| 2,081 |
| 242 |
| 8,311 |
| 22,696 |
| — |
| 125 |
| 205 |
| 190 |
| 520 |
Other personal |
| 8,977 |
| 1,468 |
| 956 |
| 11,401 |
| 7,514 |
| 36 |
| 172 |
| 185 |
| 731 |
| 1,088 |
Non-Personal |
| 173,747 |
| 19,082 |
| 2,146 |
| 194,975 |
| 97,779 |
| 4,357 |
| 272 |
| 370 |
| 1,063 |
| 1,705 |
Financial institutions (2) |
| 73,959 |
| 356 |
| 141 |
| 74,456 |
| 21,555 |
| 1,476 |
| 37 |
| 5 |
| 113 |
| 155 |
Sovereign |
| 2,009 |
| 266 |
| 15 |
| 2,290 |
| 501 |
| — |
| 7 |
| 5 |
| 6 |
| 18 |
Corporate and other |
| 97,779 |
| 18,460 |
| 1,990 |
| 118,229 |
| 75,723 |
| 2,881 |
| 228 |
| 360 |
| 944 |
| 1,532 |
Of which: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Commercial real estate |
| 17,838 |
| 1,272 |
| 294 |
| 19,404 |
| 6,646 |
| 162 |
| 55 |
| 22 |
| 120 |
| 197 |
Mobility and logistics |
| 13,021 |
| 4,312 |
| 81 |
| 17,414 |
| 10,194 |
| 520 |
| 24 |
| 45 |
| 40 |
| 109 |
Consumer industries |
| 12,875 |
| 2,912 |
| 389 |
| 16,176 |
| 11,149 |
| 496 |
| 33 |
| 68 |
| 199 |
| 300 |
Total |
| 386,651 |
| 38,582 |
| 4,683 |
| 429,916 |
| 142,788 |
| 4,393 |
| 614 |
| 796 |
| 2,175 |
| 3,585 |
2024 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
Personal |
| 198,318 |
| 24,636 |
| 3,571 |
| 226,525 |
| 41,847 |
| 41 |
| 284 |
| 429 |
| 1,099 |
| 1,812 |
Mortgages (1) |
| 186,250 |
| 21,061 |
| 2,535 |
| 209,846 |
| 13,806 |
| — |
| 77 |
| 60 |
| 325 |
| 462 |
Credit cards |
| 4,801 |
| 1,953 |
| 176 |
| 6,930 |
| 20,135 |
| — |
| 77 |
| 186 |
| 118 |
| 381 |
Other personal |
| 7,267 |
| 1,622 |
| 860 |
| 9,749 |
| 7,906 |
| 41 |
| 130 |
| 183 |
| 656 |
| 969 |
Non-Personal |
| 165,503 |
| 15,838 |
| 2,359 |
| 183,700 |
| 93,520 |
| 4,608 |
| 314 |
| 358 |
| 941 |
| 1,613 |
Financial institutions (2) |
| 69,021 |
| 1,241 |
| 59 |
| 70,321 |
| 20,341 |
| 1,584 |
| 38 |
| 12 |
| 40 |
| 90 |
Sovereign |
| 1,491 |
| 133 |
| 21 |
| 1,645 |
| 239 |
| — |
| 12 |
| 2 |
| 5 |
| 19 |
Corporate and other |
| 94,991 |
| 14,464 |
| 2,279 |
| 111,734 |
| 72,940 |
| 3,024 |
| 264 |
| 344 |
| 896 |
| 1,504 |
Of which: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Commercial real estate |
| 16,191 |
| 1,517 |
| 433 |
| 18,141 |
| 6,661 |
| 143 |
| 70 |
| 30 |
| 146 |
| 246 |
Mobility and logistics |
| 13,363 |
| 2,384 |
| 148 |
| 15,895 |
| 9,367 |
| 595 |
| 26 |
| 35 |
| 67 |
| 128 |
Consumer industries |
| 13,312 |
| 3,015 |
| 444 |
| 16,771 |
| 10,706 |
| 595 |
| 45 |
| 90 |
| 188 |
| 323 |
Total |
| 363,821 |
| 40,474 |
| 5,930 |
| 410,225 |
| 135,367 |
| 4,649 |
| 598 |
| 787 |
| 2,040 |
| 3,425 |
| (1) | As at 31 December 2025, £144.2 billion, 67%, of the total residential mortgages portfolio had Energy Performance Certificate (EPC) data available (2024 – £139.1 billion, 66.3%). Of which, 48.8% were rated as EPC A to C (2024 – 46.3)%. |
| (2) | Includes transactions, such as securitisations, where the underlying risk may be in other sectors. |
NatWest Group Annual Report on Form 20-F 2025 | 66 |
Credit risk – Banking activities continued
Non-Personal forbearance (audited)
The table below shows Non-Personal forbearance, Heightened Monitoring and Risk of Credit Loss by sector. The table shows current exposure but reflects risk transfers where there is a guarantee by another customer.
Corporate and other | Financial institutions | Sovereign | Total | |||||
2025 | | £m | | £m | | £m | | £m |
Forbearance (flow) |
| 3,495 |
| 43 |
| 12 |
| 3,550 |
Forbearance (stock) |
| 4,167 |
| 122 |
| 12 |
| 4,301 |
Heightened Monitoring and Risk of Credit Loss |
| 6,115 |
| 103 |
| 2 |
| 6,220 |
2024 |
| |
| |
| |
| |
Forbearance (flow) |
| 3,359 |
| 119 |
| 18 |
| 3,496 |
Forbearance (stock) |
| 4,556 |
| 106 |
| 18 |
| 4,680 |
Heightened Monitoring and Risk of Credit Loss |
| 5,931 |
| 150 |
| 1 |
| 6,082 |
Sector analysis – portfolio summary (audited)
| ● | Loans by geography and sector – In line with NatWest Group’s strategic focus, exposures continued to be mainly in the UK. |
| ● | Loans by stage – Stage 3 balances reduced overall, with a small reduction in Non-Personal due to write-offs and lower inflows, and a larger reduction in Personal mortgages following the securitisation transaction that removed £0.8 billion of Stage 3 assets, alongside a default definition systems and process enhancement that moved loans back to the good book. Stage 1 balances increased across the Personal portfolios, driven by growth in mortgages and unsecured lending, including the Sainsbury’s Bank portfolio acquisition. Stage 2 balances were broadly unchanged from the end of 2024, with reductions in Personal mortgages, linked to PD model enhancements and stable portfolio trends offset by increases in Non-Personal, largely driven by post model adjustment downgrades to sectors deemed most at risk of economic uncertainty. |
| ● | Loans – Past due analysis – Within the Personal portfolio, arrears balances overall decreased during 2025 mainly driven by the balance sheet management actions within the mortgage portfolio described previously. For the unsecured portfolios, arrears balances increased due to book growth and portfolio maturation. In Non-Personal, arrears balances reduced in line with Stage 3 balance reduction. The vast majority of Stage 2 balances remained up to date, as Stage 2 is normally captured through other forward-looking Stage 2 triggers. |
| ● | Weighted average 12 months PDs – Both IFRS 9 and Basel PDs remained broadly stable during the year overall, noting the reduction in Personal mortgages due to PD model enhancements and an increase in unsecured PDs driven by strategic growth and seasoning of credit card balances since 2022. Non-Personal PDs were broadly stable in the year. The higher PD in sovereigns reflected a single entity where lending is fully guaranteed. |
| ● | ECL provisions by stage and ECL provisions coverage – Overall provisions increased from 31 December 2024, following an increase in good book ECL in the Personal portfolios, driven by the portfolio acquisition of Sainsbury’s Bank and organic growth in unsecured lending, and a small number of significant individual Non-Personal Stage 3 charges. Stage 3 ECL growth was partly offset by the transfer of mortgage assets to a securitisation special purpose vehicle. Provisions coverage remained consistent with 31 December 2024. |
| ● | ECL charge – The 2025 impairment charge, primarily reflected a small number of significant individual charges in the Non-Personal portfolio alongside the initial ECL cost from the portfolio acquisition from Sainsbury’s Bank within Personal. This was partially offset by post model adjustment releases in the good book and one-off releases, notably on the definition of default systems and process enhancement on Personal mortgages and a mortgage securitisation. The increased charge in Non-Personal portfolio primarily reflected lower levels of reduction in performing book post model adjustments compared to 2024. |
| ● | Loans by residual maturity – The maturity profile of the portfolios remained consistent with prior periods. In mortgages, as expected, the vast majority of exposures were greater than five years. In unsecured lending, cards and other, exposures were concentrated in less than five years. In Non-Personal portfolios the maturity profile will vary by product and sectors, but is typically less than five years for most exposures. |
| ● | Other financial assets by asset quality – These assets were cash and debt securities, and generally of high credit quality as reflected in the AQ banding. |
| ● | Off-balance sheet exposures by asset quality – The AQ band split of off-balance sheet exposures broadly mirrored the drawn loans portfolio for non-defaulted exposures. In the Non-Personal portfolio, off-balance sheet exposures increased year-on-year, reflecting an increase in unutilised exposure in corporates and financial institutions. The increase was primarily in the AQ1 to AQ4 band, indicating high credit quality. |
| ● | Non-Personal problem debt – Exposures in the Wholesale Problem Debt Management framework marginally increased during 2025 due to an inflow of corporate customers onto the framework across a range of sectors. There was no change in the reasons for customers moving onto the framework from 2024, with trading issues and cash/liquidity remaining the key main drivers. |
| ● | Non-Personal forbearance – Exposures classified as forborne reduced marginally across multiple sectors, leading to lower stock values in corporates. A portion of forbearance flows related to cases in Customer Lending Support subject to repeated forbearance. |
NatWest Group Annual Report on Form 20-F 2025 | 67 |
Credit risk – Banking activities continued
Credit risk enhancement and mitigation (audited)
The table below shows exposures of modelled portfolios within the scope of the ECL framework and related credit risk enhancement and mitigation (CREM).
Gross | Maximum credit risk | CREM by type | CREM coverage | Exposure post CREM | ||||||||||||||||||
exposure | ECL | Total | Stage 3 | Financial (1) | Property | Other (2) | Total | Stage 3 | Total | Stage 3 | ||||||||||||
2025 | | £bn | | £bn | | £bn | | £bn | | £bn | | £bn | | £bn | | £bn | | £bn | | £bn | | £bn |
Financial assets |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Cash and balances at central banks |
| 84.1 |
| — |
| 84.1 |
| — |
| — |
| — |
| — |
| — |
| — |
| 84.1 |
| — |
Loans - amortised cost (3) |
| 429.9 |
| 3.5 |
| 426.4 |
| 2.5 |
| 47.9 |
| 261.0 |
| 26.0 |
| 334.9 |
| 2.1 |
| 91.5 |
| 0.4 |
Personal (4) |
| 234.9 |
| 1.9 |
| 233.0 |
| 1.4 |
| 1.4 |
| 214.5 |
| — |
| 215.9 |
| 1.2 |
| 17.1 |
| 0.2 |
Non-Personal (5) |
| 195.0 |
| 1.6 |
| 193.4 |
| 1.1 |
| 46.5 |
| 46.5 |
| 26.0 |
| 119.0 |
| 0.9 |
| 74.4 |
| 0.2 |
Debt securities |
| 78.5 |
| — |
| 78.5 |
| — |
| 0.3 |
| — |
| — |
| 0.3 |
| — |
| 78.2 |
| — |
Total financial assets |
| 592.5 |
| 3.5 |
| 589.0 |
| 2.5 |
| 48.2 |
| 261.0 |
| 26.0 |
| 335.2 |
| 2.1 |
| 253.8 |
| 0.4 |
Contingent liabilities and commitments |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Personal (6) |
| 45.0 |
| — |
| 45.0 |
| 0.2 |
| 1.1 |
| 3.2 |
| — |
| 4.3 |
| 0.1 |
| 40.7 |
| 0.1 |
Non-Personal |
| 102.2 |
| 0.1 |
| 102.1 |
| 0.4 |
| 4.1 |
| 7.9 |
| 5.3 |
| 17.3 |
| 0.1 |
| 84.8 |
| 0.3 |
Total off-balance sheet |
| 147.2 |
| 0.1 |
| 147.1 |
| 0.6 |
| 5.2 |
| 11.1 |
| 5.3 |
| 21.6 |
| 0.2 |
| 125.5 |
| 0.4 |
Total exposure |
| 739.7 |
| 3.6 |
| 736.1 |
| 3.1 |
| 53.4 |
| 272.1 |
| 31.3 |
| 356.8 |
| 2.3 |
| 379.3 |
| 0.8 |
2024 |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Financial assets |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Cash and balances at central banks |
| 91.8 |
| — |
| 91.8 |
| — |
| — |
| — |
| — |
| — |
| — |
| 91.8 |
| — |
Loans - amortised cost (3) |
| 410.2 |
| 3.3 |
| 406.9 |
| 3.9 |
| 46.3 |
| 253.0 |
| 25.5 |
| 324.8 |
| 3.4 |
| 82.1 |
| 0.5 |
Personal (4) |
| 226.5 |
| 1.8 |
| 224.7 |
| 2.5 |
| 0.8 |
| 209.1 |
| — |
| 209.9 |
| 2.2 |
| 14.8 |
| 0.3 |
Non-Personal (5) |
| 183.7 |
| 1.5 |
| 182.2 |
| 1.4 |
| 45.5 |
| 43.9 |
| 25.5 |
| 114.9 |
| 1.2 |
| 67.3 |
| 0.2 |
Debt securities |
| 62.5 |
| — |
| 62.5 |
| — |
| 0.1 |
| — |
| — |
| 0.1 |
| — |
| 62.4 |
| — |
Total financial assets |
| 564.5 |
| 3.3 |
| 561.2 |
| 3.9 |
| 46.4 |
| 253.0 |
| 25.5 |
| 324.9 |
| 3.4 |
| 236.3 |
| 0.5 |
Contingent liabilities and commitments |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Personal (6) |
| 41.9 |
| — |
| 41.9 |
| 0.4 |
| 1.1 |
| 3.7 |
| — |
| 4.8 |
| — |
| 37.1 |
| 0.4 |
Non-Personal |
| 98.1 |
| 0.1 |
| 98.0 |
| 0.4 |
| 3.1 |
| 8.2 |
| 5.1 |
| 16.4 |
| 0.1 |
| 81.6 |
| 0.3 |
Total off-balance sheet |
| 140.0 |
| 0.1 |
| 139.9 |
| 0.8 |
| 4.2 |
| 11.9 |
| 5.1 |
| 21.2 |
| 0.1 |
| 118.7 |
| 0.7 |
Total exposure |
| 704.5 |
| 3.4 |
| 701.1 |
| 4.7 |
| 50.6 |
| 264.9 |
| 30.6 |
| 346.1 |
| 3.5 |
| 355.0 |
| 1.2 |
| (1) | Includes cash and securities collateral. |
| (2) | Includes guarantees, charges over trade debtors, other asset finance related physical collateral as well as the amount by which credit risk exposure is reduced through netting arrangements, mainly cash management pooling, which give NatWest Group a legal right to set off the financial asset against a financial liability due to the same counterparty. Any additional credit risk mitigation from a synthetic securitisation is not included in the table above. |
| (3) | NatWest Group holds collateral in respect of individual loans – amortised cost to banks and customers. This collateral includes mortgages over property (both personal and commercial); charges over business assets such as plant and equipment; inventories and trade debtors; and guarantees of lending from parties other than the borrower. NatWest Group obtains collateral in the form of securities in reverse repurchase agreements. Collateral values are capped at the value of the loan. |
| (4) | Stage 3 mortgage exposures have relatively limited uncovered exposure reflecting the security held. On unsecured credit cards and other personal borrowing, the residual uncovered amount reflects historical experience of continued cash recovery post default through ongoing engagement with customers. |
| (5) | Stage 3 exposures post credit risk enhancement and mitigation in Non-Personal mainly represent enterprise value and the impact of written down collateral values; an individual assessment to determine ECL will consider multiple scenarios and in some instances allocate a probability weighting to a collateral value in excess of the written down value. |
| (6) | The Personal gross exposure value includes £11.4 billion (2024 – £10.1 billion) in respect of pipeline mortgages where a committed offer has been made to a customer but where the funds have not yet been drawn down. When drawn down, the exposure would be covered by a security over the borrower’s property. |
NatWest Group Annual Report on Form 20-F 2025 | 68 |
Credit risk – Banking activities continued
Personal portfolio (audited)
Disclosures in the Personal portfolio section include drawn exposure (gross of provisions).
2025 |
| 2024 |
| |||||||||||||||||||
Private |
| Private |
| |||||||||||||||||||
Banking & |
| Banking & |
| |||||||||||||||||||
Retail | Wealth | Commercial & | Central items | Retail | Wealth | Commercial & | Central items | |||||||||||||||
Banking | Management | Institutional | & other | Total | Banking | Management | Institutional | & other | Total | |||||||||||||
Personal lending | | £m | | £m | | £m | | £m | | £m |
| | £m | | £m | | £m | | £m | | £m |
|
Mortgages |
| 199,972 |
| 13,038 |
| 2,210 |
| 9 |
| 215,229 |
| 194,865 |
| 12,826 |
| 2,161 |
| — |
| 209,852 | ||
Of which: |
|
|
|
|
| |
| |
| |
| |
| | ||||||||
Owner occupied |
| 180,323 |
| 11,644 |
| 1,508 |
| 8 |
| 193,483 |
| 176,137 |
| 11,348 |
| 1,457 |
| — |
| 188,942 | ||
Buy-to-let |
| 19,649 |
| 1,394 |
| 702 |
| 1 |
| 21,746 |
| 18,728 |
| 1,478 |
| 704 |
| — |
| 20,910 | ||
Interest only |
| 21,812 |
| 11,533 |
| 436 |
| — |
| 33,781 |
| 22,186 |
| 11,276 |
| 437 |
| — |
| 33,899 | ||
Mixed (1) |
| 9,977 |
| 76 |
| 4 |
| — |
| 10,057 |
| 10,384 |
| 40 |
| 8 |
| — |
| 10,432 | ||
ECL provisions (2) |
| 248 |
| 17 |
| 5 |
| 2 |
| 272 |
| 440 |
| 12 |
| 10 |
| — |
| 462 | ||
Other personal lending (3) |
| 17,696 |
| 1,699 |
| 221 |
| 95 |
| 19,711 |
| 15,045 |
| 1,301 |
| 242 |
| — |
| 16,588 | ||
ECL provisions (2) |
| 1,586 |
| 11 |
| 7 |
| 4 |
| 1,608 |
| 1,330 |
| 12 |
| 3 |
| — |
| 1,345 | ||
Total personal lending |
| 217,668 |
| 14,737 |
| 2,431 |
| 104 |
| 234,940 |
| 209,910 |
| 14,127 |
| 2,403 |
| — |
| 226,440 | ||
Mortgage LTV ratios |
| |
| |
| |
| |
| | |
| |
| |
| |
| | |||
- Owner occupied |
| 57 | % | 61 | % | 57 | % | 42 | % | 57 | % |
| 56 | % | 59 | % | 56 | % | — | 56 | % | |
- Stage 1 |
| 57 | % | 59 | % | 57 | % | — | 57 | % |
| 56 | % | 59 | % | 55 | % | — | 56 | % | ||
- Stage 2 |
| 52 | % | 57 | % | 59 | % | 32 | % | 52 | % |
| 55 | % | 61 | % | 56 | % | — | 55 | % | |
- Stage 3 |
| 47 | % | 69 | % | 67 | % | 56 | % | 51 | % |
| 50 | % | 64 | % | 74 | % | — | 51 | % | |
- Buy-to-let |
| 54 | % | 62 | % | 55 | % | 26 | % | 55 | % |
| 53 | % | 60 | % | 52 | % | — | 53 | % | |
- Stage 1 |
| 54 | % | 60 | % | 54 | % | — | 55 | % |
| 54 | % | 60 | % | 51 | % | — | 54 | % | ||
- Stage 2 |
| 52 | % | 56 | % | 62 | % | 26 | % | 52 | % |
| 52 | % | 57 | % | 55 | % | — | 52 | % | |
- Stage 3 |
| 51 | % | 56 | % | 66 | % | 24 | % | 53 | % |
| 52 | % | 56 | % | 59 | % | — | 53 | % | |
Gross new mortgage lending |
| 34,458 | 1,492 | 313 | — |
| 36,263 |
| 26,440 |
| 1,395 |
| 257 |
| — |
| 28,092 | |||||
Of which: |
| | | | |
| | |
| |
| |
| |
| | ||||||
Owner occupied |
| 32,059 | 1,372 | 229 | — |
| 33,660 |
| 25,300 |
| 1,266 |
| 183 |
| — |
| 26,749 | |||||
-LTV> 90% | 1,677 | — | — | — |
| 1,677 | 888 |
| — |
| — |
| — |
| 888 | |||||||
Weighted average LTV (4) |
| 71 | % | 66 | % | 61 | % | — | 70 | % |
| 70 | % | 63 | % | 71 | % | — | 70 | % | ||
Buy-to-let |
| 2,399 | 120 | 84 | — |
| 2,603 |
| 1,140 |
| 129 |
| 74 |
| — |
| 1,343 | |||||
Weighted average LTV (4) |
| 61 | % | 65 | % | 61 | % | — | 61 | % |
| 61 | % | 62 | % | 56 | % | — | 61 | % | ||
Interest only |
| 2,443 |
| 1,357 |
| 54 |
| — |
| 3,854 |
| 1,575 |
| 1,238 |
| 42 |
| — |
| 2,855 | ||
Mixed (1) |
| 1,049 |
| — |
| 1 |
| — |
| 1,050 |
| 1,150 |
| — |
| 1 |
| — |
| 1,151 | ||
Mortgage forbearance |
| |
| |
| |
| |
| | |
| |
| |
| |
| | |||
Forbearance flow (5) |
| 328 |
| 14 |
| 1 |
| — |
| 343 |
| 473 |
| 8 |
| 6 |
| — |
| 487 | ||
Forbearance stock |
| 1,203 |
| 10 |
| 9 |
| 1 |
| 1,223 |
| 1,680 |
| 20 |
| 15 |
| — |
| 1,715 | ||
Current |
| 918 |
| 2 |
| 3 |
| — |
| 923 |
| 1,214 |
| 9 |
| 10 |
| — |
| 1,233 | ||
1-3 months in arrears |
| 110 |
| 6 |
| — |
| — |
| 116 |
| 146 |
| 9 |
| — |
| — |
| 155 | ||
>3 months in arrears |
| 175 |
| 2 |
| 6 |
| 1 |
| 184 |
| 320 |
| 2 |
| 5 |
| — |
| 327 | ||
| (1) | Includes accounts which have an interest only sub-account and a capital and interest sub-account to provide a more comprehensive view of interest only exposures. |
| (2) | Retail Banking excludes a non-material amount of lending and provisions held on relatively small legacy portfolios. |
| (3) | Comprises unsecured lending except for Private Banking & Wealth Management, which includes both secured and unsecured lending. It excludes loans that are commercial in nature. |
| (4) | New mortgage lending LTV reflects the LTV at the time of lending. |
| (5) | Forbearance flows only include an account once per year, although some accounts may be subject to multiple forbearance deals. Forbearance deals post default are excluded from these flows |
NatWest Group Annual Report on Form 20-F 2025 | 69 |
Credit risk – Banking activities continued
Personal portfolio (audited) continued
Mortgage LTV distribution by stage
The table below shows gross mortgage lending and related ECL by LTV band for the Retail Banking portfolio.
Mortgages | ECL provisions | ECL provisions coverage | ||||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | % | | % | | % | | % |
≤50% | 66,203 |
| 7,099 |
| 597 |
| 73,899 |
| 10 |
| 10 |
| 94.0 |
| 114.0 |
| — |
| 0.1 |
| 15.7 |
| 0.2 | |
>50% and ≤70% | 63,802 |
| 5,948 |
| 338 |
| 70,088 |
| 16 |
| 15 |
| 50.0 |
| 81.0 |
| — |
| 0.3 |
| 14.8 |
| 0.1 | |
>70% and ≤80% | 27,658 |
| 1,745 |
| 73 |
| 29,476 |
| 8 |
| 6 |
| 12.0 |
| 26.0 |
| — |
| 0.3 |
| 16.4 |
| 0.1 | |
>80% and ≤90% | 20,777 |
| 744 |
| 39 |
| 21,560 |
| 7 |
| 4 |
| 6.0 |
| 17.0 |
| — |
| 0.5 |
| 15.4 |
| 0.1 | |
>90% and ≤100% | 4,438 |
| 76 |
| 7 |
| 4,521 |
| 1 |
| 1 |
| 2.0 |
| 4.0 |
| — |
| 1.3 |
| 28.6 |
| 0.1 | |
>100% | 9 |
| 1 |
| 7 |
| 17 |
| — |
| — |
| 3 |
| 3 |
| — |
| — |
| 42.9 |
| 17.6 | |
Total with LTVs | 182,887 |
| 15,613 |
| 1,061 |
| 199,561 |
| 42 |
| 36 |
| 167 |
| 245 |
| — |
| 0.2 |
| 15.7 |
| 0.1 | |
Other | 406 |
| 1 |
| 4 |
| 411 |
| 2 |
| — |
| 1 |
| 3 |
| 0.5 |
| — |
| 25.0 |
| 0.7 | |
Total | 183,293 |
| 15,614 |
| 1,065 |
| 199,972 |
| 44 |
| 36 |
| 168 |
| 248 |
| — |
| 0.2 |
| 15.8 |
| 0.1 | |
2024 | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | |
≤50% | 64,040 |
| 8,344 |
| 1,159 |
| 73,543 |
| 21 |
| 16 |
| 153 |
| 190 |
| — |
| 0.2 |
| 13.2 |
| 0.3 | |
>50% and ≤70% | 61,739 |
| 7,741 |
| 855 |
| 70,335 |
| 29 |
| 23 |
| 104 |
| 156 |
| — |
| 0.3 |
| 12.2 |
| 0.2 | |
>70% and ≤80% | 25,022 |
| 2,361 |
| 173 |
| 27,556 |
| 13 |
| 9 |
| 22 |
| 44 |
| 0.1 |
| 0.4 |
| 12.7 |
| 0.2 | |
>80% and ≤90% | 16,718 |
| 1,769 |
| 85 |
| 18,572 |
| 9 |
| 9 |
| 13 |
| 31 |
| 0.1 |
| 0.5 |
| 15.3 |
| 0.2 | |
>90% and ≤100% | 4,076 |
| 512 |
| 26 |
| 4,614 |
| 2 |
| 3 |
| 5 |
| 10 |
| — |
| 0.6 |
| 19.2 |
| 0.2 | |
>100% | 14 |
| 4 |
| 13 |
| 31 |
| — |
| — |
| 6 |
| 6 |
| — |
| — |
| 46.2 |
| 19.4 | |
Total with LTVs |
| 171,609 |
| 20,731 |
| 2,311 |
| 194,651 |
| 74 |
| 60 |
| 303 |
| 437 |
| — |
| 0.3 |
| 13.1 |
| 0.2 |
Other |
| 212 |
| 1 |
| 1 |
| 214 |
| 2 |
| — |
| 1 |
| 3 |
| 0.9 |
| — |
| 100.0 |
| 1.4 |
Total |
| 171,821 |
| 20,732 |
| 2,312 |
| 194,865 |
| 76 |
| 60 |
| 304 |
| 440 |
| — |
| 0.3 |
| 13.1 |
| 0.2 |
| ● | Mortgage balances increased during 2025 with continuing organic growth. Unsecured lending grew overall, driven by continuing growth in prime quality whole of market lending and balance transfer credit card segments, as well as the acquisition of Sainsbury’s Bank credit card and personal loan portfolios. |
| ● | Portfolios and new business were closely monitored against agreed operating limits. These included loan-to-value ratios, buy-to-let concentrations, new-build concentrations and credit quality. Lending criteria, affordability calculations and assumptions for new lending were adjusted during the year, to maintain credit quality in line with appetite and to ensure customers are assessed fairly as economic conditions change. |
| ● | LTV distribution of portfolio was broadly consistent with the prior year with an increase in balances in the 70-90% LTV bands consistent with increased new business during the year, including support for first time buyers. |
| ● | The mortgage forbearance reported in 2025 was net of the mortgage securitisation previously mentioned, which reduced the stock by £0.4 billion at the year-end. |
NatWest Group Annual Report on Form 20-F 2025 | 70 |
Credit risk – Banking activities continued
Personal portfolio (audited) continued
Mortgage LTV distribution by region
The table below shows gross mortgage lending by LTV band for Retail Banking, by geographical region.
| | | | | | | | | | | | | | | | | | Flood risk (1,2) | ||||||
Weighted | % of regional | % of regional | Lending at high/ | |||||||||||||||||||||
≤50% | | 50%≤80% | | 80%≤100% | | >100% | | Total | average LTV | Other | Total | Total | lending at high | lending at very | very high risk (3) | |||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | % | | £m | | £m | | % | | risk (>60) | | high risk (>80) | | % |
South East |
| 13,656 |
| 19,277 |
| 5,022 |
| 1 |
| 37,956 |
| 57 |
| 3 |
| 37,959 |
| 19 |
| 3.7 |
| 1.2 |
| 4.9 |
Greater London |
| 13,505 |
| 18,501 |
| 4,069 |
| 3 |
| 36,078 |
| 56 |
| 4 |
| 36,082 |
| 18 |
| 4.8 |
| 0.9 |
| 5.7 |
East of England |
| 8,128 |
| 12,167 |
| 3,379 |
| — |
| 23,674 |
| 57 |
| 2 |
| 23,676 |
| 12 |
| 2.9 |
| 1.4 |
| 4.3 |
North West |
| 7,479 |
| 8,443 |
| 2,158 |
| 2 |
| 18,082 |
| 55 |
| 1 |
| 18,083 |
| 9 |
| 2.9 |
| 2.0 |
| 4.9 |
South West |
| 6,578 |
| 8,679 |
| 2,454 |
| — |
| 17,711 |
| 56 |
| 1 |
| 17,712 |
| 9 |
| 2.7 |
| 1.0 |
| 3.7 |
West Midlands |
| 5,385 |
| 7,228 |
| 2,013 |
| 1 |
| 14,627 |
| 57 |
| 2 |
| 14,629 |
| 7 |
| 1.8 |
| 0.6 |
| 2.4 |
Scotland |
| 4,868 |
| 5,821 |
| 1,498 |
| 1 |
| 12,188 |
| 55 |
| 2 |
| 12,190 |
| 6 |
| 2.5 |
| 1.3 |
| 3.8 |
Rest of the UK |
| 14,300 |
| 19,448 |
| 5,488 |
| 9 |
| 39,245 |
| 57 |
| 396 |
| 39,641 |
| 20 |
| 2.8 |
| 1.9 |
| 4.7 |
Total |
| 73,899 |
| 99,564 |
| 26,081 |
| 17 |
| 199,561 |
| 56 |
| 411 |
| 199,972 |
| 100 |
| 3.3 |
| 1.3 |
| 4.6 |
2024 |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
South East |
| 13,622 |
| 19,007 |
| 4,506 |
| 1 |
| 37,136 |
| 56 |
| 3 |
| 37,139 |
| 19 |
| 3.6 |
| 1.2 |
| 4.8 |
Greater London |
| 13,951 |
| 18,537 |
| 3,391 |
| 2 |
| 35,881 |
| 55 |
| 3 |
| 35,884 |
| 18 |
| 4.8 |
| 0.9 |
| 5.7 |
East of England |
| 7,776 |
| 11,730 |
| 3,211 |
| 2 |
| 22,719 |
| 58 |
| 1 |
| 22,720 |
| 12 |
| 2.9 |
| 1.4 |
| 4.3 |
North West |
| 7,507 |
| 8,305 |
| 1,878 |
| 2 |
| 17,692 |
| 54 |
| 1 |
| 17,693 |
| 9 |
| 2.9 |
| 1.9 |
| 4.8 |
South West |
| 6,577 |
| 8,455 |
| 2,055 |
| 1 |
| 17,088 |
| 56 |
| 1 |
| 17,089 |
| 9 |
| 2.6 |
| 1.0 |
| 3.6 |
West Midlands |
| 5,379 |
| 6,970 |
| 1,683 |
| 1 |
| 14,033 |
| 56 |
| 1 |
| 14,034 |
| 7 |
| 1.8 |
| 0.6 |
| 2.4 |
Scotland |
| 4,860 |
| 5,766 |
| 1,591 |
| 1 |
| 12,218 |
| 55 |
| 1 |
| 12,219 |
| 6 |
| 2.4 |
| 1.2 |
| 3.6 |
Rest of the UK |
| 13,871 |
| 19,121 |
| 4,871 |
| 21 |
| 37,884 |
| 57 |
| 203 |
| 38,087 |
| 20 |
| 2.4 |
| 2.5 |
| 4.9 |
Total |
| 73,543 |
| 97,891 |
| 23,186 |
| 31 |
| 194,651 |
| 56 |
| 214 |
| 194,865 |
| 100 |
| 3.1 |
| 1.4 |
| 4.5 |
| (1) | Not within the scope of the Independent auditors’ report. |
| (2) | As at 31 December 2025, £12.9 billion, 99%, of the Private Banking & Wealth Management mortgage portfolio had flood risk data available (2024 – £12.6 billion, 98.0%). Of which, 6.2% were rated as high flood risk and 1.0% as very high flood risk (2024 – 5.4% high flood risk and 1.0% very high flood risk). 64% of the exposure is in the Greater London region. |
| (3) | Flood risk is modelled by calculating an estimated loss for each flood source different types of flooding (fluvial, pluvial, tidal), annualised for each source and combined for a total flood score. Flood defences were considered where available. Flood scores were allocated per property based on the potential annualised loss (£) to a property dependent on the type, frequency and depth of flooding modelled across different return periods. The scoring ranged from 0 to 100, with 0 being lowest and 100 being the highest risk. A score of 61 and above was considered to be high risk and properties with a score of 81 and above were considered to be very high risk after flood mitigants were taken-into-account. |
NatWest Group Annual Report on Form 20-F 2025 | 71 |
Credit risk – Banking activities continued
Personal portfolio (audited) continued
Retail Banking fixed rate mortgages by roll-off date (1)
The table below shows gross fixed rate mortgage lending for Retail Banking, by roll-off date.
| 2025 | | 2024 | |||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||
Retail Banking mortgages - gross exposure (2) | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
Fixed rate roll-off |
| |
| |
| |
| |
| |
| |
| |
| |
<=1 year |
| 41,993 |
| 3,897 |
| 158 |
| 46,048 |
| 34,989 |
| 4,309 |
| 336 |
| 39,634 |
>1<= 2 years |
| 63,366 |
| 4,978 |
| 183 |
| 68,527 |
| 44,146 |
| 5,080 |
| 418 |
| 49,644 |
>2 years |
| 67,544 |
| 4,901 |
| 243 |
| 72,688 |
| 78,629 |
| 8,667 |
| 693 |
| 87,989 |
Total |
| 172,903 |
| 13,776 |
| 584 |
| 187,263 |
| 157,764 |
| 18,056 |
| 1,447 |
| 177,267 |
| (1) | Not within the scope of the Independent auditors’ report. |
| (2) | Excluding the Metro Bank portfolio acquired during 2024 |
Retail Banking mortgages by Energy Performance Certificate (EPC) rating (1)
The table below shows the energy efficiency of Retail Banking residential mortgages (2).
| 2025 | | 2024 | |||||||||
Owner occupied | Buy-to-let | Total | Owner occupied | Buy-to-let | Total | |||||||
EPC rating | | £m | | £m | | £m | | £m | | £m | | £m |
A |
| 1,415 |
| 27 |
| 1,442 |
| 788 |
| 18 |
| 806 |
B |
| 22,217 |
| 1,659 |
| 23,876 |
| 21,923 |
| 1,480 |
| 23,403 |
C |
| 35,153 |
| 6,767 |
| 41,920 |
| 31,353 |
| 5,876 |
| 37,229 |
D |
| 46,108 |
| 5,991 |
| 52,099 |
| 45,455 |
| 5,748 |
| 51,203 |
E |
| 13,305 |
| 1,269 |
| 14,574 |
| 14,455 |
| 1,369 |
| 15,824 |
F |
| 2,709 |
| 46 |
| 2,755 |
| 3,026 |
| 55 |
| 3,081 |
G |
| 628 |
| 10 |
| 638 |
| 695 |
| 13 |
| 708 |
Unclassified |
| 58,788 |
| 3,880 |
| 62,668 |
| 58,442 |
| 4,169 |
| 62,611 |
Total |
| 180,323 |
| 19,649 |
| 199,972 |
| 176,137 |
| 18,728 |
| 194,865 |
NatWest Group Annual Report on Form 20-F 2025 | 72 |
Credit risk – Banking activities continued
Commercial real estate (CRE)
CRE LTV distribution by stage (audited)
The table below shows CRE gross loans and related ECL by LTV band.
| Gross loans | | ECL provisions | | ECL provisions coverage | |||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | % | | % | | % | | % |
≤50% | 7,324 |
| 222 |
| 26 |
| 7,572 |
| 20 |
| 5 |
| 6 |
| 31 |
| 0.3 |
| 2.3 |
| 23.1 |
| 0.4 | |
>50% and ≤60% | 4,417 |
| 144 |
| 40 |
| 4,601 |
| 15 |
| 2 |
| 6 |
| 23 |
| 0.3 |
| 1.4 |
| 15.0 |
| 0.5 | |
>60% and ≤70% | 881 |
| 21 |
| 27 |
| 929 |
| 4 |
| 1 |
| 10 |
| 15 |
| 0.5 |
| 4.8 |
| 37.0 |
| 1.6 | |
>70% and ≤100% | 270 | 146 | 35 | 451 | 1 | 4 | 19 | 24 | 0.4 | 2.7 | 54.3 | 5.3 | ||||||||||||
>100% | 183 |
| 2 |
| 83 |
| 268 |
| 2 |
| — |
| 39 |
| 41 |
| 1.1 |
| — |
| 47.0 |
| 15.3 | |
Total with LTVs |
| 13,075 |
| 535 |
| 211 |
| 13,821 |
| 42 |
| 12 |
| 80 |
| 134 |
| 0.3 |
| 2.2 |
| 37.9 |
| 1.0 |
Total portfolio average LTV |
| 48 | % | 58 | % | 115 | % | 49 | % | |||||||||||||||
Other Investment (1) |
| 2,745 |
| 331 |
| 36 |
| 3,112 |
| 5 |
| 4 |
| 11 |
| 20 |
| 0.2 |
| 1.2 |
| 30.6 |
| 0.6 |
Investment |
| 15,820 |
| 866 |
| 247 |
| 16,933 |
| 47 |
| 16 |
| 91 |
| 154 |
| 0.3 |
| 1.8 |
| 36.8 |
| 0.9 |
Development and other (2) |
| 2,018 |
| 406 |
| 47 |
| 2,471 |
| 8 |
| 6 |
| 29 |
| 43 |
| 0.4 |
| 1.5 |
| 61.7 |
| 1.7 |
Total |
| 17,838 |
| 1,272 |
| 294 |
| 19,404 |
| 55 |
| 22 |
| 120 |
| 197 |
| 0.3 |
| 1.7 |
| 40.8 |
| 1.0 |
2024 |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
≤50% | 7,334 |
| 380 |
| 48 |
| 7,762 |
| 28 |
| 6 |
| 7 |
| 41 |
| 0.4 |
| 1.6 |
| 14.6 |
| 0.5 | |
>50% and ≤60% | 3,829 |
| 169 |
| 53 |
| 4,051 |
| 19 |
| 5 |
| 9 |
| 33 |
| 0.5 |
| 3.0 |
| 17.0 |
| 0.8 | |
>60% and ≤70% | 584 |
| 198 |
| 34 |
| 816 |
| 3 |
| 5 |
| 8 |
| 16 |
| 0.5 |
| 2.5 |
| 23.5 |
| 2.0 | |
>70% and ≤100% | 312 | 83 | 79 | 474 | 2 | 4 | 21 | 27 | 0.6 | 4.8 | 26.6 | 5.7 | ||||||||||||
>100% | 139 |
| 8 |
| 119 |
| 266 |
| 1 |
| — |
| 56 |
| 57 |
| 0.7 |
| — |
| 47.1 |
| 21.4 | |
Total with LTVs |
| 12,198 |
| 838 |
| 333 |
| 13,369 |
| 53 |
| 20 |
| 101 |
| 174 |
| 0.4 |
| 2.4 |
| 30.3 |
| 1.3 |
Total portfolio average LTV |
| 46 | % | 51 | % | 102 | % | 48 | % | |
| |
| |
| |
| |
| |
| |
| |
Other Investment (1) |
| 2,132 |
| 348 |
| 41 |
| 2,521 |
| 6 |
| 6 |
| 15 |
| 27 |
| 0.3 |
| 1.7 |
| 36.6 |
| 1.1 |
Investment |
| 14,330 |
| 1,186 |
| 374 |
| 15,890 |
| 59 |
| 26 |
| 116 |
| 201 |
| 0.4 |
| 2.2 |
| 31.0 |
| 1.3 |
Development and other (2) |
| 1,861 |
| 331 |
| 59 |
| 2,251 |
| 11 |
| 4 |
| 30 |
| 45 |
| 0.6 |
| 1.2 |
| 50.8 |
| 2.0 |
Total |
| 16,191 |
| 1,517 |
| 433 |
| 18,141 |
| 70 |
| 30 |
| 146 |
| 246 |
| 0.4 |
| 2.0 |
| 33.7 |
| 1.4 |
| (1) | Relates mainly to business banking and unsecured corporate lending. |
| (2) | Relates to the development of commercial and residential properties, along with CRE activities that are not strictly investment or development. LTV is not a meaningful measure for this type of lending activity. |
| ● | Overall – The majority of the CRE portfolio was located and managed in the UK. Business appetite and strategy was aligned across NatWest Group. |
| ● | 2025 trends – There was strong growth in the residential and retail sector, with other CRE sectors remaining broadly flat. LTV profile remained stable. |
| ● | Credit quality – Credit quality improved, with marginally fewer exposures in the Wholesale Problem Debt Management framework. |
| ● | Risk appetite – Lending appetite is subject to regular review and implemented at sub-sector level. Overall appetite slightly increased over the year supported by the view that cyclical risks are currently at a lower level. |
NatWest Group Annual Report on Form 20-F 2025 | 73 |
Credit risk – Banking activities continued
Flow statements (audited)
The flow statements that follow show the main ECL and related income statement movements. They also show the changes in ECL as well as the changes in related financial assets used in determining ECL. Due to differences in scope, exposures may differ from those reported in other tables, principally in relation to exposures in Stage 1 and Stage 2. These differences do not have a material ECL effect. Other points to note:
| ● | Financial assets include treasury liquidity portfolios, comprising balances at central banks and debt securities, as well as loans. Both modelled and non-modelled portfolios are included. |
| ● | Stage transfers (for example, exposures moving from Stage 1 into Stage 2) are a key feature of the ECL movements, with the net re-measurement cost of transitioning to a worse stage being a primary driver of income statement charges. Similarly, there is an ECL benefit for accounts improving stage. |
| ● | Changes in risk parameters shows the reassessment of the ECL within a given stage, including any ECL overlays and residual income statement gains or losses at the point of write-off or accounting write-down. |
| ● | Other (P&L only items) includes any subsequent changes in the value of written-down assets (for example, fortuitous recoveries) along with other direct write-off items such as direct recovery costs. Other (P&L only items) affects the income statement but does not affect balance sheet ECL movements. |
| ● | Amounts written-off represent the gross asset written-off against accounts with ECL, including the net asset written-off for any debt sale activity. |
| ● | There were some flows from Stage 1 into Stage 3 including transfers due to unexpected default events with a post model adjustment in place for Commercial & Institutional to account for this risk. |
| ● | The effect of any change in post model adjustments during the year is typically reported under changes in risk parameters, as are any effects arising from changes to the underlying models. |
| ● | All movements are captured monthly and aggregated. Interest suspended post default is included within Stage 3 ECL with the movement in the value of suspended interest during the year reported under currency translation and other adjustments. |
| Stage 1 | | Stage 2 | | Stage 3 | | Total | |||||||||
Financial | Financial | Financial | Financial | |||||||||||||
assets | ECL | assets | ECL | assets | ECL | assets | ECL | |||||||||
NatWest Group total | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
At 1 January 2025 |
| 515,556 |
| 598 |
| 42,165 |
| 787 |
| 5,901 |
| 2,040 |
| 563,622 |
| 3,425 |
Currency translation and other adjustments |
| (644) |
| — |
| 14 |
| 1 |
| 156 |
| 163 |
| (474) |
| 164 |
Transfers from Stage 1 to Stage 2 |
| (40,165) |
| (229) |
| 40,165 |
| 229 |
| — |
| — |
| — |
| — |
Transfers from Stage 2 to Stage 1 |
| 33,789 |
| 433 |
| (33,789) |
| (433) |
| — |
| — |
| — |
| — |
Transfers to Stage 3 |
| (397) |
| (5) |
| (2,527) |
| (258) |
| 2,924 |
| 263 |
| — |
| — |
Transfers from Stage 3 |
| 161 |
| 18 |
| 999 |
| 47 |
| (1,160) |
| (65) |
| — |
| — |
Net re-measurement of ECL on stage transfer |
|
| (299) |
|
| 616 |
| — |
| 447 |
|
| 764 | |||
Changes in risk parameters |
|
| (114) |
|
| (18) |
| — |
| 312 |
|
| 180 | |||
Other changes in net exposure |
| 38,094 |
| 212 |
| (7,429) |
| (175) |
| (2,349) |
| (256) |
| 28,316 |
| (219) |
Other (P&L only items) |
|
| (3) |
|
| (2) |
| — |
| (49) |
|
| (54) | |||
Income statement (releases)/charges |
|
| (204) |
|
| 421 |
|
| 454 |
|
| 671 | ||||
Amounts written-off |
| — |
| — |
| — |
| — |
| (579) |
| (579) |
| (579) |
| (579) |
Unwinding of discount |
|
| — |
|
| — |
|
| (150) |
|
| (150) | ||||
At 31 December 2025 |
| 546,394 |
| 614 |
| 39,598 |
| 796 |
| 4,893 |
| 2,175 |
| 590,885 |
| 3,585 |
Net carrying amount |
| 545,780 |
|
| 38,802 |
|
| 2,718 |
|
| 587,300 |
| ||||
At 1 January 2024 |
| 504,345 |
| 709 |
| 40,294 |
| 976 |
| 5,621 |
| 1,960 |
| 550,260 |
| 3,645 |
2024 movements |
| 11,211 |
| (111) |
| 1,871 |
| (189) |
| 280 |
| 80 |
| 13,362 |
| (220) |
At 31 December 2024 |
| 515,556 |
| 598 |
| 42,165 |
| 787 |
| 5,901 |
| 2,040 |
| 563,622 |
| 3,425 |
Net carrying amount |
| 514,958 |
|
| 41,378 |
|
| 3,861 |
|
| 560,197 |
| ||||
NatWest Group Annual Report on Form 20-F 2025 | 74 |
Credit risk – Banking activities continued
Flow statements (audited) continued
| Stage 1 | | Stage 2 | | Stage 3 | | Total | |||||||||
Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | |||||||||
Retail Banking - mortgages | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
At 1 January 2025 |
| 171,333 |
| 76 |
| 20,992 |
| 60 |
| 2,303 |
| 305 |
| 194,628 |
| 441 |
Currency translation and other adjustments |
| — |
| — |
| — |
| — |
| 92 |
| 92 |
| 92 |
| 92 |
Transfers from Stage 1 to Stage 2 |
| (16,507) |
| (17) |
| 16,507 |
| 17 |
| — |
| — |
| — |
| — |
Transfers from Stage 2 to Stage 1 |
| 17,824 |
| 24 |
| (17,824) |
| (24) |
| — |
| — |
| — |
| — |
Transfers to Stage 3 |
| (14) |
| — |
| (865) |
| (7) |
| 879 |
| 7 |
| — |
| — |
Transfers from Stage 3 |
| 23 |
| — |
| 806 |
| 11 |
| (829) |
| (11) |
| — |
| — |
Net re-measurement of ECL on stage transfer |
|
| (7) |
|
| 7 |
|
| 7 |
|
| 7 | ||||
Changes in risk parameters |
|
| (19) |
|
| (18) |
|
| 74 |
|
| 37 | ||||
Other changes in net exposure |
| 9,277 |
| (13) |
| (3,792) |
| (10) |
| (1,274) |
| (152) |
| 4,211 |
| (175) |
Other (P&L only items) |
|
| — |
|
| — |
|
| (16) |
|
| (16) | ||||
Income statement (releases)/charges |
|
| (39) |
|
| (21) |
|
| (87) |
|
| (147) | ||||
Amounts written-off |
| — |
| — |
| — |
| — |
| (87) |
| (87) |
| (87) |
| (87) |
Unwinding of discount |
|
| — |
|
| — |
|
| (67) |
|
| (67) | ||||
At 31 December 2025 |
| 181,936 |
| 44 |
| 15,824 |
| 36 |
| 1,084 |
| 168 |
| 198,844 |
| 248 |
Net carrying amount |
| 181,892 |
|
| 15,788 |
|
| 916 |
|
| 198,596 |
| ||||
At 1 January 2024 |
| 174,038 |
| 87 |
| 17,827 |
| 60 |
| 2,068 |
| 250 |
| 193,933 |
| 397 |
2024 movements |
| (2,705) |
| (11) |
| 3,165 |
| — |
| 235 |
| 55 |
| 695 |
| 44 |
At 31 December 2024 |
| 171,333 |
| 76 |
| 20,992 |
| 60 |
| 2,303 |
| 305 |
| 194,628 |
| 441 |
Net carrying amount |
| 171,257 |
|
| 20,932 |
|
| 1,998 |
|
| 194,187 |
| ||||
| ● | ECL coverage for mortgages decreased during the year, primarily driven by the reduction in economic uncertainty post model adjustments (supported by back-testing) and a definition of default systems and process enhancement in the first half of the year. Additionally, the transfer of £2.1 billion of mortgages with £0.1 billion of ECL to a securitisation special purpose vehicle further reduced ECL coverage overall, noting that £0.8 billion of these loans were in Stage 3. |
| ● | Stage 3 inflows reduced in the year, with the portfolio showing continued resilience alongside the effect of the definition of default systems and process enhancement earlier in the year. |
| ● | Stable portfolio trends and PD model enhancements underpinned PD reductions in the year, resulting in a reduction in Stage 2 balances. |
| ● | The relatively small ECL cost for net re-measurement on transfer into Stage 3 included the effect of risk targeted ECL adjustments, when previously in the good book. Refer to the ECL post model adjustments section for further details. |
| ● | Write-off occurs once the repossessed property has been sold and there is a residual shortfall balance remaining outstanding. This would typically be within five years from default but can be longer. |
NatWest Group Annual Report on Form 20-F 2025 | 75 |
Credit risk – Banking activities continued
Flow statements (audited) continued
| Stage 1 | | Stage 2 | | Stage 3 | | Total | |||||||||
Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | |||||||||
Retail Banking - credit cards | £m | £m | £m | £m | £m | £m | £m | £m | ||||||||
At 1 January 2025 |
| 4,523 |
| 76 |
| 2,034 |
| 186 |
| 162 |
| 117 |
| 6,719 |
| 379 |
Currency translation and other adjustments |
| — |
| — |
| — |
| — |
| 6 |
| 6 |
| 6 |
| 6 |
Transfers from Stage 1 to Stage 2 |
| (2,329) |
| (52) |
| 2,329 |
| 52 |
| — |
| — |
| — |
| — |
Transfers from Stage 2 to Stage 1 |
| 1,339 |
| 105 |
| (1,339) |
| (105) |
| — |
| — |
| — |
| — |
Transfers to Stage 3 |
| (36) |
| (1) |
| (231) |
| (78) |
| 267 |
| 79 |
| — |
| — |
Transfers from Stage 3 |
| 3 |
| 2 |
| 14 |
| 5 |
| (17) |
| (7) |
| — |
| — |
Net re-measurement of ECL on stage transfer |
|
| (71) |
|
| 191 |
|
| 101 |
|
| 221 | ||||
Changes in risk parameters |
|
| 15 |
|
| 30 |
|
| 25 |
|
| 70 | ||||
Other changes in net exposure |
| 2,243 |
| 50 |
| (640) |
| (77) |
| (33) |
| (1) |
| 1,570 |
| (28) |
Other (P&L only items) |
|
| — |
|
| — |
|
| (1) |
|
| (1) | ||||
Income statement (releases)/charges |
|
| (6) |
|
| 144 |
|
| 124 |
|
| 262 | ||||
Amounts written-off |
| — |
| — |
| — |
| — |
| (118) |
| (118) |
| (118) |
| (118) |
Unwinding of discount |
|
| — |
|
| — |
|
| (12) |
|
| (12) | ||||
At 31 December 2025 |
| 5,743 |
| 124 |
| 2,167 |
| 204 |
| 267 |
| 190 |
| 8,177 |
| 518 |
Net carrying amount |
| 5,619 |
|
| 1,963 |
|
| 77 |
|
| 7,659 |
| ||||
At 1 January 2024 |
| 3,475 |
| 70 |
| 2,046 |
| 204 |
| 146 |
| 89 |
| 5,667 |
| 363 |
2024 movements |
| 1,048 |
| 6 |
| (12) |
| (18) |
| 16 |
| 28 |
| 1,052 |
| 16 |
At 31 December 2024 |
| 4,523 |
| 76 |
| 2,034 |
| 186 |
| 162 |
| 117 |
| 6,719 |
| 379 |
Net carrying amount |
| 4,447 |
|
| 1,848 |
|
| 45 |
|
| 6,340 |
| ||||
| ● | Overall ECL for cards increased during 2025, driven primarily by the acquisition of Sainsbury’s Bank credit card balances alongside continued organic portfolio growth, reflecting strong customer demand, while sustaining robust risk appetite. |
| ● | Flow rates into Stage 3 were slightly higher in 2025 compared to 2024, reflecting the strategic growth and seasoning of credit card balances since 2022. This trend contributed to an increase in PDs during the year, driving a net flow into Stage 2 from Stage 1. |
| ● | Charge-off (analogous to partial write-off) typically occurs after 12 missed payments. |
NatWest Group Annual Report on Form 20-F 2025 | 76 |
Credit risk – Banking activities continued
Flow statements (audited) continued
| Stage 1 | | Stage 2 | | Stage 3 | | Total | |||||||||
Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | |||||||||
Retail Banking - other personal unsecured | £m | £m | £m | £m | £m | £m | £m | £m | ||||||||
At 1 January 2025 |
| 5,605 |
| 127 |
| 1,465 |
| 182 |
| 833 |
| 641 |
| 7,903 |
| 950 |
Currency translation and other adjustments |
| — |
| — |
| — |
| — |
| 27 |
| 27 |
| 27 |
| 27 |
Transfers from Stage 1 to Stage 2 |
| (2,145) |
| (95) |
| 2,145 |
| 95 |
| — |
| — |
| — |
| — |
Transfers from Stage 2 to Stage 1 |
| 1,471 |
| 157 |
| (1,471) |
| (157) |
| — |
| — |
| — |
| — |
Transfers to Stage 3 |
| (79) |
| (3) |
| (329) |
| (118) |
| 408 |
| 121 |
| — |
| — |
Transfers from Stage 3 |
| 7 |
| 3 |
| 24 |
| 10 |
| (31) |
| (13) |
| — |
| — |
Net re-measurement of ECL on stage transfer |
|
| (100) |
|
| 219 |
|
| 63 |
|
| 182 | ||||
Changes in risk parameters |
|
| (33) |
|
| (10) |
|
| 126 |
|
| 83 | ||||
Other changes in net exposure |
| 1,992 |
| 111 |
| (389) |
| (37) |
| (128) |
| (47) |
| 1,475 |
| 27 |
Other (P&L only items) |
|
| — |
|
| — |
|
| 30 |
|
| 30 | ||||
Income statement (releases)/charges |
|
| (22) |
|
| 172 |
|
| 172 |
|
| 322 | ||||
Amounts written-off |
| — |
| — |
| — |
| — |
| (168) |
| (168) |
| (168) |
| (168) |
Unwinding of discount |
|
| — |
|
| — |
|
| (33) |
|
| (33) | ||||
At 31 December 2025 |
| 6,851 |
| 167 |
| 1,445 |
| 184 |
| 941 |
| 717 |
| 9,237 |
| 1,068 |
Net carrying amount |
| 6,684 |
|
| 1,261 |
|
| 224 |
|
| 8,169 |
| ||||
At 1 January 2024 |
| 5,240 |
| 149 |
| 1,657 |
| 238 |
| 963 |
| 758 |
| 7,860 |
| 1,145 |
2024 movements |
| 365 |
| (22) |
| (192) |
| (56) |
| (130) |
| (117) |
| 43 |
| (195) |
At 31 December 2024 |
| 5,605 |
| 127 |
| 1,465 |
| 182 |
| 833 |
| 641 |
| 7,903 |
| 950 |
Net carrying amount |
| 5,478 |
|
| 1,283 |
|
| 192 |
|
| 6,953 |
| ||||
| ● | Total ECL increased during the year, primarily driven by the acquisition of Sainsbury’s Bank loan balances and continued organic loan book growth, while arrears performance remained stable, resulting in ECL coverage levels broadly consistent with 31 December 2024. |
| ● | Flow rates into Stage 3 remained stable, in line with broader portfolio trends on arrears, with overall Stage 3 balances increasing as a result of reduced debt sale activity overall in the year. |
| ● | Write-off occurs once recovery activity with the customer has been concluded or there are no further recoveries expected, but no later than six years after default. |
NatWest Group Annual Report on Form 20-F 2025 | 77 |
Credit risk – Banking activities continued
Flow statements (audited) continued
| Stage 1 | | Stage 2 | | Stage 3 | | Total | |||||||||
Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | |||||||||
Commercial & Institutional-corporate | £m | £m | £m | £m | £m | £m | £m | £m | ||||||||
At 1 January 2025 |
| 62,575 |
| 175 |
| 11,450 |
| 273 |
| 1,562 |
| 659 |
| 75,587 |
| 1,107 |
Currency translation and other adjustments |
| (331) |
| — |
| 17 |
| — |
| 24 |
| 18 |
| (290) |
| 18 |
Inter-group transfers |
| 156 |
| 1 |
| 8 |
| 1 |
| 1 |
| — |
| 165 |
| 2 |
Transfers from Stage 1 to Stage 2 |
| (14,018) |
| (50) |
| 14,018 |
| 50 |
| — |
| — |
| — |
| — |
Transfers from Stage 2 to Stage 1 |
| 8,374 |
| 103 |
| (8,374) |
| (103) |
| — |
| — |
| — |
| — |
Transfers to Stage 3 |
| (170) |
| (1) |
| (741) |
| (44) |
| 911 |
| 45 |
| — |
| — |
Transfers from Stage 3 |
| 54 |
| 7 |
| 82 |
| 15 |
| (136) |
| (22) |
| — |
| — |
Net re-measurement of ECL on stage transfer |
|
| (84) |
|
| 151 |
|
| 214 |
|
| 281 | ||||
Changes in risk parameters |
|
| (22) |
|
| (9) |
|
| 42 |
|
| 11 | ||||
Other changes in net exposure |
| 7,479 |
| 30 |
| (1,776) |
| (42) |
| (591) |
| (37) |
| 5,112 |
| (49) |
Other (P&L only items) |
|
| (4) |
|
| (3) |
|
| (61) |
|
| (68) | ||||
Income statement (releases)/charges |
|
| (80) |
|
| 97 |
|
| 158 |
|
| 175 | ||||
Amounts written-off |
| — |
| — |
| — |
| — |
| (166) |
| (166) |
| (166) |
| (166) |
Unwinding of discount |
|
| — |
|
| — |
|
| (26) |
|
| (26) | ||||
At 31 December 2025 |
| 64,119 |
| 159 |
| 14,684 |
| 292 |
| 1,605 |
| 727 |
| 80,408 |
| 1,178 |
Net carrying amount |
| 63,960 |
|
| 14,392 |
|
| 878 |
|
| 79,230 |
| ||||
At 1 January 2024 |
| 61,402 |
| 226 |
| 12,275 |
| 344 |
| 1,454 |
| 602 |
| 75,131 |
| 1,172 |
2024 movements |
| 1,173 |
| (51) |
| (825) |
| (71) |
| 108 |
| 57 |
| 456 |
| (65) |
At 31 December 2024 |
| 62,575 |
| 175 |
| 11,450 |
| 273 |
| 1,562 |
| 659 |
| 75,587 |
| 1,107 |
Net carrying amount |
| 62,400 |
|
| 11,177 |
|
| 903 |
|
| 74,480 |
| ||||
| ● | Total ECL increased in the year primarily reflecting a small number of individual defaults. Despite the growth in Stage 3 ECL, transfers into Stage 3 reduced compared to 2024, with a notable reduction in transfers seen in the second half of 2025. |
| ● | Total performing book ECL was stable year-on-year, but with a small increase in Stage 2, reflecting the net transfer of assets from Stage 1 into Stage 2. |
NatWest Group Annual Report on Form 20-F 2025 | 78 |
Credit risk – Banking activities continued
Flow statements (audited) continued
Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | |||||||||
Commercial & Institutional - property | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
At 1 January 2025 |
| 27,468 |
| 77 |
| 2,980 |
| 61 |
| 590 |
| 225 |
| 31,038 |
| 363 |
Currency translation and other adjustments |
| 8 |
| — |
| — |
| — |
| 9 |
| — |
| 17 |
| — |
Inter-group transfers |
| (175) |
| — |
| (7) |
| — |
| (1) |
| — |
| (183) |
| — |
Transfers from Stage 1 to Stage 2 |
| (2,569) |
| (8) |
| 2,569 |
| 8 |
| — |
| — |
| — |
| — |
Transfers from Stage 2 to Stage 1 |
| 2,021 |
| 23 |
| (2,021) |
| (23) |
| — |
| — |
| — |
| — |
Transfers to Stage 3 |
| (6) |
| — |
| (143) |
| (8) |
| 149 |
| 8 |
| — |
| — |
Transfers from Stage 3 |
| 45 |
| 4 |
| 28 |
| 5 |
| (73) |
| (9) |
| — |
| — |
Net re-measurement of ECL on stage transfer |
|
| (22) |
|
| 31 |
|
| 13 |
|
| 22 | ||||
Changes in risk parameters |
|
| (28) |
|
| (8) |
|
| 18 |
|
| (18) | ||||
Other changes in net exposure |
| 3,692 |
| 15 |
| (313) |
| (10) |
| (199) |
| (21) |
| 3,180 |
| (16) |
Other (P&L only items) |
|
| — |
|
| — |
|
| — |
|
| — | ||||
Income statement (releases)/charges |
|
| (35) |
|
| 13 |
|
| 10 |
|
| (12) | ||||
Amounts written-off |
| — |
| — |
| — |
| — |
| (33) |
| (33) |
| (33) |
| (33) |
Unwinding of discount |
|
| — |
|
| — |
|
| (8) |
|
| (8) | ||||
At 31 December 2025 |
| 30,484 |
| 61 |
| 3,093 |
| 56 |
| 442 |
| 193 |
| 34,019 |
| 310 |
Net carrying amount |
| 30,423 |
|
| 3,037 |
|
| 249 |
|
| 33,709 |
| ||||
At 1 January 2024 |
| 26,040 |
| 94 |
| 3,155 |
| 89 |
| 606 |
| 195 |
| 29,801 |
| 378 |
2024 movements |
| 1,428 |
| (17) |
| (175) |
| (28) |
| (16) |
| 30 |
| 1,237 |
| (15) |
At 31 December 2024 |
| 27,468 |
| 77 |
| 2,980 |
| 61 |
| 590 |
| 225 |
| 31,038 |
| 363 |
Net carrying amount |
| 27,391 |
|
| 2,919 |
|
| 365 |
|
| 30,675 |
| ||||
| ● | Total ECL for property exposures reduced notably in the year, with reductions observed in all stages. |
| ● | In Stage 3, both total financial assets and ECL reduced as there were low levels of default in the year, which were more than offset by the effects of repayments and write-offs. |
| ● | Performing book ECL reduced in the year driven by changes in risk parameters, which included the impact of reductions in post model adjustments. |
NatWest Group Annual Report on Form 20-F 2025 | 79 |
Credit risk – Banking activities continued
Flow statements (audited) continued
Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | Financial assets | ECL | |||||||||
Commercial & Institutional - other | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
At 1 January 2025 |
| 93,724 |
| 37 |
| 1,739 |
| 12 |
| 123 |
| 57 |
| 95,586 |
| 106 |
Currency translation and other adjustments |
| (377) |
| — |
| (3) |
| — |
| — |
| 14 |
| (380) |
| 14 |
Inter-group transfers |
| 18 |
| — |
| (1) |
| — |
| — |
| — |
| 17 |
| — |
Transfers from Stage 1 to Stage 2 |
| (960) |
| (3) |
| 960 |
| 3 |
| — |
| — |
| — |
| — |
Transfers from Stage 2 to Stage 1 |
| 1,714 |
| 11 |
| (1,714) |
| (11) |
| — |
| — |
| — |
| — |
Transfers to Stage 3 |
| (82) |
| — |
| (29) |
| (1) |
| 111 |
| 1 |
| — |
| — |
Transfers from Stage 3 |
| 8 |
| — |
| 9 |
| — |
| (17) |
| — |
| — |
| — |
Net re-measurement of ECL on stage transfer |
|
| (8) |
|
| 7 |
|
| 44 |
|
| 43 | ||||
Changes in risk parameters |
|
| (11) |
|
| (2) |
|
| 19 |
|
| 6 | ||||
Other changes in net exposure |
| 3,828 |
| 10 |
| (317) |
| 1 |
| (17) |
| 5 |
| 3,494 |
| 16 |
Other (P&L only items) |
|
| — |
|
| — |
|
| (3) |
|
| (3) | ||||
Income statement (releases)/charges |
|
| (9) |
|
| 6 |
|
| 65 |
|
| 62 | ||||
Amounts written-off |
| — |
| — |
| — |
| — |
| (6) |
| (6) |
| (6) |
| (6) |
Unwinding of discount |
|
| — |
|
| — |
|
| (3) |
|
| (3) | ||||
At 31 December 2025 | 97,873 | 36 | 644 | 9 | 194 | 128 | 98,711 | 173 | ||||||||
Net carrying amount | 97,837 | 635 | 66 | 98,538 | ||||||||||||
At 1 January 2024 | 88,860 | 36 | 1,599 | 14 | 101 | 22 | 90,560 | 72 | ||||||||
2024 movements | 4,864 | 1 | 140 | (2) | 22 | 35 | 5,026 | 34 | ||||||||
At 31 December 2024 |
| 93,724 |
| 37 |
| 1,739 |
| 12 |
| 123 |
| 57 |
| 95,586 |
| 106 |
Net carrying amount |
| 93,687 |
|
| 1,727 |
|
| 66 |
|
| 95,480 |
| ||||
| ● | The increase in Stage 3 financial assets and ECL primarily reflected the impact of a single large flow to default in the year. |
| ● | Performing book ECL was marginally lower at 31 December 2025, with the Stage 2 ECL reduction reflective of exposure flowing back into Stage 1. |
NatWest Group Annual Report on Form 20-F 2025 | 80 |
Credit risk – Banking activities continued
Stage 2 decomposition by a significant increase in credit risk trigger
Mortgages | Credit cards | Other | Total | |||||||||||||
2025 | | £m | | % | | £m | | % | | £m | | % | | £m | | % |
Personal trigger (1) | | | | | ||||||||||||
PD movement |
| 10,305 | 64.6 |
| 1,544 | 74.1 |
| 790 | 53.7 |
| 12,639 | 64.8 | ||||
PD persistence |
| 1,960 | 12.3 |
| 380 | 18.3 |
| 283 | 19.3 |
| 2,623 | 13.5 | ||||
Adverse credit bureau recorded with credit reference agency |
| 1,876 | 11.8 |
| 89 | 4.3 |
| 129 | 8.8 |
| 2,094 | 10.7 | ||||
Forbearance support provided |
| 178 | 1.1 |
| 2 | 0.1 |
| 7 | 0.5 |
| 187 | 1.0 | ||||
Customers in collections |
| 210 | 1.3 |
| 22 | 1.1 |
| 20 | 1.4 |
| 252 | 1.3 | ||||
Collective SICR and other reasons (2) |
| 1,287 | 8.1 |
| 44 | 2.1 |
| 232 | 15.8 |
| 1,563 | 8.0 | ||||
Days past due >30 |
| 135 | 0.8 |
| — | — |
| 7 | 0.5 |
| 142 | 0.7 | ||||
| 15,951 | 100.0 |
| 2,081 | 100.0 |
| 1,468 | 100.0 |
| 19,500 | 100.0 | |||||
2024 | | |
| | | | | | ||||||||
Personal trigger (1) | | | | | | | | | | | | | ||||
PD movement | 14,480 | 68.8 |
| 1,425 | 72.9 |
| 809 | 49.9 |
| 16,714 | 67.8 | |||||
PD persistence | 3,951 | 18.8 |
| 414 | 21.2 |
| 388 | 23.9 |
| 4,753 | 19.3 | |||||
Adverse credit bureau recorded with credit reference agency | 936 | 4.4 |
| 71 | 3.6 |
| 119 | 7.3 |
| 1,126 | 4.6 | |||||
Forbearance support provided | 189 | 0.9 |
| 1 | 0.1 |
| 9 | 0.6 |
| 199 | 0.8 | |||||
Customers in collections | 169 | 0.8 |
| 3 | 0.2 |
| 2 | 0.1 |
| 174 | 0.7 | |||||
Collective SICR and other reasons (2) | 1,248 | 5.9 |
| 39 | 2.0 |
| 290 | 17.9 |
| 1,577 | 6.4 | |||||
Days past due >30 | 88 | 0.4 |
| 0 | 0.0 |
| 5 | 0.3 |
| 93 | 0.4 | |||||
21,061 | 100.0 |
| 1,953 | 100.0 |
| 1,622 | 100.0 |
| 24,636 | 100.0 | ||||||
For the notes to this table refer to the following page.
| ● | Overall Stage 2 levels for Personal reduced, primarily driven by mortgages where stable portfolio trends and a PD model enhancements underpinned PD reductions in the year. The proportion of PD driven deterioration in Stage 2 remained broadly consistent with 31 December 2024 overall. |
| ● | The reduction of PDs on mortgages, partly due to PD model enhancements, led to an increase in the proportion of Stage 2 captured by qualitative backstops, relative to last year. |
| ● | Higher risk mortgage customers who utilised Mortgage Charter support measures continued to be collectively migrated into Stage 2 and were captured in the collective SICR and other reasons category. |
| ● | Accounts that were less than 30 days past due continued to represent the vast majority of the Stage 2 population. |
NatWest Group Annual Report on Form 20-F 2025 | 81 |
Credit risk – Banking activities continued
Stage 2 decomposition by a significant increase in credit risk trigger continued
Corporate and other (3) | Financial institutions | Sovereign | Total | |||||||||||||
2025 | | £m | | % | | £m | | % | | £m | | % | | £m | | % |
Non-Personal trigger (1) |
| |
| |
| |
| |
| |
| |
| |
| |
PD movement |
| 16,238 |
| 87.9 |
| 148 |
| 41.5 |
| 141 |
| 53.0 |
| 16,527 |
| 86.6 |
PD persistence |
| 214 |
| 1.2 |
| 2 |
| 0.6 |
| — |
| — |
| 216 |
| 1.1 |
Heightened Monitoring and Risk of Credit Loss |
| 1,106 |
| 6.0 |
| 74 |
| 20.8 |
| 124 |
| 46.6 |
| 1,304 |
| 6.8 |
Forbearance support provided |
| 185 |
| 1.0 |
| — |
| — |
| — |
| — |
| 185 |
| 1.0 |
Customers in collections |
| 21 |
| 0.1 |
| — |
| — |
| — |
| — |
| 21 |
| 0.1 |
Collective SICR and other reasons (2) |
| 571 |
| 3.1 |
| 130 |
| 36.5 |
| 1 |
| 0.4 |
| 702 |
| 3.7 |
Days past due >30 |
| 125 |
| 0.7 |
| 2 |
| 0.6 |
| — |
| — |
| 127 |
| 0.7 |
| 18,460 |
| 100.0 |
| 356 |
| 100.0 |
| 266 |
| 100.0 |
| 19,082 |
| 100.0 | |
2024 | | | | | | | | | ||||||||
Non-Personal trigger (1) |
| | ||||||||||||||
PD movement |
| 11,800 |
| 81.6 |
| 971 |
| 78.2 |
| — |
| — |
| 12,771 |
| 80.6 |
PD persistence |
| 310 |
| 2.1 |
| 2 |
| 0.2 |
| — |
| — |
| 312 |
| 2.0 |
Heightened Monitoring and Risk of Credit Loss |
| 1,599 |
| 11.1 |
| 83 |
| 6.7 |
| 132 |
| 99.2 |
| 1,814 |
| 11.5 |
Forbearance support provided |
| 229 |
| 1.6 |
| — |
| — |
| — |
| — |
| 229 |
| 1.4 |
Customers in collections |
| 34 |
| 0.2 |
| — |
| — |
| — |
| — |
| 34 |
| 0.2 |
Collective SICR and other reasons (2) |
| 396 |
| 2.7 |
| 172 |
| 13.9 |
| 1 |
| 0.8 |
| 569 |
| 3.6 |
Days past due >30 |
| 96 |
| 0.7 |
| 13 |
| 1.0 |
| — |
| — |
| 109 |
| 0.7 |
| 14,464 |
| 100.0 |
| 1,241 |
| 100.0 |
| 133 |
| 100 |
| 15,838 |
| 100.0 |
| (1) | The table is prepared on a hierarchical basis from top to bottom, for example, accounts with PD deterioration may also trigger backstop(s) but are only reported under PD deterioration. |
| (2) | Includes cases where a PD assessment cannot be made and accounts where the PD has deteriorated beyond a prescribed backstop threshold aligned to risk management practices. |
| ● | Stage 2 exposures increased during the year, in part reflecting the impact of post model adjustments in applying a risk profile downgrade to sectors deemed most at risk of economic uncertainty not captured in underlying models. The impact of cases moving into Stage 2 due to post model adjustments is captured in PD movement. |
| ● | Non-Personal exposures in Stage 2 continued to be mainly captured through PD movement and presence on the Wholesale Problem Debt Management framework, which are the primary forward-looking credit deterioration triggers. |
NatWest Group Annual Report on Form 20-F 2025 | 82 |
Credit risk – Banking activities continued
Stage 3 vintage analysis
The table below shows estimated vintage analysis of the material Stage 3 portfolios.
2025 | 2024 |
| |||||||
| Retail Banking mortgages (1) | | Non-Personal | | Retail Banking mortgages (1) | | Non-Personal |
| |
Stage 3 loans (£bn) |
| 1.1 |
| 2.2 |
| 2.3 |
| 2.4 |
|
Vintage (time in default): | |||||||||
<1 year |
| 40 | % | 35 | % | 38 | % | 34 | % |
1-3 years |
| 31 | % | 42 | % | 41 | % | 45 | % |
3-5 years |
| 11 | % | 14 | % | 8 | % | 11 | % |
>5 years |
| 18 | % | 9 | % | 13 | % | 10 | % |
| 100 | % | 100 | % | 100 | % | 100 | % | |
| (1) | Retail Banking excludes a non-material amount of lending held on relatively small legacy portfolios. |
| ● | For Retail Banking mortgages, the value of Stage 3 defaulted assets reduced during 2025, primarily as a result of balance sheet management actions in 2025. Furthermore, there was an enhancement to the mortgage definition of default systems and process, resulting in approximately £0.4 billion of loans migrating from Stage 3 back to the good book. |
NatWest Group Annual Report on Form 20-F 2025 | 83 |
Credit risk – Banking activities continued
Asset quality (audited)
The table below shows asset quality bands of gross loans and ECL, by stage, for the Personal portfolio.
| Gross loans | ECL provisions | ECL provisions coverage | |||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | % | | % | | % | | % |
Mortgages |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
AQ1-AQ4 |
| 114,087 |
| 6,432 |
| — |
| 120,519 |
| 19 |
| 9 |
| — |
| 28 |
| — |
| 0.1 |
| — |
| — |
AQ5-AQ8 |
| 83,712 |
| 8,584 |
| — |
| 92,296 |
| 26 |
| 21 |
| — |
| 47 |
| — |
| 0.2 |
| — |
| 0.1 |
AQ9 |
| 140 |
| 935 |
| — |
| 1,075 |
| — |
| 6 |
| — |
| 6 |
| — |
| 0.6 |
| — |
| 0.6 |
AQ10 |
| — |
| — |
| 1,339 |
| 1,339 |
| — |
| — |
| 191 |
| 191 |
| — |
| — |
| 14.3 |
| 14.3 |
| 197,939 |
| 15,951 |
| 1,339 |
| 215,229 |
| 45 |
| 36 |
| 191 |
| 272 |
| — |
| 0.2 |
| 14.3 |
| 0.1 | |
Credit cards |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
AQ1-AQ4 |
| 117 |
| — |
| — |
| 117 |
| 1 |
| — |
| — |
| 1 |
| 0.9 |
| — |
| — |
| 0.9 |
AQ5-AQ8 |
| 5,850 |
| 1,967 |
| — |
| 7,817 |
| 123 |
| 181 |
| — |
| 304 |
| 2.1 |
| 9.2 |
| — |
| 3.9 |
AQ9 |
| 21 |
| 114 |
| — |
| 135 |
| 1 |
| 24 |
| — |
| 25 |
| 4.8 |
| 21.1 |
| — |
| 18.5 |
AQ10 |
| — |
| — |
| 242 |
| 242 |
| — |
| — |
| 190 |
| 190 |
| — |
| — |
| 78.5 |
| 78.5 |
| 5,988 |
| 2,081 |
| 242 |
| 8,311 |
| 125 |
| 205 |
| 190 |
| 520 |
| 2.1 |
| 9.9 |
| 78.5 |
| 6.3 | |
Other personal |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
AQ1-AQ4 |
| 765 |
| 112 |
| — |
| 877 |
| 5 |
| 12 |
| — |
| 17 |
| 0.7 |
| 10.7 |
| — |
| 1.9 |
AQ5-AQ8 |
| 8,148 |
| 1,212 |
| — |
| 9,360 |
| 161 |
| 137 |
| — |
| 298 |
| 2.0 |
| 11.3 |
| — |
| 3.2 |
AQ9 |
| 64 |
| 144 |
| — |
| 208 |
| 6 |
| 36 |
| — |
| 42 |
| 9.4 |
| 25.0 |
| — |
| 20.2 |
AQ10 |
| — |
| — |
| 956 |
| 956 |
| — |
| — |
| 731 |
| 731 |
| — |
| — |
| 76.5 |
| 76.5 |
| 8,977 |
| 1,468 |
| 956 |
| 11,401 |
| 172 |
| 185 |
| 731 |
| 1,088 |
| 1.9 |
| 12.6 |
| 76.5 |
| 9.5 | |
Total |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
AQ1-AQ4 |
| 114,969 |
| 6,544 |
| — |
| 121,513 |
| 25 |
| 21 |
| — |
| 46 |
| — |
| 0.3 |
| — |
| — |
AQ5-AQ8 |
| 97,710 |
| 11,763 |
| — |
| 109,473 |
| 310 |
| 339 |
| — |
| 649 |
| 0.3 |
| 2.9 |
| — |
| 0.6 |
AQ9 |
| 225 |
| 1,193 |
| — |
| 1,418 |
| 7 |
| 66 |
| — |
| 73 |
| 3.1 |
| 5.5 |
| — |
| 5.2 |
AQ10 |
| — |
| — |
| 2,537 |
| 2,537 |
| — |
| — |
| 1,112 | 1,112 |
| — |
| — |
| 43.8 |
| 43.8 | |
| 212,904 |
| 19,500 |
| 2,537 |
| 234,941 |
| 342 |
| 426 |
| 1,112 |
| 1,880 |
| 0.2 |
| 2.2 |
| 43.8 |
| 0.8 | |
NatWest Group Annual Report on Form 20-F 2025 | 84 |
Credit risk – Banking activities continued
Asset quality (audited) continued
| Gross loans | ECL provisions | ECL provisions coverage | |||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
2024 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | % | | % | | % | | % |
Mortgages |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
AQ1-AQ4 |
| 104,793 |
| 8,416 |
| — |
| 113,209 |
| 29 |
| 16 |
| — |
| 45 |
| — |
| 0.2 |
| — |
| — |
AQ5-AQ8 |
| 81,263 |
| 11,683 |
| — |
| 92,946 |
| 48 |
| 38 |
| — |
| 86 |
| 0.1 |
| 0.3 |
| — |
| 0.1 |
AQ9 |
| 194 |
| 962 |
| — |
| 1,156 |
| — |
| 6 |
| — |
| 6 |
| — |
| 0.6 |
| — |
| 0.5 |
AQ10 |
| — |
| — |
| 2,535 |
| 2,535 |
| — |
| — |
| 325 |
| 325 |
| — |
| — |
| 12.8 |
| 12.8 |
| 186,250 |
| 21,061 |
| 2,535 |
| 209,846 |
| 77 |
| 60 |
| 325 |
| 462 |
| — |
| 0.3 |
| 12.8 |
| 0.2 | |
Credit cards |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
AQ1-AQ4 |
| 128 |
| — |
| — |
| 128 |
| 1 |
| — |
| — |
| 1 |
| 0.8 |
| — |
| — |
| 0.8 |
AQ5-AQ8 |
| 4,650 |
| 1,866 |
| — |
| 6,516 |
| 75 |
| 169 |
| — |
| 244 |
| 1.6 |
| 9.1 |
| — |
| 3.7 |
AQ9 |
| 23 |
| 87 |
| — |
| 110 |
| 1 |
| 17 |
| — |
| 18 |
| 4.4 |
| 19.5 |
| — |
| 16.4 |
AQ10 |
| — |
| — |
| 176 |
| 176 |
| — |
| — |
| 118 |
| 118 |
| — |
| — |
| 67.1 |
| 67.1 |
| 4,801 |
| 1,953 |
| 176 |
| 6,930 |
| 77 |
| 186 |
| 118 |
| 381 |
| 1.6 |
| 9.5 |
| 67.1 |
| 5.5 | |
Other personal |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
AQ1-AQ4 |
| 691 |
| 127 |
| — |
| 818 |
| 6 |
| 14 |
| — |
| 20 |
| 0.9 |
| 11.0 |
| — |
| 2.4 |
AQ5-AQ8 |
| 6,521 |
| 1,359 |
| — |
| 7,880 |
| 120 |
| 134 |
| — |
| 254 |
| 1.8 |
| 9.9 |
| — |
| 3.2 |
AQ9 |
| 55 |
| 136 |
| — |
| 191 |
| 4 |
| 35 |
| — |
| 39 |
| 7.3 |
| 25.7 |
| — |
| 20.4 |
AQ10 |
| — |
| — |
| 860 |
| 860 |
| — |
| — |
| 656 |
| 656 |
| — |
| — |
| 76.3 |
| 76.3 |
| 7,267 |
| 1,622 |
| 860 |
| 9,749 |
| 130 |
| 183 |
| 656 |
| 969 |
| 1.8 |
| 11.3 |
| 76.3 |
| 9.9 | |
Total |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
AQ1-AQ4 |
| 105,612 |
| 8,543 |
| — |
| 114,155 |
| 36 |
| 30 |
| — |
| 66 |
| — |
| 0.4 |
| — |
| 0.1 |
AQ5-AQ8 |
| 92,434 |
| 14,908 |
| — |
| 107,342 |
| 243 |
| 341 |
| — |
| 584 |
| 0.3 |
| 2.3 |
| — |
| 0.5 |
AQ9 |
| 272 |
| 1,185 |
| — |
| 1,457 |
| 5 |
| 58 |
| — |
| 63 |
| 1.8 |
| 4.9 |
| — |
| 4.3 |
AQ10 |
| — |
| — |
| 3,571 |
| 3,571 |
| — |
| — |
| 1,099 | 1,099 |
| — |
| — |
| 30.8 |
| 30.8 | |
| 198,318 |
| 24,636 |
| 3,571 |
| 226,525 |
| 284 |
| 429 |
| 1,099 |
| 1,812 |
| 0.1 |
| 1.7 |
| 30.8 |
| 0.8 | |
| ● | The distribution of lending across the AQ1-AQ9 bands remained broadly consistent with the prior year. Growth in the mortgage portfolio was mainly in the AQ1-AQ4 bands as expected. |
| ● | The proportion of Stage 3/AQ10 loans declined over the year, mainly as a result of the balance sheet management actions described above, notably the mortgage securitisation which reduced Stage 3 loans by £0.8 billion. Furthermore, there was an enhancement to the mortgage definition of default systems and process resulting in approximately £0.4 billion of loans migrating from Stage 3 back to the good book. Within the credit card portfolio, flows into Stage 3 increased year-on-year, driven by strategic growth and seasoning of credit card balances since 2022. For other personal lending, flow rates into AQ10/Stage 3 remained stable, with AQ10 balances increasing as a result of reduced debt sale activity overall in the year. |
NatWest Group Annual Report on Form 20-F 2025 | 85 |
Credit risk – Banking activities continued
Asset quality (audited) continued
The table below shows asset quality bands of gross loans and ECL, by stage, for the Non-Personal portfolio.
| Gross loans | | ECL provisions | | ECL provisions coverage | |||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
2025 | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | ||||||||||||
Corporate and other | | | | | | | | | | | | | ||||||||||||
AQ1-AQ4 | 43,968 | 2,314 | — | 46,282 | 29 | 15 | — | 44 | 0.1 | 0.7 | — | 0.1 | ||||||||||||
AQ5-AQ8 | 53,783 | 15,882 | — | 69,665 | 199 | 326 | — | 525 | 0.4 | 2.1 | — | 0.8 | ||||||||||||
AQ9 | 28 | 264 | — | 292 | — | 19 | — | 19 | — | 7.2 | — | 6.5 | ||||||||||||
AQ10 | — | — | 1,990 | 1,990 | — | — | 944 | 944 | — | — | 47.4 | 47.4 | ||||||||||||
97,779 | 18,460 | 1,990 | 118,229 | 228 | 360 | 944 | 1,532 | 0.2 | 2.0 | 47.4 | 1.3 | |||||||||||||
Financial institutions | ||||||||||||||||||||||||
AQ1-AQ4 | 68,620 | 154 | — | 68,774 | 20 | 2 | — | 22 | — | 1.3 | — | — | ||||||||||||
AQ5-AQ8 | 5,339 | 196 | — | 5,535 | 17 | 3 | — | 20 | 0.3 | 1.5 | — | 0.4 | ||||||||||||
AQ9 |
| — |
| 6 |
| — |
| 6 |
| — |
| — |
| — |
| — |
| — | — | — | — | |||
AQ10 |
| — |
| — |
| 141 |
| 141 |
| — |
| — |
| 113 |
| 113 |
| — | — | 80.1 | 80.1 | |||
| 73,959 |
| 356 |
| 141 |
| 74,456 |
| 37 |
| 5 |
| 113 |
| 155 |
| 0.1 | 1.4 | 80.1 | 0.2 | ||||
Sovereign |
|
|
|
|
|
|
|
|
| |||||||||||||||
AQ1-AQ4 |
| 1,878 |
| 1 |
| — |
| 1,879 |
| 7 |
| 1 |
| — |
| 8 |
| 0.4 | 100.0 | — | 0.4 | |||
AQ5-AQ8 |
| 131 |
| — |
| — |
| 131 |
| — |
| — |
| — |
| — |
| — | — | — | — | |||
AQ9 |
| — |
| 265 |
| — |
| 265 |
| — |
| 4 |
| — |
| 4 |
| — | 1.5 | — | 1.5 | |||
AQ10 |
| — |
| — |
| 15 |
| 15 |
| — |
| — |
| 6 |
| 6 |
| — | — | 40.0 | 40.0 | |||
| 2,009 |
| 266 |
| 15 |
| 2,290 |
| 7 |
| 5 |
| 6 |
| 18 |
| 0.4 | 1.9 | 40.0 | 0.8 | ||||
Total |
|
|
|
|
|
|
|
|
| |||||||||||||||
AQ1-AQ4 |
| 114,466 |
| 2,469 |
| — |
| 116,935 |
| 56 |
| 18 |
| — |
| 74 |
| 0.1 | 0.7 | — | 0.1 | |||
AQ5-AQ8 |
| 59,253 |
| 16,078 |
| — |
| 75,331 |
| 216 |
| 329 |
| — |
| 545 |
| 0.4 | 2.1 | — | 0.7 | |||
AQ9 |
| 28 |
| 535 |
| — |
| 563 |
| — |
| 23 |
| — |
| 23 |
| — | 4.3 | — | 4.1 | |||
AQ10 |
| — |
| — |
| 2,146 |
| 2,146 |
| — |
| — |
| 1,063 |
| 1,063 |
| — | — | 49.5 | 49.5 | |||
| 173,747 |
| 19,082 |
| 2,146 |
| 194,975 |
| 272 |
| 370 |
| 1,063 |
| 1,705 |
| 0.2 | 1.9 | 49.5 | 0.9 | ||||
NatWest Group Annual Report on Form 20-F 2025 | 86 |
Credit risk – Banking activities continued
Asset quality (audited) continued
| Gross loans | | ECL provisions | | ECL provisions coverage | |||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
2024 | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | ||||||||||||
Corporate and other | ||||||||||||||||||||||||
AQ1-AQ4 | 41,509 | 2,409 | — | 43,918 | 32 | 19 | — | 51 | 0.1 | 0.8 | — | 0.1 | ||||||||||||
AQ5-AQ8 | 53,448 | 11,783 | — | 65,231 | 232 | 306 | — | 538 | 0.4 | 2.6 | — | 0.8 | ||||||||||||
AQ9 | 34 | 272 | — | 306 | — | 19 | — | 19 | — | 7.0 | — | 6.2 | ||||||||||||
AQ10 | — | — | 2,279 | 2,279 | — | — | 896 | 896 | — | — | 39.3 | 39.3 | ||||||||||||
94,991 | 14,464 | 2,279 | 111,734 | 264 | 344 | 896 | 1,504 | 0.3 | 2.4 | 39.3 | 1.4 | |||||||||||||
Financial institutions | | |||||||||||||||||||||||
AQ1-AQ4 | 64,845 | 233 | — | 65,078 | 21 | 2 | — | 23 | — | 0.9 | — | — | ||||||||||||
AQ5-AQ8 | 4,176 | 996 | — | 5,172 | 17 | 9 | — | 26 | 0.4 | 0.9 | — | 0.5 | ||||||||||||
AQ9 |
| — |
| 12 |
| — |
| 12 |
| — |
| 1 |
| — |
| 1 |
| — | 8.3 | — | 8.3 | |||
AQ10 |
| — |
| — |
| 59 |
| 59 |
| — |
| — |
| 40 |
| 40 |
| — | — | 67.8 | 67.8 | |||
| 69,021 |
| 1,241 |
| 59 |
| 70,321 |
| 38 |
| 12 |
| 40 |
| 90 |
| 0.1 | 1.0 | 67.8 | 0.1 | ||||
Sovereign |
|
|
| |
|
|
|
|
|
| ||||||||||||||
AQ1-AQ4 |
| 1,364 |
| 1 |
| — |
| 1,365 |
| 12 |
| 1 |
| — |
| 13 |
| 0.9 | 100.0 | — | 1.0 | |||
AQ5-AQ8 |
| 127 |
| — |
| — |
| 127 |
| — |
| — |
| — |
| — |
| — | — | — | — | |||
AQ9 |
| — |
| 132 |
| — |
| 132 |
| — |
| 1 |
| — |
| 1 |
| — | 0.8 | — | 0.8 | |||
AQ10 |
| — |
| — |
| 21 |
| 21 |
| — |
| — |
| 5 |
| 5 |
| — | — | 23.8 | 23.8 | |||
| 1,491 |
| 133 |
| 21 |
| 1,645 |
| 12 |
| 2 |
| 5 |
| 19 |
| 0.8 | 1.5 | 23.8 | 1.2 | ||||
Total |
|
|
| |
|
|
|
|
|
| ||||||||||||||
AQ1-AQ4 |
| 107,718 |
| 2,643 |
| — |
| 110,361 |
| 65 |
| 22 |
| — |
| 87 |
| 0.1 | 0.8 | — | 0.1 | |||
AQ5-AQ8 |
| 57,751 |
| 12,779 |
| — |
| 70,530 |
| 249 |
| 315 |
| — |
| 564 |
| 0.4 | 2.5 | — | 0.8 | |||
AQ9 |
| 34 |
| 416 |
| — |
| 450 |
| — |
| 21 |
| — |
| 21 |
| — | 5.1 | — | 4.7 | |||
AQ10 |
| — |
| — |
| 2,359 |
| 2,359 |
| — |
| — |
| 941 |
| 941 |
| — | — | 39.9 | 39.9 | |||
| 165,503 |
| 15,838 |
| 2,359 |
| 183,700 |
| 314 |
| 358 |
| 941 |
| 1,613 |
| 0.2 | 2.3 | 39.9 | 0.9 | ||||
| ● | The majority of Non-Personal lending remained in the AQ1-AQ4 band, with the increase in the year driven by increases in financial institutions sectors. This portfolio is subject to low ECL coverage, reflecting the high credit quality in the portfolio. |
| ● | In corporate sectors, Stage 2 exposure grew in the year, primarily in the AQ5-AQ8 band, which accounted for the majority of exposure to corporates. AQ10 exposures in Stage 3 reduced in corporates, as new defaults were more than offset by write-offs and repayments on previous defaults. |
| ● | The increase in sovereigns exposure in AQ9 and Stage 2 was primarily due to increased exposure to a single counterparty where the lending is fully guaranteed. |
NatWest Group Annual Report on Form 20-F 2025 | 87 |
Credit risk – Trading activities
This section details the credit risk profile of NatWest Group’s trading activities.
Securities financing transactions and collateral (audited)
The table below shows securities financing transactions in Commercial & Institutional and Central items & other. Balance sheet captions include balances held at all classifications under IFRS.
| Reverse repos | | Repos | |||||||||
Of which: | Outside netting | Of which: | Outside netting | |||||||||
Total | can be offset | arrangements | Total | can be offset | arrangements | |||||||
2025 | £m | £m | £m | £m | £m | £m | ||||||
Gross | 95,674 | 95,618 | 56 | 89,789 | 87,730 | 2,059 | ||||||
IFRS offset | (31,599) | (31,599) | — | (31,599) | (31,599) | — | ||||||
Carrying value |
| 64,075 |
| 64,019 |
| 56 |
| 58,190 |
| 56,131 |
| 2,059 |
Master netting arrangements |
| (474) |
| (474) |
| — |
| (474) |
| (474) |
| — |
Securities collateral |
| (63,292) |
| (63,292) |
| — |
| (55,657) |
| (55,657) |
| — |
Potential for offset not recognised under IFRS |
| (63,766) |
| (63,766) |
| — |
| (56,131) |
| (56,131) |
| — |
Net |
| 309 |
| 253 |
| 56 |
| 2,059 |
| — |
| 2,059 |
2024 |
| |
| |
| |
| |
| |
| |
Gross |
| 87,901 | 87,861 | 40 | 68,024 | 67,321 | 703 | |||||
IFRS offset |
| (23,883) | (23,883) | — | (23,883) | (23,883) | — | |||||
Carrying value |
| 64,018 |
| 63,978 |
| 40 |
| 44,141 |
| 43,438 |
| 703 |
Master netting arrangements |
| (1,549) |
| (1,549) |
| — |
| (1,549) |
| (1,549) |
| — |
Securities collateral |
| (62,217) |
| (62,217) |
| — |
| (41,889) |
| (41,889) |
| — |
Potential for offset not recognised under IFRS |
| (63,766) |
| (63,766) |
| — |
| (43,438) |
| (43,438) |
| — |
Net |
| 252 |
| 212 |
| 40 |
| 703 |
| — |
| 703 |
NatWest Group Annual Report on Form 20-F 2025 | 88 |
Credit risk – Trading activities continued
Derivatives (audited)
The table below shows derivatives by type of contract. The master netting agreements and collateral shown do not result in a net presentation on the balance sheet under IFRS. A significant proportion of the derivatives relate to trading activities in Commercial & Institutional. The table also includes hedging derivatives in Central items & other.
| 2025 | | 2024 | |||||||||||||||||
Notional | ||||||||||||||||||||
GBP | USD | EUR | Other | Total | Assets | Liabilities | Notional | Assets | Liabilities | |||||||||||
£bn | £bn | £bn | £bn | £bn | £m | £m | £bn | £m | £m | |||||||||||
Gross exposure |
| 77,796 | 71,925 |
| 97,152 | 93,109 | ||||||||||||||
IFRS offset |
|
| (17,007) |
| (17,951) | (18,746) |
| (21,027) | ||||||||||||
Carrying value |
| 3,460 |
| 3,573 |
| 6,328 |
| 1,158 |
| 14,519 |
| 60,789 |
| 53,974 |
| 13,628 |
| 78,406 |
| 72,082 |
Of which: |
|
|
|
|
|
|
|
| |
| |
| | |||||||
Interest rate (1) |
| 3,125 |
| 2,072 |
| 5,699 |
| 192 |
| 11,088 |
| 32,742 |
| 26,758 |
| 10,333 |
| 37,499 |
| 31,532 |
Exchange rate |
| 331 |
| 1,495 |
| 622 |
| 966 |
| 3,414 |
| 27,981 |
| 27,042 |
| 3,279 |
| 40,797 |
| 40,306 |
Credit |
| 2 |
| 6 |
| 7 |
| — |
| 15 |
| 66 |
| 174 |
| 14 |
| 110 |
| 244 |
Equity and commodity |
| 2 |
| — |
| — |
| — |
| 2 |
| — |
| — |
| 2 |
| — |
| — |
Carrying value |
|
| 14,519 |
| 60,789 |
| 53,974 |
| 13,628 |
| 78,406 |
| 72,082 | |||||||
Counterparty mark-to-market netting |
|
|
|
|
| |
| (45,928) |
| (45,928) |
| |
| (61,883) |
| (61,883) | ||||
Cash collateral |
|
|
|
|
| |
| (9,275) |
| (4,281) |
| |
| (10,005) |
| (5,801) | ||||
Securities collateral |
|
|
|
|
| |
| (3,283) |
| (1,256) |
| |
| (4,072) |
| (896) | ||||
Net exposure |
|
|
|
|
| |
| 2,303 |
| 2,509 |
| |
| 2,446 |
| 3,502 | ||||
Banks (2) |
|
|
|
|
| |
| 89 |
| 217 |
| |
| 214 |
| 345 | ||||
Other financial institutions (3) |
|
|
|
|
| |
| 1,508 |
| 1,160 |
| |
| 1,429 |
| 1,456 | ||||
Corporate (4) |
|
|
|
|
| |
| 673 |
| 1,110 |
| |
| 769 |
| 1,669 | ||||
Government (5) |
|
|
|
|
| |
| 33 |
| 22 |
| |
| 34 |
| 32 | ||||
Net exposure |
|
|
|
|
| |
| 2,303 |
| 2,509 |
| |
| 2,446 |
| 3,502 | ||||
UK |
|
|
|
|
| |
| 1,098 |
| 1,548 |
| |
| 1,061 |
| 1,774 | ||||
Europe |
|
|
|
|
| |
| 693 |
| 589 |
| |
| 875 |
| 978 | ||||
US |
|
|
|
|
| |
| 437 |
| 283 |
| |
| 443 |
| 604 | ||||
RoW |
|
|
|
|
| |
| 75 |
| 89 |
| |
| 67 |
| 146 | ||||
Net exposure |
|
|
|
|
| |
| 2,303 |
| 2,509 |
| |
| 2,446 |
| 3,502 | ||||
Asset quality of uncollateralised derivative assets |
| |
| |
| |
| |
| |
|
|
| |
| |
| | ||
AQ1-AQ4 |
|
|
| |
| |
| |
| 1,865 |
|
| |
| 2,049 |
| | |||
AQ5-AQ8 |
|
|
| |
| |
| |
| 435 |
|
| |
| 394 |
| | |||
AQ9-AQ10 |
|
|
| |
| |
| |
| 3 |
| |
| |
| 3 |
| | ||
Net exposure |
|
|
| |
| |
| |
| 2,303 |
| |
| |
| 2,446 |
| | ||
| (1) | The notional amount of interest rate derivatives includes £8,768 billion (2024 – £7,321 billion) in respect of contracts cleared through central clearing counterparties. |
| (2) | Transactions with certain counterparties with whom NatWest Group has netting arrangements but collateral is not posted on a daily basis; certain transactions with specific terms that may not fall within netting and collateral arrangements; derivative positions in certain jurisdictions where the collateral agreements are not deemed to be legally enforceable. |
| (3) | Includes transactions with securitisation vehicles and funds where collateral posting is contingent on NatWest Group’s external rating. |
| (4) | Mainly large corporates with whom NatWest Group may have netting arrangements in place with no collateral posting. |
| (5) | Sovereigns and supranational entities with no collateral arrangements, collateral arrangements that are not considered enforceable, or one-way collateral agreements in their favour. |
NatWest Group Annual Report on Form 20-F 2025 | 89 |
Credit risk – Trading activities continued
Debt securities (audited)
The table below shows debt securities held at mandatory fair value through profit or loss by issuer as well as ratings based on the lowest of Standard & Poor’s, Moody’s and Fitch.
| Central and local government | | | | | | | |||||
UK | US | Other | Financial institutions | Corporate | Total | |||||||
2025 | £m | £m | £m | £m | £m | £m | ||||||
AAA |
| — | — |
| 1,505 |
| 1,283 |
| — |
| 2,788 | |
AA to AA+ |
| — | 4,153 |
| 257 |
| 309 |
| 18 |
| 4,737 | |
A to AA- |
| 2,105 | — |
| 1,481 |
| 596 |
| 215 |
| 4,397 | |
BBB- to A- |
| — | — |
| 892 |
| 256 |
| 384 |
| 1,532 | |
Non-investment grade |
| — | — |
| — |
| 11 |
| 50 |
| 61 | |
Total |
| 2,105 |
| 4,153 |
| 4,135 |
| 2,455 |
| 667 |
| 13,515 |
2024 |
| |
| |
| |
| |
| |
| |
AAA |
| — | — |
| 1,335 |
| 1,368 |
| — |
| 2,703 | |
AA to AA+ |
| — | 3,734 |
| 74 |
| 569 |
| 2 |
| 4,379 | |
A to AA- |
| 2,077 | — |
| 1,266 |
| 381 |
| 519 |
| 4,243 | |
BBB- to A- |
| — | — |
| 831 |
| 562 |
| 885 |
| 2,278 | |
Non-investment grade |
| — | — |
| — |
| 108 |
| 167 |
| 275 | |
Total |
| 2,077 |
| 3,734 |
| 3,506 |
| 2,988 |
| 1,573 |
| 13,878 |
NatWest Group Annual Report on Form 20-F 2025 | 90 |
Credit risk – Trading activities continued
Cross border exposure
Cross border exposures comprise both banking and trading activities, including reverse repurchase agreements. Exposures comprise loans and advances, including finance leases and instalment credit receivables, and other monetary assets, such as debt securities. The geographical breakdown is based on the country of domicile of the borrower or guarantor of ultimate risk. Cross border exposures include non-local currency claims of overseas offices on local residents but exclude exposures to local residents in local currencies. The table shows cross border exposures greater than 0.5% of NatWest Group’s total assets at the end of each reporting period.
| Government | | Banks | | Other | | Total | | Short positions | | Net of short positions | |
2025 | £m | £m | £m | £m | £m | £m | ||||||
Western Europe | 9,877 | 11,547 | 28,623 | 50,047 | 4,544 | 45,503 | ||||||
Of which: France |
| 1,631 |
| 3,039 |
| 7,760 |
| 12,430 |
| 755 |
| 11,675 |
Of which: Germany |
| 2,184 |
| 5,615 |
| 812 |
| 8,611 |
| 1,877 |
| 6,734 |
Of which: Luxembourg |
| 224 |
| 30 |
| 9,295 |
| 9,549 |
| — |
| 9,549 |
Cayman Islands (1) |
| — |
| — |
| 4,453 |
| 4,453 |
| — |
| 4,453 |
United States |
| 4,571 |
| 2,439 |
| 22,983 |
| 29,993 |
| 1,256 |
| 28,737 |
Jersey | — | — | 4,565 | 4,565 | — | 4,565 | ||||||
Canada |
| 1,855 |
| 1,244 |
| 4,041 |
| 7,140 |
| 10 |
| 7,130 |
Other institutions (2) |
| 5,638 |
| — |
| — |
| 5,638 |
| 173 |
| 5,465 |
2024 |
| |
| |
| |
| |
| |
| |
Western Europe |
| 8,581 | 11,669 | 29,891 | 50,141 | 5,889 | 44,252 | |||||
Of which: France |
| 2,347 |
| 2,543 |
| 11,161 |
| 16,051 |
| 1,491 |
| 14,560 |
Of which: Germany |
| 1,149 |
| 5,937 |
| 702 |
| 7,788 |
| 1,957 |
| 5,831 |
Of which: Luxembourg |
| 61 |
| 412 |
| 7,940 |
| 8,413 |
| 10 |
| 8,403 |
Of which: Ireland |
| 162 |
| 49 |
| 3,306 |
| 3,517 |
| 85 |
| 3,432 |
United States | 5,246 |
| 3,307 |
| 21,576 |
| 30,129 |
| 1,767 |
| 28,362 | |
Jersey |
| — | — | 5,030 | 5,030 | — | 5,030 | |||||
Canada |
| 1,664 |
| 1,555 |
| 2,308 |
| 5,527 |
| 26 |
| 5,501 |
Other institutions (2) |
| 4,520 |
| — |
| — |
| 4,520 |
| 94 |
| 4,426 |
| (1) | Cayman Islands did not meet the reporting threshold required for inclusion in the table for 2024. |
| (2) | Other institutions category denotes any international organisation which is governed by public international law or which has been set up by or on the basis of an agreement between two or more countries. |
NatWest Group Annual Report on Form 20-F 2025 | 91 |
Capital, liquidity and funding risk
NatWest Group continually ensures a comprehensive approach is taken to the management of capital, liquidity and funding, underpinned by frameworks, risk appetite and policies, to manage and mitigate its capital, liquidity and funding risks. The framework ensures the tools and capability are in place to facilitate the management and mitigation of risk ensuring NatWest Group operates within its regulatory requirements and risk appetite.
Definitions (audited)
Regulatory capital consists of reserves and instruments issued that are available, have a degree of permanency and are capable of absorbing losses. A number of strict conditions set by regulators must be satisfied to be eligible as capital.
Capital risk is the inability to conduct business in base or stress conditions on a risk or leverage basis due to insufficient qualifying capital as well as the failure to assess, monitor, plan and manage capital adequacy requirements.
Liquidity consists of assets that can be readily converted to cash within a short timeframe at a reliable value. Liquidity risk is defined as the risk that the Group or any of its subsidiaries or branches cannot meet it’s actual or potential financial obligations in a timely manner as they fall due in the short term.
Funding consists of on-balance sheet liabilities that are used to provide cash to finance assets. Funding risk is the current or prospective risk that the Group or its subsidiaries or branches cannot meet financial obligations as they fall due in the medium to long term, either at all or without increasing funding costs unacceptably.
Liquidity and funding risks arise in a number of ways, including through the maturity transformation role that banks perform. The risks are dependent on factors such as:
| ● | Maturity profile; |
| ● | Composition of sources and uses of funding; |
| ● | The quality and size of the liquidity portfolio; |
| ● | Wholesale market conditions; and |
| ● | Depositor and investor behaviour. |
Sources of risk (audited)
Capital
The eligibility of instruments and financial resources as regulatory capital is laid down by applicable regulation. Capital is categorised under two tiers (Tier 1 and Tier 2) according to the ability to absorb losses, degree of permanency and the ranking of absorbing losses on either a going or gone concern basis. There are three broad categories of capital across these two tiers:
CET1 capital - CET1 capital must be perpetual and capable of unrestricted and immediate use to cover risks or losses as soon as these occur. This includes ordinary shares issued and retained earnings.
Additional Tier 1 (AT1) capital - This is the second type of loss-absorbing capital and must be capable of absorbing losses on a going concern basis.
These instruments are either written down or converted into CET1 capital when the CET1 ratio falls below a pre-specified level.
Tier 2 capital - Tier 2 capital is the bank entities’ supplementary capital and provides loss absorption on a gone concern basis. Tier 2 capital absorbs losses after Tier 1 capital. It typically consists of subordinated debt securities which must have a minimum of five years to maturity at all times to be fully recognised for regulatory purposes.
Minimum requirement for own funds and eligible liabilities (MREL)
In addition to regulatory capital, certain loss-absorbing instruments issued by NatWest Group, such as eligible senior notes and Tier 2 capital instruments, may be used to meet MREL. MREL comprises regulatory capital (Common Equity Tier 1, Additional Tier 1 and Tier 2) together with specific senior or subordinated bail-inable debt. To quality, instruments must be fully paid-up, have a remaining maturity of at least one year, and be capable of being written down or converted into equity should the Natwest Group enter resolution. These resources support “gone-concern” requirements, ensuring that sufficient loss-absorbing capacity is available to facilitate an orderly resolution if the Bank of England determines that NatWest Group has failed or is likely to fail.
NatWest Group Annual Report on Form 20-F 2025 | 92 |
Capital, liquidity and funding risk continued
Liquidity
NatWest Group maintains a prudent approach to the definition of liquidity portfolio to ensure it is available when and where required, taking into account regulatory, legal and other constraints. Following ringfencing legislation, liquidity is no longer considered fungible across NatWest Group. Principal liquidity portfolios are maintained in the UK Domestic Liquidity Sub-Group (UKDoLSub) (primarily in NatWest Bank Plc), NatWest Markets Plc, RBS International Limited and RBSH N.V. Some disclosures in this section where relevant are presented, on a consolidated basis, for NatWest Group and the UK DoLSub.
Liquidity portfolio is divided into primary and secondary liquidity as follows:
| ● | Primary liquidity is LCR eligible assets and includes cash and balances at central banks, Treasury bills and high quality government securities. |
| ● | Secondary liquidity is assets eligible as collateral for local central bank liquidity facilities. These assets include own-issued securitisations or loans that are retained on balance sheet and pre-positioned with a central bank so that they may be converted into additional sources of liquidity at very short notice. |
Funding
NatWest Group maintains a diversified set of funding sources, including customer deposits, wholesale deposits and term debt issuance. These are managed against both internal funding and regulatory metrics. The principal levels at which funding risk is managed are at NatWest Group, NatWest Holdings Group, UK DoLSub, NatWest Markets Plc, RBS International Limited and RBSH N.V.. NatWest Group also retains access to central bank funding facilities.
For further details on capital constituents and the regulatory framework covering capital, liquidity and funding requirements, refer to the 2025 NatWest Group Pillar 3 Report.
Capital risk management
Capital management ensures that there is sufficient capital and other loss-absorbing instruments to operate effectively including meeting minimum regulatory requirements, operating within Board-approved risk appetite, maintaining its credit rating and supporting its strategic goals.
Capital management is critical in supporting the businesses and is enacted through an end-to-end framework across businesses and legal entities. Capital is managed within the organisation at the following levels; NatWest Group consolidated, NWH Group sub consolidated, NatWest Markets Plc, RBS Holdings N.V. and RBS International Limited. The banking subsidiaries within NWH Group are governed by the same principles, processes and management as NatWest Group. Note that although the aforementioned entities are regulated in line with Basel III principles, local implementation of the framework differs across geographies.
Capital planning is integrated into NatWest Group’s wider annual budgeting process and is assessed and updated at least monthly. Regular returns are submitted to the PRA which include a two-year rolling forecast view. Other elements of capital management, including risk appetite and stress testing, are set out on pages 33 to 40.
Produce capital plans
Capital plans are produced for NatWest Group, its key operating entities and its businesses over a five-year planning horizon under expected and stress conditions. Stressed capital plans are produced to support internal stress testing in the ICAAP for regulatory purposes.
Shorter-term forecasts are developed frequently in response to actual performance, changes in internal and external business environment and to manage risks and opportunities.
Assess capital adequacy
Capital plans are developed to maintain capital of sufficient quantity and quality to support NatWest Group’s business, its subsidiaries and strategic plans over the planning horizon within approved risk appetite, as determined via stress testing, and minimum regulatory requirements.
Capital resources and capital requirements are assessed across a defined planning horizon.
Impact assessment captures input from across NatWest Group including from businesses.
NatWest Group Annual Report on Form 20-F 2025 | 93 |
Capital, liquidity and funding risk continued
Inform capital actions
Capital planning informs potential capital actions including buy backs, redemptions, dividends and new issuance to external investors or via internal transactions.
Decisions on capital actions will be influenced by strategic and regulatory requirements, risk appetite, costs and prevailing market conditions.
As part of capital planning, NatWest Group will monitor its portfolio of external capital securities and assess the optimal blend and most cost effective means of financing.
Capital planning is one of the tools that NatWest Group uses to monitor and manage capital risk on a going and gone concern basis, including the risk of excessive leverage.
Liquidity risk management
NatWest Group manages its liquidity risk taking into account regulatory, legal and other constraints to ensure sufficient liquidity is available where required to cover liquidity stresses.
The principal levels at which liquidity risk is managed are:
| ● | NatWest Group |
| ● | NatWest Holdings Group |
| ● | UK DoLSub |
| ● | NatWest Markets Plc |
| ● | NatWest Markets Securities Inc. |
| ● | RBS International Limited |
| ● | RBSH N.V. |
The UK DoLSub is PRA-regulated and comprises NatWest Holdings three licensed deposit-taking UK banks: National Westminster Bank Plc (NWB Plc), The Royal Bank of Scotland plc (RBS plc) and Coutts & Company.
NatWest Group categorises its liquidity portfolio, including its locally managed liquidity portfolios, into primary and secondary liquid assets. The size of the liquidity portfolios are determined by referencing NatWest Group’s liquidity risk appetite. NatWest Group retains a prudent approach to setting the composition of the liquidity portfolios, which is subject to internal policies applicable to all entities and limits over quality of counterparty, maturity mix and currency mix.
RBS International Limited and RBSH N.V. hold locally managed portfolios that comply with local regulations that may differ from PRA rules.
The liquidity value of the portfolio is determined by taking current market prices and applying a discount or haircut, to give a liquidity value that represents the amount of cash that can be generated by the asset.
Funding risk management
NatWest Group manages funding risk through a comprehensive framework which measures and monitors the funding risk on the balance sheet including quantitative and qualitative analysis of the behavioural aspects of its assets and liabilities as well as the funding concentration.
NatWest Group Annual Report on Form 20-F 2025 | 94 |
Capital, liquidity and funding risk continued
Prudential regulation changes that may impact capital requirements
NatWest Group faces numerous changes in prudential regulation that may impact the minimum amount of capital it must hold and consequently may increase funding costs and reduce return on equity.
Regulatory changes are actively monitored by NatWest Group, including engagement with industry associations and regulators and participation in quantitative impact studies. Monitoring the changing regulatory landscape forms a fundamental part of capital planning and management of its business. NatWest Group believes that its strategy to focus on simpler, lower-risk activities within a more resilient recovery and resolution framework will enable it to manage the impact of these.
UK and EU implementation of Basel framework
The Basel framework is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision (BCBS). The Basel III standards are minimum requirements which apply to internationally active banks and ensure a global level playing field on financial regulation. Individual jurisdictions must decide how to implement the standards.
UK Basel III reforms & guidance
On 20 January 2026, the PRA published its final Basel 3.1 rules in relation to PS17/23 and PS9/24, re-affirming that implementation of the reforms will take place on 1 January 2027. For Market Risk, the PRA decided to delay the FRTB-IMA implementation until 1 January 2028, giving firms the option to use their existing IMA permissions until then. The policy statement included amendments to certain FRTB ASA (Alternative Standardised Approach) requirements, including a permissions regime for the residual risk add-on (RRAO). The policy statement also made minor amendments, corrections and clarifications to the calculation of Credit Risk and Operational Risk RWAs.
In 2025, the PRA also confirmed in PS7/25 its approach to Pillar 2A lending adjustments for Basel 3.1, ensuring that the removal of SME and infrastructure support factors from Pillar 1 RWAs does not raise overall capital requirements.
We expect Basel 3.1 to increase RWAs by around £10 billion on 1 January 2027.
EU Basel III reforms
Equivalent changes in the EU capital rules relating to the Basel III standards are implemented in the EU by the latest Banking Package (CRR III/ CRD VI) which entered into force on 9 July 2024.
The EU CRR III rules became effective on 1 January 2025, except for the Market Risk FTRB rules which will be implemented on 1 January 2027. In November 2025, the European Commission issued a consultation for targeted amendments to the FRTB framework. The impact of these changes will be limited to NatWest Group’s EU subsidiaries.
The CRD VI requirements must be incorporated into the national legislation of EU member states by early 2026. Among other changes, the directive introduces new prudential capital and liquidity standards for third‑country branches, which will apply from 11 January 2027. These changes will only affect NatWest Group’s EU third-country branches where certain conditions are met. NatWest Group continues to evaluate its EU operating model, making adaptations as necessary
NatWest Group Annual Report on Form 20-F 2025 | 95 |
Capital, liquidity and funding risk continued
Other developments in 2025
UK Capital Requirements review
In December 2025, the Financial Policy Committee (FPC) published its updated assessment of the appropriate level and structure of capital requirements for the UK banking sector, alongside a broader review of the capital framework. The Committee noted that the system-wide benchmark Tier 1 capital requirement is now considered to be around 13% of RWAs, compared with the earlier benchmark of approximately 14%. The UK countercyclical capital buffer rate was maintained at its neutral setting of 2%.
At the same time, the FPC launched a broader consultation on capital requirements, open until 2 April 2026. The consultation covers several areas, including the ensuring the leverage ratio continues to operate as intended; improving the usability and effectiveness of capital buffers; and assessing the calibration and interaction of domestic-exposure-based requirements to ensure they remain proportionate and free from unintended overlaps.
O-SII buffers
In July 2025, the PRA re issued its 2024 O SII buffer rates to incorporate the FPC’s revised approach to O SII buffer thresholds, which now includes indexation. NatWest Group plc remains on the PRA’s O SII list, and the O SII buffer for its ring fenced sub group, NatWest Holdings Group, was maintained at 1.5%.
Leverage ratio requirements
In November 2025, PRA published final policy in PS22/25 which increases the retail deposit threshold for the application of the minimum leverage ratio requirements (3.25% and applicable buffers) from £50 billion to £75 billion. This policy took effect on 1 January 2026.
PRA Step-in risk framework implementation
In April 2025, the PRA finalised its policy for the identification and management of step-in risk for UK banks, aligning to the BCBS guidelines. Step-in risk is deemed a Pillar 2 risk and must be assessed as part of the firm’s ICAAP. The PRA expects governance, monitoring and controls to be embedded within the existing risk management framework. The requirements took effect on 1 January 2026.
MREL requirements
In July 2025, the Bank of England published final policy changes relating to its approach to setting to setting a MREL. The revised rules introduce a requirement to use the full accounting value for measuring eligible liabilities towards MREL resources. The policy changes took effect from 1 January 2026.
Prudential treatment of non-UK Covered bonds
HMT is considering the introduction of an Overseas Prudential Requirements Regime (OPRR) that could be used to designate equivalency for non-UK covered bonds. Pending finalisation of this approach, the PRA do not expect firms to alter their approach to inclusion of non-UK covered bonds including for new issuances, in Level 2 HQLA (High Quality Liquid Assets) under the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook.
NatWest Group Annual Report on Form 20-F 2025 | 96 |
Capital, liquidity and funding risk continued
Summary of future changes to prudential regulation in UK that may impact NatWest Group
The table below covers expected future changes to prudential regulation in the UK which may impact NatWest Group at a consolidated level. Certain entities within the group will be exposed to changes in prudential regulation from other legislative bodies and/or local supervisory authorities where NatWest Group’s entities are authorised (e.g. the EU and Jersey) on a solo basis and these changes may be different in substance, scope and timing from those highlighted below.
In addition to the future changes shown in the table below, the model changes required under CRD IV are still under development and subject to PRA approval. In line with all firms with permissions to use the IRB approach, NatWest Group is currently undertaking a programme of model and rating system development, to align with new regulations which came into force on 1 January 2022. The final CRD IV model outcomes may lead to changes in RWAs in 2026 and beyond.
NatWest Group Annual Report on Form 20-F 2025 | 97 |
Capital, liquidity and funding risk continued
Summary of future changes to prudential regulation in UK that may impact NatWest Group continued
NatWest Group Annual Report on Form 20-F 2025 | 98 |
Capital, liquidity and funding risk continued
Summary of future changes to prudential regulation in UK that may impact NatWest Group continued
NatWest Group Annual Report on Form 20-F 2025 | 99 |
Capital, liquidity and funding risk continued
Key points
CET1 ratio 14.0% (2024 - 13.6%) | The CET1 ratio increased by 40 basis points to 14.0% due to a £2.1 billion increase in CET1 capital offset by a £10.1 billion increase in RWAs. The CET1 capital increase was mainly driven by an attributable profit to ordinary shareholders of £4.7 billion (net of ordinary interim dividend paid) and other movements on reserves and regulatory adjustments of £0.7 billion partially offset by a share buyback of £1.5 billion and a foreseeable ordinary dividend accrual of £1.8 billion. |
RWAs £193.3bn (2024 - £183.2bn) | Total RWAs increased by £10.1 billion to £193.3 billion mainly reflecting: ● an increase in credit risk RWAs of £7.6 billion, primarily reflecting franchise lending growth, including unsecured balances acquired from Sainsbury's Bank offset by the benefits of RWA management actions. An increase in CRD IV model updates partially offset by the movements in risk metrics and foreign exchange. ● an increase in counterparty credit risk RWAs of £0.5 billion mainly driven by revised close-out periods for securities financing transactions partially offset by new bespoke portfolio credit default swap and CRD IV model updates. ● an increase in operational risk RWAs of £3.8 billion following the annual recalculation, including an acceleration of £1.6 billion from Q1 2026 to align with market practice. ● a reduction in market risk RWAs of £1.7 billion, mainly driven by active risk management on options trading and changes in government bond and bond futures positions. |
UK leverage ratio 4.8% (2024 - 5.0%) | The leverage ratio decreased by 20 basis points to 4.8% due to a £47.2 billion increase in leverage exposure partially offset by a £1.4 billion increase in Tier 1 capital. The key drivers in the leverage exposure movement were an increase in other financial assets and other off balance sheet items. |
MREL ratio 31.9% (2024 - 33.0%) | The MREL ratio decreased by 110 basis points driven by a £10.1 billion increase in RWAs partially offset by a £1.2 billion increase in MREL resources. MREL resources increased to £61.6 billion driven by a £2.1 billion increase in CET1 capital offset by a £0.7 billion decrease in AT1 capital, a £0.2 billion decrease in Tier 2 capital, and a £0.1 billion decrease in senior unsecured debt. AT1 and Tier 2 capital movements were driven by issues and redemptions in the period, whilst the senior unsecured debt movement was driven by issues and redemptions totalling £1.7 billion, offset by a $1.5bn debt instrument that ceased to count towards MREL resources 12 months before it matures, and foreign exchange movements of £0.6 billion. |
Liquidity portfolio £237.9bn (2024 - £222.3bn) | The liquidity portfolio increased by £15.6 billion to £237.9 billion during the year. Primary liquidity decreased by £3.8 billion to £157.3 billion, driven by strong lending growth, TFSME tranche repayment partially offset by deposit growth and new issuances. Secondary liquidity increased by £19.4 billion due to an increase in pre-positioned collateral at the Bank of England. |
LCR average 147% (2024 - 151%) | The average Liquidity Coverage Ratio (LCR) decreased by 4% to 147%, during 2025, driven by increased lending partially offset by deposit growth. |
NSFR average 135% (2024 - 137%) | The average Net Stable Funding Ratio (NSFR) decreased by 2% to 135% during 2025 driven by increased lending, partially offset by deposit growth. |
NatWest Group Annual Report on Form 20-F 2025 | 100 |
Capital, liquidity and funding risk continued
Minimum requirements
Maximum Distributable Amount (MDA) and Minimum Capital Requirements
NatWest Group is subject to minimum capital requirements relative to RWAs. The table below summarises the minimum capital requirements (the sum of Pillar 1 and Pillar 2A), and the additional capital buffers which are held in excess of the regulatory minimum requirements and are usable in stress.
Where the CET1 ratio falls below the sum of the minimum capital and the combined buffer requirement, there is a subsequent automatic restriction on the amount available to service discretionary payments (including AT1 coupons), known as the MDA. Note that different capital requirements apply to individual legal entities or sub-groups and the table shown does not reflect any incremental PRA buffer requirements, which are not disclosable.
The current capital position provides significant headroom above both our minimum requirements and our MDA threshold requirements.
Type | | CET1 | | Total Tier 1 | | Total capital |
|
Pillar 1 requirements |
| 4.5 | % | 6.0 | % | 8.0 | % |
Pillar 2A requirements |
| 1.6 | % | 2.2 | % | 2.9 | % |
Minimum Capital Requirements |
| 6.1 | % | 8.2 | % | 10.9 | % |
Capital conservation buffer |
| 2.5 | % | 2.5 | % | 2.5 | % |
Countercyclical capital buffer (1) |
| 1.7 | % | 1.7 | % | 1.7 | % |
MDA threshold (2) |
| 10.3 | % | n/a | n/a | ||
Overall capital requirement |
| 10.3 | % | 12.4 | % | 15.1 | % |
Capital ratios at 31 December 2025 |
| 14.0 | % | 16.4 | % | 19.3 | % |
Headroom (3) (4) |
| 3.7 | % | 4.0 | % | 4.2 | % |
| (1) | The UK countercyclical buffer (CCyB) rate is currently being maintained at 2%. This may vary in either direction in the future subject to how risks develop. Foreign exposures may be subject to different CCyB rates depending on the rate set in those jurisdictions. |
| (2) | Pillar 2A requirements for NatWest Group are set as a variable amount with the exception of some fixed add-ons. |
| (3) | The headroom does not reflect excess distributable capital and may vary over time. |
| (4) | Headroom as at 31 December 2024 was CET1 3.1%, Total Tier 1 3.9% and Total Capital 4.3%. |
Leverage ratios
The table below summarises the minimum ratios of capital to leverage exposure under the binding PRA UK leverage framework applicable for NatWest Group.
Type | | CET1 | | Total Tier 1 |
|
Minimum ratio |
| 2.44 | % | 3.25 | % |
Countercyclical leverage ratio buffer (1) |
| 0.6 | % | 0.6 | % |
Total |
| 3.04 | % | 3.85 | % |
| (1) | The countercyclical leverage ratio buffer is set at 35% of NatWest Group’s CCyB. |
Liquidity and funding ratios
The table below summarises the minimum requirements for key liquidity and funding metrics under the PRA framework.
Type | | |
|
Liquidity Coverage Ratio (LCR) |
| 100 | % |
Net Stable Funding Ratio (NSFR) |
| 100 | % |
NatWest Group Annual Report on Form 20-F 2025 | 101 |
Capital, liquidity and funding risk continued
Measurement
Capital, risk-weighted assets and leverage: Key metrics
The tables below show key prudential metrics calculated in accordance with current PRA rules.
2025 | 2024 |
| |||
Capital adequacy ratios (1) | | % | | % |
|
CET1 |
| 14.0 |
| 13.6 | |
Tier 1 |
| 16.4 |
| 16.5 | |
Total |
| 19.3 |
| 19.7 | |
RWAs |
| £m |
| £m | |
Credit risk |
| 155,610 |
| 148,078 | |
Counterparty credit risk |
| 7,609 |
| 7,103 | |
Market risk |
| 4,474 |
| 6,219 | |
Operational risk |
| 25,595 |
| 21,821 | |
Total RWAs |
| 193,288 |
| 183,221 | |
Capital |
| £m |
| £m | |
CET1 |
| 27,066 |
| 24,928 | |
Tier1 |
| 31,621 |
| 30,187 | |
Total |
| 37,375 |
| 36,105 | |
Leverage ratios |
| £m |
| £m | |
Tier 1 capital |
| 31,621 |
| 30,187 | |
UK leverage exposure |
| 654,954 |
| 607,799 | |
UK leverage ratio (%) (2) |
| 4.8 | % | 5.0 | % |
UK average Tier 1 capital (3) |
| 32,296 |
| 29,923 | |
UK average leverage exposure (3) |
| 657,670 |
| 600,354 | |
UK average leverage ratio (%) (3) |
| 4.9 | % | 5.0 | % |
| (1) | The IFRS 9 transitional capital rules in respect of ECL provisions ceased to apply on 1 January 2025. The impact of the IFRS 9 transitional adjustments at 31 December 2024 was £33 million for CET1 capital, £33 million for total capital and £3 million RWAs. Excluding this adjustment at 31 December 2024, the CET1 ratio was 13.6%, Tier 1 capital ratio was 16.5% and the Total capital ratio was 19.7%. |
| (2) | The UK leverage exposure and Tier 1 capital are calculated in accordance with current PRA rules. Excluding the IFRS 9 transitional adjustment in respect of ECL provision, the UK leverage ratio at 31 December 2024 was 5.0% |
| (3) | Based on the daily average of on-balance sheet items and three month-end average of off-balance sheet items and Tier 1 capital. |
NatWest Group Annual Report on Form 20-F 2025 | 102 |
Capital, liquidity and funding risk continued
Capital flow statement
The table below analyses the movement in CET1, AT1 and Tier 2 capital for the year ended 31 December 2025.
CET1 | AT1 | Tier 2 | Total | |||||
| £m | | £m | | £m | | £m | |
At 31 December 2024 |
| 24,928 | 5,259 |
| 5,918 |
| 36,105 | |
Attributable profit for the period |
| 5,479 |
| — |
| — |
| 5,479 |
Ordinary interim dividend paid |
| (768) |
| — |
| — |
| (768) |
Share buyback |
| (1,500) |
| — |
| — |
| (1,500) |
Foreseeable ordinary dividends |
| (1,837) |
| — |
| — |
| (1,837) |
Foreign exchange reserve |
| 7 |
| — |
| — |
| 7 |
FVOCI reserve |
| 116 |
| — |
| — |
| 116 |
Own credit |
| 14 |
| — |
| — |
| 14 |
Share based remuneration and shares vested |
|
|
|
| ||||
under employee share schemes |
| 270 |
| — |
| — |
| 270 |
Goodwill and intangibles deduction |
| 158 |
| — |
| — |
| 158 |
Deferred tax assets |
| 280 |
| — |
| — |
| 280 |
Prudential valuation adjustments |
| 63 |
| — |
| — |
| 63 |
New issues of capital instruments |
| — |
| 1,244 |
| 823 |
| 2,067 |
Redemption of capital instruments |
| (22) |
| (1,948) |
| (1,000) |
| (2,970) |
Foreign exchange movements |
| — |
| — |
| 13 |
| 13 |
Adjustment under IFRS 9 transitional arrangements |
| (33) |
| — |
| — |
| (33) |
Expected loss less impairment |
| (62) |
| — |
| — |
| (62) |
Other movements |
| (27) |
| — |
| — |
| (27) |
At 31 December 2025 |
| 27,066 |
| 4,555 |
| 5,754 |
| 37,375 |
| ● | For CET1 movements refer to the key points on page 100. |
| ● | The AT1 movement reflects the £0.7 billion 7.500% Reset Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes issued in March 2025 and the £0.5 billion 7.625% Reset Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes issued in September 2025 offset by the redemption of $1.15 billion 8.000% Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes in August 2025 and $1.5 billion 6.000% Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes in December 2025. |
| ● | Tier 2 movements of £0.2 billion include a decrease of £1.0 billion due to the redemption of 3.622% Fixed to Fixed Rate Reset Tier 2 Notes due 2030 in May 2025 partially offset by an increase of £0.8 billion for a €1.0 billion 3.723% Fixed to Fixed Rate Reset Tier 2 Notes 2035 issued in February 2025 and foreign exchange movements. |
NatWest Group Annual Report on Form 20-F 2025 | 103 |
Capital, liquidity and funding risk continued
Capital generation pre-distributions
| 31 December | | 31 December | |
2025 | 2024 | |||
£m | £m | |||
CET1 |
| 27,066 |
| 24,928 |
CET1 capital pre-distributions (1) |
| 31,171 |
| 28,920 |
RWAs |
| 193,288 |
| 183,221 |
% | % | |||
CET1 ratio - opening at 1 January |
| 13.61 |
| 13.36 |
CET1 pre-distributions - closing |
| 16.13 |
| 15.78 |
Capital generation pre-distributions (1) |
| 2.52 |
| 2.43 |
| (1) | The calculation of capital generation pre-distributions uses CET1 capital pre-distributions. Distributions include ordinary dividends paid, foreseeable ordinary dividends and share buybacks. |
Risk-weighted assets
The table below analyses the movement in RWAs during the year, by key drivers.
Credit | Counterparty | Market | Operational | |||||||
risk | credit risk | risk | risk | Total | ||||||
| £bn | | £bn | | £bn | | £bn | | £bn | |
At 31 December 2024 |
| 148.1 |
| 7.1 |
| 6.2 |
| 21.8 |
| 183.2 |
Foreign exchange movement |
| (0.3) |
| — |
| — |
| — |
| (0.3) |
Business movement |
| — |
| 0.3 |
| (1.7) |
| 3.8 |
| 2.4 |
Risk parameter changes |
| (0.9) |
| — |
| — |
| — |
| (0.9) |
Methodology changes |
| — |
| — |
| — |
| — |
| — |
Model updates |
| 7.1 |
| 0.2 |
| — |
| — |
| 7.3 |
Acquisitions and disposals |
| 1.6 |
| — |
| — |
| — |
| 1.6 |
At 31 December 2025 |
| 155.6 |
| 7.6 |
| 4.5 |
| 25.6 |
| 193.3 |
NatWest Group Annual Report on Form 20-F 2025 | 104 |
Capital, liquidity and funding risk continued
Risk-weighted assets continued
The table below analyses the movement in RWAs by segment during the year.
| | Private Banking | | | | |||||
Retail | & Wealth | Commercial & | Central items | Total NatWest | ||||||
Banking | Management | Institutional | & other | Group | ||||||
Total RWAs | £bn | £bn | £bn | £bn | £bn | |||||
At 31 December 2024 | 65.5 | 11.0 | 104.7 | 2.0 | 183.2 | |||||
Foreign exchange movement | — | — | (0.3) | — | (0.3) | |||||
Business movement |
| (0.5) |
| 0.4 |
| 3.0 |
| (0.5) |
| 2.4 |
Risk parameter changes |
| 0.3 |
| — |
| (1.2) |
| — |
| (0.9) |
Methodology changes |
| — |
| — |
| — |
| — |
| — |
Model updates |
| 1.6 |
| — |
| 5.7 |
| — |
| 7.3 |
Acquisitions and disposals |
| 1.6 |
| — |
| — |
| — |
| 1.6 |
At 31 December 2025 |
| 68.5 |
| 11.4 |
| 111.9 |
| 1.5 |
| 193.3 |
Credit risk |
| 59.1 |
| 9.6 |
| 85.4 |
| 1.5 |
| 155.6 |
Counterparty credit risk |
| 0.2 |
| 0.1 |
| 7.3 |
| — |
| 7.6 |
Market risk |
| 0.1 |
| — |
| 4.4 |
| — |
| 4.5 |
Operational risk |
| 9.1 |
| 1.7 |
| 14.8 |
| — |
| 25.6 |
Total RWAs |
| 68.5 |
| 11.4 |
| 111.9 |
| 1.5 |
| 193.3 |
Total RWAs increased by £10.1 billion during the period mainly reflecting:
| ● | A reduction in risk-weighted assets from foreign exchange movements of £0.3 billion primarily due to sterling appreciation versus the US Dollar and depreciation versus euro. |
| ● | An increase in business movements of £2.4 billion, mainly driven by an increase in credit risk reflecting franchise lending growth offset by the benefits of RWA management actions. An increase in operational risk following the annual recalculation, including an acceleration of £1.6 billion from Q1 2026 to align with market practice and an increase in counterparty credit risk due to revised close-out periods for securities financing transactions partially offset by new bespoke portfolio credit default swap. There was a decrease in market risk mainly driven by active risk management on options trading and changes in government bond and bond futures positions. |
| ● | A reduction in risk parameters of £0.9 billion primarily driven by movements in risk metrics within Commercial & Institutional and Retail Banking. |
| ● | An increase in model updates of £7.3 billion primarily driven by CRD IV model updates within Commercial & Institutional and Retail Banking. |
| ● | An increase in acquisitions of £1.6 billion driven by balances acquired from Sainsbury’s Bank. |
NatWest Group Annual Report on Form 20-F 2025 | 105 |
Capital, liquidity and funding risk continued
Leverage exposure
The leverage metrics for UK entities are calculated in accordance with the Leverage ratio (CRR) part of the PRA Rulebook.
| 31 December | | 31 December | |
2025 | 2024 | |||
| £m |
| £m | |
Cash and balances at central banks |
| 85,182 |
| 92,994 |
Trading assets |
| 46,537 |
| 48,917 |
Derivatives |
| 60,789 |
| 78,406 |
Financial assets |
| 505,609 |
| 469,599 |
Other assets |
| 16,436 |
| 18,069 |
Total assets |
| 714,553 |
| 707,985 |
Derivatives |
|
| | |
- netting and variation margin |
| (58,769) |
| (76,101) |
- potential future exposures |
| 18,155 |
| 16,692 |
Securities financing transactions gross up |
| 2,593 |
| 2,460 |
Other off balance sheet items |
| 70,909 |
| 59,498 |
Regulatory deductions and other adjustments |
| (9,699) |
| (11,014) |
Claims on central banks |
| (81,616) |
| (89,299) |
Exclusion of bounce back loans |
| (1,172) |
| (2,422) |
UK leverage exposure |
| 654,954 |
| 607,799 |
UK leverage ratio (%) |
| 4.8 |
| 5.0 |
Liquidity key metrics
The table below sets out the NatWest Group key liquidity and related metrics on an average basis.
| 2025 | | 2024 | ||||||
NatWest Group | UK DoLSub | NatWest Group | UK DoLSub | ||||||
Liquidity Coverage Ratio (1) | 147 | % | 135 | % | 151 | % | 142 | % | |
Net Stable Funding Ratio (2) | 135 | % | 129 | % | 137 | % | 130 | % | |
Stressed Outflow Coverage (3) | 158 | % | 143 | % | 157 | % | 143 | % | |
| (1) | The LCR Average is calculated as the average of the preceding 12 months. |
| (2) | The NSFR Average is calculated as the average of the preceding four quarters. |
| (3) | NatWest Group’s Stressed Outflow Coverage (SOC) is an internal measure calculated by reference to liquid assets as a percentage of net stressed contractual and behavioural outflows over three months. The most severe outcome is selected from a range of scenarios comprising of market-wide, idiosyncratic and a combination of both. This assessment is performed in accordance with PRA guidance. The SOC Average is calculated as the average of the preceding 12 months. |
NatWest Group Annual Report on Form 20-F 2025 | 106 |
Capital, liquidity and funding risk continued
Minimum requirements of own funds and eligible liabilities (MREL)
The following table illustrates the components of estimated MREL in NatWest Group and operating subsidiaries and includes external issuances only. The roll-off profile relating to senior debt and subordinated debt instruments is set out on page 109.
| 2025 | 2024 |
| |||||||||||||||
Par value (1) | Balance sheet value | Regulatory value | MREL value (2) | Par value (1) | Balance sheet value | Regulatory value | MREL value (2) |
| ||||||||||
| £bn | | £bn | | £bn | | £bn | | £bn | | £bn | | £bn | | £bn |
| ||
CET1 capital (3) |
| 27.1 |
| 27.1 |
| 27.1 |
| 27.1 |
| 24.9 |
| 24.9 |
| 24.9 |
| 24.9 | ||
Tier 1 capital: end-point CRR compliant AT1 | ||||||||||||||||||
of which: NatWest Group plc (holdco) |
| 4.6 |
| 4.6 |
| 4.6 |
| 4.6 |
| 5.3 |
| 5.3 |
| 5.3 |
| 5.3 | ||
of which: NatWest Group plc operating subsidiaries (opcos) |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||
| 4.6 |
| 4.6 |
| 4.6 |
| 4.6 |
| 5.3 |
| 5.3 |
| 5.3 |
| 5.3 | |||
Tier 1 capital: end-point CRR non-compliant | ||||||||||||||||||
of which: holdco |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||
of which: opcos |
| 0.1 |
| 0.1 |
| — |
| — |
| 0.1 |
| 0.1 |
| — |
| — | ||
| 0.1 |
| 0.1 |
| — |
| — |
| 0.1 |
| 0.1 |
| — |
| — | |||
Tier 2 capital: end-point CRR compliant | ||||||||||||||||||
of which: holdco |
| 5.8 |
| 5.7 |
| 5.8 |
| 5.8 |
| 5.9 |
| 5.7 |
| 5.9 |
| 5.9 | ||
of which: opcos |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||
| 5.8 |
| 5.7 |
| 5.8 |
| 5.8 |
| 5.9 |
| 5.7 |
| 5.9 |
| 5.9 | |||
Tier 2 capital: end-point CRR non compliant | ||||||||||||||||||
of which: holdco |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||
of which: opcos |
| 0.2 |
| 0.3 |
| — |
| — |
| 0.2 |
| 0.3 |
| — |
| — | ||
| 0.2 |
| 0.3 |
| — |
| — |
| 0.2 |
| 0.3 |
| — |
| — | |||
Senior unsecured debt securities | ||||||||||||||||||
of which: holdco |
| 25.4 |
| 25.4 |
| — |
| 24.3 |
| 24.4 |
| 24.0 |
| — |
| 24.4 | ||
of which: opcos |
| 37.5 |
| 37.6 |
| — |
| — |
| 33.7 |
| 33.6 |
| — |
| — | ||
| 62.9 |
| 63.0 |
| — |
| 24.3 |
| 58.1 |
| 57.6 |
| — |
| 24.4 | |||
Tier 2 capital | ||||||||||||||||||
Other regulatory adjustments |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||
Total |
| 100.7 |
| 100.8 |
| 37.4 |
| 61.6 |
| 94.5 |
| 93.9 |
| 36.1 |
| 60.5 | ||
RWAs |
|
| 193.3 |
| 183.2 | |||||||||||||
UK leverage exposure |
|
| 655.0 |
| 607.8 | |||||||||||||
MREL as a ratio of RWAs |
| 31.9 | % | 33.0 | % | |||||||||||||
MREL as a ratio of UK leverage exposure |
| 9.4 | % | 9.9 | % | |||||||||||||
| (1) | Par value reflects the nominal value of securities issued. |
| (2) | MREL value reflects NatWest Group’s interpretation of the Bank of England’s current approach to setting a MREL. Liabilities excluded from MREL include instruments with less than one year remaining to maturity, structured debt, operating company senior debt, and other instruments that do not meet the MREL criteria. The MREL calculation includes Tier 1 and Tier 2 securities before the application of any regulatory caps or adjustments. |
| (3) | Shareholders’ equity was £42.6 billion (2024 - £39.4 billion). |
NatWest Group Annual Report on Form 20-F 2025 | 107 |
Capital, liquidity and funding risk continued
Minimum requirements of own funds and eligible liabilities (MREL) continued
The following table illustrates the components of the stock of outstanding issuance in NatWest Group and its operating subsidiaries including external and internal issuances.
NatWest | NWM | RBS | ||||||||||||||||
NatWest | Holdings | NatWest | Securities | International | ||||||||||||||
Group plc | Limited | NWB Plc | RBS plc | NWM Plc | Markets N.V. | Inc.(6) | Limited (7) | |||||||||||
£bn | | £bn | | £bn | | £bn | | £bn | | £bn | £bn | | £bn | |||||
Additional Tier 1 |
| Externally issued |
| 4.6 | — | 0.1 | — | — | — |
| — |
| — | |||||
Additional Tier 1 |
| Internally issued |
| — |
| 3.7 |
| 3.2 |
| 0.5 |
| 1.2 |
| 0.2 |
| — |
| 0.1 |
| 4.6 |
| 3.7 |
| 3.3 |
| 0.5 |
| 1.2 |
| 0.2 |
| — |
| 0.1 | |||
Tier 2 |
| Externally issued |
| 5.7 |
| — |
| — |
| — |
| — |
| 0.3 |
| — |
| — |
Tier 2 |
| Internally issued |
| — |
| 5.0 |
| 4.1 |
| 0.5 |
| 1.1 |
| 0.1 |
| 0.3 |
| — |
| 5.7 |
| 5.0 |
| 4.1 |
| 0.5 |
| 1.1 |
| 0.4 |
| 0.3 |
| — | |||
Senior unsecured |
| Externally issued |
| 25.4 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
Senior unsecured |
| Internally issued |
| — |
| 14.1 |
| 8.1 |
| 1.1 |
| 4.3 |
| — |
| — |
| 0.3 |
| 25.4 |
| 14.1 |
| 8.1 |
| 1.1 |
| 4.3 |
| — |
| — |
| 0.3 | |||
Total outstanding issuance |
| 35.7 |
| 22.8 |
| 15.5 |
| 2.1 |
| 6.6 |
| 0.6 |
| 0.3 |
| 0.4 |
| (1) | For AT1 & Tier 2, the balances are the IFRS balance sheet carrying amounts, which may differ from the amount which the instrument contributes to regulatory capital. Regulatory balances exclude, for example, issuance costs and fair value movements, while dated capital is required to be amortised on a straight-line basis over the final five years of maturity. |
| (2) | Balance sheet amounts reported for AT1 and Tier 2 instruments are before grandfathering restrictions imposed by CRR. |
| (3) | Internal issuance for NWB Plc and RBS plc represents AT1, Tier 2 or Senior unsecured issuance to NatWest Holdings Limited and for NWM N.V. and NWM SI to NWM Plc. |
| (4) | The balances are the IFRS balance sheet carrying amounts for Senior unsecured debt category and it does not include CP, CD and short term/medium notes issued from NatWest Group operating subsidiaries. |
| (5) | The above table does not include CET1 numbers. |
| (6) | NWM Securities Inc - regulated under US broker dealer rules. |
| (7) | RBS International Limited - the Resolution Regime is under development in Jersey. |
NatWest Group Annual Report on Form 20-F 2025 | 108 |
Capital, liquidity and funding risk continued
Roll-off profile
The following table illustrates the roll-off profile of NatWest Group’s major wholesale funding programmes.
| As at and for year | | Roll-off profile | |||||||||||
ended 31 December 2025 | | H1 2026 | | H2 2026 | | 2027 | | 2028 | | 2029 & 2030 | | 2031 & later | ||
Senior debt roll-off profile (1) | | £m | £m | £m | £m | £m | £m | £m | ||||||
NatWest Group plc | 25,441 | 1,121 | — | 2,367 | 4,743 | 10,104 | 7,106 | |||||||
NWM Plc | 30,231 | 6,221 | 4,433 | 6,551 | 4,780 | 7,909 | 337 | |||||||
NatWest Bank Plc | 2,736 | 2,710 | 26 | — | — | — | — | |||||||
NWM N.V. | 2,627 | 991 | 779 | 450 | — | 40 | 367 | |||||||
NatWest Bank Plc - Covered bonds | 750 | — | — | — | — | 750 | — | |||||||
Total notes issued | 61,785 | 11,043 | 5,238 | 9,368 | 9,523 | 18,803 | 7,810 | |||||||
Subordinated debt instruments roll-off profile (2) | ||||||||||||||
NatWest Group plc | 5,729 | — |
| 982 |
| 630 |
| 1,310 |
| 2,807 |
| — | ||
NWM Plc | 19 | — |
| 17 |
| — |
| — |
| — |
| 2 | ||
NWM N.V. | 253 | — |
| — |
| — |
| — |
| — |
| 253 | ||
Total subordinated debt | 6,001 | — |
| 999 |
| 630 |
| 1,310 |
| 2,807 |
| 255 | ||
| (1) | Based on final contractual instrument maturity. |
| (2) | Based on first call date of instrument; however, this does not indicate NatWest Group’s strategy on capital and funding management. The table above does not include debt accounted Tier 1 instruments although those instruments form part of the total subordinated debt balance. |
| (3) | The roll-off table is based on sterling-equivalent balance sheet values. |
NatWest Group Annual Report on Form 20-F 2025 | 109 |
Capital, liquidity and funding risk continued
Liquidity portfolio
The table below shows the composition of the liquidity portfolio with primary liquidity aligned to high-quality liquid assets on a regulatory LCR basis. Secondary liquidity comprises of assets which are eligible as collateral for local central bank liquidity facilities and do not form part of the LCR eligible high-quality liquid assets. High-quality liquid assets cover both Pillar 1 and Pillar 2 risks.
| Liquidity value | |||||||||||
31 December 2025 | 31 December 2024 | |||||||||||
NatWest | NWH | UK DoL | NatWest | NWH | UK DoL | |||||||
Group (1) | Group (2) | Sub | Group (1) | Group (2) | Sub | |||||||
| £m | | £m | | £m | | £m | | £m | | £m | |
Cash and balances at central banks |
| 81,107 |
| 52,307 |
| 51,640 |
| 88,617 |
| 58,313 |
| 57,523 |
High quality government/MDB/PSE and GSE bonds (3) |
| 61,438 |
| 42,214 |
| 42,214 |
| 58,818 |
| 43,275 |
| 43,275 |
Extremely high quality covered bonds |
| 4,415 |
| 4,414 |
| 4,414 |
| 4,341 |
| 4,340 |
| 4,340 |
LCR level 1 Eligible Assets |
| 146,960 |
| 98,935 |
| 98,268 |
| 151,776 |
| 105,928 |
| 105,138 |
LCR level 2 Eligible Assets (4) |
| 10,325 |
| 9,466 |
| 9,466 |
| 9,271 |
| 7,957 |
| 7,957 |
Primary liquidity (HQLA) (5) |
| 157,285 |
| 108,401 |
| 107,734 |
| 161,047 |
| 113,885 |
| 113,095 |
Secondary liquidity |
| 80,647 |
| 80,647 |
| 80,647 |
| 61,230 |
| 61,200 |
| 61,200 |
Total liquidity value |
| 237,932 |
| 189,048 |
| 188,381 |
| 222,277 |
| 175,085 |
| 174,295 |
| (1) | NatWest Group includes the UK Domestic Liquidity Sub-Group (UK DoLSub), NatWest Markets Plc and other significant operating subsidiaries that hold liquidity portfolios. These include RBSI Ltd and NWM N.V. who hold managed portfolios that comply with local regulations that may differ from PRA rules. |
| (2) | NWH Group comprises UK DoLSub and NatWest Bank Europe GmbH who hold managed portfolios that comply with local regulations that may differ from PRA rules. |
| (3) | Multilateral development bank abbreviated to MDB, public sector entities abbreviated to PSE and government sponsored entities abbreviated to GSE. |
| (4) | Includes Level 2A and Level 2B. |
| (5) | High-quality liquid assets abbreviated to HQLA. |
NatWest Group Annual Report on Form 20-F 2025 | 110 |
Capital, liquidity and funding risk continued
Funding sources (audited)
The table below shows the carrying values of the principal funding sources based on contractual maturity. Balance sheet captions include balances held at all classifications under IFRS 9.
| 2025 | | 2024 | |||||||||
Short-term less | Long-term more | Short-term less | Long-term more | |||||||||
than 1 year | than 1 year | Total | than 1 year | than 1 year | Total | |||||||
| £m | | £m | | £m | | £m | | £m | | £m | |
Bank Deposits | ||||||||||||
Repos |
| 22,371 |
| 5,445 |
| 27,816 |
| 11,967 |
| — |
| 11,967 |
Other bank deposits (1) |
| 6,094 |
| 10,182 |
| 16,276 |
| 9,708 |
| 9,777 |
| 19,485 |
| 28,465 |
| 15,627 |
| 44,092 |
| 21,675 |
| 9,777 |
| 31,452 | |
Customer Deposits | ||||||||||||
Repos |
| 753 |
| 1,043 |
| 1,796 |
| 1,363 |
| — |
| 1,363 |
Non-bank financial institutions |
| 53,559 |
| 4 |
| 53,563 |
| 48,761 |
| 241 |
| 49,002 |
Personal |
| 232,815 |
| 7,757 |
| 240,572 |
| 231,483 |
| 2,451 |
| 233,934 |
Corporate |
| 147,022 |
| 45 |
| 147,067 |
| 149,086 |
| 105 |
| 149,191 |
| 434,149 |
| 8,849 |
| 442,998 |
| 430,693 |
| 2,797 |
| 433,490 | |
Trading liabilities (2) | ||||||||||||
Repos (3) |
| 26,168 |
| 2,410 |
| 28,578 |
| 29,752 |
| 810 |
| 30,562 |
Derivatives collateral |
| 11,966 |
| — |
| 11,966 |
| 12,509 |
| — |
| 12,509 |
Other bank and customer deposits |
| 454 |
| 286 |
| 740 |
| 627 |
| 268 |
| 895 |
Debt securities in issue - Medium term notes |
| 28 |
| 206 |
| 234 |
| 20 |
| 237 |
| 257 |
| 38,616 |
| 2,902 |
| 41,518 |
| 42,908 |
| 1,315 |
| 44,223 | |
Other financial liabilities |
|
|
|
| |
| |
| | |||
Customer deposits including repos |
| 836 |
| 1,476 |
| 2,312 |
| 471 |
| 1,341 |
| 1,812 |
Debt securities in issue: |
|
|
| — |
| |
| |
| | ||
Commercial paper and certificates of deposit |
| 8,718 |
| 683 |
| 9,401 |
| 10,889 |
| 377 |
| 11,266 |
Medium term notes |
| 11,475 |
| 41,999 |
| 53,474 |
| 11,118 |
| 34,967 |
| 46,085 |
Covered bonds |
| — |
| 749 |
| 749 |
| — |
| 749 |
| 749 |
Securitisation |
| — |
| 1,663 |
| 1,663 |
| 295 |
| 880 |
| 1,175 |
| 21,029 |
| 46,570 |
| 67,599 |
| 22,773 |
| 38,314 |
| 61,087 | |
Subordinated liabilities |
| 1,076 |
| 5,047 |
| 6,123 |
| 1,051 |
| 5,085 |
| 6,136 |
Total funding |
| 523,335 |
| 78,995 |
| 602,330 |
| 519,100 |
| 57,288 |
| 576,388 |
Of which: available in resolution (4) |
|
|
| 30,049 |
|
|
| 29,742 | ||||
| (1) | Includes £8.2 billion (2024 – £12.0 billion) relating to Term Funding Scheme with additional incentives for Small and Medium-sized Enterprises participation. |
| (2) | Excludes short positions of £7.5 billion (2024 – £10.5 billion). |
| (3) | Comprises central & other bank repos of £8.2 billion (2024 – £7.2 billion), other financial institution repos of £18.0 billion (2024 – £20.4 billion) and other corporate repos of £2.4 billion (2024 – £3.0 billion). |
| (4) | Eligible liabilities (as defined in the Banking Act 2009 as amended from time to time) that meet the eligibility criteria set out in the regulations, rules, policies, guidelines, or statements of the Bank of England including the Statement of Policy published by the Bank of England in December 2021 (updating June 2018). The balance consists of £24.3 billion (2024 – £24.0 billion) under debt securities in issue (senior MREL) and £5.7 billion (2024 – £5.7 billion) under subordinated liabilities. |
NatWest Group Annual Report on Form 20-F 2025 | 111 |
Capital, liquidity and funding risk continued
Contractual maturity (audited)
This table shows the residual maturity of financial instruments, based on contractual date of maturity of NatWest Group’s banking activities, including hedging derivatives. Trading activities, comprising mandatory fair value through profit or loss (MFVTPL) assets and held-for-trading (HFT) liabilities have been excluded from the maturity analysis and are shown in total in the table below.
| Banking activities | | | | | |||||||||||||||||
Less than | 6 months- | More than | Trading | |||||||||||||||||||
1 months | 1‑3 months | 3‑6 months | 1 year | Subtotal | 1‑3 years | 3‑5 years | 5 years | Total | activities | Total | ||||||||||||
2025 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||
Cash and balances at central banks |
| 85,182 |
| — |
| — |
| — |
| 85,182 |
| — |
| — |
| — |
| 85,182 |
| — |
| 85,182 |
Trading assets |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 46,537 |
| 46,537 |
Derivatives |
| (10) |
| 95 |
| 34 |
| 29 |
| 148 |
| 65 |
| 322 |
| — |
| 535 |
| 60,254 |
| 60,789 |
Settlement balances |
| 645 |
| — |
| — |
| — |
| 645 |
| — |
| — |
| — |
| 645 |
| — |
| 645 |
Loans to banks - amortised cost |
| 4,854 |
| 748 |
| 411 |
| 109 |
| 6,122 |
| 696 |
| — |
| 140 |
| 6,958 |
| — |
| 6,958 |
Loans to customers - amortised cost (1) |
| 43,857 |
| 19,126 |
| 17,086 |
| 23,561 |
| 103,630 |
| 66,657 |
| 49,262 |
| 202,841 |
| 422,390 |
| — |
| 422,390 |
Personal |
| 7,795 |
| 2,222 |
| 3,331 |
| 6,496 |
| 19,844 |
| 24,503 |
| 21,533 |
| 168,637 |
| 234,517 |
| — |
| 234,517 |
Corporate |
| 20,497 |
| 4,196 |
| 3,851 |
| 7,862 |
| 36,406 |
| 30,312 |
| 21,908 |
| 30,208 |
| 118,834 |
| — |
| 118,834 |
Non-bank financial institutions |
| 15,565 |
| 12,708 |
| 9,904 |
| 9,203 |
| 47,380 |
| 11,842 |
| 5,821 |
| 3,996 |
| 69,039 |
| — |
| 69,039 |
Other financial assets |
| 1,683 |
| 2,994 |
| 3,968 |
| 2,621 |
| 11,266 |
| 23,899 |
| 9,978 |
| 33,583 |
| 78,726 |
| 1,044 |
| 79,770 |
Total financial assets |
| 136,211 |
| 22,963 |
| 21,499 |
| 26,320 |
| 206,993 |
| 91,317 |
| 59,562 |
| 236,564 |
| 594,436 |
| 107,835 |
| 702,271 |
2024 |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Total financial assets |
| 146,069 |
| 22,925 |
| 18,701 |
| 31,177 |
| 218,872 |
| 76,479 |
| 56,413 |
| 215,575 |
| 567,339 |
| 128,007 |
| 695,346 |
| (1) | Loans to customers is gross and excludes £3.5 billion (2024 - £3.3 billion) of impairment provisions. |
NatWest Group Annual Report on Form 20-F 2025 | 112 |
Capital, liquidity and funding risk continued
Contractual maturity (audited) continued
Banking activities | ||||||||||||||||||||||
| Less than | | | | | | | | | | | | | | More than | | | | Trading | | | |
1 months | 1‑3 months | 3‑6 months | 6 months - 1 year | Subtotal | 1‑3 years | 3‑5 years | 5 years | Total | activities | Total | ||||||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
Bank deposits excluding repos |
| 4,447 |
| 342 |
| 845 |
| 460 |
| 6,094 |
| 6,556 |
| 568 |
| 3,058 |
| 16,276 |
| — |
| 16,276 |
Bank repos |
| 20,926 |
| 881 |
| — |
| 564 |
| 22,371 |
| 3,616 |
| 1,829 |
| — |
| 27,816 |
| — |
| 27,816 |
Customer repos |
| 587 |
| 16 |
| — |
| 150 |
| 753 |
| 1,043 |
| — |
| — |
| 1,796 |
| — |
| 1,796 |
Customer deposits excluding repos |
| 380,523 |
| 20,637 |
| 17,331 |
| 14,905 |
| 433,396 |
| 7,785 |
| 13 |
| 8 |
| 441,202 |
| — |
| 441,202 |
Personal |
| 205,094 |
| 5,698 |
| 9,628 |
| 12,395 |
| 232,815 |
| 7,750 |
| 7 |
| — |
| 240,572 |
| — |
| 240,572 |
Corporate |
| 126,625 |
| 11,281 |
| 7,074 |
| 2,042 |
| 147,022 |
| 31 |
| 6 |
| 8 |
| 147,067 |
| — |
| 147,067 |
Non-bank financial institutions |
| 48,804 |
| 3,658 |
| 629 |
| 468 |
| 53,559 |
| 4 |
| — |
| — |
| 53,563 |
| — |
| 53,563 |
Settlement balances |
| 942 |
| — |
| — |
| — |
| 942 |
| — |
| — |
| — |
| 942 |
| — |
| 942 |
Trading liabilities |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 49,022 |
| 49,022 |
Derivatives |
| 31 |
| 14 |
| 12 |
| 29 |
| 86 |
| 164 |
| 106 |
| 1 |
| 357 |
| 53,617 |
| 53,974 |
Other financial liabilities |
| 3,745 |
| 3,702 |
| 7,783 |
| 5,799 |
| 21,029 |
| 22,923 |
| 16,418 |
| 7,229 |
| 67,599 |
| — |
| 67,599 |
CPs and CDs |
| 1,500 |
| 1,718 |
| 2,497 |
| 3,003 |
| 8,718 |
| 683 |
| — |
| — |
| 9,401 |
| — |
| 9,401 |
Medium term notes |
| 2,209 |
| 1,459 |
| 5,107 |
| 2,700 |
| 11,475 |
| 21,229 |
| 15,412 |
| 5,358 |
| 53,474 |
| — |
| 53,474 |
Covered bonds |
| — |
| — |
| — |
| — |
| — |
| — |
| 749 |
| — |
| 749 |
| — |
| 749 |
Securitisations |
| — |
| — |
| — |
| — |
| — |
| 3 |
| — |
| 1,660 |
| 1,663 |
| — |
| 1,663 |
Customer deposits including repos |
| 36 |
| 525 |
| 179 |
| 96 |
| 836 |
| 1,008 |
| 257 |
| 211 |
| 2,312 |
| — |
| 2,312 |
Subordinated liabilities |
| — |
| 57 |
| 20 |
| 999 |
| 1,076 |
| 1,892 |
| 2,780 |
| 375 |
| 6,123 |
| — |
| 6,123 |
Notes in circulation |
| 3,164 |
| — |
| — |
| — |
| 3,164 |
| — |
| — |
| — |
| 3,164 |
| — |
| 3,164 |
Lease liabilities |
| 4 |
| 19 |
| 21 |
| 41 |
| 85 |
| 158 |
| 62 |
| 230 |
| 535 |
| — |
| 535 |
Total financial liabilities |
| 414,369 |
| 25,668 |
| 26,012 |
| 22,947 |
| 488,996 |
| 44,137 |
| 21,776 |
| 10,901 |
| 565,810 |
| 102,639 |
| 668,449 |
2024 | ||||||||||||||||||||||
Total financial liabilities |
| 399,323 |
| 28,936 |
| 21,299 |
| 32,066 |
| 481,624 |
| 33,905 |
| 16,240 |
| 6,535 |
| 538,304 |
| 126,332 |
| 664,636 |
NatWest Group Annual Report on Form 20-F 2025 | 113 |
Capital, liquidity and funding risk continued
Senior notes and subordinated liabilities - residual maturity profile by instrument type (audited)
The table below shows NatWest Group’s debt securities in issue and subordinated liabilities by residual maturity.
| Trading | | | | | | | | | | | | | | | |
liabilities | Other financial liabilities | |||||||||||||||
Debt securities in issue | ||||||||||||||||
Debt securities | Commercial | Covered | Subordinated | Total notes | ||||||||||||
in issue MTNs | paper and CDs | MTNs | bonds | Securitisation | liabilities | Total | in issue | |||||||||
2025 | £m | £m | £m | £m | £m | £m | £m | £m | ||||||||
Less than 1 year |
| 28 |
| 8,718 |
| 11,475 |
| — |
| — |
| 1,076 |
| 21,269 |
| 21,297 |
1‑3 years |
| 1 |
| 683 |
| 21,229 |
| — |
| 3 |
| 1,892 |
| 23,807 |
| 23,808 |
3‑5 years |
| 73 |
| — |
| 15,412 |
| 749 |
| — |
| 2,780 |
| 18,941 |
| 19,014 |
More than 5 years |
| 132 |
| — |
| 5,358 |
| — |
| 1,660 |
| 375 |
| 7,393 |
| 7,525 |
Total |
| 234 |
| 9,401 |
| 53,474 |
| 749 |
| 1,663 |
| 6,123 |
| 71,410 |
| 71,644 |
2024 | ||||||||||||||||
Less than 1 year |
| 20 |
| 10,889 |
| 11,118 |
| — |
| 295 |
| 1,051 |
| 23,353 |
| 23,373 |
1‑3 years |
| 35 |
| 377 |
| 18,426 |
| — |
| 7 |
| 1,523 |
| 20,333 |
| 20,368 |
3‑5 years |
| 42 |
| — |
| 12,409 |
| 749 |
| — |
| 2,623 |
| 15,781 |
| 15,823 |
More than 5 years |
| 160 |
| — |
| 4,132 |
| — |
| 873 |
| 939 |
| 5,944 |
| 6,104 |
Total |
| 257 |
| 11,266 |
| 46,085 |
| 749 |
| 1,175 |
| 6,136 |
| 65,411 |
| 65,668 |
The table below shows the currency breakdown. |
| |
| |
| |
| |
| |
| |
| |
| |
| GBP |
| USD |
| EUR |
| Other |
| Total | |||||||
2025 |
| £m |
| £m |
| £m |
| £m |
| £m | ||||||
Commercial paper and CDs |
| 3,227 |
| 1,341 |
| 4,833 |
| — |
| 9,401 | ||||||
MTNs |
| 4,914 |
| 22,061 |
| 23,536 |
| 3,197 |
| 53,708 | ||||||
Covered bonds |
| 749 |
| — |
| — |
| — |
| 749 | ||||||
Securitisation |
| 1,663 |
| — |
| — |
| — |
| 1,663 | ||||||
Subordinated liabilities |
| 2,383 |
| 1,325 |
| 2,415 |
| — |
| 6,123 | ||||||
Total |
| 12,936 |
| 24,727 |
| 30,784 |
| 3,197 |
| 71,644 | ||||||
2024 |
| |
| |
| |
| |
| | ||||||
Total |
| 14,541 |
| 23,797 |
| 24,325 |
| 3,005 |
| 65,668 | ||||||
NatWest Group Annual Report on Form 20-F 2025 | 114 |
Capital, liquidity and funding risk continued
Funding gap: maturity and segment analysis
The contractual maturity of loans to customers and customer deposits are shown below. The table demonstrates the maturity transformation role being performed by NatWest Group of lending long-term whilst relying largely on short-term funding. This is possible as the behavioural profiles of many customer deposits, which tend to be repayable on demand, show longer maturity and greater stability than their contractual agreements.
NatWest Group forms expectations on customer behaviours through both qualitative and quantitative techniques, incorporating observed customer behaviours over historic time periods, which includes the more recent periods of interest rate change. Customer behaviour assumptions are approved by the NatWest Group Balance Sheet Committee and have been used to prepare the funding gap analysis, which reduces maturity mismatch across the periods shown.
Contractual maturity | Behavioural maturity | |||||||||||||||||||||||||||||||
Loans to customers (1) | Customer deposits | Net surplus/(gap) | Net surplus/(gap) | |||||||||||||||||||||||||||||
| | | | | Greater | | | | | | | | Greater | | | | | | | | Greater | | | | | | | | Greater | | | |
Less than | 1-5 | than | Less than | 1-5 | than | Less than | 1-5 | than | Less than | 1-5 | than | |||||||||||||||||||||
1 year | years | 5 years | Total | 1 year | years | 5 years | Total | 1 year | years | 5 years | Total | 1 year | years | 5 years | Total | |||||||||||||||||
2025 | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | ||||||||||||||||
Retail Banking |
| 15 |
| 42 |
| 159 |
| 216 |
| 195 |
| 7 |
| — |
| 202 |
| 180 |
| (35) |
| (159) |
| (14) |
| (25) |
| (79) |
| 90 |
| (14) |
Private Banking & Wealth Management |
| 3 |
| 7 |
| 9 |
| 19 |
| 43 |
| — |
| — |
| 43 |
| 40 |
| (7) |
| (9) |
| 24 |
| 14 |
| (6) |
| 16 |
| 24 |
Commercial & Institutional |
| 52 |
| 68 |
| 35 |
| 155 |
| 203 |
| 2 |
| — |
| 205 |
| 151 |
| (66) |
| (35) |
| 50 |
| 13 |
| (18) |
| 55 |
| 50 |
Central items & other |
| — |
| — |
| — |
| — |
| 1 |
| — |
| — |
| 1 |
| 1 |
| — |
| — |
| 1 |
| 1 |
| — |
| — |
| 1 |
Total |
| 70 |
| 117 |
| 203 |
| 390 |
| 442 |
| 9 |
| — |
| 451 |
| 372 |
| (108) |
| (203) |
| 61 |
| 3 |
| (103) |
| 161 |
| 61 |
2024 |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Total |
| 68 |
| 105 |
| 197 |
| 370 |
| 436 |
| 3 |
| — |
| 439 |
| 368 |
| (102) |
| (197) |
| 69 |
| 20 |
| 59 |
| (10) |
| 69 |
| (1) | Loans to customers and customer deposits include trading assets and trading liabilities respectively and excludes reverse repos and repos. |
| ● | The net customer funding surplus decreased by £8 billion during 2025 to £61 billion driven by a £20 billion increase in loans to customers offset by a £12 billion increase in deposits. |
| ● | The customer deposit mix was broadly similar to 2024, with additional prudence applied to customer account depositor behavioural assumptions. |
Encumbrance (audited)
NatWest Group evaluates the extent to which assets can be financed in a secured form (encumbrance), but certain asset types lend themselves more readily to encumbrance. The typical characteristics that support encumbrance are an ability to pledge those assets to another counterparty or entity through operation of law without necessarily requiring prior notification, homogeneity, predictable and measurable cash flows, and a consistent and uniform underwriting and collection process. Retail assets including residential mortgages, credit card receivables and personal loans display many of these features.
NatWest Group categorises its assets into four broad groups, those that are:
| ● | Already encumbered and used to support funding currently in place through own-asset securitisations, covered bonds and securities repurchase agreements. |
| ● | Pre-positioned with central banks as part of funding schemes and those encumbered under such schemes. |
| ● | Ring-fenced to meet regulatory requirements, where NatWest Group has in place an operational continuity in resolution (OCIR) investment mandate wherein the PRA requires critical service providers to hold segregated liquidity buffers covering at least 50% of their annual fixed overheads. |
| ● | Unencumbered. In this category, NatWest Group has in place an enablement programme which seeks to identify assets capable of being encumbered and to identify the actions to facilitate such encumbrance whilst not affecting customer relationships or servicing. Programmes to manage the use of assets to actively support funding are established within UK DoLSub and NatWest Markets Plc. |
NatWest Group Annual Report on Form 20-F 2025 | 115 |
Capital, liquidity and funding risk continued
Balance sheet encumbrance
The table shows the retained encumbered assets of NatWest Group.
Encumbered as a result of transactions with | Unencumbered assets not pre-positioned with central banks | |||||||||||||||||||
counterparties other than central banks | Pre-positioned | Collateral | ||||||||||||||||||
| | | SFT, | | | | & encumbered | | ring-fenced to | | | | | | | | | | | |
Covered | derivatives and | assets held at | meet regulatory | Readily | Other | Cannot | ||||||||||||||
debts | other (1,2) | Total | central banks | requirement | available | available (3) | be used (4) | Total | Total (5) | |||||||||||
2025 | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn | ||||||||||
Cash and balances at central banks |
| — |
| 3.5 |
| 3.5 |
| — |
| — |
| 81.7 |
| — |
| — |
| 81.7 |
| 85.2 |
Trading assets |
| — |
| 16.1 |
| 16.1 |
| — |
| — |
| 2.5 |
| 0.1 |
| 27.8 |
| 30.4 |
| 46.5 |
Derivatives |
| — | — | — | — | — | — | — |
| 60.8 |
| 60.8 |
| 60.8 | ||||||
Settlement balances |
|
| 0.6 |
| 0.6 |
| 0.6 | |||||||||||||
Loans to banks - amortised cost |
| — |
| — |
| — |
| — |
| — |
| 2.0 |
| 1.7 |
| 3.3 |
| 7.0 |
| 7.0 |
Loans to customers - amortised cost (6) |
| 13.8 |
| — |
| 13.8 |
| 115.5 |
| — |
| 93.7 |
| 145.3 |
| 50.6 |
| 289.6 |
| 418.9 |
Other financial assets (7) |
| — |
| 25.5 |
| 25.5 |
| — |
| 0.5 |
| 53.6 |
| — |
| 0.2 |
| 53.8 |
| 79.8 |
Intangible assets |
|
| 7.3 |
| 7.3 |
| 7.3 | |||||||||||||
Other assets |
| — |
| — |
| — |
| — |
| — |
| — |
| 2.3 |
| 6.2 |
| 8.5 |
| 8.5 |
Total assets |
| 13.8 |
| 45.1 |
| 58.9 |
| 115.5 |
| 0.5 |
| 233.5 |
| 149.4 |
| 156.8 |
| 539.7 |
| 714.6 |
2024 |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Total assets |
| 12.7 |
| 40.8 |
| 53.5 |
| 94.5 |
| 1.8 |
| 242.9 |
| 132.5 |
| 182.8 |
| 558.2 |
| 708.0 |
| (1) | Repos and other secured deposits, cash, coin and nostro balance held with the Bank of England as collateral against deposits and notes in circulation are included here rather than within those positioned at the central bank as they are part of normal banking operations. Securities financing transactions (SFT) include collateral given to secure derivative liabilities. |
| (2) | Derivative cash collateral of £5.7 billion (2024 - £8.0 billion) has been included in the encumbered assets. |
| (3) | Other assets that are capable of being encumbered are those assets on the balance sheet that are available for funding and collateral purposes but are not readily realisable in their current form. These assets include loans that could be pre-positioned with central banks but have not been subject to internal and external documentation review and diligence work. |
| (4) | Cannot be used includes: |
| a) | Derivatives, reverse repurchase agreements and trading related settlement balances. |
| b) | Non-financial assets such as intangibles, prepayments and deferred tax. |
| c) | Loans that are not encumbered and cannot be pre-positioned with central banks on criteria set by the central banks, including those relating to date of origination and level of documentation. |
| d) | Non-recourse invoice financing balances and certain shipping loans whose terms and structure prohibit their use as collateral. |
| (5) | In accordance with market practice, NatWest Group employs securities recognised on the balance sheet, and securities received under reverse repo transactions as collateral for repos. |
| (6) | The pre-positioned and encumbered assets held at central banks of £115.5 billion includes the encumbered residential mortgages of £16.1 billion. £75.6 billion of residential UK mortgages are included in £93.7 billion readily available loans to customers. |
| (7) | Other financial assets under SFT, derivatives and other include £0.5 billion of debt securities under the continuing control of NWB Plc. This follows the agreement between NWB Plc and the Group Pension Fund to establish a bankruptcy remote reservoir trust to hold these assets. Refer to Note 5 for additional information. |
Climate and nature risk
Definition
Climate and nature risk is the threat of financial loss or adverse non-financial impacts associated with climate change and nature loss respectively and the political, economic and environmental responses to it.
Sources of risk
Physical risks may arise from climate events such as heatwaves, droughts, floods, storms and nature-related events such as land or air pollution. They can potentially result in financial losses, impairing asset values and the creditworthiness of borrowers. NatWest Group could be exposed to physical risks directly by the effects on its property portfolio and, indirectly, by the impacts on the wider economy as well as on the property, business interests and supply chains of its customers.
NatWest Group Annual Report on Form 20-F 2025 | 116 |
Climate and nature risk continued
Sources of risk continued
Transition risks may arise from the process of adjustment towards a low-carbon, nature-restored economy. Changes in policy, technology and sentiment could prompt reassessment of customers’ financial risk and may lead to falls in the value of a large range of assets. NatWest Group could be exposed to transition risks directly through the costs of adaptation of its own operations as well as supply chain disruption leading to financial impacts. Potential indirect effects include the impact on the wider economy, including on customers, which may erode NatWest Group’s competitiveness and profitability, as well as threaten reputational damage.
Liability risks may arise should stakeholders consider NatWest Group’s climate and nature risk management practices and disclosures insufficient, and responsible for or attributable to, stakeholders’ losses. On the other hand, liability risks may also arise where some jurisdictions believe financial institutions have taken their sustainability-related initiatives too far, with some imposing sanctions in these circumstances.
Climate risk has been included in the NatWest Group risk directory since 2021. In 2024, we broadened the definition to climate and nature risk and updated our internal risk policy to reflect this. We are in the early stages of embedding nature into our risk management processes.
As climate and nature risk is both a principal risk within NatWest Group’s EWRMF, and a cross-cutting risk, which impacts other principal risks, NatWest Group periodically refreshes its assessment of the relative impact of climate-related risk factors to other principal risks, where NatWest Group’s exposure to a principal risk could be taken outside of appetite due to climate-related risk factors. In identifying climate-related risks and opportunities to NatWest Group, the period in which each is likely to occur, was assessed. Risks and opportunities deemed material to the five-year financial planning cycle were viewed as short-term. Long-term was defined as beyond 15 years, while medium-term was defined as within the next five to 15 years(1).
The outcome of the latest assessment of the relative impact of climate-related risk factors on other principal risks is included in the following table. All principal risks in the table were identified as potentially the most impacted by climate risk, over short, medium and long term horizons, noting these risks could amplify capital and liquidity risks themselves.
Risk type | Risks to NatWest Group | Drivers | Identification, assessment and measurement |
Credit risk | From the adverse impact on future credit worthiness of customers due to climate change risk factors impacting asset valuation, income and costs. Mitigants include operational limits in the residential mortgage portfolio and inclusion of climate considerations in sector strategy within the commercial portfolio. | Physical: acute, chronic(2) Transition: government policy and legislation, market, technology, reputation | Scenario analysis Portfolio level assessments Transaction level assessments |
Operational risk | Due to the increased likelihood and potential impact of business disruption arising from new and changing policy standards. Mitigants include resilience and disclosure controls. | Physical: acute, chronic(2) Transition: government policy and legislation, market, technology, reputation | Scenario analysis Transaction level assessments |
Compliance risk | NatWest Group is required to comply with all applicable climate-related legal and regulatory obligations. Mitigants include relevant horizon scanning. | Physical: acute, chronic(2) Transition: government policy and legislation, market, technology, reputation Liability: greenwashing | Transaction level assessments |
Conduct risk | Due to poor customer outcomes arising from the impacts of climate change. Mitigants include additional checks on sustainability claims and applying product flaw controls. | Transition: government policy and legislation, market, technology, reputation Liability: greenwashing | Scenario analysis Transaction level assessments |
Reputational risk | Arising from NatWest Group’s actual or perceived contribution to climate change, or from the adequacy of our actions in response. Mitigants include the environmental social, & ethical risk framework(3). | Transition: government policy and legislation, market, technology Liability: greenwashing | Portfolio level assessments Transaction level assessments |
| (1) | NatWest Group’s climate transition planning uses different time frames than those used in financial reporting. Accordingly, the references to ‘short’, ‘medium’ and ‘long-term’ in climate reporting are not indicative of the meaning of similar terms used in NatWest Group’s other disclosures. |
| (2) | Acute – event-driven such as increased severity of extreme weather events (for example, storms, droughts, floods, and fires) or water, land or air pollution. Chronic – longer-term shifts in precipitation and temperature and increased variability in weather patterns (for example, sea level rise) or biodiversity loss. |
| (3) | From 1 January 2026, the name of the ESE Risk Framework was updated to the Environmental & Social Risk Framework. This change better reflects the framework's underlying methodology which focuses on a risk-based approach aligned to organisational risk appetite, rather than values-based judgements. |
NatWest Group Annual Report on Form 20-F 2025 | 117 |
Climate and nature risk continued
Key developments in 2025
The effective management of climate risk requires the integration of climate-related risk drivers into strategic planning, transactions and decision-making. The approach has evolved since 2021 alongside NatWest Group’s ongoing, multi-year progressive pathway to mature climate risk management capabilities, and in 2025:
| ● | NatWest Group continued to enhance its in-house climate risk modelling capabilities, supporting the ongoing integration of climate risk within its capital adequacy (ICAAP), impairment (IFRS 9) and risk management processes. Insights from risk processes have been shared with sector and front-line teams to support the financial budget and climate transition plan processes. In particular, internal physical risk modelling capabilities have been developed during 2025 albeit with further enhancements to come in 2026. |
| ● | NatWest Group continued its roll-out of climate decisioning framework (CDF) tools. These comprise climate risk scorecards and climate transition plan assessment tools. The roll-out continues on a test and learn basis. However we are now introducing initial use cases where we identify higher-risk transactions for enhanced oversight or escalated approval processes. |
Governance
Risk governance for climate and nature risk is in line with the approach outlined in the Risk management framework section.
The Board is responsible for monitoring and overseeing climate-related risk within NatWest Group’s overall business strategy and risk appetite.
The risk appetite statement is reviewed and approved at least annually by the Board on the Board Risk Committee’s recommendation to ensure it remains appropriate and aligned to strategy.
The Chief Risk Officer shares accountability with the Chief Executive Officer under the Senior Managers Regime for identifying and managing the financial risks arising from climate change. This includes ensuring that the financial risks from climate change are adequately reflected in risk management frameworks and policies, and that NatWest Group can identify, measure, monitor, manage and report on its exposure to these risks. Reporting is provided on a regular basis, via the Chief Risk Officer Risk Report, to the Executive and Board Risk Committees, while an annual spotlight on climate and nature Risk is also undertaken to these committees.
The Group Executive Committee continues to supervise strategic implementation and delivery, supported by Group Sustainability, other functions and franchises.
Risk appetite
Risk appetite for climate risk is in line with the approach outlined in the Risk management framework section.
Identification, assessment and measurement
NatWest Group continues to enhance its processes to effectively measure the potential size and scope of climate-related risks, through the three approaches detailed below. Identification, assessment and measurement is undertaken at NatWest Group and business segment levels as appropriate and through an integrated governance model. The approach to nature-related risks is not as mature as the approach to climate-related risks.
Strategic analysis
NatWest Group focused on continuing to develop the capabilities to use scenario analysis to identify the most material climate risks for its customers, seeking to harness insights to inform risk management practices and support decision making.
Scenario analysis allows NatWest Group to test a range of possible future climate pathways and understand the nature and magnitude of the risks they present. The purpose of scenario analysis is not to forecast the future but to understand and prepare to manage risks that could arise.
NatWest Group recognises a number of potential key use cases for climate scenario analysis, including, but not restricted to, the following:
| ● | Regulatory stress testing requirements. |
| ● | Portfolio management. |
| ● | Strategic decision-making, capital adequacy and provisioning. |
Specific internal-run exercises in 2025 included:
| ● | A credit-risk focused exercise covering both physical and transition risk scenarios for both the Commercial & Institutional portfolio and the Retail Banking residential mortgage portfolio. |
| ● | A non-financial risk scenario for climate focused on external communications which could omit or contain incorrect information, resulting in an inaccurate representation of NatWest Group activities. |
NatWest Group Annual Report on Form 20-F 2025 | 118 |
Climate and nature risk continued
Strategic analysis continued
Credit and non-financial risk scenario analysis exercises for climate were also run in 2024.
There are various challenges with quantitative climate scenario analysis, including in relation to the immaturity of modelling techniques and limitations surrounding data on climate-related risks. In addition, there is significant uncertainty as to how the climate will evolve over time, how and when governments, regulators, businesses, investors and customers respond and how those responses impact the economy, asset valuations, economic systems, policy and wider society. These risks and uncertainties, coupled with significantly long timeframes, make the outputs of climate-related risk modelling with respect to the potential use cases identified inherently more uncertain than outputs modelled for traditional financial planning cycles based on historical financial information. Recognising these challenges, qualitative work focused on the cascading and compounding consequences of climate and nature breakdown (for example, lower growth, higher inflation, societal and political uncertainty) continues to be developed and assessed under the emerging threats framework.
Refer to the risk and scenario analysis section of NatWest Group plc 2025 Climate Transition Plan Report for further information.
Portfolio level assessment
NatWest Group uses a number of tools to undertake portfolio level assessments including operational limits in retail credit risk, stress analysis in market risk and heightened climate-related risk sector assessment in Non-Personal credit risk. The latter, refreshed annually, seeks to identify sectors that are likely to see increased credit risks for NatWest Group because of climate-related factors, over a ten to 15-year horizon.
Transaction level assessment
Assessments are undertaken which consider anti-greenwashing factors within NatWest Group’s franchises, marketing and communications processes.
The NatWest Group Supplier Code of Best Practice encourages NatWest Group suppliers to undertake sustainability assessments to evaluate supplier sustainability performance.
Within the Non-Personal credit portfolio, NatWest Group continues to use its CDF tools to engage with its customers to understand their climate transition journeys and how they are managing the climate-related risk for their business. In 2025, NatWest Group continued to roll-out CDF on a test-and-learn basis, adding coverage of insurance and other financial institutions’ customers to the existing customer segments (Large Corporates, Mid-Corporates, Commercial Real Estate, Housing Associations, Banks, Funds, and Asset Managers).
Enhancements were also made to the large corporates assessment to increase the granularity of sector and country-specific questions, for example, questions which assess how much of NatWest Group’s customer’s business activities are EU taxonomy aligned. This phased test-and-learn approach continues to build internal capability among first and second-line colleagues, and foster a culture where climate risk is embedded into the existing credit journey.
Recognising the complexity of the energy transition, we conducted an energy system review during 2025 to ensure our strategy reflects the interconnected risks and opportunities across the energy value chain as the economy transitions toward net zero. The energy system review considered the systemic nature of the energy transition which anticipates further growth in renewables, the important yet declining role of oil and gas, significant infrastructure investment and demand-side electrification. Reflecting the outcome of our energy system review, we have established a new E&S Energy Supply Sector Risk Acceptance Criteria. Noting that the natural resources portfolio limit remains unchanged following the energy system review, we are implementing an oversight and governance framework to help ensure that our financing activity aligns with our sector and bank-wide strategy and remains within the portfolio limit and other constraints. Refer to the NatWest Group plc 2025 Climate Transition Plan Report for further details.
NatWest Group also regularly considers the potential impact of existing and emerging regulatory requirements related to climate change at NatWest Group and subsidiary level, through external horizon scanning and monitoring of emerging regulatory requirements.
Mitigation
NatWest Group manages and mitigates climate-related risk in the Non-Personal portfolio through:
| ● | Top-down portfolio assessments, including incorporating climate factors in the overall sector strategy, updating the environmental, social and ethical risk acceptance criteria in response to potential climate-related risks and applying climate-enhanced transaction acceptance standards. |
NatWest Group Annual Report on Form 20-F 2025 | 119 |
Climate and nature risk continued
Mitigation continued
| ● | Bottom-up customer assessments, including the use of CDF tools to provide a consistent and structured approach for understanding customer-specific exposure to climate-related risks and identify higher risk transactions for enhanced oversight or escalated approval processes. |
In the residential mortgage portfolio, lending limits are applied based on climate characteristics, including:
| ● | Exposure to EPC A and B rated properties. |
| ● | Buy-to-let properties with potential EPC between D and G. |
| ● | Flats, new builds and buy-to-let properties at high or very high risk of flood. |
Additionally, NatWest Group credit policies do not allow buy-to-let mortgages to properties with an EPC rating between F and G. Limits are continually reviewed to reflect new flood risk data, risk profile and market conditions.
NatWest Group also continues to engage actively with academia to ensure that best practice and the latest thinking on climate risks is considered within NatWest Group’s work. This includes attending and participating in academic events through, for example, the Centre for Greening Finance and Investment and supporting research initiatives by, for example, University College London and the Institute and Faculty of Actuaries.
Industry engagement
NatWest Group continues to participate in a number of industry forums to help shape the financial service industry’s response to the challenges posed by climate risk. An example is the Climate Financial Risk Forum, established by the PRA and the FCA.
Non-traded market risk
Definition (audited)
Non-traded market risk is the risk to the value of assets or liabilities outside the trading book, or the risk to income, that arises from changes in market prices such as interest rates, foreign exchange rates and equity prices, or from changes in managed rates.
Sources of risk (audited)
Non-traded market risk exists in all balance-sheet exposure that makes reference to market risk factors, when customer behaviour could impact the size and timing of the repricing or maturity of future cash flows, or when valuation of assets and liabilities is driven by market risk factors such as interest rates or foreign exchange rates.
The key sources of non-traded market risk are interest rate risk, credit spread risk, foreign exchange risk, equity risk and accounting volatility risk. Qualitative and quantitative information on these risk types is provided following the VaR table below.
Key developments in 2025
| ● | In the UK, the Bank of England base rate fell to 3.75% at 31 December 2025 from 4.75% at 31 December 2024. The five-year sterling overnight index interest rate swap rate also fell to 3.66% at 31 December 2025 from 4.04% at 31 December 2024. The corresponding ten-year rate fell to 4.00% from 4.09%. The movement in swap rates reflects market expectations about the level of the UK base rate in the medium term, with expectations for the UK base rate being slightly lower at 31 December 2025. |
| ● | Overall, total non-traded market risk VaR decreased in 2025 on both an average basis and a period-end basis. The largest component, credit spread VaR, remained relatively stable during 2025, supported by generally consistent bond holdings in the liquidity portfolio. For further VaR commentary, see the following page. |
| ● | NatWest Group’s structural hedge notional increased to £198 billion at 31 December 2025 compared to £194 billion at 31 December 2024, reflecting increased equity structural hedging and deposit stability. As maturing structural hedges were replaced at higher swap rates, the yield on the hedge rose to 2.40% in 2025 from 1.77% in 2024. |
| ● | The sensitivity of net interest earnings to a 25-basis-point upward shift in the yield curve was a cumulative £824 million over three years at 31 December 2025, compared to £739 million at 31 December 2024. The main contributors to the sensitivity were managed-margin deposits, including instant access savings and unhedged current accounts, and the structural hedge. |
| ● | Sterling strengthened against the US dollar, to 1.35 at 31 December 2025 compared to 1.25 at 31 December 2024. It weakened against the euro, to 1.15 at 31 December 2025 compared to 1.20 at 31 December 2024. Net investments in foreign operations reduced by £0.4 billion in sterling-equivalent terms over the year. After hedging, residual structural foreign currency exposures were higher, increasing, in sterling-equivalent terms, by £0.1 billion. |
NatWest Group Annual Report on Form 20-F 2025 | 120 |
Non-traded market risk continued
Governance (audited)
Risk governance for non-traded market risk is in line with the approach outlined in the Risk management framework section.
Risk appetite
Risk appetite for non-traded market risk is in line with the approach outlined in the Risk management framework section.
NatWest Group’s qualitative appetite for non-traded market risk is set out in the non-traded market risk appetite statement. Quantitative appetite is expressed in terms of exposure limits. At NatWest Group level, these comprise value-at-risk (VaR) and earnings-at-risk limits. Stress and sensitivity limits are also incorporated.
Risk measurement
Non-traded internal VaR (1-day 99%)
The following table shows one-day internal banking book value-at-risk (VaR) at a 99% confidence level, split by risk type. VaR values for each year are calculated based on one-day values for each of the 12 month-end reporting dates.
NatWest Group’s VaR metrics are explained on page 124. Each of the key risk types are discussed in greater detail in their individual sub-sections following this table.
2025 | 2024 | |||||||||||||||
| Average | | Maximum | | Minimum | | Period end | | Average | | Maximum | | Minimum | | Period end | |
£m | £m | £m | £m | £m | £m | £m | £m | |||||||||
Interest rate |
| 4.9 |
| 7.4 |
| 2.5 |
| 6.5 |
| 17.2 |
| 28.2 |
| 4.0 |
| 4.0 |
Credit spread |
| 48.6 |
| 53.8 |
| 39.6 |
| 39.6 |
| 51.8 |
| 60.2 |
| 45.3 |
| 48.4 |
Structural foreign exchange rate |
| 9.3 |
| 14.1 |
| 6.0 |
| 13.3 |
| 7.6 |
| 9.8 |
| 5.1 |
| 6.3 |
Equity |
| 5.1 |
| 7.8 |
| 2.8 |
| 3.2 |
| 8.6 |
| 10.3 |
| 7.6 |
| 7.7 |
Pipeline risk |
| 3.5 |
| 5.9 |
| 0.6 |
| 3.6 |
| 8.5 |
| 17.3 |
| 3.4 |
| 6.1 |
Diversification (1) |
| (22.6) |
|
|
| (24.3) |
| (35.3) |
|
|
| (23.4) | ||||
Total |
| 48.8 |
| 53.3 |
| 41.9 |
| 41.9 |
| 58.4 |
| 73.8 |
| 49.1 |
| 49.1 |
| (1) | NatWest Group benefits from diversification across various financial instrument types, currencies and markets. The extent of the diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR. |
| ● | Overall, total non-traded market risk VaR decreased in 2025 on both an average and period-end basis. |
| ● | Interest rate VaR fell on an average basis, reflecting reduced interest rate repricing mismatches across customer products. |
| ● | Credit spread VaR remained relatively stable during 2025, supported by generally consistent bond holdings in the liquidity portfolio. The period-end decrease followed the rollout of updated timeseries in December 2025. |
| ● | Equity VaR decreased, mainly due to the sale of Permanent TSB equity. |
| ● | Pipeline VaR also decreased. This reflected changes in the assumptions applied to customer behaviour through the fixed-rate mortgage application process, which more closely aligned NatWest Group’s estimates of future customer completions to pipeline hedging activity. |
NatWest Group Annual Report on Form 20-F 2025 | 121 |
Non-traded market risk continued
Interest rate risk
Non-traded interest rate risk (NTIRR) arises from the provision to customers of a range of banking products with differing interest rate characteristics. When aggregated, these products form portfolios of assets and liabilities with varying degrees of sensitivity to changes in market interest rates. Mismatches can give rise to volatility in net interest income as interest rates vary.
NTIRR comprises the following three primary risk types:
| ● | Gap risk: arises from the timing of rate changes in non-trading book instruments. The extent of gap risk depends on whether changes to the term structure of interest rates occur consistently across the yield curve (parallel risk) or differentially by period (non-parallel risk). |
| ● | Basis risk: captures the impact of relative changes in interest rates for financial instruments that have similar tenors but are priced using different interest rate indices, or on the same interest rate indices but with different tenors. |
| ● | Option risk: arises from option derivative positions or from optional elements embedded in assets, liabilities and/or off-balance sheet items, where NatWest Group or its customer can alter the level and timing of their cash flows. Option risk also includes pipeline risk. Pipeline risk is the risk of loss arising from personal customers owning an option to draw down a loan – typically a mortgage – at a committed rate, where interest rate changes may result in greater or fewer customers than anticipated taking up the committed offer. |
To manage exposures within its risk appetite, NatWest Group aggregates interest rate positions and hedges its residual exposure, primarily with interest rate swaps.
Structural hedging aims to reduce gap risk and the sensitivity of earnings to interest rate shocks. It also provides some protection against prolonged periods of falling rates. Structural hedging is explained in greater detail below, followed by information on how NatWest Group measures NTIRR from both an economic value-based and an earnings-based perspective.
Structural hedging
NatWest Group has a significant pool of stable, non and low interest-bearing liabilities, principally comprising current accounts and savings, in addition to its equity and reserves. A proportion of these balances are hedged, either by offsetting the positions against fixed-rate assets (such as fixed-rate mortgages and UK government gilts) or by hedging positions externally using interest rate swaps, which are generally booked as cash-flow hedges of floating-rate assets, in order to reduce income volatility and provide a revenue stream in net interest income. (Further details on NatWest Group’s cash-flow hedge accounting programme can be found in Note 13 in the Notes to the accounts.) Hence, the structural hedge is one component of a larger interest rate risk management programme.
After offsetting or hedging the interest rate exposure, NatWest Group attributes income to equity or products in structural hedges by reference to the relevant interest rate swap curve. Over time, this approach has provided a basis for stable income attribution for management purposes to products and interest rate returns. The programme aims to track a time series of medium-term swap rates, but the yield will be affected by changes in product volumes and NatWest Group’s equity capital.
NatWest Group Annual Report on Form 20-F 2025 | 122 |
Non-traded market risk continued
Structural hedging continued
The table below shows incremental income, hedge income, the period-end and average notional balances attributed to the structural hedge, and the total yield. These are analysed between equity and products. Hedge income represents the fixed leg of the hedge, while incremental income represents the difference between hedge income and short-term cash rates. For example, the sterling overnight index average (SONIA) is used to estimate incremental income from sterling structural hedges. If the UK base rate were to fall, the difference between incremental income and hedge income would continue to fall.
| Incremental | | Hedge | | Period end | | Average | | Total | |
income | income | notional | notional | yield | ||||||
2025 | £m | £m | £bn | £bn | % | |||||
Equity | (449) |
| 487 |
| 25 |
| 22 |
| 2.18 | |
Product |
| (2,990) |
| 4,181 |
| 173 |
| 172 |
| 2.43 |
Total |
| (3,439) |
| 4,668 |
| 198 |
| 194 |
| 2.40 |
2024 |
| |
| |
| |
| |
| |
Equity |
| (694) |
| 440 |
| 22 |
| 22 |
| 1.98 |
Product |
| (5,806) |
| 3,039 |
| 172 |
| 174 |
| 1.75 |
Total |
| (6,500) |
| 3,479 |
| 194 |
| 196 |
| 1.77 |
Equity structural hedges refer to income allocated primarily to equity and reserves. At 31 December 2025, the equity structural hedge notional was allocated between NWH Group and NWM Group in a ratio of approximately 81%/19% respectively.
Product structural hedges refer to income allocated to customer products by NWH Group Treasury, mainly current account and savings balances in Commercial & Institutional, Retail Banking and Private Banking & Wealth Management.
At 31 December 2025, approximately 95% by notional of total structural hedges were sterling-denominated.
| ● | The structural hedge period-end notional increased as a result of increased hedging of the NatWest Group equity and reserves. The product hedge was broadly stable, reflecting deposit stability year on year. |
| ● | The five-year sterling swap rate fell to 3.65% at 31 December 2025 from 4.04% at 31 December 2024. The ten-year sterling swap rate also fell, to 3.99% from 4.09%. The structural hedge yield rose to 2.40% in 2025 from 1.77% in 2024. |
| ● | Hedge income rose by £1,189 million to £4,668 million from £3,479 million. Incremental income remained negative but fell year on year. This was mainly driven by replacement of maturing hedges at higher yields and lower overnight SONIA rates in 2025 compared to 2024. |
NatWest Group Annual Report on Form 20-F 2025 | 123 |
Non-traded market risk continued
Interest rate risk measurement
NTIRR can be measured using value-based or earnings-based approaches. Value-based approaches measure the change in value of the balance sheet assets and liabilities including all cash flows. Earnings-based approaches measure the potential impact on the income statement of changes in interest rates over a defined horizon, generally one to three years.
NatWest Group uses VaR as its value-based approach and sensitivity of net interest earnings as its earnings-based approach.
These two approaches provide complementary views of the impact of interest rate risk on the balance sheet at a point in time. The scenarios employed in the net interest earnings sensitivity approach may incorporate assumptions about how NatWest Group and its customers will respond to a change in the level of interest rates.
In contrast, the VaR approach measures the sensitivity of the balance sheet at a point in time. Capturing all cash flows, VaR also highlights the impact of duration and repricing risks beyond the one-to-three-year period shown in earnings sensitivity calculations.
Value-at-risk
VaR is a statistical estimate of the potential change in the market value of a portfolio (and, thus, the impact on the income statement) over a specified time horizon at a given confidence level.
NatWest Group’s standard VaR metrics – which assume a time horizon of one trading day and a confidence level of 99% – are based on interest rate repricing gaps at the reporting date. Daily rate moves are modelled using observations from the last 500 business days. These incorporate customer products plus associated funding and hedging transactions as well as non-financial assets and liabilities. Behavioural assumptions are applied as appropriate.
The non-traded interest rate risk VaR metrics for NatWest Group’s retail and commercial banking activities are included in the banking book VaR table presented earlier in this section. The VaR captures the risk resulting from mismatches in the repricing dates of assets and liabilities.
It also includes any mismatch between the maturity profile of external hedges and NatWest Group’s target maturity profile for the hedge.
Sensitivity of net interest earnings
Net interest earnings are sensitive to changes in the level of interest rates, mainly because maturing structural hedges are replaced at higher or lower rates and changes to coupons on managed rate customer products do not always match changes in market rates of interest or central bank policy rates (“managed margin”).
Earnings sensitivity is derived from a market-implied forward rate curve, which will incorporate expected changes in central bank policy rates such as the Bank of England base rate.
A simple scenario is shown that projects forward earnings based on the 31 December 2025 balance sheet, which is assumed to remain constant. An earnings projection is derived from the market-implied curve, which is then subjected to interest rate shocks. The difference between the market-implied projection and the shock gives an indication of underlying sensitivity to interest rate movements.
Reported sensitivities should not be considered a forecast of future performance in these rate scenarios. Actions that could reduce interest earnings sensitivity include changes in pricing strategies on customer loans and deposits as well as hedging. Management action may also be taken to stabilise total income also taking into account non-interest income.
NatWest Group Annual Report on Form 20-F 2025 | 124 |
Non-traded market risk continued
Three-year 25-basis-point sensitivity table
The table below shows the sensitivity of net interest earnings – for both structural hedges and managed rate accounts – on a one, two and three-year forward-looking basis to an upward or downward interest rate shift of 25 basis points. In all scenarios, yield curves are assumed to move in parallel.
+25 basis points upward shift | -25 basis points downward shift | |||||||||||
| Year 1 | | Year 2 | | Year 3 | | Year 1 | | Year 2 | | Year 3 | |
2025 | £m | £m | £m | £m | £m | £m | ||||||
Structural hedges |
| 41 |
| 130 |
| 220 |
| (41) |
| (130) |
| (220) |
Managed margin |
| 153 |
| 139 |
| 125 |
| (157) |
| (127) |
| (140) |
Total |
| 194 |
| 269 |
| 345 |
| (198) |
| (257) |
| (360) |
2024 |
| |
| |
| |
| |
| |
| |
Structural hedges |
| 41 |
| 125 |
| 212 |
| (41) |
| (125) |
| (212) |
Managed margin |
| 121 |
| 116 |
| 124 |
| (142) |
| (120) |
| (125) |
Total |
| 162 |
| 241 |
| 336 |
| (183) |
| (245) |
| (337) |
| ● | The sensitivity of net interest earnings in all scenarios mainly reflects managed-margin deposits and the impact of higher or lower rates on structural hedges. |
| ● | Managed-margin sensitivity in both upward and downward rate scenarios partly reflects assumptions applied to deposits and other products, where customer rates change in response to changes in central bank rates. Managed-margin sensitivity to rate shocks was higher at 31 December 2025 than at 31 December 2024; however, as net interest earnings also increased, sensitivity as a proportion of net interest earnings was relatively stable overall. |
One-year 25 and 100-basis-point sensitivity table
The following table presents the one-year sensitivity to upward and downward 25-basis-point and 100-basis-point shifts in the yield curve, analysed by currency.
2025 | 2024 | |||||||||||||||
Shifts in yield curve | Shifts in yield curve | |||||||||||||||
| +25 basis points | | -25 basis points | | +100 basis points | | -100 basis points | | +25 basis points | | -25 basis points | | +100 basis points | | -100 basis points | |
£m | £m | £m | £m | £m | £m | £m | ||||||||||
Euro |
| 25 |
| (11) |
| 56 |
| (47) |
| 11 |
| (7) |
| 38 |
| (43) |
Sterling |
| 147 |
| (165) |
| 503 |
| (655) |
| 131 |
| (155) |
| 531 |
| (646) |
US dollar |
| 19 |
| (19) |
| 69 |
| (75) |
| 15 |
| (16) |
| 63 |
| (71) |
Other |
| 3 |
| (3) |
| 13 |
| (11) |
| 5 |
| (5) |
| 19 |
| (17) |
Total |
| 194 |
| (198) |
| 641 |
| (788) |
| 162 |
| (183) |
| 651 |
| (777) |
Sensitivity of fair value through other comprehensive income (FVOCI) portfolios and cash flow hedging reserves to interest rate movements
NatWest Group holds most of the bonds in its liquidity portfolio at fair value and the bonds are generally classified as FVOCI for accounting purposes. Valuation changes arising from unexpected movements in market rates are initially recognised in FVOCI reserves.
Interest rate swaps are used to implement the structural hedging programme and also hedging of some personal and commercial lending portfolios, primarily fixed-rate mortgages. Generally, these swaps are booked in cash flow hedge accounting relationships. Changes in the valuation of swaps that are in effective cash flow hedge accounting relationships are recognised in cash flow hedge reserves.
The table below shows the sensitivity of bonds initially classified as FVOCI and swaps subject to cash flow hedge accounting to a parallel shift in all rates. Valuation changes affecting interest rate swaps that hedge bonds in the liquidity portfolio are also included. Where FVOCI bonds and swaps are booked in fair value hedge accounting relationships, the valuation change affecting both instruments would be recognised in the income statement. For the purpose of this analysis, cash flow hedges are assumed to be fully effective.
NatWest Group Annual Report on Form 20-F 2025 | 125 |
Non-traded market risk continued
Sensitivity of fair value through other comprehensive income (FVOCI) portfolios and cash flow hedging reserves to interest rate movements continued
The effectiveness of cash flow and fair value hedge relationships is monitored and regularly tested in accordance with IFRS requirements. Note also that valuation changes affecting the cash flow hedge reserve affect tangible net asset value, but would not be expected to affect CET1 capital.
2025 | 2024 | |||||||||||||||
| +25 basis points | | -25 basis points | | +100 basis points | | -100 basis points | | +25 basis points | | -25 basis points | | +100 basis points | | -100 basis points | |
£m | £m | £m | £m | £m | £m | £m | £m | |||||||||
FVOCI reserves |
| (22) |
| 22 |
| (91) |
| 87 |
| (9) |
| 9 |
| (38) |
| 31 |
Cash flow hedge reserves |
| (171) |
| 174 |
| (664) |
| 713 |
| (244) |
| 249 |
| (946) |
| 1,027 |
Total |
| (193) |
| 196 |
| (754) |
| 801 |
| (253) |
| 258 |
| (984) |
| 1,058 |
| ● | The sensitivity of cash flow hedge reserves fell in 2025 compared to 2024, while the sensitivity of FVOCI reserves increased slightly. The movement in cash flow hedge reserves in 2025 is shown in the statement of changes in equity on pages 155 to 157. |
Credit spread risk
Credit spread risk arises from the potential adverse economic impact of a change in the spread between bond yields and swap rates, where the bond portfolios are accounted at fair value through other comprehensive income.
NatWest Group’s bond portfolios primarily comprise high-quality securities maintained as a liquidity buffer to ensure it can continue to meet its obligations in the event that access to wholesale funding markets is restricted. Additionally, other high-quality bond portfolios are held for collateral purposes and to support payment systems.
Credit spread risk is monitored daily through sensitivities and VaR measures (refer to the non-traded market risk VaR table earlier in this section). Exposures and limit utilisations are reported to senior management on a regular basis. Dealing mandates in place for the bond portfolios further mitigate the risk by imposing constraints by duration, asset class and credit rating.
Foreign exchange risk
Non-traded foreign exchange risk arises from three main sources:
| ● | Structural foreign exchange rate risk – mainly arises from the capital deployed in foreign subsidiaries and branches. |
| ● | Transactional foreign exchange rate risk – arises from customer transactions and profits and losses that are in a currency other than the functional currency. |
| ● | Forecast earnings or costs in foreign currencies – NatWest Group assesses its potential exposure to forecast foreign currency income and expenses. NatWest Group hedges forward some forecast expenses. |
The most material non-traded open currency positions are the structural foreign exchange exposures arising from investments in foreign subsidiaries and branches. These exposures are assessed and managed to predefined risk appetite levels under delegated authority agreed by the CFO with support from the Asset & Liability Management Committee. NatWest Group seeks to limit the potential volatility impact on its CET1 ratio from exchange rate movements by deliberately maintaining a structural open currency position. Gains or losses arising from the retranslation of net investments in overseas operations are recognised in other comprehensive income and reduce the sensitivity of capital ratios to foreign exchange rate movements primarily arising from the retranslation of non-sterling denominated RWAs. Sensitivity is minimised where, for a given currency, the ratio of the structural open position to RWAs equals the CET1 ratio.
The sensitivity of this ratio to exchange rates is monitored monthly and reported to the Asset & Liability Management Committee at least quarterly. Foreign exchange exposures arising from customer transactions are hedged by businesses on a regular basis in line with NatWest Group policy.
NatWest Group Annual Report on Form 20-F 2025 | 126 |
Non-traded market risk continued
Foreign exchange risk continued
The table below shows structural foreign currency exposures.
| Net investments | | Net | | Structural foreign | | | Residual | ||
in foreign | investment | currency exposures | Economic | | structural foreign | |||||
operations | hedges | pre-economic hedges | hedges (1) | currency exposures | ||||||
2025 | £m | £m | £m | £m | £m | |||||
US dollar |
| 1,067 |
| — |
| 1,067 |
| (1,067) |
| — |
Euro |
| 4,543 |
| (2,560) |
| 1,983 |
|
| 1,983 | |
Other non-sterling |
| 901 |
| (478) |
| 423 |
|
| 423 | |
Total |
| 6,511 |
| (3,038) |
| 3,473 |
| (1,067) |
| 2,406 |
2024 |
| |
| |
| |
| |
| |
US dollar |
| 1,826 |
| (598) |
| 1,228 |
| (1,228) |
| — |
Euro |
| 4,162 |
| (2,351) |
| 1,811 |
| — |
| 1,811 |
Other non-sterling |
| 874 |
| (372) |
| 502 |
|
| 502 | |
Total |
| 6,862 |
| (3,321) |
| 3,541 |
| (1,228) |
| 2,313 |
| (1) | Economic hedges of US dollar net investments in foreign operations represent US dollar AT1 equity securities that do not qualify as net investment hedges for accounting purposes. They provide an offset to structural foreign exchange exposures to the extent that there are net assets in overseas operations available, but they are accounted for at historical cost under IFRS until redemption. |
| ● | Changes in foreign currency exchange rates affect equity in proportion to structural foreign currency exposure pre economic hedges. For example, a 5% strengthening or weakening in foreign currencies against sterling would result in a gain or loss of £0.2 billion in equity, respectively. |
Equity risk (audited)
Non-traded equity risk is the potential variation in income and reserves arising from changes in equity valuations. Equity positions are carried on the balance sheet at fair value based on market prices where available. Equity positions may take the form of shares that are publicly listed on a recognised exchange, privately owned investments and shareholdings in industry participations including SWIFT. Further disclosure of NatWest Group’s investments in equity shareholdings, fair value gains and losses and valuation techniques may be found in the notes to the consolidated financial statements. Investments, acquisitions or disposals of a strategic nature are referred to the Acquisitions & Disposals Committee. Once approved by the Chief Financial Officer with support from the Acquisitions & Disposals Committee for execution, such transactions are referred for approval to the Board, the Executive Committee, the Chief Executive Officer, the Chief Financial Officer or as otherwise required. Decisions to acquire or hold equity positions in the non-trading book that are not of a strategic nature are taken by authorised persons with delegated authority. Non-traded equity value at risk is monitored monthly and capital allocation to the risk is included in NatWest Group’s annual Internal Capital Adequacy Assessment Process (ICAAP).
Accounting volatility risk
Accounting volatility risk arises when an exposure is accounted for at amortised cost but economically hedged by a derivative that is accounted for at fair value. Although this is not an economic risk, the difference in accounting between the exposure and the hedge creates volatility in the income statement.
Accounting volatility can be mitigated through hedge accounting. However, residual volatility will remain in cases where accounting rules mean that hedge accounting is not an option, or where there is some hedge ineffectiveness. Accounting volatility risk is reported to the Asset & Liability Management Committee monthly and capitalised as part of the ICAAP.
NatWest Group Annual Report on Form 20-F 2025 | 127 |
Traded market risk
Definition (audited)
Traded market risk is the risk of losses in trading book positions from fluctuations in market variables, such as interest rates, credit spreads, foreign exchange rates, equity prices, implied volatilities and asset correlations.
Sources of risk (audited)
NatWest Group is exposed to traded market risk through trading activities entered into by NatWest Markets where such risk arises from market-making and underwriting activity and by facilitating customer-facing business that cannot be immediately offset with other customers or market participants. From a market risk perspective, activities are focused on rates; currencies; and traded credit. NatWest Markets undertakes transactions in financial instruments including debt securities, as well as securities financing and derivatives.
The key categories of traded market risk are interest rate risk, credit spread risk and foreign currency price risk.
Trading activities may also give rise to counterparty credit risk. For further detail refer to the Credit risk section.
Key developments in 2025
| ● | Drivers of market volatility during the year included global inflationary concerns, US tariffs, the ongoing Russia-Ukraine conflict and geopolitical tensions in the Middle East. |
| ● | Traded VaR and SVaR remained within appetite, aided by NatWest Group’s continued disciplined approach to risk-taking. |
| ● | Overall, internal traded VaR decreased on an average basis, compared to 2024. |
Governance (audited)
Risk governance for traded market risk is in line with the approach outlined in the Risk management framework section.
Risk appetite
Risk appetite for traded market risk is in line with the approach outlined in the Risk management framework section.
NatWest Group’s qualitative appetite for traded market risk is set out in the traded market risk appetite statement. Quantitative appetite is expressed in terms of exposure limits. The limits at NatWest Group level comprise value-at-risk (VaR), stressed value-at-risk (SVaR) and stress-testing. More details on these metrics are provided on the following pages.
NatWest Group Annual Report on Form 20-F 2025 | 128 |
Traded market risk continued
Measurement
NatWest Group uses VaR, SVaR and the incremental risk charge (IRC) to capitalise traded market risk. Risks that are not adequately captured by VaR or SVaR are captured by the Risks Not In VaR (RNIV) framework to ensure that NatWest Group is adequately capitalised for market risk. In addition, stress testing is used to identify any vulnerabilities and potential losses.
The key inputs into these measurement methods are market data and risk factor sensitivities. Sensitivities refer to the changes in trade or portfolio value that result from small changes in market parameters that are subject to the market risk limit framework. Revaluation ladders are used in place of sensitivities to capture the impact of large moves in risk factors or the joint impact of two risk factors.
These methods have been designed to capture correlation effects and allow NatWest Group to form an aggregated view of its traded market risk across risk types, markets and business lines while also taking into account the characteristics of each risk type.
Value-at-risk
For internal risk management purposes, VaR assumes a time horizon of one trading day and a confidence level of 99%.
The internal VaR model – which captures all trading book positions including those products approved by the regulator – is based on a historical simulation, utilising market data from the previous 500 days, and is sensitive to recent market conditions.
The model also captures the potential impact of interest rate risk; credit spread risk; foreign currency price risk; equity price risk; and commodity price risk.
When simulating potential movements in such risk factors, a combination of absolute, relative and rescaled returns is used.
The performance and adequacy of the VaR model are tested regularly through the following processes:
| ● | Back-testing: Internal and regulatory back-testing is conducted on a daily basis. Information on internal back-testing is provided in this section. Information on regulatory back-testing appears in the Pillar 3 Report. |
| ● | Ongoing model validation: VaR model performance is assessed both regularly, and on an ad-hoc basis, if market conditions or portfolio profile change significantly. |
| ● | Model Risk Management review: As part of the model lifecycle, all risk models (including the VaR model) are independently reviewed to ensure the model is still fit for purpose given current market conditions and portfolio profile. For further detail on the independent model validation carried out by Model Risk Management refer to pages 143 and 144. More information relating to pricing and market risk models is presented in the Pillar 3 Report. |
NatWest Group Annual Report on Form 20-F 2025 | 129 |
Traded market risk continued
One-day 99% traded internal VaR
Traded VaR (1-day 99%) (audited)
The table below shows one-day 99% internal VaR for NatWest Group’s trading portfolios, split by exposure type.
2025 | 2024 | |||||||||||||||
Average | Maximum | Minimum | Period end | Average | Maximum | Minimum | Period end | |||||||||
| £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | |
Interest rate |
| 3.2 |
| 5.4 |
| 1.8 |
| 2.3 |
| 6.6 |
| 12.1 |
| 3.0 |
| 3.8 |
Credit spread |
| 4.8 |
| 7.2 |
| 3.1 |
| 3.1 |
| 7.7 |
| 10.1 |
| 5.6 |
| 5.6 |
Currency |
| 1.3 |
| 4.0 |
| — |
| 0.5 |
| 2.0 |
| 6.7 |
| 0.5 |
| 1.3 |
Equity |
| 0.1 |
| 0.1 |
| — |
| 0.1 |
| 0.1 |
| 0.3 |
| — |
| — |
Diversification (1) |
| (3.8) |
|
|
| (2.5) |
| (6.3) |
|
|
| (5.4) | ||||
Total |
| 5.6 |
| 9.7 |
| 3.4 |
| 3.5 |
| 10.1 |
| 16.2 |
| 5.3 |
| 5.3 |
| (1) | NatWest Group benefits from diversification across various financial instrument types, currencies and markets. The extent of the diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR. |
| ● | Both interest rate VaR and credit spread VaR decreased on an average basis, compared to 2024. |
| ● | This reflects an earlier period of higher market volatility dropping out of the rolling window for VaR calculation during H2 2024. |
NatWest Group Annual Report on Form 20-F 2025 | 130 |
Traded market risk continued
VaR back-testing
The main approach employed to assess the VaR model’s ongoing performance is back-testing, which counts the number of days when a loss exceeds the corresponding daily VaR estimate, measured at a 99% confidence level.
Two types of profit and loss (P&L) are used in back-testing comparisons: Actual P&L and Hypothetical P&L. For more details on the back-testing approach, refer to the Pillar 3 Report.
The table below shows internal back-testing exceptions in the major NatWest Markets businesses for the 250-business-day period to 31 December 2025. Internal back-testing compares one-day 99% traded internal VaR with Actual and Hypothetical (Hypo) P&L.
Back-testing exceptions | ||||
| Actual |
| Hypo | |
Fixed income | | — | | — |
Currencies |
| — |
| 3 |
| ● | The back-testing exceptions in Currencies were driven by losses in February, April and August 2025 due to increased foreign exchange and rates market volatility. |
Stressed VaR (SVaR)
As with VaR, the SVaR methodology produces estimates of the potential change in the market value of a portfolio, over a specified time horizon, at a given confidence level. SVaR is a VaR-based measure using historical data from a one-year period of stressed market conditions.
A simulation of 99% VaR is run on the current portfolio for each 250-day period from 2005 to the current VaR date, moving forward one day at a time. The SVaR is the worst VaR outcome of the simulated results.
This is in contrast with VaR, which is based on a rolling 500-day historical data set. A time horizon of ten trading days is assumed with a confidence level of 99%.
The internal traded SVaR model captures all trading book positions.
2025 | 2024 | |||||||||||||||
Average | Maximum | Minimum | Period end | Average | Maximum | Minimum | Period end | |||||||||
| £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | |
Total internal traded SVaR |
| 58 |
| 112 |
| 31 |
| 38 | 56 |
| 136 |
| 31 |
| 41 | |
NatWest Group Annual Report on Form 20-F 2025 | 131 |
Traded market risk continued
Risks not in VaR (RNIVs)
The RNIV framework is used to identify and quantify market risks that are not fully captured by the internal VaR and SVaR models.
RNIV calculations form an integral part of ongoing model and data improvement efforts to capture all market risks in scope for model approval in VaR and SVaR.
For further qualitative and quantitative disclosures on RNIVs, refer to the Market risk section of the Pillar 3 Report.
Stress testing
For information on stress testing, refer to pages 36 to 40.
Incremental risk charge (IRC)
The IRC model quantifies the impact of rating migration and default events on the market value of instruments with embedded credit risk (in particular, bonds and credit default swaps) held in the trading book. It further captures basis risk between different instruments, maturities and reference entities. For further qualitative and quantitative disclosures on the IRC, refer to the Market risk section of the Pillar 3 Report 2025.
Monitoring and mitigation
Traded market risk is identified and assessed by gathering, analysing, monitoring and reporting market risk information at desk, business, business segment and NatWest Group-wide levels. Industry expertise, continued system developments and techniques such as stress testing are also used to enhance the effectiveness of the identification and assessment of all material market risks.
Traded market risk exposures are monitored against limits and analysed daily. A daily report summarising the position of exposures against limits at desk, business, business segment and NatWest Group levels is provided to senior management and market risk managers across the function. Limit reporting is supplemented with regulatory capital and stress testing information as well as ad-hoc reporting.
A risk review of trading businesses is undertaken weekly with senior risk and front office staff. This includes a review of profit and loss drivers, notable position concentrations and other positions of concern.
Business profit and loss performance is monitored automatically through loss triggers which, if breached, require a remedial action plan to be agreed between the Market Risk function and the business. The loss triggers are set using both a fall-from-peak approach and an absolute loss level. In addition, regular updates on traded market risk positions are provided to the Executive Risk Committee, the Board Risk Committee and the Board.
NatWest Group Annual Report on Form 20-F 2025 | 132 |
Traded market risk continued
Market risk – linkage to balance sheet
The table below analyses NatWest Group’s balance sheet by non-trading and trading business.
2025 | 2024 | |||||||||||||
Non-trading | Trading | Non-trading | Trading | |||||||||||
Total | business (1) | business (2) | Total | business (1) | business (2) | |||||||||
| £bn | | £bn | | £bn | | £bn | | £bn | | £bn | | Primary market risk factor | |
Assets |
| | ||||||||||||
Cash and balances at central banks |
| 85.2 |
| 85.2 |
| — |
| 93.0 |
| 93.0 |
| — |
| Interest rate |
Trading assets |
| 46.5 |
| 0.1 |
| 46.4 |
| 48.9 |
| 0.3 |
| 48.6 |
| |
Reverse repos |
| 27.7 |
| — |
| 27.7 |
| 27.1 |
| — |
| 27.1 |
| Interest rate |
Securities |
| 12.8 |
| — |
| 12.8 |
| 13.9 |
| — |
| 13.9 |
| Interest rate, credit spreads, equity |
Other |
| 6.0 |
| 0.1 |
| 5.9 |
| 7.9 |
| 0.3 |
| 7.6 |
| Interest rate |
Derivatives |
| 60.8 |
| 0.8 |
| 60.0 |
| 78.4 |
| 1.4 |
| 77.0 |
| Interest rate, credit spreads, equity |
Settlement balances |
| 0.6 |
| — |
| 0.6 |
| 2.1 |
| 0.1 |
| 2.0 |
| Settlement |
Loans to banks |
| 7.0 |
| 7.0 |
| — |
| 6.0 |
| 6.0 |
| — |
| Interest rate |
Loans to customers |
| 418.9 |
| 418.9 |
| — |
| 400.3 |
| 400.3 |
| — |
| Interest rate |
Other financial assets |
| 79.8 |
| 79.8 |
| — |
| 63.2 |
| 63.2 |
| — |
| Interest rate, credit spreads, equity |
Intangible assets |
| 7.3 |
| 7.3 |
| — |
| 7.6 |
| 7.6 |
| — |
| Interest rate, credit spreads, equity |
Other assets |
| 8.5 |
| 8.5 |
| — |
| 8.5 |
| 8.5 |
| — |
| |
Total assets |
| 714.6 |
| 607.6 |
| 107.0 |
| 708.0 |
| 580.4 |
| 127.6 |
| |
Liabilities |
| |
| |
| |
| |
| |
| |
| |
Bank deposits |
| 44.1 |
| 44.1 |
| — |
| 31.5 |
| 31.5 |
| — |
| Interest rate |
Customer deposits |
| 443.0 |
| 443.0 |
| — |
| 433.5 |
| 433.5 |
| — |
| Interest rate |
Settlement balances |
| 0.9 |
| 0.1 |
| 0.8 |
| 1.7 |
| — |
| 1.7 |
| Settlement |
Trading liabilities |
| 49.0 |
| 0.2 |
| 48.8 |
| 54.7 |
| 0.2 |
| 54.5 |
| |
Repos |
| 28.6 |
| — |
| 28.6 |
| 30.6 |
| — |
| 30.6 |
| Interest rate |
Short positions |
| 7.5 |
| — |
| 7.5 |
| 10.5 |
| — |
| 10.5 |
| Interest rate, credit spreads |
Other |
| 12.9 |
| 0.2 |
| 12.7 |
| 13.6 |
| 0.2 |
| 13.4 |
| Interest rate |
Derivatives |
| 54.0 |
| 0.5 |
| 53.5 |
| 72.1 |
| 1.0 |
| 71.1 |
| Interest rate, credit spreads |
Other financial liabilities |
| 67.6 |
| 67.6 |
| — |
| 61.1 |
| 61.1 |
| — |
| Interest rate |
Subordinated liabilities |
| 6.1 |
| 6.1 |
| — |
| 6.1 |
| 6.1 |
| — |
| Interest rate |
Notes in circulation |
| 3.2 |
| 3.2 |
| — |
| 3.3 |
| 3.3 |
| — |
| Interest rate |
Other liabilities |
| 4.0 |
| 4.0 |
| — |
| 4.6 |
| 4.6 |
| — |
| |
Total liabilities |
| 671.9 |
| 568.8 |
| 103.1 |
| 668.6 |
| 541.3 |
| 127.3 |
| |
| (1) | Non-trading businesses are entities that primarily have exposures that are not classified as trading book. For these exposures, with the exception of pension-related activities, the main measurement methods are sensitivity analysis of net interest income, internal non-traded market risk VaR and fair value calculations. For more information refer to the non-traded market risk section. |
| (2) | Trading businesses are entities that primarily have exposures that are classified as trading book under regulatory rules. For these exposures, the main methods used by NatWest Group to measure market risk are detailed in the traded market risk section. |
| (3) | Foreign exchange risk affects all non-sterling denominated exposures on the balance sheet across trading and non-trading businesses, and therefore has not been listed in the above tables. |
NatWest Group Annual Report on Form 20-F 2025 | 133 |
Pension risk
Definition
Pension risk is the inability to meet contractual obligations and other liabilities to the established employee or related company pension scheme.
Sources of risk
NatWest Group has exposure to pension risk through its defined benefit schemes worldwide. The Main section of The NatWest Group Pension Fund (the Main section) is the largest source of pension risk. Refer to Note 5 to the consolidated financial statements, for further details on NatWest Group’s pension obligations, including sensitivities to the main risk factors.
Pension scheme liabilities vary with changes in long-term interest rates and inflation as well as with pensionable salaries, the longevity of scheme members and legislation.
The Trustee of NatWest Group’s largest scheme (the Main section of the NatWest Group Pension Fund) holds buy-in policies with third-party insurers. Under the buy-in insurance contracts, the insurer makes payments to the scheme to cover pension benefits paid to members. As a result, the insured portion of the scheme is protected against all material demographic and market risks.
These risks have been replaced with the risk that the insurer defaults on payments due to the scheme. The uninsured scheme assets continue to vary with changes in market risk drivers such as interest rates, inflation expectations and credit spreads. NatWest Group is therefore still exposed to the risk that the schemes’ assets, together with future returns and additional future contributions, are estimated to be insufficient to meet liabilities as they fall due.
In such circumstances, NatWest Group could be obliged (or might choose) to make additional contributions to the schemes or be required to hold additional capital to mitigate this risk.
Key developments in 2025
| ● | During the year, the Trustee of the Main section of the NatWest Group Pension Fund completed partial buy-in transactions, in addition to those completed during 2024, passing demographic and market risk to third-party insurers. Over 40% (£10.3 billion) of the scheme’s liabilities are now covered by buy-in policies, which is an increase from one - third at the end of 2024. |
Governance
Risk governance for pension risk is in line with the approach outlined in the Risk management framework section.
Chaired by the Chief Financial Officer (CFO), the Asset & Liability Management Committee supports the CFO in considering the financial strategy and balance sheet implications relating to pension liabilities and pension strategy and other issues material to NatWest Group’s pension strategy. It also supports the CFO in considering investment strategy proposals from the Trustee of the Main section. The Board reviews and, as appropriate, approves any material pension strategy proposals.
NatWest Group Annual Report on Form 20-F 2025 | 134 |
Pension risk continued
Risk appetite
Risk appetite for pension risk is in line with the approach outlined in the Risk management framework section.
Pension risk appetite is approved by the Board. NatWest Group maintains an independent view of the risk inherent in its pension funds. NatWest Group has a pension risk appetite statement that is reviewed and approved at least annually by the Board on the Board Risk Committee’s recommendation to ensure it remains appropriate and aligned to strategy.
Policies and standards are in place to provide formal controls for pension risk reporting, modelling, governance and stress testing. A pension risk policy, which sits within the enterprise-wide risk management framework, is also in place and is subject to associated framework controls.
Performance against risk appetite is reported regularly to the Executive Risk Committee, the Board Risk Committee, and the Board. Relevant pension risk matters are escalated through the Executive Risk Committee, Asset & Liability Management Committee and Board Risk Committee as appropriate and to the Board as applicable. For more information, refer to the Governance and remuneration section.
Measurement and monitoring
Pension risk is monitored by the Executive Risk Committee and the Board Risk Committee. Relevant pension risk matters are escalated to the Board as applicable. NatWest Group also undertakes stress tests on its material defined benefit pension schemes each year.
These tests are also used to satisfy the requests of regulatory bodies such as the Bank of England. The stress testing framework includes pension risk capital calculations for the purposes of the Internal Capital Adequacy Assessment Process as well as additional stress tests for a number of internal management purposes.
The results of the stress tests and their consequential impact on NatWest Group’s balance sheet, income statement and capital position are incorporated into the overall NatWest Group stress test results. NatWest Bank Plc (a subsidiary of NatWest Group) is the principal employer of the Main section and could be required to fund any deficit that arises. The financial strength of third-party insurers is monitored on a periodic basis by the Trustee and NatWest Group.
Mitigation
The Main section is well - protected against interest rate and inflation risks within the non - insured portfolio, reflecting risk mitigation measures taken by the Trustee such as hedging and reduced exposure to growth assets. The buy - in transactions completed to date further protect against demographic and market risks.
If, in an extreme scenario, an insurer was unable to make payments due to the scheme under the buy-in insurance contracts, NatWest Group would continue to be responsible for financially supporting the scheme to meet pension benefits. However, strong mitigants are in place against this risk, including the insurance regulatory regime. The potential impact of climate change is one of the factors considered in managing the assets of the Main section. The Trustee monitors the risk to its investments from changes in the global economy and invests, where return justifies the risk, in sectors that reduce the world’s reliance on fossil fuels, or that may otherwise promote environmental benefits. The Trustee also expects third-party insurers to have appropriate policies to address climate risk and to report on climate exposure attributable to the Main section.
Further details regarding the Trustee’s approach to managing climate change risk can be found in its Responsible Ownership Policy, its net zero commitment and its climate disclosures produced on an annual basis, as required by The Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021.
NatWest Group Annual Report on Form 20-F 2025 | 135 |
Operational risk
Definition
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or external events. It arises from day-to-day operations and is relevant to every aspect of the business.
Sources of risk
Operational risk may arise from a failure to manage operations, systems, processes, transactions and assets appropriately. This includes human error, an inability to deliver change adequately or on time, the non-availability of technology services, or the loss of customer data. It also includes systems failure, theft of NatWest Group property, information loss, the impact of natural or man-made disasters and the threat of cyberattacks. Operational risk can also arise from a failure to account for changes in law or regulations or to take appropriate measures to protect assets.
Key developments in 2025
| ● | The enhanced risk and control self-assessment approach was refined further with a focus on material operational risks and controls across the key end-to-end processes. |
| ● | The use of automated data-led insights was embedded to oversee the operational risk profile and manage it within appetite. |
| ● | Improvements to technology end of life risk management were implemented to mitigate associated technology and cyber risks. |
| ● | AI tools have been introduced to support the articulation and adequacy of controls including generative AI chat bots to support the embedding of frameworks and to help with horizon scanning. |
| ● | Compliance with UK and EU operational resilience regulatory requirements was achieved and maintained along with material compliance with EU Digital Operational Resilience Act (DORA). |
| ● | NatWest Group continued to evolve the assessment of its operational resilience with increasingly severe, complex, and prolonged scenario tests for cyber, third-party, and significant IT failure risks. |
| ● | Threat horizon scanning and vulnerability management processes were enhanced to support risk identification, scenario testing and the prioritisation of risk mitigation activities. |
Governance
The risk governance arrangements in place for operational risk are in line with the approach as set out in the Risk management framework section.
Aligned to this, a strong operational risk management oversight function is vital to support NatWest Group’s ambitions to serve its customers better. Improved management of operational risk against defined risk appetite is vital for stability and reputational integrity.
To support ongoing oversight of the management of the operational risk profile the Operational Risk Executive Steering Committee ensures all material operational risks are monitored and managed within appetite.
Risk appetite
Risk appetite for operational risk is in line with the approach outlined in the Risk management framework section.
Measurement and monitoring
Measurement and monitoring for operational risk is in line with the approach outlined in the Risk management framework section.
Mitigation
Mitigation for operational risk is in line with the approach outlined in the Risk management framework section.
Operational risks are mitigated by applying preventative and detective controls which are assessed on adequacy and effectiveness through risk and control self-assessment process on a regular basis to determine risk exposure. Mitigation is prioritised using risk-based approach considering risk appetite.
NatWest Group Annual Report on Form 20-F 2025 | 136 |
Operational risk continued
Operational resilience and cybersecurity
NatWest Group maintains a robust approach to operational resilience through comprehensive, NatWest Group-wide processes. These include regular scenario tests that simulate increasingly severe and sophisticated disruption events. In 2025, as part of NatWest Group’s operational resilience strategy, severe but plausible disruption scenario tests were undertaken and encompassed cyber threats, third-party risks, and significant IT failures confirming the preparedness and effectiveness of NatWest Group’s operational resilience strategies, and plans including third party arrangements in the event of severe but plausible disruptions.
This rigorous approach was underpinned with the enhancement, ongoing monitoring, and transparent reporting of key risk indicators and performance metrics for Important Business Services.
In early Q1 2025, NatWest Group confirmed that it had materially met the requirements of the EU DORA. Furthermore, by the end of March 2025, NatWest Group confirmed full compliance with the operational resilience requirements set by the Financial Conduct Authority and the Prudential Regulation Authority.
By meeting the 2025 compliance deadlines for these critical regulatory frameworks, NatWest Group demonstrated the strength and reliability of its systems and controls. This enables effective risk management, minimises potential disruptions, and safeguards both customers and the wider financial system. These efforts reinforce NatWest Group’s commitment to building trust and stability within financial services.
Operational resilience remains a key priority, achieved through the effective management of a broad spectrum of interconnected operational risks. NatWest Group consistently meets regulatory expectations and actively participates in multiple industry-wide operational resilience forums.
This engagement provides a valuable cross-sector perspective on the evolving operational resilience risk landscape and supports NatWest Group’s ability to adapt to ongoing innovation and change, both internally and across the financial services sector.
NatWest Group operates layered security controls and its architecture is designed to provide inherent protection against threats. This approach avoids reliance on any one type or method of security control. Minimum security control requirements are set out in key risk policies, standards, processes and procedures.
Throughout 2025, NatWest Group continued to monitor and manage the threat landscape focusing on:
| ● | Initial access brokers (cyber criminals who specialise in breaching organisations then selling the access to other threat actors), ransomware gangs and, in light of ongoing geopolitical tensions, nation states. |
| ● | Innovations in technology, assessing the inherent risk and developing appropriate responses to manage any associated risks. Artificial Intelligence, Quantum Computing and Cloud Adoption have been areas of focus in 2025. |
As cyberattacks evolve, NatWest Group continues to invest in additional capability designed to defend against emerging risks.
Event and loss data management
The operational risk event and loss data management process ensures NatWest Group captures and records operational risk events with financial and non-financial impacts that meet defined criteria. Loss data is used for internal, regulatory and industry reporting and is included in capital modelling when calculating economic capital for operational risk. The most serious events are escalated in a simple, standardised process to all senior management, by way of a ‘Early Event Escalation Process’. NatWest Group has not experienced a material cybersecurity breach or associated material loss in the last three years.
All financial impacts and recoveries associated with an operational risk event are reported against the date they were recorded in NatWest Group’s financial accounts. A single event can result in multiple losses (or recoveries) that may take time to crystallise. Losses and recoveries with a financial accounting date in 2025 may relate to events that occurred, or were identified in, prior years. NatWest Group purchases insurance against specific losses and to comply with statutory or contractual requirements.
NatWest Group Annual Report on Form 20-F 2025 | 137 |
Operational risk continued
Percentage and value of events
At 31 December 2025, the total value of operational risk events was £76 million, representing an increase of £58 million compared with 2024. This movement was primarily driven by the release of unutilised provisions in 2024 within the clients, products and business practices category. The volume of losses has decreased by 10% compared to 2024.
Value and volume of events (>£10k) | Value of events £k | Volume of events (1) |
| ||||||||||||||
Event category | | 2025 | | 2024 | | YoY £ | | YoY | % | 2025 | | 2024 | | YoY | | YoY | % |
Fraud |
| 47 |
| 43 |
| 4 | 22 | % | 1,169 | 1,321 | (152) | (10) | % | ||||
Clients, products and business practices |
| 16 |
| (37) |
| 53 | 294 | % | 18 | 30 | (12) | (1) | % | ||||
Execution, delivery and process management |
| 9 |
| 8 |
| 1 | 6 | % | - | 1 | (1) | — | |||||
Employment practices and workplace safety |
| 3 |
| 1 |
| 2 | 11 | % | 20 | 12 | 8 | — | |||||
Technology and infrastructure failures |
| 1 |
| 3 |
| (2) | (11) | % | 144 | 129 | 15 | 1 | % | ||||
Disasters and public safety | — | — | — | — | 5 | 11 | (6) | — | |||||||||
| 76 |
| 18 |
| 58 | 322 | % | 1,356 | 1,504 | (148) | (10) | % | |||||
| (1) | The calculation in the table is based on the volume and value of events (the proportion and cost of operational risk events to NatWest Group) where the associated loss is more than or equal to £10,000. |
Cybersecurity risk management processes
NatWest Group’s cybersecurity risk management
The information security policy forms part of the internal process to support NatWest Group’s annual attestation to its management’s assessment of the effectiveness of its internal control over financial reporting required under Section 404 of the Sarbanes-Oxley Act.
The cybersecurity risk management framework is designed to mitigate the impact of cybersecurity threats and incidents.
The framework also includes a structured approach for identifying and managing both internal cybersecurity incidents and external incidents impacting NatWest Group’s
In addition, the framework includes a process for assessing the severity and source of a cybersecurity threat or incident, including in relation to
The functions of the cybersecurity risk management framework are based on a three lines of defence model:
| ● | NatWest Group’s first line of defence is responsible for setting NatWest Group’s information and cybersecurity risk management strategy and Information Security Policy, including: delivering effective and efficient cybersecurity products and services and identifying, considering and assessing material cybersecurity threats on an ongoing basis. As part of the first line of defence, NatWest Group: |
| a) | continues to invest significant resources in developing and improving its cybersecurity risk management. |
| b) | supports due diligence processes in respect of third-party service providers involved in NatWest Group’s supply chain by defining minimum security requirements in line with industry practice that suppliers are contractually bound by. These minimum standards, among others, require suppliers to notify NatWest Group of any material cybersecurity incidents and for UK based suppliers to hold independent assurance, with Cyber Essentials+ certification being the minimum accepted. |
| c) | educates its employees and customers on cybersecurity threats and incidents through education and awareness programmes that are designed around the most relevant cybersecurity threats and incidents for NatWest Group. These programmes, including ethical phishing campaigns are reviewed regularly and updated based on changes to the cybersecurity threat landscape. Employees are also required to participate in annual information security (including cybersecurity) trainings. |
NatWest Group Annual Report on Form 20-F 2025 | 138 |
Operational risk continued
Cybersecurity risk management processes continued
| ● | As part of the second line of defence, a dedicated operational risk team is responsible for the assessment, identification and management of NatWest Group’s cybersecurity risk and provides regular updates and opinions to senior risk committees of NatWest Group. These include monthly updates and escalations as required to the NatWest Digital X Risk Committee. The operational risk team also provides a Risk opinion as part of the annual information and cyber security risk spotlight to NatWest Group’s Executive Risk Committee and Board Risk Committee. |
| ● | As part of the third line of defence, NatWest Group’s Internal Audit team has a risk-based coverage approach to assess the adequacy of the design and operational effectiveness of key internal controls, governance and risk management, including in connection with cybersecurity risk. The frequency and scope of the internal audit coverage depends on the ongoing assessment of the key risks to NatWest Group. |
Cybersecurity threats for 2025
NatWest Group is continuously exposed to cybersecurity threats across its business and supply chain, which are closely monitored by NatWest Group. In the year ended 31 December 2025, NatWest Group did
Cybersecurity Risk Oversight
Board
The Board of Directors (Board) ensures there is a framework of prudent and effective controls which enables risks – including information and cyber security risk - to be assessed and managed. The Board approves the EWRMF (including NatWest Group’s risk appetite framework) on recommendation from the
The Board monitors information and cybersecurity performance against risk appetite through the receipt of regular reporting and receives reporting on top and emerging risks, including the likelihood of a cyber-attack. The Board also reviews the effectiveness of risk management and internal control systems.
Group Board Risk Committee (BRC)
Provides oversight and advice to the Board on current and future risk exposures of NatWest Group and its subsidiaries; future risk profile including risk appetite; the approval and effectiveness of the EWRMF and the internal controls required to manage risk. It approves the enterprise-wide risk management strategy and oversees its effective delivery. BRC reviews all information and cybersecurity risk exposures and management’s recommendations to monitor, control and mitigate such exposures. It also reviews NatWest Group’s information and cybersecurity performance against risk appetite through the receipt of regular reporting, updates on top and emerging risks and
Management responsible for managing information and cybersecurity risk
The first line of defence is responsible for setting NatWest Group’s information and cybersecurity risk management strategy, including: delivering effective and efficient cybersecurity products, policies and services and identifying, considering and assessing material cybersecurity threats on an ongoing basis.
NatWest Group Annual Report on Form 20-F 2025 | 139 |
Compliance and conduct risk
Definition
Compliance risk is the risk that NatWest Group fails to observe the letter and spirit of all relevant laws, codes, rules, regulations and standards of good market practice.
Conduct risk is the risk of inappropriate behaviour towards customers, or in the markets in which NatWest Group operates, which leads to poor or inappropriate customer outcomes, and/or undermines market integrity.
The consequences of failing to meet compliance and/or conduct responsibilities can be significant and could result, for example, in legal action, regulatory enforcement, material financial loss and/or reputational damage.
Sources of risk
Compliance and conduct risk exist across all stages of NatWest Group’s relationships with its customers and arise from a variety of activities including product design, marketing and sales, complaint handling, staff training, and handling of confidential inside information.
As set out in Note 25 to the consolidated financial statements, members of NatWest Group are party to legal proceedings and are subject to investigation and other regulatory action in the UK, the US and other jurisdictions.
Key developments in 2025
| ● | As part of the Non-Financial Risk Enhancement Programme, NatWest Group reviewed its compliance and conduct framework against the Operational Riskdata eXchange Association (ORX) regulatory compliance and conduct risk taxonomy. ORX is the largest operational risk management association in the financial services sector and this industry-standard taxonomy informed proposals for the annual risk directory refresh, including new level 2 risks and a consolidation of conduct and regulatory compliance risks into a single 'compliance and conduct level 1 risk’ from 2026. These changes will enhance risk coverage, strengthen integration with the EWRMF, and align more closely with industry practice. |
| ● | NatWest Group is also evaluating alternative rules mapping approaches, including a regulatory traceability model supported by an integrated AI-enabled platform. This will simplify governance, reduce complexity, and improve consistency, while ensuring its framework remains resilient and future-ready. |
| ● | On 4 September 2025, the US Court of Appeal approved an amendment of the plea agreement and formally terminated the Monitorship (extended oversight) of NatWest Markets Plc (NWM). This is a result of the notable progress made in strengthening our compliance programme, improvements in internal controls and remediation, and the status of the implementation of the Monitor’s recommendations. NWM’s obligations under the plea agreement and probation have been extended until December 2026. Going forward, NWM will report progress on the compliance programme to the US Department of Justice (DOJ) directly. |
| ● | The Judicial Review challenging the Financial Ombudsman Service’s (FOS) interpretation of ‘unfair relationships’ under Section 140 of the Consumer Credit Act (CCA) remains ongoing. NatWest Group and peer banks have raised concerns over the reopening of closed complaints, with the FCA intervening in support of our position. Separately, proposed CCA reforms aim to modernise regulation via a flexible, outcome-based regime. |
| ● | Following the Supreme Court’s August 2025 ruling regarding ‘unfair relationships’ when arranging motor finance, the FCA’s October consultation outlined a redress scheme expected to launch in 2026. |
| ● | A review of mortgage rules was launched by the FCA to simplify regulatory requirements and improve consumer flexibility. The proposals seek to simplify rules, enhance access to advice and execution-only options, and streamline affordability assessments under Consumer Duty. NatWest Group continues to monitor developments to ensure its proposition remains compliant and responsive. |
| ● | The FCA’s March review of the treatment of vulnerable customers recognised progress but highlighted areas for improvement. NatWest Group remains committed to delivering fair outcomes and maintaining regulatory compliance. |
NatWest Group Annual Report on Form 20-F 2025 | 140 |
Compliance and conduct risk continued
Key developments in 2025 continued
| ● | The PRA and FCA are consulting across the financial services industry on the Senior Managers and Certification Regime that could reduce the number of roles within scope by up to 40%, with His Majesty’s Treasury (HMT) supporting swift implementation. |
| ● | HMT has launched a consultation to review the FOS’s remit and propose to modernise the framework. The FCA and FOS have published next steps, signalling coordinated reform of consumer compensation mechanisms. |
Governance
Risk governance for compliance and conduct risk is in line with the approach outlined in the Risk management framework section.
To support ongoing oversight of the management of the compliance and conduct risk profile, a number of committees are in place, the most senior of which is the “One Bank Good Customer Outcomes Leadership Committee”.
Risk appetite
Risk appetite for compliance and conduct risk is in line with the approach outlined in the Risk management framework section.
Measurement and monitoring
Measurement and monitoring for compliance and conduct risk are in line with the approach outlined in the Risk management framework section.
Mitigation
Mitigation for compliance and conduct risk is in line with the approach outlined in the Risk management framework section.
Activity to mitigate the most material compliance and conduct risk is carried out across NatWest Group with specific areas of focus in the customer-facing businesses and legal entities. Examples of mitigation include consideration of customer needs in business and product planning, targeted training, conflicts of interest management, market conduct surveillance, complaints management, mapping of priority regulatory requirements and independent monitoring activity. Internal policies help support a strong customer focus across NatWest Group.
Financial crime risk
Definition
Financial crime risk is the risk that NatWest Group's products, services, employees and/or third parties are intentionally or unintentionally used to facilitate financial crime in the form of money laundering, terrorist financing, bribery and corruption, sanctions and tax evasion, as well as external or internal fraud.
Sources of risk
Financial crime risk may be present if NatWest Group’s customers, employees or third parties undertake or facilitate financial crime, or if NatWest Group’s products or services are used intentionally or unintentionally to facilitate such crime. Financial crime risk is an inherent risk across all lines of business.
Key developments in 2025
| ● | Significant investment continued to be made to support the delivery of a multi-year transformation plan across financial crime risk management. |
| ● | Enhancements were made to technology, data quality, and data analytics to improve the effectiveness of systems used to monitor customers and transactions. |
| ● | Financial crime events were held throughout the year to further embed financial crime risk management culture and behaviours. |
NatWest Group Annual Report on Form 20-F 2025 | 141 |
Financial crime risk continued
Key developments in 2025 continued
| ● | There was active participation in public/private partnerships including the Joint Money Laundering Intelligence Taskforce and Data Fusion. Following the success of the pilot, Data Fusion has become a permanent operational capability, able to deliver benefits across the public-private economic crime system. This includes the implementation of a permanent public-private Joint Analytical Team, housed within the National Crime Agency. |
Governance
Risk governance for financial crime risk is in line with the approach outlined in the Risk management framework section.
The Financial Crime Oversight Committee, which is jointly chaired by the Group Money Laundering Reporting Officer and the Director of Financial Crime is the core governance committee for financial crime risk (excluding fraud). It oversees financial crime risk management, operational performance, and transformation matters including decision-making.
Financial crime matters are escalated through the Executive Risk Committee and to the Board as applicable.
The Fraud Executive Steering Group, which is chaired by the Chief Customer and Operations Officer, is the core governance committee for fraud. It oversees fraud risk management, operational performance, and investment matters including decision-making and escalations to relevant senior committees.
Risk appetite
Risk appetite for financial crime risk is in line with the approach outlined in the Risk management framework section.
Measurement and monitoring
Measurement and monitoring for financial crime risk are in line with the approach outlined in the Risk management framework section.
Financial crime risks are identified and reported through continuous risk management and regular reporting to the Financial Crime Oversight Committee and other risk governance committees (including the Board Risk Committees). Quantitative and qualitative data is reviewed and assessed to measure whether financial crime risk is within appetite.
Mitigation
Mitigation for financial crime risk is in line with the approach outlined in the Risk management framework section.
Through the financial crime framework, relevant policies, systems, processes and controls are used to mitigate and manage financial crime risk. This includes the use of dedicated screening and monitoring systems and controls to identify people, organisations, transactions and behaviours that may require further investigation or other actions. Centralised expertise is available to detect and disrupt threats to NatWest Group and its customers.
Intelligence is shared with law enforcement, regulators and government bodies to strengthen national and international defences against those who would misuse the financial system for criminal motives.
NatWest Group Annual Report on Form 20-F 2025 | 142 |
Model risk
Definition
Model risk is the potential for adverse consequences from model errors or the inappropriate use of modelled outputs to inform business decisions. NatWest Group defines a model as a quantitative method, system, or approach that applies statistical, economic, financial, accounting, mathematical or data science theories, techniques and assumptions to process input data into estimates.
Sources of risk
NatWest Group uses a variety of models in the course of its business activities. Examples include the use of model outputs to support customer decisioning, measuring and assessing risk exposures (including credit, market, and climate risk), calculating regulatory capital and liquidity requirements and automation of operational processes.
Model applications may give rise to different risks depending on the business in which they are used. Model risk is therefore assessed separately for each franchise in addition to the overall assessment made for NatWest Group.
Key developments in 2025
| ● | Continued with a programme of work to implement model risk management (MRM) framework changes that were introduced in 2024 in response to PRA’s Supervisory Statement 1/23 across the model landscape. |
| ● | Introduced further updates to the MRM framework to address feedback received from the PRA following their industry-wide thematic review of MRM and further improve model risk management practices. |
| ● | Deterministic quantitative methods, which are complex and material calculators that although not technically models still present similar risks, were brought in scope of the MRM framework. |
| ● | Enhanced the framework for the independent validation of models. |
| ● | Delivered model inventory design changes to support implementation of MRM framework enhancements, including a focus on recording of model use, which has enabled better oversight and risk management of models. |
| ● | Continued focus on improving the completeness and accuracy of model risk data contained within the inventory through enhanced oversight metrics and targeted remediation work. |
Governance
Risk governance for model risk is in line with the approach outlined in the Risk management framework section. A governance framework is in place to ensure policies and processes relating to models are appropriate and effective. Two roles are key to this – model risk owners and model validation leads. Model risk owners are responsible for model approval and ongoing performance monitoring. Model validation leads, in the second line of defence, are responsible for oversight, including ensuring that models are independently validated prior to use and on an ongoing basis aligned to the model’s tier.
Business and function model management committees are used to govern key model risk matters and escalate to senior management where required.
Risk appetite
Risk appetite for model risk is in line with the approach outlined in the Risk management framework section.
NatWest Group Annual Report on Form 20-F 2025 | 143 |
Model risk continued
Measurement and monitoring
Model risk is measured and managed through continuous assessment and regular reporting to NatWest Group’s senior risk committees and at Board level.
Policies, toolkits and model standards related to the development, validation, approval, implementation, use and ongoing monitoring of models are in place to ensure adequate control across the lifecycle of an individual model.
All models developed for use are assigned a model tier, based on the model’s materiality and complexity. Risk based model tiering is used to prioritise risk management activities throughout the model lifecycle, and to identify and classify those models which pose the highest risk to NatWest Group’s business activities, safety and/or soundness.
Validation of material models is conducted by an independent risk function comprising of skilled, well-informed subject matter experts. This is completed for new models or material amendments to existing models and as part of an ongoing periodic programme to assess model performance. The frequency of periodic revalidation is aligned to the tier of the model. The independent validation focuses on a variety of model features, including model inputs, model processing, model outputs, the implementation of the model and the quality of the ongoing performance monitoring. Independent validation also focuses on the quality and accuracy of the development documentation and the model’s compliance with regulation.
The model materiality combined with the validation rating provides the basis for model risk appetite measures and enables model risk to be robustly monitored and managed across NatWest Group.
Ongoing performance monitoring is conducted by model owners and overseen by the model validators to ensure parameter estimates and model constructs remain fit for purpose, model assumptions remain valid and that models are being used consistently with their intended purpose. This allows timely action to be taken to remediate poor model performance and/or any control gaps or weaknesses.
Mitigation
By their nature – as approximations of reality – model risk is inherent in the use of models. It is managed by refining or redeveloping models where appropriate – due to changes in market conditions, business assumptions or processes – and by applying adjustments to model outputs (either quantitative or based on expert opinion). Enhancements may also be made to the process within which the model output is used in order to further limit risk levels.
NatWest Group Annual Report on Form 20-F 2025 | 144 |
Reputational risk
Definition
Reputational risk is the risk of damage to stakeholder trust due to negative consequences arising from internal actions or external events.
Sources of risk
The three primary drivers of reputational risk are: failure in internal risk management systems, processes or culture; NatWest Group’s actions materially conflicting with stakeholder expectations; and contagion (when NatWest Group’s reputation is damaged by failures in key sectors including NatWest Group’s supply chain or other partnerships).
Key developments in 2025
| ● | Enhancements were made to expand the requirements of the reputational risk policy to suppliers and third parties. |
| ● | The environmental, social and ethical (ESE)(1) animal welfare, mining and metals and forestry, fisheries and agribusiness risk acceptance criteria were reviewed and updated in line with strategic objectives. |
Governance
Risk governance for reputational risk is in line with the approach outlined in the Risk management framework section.
A reputational risk policy supports reputational risk management across NatWest Group. Reputational risk registers are used to manage reputational risks identified within relevant business areas. These are reported to the relevant business executive risk committee.
Material reputational risks to NatWest Group are escalated via the NatWest Group reputational risk register which is reported at every meeting of the Group Reputational Risk Committee. The Group Reputational Risk Committee also opines on matters that represent material reputational risks. The Executive and Board Risk Committees oversee the identification and reporting of reputational risk.
Risk appetite
Risk appetite for reputational risk is in line with the approach outlined in the Risk management framework section.
Reputational risk appetite is approved by the Board. NatWest Group manages and articulates its appetite for reputational risk through a qualitative reputational risk appetite statement and associated quantitative measures.
The risk appetite statements and associated measures for reputational risk are reviewed at least annually by the Board on the Board Risk Committee’s recommendation to ensure they remain appropriate and aligned to strategy.
NatWest Group seeks to identify, measure and manage risk aligned to stakeholder trust. However, reputational risk is inherent in NatWest Group’s operating environment and public trust is a specific factor in setting reputational risk appetite.
Monitoring and measurement
Relevant internal and external factors are monitored through regular reporting via reputational risk registers at business or legal entity level. They are escalated, where appropriate, to the relevant business risk committee and, where material, to the Group Reputational Risk Committee.
Additional principal risk indicators for material risks being monitored are also reported to the Group Reputational Risk Committee and to the Executive and Board Risk Committees.
Mitigation
Standards of conduct are in place across NatWest Group requiring strict adherence to policies, procedures and ways of working to ensure business is transacted in a way that meets – or exceeds – stakeholder expectations.
External events that could cause reputational damage are identified and mitigated through NatWest Group’s top and emerging risks process (where sufficiently material) as well as through the NatWest Group and business-level reputational risk registers.
(1) From 1 January 2026, the name of the ESE risk framework was updated to the Environmental and Social Risk Framework. This change better reflects the framework’s underlying methodology which focuses on a risk-based approach aligned to organisational risk appetite, rather than values-based judgements.
NatWest Group Annual Report on Form 20-F 2025 | 145 |
Financial statements
Page | |
Independent auditor’s report (PCAOB number: | 147 |
Consolidated income statement for the year ended 31 December 2025 | 152 |
Consolidated statement of comprehensive income for the year ended 31 December 2025 | 153 |
Consolidated balance sheet as at 31 December 2025 | 154 |
Consolidated statement of changes in equity for the year ended 31 December 2025 | 155 |
Consolidated cash flow statement for the year ended 31 December 2025 | 158 |
Accounting policies | 159 |
Notes to the consolidated financial statements | 169 |
1 Net interest income | 169 |
2 Non-interest income | 170 |
3 Operating expenses | 171 |
4 Segmental analysis | 175 |
5 Pensions | 181 |
6 Auditor’s remuneration | 188 |
7 Tax | 189 |
8 Earnings per share | 193 |
9 Financial instruments – classification | 194 |
10 Financial instruments – valuation | 198 |
11 Financial instruments – maturity analysis | 211 |
12 Trading assets and liabilities | 214 |
13 Derivatives | 215 |
14 Loan impairment provisions | 222 |
15 Other financial assets | 224 |
16 Intangible assets | 225 |
17 Other assets | 226 |
18 Other financial liabilities | 226 |
19 Subordinated liabilities | 227 |
20 Other liabilities | 228 |
21 Share capital and other equity | 229 |
22 Structured entities | 232 |
23 Asset transfers | 234 |
24 Capital resources | 235 |
25 Memorandum items | 236 |
26 Non-cash and other items | 244 |
27 Analysis of the net investment in business interests and intangible assets | 245 |
28 Analysis of changes in financing during the year | 245 |
29 Analysis of cash and cash equivalents | 246 |
30 Directors’ and key management remuneration | 246 |
31 Transactions with directors and key management | 247 |
32 Related parties | 247 |
33 Post balance sheet events | 249 |
NatWest Group Annual Report on Form 20-F 2025 | 146 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of NatWest Group plc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of NatWest Group plc (the “Group”) as of 31 December 2025 and 2024, the related consolidated income statements, statements of comprehensive income, statements of changes in equity and cash flow statements for each of the three years in the period ended 31 December 2025, the related notes 1 to 33, and the information identified as audited in the Risk and capital management section (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group at 31 December 2025 and 2024, and the results of its operations and its cash flows for each of the three years ended in the period 31 December 2025, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Group’s internal control over financial reporting as of 31 December 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated 17 February 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on the Group’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
NatWest Group Annual Report on Form 20-F 2025 | 147 |
Report of Independent Registered Public Accounting Firm continued
Estimate of expected credit loss provisions
Description of the matter | How We Addressed the Matter in Our Audit |
At 31 December 2025, the Group reported total gross loans – amortised cost and FVOCI of £429.9 billion and associated £3.6 billion of expected credit losses (“ECL”). As explained more fully in the Accounting policies, the credit risk section of the Risk and capital management section and Note 14 to the consolidated financial statements, ECL is recognised for financial instruments classified as amortised cost or fair value through other comprehensive income. Performing assets are measured at either (i) 12-month ECL (“Stage 1”) or (ii) for those assets that are considered to have a significant increase in credit risk (“SICR”), lifetime ECL (“Stage 2”). Defaulted assets (“Stage 3”) are also measured at lifetime ECL. Auditing the ECL estimate was complex due to the judgemental methods used to estimate the ECL, including: accounting interpretations, modelling assumptions and the selection and use of the data used to build and run modelled estimates of Probability of Default (“PD”), Loss Given Default (“LGD”) and Exposure at Default (“EAD”); how to allocate assets between the stages; multiple economic scenarios incorporated in the models; post-model adjustments applied; and the recovery and timing assumptions for individually provided Stage 3 ECLs. The ongoing impact of the uncertain geopolitical and economic outlook led to increased judgements applied in these areas. | We evaluated the design and tested the operating effectiveness of controls over the ECL process, including those over the judgements and estimates noted above. The controls we tested included, amongst others, controls over monitoring of the criteria used to allocate assets into stages, model governance, credit monitoring, individual provisions and the governance over the review of the overall ECL, including the application of model adjustments. To test the ECL provision, amongst other procedures, we performed an overall assessment of the ECL provision levels by stage to assess if they were reasonable by considering the overall credit quality of the Group’s portfolios, risk profile, the current geopolitical and macroeconomic environment, and the industries to which the Group is exposed, as well as performing peer benchmarking, where available, to assess overall staging and provision coverage levels. We evaluated the criteria used to allocate a financial asset to Stage 1, 2 or 3 in accordance with IFRS 9, recalculated the staging of the complete population of assets, and performed sensitivity analyses to assess the impact of different criteria on the ECL and the impact of performing collective staging downgrades to industries, geographic regions and high-risk populations particularly impacted by recent economic conditions. We selected a sample of ECL models based on both quantitative and qualitative factors, and involved our modelling specialists to test the assumptions, inputs, methodology and model build. This included a combination of assessing model design and formulae, alternative modelling techniques, the implementation of new models and recalculating the PD, LGD and EAD during the year. We also considered the results of the Group’s internal model monitoring and validation results. To evaluate the completeness and accuracy of data used in the ECL calculation, we agreed a sample of data points to source systems, including data used to run the models and historic loss data used to monitor the models. We involved our economic specialists to assist us in evaluating the base case and alternative economic scenarios, including evaluating probability weights and considering contrary evidence from external sources. We tested a sample of post model adjustments held at year end. This included challenging the identification of retail customers vulnerable to price and rate increases, commercial sub-sectors susceptible to inflation and liquidity challenges, loss given default assumptions, time to collect and model shortcomings. With our modelling specialists, we assessed the risk of bias and the completeness of these adjustments by considering the data, judgements, methodology, sensitivities, and governance of these adjustments. We evaluated and recalculated the scenarios, assumptions and cash flows for a sample of individual provisions including the alternative scenarios and the probability weights assigned, involving our valuation specialists where appropriate. We also evaluated the adequacy of the related disclosures provided in the consolidated financial statements. |
NatWest Group Annual Report on Form 20-F 2025 | 148 |
Report of Independent Registered Public Accounting Firm continued
Valuation of financial instruments with higher risk characteristics
Description of the Matter | How We Addressed the Matter in Our Audit |
At 31 December 2025, the Group reported level 3 financial assets of £1.3 billion and level 3 financial liabilities of £0.3 billion, which includes financial instruments with higher risk characteristics. Auditing management’s judgements and assumptions used in the estimation of the fair value of these instruments was complex due to the judgemental nature of valuation techniques, modelling assumptions, significant illiquid inputs and certain valuation adjustments. Complex models were used to value exotic features in certain interest rate swaps and options. Judgemental unobservable inputs included discount rates associated with derivatives with complex collateral arrangements and illiquid loans. Judgemental fair value adjustments included Funding Valuation Adjustments (FVA), Credit Valuation Adjustments (CVA), and material product and deal specific adjustments on long-dated derivative portfolios. | We evaluated the design and tested the operating effectiveness of controls relating to financial instrument valuation, which included controls over the Group's independent price verification process, valuation models governance, collateral management, and income statement analysis. Amongst other procedures, we involved our financial instrument valuation and modelling specialists to assist us in testing complex model-dependent valuations by performing independent revaluations to assess the appropriateness of models and the adequacy of both assumptions and inputs. We also independently re-priced a sample of instruments that were valued using illiquid pricing inputs, using alternative pricing sources, where available, to evaluate management’s valuation. In addition, we compared fair value adjustment methodologies against current market practice. With the assistance of our financial instrument valuation and modelling specialists, we revalued a sample of counterparty level FVAs and CVAs, comparing funding spreads to third party data and independently assessed illiquid CVA inputs. We also tested material product and deal specific adjustments on long-dated derivative portfolios and assessed other information, including trading activity, asset disposals and collateral discrepancies, to evaluate modelling assumptions and inputs. |
NatWest Group Annual Report on Form 20-F 2025 | 149 |
Report of Independent Registered Public Accounting Firm continued
Valuation of hard to value pension assets and the defined benefit obligation
Description of the Matter | How We Addressed the Matter in Our Audit |
At 31 December 2025, the Group reported a net pension asset of £156 million comprising £234 million of schemes in surplus and £78 million of schemes in deficit. As explained in the accounting policies and Note 5 to the consolidated financial statements, the defined benefit obligation is measured on an actuarial basis. The charge to the income statement for pension costs is recognised in operating expenses. Gains and losses are recognised in other comprehensive income in full in the period in which they arise. Auditing the pension plan was complex due to the judgemental nature of the assumptions used in the estimation of the fair value of the schemes’ illiquid assets and the defined benefit obligation. These assumptions included, the discount rate, inflation, pension payment and longevity used in the valuation of retirement benefit liabilities. The estimation of the fair value of the pension schemes’ assets was complex due to the judgemental nature of the assumptions and calibrations for illiquid or complex model-dependent valuations of certain investments held by the pension schemes. | We evaluated the design and tested the operating effectiveness of controls over the process covering the valuation of the defined benefit obligation and hard to value assets. For example, we tested controls over management’s review of the actuarial assumptions used in developing the defined benefit obligation. To test the defined benefit obligation, we involved our actuarial specialists to assist in evaluating the actuarial assumptions as discussed above by comparing them to ranges independently developed from third party sources and market data. With the assistance of our specialists, we assessed the impact on pension liabilities due to changes in financial and longevity assumptions over the year, by comparing to third-party sources and market data. We tested the fair value of scheme assets by independently calculating the fair value for a sample of the assets held. We involved our valuation specialists to assess the appropriateness of management’s valuation methodology including the judgements made in determining significant assumptions used in the valuation of complex and illiquid pension assets including the buy-in insurance contracts and the resultant impact of these buy-in transactions on the financial statements. We independently re-priced illiquid and complex assets that had been valued using unobservable market inputs, using alternative pricing sources where available, to evaluate management’s valuations. We also evaluated the adequacy of the related disclosures provided in the consolidated financial statements. |
/s/ Ernst & Young LLP
We have served as the Group’s auditors since 2016.
London, United Kingdom
17 February 2026
NatWest Group Annual Report on Form 20-F 2025 | 150 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of NatWest Group plc
Opinion on Internal Control over Financial Reporting
We have audited NatWest Group plc and subsidiaries’ (the “Group”) internal control over financial reporting as of 31 December 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“2013 framework”) (the COSO criteria). In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of 31 December 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Group as of 31 December 2025 and 2024, the related consolidated income statements, statements of comprehensive income, statements of changes in equity and cash flow statements for each of the three years in the period ended 31 December 2025, the related Accounting policies and Notes 1 to 33, and the information identified as audited in the Risk and capital management section (collectively referred to as the “consolidated financial statements”), and our report dated 17 February 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/
We have served as the Group’s auditors since 2016.
17 February 2026
NatWest Group Annual Report on Form 20-F 2025 | 151 |
Consolidated income statement
for the year ended 31 December 2025
| | 2025 | | 2024 | | 2023 | ||
| Note |
| £m |
| £m |
| £m | |
Interest receivable |
| |
| |
| | ||
Interest payable |
| ( |
| ( |
| ( | ||
Net interest income |
| 1 |
| |
| |
| |
Fees and commissions receivable | | | | |||||
Fees and commissions payable |
| ( |
| ( |
| ( | ||
Trading income |
| |
| |
| | ||
Other operating income |
| |
| |
| | ||
Non-interest income |
| 2 |
| |
| |
| |
Total income |
| |
| |
| | ||
Staff costs | ( | ( | ( | |||||
Premises and equipment |
| ( |
| ( |
| ( | ||
Other administrative expenses |
| ( |
| ( |
| ( | ||
Depreciation and amortisation |
| ( |
| ( |
| ( | ||
Operating expenses | 3 |
| ( |
| ( |
| ( | |
Profit before impairment losses |
| |
| |
| | ||
Impairment losses |
| 14 |
| ( |
| ( |
| ( |
Operating profit before tax |
| | | | ||||
Tax charge |
| 7 |
| ( | ( | ( | ||
Profit from continuing operations |
| | | | ||||
Profit/(loss) from discontinued operations, net of tax |
|
| — |
| |
| ( | |
Profit for the year | | | | |||||
Attributable to: |
| |||||||
Ordinary shareholders | | | | |||||
Paid-in equity holders |
| | | | ||||
Non-controlling interests |
| | | ( | ||||
| | | ||||||
Earnings per ordinary share - continuing operations | 8 | |||||||
Earnings per ordinary share - discontinued operations | 8 | — | ||||||
Total earnings per share attributable to ordinary shareholders - basic (1) | 8 | |||||||
Earnings per ordinary share - diluted continuing operations | 8 | |||||||
Earnings per ordinary share - diluted discontinued operations | 8 | — | ||||||
Total earnings per share attributable to ordinary shareholders - diluted | 8 |
| (1) |
NatWest Group Annual Report on Form 20-F 2025 | 152 |
Consolidated statement of comprehensive income
for the year ended 31 December 2025
| | 2025 | | 2024 | | 2023 |
£m |
| £m |
| £m | ||
Profit for the year | |
| |
| | |
Items that do not qualify for reclassification |
|
|
| |||
Remeasurement of retirement benefit schemes | | ( | ( | |||
Changes in fair value of credit in financial liabilities designated at fair value through profit or loss | ( | ( | ( | |||
FVOCI financial assets | | | | |||
Tax | ( |
| |
| | |
| |
| ( |
| ( | |
| ||||||
Items that do qualify for reclassification | ||||||
FVOCI financial assets | |
| ( |
| | |
Cash flow hedges (1) | |
| |
| | |
Currency translation | ( |
| |
| ( | |
Tax | ( |
| ( |
| ( | |
| |
| |
| | |
Other comprehensive income after tax | |
| |
| | |
Total comprehensive income for the year | |
| |
| | |
Attributable to: | ||||||
Ordinary shareholders | |
| |
| | |
Paid-in equity holders | |
| |
| | |
Non-controlling interests | |
| |
| ( | |
| |
| |
| |
| (1) |
NatWest Group Annual Report on Form 20-F 2025 | 153 |
Consolidated balance sheet
as at 31 December 2025
| | 2025 | | 2024 | ||
| Note |
| £m |
| £m | |
Assets | ||||||
Cash and balances at central banks |
| 9 |
| |
| |
Trading assets | 12 | | | |||
Derivatives | 13 | | | |||
Settlement balances |
|
| |
| | |
Loans to banks - amortised cost |
| 9 |
| |
| |
Loans to customers - amortised cost | 9 |
| |
| | |
Securities subject to repurchase agreements |
|
| | | ||
Other financial assets excluding securities subject to repurchase agreements |
|
| |
| | |
Other financial assets |
| 15 |
| |
| |
Intangible assets |
| 16 |
| |
| |
Other assets |
| 17 |
| |
| |
Total assets |
| |
| | ||
Liabilities | ||||||
Bank deposits | 9 | | | |||
Customer deposits | 9 | | | |||
Settlement balances |
|
| |
| | |
Trading liabilities |
| 12 |
| |
| |
Derivatives | 13 | | | |||
Other financial liabilities | 18 | | | |||
Subordinated liabilities |
| 19 |
| |
| |
Notes in circulation | | | ||||
Other liabilities | 20 |
| |
| | |
Total liabilities |
| |
| | ||
Ordinary shareholders' interests | | | ||||
Other owners’ interests |
|
| | | ||
Owners’ equity | 21 | | | |||
Non-controlling interests |
|
| | | ||
Total equity |
| | | |||
Total liabilities and equity |
| | |
The accounts were approved by the Board of directors on 12 February 2026 and signed on its behalf by:
Richard Haythornthwaite | | John-Paul Thwaite | | Katie Murray | | NatWest Group plc |
Chair | Group Chief Executive Officer | Group Chief Financial Officer | Registered No. SC45551 |
NatWest Group Annual Report on Form 20-F 2025 | 154 |
Consolidated statement of changes in equity
for the year ended 31 December 2025
Other reserves | ||||||||||||||||||||||
Share | Other | Total | Non | |||||||||||||||||||
capital and | Paid-in | statutory | Retained | Cash flow | Foreign | owners' | controlling | Total | ||||||||||||||
share premium | equity | reserves (3) | earnings | Fair value | hedging (4,5) | exchange | Merger | equity | interests | equity | ||||||||||||
£m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | ||
At 1 January 2025 | | | | | ( | ( | | | | | | |||||||||||
Profit attributable to ordinary shareholders and other equity owners | | | | | ||||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||
Realised gains on FVOCI equity shares |
| | ( | — |
|
| — | |||||||||||||||
Remeasurement of retirement benefit schemes |
| | | | ||||||||||||||||||
Changes in fair value of credit in financial liabilities designated at FVTPL due to own credit risk |
| ( | ( |
|
| ( | ||||||||||||||||
Unrealised gains | | | | |||||||||||||||||||
Amounts recognised in equity | | | | |||||||||||||||||||
Retranslation of net assets | | | | |||||||||||||||||||
Losses on hedges of net assets |
| ( | ( | ( | ||||||||||||||||||
Reclassification of OCI to Income statement |
| | | | |
|
| | ||||||||||||||
Tax | ( | ( | ( | | ( | ( | ||||||||||||||||
Total comprehensive income |
| | | | | — | |
| |
| | |||||||||||
Transactions with owners | ||||||||||||||||||||||
Ordinary share dividends paid |
| ( | ( |
| ( |
| ( | |||||||||||||||
Redemption of paid-in equity | ( | ( | ( | ( | ||||||||||||||||||
Paid-in equity dividends paid | ( | ( | ( | |||||||||||||||||||
Shares repurchased (1) | ( | | ( | ( | ( | |||||||||||||||||
Paid-in equity issued (2) | | | | |||||||||||||||||||
Purchase of non-controlling interest | ( | ( | ( | ( | ||||||||||||||||||
Employee share schemes | | | | |||||||||||||||||||
Shares vested under employee share schemes | | | | |||||||||||||||||||
Share-based remuneration | | | | |||||||||||||||||||
At 31 December 2025 |
| | | | | | ( | | | | | | ||||||||||
For the notes to this table refer to page 157.
NatWest Group Annual Report on Form 20-F 2025 | 155 |
Consolidated statement of changes in equity continued
| Other reserves | |||||||||||||||||||||
Share | Other | Total | Non | |||||||||||||||||||
capital and | Paid-in | statutory | Retained | Cash flow | Foreign | owners' | controlling | Total | ||||||||||||||
share premium | equity | reserves (3) | earnings | Fair value | hedging (4,5) | exchange | Merger | equity | interests | equity | ||||||||||||
| £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | |
At 1 January 2024 | | | | | ( | ( | | | | | | |||||||||||
Profit attributable to ordinary shareholders and other equity owners | ||||||||||||||||||||||
- continuing operations | | | | | ||||||||||||||||||
- discontinued operations | | | | |||||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||
Realised gains on FVOCI equity shares | | ( | — | — | ||||||||||||||||||
Remeasurement of retirement benefit schemes | ( | ( | ( | |||||||||||||||||||
Changes in fair value of credit in financial liabilities designated at FVTPL due to own credit risk |
| ( | ( |
| ( | |||||||||||||||||
Unrealised losses |
| ( | ( |
| ( | |||||||||||||||||
Amounts recognised in equity |
| ( | ( |
| ( | |||||||||||||||||
Retranslation of net assets |
| ( | ( |
| ( | |||||||||||||||||
Gains on hedges of net assets | | | | |||||||||||||||||||
Reclassification of OCI to Income statement |
| | | | |
| | |||||||||||||||
Tax | | | ( | ( | ( | ( | ||||||||||||||||
Total comprehensive income |
| | ( | | ( | — | | |
| | ||||||||||||
|
| |||||||||||||||||||||
Transactions with owners | ||||||||||||||||||||||
Ordinary share dividends paid | ( | ( | ( | ( | ||||||||||||||||||
Paid-in equity dividends paid | ( | ( | ( | |||||||||||||||||||
Shares repurchased (1,6) | ( | | ( | ( | ( | |||||||||||||||||
Paid-in equity issued (2) | | | | |||||||||||||||||||
Employee share schemes | | | | |||||||||||||||||||
Shares vested under employee share schemes | | | | |||||||||||||||||||
Share-based remuneration | | | | |||||||||||||||||||
Own shares acquired | ( | ( | ( | |||||||||||||||||||
At 31 December 2024 | | | | | ( | ( | | | | | | |||||||||||
For the notes to this table refer to the following page.
NatWest Group Annual Report on Form 20-F 2025 | 156 |
Consolidated statement of changes in equity continued
Other reserves | ||||||||||||||||||||||
Share | Other | Total | Non | |||||||||||||||||||
capital and | Paid-in | statutory | Retained | Cash flow | Foreign | owners' | controlling | Total | ||||||||||||||
share premium | equity | reserves (3) | earnings | Fair value | hedging (4,5) | exchange | Merger | equity | interests | equity | ||||||||||||
£m | £m | £m | | £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||
At 1 January 2023 | | | | | ( | ( | | | | | | |||||||||||
Profit/(loss) attributable to ordinary shareholders and other equity owners | ||||||||||||||||||||||
- continuing operations | | | ( | | ||||||||||||||||||
- discontinued operations | ( | ( | ( | |||||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||
Realised gains on FVOCI equity shares | | ( | — | — | ||||||||||||||||||
Remeasurement of retirement benefit schemes | ( |
| ( | ( | ||||||||||||||||||
Changes in fair value of credit in financial liabilities designated at FVTPL due to own credit risk | ( | ( | ( | |||||||||||||||||||
Unrealised gains | | | | |||||||||||||||||||
Amounts recognised in equity | |
| | | ||||||||||||||||||
Retranslation of net assets | ( | ( | ( | |||||||||||||||||||
Gains on hedges of net assets | |
| | | ||||||||||||||||||
Reclassification of OCI to Income statement | | | ( |
| | | ||||||||||||||||
Tax | | ( | ( | ( | ( | ( | ||||||||||||||||
Total comprehensive income | | | | ( | — |
| |
| ( |
| | |||||||||||
Transactions with owners | ||||||||||||||||||||||
Ordinary share dividends paid | ( |
| ( |
| ( |
| ( | |||||||||||||||
Paid-in equity dividends paid | ( |
| ( |
|
| ( | ||||||||||||||||
Shares repurchased (1) | ( | | ( | ( | ( | |||||||||||||||||
Employee share schemes | | | | |||||||||||||||||||
Shares vested under employee share schemes | | | | |||||||||||||||||||
Share-based remuneration | ( | ( | ( | |||||||||||||||||||
Own shares acquired | ( | ( | ( | |||||||||||||||||||
Acquisition of subsidiary |
|
| |
| | |||||||||||||||||
At 31 December 2023 | | | | | ( | ( | | |
| |
| |
| | ||||||||
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
| (6) |
NatWest Group Annual Report on Form 20-F 2025 | 157 |
Consolidated cash flow statement
for the year ended 31 December 2025
| | 2025 | | 2024 | | 2023 | ||
| Note |
| £m |
| £m |
| £m | |
Cash flows from operating activities | ||||||||
Operating profit before tax from continuing operations |
| |
| |
| | ||
Operating profit/(loss) before tax from discontinued operations | — | | ( | |||||
Adjustments for: |
| |||||||
Non-cash and other items | 26 | | | | ||||
Change in operating assets and liabilities | 26 |
| |
| ( |
| ( | |
Income taxes paid |
| ( | ( | ( | ||||
Net cash flows from operating activities (1,2) |
| | | ( | ||||
Cash flows from investing activities |
| |||||||
Sale and maturity of other financial assets | | | | |||||
Purchase of other financial assets | ( | ( | ( | |||||
Income received on other financial assets | | | | |||||
Net movement in business interests and intangible assets | 27 | ( | ( | | ||||
Sale of property, plant and equipment | | | | |||||
Purchase of property, plant and equipment | ( | ( | ( | |||||
Net cash flows from investing activities | ( | ( | ( | |||||
Cash flows from financing activities |
|
|
|
| ||||
Issue of paid-in equity | | | — | |||||
Redemption of paid-in equity | ( | — | — | |||||
Issue of subordinated liabilities | | | | |||||
Redemption of subordinated liabilities | ( | ( | ( | |||||
Interest paid on subordinated liabilities | ( | ( | ( | |||||
Issue of MRELs | | | | |||||
Maturity and redemption of MRELs | ( | ( | ( | |||||
Interest paid on MRELs | ( | ( | ( | |||||
Purchase of non - controlling interest | ( | — | — | |||||
Shares repurchased | ( | ( | ( | |||||
Dividends paid | ( | ( | ( | |||||
Net cash flows from financing activities | ( | ( | ( | |||||
Effects of exchange rate changes on cash and cash equivalents |
| | ( | ( | ||||
Net decrease in cash and cash equivalents |
| ( | ( | ( | ||||
Cash and cash equivalents at 1 January | | | | |||||
Cash and cash equivalents at 31 December | 29 |
| |
| |
| |
| (1) |
| (2) |
NatWest Group Annual Report on Form 20-F 2025 | 158 |
Accounting policies
This section includes the basis of preparation and critical and material accounting policies used to prepare the financial statements. Our accounting policies are the specific principles, bases, conventions, rules, and practices we apply in preparing and presenting the financial statements. Further information is provided where judgement and estimation is applied to critical accounting policies and key sources of estimation uncertainty. Future accounting developments details new and amendments to existing accounting standards, their effective date, and our assessment of their impact on future financial statements. |
1. Presentation of financial statements
NatWest Group plc is incorporated in the UK and registered in Scotland. The financial statements are presented in the functional currency, pounds sterling.
The audited financial statements include these accounting policies, the accompanying notes to the financial statements on pages 169 to 249 and the audited sections of the Risk and capital management section on pages 29 to 145 which together from an integral part of the primary financial statements.
The directors have prepared the 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 the financial statements are approved (see the Report of the directors) and in accordance with UK - adopted International Accounting Standards (IAS), and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The critical and material accounting policies and related judgements are set out below.
The financial statements are presented on an historical cost basis except for certain financial instruments which are stated at fair value.
The effect of the amendments to IFRS Accounting Standards effective from 1 January 2025 on our financial statements was immaterial.
We have applied the exception from the accounting requirements for deferred taxes in IAS 12 Income taxes in respect of Pillar 2 income taxes issued by the IASB in May 2023. Accordingly, we have not recognised or disclosed information about deferred tax assets and liabilities related to Pillar 2 income taxes.
Our consolidated financial statements incorporate the results of NatWest Group plc and the entities it controls. Control arises when we have the power to direct the activities of an entity so as to affect the return from the entity. Control is assessed by reference to our ability to enforce our will on the other entity, typically through voting rights. The consolidated financial statements are prepared under consistent accounting policies.
A subsidiary is included in the consolidated financial statements at fair value on acquisition from the date it is controlled by us until the date we cease to control it through a sale or a significant change in circumstances.
Changes in our interest in a subsidiary that do not result in us ceasing to control that subsidiary are accounted for as equity transactions.
We apply accounting for associates and joint arrangements to entities where we have significant influence, but not control, over the operating and financial policies. We assess significant influence by reference to a presumption of voting rights of more than 20%, but less than 50%, supplemented by a qualitative assessment of substantive rights which include representation at the Board of Directors and significant exchange of managerial personnel or technology amongst others.
Investments in associates and joint ventures are recorded upon initial recognition at cost and increased or decreased each period by the share of the subsequent levels of profit or loss. Other changes in equity are considered in line with their nature.
The judgements and assumptions involved in our accounting policies that are considered by the Board to be the most important to the portrayal of its financial condition are noted below. The use of estimates, assumptions or models that differ from those adopted by us would affect our reported results.
NatWest Group Annual Report on Form 20-F 2025 | 159 |
Accounting policies continued
How Climate risk affects our accounting judgements and estimates
Business planning
Key financial estimates are based on management's latest five-year revenue and cost forecasts. The outputs from this forecast affect forward-looking accounting estimates. Measurement of deferred tax and expected credit losses are highly sensitive to reasonably possible changes in those anticipated conditions. In 2024, our scenario planning was enhanced by the further integration of NatWest Group’s climate transition plan, including the assessment of climate - related risks and opportunities.
In 2025, our scenario planning was enhanced by the further integration of NatWest Group’s climate transition plan, including the assessment of climate-related risks and opportunities.
| ● | Our climate transition plan includes an assessment of: |
| o | Changes in products, services and business operations to support customer transition towards net zero. |
| o | Financial impacts of supporting customer transition, including investment required. The linkage between our financial plan and our climate transition plan will continue to be developed and refreshed annually as part of the financial planning cycle. |
| o | The impact of UK Government policies. To estimate the impact of current UK Government policy on our climate transition plan, we developed a progress-adjusted scenario. We use the UK CCC’s Seventh Carbon Budget Report’s sectoral balanced pathways and apply estimated time delays based on the credibility assessment of policies from the UK CCC’s June 2025 Progress Report. |
There remains considerable uncertainty in the climate policy environment, shaped by geopolitical developments and wider uncertainty over how the climate will evolve and how and when governments, regulators, businesses, investors and customers will respond.
Information used in other accounting estimates
We make use of reasonable and supportable information to make accounting judgements and estimates. This includes information about the observable effects of the physical and transition risks of climate change on the current creditworthiness of borrowers, asset values and market indicators. Many of the effects arising from climate change will be longer term in nature, with an inherent level of uncertainty, and have limited effect on accounting judgements and estimates for the current period. Some physical and transition risks can manifest in the shorter term. The following items represent the most significant effects:
| ● | The classification of financial instruments linked to climate, or other sustainability indicators. Consideration is given to whether the effect of climate - related terms prevent the instrument cashflows being solely payments of principal and interest. |
| ● | The use of market indicators as inputs to fair value is assumed to include current information and knowledge regarding the effect of climate risk. |
Effect of climate change in the estimation of expected credit loss
We are monitoring the effect of the physical and transition consequences of climate change on our experience of loan loss. We use available information regarding the effect of climate transition policy largely driven by carbon prices as an adjustment to macroeconomic factors that are used as inputs to the models that generate PD and LGD outcomes, which are key inputs to the ECL calculation. The determination of whether specific loss drivers and climate events generate specific losses is ongoing and is necessary to determine how sensitive changes in ECL could be to climate inputs.
Future cashflows are discounted, so long-dated cashflows are less likely to affect current expectations on credit loss. Our assessment of sector - specific risks, and whether additional adjustments are required, includes expectations of the ability of those sectors to meet their financing needs in the market. Changes in credit stewardship and credit risk appetite that stem from climate transition policies may directly affect our positions.
NatWest Group Annual Report on Form 20-F 2025 | 160 |
Accounting policies continued
2. Critical accounting policies
The judgements and assumptions involved in our accounting policies that are considered by the Board to be the most important to the portrayal of our financial condition are noted below. The use of estimates, assumptions or models that differ from those adopted by us would affect our reported results. Management’s consideration of uncertainty is outlined in the relevant sections, including the ECL estimate in the Risk and capital management section.
Information used for significant estimate
Policy | | Judgement | | Estimate | | Further information |
Deferred tax | Determination of whether sufficient sustainable taxable profits will be generated in future years to recover the deferred tax asset. | Our estimates are based on the five - year revenue and cost forecasts (which include inherent uncertainties). | Note 7 | |||
Fair value – financial instruments | Classification of a fair value instrument as level 3, where the valuation is driven by unobservable inputs. | Estimation of the fair value, where it is reasonably possible to have alternative assumptions in determining the FV. | Note 10 | |||
Loan impairment provisions | Definition of default against which to apply PD, LGD and EAD models. Selection of multiple economic scenarios.Criteria for a significant increase in credit risk. Identification of risks not captured by the models. | ECL estimates contain a number of measurement uncertainties (such as the weighting of multiple economic scenarios) and disclosures include sensitivities to show the impact on other reasonably possible scenarios. | Note 14 |
Changes in judgements and assumptions could result in a material adjustment to those estimates in future reporting periods.
2.1. Deferred tax
Deferred tax is the estimated tax expected to be payable or recoverable in respect of temporary differences between the carrying amount of an asset or liability for accounting purposes and the carrying amount for tax purposes in the future. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent their recovery is probable.
Deferred tax is calculated using tax rates expected to apply in the periods when the assets will be realised or the liabilities settled, based on tax rates and laws enacted, or substantively enacted, at the balance sheet date.
Deferred tax asset recoverability is based on the level of supporting eligible and available deferred tax liabilities we have and of our future taxable profits. These future taxable profits are based on our five-year revenue and cost forecasts and the expectation of long - term economic growth beyond this period. The five-year forecast takes account of management’s current expectations of competitiveness and profitability. The long - term growth rate reflects external indicators which will include market expectations on climate risk. We do not consider any additional adjustments to this indicator.
2.2. Fair value – financial instruments
We measure financial instruments at fair value when they are classified as mandatory fair value through profit or loss; held-for-trading; designated fair value through profit or loss and fair value through other comprehensive income and they are recognised in the financial statements at fair value. All derivatives are measured at fair value.
We manage some portfolios of financial assets and financial liabilities based on our net exposure to either market or credit risk. In these cases, the fair value is derived from the net risk exposure of that portfolio with portfolio level adjustments applied to incorporate bid-offer spreads, counterparty credit risk, and funding costs (refer to ‘Valuation Adjustments’).
Where the market for a financial instrument is not active, fair value is established using a valuation technique. These valuation techniques involve a degree of estimation, the extent of which depends on the instrument’s complexity and the availability of market-based data. The complexity and uncertainty in the financial instrument’s fair value is categorised using the fair value hierarchy.
The use of market indicators as inputs to fair value is assumed to include current information and knowledge regarding the effect of climate risk.
NatWest Group Annual Report on Form 20-F 2025 | 161 |
Accounting policies continued
2.3. Loan impairment provisions: expected credit losses (ECL)
At each balance sheet date each financial asset or portfolio of financial assets measured at amortised cost or at fair value through other comprehensive income, issued financial guarantee and loan commitment (other than those classified as held for trading) is assessed for impairment. Any change in impairment is reported in the income statement.
Loss allowances are forward-looking, based on 12-month ECL where there has not been a significant increase in credit risk rating, otherwise allowances are based on lifetime expected losses.
ECL is a probability-weighted estimate of credit losses. The probability is determined by the risk of default which is applied to the cash flow estimates. In the absence of a change in credit rating, allowances are recognised when there is a reduction in the net present value of expected cash flows. Following a significant increase in credit risk, ECL is adjusted from 12 months to lifetime. This will lead to a higher impairment charge.
The measurement of expected credit loss considers the ability of borrowers to make payments as they fall due. Future cashflows are discounted, so long-dated cashflows are less likely to affect current expectations on credit loss. Our assessment of sector specific risks, and whether additional adjustments are required, include expectations of the ability of those sectors to meet their financing needs in the market. Changes in credit stewardship and credit risk appetite that stem from climate transition policies may directly affect our positions.
Judgement is exercised as follows:
| ● | Non-modelled portfolios – under IFRS 9, there are bespoke treatments for the identification of significant increase in credit risk. Benchmark PDs, EADs and LGDs are reviewed annually for appropriateness. The ECL calculation is based on expected future cash flows, which is typically applied at a portfolio level. |
| ● | Multiple economic scenarios (MES) – the central, or base, scenario is most critical to the ECL calculation, independent of the method used to generate a range of alternative outcomes and their probabilities. |
| ● | Significant increase in credit risk - IFRS 9 requires that at each reporting date, an entity shall assess whether the credit risk on an account has increased significantly since initial recognition. Part of this assessment requires a comparison to be made between the current lifetime PD (i.e. the current probability of default over the remaining lifetime) with the equivalent lifetime PD as determined at the date of initial recognition. |
On restructuring where a financial asset is not derecognised, the revised cash flows are used in re-estimating the credit loss. Where restructuring causes derecognition of the original financial asset, the fair value of the replacement asset is used as the closing cash flow of the original asset.
Where in the course of the orderly realisation of a loan, it is exchanged for equity shares or property, the exchange is accounted for as the sale of the loan and the acquisition of equity securities or investment property. Where our acquired interest is in equity shares, relevant policies for control, associates and joint ventures apply.
Impaired financial assets are written off and therefore derecognised from the balance sheet when we conclude that there is no longer any realistic prospect of recovery of part, or all, of the loan. For financial assets that are individually assessed for impairment, the timing of the write-off is determined on a case-by-case basis. Such financial assets are reviewed regularly and write-off will be prompted by bankruptcy, insolvency, renegotiation, and similar events.
The typical time frames from initial impairment to write-off for our collectively assessed portfolios are:
| ● | Retail mortgages: write-off usually occurs within |
| ● | Credit cards: the irrecoverable amount is typically written off after |
| ● | Overdrafts and other unsecured loans: write-off occurs within |
| ● | Commercial loans: write-offs are determined in the light of individual circumstances; and uncollateralised impaired business loans are generally written off within |
NatWest Group Annual Report on Form 20-F 2025 | 162 |
Accounting policies continued
3. Material accounting policies
3.1. Revenue recognition
Interest receivable and payable are recognised in the income statement using the effective interest rate method for all financial instruments measured at amortised cost; debt instruments measured at fair value through other comprehensive income; and the effective part of any related accounting hedging instruments.
Finance lease income is recognised at a constant periodic rate of return before tax on the net investment on the lease.
Other interest relating to financial instruments measured at fair value is recognised as part of the movement in fair value and is reported in income from trading activities or other operating income as relevant. Fees in respect of services are recognised as the right to consideration accrues through the performance of each distinct service obligation to the customer.
The arrangements are generally contractual and the cost of providing the service is incurred as the service is rendered. The price is usually fixed and always determinable.
3.2. Discontinued operations, held for sale and disposal groups
The results of discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss from discontinued operations, net of tax in the income statement. Comparatives are re - presented for the income statement, cash flow statement, statement of changes in equity and related notes.
An asset or disposal group (assets and liabilities) is classified as held for sale if we will recover its carrying amount principally through a sale transaction rather than through continuing use. It is measured at the lower of its carrying amount or fair value less cost to sell unless the existing measurement provisions of IFRS apply. These are presented as single amounts; comparatives are not re - presented.
3.3. Staff costs
Employee costs, such as salaries, paid absences, and other benefits are recognised over the period in which the employees provide the related services to us.
Employees may receive variable compensation in cash, in deferred cash or debt instruments of NatWest Group or in ordinary shares of NatWest Group plc subject to deferral, clawback and forfeiture criteria. We operate a number of share-based compensation schemes under which we grant awards of NatWest Group plc shares and share options to our employees. Such awards are subject to vesting conditions.
Variable compensation that is settled in cash or debt instruments is charged to the income statement on a straight-line basis over the period during which services are provided, taking account of forfeiture and clawback criteria. The value of employee services received in exchange for NatWest Group plc shares and share options is recognised as an expense over the vesting period, subject to deferral, clawback, cancellation and forfeiture criteria with a corresponding increase in equity. The fair value of shares granted is the market price adjusted for the expected effect of dividends as employees are not entitled to dividends until shares are vested.
The fair value of options granted is determined using option pricing models to estimate the numbers of shares likely to vest. These consider the exercise price of the option, the current share price, the risk-free interest rate, the expected volatility of the share price over the life of the option and other relevant factors such as the dividend yield.
Defined contribution pension scheme
A scheme where we pay fixed contributions and there is no legal or constructive obligation to pay further contributions or benefits. Contributions are recognised in the income statement as employee service costs accrue.
NatWest Group Annual Report on Form 20-F 2025 | 163 |
Accounting policies continued
Defined benefit pension scheme
A scheme that defines the benefit an employee will receive on retirement and is dependent on one or more factors such as age, salary, and years of service. The net of the recognisable scheme assets and obligations is reported on the balance sheet in other assets or other liabilities. The defined benefit obligation is measured on an actuarial basis.
The charge to the income statement for pension costs (mainly the service cost and the net interest on the net defined benefit asset or liability) is recognised in operating expenses.
Actuarial gains and losses (i.e. gains and/or losses on remeasuring the net defined benefit asset or liability due to changes in actuarial measurement assumptions) are recognised in other comprehensive income in full in the period in which they arise, and not subject to recycling to the income statement.
The difference between scheme assets and scheme liabilities, the net defined benefit asset or liability, is recognised on the balance sheet if the criteria of the asset ceiling test are met. This requires the net defined benefit surplus to be limited to the present value of any economic benefits available to us in the form of refunds from the plan or reduced contributions to it.
We will recognise a liability where a minimum funding requirement exists for any of our defined benefit pension schemes. This reflects agreed minimum funding and the availability of a net surplus as described above.
We recognise a net defined benefit asset when the net defined benefit surplus can generate a benefit in the form of a refund or reduction in future contributions to the plan. The net benefit pension asset is recognised at the present value of the benefits that will be available to us excluding interest and the effect of the asset ceiling (if any), excluding interest. Changes in the present value of the net benefit pension asset are recognised immediately in other comprehensive income.
In instances where Trustees have the ability to declare augmented benefits to participants, we do not recognise a defined benefit pension asset and record the surplus immediately in other comprehensive income.
3.4. Intangible assets
Intangible assets are identifiable non-monetary assets without physical substance acquired or developed by us, and are stated at cost less accumulated amortisation and impairment losses. Amortisation is a method to spread the cost of such assets over time in the income statement.
This is charged to the income statement over the assets' estimated useful economic lives using methods that best reflect the pattern of economic benefits.
The estimated useful economic lives are:
Computer software | |
Other acquired intangibles |
Direct costs relating to the development of internal-use computer software are reported on the balance sheet after technical feasibility and economic viability have been established. These direct costs include payroll, the costs of materials and services, and directly attributable overheads. Capitalisation of costs ceases when the software can operate as intended.
During and after development, accumulated costs are reviewed for impairment against the benefits that the software is expected to generate. Costs incurred prior to the establishment of technical feasibility and economic viability are expensed to the income statement as incurred, as are all training costs and general overheads. The costs of licences to use computer software that are expected to generate economic benefits beyond three years are also reported on the balance sheet.
Goodwill on the acquisition of a subsidiary is the excess of the fair value of the consideration paid, the fair value of any existing interest in the subsidiary and the amount of any non-controlling interest measured either at fair value or at its share of the subsidiary’s net assets over the net fair value of the subsidiary’s identifiable assets, liabilities, and contingent liabilities.
Goodwill is measured at initial cost less any subsequent impairment losses. The gain or loss on the disposal of a subsidiary includes the carrying value of any related goodwill.
NatWest Group Annual Report on Form 20-F 2025 | 164 |
Accounting policies continued
3.5. Impairment of non-financial assets
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired.
At each balance sheet date, we assess whether there is any indication that other intangible assets or property, plant and equipment are impaired. If any such indication exists, we estimate the recoverable amount of the asset and compare it to its balance sheet value to calculate if an impairment loss should be recognised in the income statement. A reversal of an impairment loss on other intangible assets or property, plant and equipment is recognised in the income statement provided the increased carrying value is not greater than it would have been had
The recoverable amount of an asset that does not generate cash flows that are independent from those of other assets or groups of assets, is determined as part of the cash-generating unit to which the asset belongs.
A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. For the purposes of impairment testing, goodwill acquired in a business combination is allocated to cash-generating units or groups of cash-generating units expected to benefit from the combination.
The recoverable amount of an asset or cash-generating unit is the higher of its fair value less cost to sell or its value in use. Value in use is the present value of future cash flows from the asset or cash-generating unit discounted at a rate that reflects market interest rates adjusted for risks specific to the asset or cash-generating unit that have not been considered in estimating future cash flows.
The assessment of asset impairment is based upon value in use. This represents the value of future cashflows and uses our five-year revenue and cost forecasts and the expectation of long term economic growth beyond this period. The five-year forecast takes account of management’s current expectations of competitiveness and profitability, including near-term effects of climate transition risk. The long-term growth rate reflects external indicators which will include market expectations on climate risk. We do not consider any additional adjustments to this indicator.
3.6. Foreign currencies
Foreign exchange differences arising on the settlement of foreign currency transactions and from the translation of monetary assets and liabilities are reported in income from trading activities except for differences arising on cash flow hedges and hedges of net investments in foreign operations.
Non-monetary items denominated in foreign currencies that are stated at fair value are translated into the functional currency at the foreign exchange rates ruling at the dates the values are determined. Translation differences are recognised in the income statement except for differences arising on non-monetary financial assets classified as fair value through other comprehensive income.
Income and expenses of foreign subsidiaries and branches are translated into sterling at average exchange rates unless these do not approximate the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on the translation of a foreign operation are recognised in other comprehensive income. The amount accumulated in equity is reclassified from equity to the income statement on disposal of a foreign operation.
3.7. Tax
Tax encompassing current tax and deferred tax is recognised in the income statement except when taxable items are recognised in other comprehensive income or equity. Tax consequences arising from servicing financial instruments classified as equity are recognised in the income statement.
Accounting for taxes is judgemental and carries a degree of uncertainty because tax law is subject to interpretation, which might be questioned by the relevant tax authority. We recognise the most likely current and deferred tax liability or asset, assessed for uncertainty using consistent judgements and estimates. Current and deferred tax assets are only recognised where their recovery is deemed probable, and current and deferred tax liabilities are recognised at the amount that represents the best estimate of the probable outcome having regard to their acceptance by the tax authorities.
NatWest Group Annual Report on Form 20-F 2025 | 165 |
Accounting policies continued
3.8. Financial instruments
Financial instruments are measured at fair value on initial recognition on the balance sheet.
Monetary financial assets are classified into one of the following subsequent measurement categories (subject to business model assessment and review of contractual cash flow for the purposes of sole payments of principal and interest where applicable):
| ● | amortised cost measured at cost using the effective interest rate method, less any impairment allowance; |
| ● | fair value through other comprehensive income (FVOCI) measured at fair value, using the effective interest rate method and changes in fair value through other comprehensive income; |
| ● | mandatory fair value through profit or loss (MFVTPL) measured at fair value and changes in fair value reported in the income statement; or |
| ● | designated at fair value through profit or loss (DFV) (held for trading) measured at fair value and changes in fair value reported in the income statement. |
Classification by business model reflects how we manage our financial assets to generate cash flows. A business model assessment helps to ascertain the measurement approach depending on whether cash flows result from holding financial assets to collect the contractual cash flows, from selling those financial assets, or both.
Business model assessment of assets is made at portfolio level, being the level at which they are managed to achieve a predefined business objective. This is expected to result in the most consistent classification of assets because it aligns with the stated objectives for the portfolio, its risk management, manager’s remuneration and the ability to monitor sales of assets from a portfolio. When a significant change to our business is communicated to external parties, we reassess our business model for managing those financial assets. We reclassify financial assets if we have a significant change to the business model. A reclassification is applied prospectively from the reclassification date.
The contractual terms of a financial asset; any leverage features; prepayment and extension terms; and discounts or penalties to interest rates that are part of meeting environmental, social and governance targets as well as other contingent and leverage features, non-recourse arrangements and features that could modify the timing and/or amount of the contractual cash flows that might reset the effective rate of interest; are considered in determining whether cash flows are solely payments of principal and interest.
Certain financial assets may be designated at fair value through profit or loss (DFV) upon initial recognition if such designation eliminates, or significantly reduces, accounting mismatch.
Equity shares are measured at fair value through profit or loss unless specifically elected as at fair value through other comprehensive income (FVOCI).
Upon disposal, the cumulative gains or losses in fair value through other comprehensive income reserve are recycled to the income statement for monetary assets and for non-monetary assets (equity shares) the cumulative gains or losses are transferred directly to retained earnings.
Regular way purchases and sales of financial assets classified as amortised cost are recognised on the settlement date; all other regular way transactions in financial assets are recognised on the trade date.
Financial liabilities are classified into one of following measurement categories:
| ● | amortised cost measured at cost using the effective interest rate method; |
| ● | held for trading measured at fair value and changes in fair value reported in income statement; or |
| ● | designated at fair value through profit or loss; measured at fair value and changes in fair value reported in the income statement except changes in fair value attributable to the credit risk component recognised in other comprehensive income when no accounting mismatch occurs. |
3.9. Netting
Financial assets and financial liabilities are offset, and the net amount presented on the balance sheet when, and only when, we currently have a legally enforceable right to set off the recognised amounts and we intend either to settle on a net basis or to realise the asset and settle the liability simultaneously. We are party to a number of arrangements, including master netting agreements, that give us the right to offset financial assets and financial liabilities, but where we do not intend to settle the amounts net or simultaneously, the assets and liabilities concerned are presented separately on the balance sheet.
NatWest Group Annual Report on Form 20-F 2025 | 166 |
Accounting policies continued
3.10. Capital instruments
We classify a financial instrument that we issue as a financial liability if it is a contractual obligation to deliver cash or another financial asset, or to exchange financial assets or financial liabilities on potentially unfavourable terms and as equity if we evidence a residual interest in our assets after the deduction of liabilities. Incremental costs and related tax that are directly attributable to an equity transaction are deducted from equity.
The consideration for any ordinary shares of NatWest Group plc purchased by us (known as treasury shares or own shares held) is deducted from retained earnings. On the cancellation of treasury shares their nominal value is removed from retained earnings and a consequential amount recognised in capital redemption reserve in compliance with the Companies Act 2006. On the sale or re-issue of treasury shares the consideration received and related tax are credited to equity, net of any directly attributable incremental costs.
3.11. Derivatives and hedging
Derivatives are reported on the balance sheet at fair value.
We use derivatives as part of our trading activities, to manage our own risk such as interest rate, foreign exchange, or credit risk or in certain customer transactions. Not all derivatives used to manage risk are in hedge accounting relationships (an IFRS method to reduce accounting mismatch from changes in the fair value of the derivatives reported in the income statement).
Gains and losses arising from changes in the fair value of derivatives that are not in hedge relationships are recognised in Income from trading activities unless those derivatives are managed together with financial instruments designated at fair value; these gains and losses are included in Other operating income.
Hedge accounting
Hedge accounting relationships are designated and documented at inception in line with the requirements of IAS 39 Financial instruments – Recognition and Measurement.
The documentation identifies the hedged item, the hedging instrument and details of the risk that is being hedged and the way in which effectiveness will be assessed at inception and during the period of the hedge. When designating a hedging relationship, we consider: the economic relationship between the hedged item (including the risk being hedged) and the hedging instrument; the nature of the risk; the risk management objective and strategy for undertaking the hedge; and the appropriateness of the method that will be used to assess hedge effectiveness.
Designated hedging relationships must be expected to be highly effective both on a prospective and retrospective basis. This is assessed using regression techniques which model the degree of offsetting between the changes in fair value or cash flows attributable to the hedged risk and the changes in fair value of the designated hedging derivatives. Ineffectiveness is measured based on actual levels of offsetting and recognised in the income statement.
We enter into three types of hedge accounting relationships.
Fair value hedge - the gain or loss on the hedging instrument and the hedged item attributable to the hedged risk is recognised in the income statement. Where the hedged item is measured at amortised cost, the balance sheet amount of the hedged item is also adjusted.
Cash flow hedge - the effective portion of the designated hedge relationship is recognised in other comprehensive income and the ineffective portion in the income statement. When the hedged item (forecasted cash flows) results in the recognition of a financial asset or financial liability, the cumulative gain or loss is reclassified from equity to the income statement in the same periods in which the hedged forecasted cash flows affect the income statement.
Hedge of net investment in a foreign operation - in the hedge of a net investment in a foreign operation, the effective portion of the designated hedge relationship is recognised in other comprehensive income. Any ineffective portion is recognised in profit or loss. Non-derivative financial liabilities as well as derivatives may be designated as a hedging instrument in a net investment hedge.
NatWest Group Annual Report on Form 20-F 2025 | 167 |
Accounting policies continued
Discontinuation of hedge accounting
Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge accounting i.e. the hedge is not highly effective in offsetting changes in fair value or cash flows attributable to the hedged risk, consistent with the documented risk management strategy; the hedging instrument expires or is sold, terminated or exercised; or if hedge designation is revoked.
For fair value hedging any cumulative adjustment is amortised to the income statement over the life of the hedged item. Where the hedged item is no longer on the balance sheet the adjustment to the hedged item is reported in the income statement. For cash flow hedging the cumulative unrealised gain or loss is reclassified from equity to the income statement when the hedged cash flows occur or, if the forecast transaction results in the recognition of a financial asset or financial liability, when the hedged forecast cash flows affect the income statement. Where a forecast transaction is no longer expected to occur, the cumulative unrealised gain or loss is reclassified from equity to the income statement immediately.
For net investment hedging on disposal or partial disposal of a foreign operation, the amount accumulated in equity is reclassified from equity to the income statement.
3.12. Provisions
We recognise a provision for a present obligation resulting from a past event when it is more likely than not that we will be required to pay to settle the obligation and the amount of the obligation can be estimated reliably.
Provision is made for restructuring costs, including the costs of redundancy, when we have a constructive obligation.An obligation exists when we have a detailed formal plan for the restructuring and have raised a valid expectation in those affected either by starting to implement the plan or by announcing its main features.
We recognise any onerous cost of the present obligation under a contract as a provision. An onerous cost is the unavoidable cost of meeting our contractual obligations that exceed the expected economic benefits. When we intend to vacate a leasehold property or right of use asset, the asset would be tested for impairment and a provision may be recognised for the ancillary contractual occupancy costs.
3.13. Financial guarantee contracts
Under a financial guarantee contract, we, in return for a fee, undertake to meet a customer's obligations under the terms of a debt instrument if the customer fails to do so. A financial guarantee not designated as fair value through profit or loss is recognised as a liability; initially at fair value and subsequently at the higher of its initial value less cumulative amortisation and any provision under the contract measured in accordance with our ECL accounting policy. Amortisation is calculated to recognise fees receivable in the income statement over the period of the guarantee. A separate asset is recognised in respect of fees receivable for provision of the financial guarantee.
Purchased financial guarantees are considered to be integral, and fully adjust the covered debt instrument expected credit loss provision, only where the guarantee is contemplated at the inception of the debt instrument and is entered into within a reasonable timeframe.
4. Future accounting developments
International Financial Reporting Standards
Effective 1 January 2026
| ● | Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 and IFRS 7 – Issued May 2024) |
Effective 1 January 2027
| ● | Presentation and Disclosures in Financial Statements (IFRS 18 – Issued April 2024) |
| ● | Subsidiaries without Public Accountability (IFRS 19 – Issued May 2024) |
We are assessing the effect of adopting the accounting developments effective from 1 January 2027 on our financial statements and have largely completed a similar assessment for the Amendments to IFRS 9 and IFRS 7 effective from 1 January 2026. We do not expect any to have a material impact on our financial performance or position, although IFRS18 may have an impact on presentation and disclosure.
NatWest Group Annual Report on Form 20-F 2025 | 168 |
Notes to the consolidated financial statements
1 Net interest income
Net interest income is the difference between the interest NatWest Group earns from its interest-bearing assets, such as loans, balances with central banks and other financial assets, and the interest paid on its interest-bearing liabilities, such as deposits and subordinated liabilities. |
Interest income on financial instruments measured at amortised cost, debt instruments classified as FVOCI and the interest element of the effective portion of any designated hedging relationships are measured using the effective interest rate method, which allocates the interest income or interest expense over the expected life of the asset or liability at the rate that exactly discounts all estimated future cash flows to equal the instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable or receivable that are an integral part of the instrument’s yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs. All contractual terms of a financial instrument are considered when estimating future cash flows. Interest income on financial assets is presented in interest receivable, interest expense on financial liabilities is presented in interest payable. Negative interest on financial assets is presented in interest payable and negative interest on financial liabilities is presented in interest receivable. Included in interest receivable (Loans to customers - amortised cost) is finance lease income of £
For accounting policy information refer to Accounting policy 3.1.
| 2025 | | 2024 | | 2023 | |
Continuing operations |
| £m |
| £m |
| £m |
Balances at central banks and loans to banks - amortised cost |
| |
| |
| |
Loans to customers - amortised cost |
| |
| |
| |
Other financial assets |
| |
| |
| |
Interest receivable | | | | |||
|
|
| ||||
Bank deposits |
| |
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Customer deposits |
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Other financial liabilities |
| |
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Subordinated liabilities |
| |
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| |
Interest payable |
| |
| |
| |
Net interest income |
| |
| |
| |
NatWest Group Annual Report on Form 20-F 2025 | 169 |
Notes to the consolidated financial statements continued
2 Non-interest income
There are three main categories of non-interest income: net fees and commissions, trading income, and other operating income. Net fees and commissions is the difference between fees received from customers for services provided by NatWest Group, such as credit card annual fees, underwriting fees, payment services, brokerage fees, trade finance, investment management fees, trustee and fiduciary services, and fees incurred in the provision of those services, such as credit card interchange fees, customer incentives, loan administration, foreign currency transaction charges, and brokerage fees. Trading income is earned from short-term financial assets and financial liabilities to either make a spread between purchase and sale price or held to take advantage of movements in prices and yields. Other operating income includes revenue from other operating activities which are not related to the principal activities of the company, such as: share of profit or loss of associates; operating lease income; the profit or loss on the sale of a subsidiary or property, plant and equipment; profit or loss on own debt; and changes in the fair value of financial assets and liabilities designated at fair value through profit or loss. For accounting policy information refer to Accounting policies 3.1, 3.6, 3.8 and 3.11. |
| 2025 | | 2024 | | 2023 | |
Continuing operations | £m | £m | £m | |||
Net fees and commissions (1) |
| |
| |
| |
Trading income | ||||||
Foreign exchange |
| | | | ||
Interest rate (2) |
| | | | ||
Credit |
| | ( | ( | ||
Changes in fair value of own debt and derivative liabilities | ||||||
attributable to own credit risk - debt securities in issue |
| | ( | ( | ||
Equities, commodities and other |
| | — | | ||
| | | | |||
Other operating income | ||||||
Rental income on operating lease assets and investment property |
| |
| |
| |
Changes in fair value of financial assets and liabilities designated at FVTPL (3) | ( | ( | ( | |||
Changes in fair value of other financial assets at FVTPL (4) | | | | |||
Hedge ineffectiveness |
| ( |
| |
| |
Profit/(loss) on disposal of amortised cost assets and liabilities |
| |
| |
| ( |
Loss on disposal of fair value through other comprehensive income assets |
| ( |
| ( |
| ( |
Profit/(loss) on sale of property, plant and equipment |
| |
| |
| ( |
Loss on disposal of subsidiaries and associates |
| ( |
| — |
| ( |
Share of profits/(losses) of associated entities |
| |
| |
| ( |
Foreign exchange recycling (losses)/gains | ( | ( | | |||
Other income (5) |
| |
| |
| ( |
| | | ||||
| | |
(1) | Refer to Note 4 for further analysis. |
(2) | Includes fair value changes on derivatives not designated in a hedge accounting relationship, and gains and losses from structural hedges. |
(3) | Includes related derivatives. |
(4) | Includes instruments that have failed solely payments of principal and interest testing under IFRS 9. |
(5) | Includes dividend income £ |
NatWest Group Annual Report on Form 20-F 2025 | 170 |
Notes to the consolidated financial statements continued
3 Operating expenses
Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other administrative expenses. For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5. |
| 2025 | | 2024 | | 2023 | |
Continuing operations | £m | £m | £m | |||
Salaries |
| |
| |
| |
Bonus awards (1) |
| |
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| |
Temporary and contract costs | | | | |||
Social security costs |
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Pension costs | | | | |||
- defined benefit schemes (Note 5) |
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- defined contribution schemes |
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Other |
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Staff costs |
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Premises and equipment |
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Bank levy |
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Depreciation and amortisation (2) |
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Other administrative expenses (3) |
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Administrative expenses |
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(1)Includes current year charge for amounts deferred from prior years. Refer to reconciliation of bonus awards to income statement charge on page 174.
(2)Includes depreciation of right of use assets of £
(3)Includes litigation and conduct costs, net of amounts recovered. Refer to Note 20 for further details.
The average number of persons employed during the year, excluding temporary staff and rounded to the nearest hundred, was
NatWest Group Annual Report on Form 20-F 2025 | 171 |
Notes to the consolidated financial statements continued
3 Operating expenses continued
The number of persons employed at 31 December 2025, excluding temporary staff and rounded to the nearest hundred, by reportable segment, was as follows:
Continuing operations | | 2025 | | 2024 | | 2023 |
Retail Banking |
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Private Banking & Wealth Management |
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Commercial & Institutional |
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Central items & other |
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Total |
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UK |
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India |
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Poland (1) | | | | |||
USA | | | | |||
Republic of Ireland | — | | | |||
Rest of the World |
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Total |
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| (1) | Reflecting closure of operations in Poland. |
NatWest Group Annual Report on Form 20-F 2025 | 172 |
Notes to the consolidated financial statements continued
3 Operating expenses continued
Share-based payments
Award plan | | Eligible employees | | Nature of award | | Vesting conditions (1) | | Settlement |
Sharesave | UK, Channel Islands, Gibraltar, Isle of Man, Poland and India. | Option to buy shares under employee savings plan | Continuing employment or leavers in certain circumstances | 2026 to 2030 | ||||
Deferred performance awards | All | Awards of ordinary shares and conditional shares | Continuing employment or leavers in certain circumstances | 2026 to 2031 | ||||
Long-term incentives (2) | Senior employees | Awards of ordinary shares and conditional shares | Continuing employment or leavers in certain circumstances and/or satisfaction of the pre-vesting assessment and underpins | 2026 to 2032 | ||||
Sharing in Success (3) | All | Awards of ordinary shares and conditional shares | Future continuing employment and achievement of pre-defined measures. | 2026 |
(1) | All awards are subject to the discretion of Remuneration Committee. |
(2) | Long-term incentives include buy-out awards offered to compensate certain new hires for the loss of forfeited awards from their previous employment. Existing Long - term incentives vest over |
(3) | In 2025 |
Sharesave | 2025 | 2024 | 2023 | |||||||||
| Average | | Shares | | Average | | Shares | | Average | | Shares | |
exercise price | under option | exercise price | under option | exercise price | under option | |||||||
£ | (million) | £ | (million) | £ | (million) | |||||||
At 1 January |
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Granted |
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Exercised |
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| ( |
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| ( |
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| ( |
Cancelled |
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| ( |
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| ( |
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| ( |
At 31 December |
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The fair value of Sharesave options granted in 2025 was determined using a pricing model that included: expected volatility of share price determined at the grant date based on historical share price volatility over a period of up to
The exercise price of options and the fair value on granting awards of fully paid shares is the average market price over the trading days ( trading days for Sharesave) preceding grant date. When estimating the fair value of the award, the number of shares granted and the prevailing market price as defined on page 138 of Exhibit 15.2 are used. The fair value of the award is recognised as services are provided by employees over the vesting period.
Options are exercisable within
Deferred performance awards | 2025 | 2024 | 2023 | |||||||||
| Value at | | Shares | | Value at | | Shares | | Value at | | Shares | |
grant | awarded | grant | awarded | grant | awarded | |||||||
£m | (million) | £m | (million) | £m | (million) | |||||||
At 1 January |
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Granted |
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Forfeited |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
Vested |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
At 31 December |
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| |
| |
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| |
NatWest Group Annual Report on Form 20-F 2025 | 173 |
Notes to the consolidated financial statements continued
3 Operating expenses continued
The awards granted in 2025 vest in equal tranches on the anniversary of the award, predominantly over
Long-term incentives | 2025 | 2024 | 2023 | |||||||||
| Value at | | Shares | | Value at | | Shares | | Value at | | Shares | |
grant | awarded | grant | awarded | grant | awarded | |||||||
£m | (million) | £m | (million) | £m | (million) | |||||||
At 1 January |
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Granted |
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Vested/exercised |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
Lapsed |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
At 31 December |
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The market value of awards vested/exercised in 2025 was £
Bonus awards | 2025 | 2024 | Change |
| |||
| | £m | | £m | | % |
|
Deferred cash awards (1) |
| |
| |
| | % |
Deferred share awards |
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| |
| ( | % |
Total bonus awards (2) |
| |
| |
| | % |
Bonus awards as a % of operating profit before tax and bonus awards |
| | % | | % | ||
Proportion of bonus awards that are deferred |
| ||||||
- deferred cash awards |
| | % | | % | ||
- deferred share awards |
| | % | | % |
Reconciliation of bonus awards to income statement charge
| 2025 | | 2024 | | 2023 | |
£m | £m | £m | ||||
Bonus awarded |
| |
| |
| |
Less: deferral of charge for amounts awarded for current year |
| ( |
| ( |
| ( |
Income statement charge for amounts awarded in current year |
| |
| |
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Add: current year charge for amounts deferred from prior years |
| |
| |
| |
Less: forfeiture of amounts deferred from prior years |
| ( |
| ( |
| ( |
Income statement charge for amounts deferred from prior years |
| |
| |
| |
Income statement charge for bonus awards (2) |
| |
| |
| |
(1) | Includes March cash awards which are limited to £ |
(2) | Excludes other performance-related compensation. |
NatWest Group Annual Report on Form 20-F 2025 | 174 |
Notes to the consolidated financial statements continued
3 Operating expenses continued
Year in which income statement charge is expected to be taken for deferred bonus awards
| Actual | Expected | ||||||||
| | | | | 2027 | |||||
2023 | 2024 | 2025 | 2026 | and beyond | ||||||
£m | £m | £m | £m | £m | ||||||
Bonus awards deferred from 2023 and earlier |
| |
| |
| | | | ||
Bonus awards deferred from 2024 | — | — | | | | |||||
Less: forfeiture of amounts deferred from prior years |
| ( |
| ( |
| ( | — | — | ||
Bonus awards deferred for 2025 |
| — |
| — |
| — | | | ||
| |
| |
| | | | |||
4 Segmental analysis
NatWest Group analyses its performance between the different operating segments of the Group as required by IFRS 8 Operating segments. The presentation is consistent with internal financial reporting and how senior management assesses the performance of each operating segment. |
Reportable operating segments:
The business is organised into the following reportable segments: Retail Banking, Private Banking & Wealth Management, Commercial & Institutional, and Central items & other.
Retail Banking serves personal customers in the UK.
Private Banking &Wealth Management serves UK-connected high net worth individuals and their business interests.
Commercial & Institutional consists of customer businesses reported under Business Banking, Commercial Mid-market and Corporate & Institutions, supporting our customers across the full non-personal customer lifecycle, both domestically and internationally. Our Markets offering helps our customers manage financial risks across different geographies, while our International offering provides full-service banking operations in the Channel Islands, Isle of Man, Gibraltar and Luxembourg.
Central items & other includes corporate functions, such as treasury, finance, risk management, compliance, legal, communications and human resources. Central functions manage NatWest Group capital resources and NatWest Group-wide regulatory projects and provide services to the reportable segments. Central items & other includes businesses and amounts not directly related to any of the other reportable segments.
NatWest Group Annual Report on Form 20-F 2025 | 175 |
Notes to the consolidated financial statements continued
4 Segmental analysis continued
Allocation of central balance sheet items
NatWest Group allocates all central costs relating to central functions to the business using appropriate drivers; these are reported as indirect costs in the segmental income statements. Assets and risk-weighted assets held centrally, mainly relating to NatWest Group Treasury, are allocated to the business using appropriate drivers.
Private Banking | Central | |||||||||
Retail | & Wealth | Commercial & | items | |||||||
| Banking | | Management | | Institutional | | & other | | Total | |
2025 |
| £m |
| £m |
| £m |
| £m |
| £m |
Continuing operations | ||||||||||
Net interest income |
| |
| |
| |
| ( |
| |
Net fees and commissions |
| |
| |
| |
| |
| |
Other non-interest income |
| |
| |
| |
| |
| |
Total income |
| |
| |
| |
| |
| |
Depreciation and amortisation |
| ( |
| ( |
| ( |
| ( |
| ( |
Other operating expenses |
| ( |
| ( |
| ( |
| |
| ( |
Impairment (losses)/releases |
| ( |
| ( |
| ( |
| |
| ( |
Operating profit |
| |
| |
| |
| |
| |
2024 | | | | | | |||||
Continuing operations | ||||||||||
Net interest income |
| |
| |
| |
| |
| |
Net fees and commissions |
| |
| |
| |
| |
| |
Other non-interest income |
| |
| |
| |
| |
| |
Total income |
| |
| |
| |
| |
| |
Depreciation and amortisation |
| ( |
| ( |
| ( |
| ( |
| ( |
Other operating expenses |
| ( |
| ( |
| ( |
| |
| ( |
Impairment (losses)/releases |
| ( |
| |
| ( |
| |
| ( |
Operating profit/(loss) |
| |
| |
| |
| ( |
| |
2023 | ||||||||||
Continuing operations | ||||||||||
Net interest income | | | | ( | | |||||
Net fees and commissions | | | | — | | |||||
Other non-interest income | | | | | | |||||
Total income | | | | | | |||||
Depreciation and amortisation | ( | ( | ( | ( | ( | |||||
Other operating expenses | ( | ( | ( | | ( | |||||
Impairment losses | ( | ( | ( | ( | ( | |||||
Operating profit | | | | | |
NatWest Group Annual Report on Form 20-F 2025 | 176 |
Notes to the consolidated financial statements continued
4 Segmental analysis continued
Total revenue (1) | ||||||||||
Private Banking | ||||||||||
Retail | & Wealth | Commercial & | Central items & | |||||||
| Banking |
| Management |
| Institutional |
| other |
| Total | |
2025 |
| £m |
| £m |
| £m |
| £m |
| £m |
Continuing operations | | | | | | |||||
External |
| |
| |
| |
| |
| |
Inter-segmental (2) |
| |
| |
| ( |
| ( |
| — |
Total |
| |
| |
| |
| |
| |
|
|
|
|
| ||||||
2024 |
|
|
|
|
| |||||
Continuing operations | | | | | ||||||
External | |
| |
| |
| |
| | |
Inter-segmental (2) |
| |
| |
| ( |
| |
| — |
Total |
| |
| |
| |
| |
| |
2023 | ||||||||||
Continuing operations | ||||||||||
External | | | | | | |||||
Inter-segmental (2) | | | ( | | — | |||||
Total | | | | | |
Total income | ||||||||||
Private Banking | ||||||||||
Retail | & Wealth | Commercial & | Central items & | |||||||
| Banking |
| Management |
| Institutional |
| other |
| Total | |
2025 |
| £m |
| £m |
| £m |
| £m |
| £m |
Continuing operations | ||||||||||
External |
| | |
| |
| | | ||
Inter-segmental (2) |
| ( | |
| |
| ( | — | ||
Total |
| | |
| |
| | | ||
2024 |
|
|
| |||||||
Continuing operations | ||||||||||
External |
| | |
| |
| | | ||
Inter-segmental (2) | | |
| ( |
| ( | — | |||
Total | | |
| |
| | | |||
2023 | ||||||||||
Continuing operations | ||||||||||
External | | |
| |
| | | |||
Inter-segmental (2) | | | ( | ( | — | |||||
Total | | | | | |
For the notes to this table refer to page 180.
NatWest Group Annual Report on Form 20-F 2025 | 177 |
Notes to the consolidated financial statements continued
4 Segmental analysis continued
Analysis of net fees and commissions
| | Private Banking | | | | |||||
Retail | & Wealth | Commercial & | Central items | |||||||
| Banking | Management | Institutional | & other | Total | |||||
2025 | | £m | £m | £m | £m | £m | ||||
Continuing operations | ||||||||||
Fees and commissions receivable |
| |
| |
| |
| | ||
- Payment services |
| |
| | |
| — |
| | |
- Credit and debit card fees |
| |
| | |
| — |
| | |
- Lending and financing | | | | — | | |||||
- Brokerage |
| |
| | |
| — |
| | |
- Investment management, trustee and fiduciary services | |
| | |
| |
| | ||
- Underwriting fees |
| — |
| — | |
| — |
| | |
- Other |
| |
| | |
| ( |
| | |
Total |
| |
| | |
| |
| | |
Fees and commissions payable |
| ( |
| ( | ( |
| |
| ( | |
Net fees and commissions |
| |
| | |
| |
| | |
2024 | ||||||||||
Continuing operations | ||||||||||
Fees and commissions receivable |
| |
| |
| |
| | ||
- Payment services |
| |
| | |
| — |
| | |
- Credit and debit card fees |
| |
| | |
| |
| | |
- Lending and financing |
| | | | — | | ||||
- Brokerage |
| |
| | |
| — |
| | |
- Investment management, trustee and fiduciary services |
| |
| | |
| |
| | |
- Underwriting fees |
| — |
| — | |
| — |
| | |
- Other |
| |
| | |
| ( |
| | |
Total |
| |
| | |
| |
| | |
Fees and commissions payable |
| ( |
| ( | ( |
| — |
| ( | |
Net fees and commissions |
| |
| | |
| |
| | |
2023 | ||||||||||
Continuing operations | ||||||||||
Fees and commissions receivable |
| |
| |
| |
| | ||
- Payment services |
| |
| | |
| |
| | |
- Credit and debit card fees |
| |
| | |
| |
| | |
- Lending and financing |
| |
| | |
| |
| | |
- Brokerage |
| | | |
| — |
| | ||
- Investment management, trustee and fiduciary services |
| |
| | |
| |
| | |
- Underwriting fees |
| — | — | | — | | ||||
- Other |
| |
| | |
| ( |
| | |
Total |
| |
| | |
| |
| | |
Fees and commissions payable |
| ( |
| ( | ( |
| ( |
| ( | |
Net fees and commissions |
| |
| | |
| — |
| |
NatWest Group Annual Report on Form 20-F 2025 | 178 |
Notes to the consolidated financial statements continued
4 Segmental analysis continued
2025 | 2024 | 2023 | ||||||||||
Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | |||||||
| £m | | £m | | £m | | £m | | £m | | £m | |
Retail Banking |
| | | | | |
| | ||||
Private Banking & Wealth Management |
| | | | | |
| | ||||
Commercial & Institutional |
| | | | | |
| | ||||
Central items & other |
| | | | | |
| | ||||
Total |
| | | | | |
| | ||||
Segmental analysis of goodwill
The total carrying value of goodwill at 31 December 2025 was £
NatWest Group Annual Report on Form 20-F 2025 | 179 |
Notes to the consolidated financial statements continued
4 Segmental analysis continued
Geographical segments
The geographical analysis in the tables below has been compiled on the basis of location of office where the transactions are recorded.
| UK | | USA | | Europe | | RoW | | Total | |
2025 |
| £m |
| £m |
| £m |
| £m |
| £m |
Continuing operations | ||||||||||
Total revenue (1) |
| |
| | | | | |||
Interest receivable |
| |
| | | | | |||
Interest payable | ( | ( | ( | ( | ( | |||||
Net fees and commissions |
| |
| | | | | |||
Trading income |
| |
| | | | | |||
Other operating income |
| |
| ( | | — | | |||
Total income (3) |
| |
| | | | | |||
Operating profit before tax |
| |
| | | | | |||
Total assets |
| |
| | | | | |||
Total liabilities |
| |
| | | | | |||
Contingent liabilities and commitments (4) |
| |
| — | | — | | |||
UK | USA | Europe | RoW | Total | ||||||
2024 | £m | £m | £m | £m | £m | |||||
Continuing operations | ||||||||||
Total revenue (1) |
| |
| | | | | |||
Interest receivable |
| |
| | | | | |||
Interest payable | ( | ( | ( | ( | ( | |||||
Net fees and commissions |
| |
| | | | | |||
Trading income |
| |
| | | | | |||
Other operating income |
| |
| ( | ( | | | |||
Total income (3) |
| |
| | | | | |||
Operating profit/(loss) before tax |
| |
| | ( | | | |||
Total assets |
| |
| | | | | |||
Total liabilities |
| |
| | | | | |||
Contingent liabilities and commitments (4) |
| |
| — | | | | |||
2023 |
| |
| |
| |
| |
| |
Continuing operations | ||||||||||
Total revenue (1) |
| |
| |
| |
| |
| |
Interest receivable |
| |
| |
| |
| |
| |
Interest payable | ( | ( | ( | ( | ( | |||||
Net fees and commissions |
| |
| |
| |
| |
| |
Trading income |
| |
| |
| |
| |
| |
Other operating income |
| |
| ( |
| |
| |
| |
Total income (3) |
| |
| |
| |
| |
| |
Operating profit/(loss) before tax |
| |
| |
| ( |
| |
| |
Total assets |
| |
| |
| |
| |
| |
Total liabilities |
| |
| |
| |
| |
| |
Contingent liabilities and commitments (4) |
| |
| — |
| |
| |
| |
(1) | Total revenue comprises interest receivable, fees and commissions receivable, income from trading activities and other operating income. |
(2) | Revenue and income arising from transactions between the group’s segments are reported as inter-segment and include net inter-segment funding income/(expense). |
(3) | Total income excludes internal service fee income which has been calculated on a cost plus mark-up basis. |
(4) | Refer to Note 25 Memorandum items - Contingent liabilities and commitments. |
NatWest Group Annual Report on Form 20-F 2025 | 180 |
Notes to the consolidated financial statements continued
5 Pensions
NatWest Group operates two types of pension scheme: defined contribution and defined benefit. The defined contribution schemes invest contributions in a choice of funds and the accumulated contributions and investment returns are used by the employee to provide benefits on retirement. There is no legal or constructive obligation for NatWest Group to pay any further contributions or benefits. The defined benefit schemes provide pensions in retirement based on employees’ pensionable salaries and service. |
NatWest Group’s balance sheet includes any defined benefit pension scheme surplus or deficit as a retirement benefit asset or liability reported in other assets and other liabilities. The surplus or deficit is the difference between the liabilities to be paid from the defined benefit scheme and the assets held by the scheme to meet these liabilities. The liabilities are calculated by external actuaries using a number of financial and demographic assumptions.
For some NatWest Group defined benefit schemes where there is a net defined benefit surplus in excess of the present value of any economic benefits that can be obtained from that surplus, the application of accounting standards means we do not recognise that surplus on the balance sheet.
For accounting policy information refer to Accounting policy 3.3.
Defined contribution schemes
NatWest Group sponsors several defined contribution schemes in different territories, which new employees are entitled to join. NatWest Group pays specific contributions into individual investment funds on employees’ behalf. Once those contributions are paid, there is no further liability on the NatWest Group balance sheet relating to the defined contribution schemes.
Defined benefit schemes
NatWest Group sponsors a number of pension schemes in the UK and overseas, including the Main section of the NatWest Group Pension Fund (the Main section) which operates under UK trust law and is managed and administered on behalf of its members in accordance with the terms of the trust deed, the scheme rules and UK legislation.
Pension fund trustees are appointed to operate each fund and ensure benefits are paid in accordance with the scheme rules and national law. The trustees are the legal owner of a scheme’s assets, and have a duty to act in the best interests of all scheme members.
The schemes generally provide a pension of -sixtieth of final pensionable salary for each year of service prior to retirement up to a maximum of
These have been closed to new entrants since 2006, although active members continue to build up additional pension benefits, currently subject to
The Main section corporate trustee is NatWest Pension Trustee Limited (the Trustee), a wholly owned subsidiary of NWB Plc, Principal Employer of the Main section.
The Board of the Trustee includes member trustee directors selected from eligible active staff, deferred and pensioner members who apply and trustee directors appointed by NatWest Group.
Under UK legislation, a defined benefit pension scheme is required to meet the statutory funding objective of having sufficient and appropriate assets to cover its liabilities (the pensions that have been promised to members).
Similar governance principles apply to NatWest Group’s other defined benefit pension schemes.
Investment strategy
The assets of the Main section represent
Within the non-insured portfolio the Main section employs physical, derivative and non-derivative instruments to achieve a desired asset class exposure and to reduce the section’s interest rate, inflation, and currency risk. This means that the net funding position is considerably less sensitive to changes in market conditions than the value of the assets or liabilities in isolation. In particular, movements in interest rate and inflation are substantially hedged by the Trustee.
NatWest Group Annual Report on Form 20-F 2025 | 181 |
Notes to the consolidated financial statements continued
5 Pensions continued
The Main and AA sections now include buy-in insurance policies, following transactions over 2023-2025. Each insurance transaction saw a premium paid to an insurer in exchange for a buy-in insurance contract. The contracts provide a stream of cashflows to the Trustee replicating payments due to members, thereby passing material demographic and market risk to the insurer.
At 31 December 2025, the Main section included buy-in insurance contracts covering around
The premium for each transaction was determined by the insurer using its pricing basis. Under IAS 19, the value placed on this asset mirrors the valuation of the defined benefit obligations covered, incorporating an assessment of credit risk. Since the insurer’s pricing basis is more conservative than the best-estimate valuation under IAS 19, an asset loss arises at outset. However, the asset loss is offset by a corresponding movement in the asset ceiling adjustment, meaning the net balance sheet and OCI impacts are neutral. Once the contract has been established, the value of the buy-in insurance contracts will move in line with movements in the defined benefit obligations covered, protecting the scheme against demographic and market risk.
Major classes of plan assets as a percentage of total plan assets of the Main section
2025 | 2024 | |||||||||||
| Quoted | | Unquoted | | Total | | Quoted | | Unquoted | | Total | |
% | % | % | % | % | % | |||||||
Equities | — | | | | | | ||||||
Index-linked bonds |
| | — | | | — | | |||||
Government bonds |
| | — | | | — | | |||||
Corporate and other bonds |
| | | | | | | |||||
Real estate |
| — |
| | | — |
| | | |||
Derivatives |
| — |
| ( | ( | — |
| | | |||
Buy-in insurance contracts | — | | | — | | | ||||||
Cash and other assets | — | | | — | | | ||||||
| | | | | | | ||||||
The Main section’s holdings of derivative instruments are summarised in the table below:
2025 | 2024 | |||||||||||
Notional | Fair value | Notional | Fair value | |||||||||
| amounts | | Assets | | Liabilities | | amounts | | Assets | | Liabilities | |
£bn | £m | £m | £bn | £m | £m | |||||||
Inflation rate swaps |
| |
| |
| |
| |
| |
| |
Interest rate swaps |
| |
| |
| |
| |
| |
| |
Currency forwards |
| |
| |
| |
| |
| |
| |
Equity and bond call options |
| — |
| — |
| — |
| — |
| — |
| — |
Equity and bond put options |
| — |
| — |
| — |
| — |
| — |
| — |
Other |
| |
| — |
| |
| |
| |
| |
Swaps have been executed at prevailing market rates and within standard market bid/offer spreads with a number of counterparties, including NWB Plc.
At 31 December 2025, the gross notional value of the swaps was £
NatWest Group Annual Report on Form 20-F 2025 | 182 |
Notes to the consolidated financial statements continued
5 Pensions continued
The schemes do not invest directly in NatWest Group but may have exposure to NatWest Group through indirect holdings. The trustees of the respective UK schemes are responsible for ensuring that indirect investments in NatWest Group do not exceed the regulatory limit of
Changes in value of net pension assets/(liability)
Main section | All schemes | |||||||||||||||
| | | Present value | | Asset | | Net | | | | | Asset | | |||
Fair value | of defined | ceiling/ | pension | Fair | Present value | ceiling/ | Net | |||||||||
of plan | benefit | minimum | assets/ | value of | of defined | minimum | pension | |||||||||
assets | obligation (1) | funding | liability | plan assets | benefit obligation (1) | funding | assets (2) | |||||||||
£m | £m | £m | £m | £m | £m | £m | £m | |||||||||
At 1 January 2024 |
| |
| ( | ( | — | | ( | ( | | ||||||
Currency translation and other adjustments | — | — | — | — | ( | | ( | — | ||||||||
Income statement - operating expenses | | ( | ( | ( | | ( | ( | ( | ||||||||
Other comprehensive income | ( | | | ( | ( | | | ( | ||||||||
Contributions by employer | | — | — | | | — | — | | ||||||||
Contributions by plan participants and other scheme members | | ( | — | — | | ( | — | — | ||||||||
Assets/liabilities extinguished upon settlement | — | — | — | — | ( | | — | — | ||||||||
Benefits paid | ( | | — | — | ( | | — | | ||||||||
At 1 January 2025 | | ( | ( | — | | ( | ( | | ||||||||
Currency translation and other adjustments | — | — | — | — | | ( | ( | | ||||||||
Income statement - operating expenses | ||||||||||||||||
Net interest expense | | ( | ( | | | ( | ( | | ||||||||
Current service cost | — | ( | — | ( | — | ( | — | ( | ||||||||
Past service cost | — | ( | — | ( | — | ( | — | ( | ||||||||
Loss on curtailments and settlements | — | — | — | — | — | ( | — | ( | ||||||||
| ( | ( | ( | | ( | ( | ( | |||||||||
Other comprehensive income | ||||||||||||||||
Return on plan assets excluding recognised interest income (3) | ( | — | — | ( | ( | — | — | ( | ||||||||
Experience gains and losses | — | ( | — | ( | — | ( | — | ( | ||||||||
Effect of changes in actuarial financial assumptions | — | | — | | — | | — | | ||||||||
Effect of changes in actuarial demographic assumptions | — | ( | — | ( | — | ( | — | ( | ||||||||
Asset ceiling adjustments (3) | — | — | | | — | — | | | ||||||||
( | | | | ( | | | | |||||||||
Contributions by employer (4) | | — | — | | | — | — | | ||||||||
Contributions by plan participants and other scheme members | | ( | — | — | | ( | — | — | ||||||||
Assets/liabilities extinguished upon settlement | — | — | — | — | ( | | — | — | ||||||||
Benefits paid | ( | | — | — | ( | | — | | ||||||||
At 31 December 2025 | | ( | ( | — | | ( | ( | | ||||||||
| (1) | Defined benefit obligations are subject to annual valuation by independent actuaries. |
| (2) | NatWest Group recognises the net pension scheme surplus or deficit as a net asset or liability. In doing so, the funded status is adjusted to reflect any schemes with a surplus that NatWest Group may not be able to access, as well as any minimum funding requirement to pay in additional contributions. This is most relevant to the Main section, where the surplus is not recognised as the trustees have rights over the use of the surplus. Other NatWest Group schemes that this applies to include the Ulster Bank Pension Scheme (NI) and the NatWest Markets section. |
| (3) | Buy-in transactions have had an, offsetting impact on the ‘Return on plan assets excluding recognised interest income’ and “Asset ceiling adjustments” line items recognised in OCI. |
| (4) | NatWest Group expects to make contributions to the Main section of £ |
NatWest Group Annual Report on Form 20-F 2025 | 183 |
Notes to the consolidated financial statements continued
5 Pensions continued
Amounts recognised on the balance sheet
All schemes | ||||
| 2025 | | 2024 | |
£m | £m | |||
Fund asset at fair value |
| |
| |
Present value of fund liabilities |
| ( |
| ( |
Funded status |
| |
| |
Assets ceiling/minimum funding |
| ( |
| ( |
| |
| | |
Net pension asset/(liability) comprises
| 2025 | | 2024 | |
£m | £m | |||
Net assets of schemes in surplus (Note 17) |
| |
| |
Net liabilities of schemes in deficit (Note 20) |
| ( |
| ( |
| |
| |
Funding and contributions by NatWest Group
In the UK, the trustees of defined benefit pension schemes are required to perform funding valuations every
A full triennial funding valuation of the Main section, effective 31 December 2023, was completed during financial year 2024.
This triennial funding valuation determined the funding level to be
The key assumptions used to determine the uninsured funding liabilities were the discount rate, which is determined based on fixed interest swap and gilt yields plus
Accounting Assumptions
Placing a value on NatWest Group’s defined benefit pension schemes’ liabilities requires NatWest Group’s management to make a number of assumptions, with the support of independent actuaries. The ultimate cost of the defined benefit obligations depends upon actual future events and the assumptions made are unlikely to be exactly borne out in practice, meaning the final cost may be higher or lower than expected.
NatWest Group Annual Report on Form 20-F 2025 | 184 |
Notes to the consolidated financial statements continued
5 Pensions continued
The most significant assumptions used for the Main section are shown below:
Principal IAS 19 actuarial assumptions (1) | ||||
| 2025 | | 2024 | |
% | % | |||
Discount rate |
| |
| |
Inflation assumption (RPI) |
| |
| |
Rate of increase in salaries |
| |
| |
Rate of increase in deferred pensions |
| |
| |
Rate of increase in pensions in payment |
| |
| |
Lump sum conversion rate at retirement |
| |
| |
Longevity at age 60: |
| years |
| years |
Current pensioners | ||||
Males |
|
| ||
Females |
|
| ||
Future pensioners, currently aged 40 |
|
| ||
Males |
|
| ||
Females |
|
| ||
(1) | The above financial assumptions are long-term assumptions set with reference to the period over which the obligations are expected to be settled. |
Discount rate
The IAS 19 valuation uses a single discount rate set by reference to the yield on a basket of high quality sterling corporate bonds.
Significant judgement is required when setting the criteria for bonds to be included in the basket of bonds that is used to determine the discount rate used in the IAS 19 valuations. The criteria include issue size, quality of pricing and the exclusion of outliers. Judgement is also required in determining the shape of the yield curve at long durations; a constant credit spread relative to gilts is assumed. Sensitivity to the main assumptions is presented below.
NatWest Group Annual Report on Form 20-F 2025 | 185 |
Notes to the consolidated financial statements continued
5 Pensions continued
The weighted average duration of the Main section's defined benefit obligation at 31 December 2025 is
NatWest Group Annual Report on Form 20-F 2025 | 186 |
Notes to the consolidated financial statements continued
5 Pensions continued
The table below shows how the funded status of the Main section would change if the key assumptions used were changed independently. In practice the variables have a degree of correlation and do not move completely in isolation.
(Decrease)/ | (Decrease)/ | Increase in | ||||
increase in | increase in | net pension | ||||
value of | value of | (obligations)/ | ||||
| assets | | liabilities | | assets | |
2025 (1) | £m | £m | £m | |||
( | ( | ( | ||||
| | | ||||
( | ( | | ||||
Longevity increase of | | | ( | |||
| | ( | ||||
Increase in equity values of | | na | | |||
2024 | ||||||
| ( | ( | ( | |||
| | | | |||
| ( | ( | | |||
Longevity increase of | | | ( | |||
| | ( | ||||
Increase in equity values of |
| | na | |
na = not applicable
| (1) | The asset sensitivities shown for 2025 are derived using benchmark information, so will be more approximate than those shown for 2024. |
| (2) | Includes both quoted and private equity. |
The table below shows the combined change in defined benefit obligation from larger movements in these assumptions, assuming no changes in other assumptions.
| Change in life expectancies | |||||||||||
| -2 years |
| -1 year |
| No change |
| + 1 year |
| + 2 years | |||
2025 | | | | £bn | | £bn | | £bn | | £bn | | £bn |
Change in credit spreads |
| + |
| ( |
| ( |
| ( |
| ( |
| — |
| No change |
| ( |
| ( |
| — |
| |
| | |
| - |
| ( |
| |
| |
| |
| | |
2024 |
|
|
|
|
| |||||||
Change in credit spreads |
| + |
| ( |
| ( |
| ( |
| ( |
| — |
| No change |
| ( |
| ( |
| — |
| |
| | |
| - |
| ( |
| |
| |
| |
| | |
NatWest Group Annual Report on Form 20-F 2025 | 187 |
Notes to the consolidated financial statements continued
5 Pensions continued
The defined benefit obligation of the Main section is attributable to the different classes of scheme members in the following proportions:
| 2025 | | 2024 | |
Membership category | % | % | ||
Active members |
| |
| |
Deferred members |
| |
| |
Pensioners and dependants |
| |
| |
| |
| |
The experience history of NatWest Group schemes is shown below:
Main section | All schemes |
| ||||||||||||||||||||
| 2025 | 2024 | | 2023 | | 2022 | | 2021 | | 2025 | 2024 | 2023 | | 2022 | | 2021 |
| |||||
Experience history of defined benefit schemes | £m | £m |
| £m |
| £m |
| £m |
| £m | £m | £m |
| £m |
| £m |
| |||||
Fair value of plan assets | | | |
| |
| |
| | | |
| |
| |
| ||||||
Present value of plan obligations | ( | ( | ( |
| ( |
| ( |
| ( | ( | ( |
| ( |
| ( |
| ||||||
Net surplus | | | |
| |
| |
| | | |
| |
| |
| ||||||
Experience (losses)/gains on plan liabilities | ( | | ( |
| ( |
| |
| ( | ( | ( |
| ( |
| |
| ||||||
Experience (losses)/gains on plan assets | ( | ( | ( |
| ( |
| |
| ( | ( | ( |
| ( |
| |
| ||||||
Actual return on plan assets | | ( | |
| ( |
| |
| | ( | |
| ( |
| |
| ||||||
Actual return on plan assets | | % | ( | % | | % | ( | % | | % | | % | ( | % | | % | ( | % | | % | ||
6 Auditor’s remuneration
Amounts payable to NatWest Group's auditors for statutory audit and other services are set out below. |
All audit-related and other services are approved by the Group Audit Committee and are subject to strict controls to ensure the external auditor’s independence is unaffected by the provision of other services. The Group Audit Committee recognises that for certain assignments, the auditors are best placed to perform the work economically; for other work, NatWest Group selects the supplier best placed.
| 2025 | | 2024 | | 2023 | |
£m | £m |
| £m | |||
Fees payable for: | ||||||
- the audit of NatWest Group’s annual accounts (1) |
| |
| |
| |
- the audit of NatWest Group plc’s subsidiaries (1) |
| |
| |
| |
- audit-related assurance services (1,2) |
| |
| |
| |
Total audit and audit-related assurance services fees |
| |
| |
| |
Other assurance services |
| |
| |
| |
Corporate finance services (3) |
| |
| |
| |
Total other services |
| |
| |
| |
(1) | The 2025 audit fee was approved by the Group Audit Committee. At 31 December 2025, £ |
(2) | Comprises fees of £ |
(3) | Comprises fees of £ |
NatWest Group Annual Report on Form 20-F 2025 | 188 |
Notes to the consolidated financial statements continued
7 Tax
NatWest Group’s corporate income tax charge for the period is set out below, together with a reconciliation to the expected tax charge calculated using the UK standard corporation tax rate and details of the NatWest Group’s deferred tax balances.
For accounting policy information refer to Accounting policies 2.1 and 3.7.
Analysis of the tax charge for the year
The tax charge comprises current and deferred tax in respect of profits and losses recognised or originating in the income statement. Tax on items originating outside the income statement is charged to other comprehensive income or direct to equity (as appropriate) and is therefore not reflected in the table below. Current tax is tax payable or recoverable in respect of the taxable profit or loss for the year and any adjustments to tax payable in prior years. Deferred tax is explained on page 191. |
2025 | 2024 | 2023 | ||||
Continuing operations | | £m | | £m | | £m |
Current tax |
| |
| | ||
Charge for the year |
| ( | ( | ( | ||
Over/(under) provision in respect of prior years |
| | ( | ( | ||
| ( | ( | ( | |||
Deferred tax |
| |||||
Charge for the year |
| ( | ( | ( | ||
Net increase in the carrying value of deferred tax assets in respect of losses | | | | |||
(Under)/over provision in respect of prior years |
| ( | | ( | ||
Tax charge for the year |
| ( | ( | ( |
NatWest Group Annual Report on Form 20-F 2025 | 189 |
Notes to the consolidated financial statements continued
7 Tax continued
Factors affecting the tax charge for the year
Taxable profits differ from profits reported in the income statement as certain amounts of income and expense may not be taxable or deductible. In addition, taxable profits may reflect items that have been included outside the income statement (for instance, in other comprehensive income) or adjustments that are made for tax purposes only.
Current tax for the year ended 31 December 2025 is based on rates of
The expected tax charge for the year is calculated by applying the standard UK corporation tax rate of
The actual tax charge differs from the expected tax charge as follows:
| 2025 | | 2024 | | 2023 | |
Continuing operations | £m | £m | £m | |||
Expected tax charge |
| ( | ( | ( | ||
Losses and temporary differences in year where no deferred tax asset recognised |
| ( | ( | ( | ||
Foreign profits and losses taxed at other rates |
| | | | ||
Items not allowed for tax: | ||||||
- losses on disposals and write-downs |
| ( | ( | ( | ||
- UK bank levy |
| ( | ( | ( | ||
- regulatory and legal actions |
| | ( | ( | ||
- other disallowable items |
| ( | ( | ( | ||
Non-taxable items: |
| |||||
- foreign exchange recycling on capital reduction | | — | | |||
- RPI-related uplift on index linked gilts | | | | |||
- dividends | | — | — | |||
- other non-taxable items | | | | |||
Taxable foreign exchange movements |
| ( | | | ||
Unrecognised losses brought forward and utilised |
| | | | ||
Net increase/(decrease) in the carrying value of deferred tax assets in respect of: |
| |||||
- UK losses | | | | |||
- Netherlands losses | | | | |||
- Other overseas losses | | — | ( | |||
Banking surcharge |
| ( | ( | ( | ||
Pillar 2 top-up tax | — | ( | — | |||
Redemption of AT1 (paid-in equity) capital notes | ( | — | — | |||
Tax on AT1 (paid-in equity) dividends |
| | | | ||
Adjustments in respect of prior years (1) | | ( | ( | |||
Actual tax charge |
| ( | ( | ( |
(1) | Prior year tax adjustments incorporate refinements to tax computations made on submission and agreement with the tax authorities and adjustments to provisions in respect of uncertain tax positions. |
NatWest Group Annual Report on Form 20-F 2025 | 190 |
Notes to the consolidated financial statements continued
7 Tax continued
Global minimum top-up tax
The Group is subject to the global minimum top-up tax under Pillar Two tax legislation. The Group recognised
The Group has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax and accounts for it as a current tax when it is incurred.
Judgement: tax contingencies
NatWest Group’s corporate income tax charge and its provisions for corporate income taxes necessarily involve a degree of estimation and judgement. The tax treatment of some transactions is uncertain and tax computations are yet to be agreed with the relevant tax authorities. Any difference between the final outcome and the amounts provided will affect current and deferred income tax charges in the period when the matter is resolved. NatWest Group recognises anticipated tax liabilities based on all available evidence and, where appropriate, in the light of external advice.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable in respect of temporary differences where the carrying amount of an asset or liability differs for accounting and tax purposes. Deferred tax liabilities reflect the expected amount of tax payable in the future on these temporary differences. Deferred tax assets reflect the expected amount of tax recoverable in the future on these differences. The net deferred tax asset recognised by NatWest Group is shown below, together with details of the accounting judgements and tax rates that have been used to calculate the deferred tax. Details are also provided of any deferred tax assets or liabilities that have not been recognised on the balance sheet. |
Analysis of deferred tax
| 2025 | | 2024 | |
| £m | | £m | |
Deferred tax asset |
| |
| |
Deferred tax liability |
| ( |
| ( |
Net deferred tax asset |
| |
| |
| Accelerated | Tax losses | ||||||||||||
| capital | Expense | Financial | carried | ||||||||||
| Pension | allowances | provisions | instruments (1) | forward | Other | Total | |||||||
| | £m | | £m | | £m | | £m | | £m | | £m | | £m |
At 1 January 2024 |
| ( |
| |
| |
| |
| |
| |
| |
Credit/ (charge) to income statement: |
| |||||||||||||
- continuing operations | | | | ( | | ( | | |||||||
(Charge)/credit to other comprehensive income |
| ( | — | — | ( | — | | ( | ||||||
Currency translation and other adjustments |
| ( |
| — |
| — |
| ( |
| ( |
| — |
| ( |
At 1 January 2025 |
| ( |
| |
| |
| |
| |
| |
| |
Charge to income statement: |
|
|
|
|
|
|
| |||||||
- continuing operations | ( | ( | ( | ( | ( | ( | ( | |||||||
(Charge)/credit to other comprehensive income |
| ( |
| — |
| — |
| ( |
| — |
| |
| ( |
Currency translation and other adjustments |
| ( |
| ( |
| — |
| — |
| |
| — |
| |
At 31 December 2025 |
| ( |
| |
| |
| |
| |
| |
| |
(1) | The in-year movement predominantly relates to cash flow hedges. |
NatWest Group Annual Report on Form 20-F 2025 | 191 |
Notes to the consolidated financial statements continued
7 Tax continued
Deferred tax assets in respect of carried forward tax losses are recognised if the losses can be used to offset probable future taxable profits after taking into account the expected reversal of other temporary differences. Recognised deferred tax assets in respect of tax losses are analysed further below.
| 2025 | | 2024 | |
£m | £m | |||
UK tax losses carried forward | ||||
- NWB Plc |
| |
| |
- RBS plc |
| |
| |
Total |
| |
| |
Overseas tax losses carried forward | ||||
- Ulydien DAC | | | ||
- NWM N.V. |
| |
| |
| |
| |
Critical accounting policy: Deferred tax
NatWest Group has recognised a deferred tax asset of £
Judgement – NatWest Group has considered the carrying value of deferred tax assets and concluded that, based on management’s estimates, sufficient sustainable taxable profits will be generated in future years to recover recognised deferred tax assets.
Estimates – For entities with mature business models and a longer track record of profitability and stable earnings, these estimates are partly based on forecast performance beyond the horizon for management’s detailed plans. They have regard to inherent uncertainties. The deferred tax asset in Ulydien DAC is supported substantially by future reversing taxable temporary differences on which deferred tax liabilities are recognised at 31 December 2025.
UK tax losses
Under UK tax rules, tax losses can be carried forward indefinitely. As the recognised tax losses in NatWest Group arose prior to 1 April 2015, credit in future periods is given against
NWM Plc – Losses of £
NWB Plc – A deferred tax asset of £
RBS plc – A deferred tax asset of £
Overseas tax losses
Ulydien DAC – A deferred tax asset of £
NatWest Group Annual Report on Form 20-F 2025 | 192 |
Notes to the consolidated financial statements continued
7 Tax continued
NatWest Markets N.V. (NWM N.V.) - A deferred tax asset of £
Unrecognised deferred tax
Deferred tax assets of £
Deferred tax liabilities of £
8 Earnings per share
Earnings per share measures how much profit NatWest Group makes for each share in issue during the year. Basic earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding. Diluted earnings per ordinary share is calculated by dividing the basic earnings by the weighted average number of ordinary shares outstanding plus the weighted average number of ordinary shares that would be issued on conversion of dilutive share options and convertible securities. The assessment of whether the effect of share options and convertible securities is dilutive or not is based on the earnings from continuing operations. |
| 2025 | | 2024 | | 2023 | |
£m | £m | £m | ||||
Earnings |
| |
| |
| |
Profit from continuing operations attributable to ordinary shareholders |
| |
| |
| |
Profit/(loss) from discontinued operations attributable to ordinary shareholders |
| — |
| |
| ( |
Profit attributable to ordinary shareholders |
| |
| |
| |
|
|
|
| |||
Weighted average number of shares (millions) |
|
|
| |||
Weighted average number of ordinary shares outstanding during the year |
| |
| |
| |
Effect of dilutive share options and convertible securities |
| |
| |
| |
Diluted weighted average number of ordinary shares outstanding during the year |
| |
| |
| |
Earnings per ordinary share - continuing operations | ||||||
Earnings per ordinary share - discontinued operations | — | |||||
Total earnings per share attributable to ordinary shareholders - basic (1) |
|
|
| |||
Earnings per ordinary share - diluted continuing operations |
|
|
| |||
Earnings per ordinary share - diluted discontinued operations |
| — |
|
| ||
Total earnings per share attributable to ordinary shareholders - diluted |
|
|
|
(1) | In 2023, the unrounded Total earnings per share attributable to ordinary shareholders – basic is |
NatWest Group Annual Report on Form 20-F 2025 | 193 |
Notes to the consolidated financial statements continued
9 Financial instruments – classification
Financial instruments are contracts that give rise to a financial asset of one entity and a corresponding financial liability or equity instrument of a counterparty entity, such as cash, derivatives, loans, deposits and settlement balances. This note presents financial instruments classified in accordance with IFRS 9 – Financial Instruments. |
Judgement: classification of financial assets
Classification of financial assets between amortised cost and fair value through other comprehensive income requires a degree of judgement in respect of business models and contractual cashflows.
| ● | The business model criteria are assessed at a portfolio level to determine whether assets are classified as held to collect or held to collect and sell. Information that is considered in determining the applicable business model includes: the portfolio’s policies and objectives; how the performance and risks of the portfolio are managed, evaluated and reported to management; and the frequency, volume and timing of sales in prior periods, sales expectation for future periods, and the reasons for sales. |
| ● | The contractual cash flow characteristics of financial assets are assessed with reference to whether the cash flows represent solely payments of principal and interest (SPPI). A level of judgement is made in assessing terms that could change the contractual cash flows so that it would not meet the condition for SPPI, including contingent and leverage features, non-recourse arrangements and features that could modify the time value of money. |
For accounting policy information refer to Accounting policies 3.8, 3.9 and 3.11.
The following tables analyse financial assets and liabilities in accordance with the categories of financial instruments in IFRS 9.
Amortised | Other |
| ||||||||||
MFVTPL | DFV | FVOCI | cost | assets |
| Total | ||||||
Assets | | £m | | £m | | £m | | £m | | £m | | £m |
Cash and balances at central banks |
|
|
| |
| | ||||||
Trading assets | | | ||||||||||
Derivatives (1) | | | ||||||||||
Settlement balances |
| | | |||||||||
Loans to bank - amortised cost (2) |
|
|
| |
| | ||||||
Loans to customers - amortised cost (3) |
|
|
| |
| | ||||||
Other financial assets |
| | | |
| |
| | ||||
Intangible assets | | | ||||||||||
Other assets |
|
| | | ||||||||
31 December 2025 |
| |
| | |
| |
| |
| |
Cash and balances at central banks |
| |
| | ||||||||
Trading assets | |
|
| | ||||||||
Derivatives (1) | |
|
| | ||||||||
Settlement balances |
| |
| | ||||||||
Loans to bank - amortised cost (2) |
| |
| | ||||||||
Loans to customers - amortised cost (3) |
|
| |
| | |||||||
Other financial assets |
| |
| | | |
| | ||||
Intangible assets | | | ||||||||||
Other assets |
| | | |||||||||
31 December 2024 |
| |
| | | |
| | |
For the notes to this table refer to the following page.
NatWest Group Annual Report on Form 20-F 2025 | 194 |
Notes to the consolidated financial statements continued
9 Financial instruments – classification continued
Held-for- | Amortised | Other | ||||||||
| trading | | DFV | | cost | | liabilities | | Total | |
Liabilities | | £m | £m | £m | £m | £m | ||||
Bank deposits (4) |
|
| |
|
| | ||||
Customer deposits |
|
| |
|
| | ||||
Settlement balances |
|
| |
|
| | ||||
Trading liabilities | | | ||||||||
Derivatives (1) |
| |
|
|
| | ||||
Other financial liabilities (5) |
|
| | |
|
| | |||
Subordinated liabilities |
|
| | |
|
| | |||
Notes in circulation | | | ||||||||
Other liabilities (6) |
|
| |
| |
| | |||
31 December 2025 |
| |
| | |
| |
| | |
Bank deposits (4) |
|
| |
|
| | ||||
Customer deposits |
|
| |
|
| | ||||
Settlement balances |
|
| |
|
| | ||||
Trading liabilities |
| |
|
|
| | ||||
Derivatives (1) |
| |
|
|
| | ||||
Other financial liabilities (5) |
|
| | |
|
| | |||
Subordinated liabilities |
|
| | |
|
| | |||
Notes in circulation | | | ||||||||
Other liabilities (6) |
|
| |
| |
| | |||
31 December 2024 |
| |
| | |
| |
| |
(1) | Includes net hedging derivatives assets of £ |
(2) | Includes items in the course of collection from other banks of £ |
(3) | Includes finance lease receivables of £ |
(4) | Includes items in the course of transmission to other banks of £ |
(5) | The carrying amount of customer deposits designated at fair value through profit or loss is materially the same as the principal amount for both periods. |
(6) | Includes lease liabilities of £ |
NatWest Group Annual Report on Form 20-F 2025 | 195 |
Notes to the consolidated financial statements continued
9 Financial instruments – classification continued
We originate loans that include features that change the contractual cash flows based on the borrower meeting certain contractually specified environmental, social and governance (ESG) targets. These are known as ESG-linked, or sustainability-linked, loans. As part of the terms of these loans, the contractual interest rate is reduced or increased if the borrower meets, or fails to meet, specific targets linked to the activity of the borrower, for example; reducing carbon emissions, increasing the level of diversity at Board level, or achieving a sustainable supply chain. ESG features are first assessed to ascertain whether the adjustment to the contractual cash flows results in a de minimis exposure to risks or volatility in those contractual cash flows. If this is the case the classification of the loan is not affected. If the effect of the ESG feature is assessed as being more than de minimis, we apply judgement to ensure that the ESG features do not generate compensation for risks that are not in line with a basic lending arrangement. This includes, amongst other aspects, a review of the consistency of the ESG targets with the asset or activity of the borrower, and consideration of the targets within our risk appetite. Some of these loans were eligible under our climate and sustainable funding and financing inclusion (CSFFI) criteria, which underpinned our previous target to provide £
The table below analyses financial assets forming a component of ESG-linked loans and other products with contractual terms that could change the timing or amount of cash flows. This is based on balance sheet values as at 31 December and the maximum impact of the potential margin changes on these over a 12 month period.
| 2025 | 2024 | ||||||||||
| Positive impact on | | Negative impact on | | Positive impact on | Negative impact on | ||||||
Carrying value | product margin | product margin | Carrying value | product margin | product margin | |||||||
£bn | bps | bps | £bn | bps | bps | |||||||
Sustainability-linked loans |
| |
| |
| |
| |
| |
| |
Other products |
| |
| — |
| — |
| |
| — |
| — |
Lending subject to performance triggers |
| |
|
| |
|
| |||||
Additional information on finance lease receivables
The following table shows the reconciliation of undiscounted finance lease receivables to net investment in finance leases which are presented under Loans to customers-amortised cost on the balance sheet.
| 2025 | | 2024 | |
£m | £m | |||
Amount receivable under finance leases | | | ||
Within 1 year | | | ||
1 to 2 years | | | ||
2 to 3 years | | | ||
3 to 4 years | | | ||
4 to 5 years | | | ||
After 5 years | | | ||
Total lease payments | | | ||
Unguaranteed residual values | | | ||
Future drawdowns | ( | ( | ||
Unearned income | ( | ( | ||
Present value of lease payments | | | ||
Impairments | ( | ( | ||
Net investment in finance leases | | |
NatWest Group Annual Report on Form 20-F 2025 | 196 |
Notes to the consolidated financial statements continued
9 Financial instruments – classification continued
Financial instruments – financial assets and liabilities that can be offset
The tables below present information on financial assets and financial liabilities that are offset on the balance sheet under IFRS or subject to enforceable master netting agreements together with financial collateral received or given.
Instruments which can be offset | Potential for offset not recognised by IFRS | | | |||||||||||||||
Effect of | Net amount | |||||||||||||||||
master | after netting | Instruments | ||||||||||||||||
netting | agreements and | outside | ||||||||||||||||
IFRS | Balance | and similar | Cash | Securities | effect of | netting | Balance | |||||||||||
Gross | offset | sheet | agreements | collateral | collateral | related collateral | agreements | sheet total | ||||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
Derivative assets |
| | ( | | ( | ( | ( | | | | ||||||||
Derivative liabilities |
| | ( | | ( | ( | ( | | | | ||||||||
Net position (1) |
| | | | — | ( | ( | ( | | | ||||||||
Trading reverse repos |
| | ( | | ( | — | ( | | | | ||||||||
Trading repos |
| | ( | | ( | — | ( | — | | | ||||||||
Net position |
| | — | | — | — | ( | | ( | ( | ||||||||
|
| |||||||||||||||||
Non trading reverse repos |
| | ( | | ( | — | ( | — | — | | ||||||||
Non trading repos |
| | ( | | ( | — | ( | — | — | | ||||||||
Net position |
| | — | | — | — | ( | — | — | | ||||||||
2024 |
|
|
|
|
|
| ||||||||||||
Derivative assets |
| | ( | | ( | ( | ( | | | | ||||||||
Derivative liabilities |
| | ( | | ( | ( | ( | | | | ||||||||
Net position (1) |
| | | | — | ( | ( | ( | | | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Trading reverse repos |
| | ( | | ( | — | ( | | | | ||||||||
Trading repos |
| | ( | | ( | — | ( | — | | | ||||||||
Net position |
| ( | — | ( | — | | | ( | ( | |||||||||
Non trading reverse repos |
| | ( | | ( | — | ( | — | — | | ||||||||
Non trading repos |
| | ( | | ( | — | ( | — | — | | ||||||||
Net position |
| | — | | — | — | ( | — | — | | ||||||||
(1) | Net IFRS offset balance of £ |
NatWest Group Annual Report on Form 20-F 2025 | 197 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation
Financial instruments recognised at fair value are revalued using techniques that can include observable inputs (pricing information that is readily available in the market, for example UK Government securities), and unobservable inputs (pricing information that is not readily available, for example unlisted securities). Gains and losses are recognised in the income statement and statement of comprehensive income as appropriate. This note presents information on the valuation of financial instruments. The table below provides an overview of the various sections contained within the note. |
Critical accounting policy: Fair value - financial instruments
Financial instruments classified as mandatory fair value through profit or loss; held-for-trading; designated fair value through profit or loss; and fair value through other comprehensive income are recognised in the financial statements at fair value. All derivatives are measured at fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement considers the characteristics of the asset or liability and the assumptions that a market participant would consider when pricing the asset or liability.
NatWest Group manages some portfolios of financial assets and financial liabilities based on its net exposure to either market or credit risk. In these cases, the fair value is derived from the net risk exposure of that portfolio with portfolio level adjustments applied to incorporate bid-offer spreads, counterparty credit risk, and funding costs (refer to ‘Valuation Adjustments’).
Where the market for a financial instrument is not active, fair value is established using a valuation technique. These valuation techniques involve a degree of estimation, the extent of which depends on the instrument’s complexity and the availability of market-based data. The complexity and uncertainty in the financial instrument’s fair value is categorised using the fair value hierarchy.
For accounting policy information refer to Accounting policies 2.2, 3.8 and 3.11.
NatWest Group Annual Report on Form 20-F 2025 | 198 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
Valuation
Page | |
Financial instruments | |
Critical accounting policy: Fair value | 198 |
Valuation | |
Fair value hierarchy (D) | 200 |
Valuation techniques (D) | 200 |
Inputs to valuation models (D) | 200 |
Valuation control (D) | 201 |
Key areas of judgement (D) | 202 |
Assets and liabilities split by fair value hierarchy level (T) | 203 |
Valuation adjustments | |
Fair value adjustments made (T) | 204 |
Funding valuation adjustments (FVA) (D) | 204 |
Credit valuation adjustments (CVA) (D) | 204 |
Bid-offer (D) | 204 |
Product and deal specific (D) | 205 |
Own credit (D) | 205 |
Level 3 additional information | |
Level 3 ranges of unobservable inputs (D) | 206 |
Level 3 instruments, valuation techniques and inputs (T) | 206 |
Level 3 sensitivities (D) | 206 |
Alternative assumptions (D) | 207 |
Other considerations (D) | 207 |
High and low range of fair value of level 3 assets and liabilities (T) | 207 |
Movement in level 3 assets and liabilities over the reporting period (D) | 208 |
Movement in level 3 assets and liabilities (T) | 208 |
Fair value of financial instruments measured at amortised cost | |
Fair value of financial instruments measured at amortised cost on the balance sheet | 209 |
(D) = Descriptive; (T) = Table |
NatWest Group Annual Report on Form 20-F 2025 | 199 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
Fair value hierarchy
Financial instruments carried at fair value have been classified under the fair value hierarchy. The classification ranges from level 1 to level 3, with more expert judgement and price uncertainty for those classified at level 3.
The determination of an instrument’s level cannot be made at a global product level as a single product type can be in more than one level. For example, a single name corporate credit default swap could be in level 2 or level 3 depending on the level of market activity for the referenced entity.
Level 1 – instruments valued using unadjusted quoted prices in active and liquid markets, for identical financial instruments. Examples include government bonds, listed equity shares and certain exchange-traded derivatives.
Level 2 - instruments valued using valuation techniques that have observable inputs. Observable inputs are those that are readily available with limited adjustments required. Examples include most government agency securities, investment-grade corporate bonds, certain mortgage products - including collateralised loan obligations (CLOs), most bank loans, repos and reverse repos, state and municipal obligations, most notes issued, certain money market securities, loan commitments and most over the counter (OTC) derivatives.
Level 3 - instruments valued using a valuation technique where at least one input which could have a significant effect on the instrument’s valuation, is not based on observable market data. Examples include non-derivative instruments which trade infrequently, certain syndicated and commercial mortgage loans, private equity, and derivatives with unobservable model inputs.
Valuation techniques
NatWest Group derives the fair value of its instruments differently depending on whether the instrument is a non-modelled or a modelled product.
Non-modelled products are valued directly from a price input, typically on a position-by-position basis. Examples include equities and most debt securities.
Non-modelled products can fall into any fair value levelling hierarchy depending on the observable market activity, liquidity, and assessment of valuation uncertainty of the instruments. The assessment of fair value and the classification of the instrument to a fair value level is subject to the valuation controls discussed in the Valuation control section.
Modelled products - valued using a pricing model range in complexity from comparatively vanilla products such as interest rate swaps and options (e.g., interest rate caps and floors) through to more complex derivatives (e.g., balance guarantee swaps).
For modelled products the fair value is derived using the model and the appropriate model inputs or parameters, as opposed to a cash price equivalent. Model inputs are taken either directly or indirectly from available data, where some inputs are also modelled.
Fair value classification of modelled instruments is either level 2 or level 3, depending on the product/model combination, the observability and quality of input parameters and other factors. All these must be assessed to classify a position. The modelled product is assigned to the lowest fair value hierarchy level of any significant input used in that valuation.
Most derivative instruments, for example vanilla interest rate swaps, foreign exchange swaps and liquid single name credit derivatives, are classified as level 2. This is because they are vanilla products valued using standard market models and with observable inputs. Level 2 products range from vanilla to more complex products, where more complex products remain classified as level 2 due to the low materiality of any unobservable inputs.
Inputs to valuation models
When using valuation techniques, the fair value can be significantly affected by the choice of valuation model and underlying assumptions. Factors considered include the cashflow amounts and timing of those cash flows, and application of appropriate discount rates, incorporating both funding and credit risk. Values between and beyond available data points are obtained by interpolation and extrapolation. The principal inputs to these valuation techniques are as follows:
Bond prices - quoted prices are generally available for government bonds, certain corporate securities, and some mortgage-related products.
NatWest Group Annual Report on Form 20-F 2025 | 200 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
Credit spreads/margins - these reflect credit default swap levels or the return required over a benchmark rate or index to compensate for the referenced credit risk. Where available, these are derived from the price of credit default swaps or other credit-based instruments, such as debt securities. When direct prices are not available, credit spreads/margins are determined with reference to available prices of entities with similar characteristics.
Interest rates - these are principally based on interest rate swap prices referencing benchmark interest rates. Interest rates, include SONIA (Sterling Overnight Interbank Average Rate) and other overnight rates. Other quoted interest rates may also be used from both the bond, and futures markets.
Foreign currency exchange rates - there are observable prices both for spot and forward contracts and futures in the world's major currencies.
Equity and equity index prices - quoted prices are generally readily available for equity shares listed on the world's major stock exchanges and for major indices on such shares.
Price volatilities and correlations - volatility is a measure of the tendency of a price to change with time. Correlation measures the degree which two or more prices or variables are observed to move together. Variables that move in the same direction show positive correlation; those that move in opposite directions are negatively correlated.
Prepayment rates - are used to reflect how fast a pool of assets prepay. The fair value of a financial instrument that can be prepaid by the issuer or borrower differs from that of an instrument that cannot be prepaid. When valuing prepayable instruments, the value of this prepayment option is considered.
Recovery rates/loss given default - are used as an input to valuation models and reserves for asset-backed securities and other credit products as an indicator of severity of losses on default. Recovery rates are primarily sourced from market data providers, the value of the underlying collateral or inferred from observable credit spreads.
Valuation control
NatWest Group's control environment for the determination of the fair value of financial instruments includes formalised procedures for the review and validation of fair values. The review of market prices and inputs is performed by an independent price verification (IPV) team.
IPV is a key element of the control environment. Valuations are first performed by the business which entered into the transaction. These valuations are then reviewed by the IPV team, independent of those trading the financial instruments, in light of available pricing evidence.
Independent pricing data is collated from a range of sources. Each source is reviewed for quality and the independent data applied in the IPV processes using a formalised input quality hierarchy. Consensus services are one source of independent data and encompass interest rate, currency, credit, and bond markets, providing comprehensive coverage of vanilla products and a wide selection of exotic products.
Where measurement differences are identified through the IPV process these are grouped by the quality hierarchy of the independent data. If the size of the difference exceeds defined thresholds, an adjustment is made to bring the valuation to within the independently calculated fair value range.
IPV takes place at least monthly, for all fair value financial instruments. The IPV control includes formalised reporting and escalation of any valuation differences in breach of established thresholds.
The quality and completeness of the information gathered in the IPV process gives an indication as to the liquidity and valuation uncertainty of an instrument and forms part of the information considered when determining fair value hierarchy classifications.
Initial fair value level classification of a financial instrument is carried out by the IPV team. These initial classifications are subject to senior management review. Particular attention is paid to instruments transferring from one level to another, new instrument classes or products, instruments where the transaction price is significantly different from the fair value and instruments where valuation uncertainty is high.
Valuation Committees are made up of valuation specialists and senior business representatives from various functions and oversees pricing, reserving and valuations issues. These committees meet monthly to review and ratify any methodology changes. The Executive Valuation Committee meets quarterly to address key material and subjective valuation issues, to review items escalated by Valuation Committees and to discuss other relevant industry matters.
NatWest Group Annual Report on Form 20-F 2025 | 201 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
The Group model risk policy sets the policy for model documentation, testing and review. Governance of the model risk policy is carried out by the Group Model Risk Oversight Committee, which comprises model risk owners and independent model experts. All models are required to be independently validated in accordance with the model risk Policy.
Key areas of judgement
Over the years the business has simplified, with most products classified as level 1 or 2 of the fair value hierarchy. However, the diverse range of products historically traded by NatWest Group means some products remain classified as level 3. Level 3 indicates a significant level of pricing uncertainty, where expert judgement is used. As such, extra disclosures are required in respect of level 3 instruments.
In general, the degree of expert judgement used and hence valuation uncertainty depends on the degree of liquidity of an instrument or input.
Where markets are liquid, little judgement is required. However, when the information regarding the liquidity in a particular market is not clear, a judgement may need to be made. For example, for an equity traded on an exchange, daily volumes of trading can be seen, but for an OTC derivative, assessing the liquidity of the market with no central exchange is more challenging.
The breadth and depth of the IPV data allows for a rules-based quality assessment to be made of market activity, liquidity, and pricing uncertainty, which assists with the process of allocation to an appropriate level. Where suitable independent pricing information is not readily available, the quality assessment will result in the instrument being assessed as level 3.
NatWest Group Annual Report on Form 20-F 2025 | 202 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
The table below shows the assets and liabilities held by NatWest Group split by fair value hierarchy level. Level 1 are considered the most liquid instruments, and level 3 the most illiquid, valued using expert judgement and so carry the most significant price uncertainty.
2025 | 2024 | ||||||||||||||||
| Level 1 | | Level 2 | | Level 3 | | Total | Level 1 | | Level 2 | | Level 3 | Total | ||||
| £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m | ||
Assets |
|
| |
| |
| |
| |
| |
| |||||
Trading assets |
| |
| |
| |
| |
| |
| |
| ||||
Loans |
| — |
| |
| |
| | — |
| |
| |
| | ||
Securities |
| |
| |
| — |
| | |
| |
| — |
| | ||
Derivatives |
|
|
|
|
| ||||||||||||
Interest rate | — | | | | — | | | | |||||||||
Foreign exchange | — | | | | — | | | | |||||||||
Other | — | | | | — | | | | |||||||||
Other financial assets |
|
|
|
|
|
|
| ||||||||||
Loans |
| — |
| |
| |
| | — |
| |
| |
| | ||
Securities |
| |
| |
| |
| | |
| |
| |
| | ||
Total financial assets held at fair value |
| |
| |
| | | |
| |
| | | ||||
As a % of total fair value assets | | % | | % | | % | | % | | % | | % | |||||
Liabilities |
|
|
|
|
|
|
| ||||||||||
Trading liabilities |
|
|
|
|
|
|
|
| |||||||||
Deposits |
| — |
| |
| — |
| | — |
| |
| — |
| | ||
Debt securities in issue |
| — |
| |
| — |
| | — |
| |
| — |
| | ||
Short positions |
| |
| |
| |
| | |
| |
| |
| | ||
Derivatives |
|
|
|
|
|
|
| ||||||||||
Interest rate | — | | | | — | | | | |||||||||
Foreign exchange | — | | | | — | | | | |||||||||
Other | — | | | | — | | | | |||||||||
Other financial liabilities |
|
|
|
|
|
|
| ||||||||||
Debt securities in issue |
| — |
| |
| |
| | — |
| |
| |
| | ||
Other deposits |
| — |
| |
| |
| | — |
| |
| |
| | ||
Subordinated liabilities |
| — |
| |
| — |
| | — |
| |
| — |
| | ||
Total financial liabilities held at fair value |
| |
| |
| |
| | |
| |
| |
| | ||
As a % of total fair value liabilities | | % | | % | | % | | % | | % | | % | |||||
(1) | Transfers between levels are deemed to have occurred at the beginning of the quarter in which the instrument was transferred. |
(2) | For an analysis of debt securities held at mandatory fair value through profit or loss by issuer as well as ratings and derivatives, by type and contract, refer to Risk and capital management – Credit risk. |
NatWest Group Annual Report on Form 20-F 2025 | 203 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
Valuation adjustments
When valuing financial instruments in the trading book, adjustments are made to mid-market valuations to cover bid-offer spread, funding and credit risk. These adjustments are presented in the table below:
| 2025 | | 2024 | |
Adjustment | £m | £m | ||
Funding valuation adjustments |
| ( |
| |
Credit valuation adjustments |
| |
| |
Bid–offer |
| |
| |
Product and deal specific |
| |
| |
Total |
| |
| |
The decrease in funding valuation adjustments was primarily driven by unwinding of a major portfolio. The decrease in credit valuation adjustments was driven by credit spreads tightening with the impacts of exposure changes largely offsetting. The decrease in bid-offer was driven by risk reduction and unwinding of a major portfolio. The decrease in product and deal specific was driven by the amortisation of deferred trade inception profits partially offset by new trading activity.
Funding valuation adjustments (FVA)
FVA represents an estimate of the adjustment that a market participant would make to incorporate funding costs and benefits that arise in relation to derivative exposures. FVA is calculated as a portfolio level adjustment and can result in either a funding charge (positive) or funding benefit (negative).
Funding levels are applied to estimated potential future exposures. For uncollateralised derivatives, the exposure reflects the future valuation of the derivative. For collateralised derivatives, the exposure reflects the difference between the future valuation of the derivative and the level of collateral posted.
Credit valuation adjustments (CVA)
CVA represents an estimate of the adjustment to fair value that is made to incorporate the counterparty credit risk inherent in derivative exposures. CVA is calculated on a portfolio basis reflecting an estimate of the amount a third party would charge to assume the credit risk.
Collateral held under a credit support agreement is factored into the CVA calculation. In such cases where NatWest Group holds collateral against counterparty exposures, CVA is held to the extent that residual risk remains.
FVA and CVA are actively managed by a credit and market risk hedging process, and therefore movements in CVA and FVA are partially offset by trading revenue on the hedges.
Bid-offer
Fair value positions are required to be marked to exit levels, represented by bid (long positions) or offer (short positions) levels. Non-derivative positions are typically marked directly to bid or offer prices. However derivative exposures are adjusted to exit levels by taking bid-offer reserves calculated on a portfolio basis. The reserving approach is based on current market bid-offer spreads and standard market bucketing of risk.
Bid-offer spreads vary by maturity and risk type to reflect different spreads in the market. For positions where there is no observable quote, the bid-offer spreads are widened in comparison to proxies to reflect reduced liquidity or observability.
Netting is applied on a portfolio basis to reflect the value at which NatWest Group believes it could exit the net risk of the portfolio, rather than the sum of exit costs for each of the portfolio’s individual trades. This is applied where the asset and liability positions are managed as a portfolio for risk and reporting purposes.
NatWest Group Annual Report on Form 20-F 2025 | 204 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
Product and deal specific
On initial recognition of financial assets and liabilities valued using valuation techniques which have a significant dependence on information other than observable market data, any difference between the transaction price and that derived from the valuation technique is deferred. Such amounts are recognised in the income statement over the life of the transaction, when market data becomes observable, or when the transaction matures or is closed out as appropriate. On 31 December 2025, net gains of £
Where system-generated valuations do not accurately reflect market prices, manual valuation adjustments are applied either at a position or portfolio level. Manual adjustments are subject to the scrutiny of independent control teams and are subject to monthly review by senior management.
Own credit
NatWest Group considers the effect of its own credit standing when valuing financial liabilities recorded at fair value. Own credit spread adjustments are made when valuing issued debt held at fair value, including issued structured notes. An own credit adjustment is applied to positions where it is believed that counterparties would consider NatWest Group's creditworthiness when pricing trades. Accumulated changes in fair value due to credit risk are £
NatWest Group Annual Report on Form 20-F 2025 | 205 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
Level 3 additional information
For illiquid assets and liabilities, classified as level 3, additional information is provided on the valuation techniques used and price sensitivity of the products to those inputs. This is to enable the reader to gauge the level of uncertainty that arises from positions with significant unobservable inputs or modelling parameters.
Level 3 ranges of unobservable inputs
The table below provides additional information on level 3 instruments and inputs. This shows the valuation technique used for the fair value calculation, the unobservable input and input range.
| 2025 |
| 2024 | |||||||||||
Financial instrument | | Valuation technique | | Unobservable inputs | | Units | | Low | | High | | Low | | High |
Trading assets and Other financial assets | ||||||||||||||
Loans |
| Price-based | Price | % | | | | | ||||||
Discount cash flow | Credit spreads | bps | | | | | ||||||||
Debt securities |
| Price-based | Price |
| % | — | | — | | |||||
Equity Shares | Price-based | Price | GBP | — | | — | | |||||||
Price-based | Price | % | — | — | — | | ||||||||
| Discount cash flow | Discount margin | % | — | — | | | |||||||
Net asset valuation | Fund NAV | % | | | | | ||||||||
Derivative assets and liabilities | ||||||||||||||
Credit derivatives | Credit derivative pricing | Credit spreads | bps | | | | | |||||||
| Option pricing | Correlation |
| % | ( | | ( | | ||||||
| | Volatility | % | | | | | |||||||
| | Upfront points |
| % | — | | — | | ||||||
| | Recovery rate |
| % | — | | — | | ||||||
Interest rate & FX |
| Option pricing | Correlation |
| % | ( | | ( | | |||||
derivatives | | Volatility | % | | | | | |||||||
Constant Prepayment Rate | % | | | | | |||||||||
Mean Reversion | % | — | | — | | |||||||||
Inflation volatility | % | | | | | |||||||||
Inflation rate | % | | | | | |||||||||
(1) | Valuation for private equity investments may be estimated by looking at past prices of similar stocks and from valuation statements where valuations are usually derived from earnings measures such as EBITDA or net asset value (NAV). Similarly, for equity or bond fund investments, prices may be estimated from valuation or credit statements using NAV or similar measures. |
(2) | NatWest Group does not have any material liabilities measured at fair value that are issued with an inseparable third-party credit enhancement. |
Level 3 sensitivities
The level 3 sensitivities presented on the next page are calculated at a trade or low-level portfolio basis rather than an overall portfolio basis. As individual sensitivities are aggregated with no reflection of the correlated nature between instruments, the overall portfolio sensitivity may not be accurately reflected. For example, some portfolios may be negatively correlated to others, where a downwards movement in one asset would produce an upwards movement in another. However, due to the additive presentation of the above figures this correlation impact cannot be displayed. As such, the actual potential downside sensitivity of the total portfolio may be less than the non-correlated sum of the additive figures as shown in the table on the next page.
NatWest Group Annual Report on Form 20-F 2025 | 206 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
Alternative assumptions
Reasonably plausible alternative assumptions of unobservable inputs are determined based on a specified target level of certainty of
Alternative assumptions are determined with reference to all available evidence including consideration of the following: quality of independent pricing information considering consistency between different sources, variation over time, perceived tradability or otherwise of available quotes; consensus service dispersion ranges; volume of trading activity and market bias (e.g. one-way inventory); day 1 profit or loss arising on new trades; number and nature of market participants; market conditions; modelling consistency in the market; size and nature of risk; length of holding of position; and market intelligence.
Other considerations
Whilst certain inputs used to calculate CVA, FVA and own credit adjustments are not based on observable market data, the uncertainty of these inputs is not considered to have a significant effect on the net valuation of the related derivative portfolios and issued debt.
As such, the fair value levelling of the derivative portfolios and issued debt is not determined by CVA, FVA or own credit inputs. In addition, any fair value sensitivity driven by these inputs is not included in the level 3 sensitivities presented.
The table below shows the favourable and unfavourable range of fair value of the level 3 assets and liabilities. This range incorporates the range of fair value inputs as described in the previous table.
2025 | 2024 | |||||||||||
Level 3 | Favourable | Unfavourable | Level 3 | Favourable | Unfavourable | |||||||
| £m | | £m | | £m | | £m | | £m | | £m | |
Assets | ||||||||||||
Trading assets | ||||||||||||
Loans |
| |
| — |
| — |
| |
| — |
| — |
Derivatives |
|
|
|
|
|
| ||||||
Interest rate |
| |
| |
| ( |
| |
| |
| ( |
Foreign exchange |
| |
| |
| ( |
| |
| — |
| — |
Other |
| |
| — |
| — |
| |
| — |
| — |
Other financial assets |
|
| ||||||||||
Loans |
| |
| — |
| ( |
| |
| — |
| ( |
Securities |
| |
| |
| ( |
| |
| |
| ( |
Total financial assets held at fair value |
| |
| |
| ( |
| |
| |
| ( |
|
| |
| |
| |
| |
| |
| |
Liabilities |
| |
| |
| |
| |
| |
| |
Trading liabilities |
| |
| |
| |
| |
| |
| |
Short positions |
| |
| — |
| — |
| |
| — |
| — |
Derivatives |
|
|
|
|
|
| ||||||
Interest rate | | | ( | | | ( | ||||||
Foreign exchange |
| |
| — |
| — |
| |
| — |
| — |
Other |
| |
| — |
| — |
| |
| |
| ( |
Other financial liabilities |
| |||||||||||
Debt securities in issue |
| |
| — |
| — |
| |
| — |
| — |
Other deposits |
| |
| — |
| ( |
| |
| |
| ( |
Total financial liabilities held at fair value |
| |
| |
| ( |
| |
| |
| ( |
NatWest Group Annual Report on Form 20-F 2025 | 207 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
Movement in level 3 assets and liabilities
The following table shows the movement in level 3 assets and liabilities in the year.
Other | Other | Other | Other | |||||||||||||
Derivatives | trading | financial | Total | Derivatives | trading | financial | Total | |||||||||
assets | assets (2) | assets (3) | assets | liabilities | liabilities (2) | liabilities | liabilities | |||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
At 1 January |
| |
| |
| |
| |
| |
| |
| | | |
Amounts recorded in the income statement (1) |
| ( |
| ( |
| |
| ( |
| ( |
| — |
| | ( | |
Amount recorded in the statement of comprehensive income |
| — |
| — |
| |
| |
| — |
| — |
| — | — | |
Level 3 transfers in |
| |
| — |
| — |
| |
| |
| — |
| — | | |
Level 3 transfers out |
| ( |
| — |
| ( |
| ( |
| ( |
| — |
| ( | ( | |
Purchases/originations |
| |
| |
| |
| |
| |
| — |
| — | | |
Settlements/other decreases |
| ( |
| ( |
| — |
| ( |
| ( |
| — |
| — | ( | |
Sales |
| ( |
| ( |
| ( |
| ( |
| ( |
| — |
| — | ( | |
Foreign exchange and other adjustments |
| |
| |
| — |
| |
| |
| — |
| | | |
At 31 December |
| |
| |
| |
| |
| |
| |
| | | |
Amounts recorded in the income statement in respect of balances held at period end - unrealised |
| ( |
| |
| |
| |
| ( |
| — |
| — | ( | |
2024 | | | | | | | | |||||||||
At 1 January | |
| |
| |
| |
| |
| |
| | | ||
Amounts recorded in the income statement (1) | ( |
| ( |
| |
| ( |
| ( |
| — |
| — | ( | ||
Amount recorded in the statement of comprehensive income | — |
| — |
| |
| |
| — |
| — |
| — | — | ||
Level 3 transfers in | |
| |
| |
| |
| |
| |
| | | ||
Level 3 transfers out | ( | ( | ( | ( | ( | ( | — | ( | ||||||||
Purchases/originations | |
| |
| |
| |
| |
| |
| — | | ||
Settlements/other decreases | ( |
| ( |
| ( |
| ( |
| ( |
| — |
| — | ( | ||
Sales | ( |
| — |
| ( |
| ( |
| ( |
| ( |
| — | ( | ||
Foreign exchange and other adjustments | — |
| ( |
| ( |
| ( |
| ( |
| — |
| — | ( | ||
At 31 December | | | | | | | | | ||||||||
Amounts recorded in the income statement in respect of balances held at period end - unrealised | | | | | | — | — | |
| (1) | There were net losses on trading assets and liabilities of £ |
| (2) | Other trading assets and other trading liabilities comprise assets and liabilities held at fair value in trading portfolios. |
| (3) | Other financial assets comprise fair value through other comprehensive income, designated as at fair value through profit or loss and other fair value through profit or loss. |
NatWest Group Annual Report on Form 20-F 2025 | 208 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
Fair value of financial instruments measured at amortised cost on the balance sheet
The following table shows the carrying value and fair value of financial instruments measured at amortised cost on the balance sheet.
| | | | | | Items where | ||||||
fair value | ||||||||||||
Carrying | Fair | Fair value hierarchy level | approximates | |||||||||
value | value | Level 1 | Level 2 | Level 3 | carrying value | |||||||
2025 | £bn | £bn | £bn | £bn | £bn | £bn | ||||||
Financial assets |
|
|
|
|
|
| ||||||
Cash and balances at central banks |
| | | — | — | — | | |||||
Settlement balances | | | — | — | — | | ||||||
Loans to banks |
| | | — | | | | |||||
Loans to customers | | | — | | | — | ||||||
Other financial assets - securities |
| | | | | | — | |||||
2024 | ||||||||||||
Financial assets |
| |||||||||||
Cash and balances at central banks |
| | | — | — | — | | |||||
Settlement balances |
| | | — | — | — | | |||||
Loans to banks | | | — | | | | ||||||
Loans to customers |
| | | — | | | — | |||||
Other financial assets - securities |
| | | | | | — | |||||
2025 |
| |||||||||||
Financial liabilities |
| |||||||||||
Bank deposits |
| |
| |
| — |
| |
| |
| |
Customer deposits |
| |
| |
| — |
| |
| |
| |
Settlement balances |
| |
| |
| — |
| — |
| — |
| |
Other financial liabilities | ||||||||||||
- debt securities in issue | | | — | | | — | ||||||
Subordinated liabilities |
| |
| |
| — |
| |
| — |
| — |
Notes in circulation | | | — | — | — | | ||||||
2024 | ||||||||||||
Financial liabilities |
|
|
|
|
|
| ||||||
Bank deposits | |
| |
| — |
| |
| |
| | |
Customer deposits |
| |
| |
| — |
| |
| |
| |
Settlement balances |
| |
| |
| — |
| — |
| — |
| |
Other financial liabilities | ||||||||||||
- debt securities in issue |
| | | — | | | — | |||||
Subordinated liabilities |
| |
| |
| — |
| |
| — |
| — |
Notes in circulation |
| | | — | — | — | | |||||
The assumptions and methodologies underlying the calculation of fair values of financial instruments at the balance sheet date are as follows:
Short-term financial instruments
For certain short-term financial instruments, including but not limited to, cash and balances at central banks, settlement balances, loans with short-term maturities, notes in circulation and customer demand deposits, carrying value is deemed a reasonable approximation of fair value.
NatWest Group Annual Report on Form 20-F 2025 | 209 |
Notes to the consolidated financial statements continued
10 Financial instruments – valuation continued
Loans to banks and customers
In estimating the fair value of net loans to customers and banks measured at amortised cost, NatWest Group's loans are segregated into appropriate portfolios reflecting the characteristics of the constituent loans. Two principal methods are used to estimate fair value:
| (a) | Contractual cash flows that are discounted using a market discount rate that incorporates the current spread for the borrower or where this is not observable, the spread for borrowers of a similar credit standing. |
| (b) | Expected cash flows (unadjusted for credit losses) are discounted at the current offer rate for the same or similar products. The current methodology caps all loan values at par rather than modelling clients' option to repay loans early. This approach is adopted for lending portfolios in Retail Banking, Commercial & Institutional (SME loans) and Private Banking & Wealth Management in order to reflect the homogeneous nature of these portfolios. |
Debt securities and subordinated liabilities
Most debt securities are valued using quoted prices in active markets or from quoted prices of similar financial instruments. The remaining population is valued using discounted cashflows at current offer rates.
Bank and customer deposits
Fair values of deposits are estimated using discounted cash flow valuation techniques. Where required, methodologies can be revised as additional information and valuation inputs become available.
NatWest Group Annual Report on Form 20-F 2025 | 210 |
Notes to the consolidated financial statements continued
11 Financial instruments - maturity analysis
This note shows the maturity profile of NatWest Group’s financial assets and liabilities by contractual date of maturity and contractual cash flows. |
Remaining maturity
The following table shows the residual maturity of financial instruments, based on contractual date of maturity.
2025 | 2024 | |||||||||||
Less than | More than | Less than | More than | |||||||||
12 months | 12 months | Total | 12 months | 12 months | Total | |||||||
| | £m | | £m | | £m | | £m | | £m | | £m |
Assets | ||||||||||||
Cash and balances at central banks |
| |
| — |
| |
| |
| — |
| |
Trading assets |
| |
| |
| |
| |
| |
| |
Derivatives |
| |
| |
| |
| |
| |
| |
Settlement balances |
| |
| — |
| |
| |
| — |
| |
Loans to banks - amortised cost | | | | | | | ||||||
Loans to customers - amortised cost | | | | | | | ||||||
Other financial assets |
| |
| |
| |
| |
| |
| |
Liabilities |
| |||||||||||
Bank deposits |
| | | | | | | |||||
Customer deposits |
| |
| |
| |
| |
| |
| |
Settlement balances |
| |
| — |
| |
| |
| — |
| |
Trading liabilities |
| |
| |
| |
| |
| |
| |
Derivatives | | | | | | | ||||||
Other financial liabilities |
| |
| |
| |
| |
| |
| |
Subordinated liabilities |
| |
| |
| |
| |
| |
| |
Notes in circulation | | — | | | — | | ||||||
Lease liabilities |
| |
| |
| |
| |
| |
| |
Assets and liabilities by contractual cash flows up to
The tables on the following page show the contractual undiscounted cash flows receivable and payable, up to a period of
Financial assets have been reflected in the time band of the latest date on which they could be repaid, unless earlier repayment can be demanded by NatWest Group. Financial liabilities are included at the earliest date on which the counterparty can require repayment, regardless of whether or not such early repayment results in a penalty. If the repayment of a financial instrument is triggered by, or is subject to, specific criteria such as market price hurdles being reached, the asset is included in the time band that contains the latest date on which it can be repaid, regardless of early repayment. The liability is included in the time band that contains the earliest possible date on which the conditions could be fulfilled, without considering the probability of the conditions being met.
For example, if a structured note is automatically prepaid when an equity index exceeds a certain level, the cash outflow will be included in the less than three months period, whatever the level of the index at the year end. The settlement date of debt securities in issue, issued by certain securitisation vehicles consolidated by NatWest Group, depends on when cash flows are received from the securitised assets. Where these assets are prepayable, the timing of the cash outflow relating to securities assumes that each asset will be prepaid at the earliest possible date. As the repayments of assets and liabilities are linked, the repayment of assets in securitisations is shown on the earliest date that the asset can be prepaid, as this is the basis used for liabilities.
The principal amounts of financial assets and liabilities that are repayable after
NatWest Group Annual Report on Form 20-F 2025 | 211 |
Notes to the consolidated financial statements continued
11 Financial instruments - maturity analysis continued
The maturity of guarantees and commitments is based on the earliest possible date they would be drawn in order to evaluate NatWest Group's liquidity position.
MFVTPL assets of £
| 0-3 months | | 3-12 months | | 1-3 years | | 3-5 years | | 5-10 years | | 10-20 years | |
2025 | £m | £m | £m | £m | £m | £m | ||||||
Assets by contractual maturity up to 20 years |
|
|
|
|
|
| ||||||
Cash and balances at central banks |
| |
| — |
| — |
| — |
| — |
| — |
Derivatives held for hedging | | | | | | | ||||||
Settlement balances |
| | — | — | — | — | — | |||||
Loans to banks - amortised cost |
| |
| |
| |
| |
| |
| |
Loans to customers - amortised cost |
| |
| |
| |
| |
| |
| |
Other financial assets (1) | | | | | | | ||||||
Finance lease |
| — |
| |
| |
| |
| |
| |
| | |
| |
| |
| |
| | ||
Liabilities by contractual maturity up to 20 years |
|
| ||||||||||
Bank deposits |
| |
| |
| |
| |
| |
| — |
Customer deposits |
| |
| |
| |
| |
| — |
| |
Settlement balances |
| |
| — |
| — |
| — |
| — |
| — |
Derivatives held for hedging |
| |
| |
| |
| |
| |
| |
Other financial liabilities |
| |
| |
| |
| |
| |
| |
Subordinated liabilities | | | | | | | ||||||
Other liabilities - Notes in circulation | | — | — | — | — | — | ||||||
Lease liabilities |
| | |
| |
| |
| |
| | |
| |
| |
| |
| |
| |
| | |
Guarantees and commitments - notional amount (2) |
| |||||||||||
Guarantees (3) |
| |
| — | — | — | — | — | ||||
Commitments (4) |
| |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| — |
For the notes to this table refer to the following page.
NatWest Group Annual Report on Form 20-F 2025 | 212 |
Notes to the consolidated financial statements continued
11 Financial instruments - maturity analysis continued
| 0-3 months | | 3-12 months | | 1-3 years | | 3-5 years | | 5-10 years | | 10-20 years | |
2024 | | £m | | £m | | £m | | £m | | £m | | £m |
Assets by contractual maturity up to 20 years |
|
|
|
|
|
| ||||||
Cash and balances at central banks |
| |
| — |
| — |
| — |
| — |
| — |
Derivatives held for hedging |
| | | | | | | |||||
Settlement balances | | — | — | — | — | — | ||||||
Loans to banks - amortised cost |
| |
| |
| |
| |
| |
| |
Loans to customers - amortised cost |
| |
| |
| |
| |
| |
| |
Other financial assets (1) |
| | | | | | | |||||
Finance lease | |
| |
| |
| |
| |
| | |
| |
| |
| |
| |
| | |||
Liabilities by contractual maturity up to 20 years |
|
| ||||||||||
Bank deposits |
| |
| |
| |
| |
| |
| — |
Customer deposits |
| |
| |
| |
| |
| — |
| |
Settlement balances |
| |
| — |
| — |
| — |
| — |
| — |
Derivatives held for hedging |
| |
| |
| |
| |
| |
| |
Other financial liabilities |
| |
| |
| |
| |
| |
| |
Subordinated liabilities |
| | | | | | | |||||
Other liabilities - Notes in circulation | | — | — | — | — | — | ||||||
Lease liabilities | | |
| |
| |
| |
| | ||
| |
| |
| |
| |
| |
| | |
Guarantees and commitments - notional amount (2) |
| |||||||||||
Guarantees (3) |
| |
| — | — | — | — | — | ||||
Commitments (4) |
| |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| — |
| (1) | Other financial assets exclude equity shares. |
| (2) | Refer to Note 25 Memorandum items - Contingent liabilities and commitments. |
(3) | NatWest Group is only called upon to satisfy a guarantee when the guaranteed party fails to meet its obligations. NatWest Group expects most guarantees it provides to expire unused. |
(4) | NatWest Group has given commitments to provide funds to customers under undrawn formal facilities, credit lines and other commitments to lend subject to certain conditions being met by the counterparty. NatWest Group does not expect all facilities to be drawn, and some may lapse before drawdown. |
NatWest Group Annual Report on Form 20-F 2025 | 213 |
Notes to the consolidated financial statements continued
12 Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities held at fair value and classified as held-for-trading. Financial instruments are classified as held-for-trading if they are held for the purpose of selling or repurchasing them in the short term, to make a spread between purchase and sale price or held to take advantage of movements in prices and yields. For accounting policy information refer to Accounting policy 3.8. |
2025 | 2024 | |||
Assets | | £m | | £m |
Loans |
| |
| |
Reverse repos |
| |
| |
Collateral given |
| |
| |
Other loans |
| |
| |
Total loans |
| |
| |
Securities |
|
| ||
Central and local government |
|
| ||
- UK |
| |
| |
- US |
| |
| |
- Other |
| |
| |
Financial institutions and corporate |
| |
| |
Total securities |
| |
| |
Total |
| |
| |
Liabilities |
|
| ||
Deposits |
|
| ||
Repos |
| |
| |
Collateral received |
| |
| |
Other deposits |
| |
| |
Total deposits |
| |
| |
Debt securities in issue |
| |
| |
Short positions |
|
| ||
Central and local government | ||||
- UK | | | ||
- US | | | ||
- Other | | | ||
Financial institutions and Corporate | | | ||
Total short positions | | | ||
Total |
| |
| |
NatWest Group Annual Report on Form 20-F 2025 | 214 |
Notes to the consolidated financial statements continued
13 Derivatives
Derivative is a term covering a wide range of financial instruments that derive their fair value from an underlying rate or price, for example interest rates or exchange rates (the underlying). NatWest Group uses derivatives as a part of its trading activities, to manage its own risks such as interest rate, foreign exchange, or credit risk and in certain customer transactions. This note shows contracted volumes of derivatives, how they are used for hedging purposes and the effects of the application of hedge accounting. For accounting policy information refer to Accounting policies 3.8 and 3.11. |
| Notional | | Asset | Liability | ||||||||||||||
Traded on | Traded on | Traded on | ||||||||||||||||
recognised | Traded over | recognised | Traded over | recognised | Traded over | |||||||||||||
exchanges | the counter | Total | exchanges | the counter | Total | exchanges | the counter | Total | ||||||||||
2025 | £bn | £bn | £bn | £m | £m | £m | £m | £m | £m | |||||||||
Interest rate | | | | | | | | | | | | | | — | | | | |
- Swaps |
| — |
| |
| |
| — |
| |
| |
| — |
| |
| |
- Options |
| |
| |
| |
| |
| |
| |
| — |
| |
| |
- Forwards and futures |
| |
| |
| |
| — |
| — |
| — |
| — |
| — |
| — |
Exchange rate |
| |
| |
| |
| — |
| |
| |
| |
| |
| |
- Swaps |
| — |
| |
| |
| — |
| |
| |
| — |
| |
| |
- Options |
| |
| |
| |
| — |
| |
| |
| |
| |
| |
- Spot, forwards and futures |
| — |
| |
| |
| — |
| |
| |
| — |
| |
| |
Credit |
| — |
| |
| |
| — |
| |
| |
| — |
| |
| |
Equity and commodity |
| — |
| |
| |
| — |
| — |
| — |
| — |
| — |
| — |
Total |
| |
| |
| |
| |
| |
| |
| |
| |
| |
2024 |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Interest rate |
| | | | | | | | | | | | | | | | | |
- Swaps |
| — |
| |
| |
| — |
| |
| |
| — |
| |
| |
- Options |
| |
| |
| |
| |
| |
| |
| |
| |
| |
- Forwards and futures |
| |
| |
| |
| — |
| — |
| — |
| — |
| — |
| — |
Exchange rate |
| |
| |
| |
| |
| |
| |
| |
| |
| |
- Swaps |
| — |
| |
| |
| — |
| |
| |
| — |
| |
| |
- Options |
| |
| |
| |
| |
| |
| |
| |
| |
| |
- Spot, forwards and futures |
| — |
| |
| |
| — |
| |
| |
| — |
| |
| |
Credit |
| — |
| |
| |
| — |
| |
| |
| — |
| |
| |
Equity and commodity |
| — |
| |
| |
| — |
| — |
| — |
| — |
| — |
| — |
Total |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Included in the table above is the notional amount of £
Hedge accounting using derivatives
NatWest Group applies hedge accounting to reduce the accounting mismatch caused in the income statement by using derivatives to hedge the following risks: interest rate, foreign exchange and the foreign exchange risk associated with net investment in foreign operations.
NatWest Group Annual Report on Form 20-F 2025 | 215 |
Notes to the consolidated financial statements continued
13 Derivatives continued
NatWest Group’s interest rate hedging relates to the management of NatWest Group’s non-trading structural interest rate risk, caused by the mismatch between fixed interest rates and floating interest rates on its financial instruments. NatWest Group manages this risk within approved limits. Residual risk positions are hedged with derivatives, principally interest rate swaps.
Cash flow hedges of interest rate risk relate to exposures to the variability in future interest payments and receipts due to the movement of interest rates on forecast transactions and on financial assets and financial liabilities. This variability in cash flows is hedged by interest rate swaps, which convert variable cash flows into fixed. For these cash flow hedge relationships, the hedged items are actual and forecast variable interest rate cash flows arising from financial assets and financial liabilities with interest rates linked to the relevant interest rates, most notably SOFR, EURIBOR, the European Central Bank deposit rate, SONIA and the Bank of England Official Bank Rate. The variability in cash flows due to movements in the relevant interest rate is hedged; this risk component is identified using the risk management systems of NatWest Group and encompasses the majority of cash flow variability risk.
Suitable larger fixed rate financial instruments are subject to fair value hedging in line with documented risk management strategies.
Fair value hedges of interest rate risk involve interest rate swaps transforming the fixed interest rate risk in financial assets and financial liabilities to floating. The hedged risk is the risk of changes in the hedged item’s fair value attributable to changes in the interest rate risk component of the hedged item. The significant interest rates identified as risk components are SOFR, EURIBOR, ESTR and SONIA. These risk components are identified using the risk management systems of NatWest Group and encompass the majority of the hedged item’s fair value risk.
NatWest Group hedges the exchange rate risk of its net investment in foreign currency denominated operations with currency borrowings and forward foreign exchange contracts.
NatWest Group reviews the value of the investments’ net assets, executing hedges where appropriate to reduce the sensitivity of capital ratios to foreign exchange rate movement. Hedge accounting relationships will be designated where required.
Exchange rate risk also arises in NatWest Group where payments are denominated in currencies other than the functional currency. Residual risk positions are hedged with foreign exchange derivatives, fixing the exchange rate the payments will be settled in. The derivatives are documented as cash flow hedges.
For all cash flow hedging, fair value hedge relationships and net investment hedging, NatWest Group determines that there is an economic relationship between the hedged item and hedging instrument via assessing the initial and ongoing effectiveness by comparing movements in the fair value of the expected highly probable forecast interest cash flows/fair value of the hedged item attributable to the hedged risk with movements in the fair value of the expected changes in cash flows from the hedging instrument. The method used for comparing movements is either regression testing, or the dollar offset method. The method for testing effectiveness and the period over which the test is performed depends on the applicable risk management strategy and is applied consistently to each risk management strategy. Hedge effectiveness is assessed on a cumulative basis and the determination of effectiveness is in line with the requirements of IAS 39.
NatWest Group uses either the actual ratio between the hedged item and hedging instrument(s) or one that minimises hedge ineffectiveness to establish the hedge ratio for hedge accounting. Hedge ineffectiveness is measured in line with the requirements of IAS 39 and recognised in the income statement as it arises.
NatWest Group Annual Report on Form 20-F 2025 | 216 |
Notes to the consolidated financial statements continued
13 Derivatives continued
Derivatives in hedge accounting relationships
Included in the table below are derivatives held for hedging purposes as follows.
2025 | 2024 | |||||||||||||||
Changes in fair | Changes in fair | |||||||||||||||
value used for | value used for | |||||||||||||||
Notional | Assets | Liabilities | hedge ineffectiveness (1) | Notional | Assets | Liabilities | hedge ineffectiveness (1) | |||||||||
| £bn | | £m | | £m | | £m | | £bn | | £m | | £m | | £m | |
Fair value hedging |
| |
| |
| |
| |
| | ||||||
Interest rate contracts (2) |
| |
| |
| | |
| |
| |
| | | ||
|
|
|
| |||||||||||||
Cash flow hedging |
|
|
|
|
|
|
|
|
|
| ||||||
Interest rate contracts |
| |
| |
| | |
| |
| |
| | | ||
Exchange rate contracts |
| |
| |
| | ( |
| |
| |
| | | ||
|
|
|
|
|
| |||||||||||
Net investment hedging |
|
|
|
|
|
|
|
| ||||||||
Exchange rate contracts (3) |
| |
| |
| | ( |
| |
| |
| | | ||
| | | | | | | | |||||||||
IFRS netting and clearing house settlements | ( | ( | ( | ( | ||||||||||||
|
| |
| |
|
| |
| | |||||||
| (1) | The change in fair value used for hedge ineffectiveness includes instruments that were derecognised in the year. |
| (2) | The hedged risk includes inflation risk. |
| (3) | In addition to the derivative hedging instruments above, NatWest Group held notionals of £ |
Hedge ineffectiveness
Hedge ineffectiveness recognised in other operating income comprises.
| 2025 | | 2024 | | 2023 | |
£m | £m | £m | ||||
Fair value hedging |
|
| |
| | |
Loss on hedged items attributable to the hedged risk |
| ( |
| ( |
| ( |
Gain on the hedging instruments |
| |
| |
| |
Fair value hedging ineffectiveness |
| ( |
| |
| |
Cash flow hedging | ||||||
Interest rate risk | ( | ( | | |||
Cash flow hedging ineffectiveness |
| ( |
| ( |
| |
Total |
| ( |
| |
| |
The main sources of ineffectiveness for interest rate risk hedge accounting relationships are:
| ● | The effect of the counterparty credit risk on the fair value of the interest rate swap which is not reflected in the fair value of the hedged item attributable to the change in interest rate (fair value hedge); |
| ● | Differences in the repricing basis between the hedging instrument and hedged cash flows (cash flow hedge); and |
| ● | Upfront present values on the hedging derivatives where hedge accounting relationships have been designated after the trade date (cash flow hedge and fair value hedge). |
NatWest Group Annual Report on Form 20-F 2025 | 217 |
Notes to the consolidated financial statements continued
13 Derivatives continued
Maturity of notional hedging contracts
The following table shows the period in which the notional of hedging contract ends.
| 0-3 months | | 3-12 months | | 1-3 years | | 3-5 years | | 5-10 years | | Over 10 years | | Total | |
2025 | £bn | £bn | £bn | £bn | £bn | £bn | £bn | |||||||
Fair value hedging | ||||||||||||||
Interest rate risk (1) | ||||||||||||||
Hedging assets | | | | | | | | |||||||
Hedging liabilities | | | | | | | | |||||||
2024 | ||||||||||||||
Fair value hedging | ||||||||||||||
Interest rate risk (1) | ||||||||||||||
Hedging assets | | | | | | | | |||||||
Hedging liabilities | | | | | | | | |||||||
2025 | ||||||||||||||
Cash flow hedging | ||||||||||||||
Interest rate risk | ||||||||||||||
Hedging assets | | | | | | — | | |||||||
Hedging liabilities | | | | | | | | |||||||
Exchange rate risk | ||||||||||||||
Hedging assets | | | — | — | — | — | | |||||||
Hedging liabilities | — | | | | — | — | | |||||||
2024 | ||||||||||||||
Cash flow hedging | ||||||||||||||
Interest rate risk | ||||||||||||||
Hedging assets | | | | | | — | | |||||||
Hedging liabilities | | | | | | | | |||||||
Exchange rate risk | ||||||||||||||
Hedging assets | | | | — | — | — | | |||||||
Hedging liabilities | | | | | — | — | |
| (1) | The hedged risk includes inflation risk. |
Average fixed interest rates
The following table shows average fixed rate for cash flow hedges, interest rate risk.
| 0-3 months | | 3-12 months | | 1-3 years | | 3-5 years | | 5-10 years | | Over 10 years | | Total | |
2025 | % | % | % | % | % | % | % | |||||||
Average fixed interest rate |
| |
| |
| |
| |
| |
| |
| |
Hedging assets |
| |
| |
| |
| |
| |
| |
| |
Hedging liabilities |
| |
| |
| |
| |
| |
| |
| |
2024 |
| |
| |
| |
| |
| |
| |
| |
Average fixed interest rate |
| |
| |
| |
| |
| |
| |
| |
Hedging assets |
| |
| |
| |
| |
| |
| |
| |
Hedging liabilities |
| |
| |
| |
| |
| |
| |
| |
NatWest Group Annual Report on Form 20-F 2025 | 218 |
Notes to the consolidated financial statements continued
13 Derivatives continued
Average foreign exchange rates
For cash flow hedging of exchange rate risk, the average foreign exchange rates applicable across the relationships were as below for the main currencies hedged.
| 2025 | | 2024 | |
INR/GBP |
| |
| |
USD/GBP |
| |
| |
JPY/GBP |
| |
| |
EUR/GBP |
| |
| — |
JPY/USD |
| |
| |
NOK/USD |
| |
| |
AUD/USD | | | ||
CHF/USD | | | ||
EUR/USD |
| |
| |
Analysis of hedged items and related hedging instruments
The table below analyses assets and liabilities subject to hedging derivatives.
| | | Changes in fair | |||
Carrying value | Impact on | value used as | ||||
of hedged | hedged items | a basis to | ||||
assets and | included in | determine | ||||
liabilities | carrying value | ineffectiveness (1) | ||||
2025 | £m | £m | £m | |||
Fair value hedging - interest rate (2) | ||||||
Loans to banks and customers - amortised cost | | ( | | |||
Other financial assets - securities | | | — | |||
Total (3) | | ( | | |||
Bank and customer deposits | | | | |||
Other financial liabilities - debt securities in issue (5) | | ( | ( | |||
Subordinated liabilities | | ( | ( | |||
Total | | ( | ( | |||
2024 | ||||||
Fair value hedging - interest rate (2) | ||||||
Loans to banks and customers - amortised cost | | ( | ( | |||
Other financial assets - securities | | ( | ( | |||
Total (3) | | ( | ( | |||
Bank and customer deposits | | — | ( | |||
Other financial liabilities - debt securities in issue (5) | | ( | ( | |||
Subordinated liabilities | | ( | ( | |||
Total | | ( | ( |
For the notes to this table refer to the following page.
NatWest Group Annual Report on Form 20-F 2025 | 219 |
Notes to the consolidated financial statements continued
13 Derivatives continued
Changes in fair value | ||||||
Carrying value of | used as a basis to | |||||
hedged assets and liabilities | determine ineffectiveness (1) | |||||
2025 | £m | £m | ||||
Cash flow hedging - interest rate | ||||||
Loans to banks and customers - amortised cost (4) | | ( | ||||
Other financial assets - securities | | ( | ||||
Total | | ( | ||||
Bank and customer deposits | | | ||||
Other financial liabilities - debt securities in issue | | — | ||||
Total | | | ||||
Cash flow hedging - exchange rate | ||||||
Loans to banks and customers - amortised cost (4) | | — | ||||
Other financial assets - securities | | — | ||||
Total | | — | ||||
Other financial liabilities - debt securities in issue | | ( | ||||
Other | | | ||||
Total | | | ||||
2024 | ||||||
Cash flow hedging - interest rate |
| |
|
| ||
Loans to banks and customers - amortised cost (4) |
|
| |
| ( | |
Other financial assets - securities |
|
| |
| ( | |
Total |
|
| |
| ( | |
Bank and customer deposits | | ( | ||||
Other financial liabilities - debt securities in issue | | — | ||||
Total | | ( | ||||
Cash flow hedging - exchange rate | ||||||
Loans to banks and customer - amortised cost (4) |
|
| |
| — | |
Other financial assets - securities | | — | ||||
Total | | — | ||||
Other financial liabilities - debt securities in issue | | ( | ||||
Other | | — | ||||
Total |
|
| |
| ( |
| (1) | The change in fair value used for hedge ineffectiveness includes instruments that were derecognised in the year. |
| (2) | The hedged risk includes inflation risk. |
| (3) | Carrying values include £ |
| (4) | Includes cash and balances at central banks. |
| (5) | The carrying value include £ |
NatWest Group Annual Report on Form 20-F 2025 | 220 |
Notes to the consolidated financial statements continued
13 Derivatives continued
Analysis of cash flow and foreign exchange hedge reserve
The following table shows an analysis of the pre-tax cash flow hedge reserve and foreign exchange hedge reserve.
2025 | 2024 | |||||||
Foreign | Foreign | |||||||
Cash flow | exchange | Cash flow | exchange | |||||
hedge reserve | hedge reserve | hedge reserve | hedge reserve | |||||
| £m | | £m | | £m | | £m | |
Continuing |
|
|
|
| ||||
Interest rate risk |
| ( |
| — |
| ( |
| — |
Foreign exchange risk |
| | ( | ( | | |||
De-designated |
|
|
|
| ||||
Interest rate risk |
| ( |
| — |
| ( |
| — |
Foreign exchange risk |
| — |
| ( |
| |
| ( |
Total |
| ( |
| ( |
| ( |
| ( |
2025 | 2024 | |||||||
Foreign | Foreign | |||||||
Cash flow | exchange hedge | Cash flow | exchange hedge | |||||
| hedge reserve |
| reserve |
| hedge reserve |
| reserve | |
| £m |
| £m |
| £m |
| £m | |
Amount recognised in equity | ||||||||
Interest rate risk | | | — | | ( | — | ||
Foreign exchange risk |
| |
| ( |
| |
| |
Total |
| |
| ( |
| ( |
| |
Amount transferred from equity to earnings | ||||||||
Interest rate risk to net interest income |
| |
| — |
| |
| — |
Foreign exchange risk to net interest income | ( | — | ( | — | ||||
Foreign exchange risk to non interest income | — | ( | — | | ||||
Foreign exchange risk to operating expenses |
| |
| — |
| |
| — |
Total |
| |
| ( |
| |
| |
NatWest Group Annual Report on Form 20-F 2025 | 221 |
Notes to the consolidated financial statements continued
14 Loan impairment provisions
There is a risk that customers and counterparties fail to meet their contractual obligation to settle outstanding amounts, for which we hold expected credit losses (ECL). The calculation of ECL considers historical, current, and forward-looking information to determine the amount we do not expect to recover. It considers losses on both defaulted exposures and performing exposures that may default in future. ECL is recognised on drawn exposures, loans commitments, and contingent liabilities. For accounting policy information refer to Accounting policy 2.3. Further disclosures on credit risk and information on ECL methodology are shown from pages 187 to 233. |
Loan exposure and impairment metrics
The table below summarises loans and credit impairment measures within the scope of IFRS 9 Expected credit loss framework.
| 2025 | 2024 | ||
| | £m | | £m |
Loans - amortised cost and FVOCI (1,2) |
| |
| |
Stage 1 |
| |
| |
Stage 2 |
| |
| |
Stage 3 |
| |
| |
Of which: individual | | | ||
Of which: collective |
| |
| |
| | |||
ECL provisions (3) |
|
| ||
- Stage 1 |
| |
| |
- Stage 2 |
| |
| |
- Stage 3 |
| |
| |
Of which: individual | | | ||
Of which: collective | | | ||
| |
| | |
ECL provision coverage (4) |
|
| ||
- Stage 1 (%) | |
| | |
- Stage 2 (%) | |
| | |
- Stage 3 (%) | |
| | |
| |
| | |
Continuing operations | ||||
Impairment (releases)/losses |
|
| ||
ECL charge (5) | | | ||
Stage 1 | ( | ( | ||
Stage 2 | | | ||
Stage 3 | | | ||
Of which: individual | | | ||
Of which: collective | | | ||
Amounts written off |
| |
| |
Of which: individual | | | ||
Of which: collective |
| |
| |
(1) | The table shows gross loans only and excludes amounts that are outside the scope of the ECL framework. Refer to Financial instruments within the scope of the IFRS 9 ECL framework for further details. Other financial assets within the scope of the IFRS 9 ECL framework were cash and balances at central banks totalling £ |
(2) | Includes loans to customers and banks. |
(3) | Includes £ |
(4) | ECL provisions coverage is calculated as ECL provisions divided by loans – amortised cost and FVOCI. It is calculated on loans and total ECL provisions, including ECL for other (non-loan) assets and unutilised exposure. Some segments with a high proportion of debt securities or unutilised exposure may result in a not meaningful coverage ratio. |
(5) | Includes a £ |
NatWest Group Annual Report on Form 20-F 2025 | 222 |
Notes to the consolidated financial statements continued
14 Loan impairment provisions continued
Credit risk enhancement and mitigation
For information on Credit risk enhancement and mitigation held as security, refer to Risk and capital management – Credit risk enhancement and mitigation section.
Critical accounting policy: Loan impairment provisions
Accounting policy 2.3 sets out how the expected loss approach is applied. At 31 December 2025, impairment provisions amounted to £
The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at the loan's original effective interest rate.
The measurement of credit impairment under the IFRS expected loss model depends on management's assessment of any potential deterioration in the creditworthiness of the borrower, its modelling of expected performance and the application of economic forecasts. All three elements require judgements that are potentially significant to the estimate of impairment losses. For further information and sensitivity analysis, refer to Risk and capital management - Measurement uncertainty and ECL sensitivity analysis section.
IFRS 9 models
Refer to Credit risk – IFRS 9 models section for further details.
Approach for multiple economic scenarios (MES)
The base scenario plays a greater part in the calculation of ECL than the approach to MES. Refer to Credit risk - Economic loss drivers - Probability weightings of scenarios section for further details.
NatWest Group Annual Report on Form 20-F 2025 | 223 |
Notes to the consolidated financial statements continued
15 Other financial assets
Other financial assets consist of debt securities, equity shares and loans that are not held for trading. Balances consist of local and central government securities, a part of NatWest Group’s liquidity portfolio. For accounting policy information refer to Accounting policy 3.8. |
Debt securities | ||||||||||||||||
Central and local government | Other | Equity | ||||||||||||||
UK | US | Other | debt | Total | shares | Loans | Total | |||||||||
2025 | | £m | | £m | | £m | | £m | | £m | | £m | | £m | | £m |
Mandatory fair value through profit or loss |
| — |
| — |
| — |
| |
| |
| | |
| | |
Designated at fair value | — | — | — | | | — | — | | ||||||||
Fair value through other comprehensive income (1) |
| |
| |
| |
| |
| |
| | |
| | |
Amortised cost |
| |
| |
| |
| |
| |
| — | — |
| | |
Total |
| |
| |
| |
| |
| |
| | |
| | |
2024 | ||||||||||||||||
Mandatory fair value through profit or loss | — |
| — |
| — |
| |
| |
| | |
| | ||
Designated at fair value | — | — | | | | — | — | | ||||||||
Fair value through other comprehensive income (1) |
| |
| |
| |
| |
| |
| | |
| | |
Amortised cost |
| |
| |
| |
| |
| |
| — | — |
| | |
Total |
| |
| |
| |
| |
| |
| | |
| | |
(1) | Upon initial recognition, NatWest Group occasionally irrevocably designates some of its equity investments as equity instruments at FVOCI when they meet the definition of equity under IAS 32 Financial instruments: presentation, are not held for trading or they are held for strategic purposes. Such classification is determined on an instrument-by-instrument basis. Gains and losses on these equity instruments are not recycled to the income statement and dividends are recognised in profit or loss except when they represent a recovery of part of the cost of the instrument, in which case such gains are recorded in OCI. Equity instruments at FVOCI are not subject to an impairment assessment. |
There were
NatWest Group disposed of equity shares in Visa Inc £
Dividends received on FVOCI equity shares during 2025 includes £
NatWest Group Annual Report on Form 20-F 2025 | 224 |
Notes to the consolidated financial statements continued
16 Intangible assets
Intangible assets, such as internally generated software and goodwill generated on business combinations, are not physical in nature. This note presents the cost of the assets, which is the amount NatWest Group initially paid or incurred, additions and disposals during the year, and any amortisation or impairment. Amortisation is a charge that reflects the usage of the asset and impairment is a reduction in value arising from specific events identified during the year. For accounting policy information refer to Accounting policies 3.4 and 3.5. |
2025 | 2024 | |||||||||||
| Goodwill | | Other (1) | | Total | | Goodwill | | Other (1) | | Total | |
Cost | £m | £m | £m | £m | £m | £m | ||||||
At 1 January |
| | | |
| | | | ||||
Currency translation and other adjustments |
| — |
| |
| |
| ( |
| ( |
| ( |
Acquisitions of companies and businesses | — | — | — | — | — | — | ||||||
Additions |
| — |
| |
| |
| — |
| |
| |
Disposals and write-off of fully amortised assets |
| — |
| ( |
| ( |
| — |
| ( |
| ( |
Reclassifications to assets held for sale (2) | ( | ( | ( | — | — | — | ||||||
At 31 December |
| | | |
| | | | ||||
Accumulated amortisation and impairment |
|
| ||||||||||
At 1 January |
| | | |
| | | | ||||
Currency translation and other adjustments |
| — |
| |
| |
| — |
| ( |
| ( |
Disposals and write-off of fully amortised assets |
| — |
| ( |
| ( |
| — |
| ( |
| ( |
Impairment of intangible assets |
| — |
| |
| |
| |
| |
| |
Amortisation charge for the year | — | | | — | | | ||||||
Reclassifications to assets held for sale (2) | — | ( | ( | — | — | — | ||||||
At 31 December |
| |
| |
| |
| |
| |
| |
Net book value at 31 December |
| |
| |
| |
| |
| |
| |
| (1) | Principally consists of internally generated software. |
| (2) | Being reclassification of goodwill associated with Cushon to assets held for sale. |
Intangible assets and goodwill are reviewed for indicators of impairment. Intangible assets were impaired by £
NatWest Group’s goodwill acquired in business combinations is reviewed for impairment annually at 31 December by cash-generating unit (CGU): 2025 - Retail Banking £
Impairment testing involves the comparison of the carrying value of each CGU with its recoverable amount. The carrying values of the segments reflect the equity allocations made by management, which are consistent with NatWest Group’s capital targets. Recoverable amount is the higher of fair value less costs of disposal and value in use. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants. Value in use is the present value of expected future cash flows from the CGU.
The recoverable amounts for all CGUs at 31 December 2025 were based on value in use, using management's latest five-year revenue and cost forecasts. These are discounted cash flow projections over five years. The forecast is then extrapolated in perpetuity using a long-term growth rate to compute a terminal value, which comprises the majority of the value in use. The long-term growth rates have been based on expected growth of the CGUs (2024 and 2025 –
NatWest Group Annual Report on Form 20-F 2025 | 225 |
Notes to the consolidated financial statements continued
17 Other assets
Other assets are non-financial assets and reflect a grouping of assets that are not large enough to present separately on the balance sheet. |
| 2025 | | 2024 | |
£m | £m | |||
Interests in associates (1) | | | ||
Property, plant and equipment (2) | | | ||
Pension schemes in net surplus (Note 5) | | | ||
Tax recoverable |
| |
| |
Deferred tax (Note 7) | | | ||
Assets of disposal groups | | | ||
Other |
| |
| |
Other assets |
| |
| |
(1) | Includes interest in Business Growth Fund £ |
(2) | The estimated useful lives of NatWest Group's property, plant and equipment are: freehold buildings and long leasehold |
18 Other financial liabilities
Other financial liabilities consist of customer deposits designated at fair value and debt securities in issue. For accounting policy information refer to Accounting policies 3.8 and 3.10. |
| 2025 | | 2024 | |
| £m | £m | ||
Customer deposits |
|
| ||
including repos | | | ||
Debt securities in issue |
|
| ||
- MRELs |
| |
| |
- Other medium term notes | | | ||
- Commercial paper and certificates of deposit | | | ||
- Covered bonds | | | ||
- Securitisation |
| |
| |
Total |
| |
| |
NatWest Group Annual Report on Form 20-F 2025 | 226 |
Notes to the consolidated financial statements continued
19 Subordinated liabilities
Subordinated liabilities are debt securities that, in the event of winding up or bankruptcy, rank below other liabilities for interest payments and repayment. For accounting policy information refer to Accounting policies 3.8 and 3.10. |
| 2025 | | 2024 | |
£m | £m | |||
Dated loan capital |
| |
| |
Undated loan capital |
| |
| |
Preference shares |
| |
| |
|
| |
| |
Certain preference shares issued by the company are classified as liabilities; these securities remain subject to the capital maintenance rules of the Companies Act 2006.
First call | Maturity | Capital | 2025 | 2024 | |||||
Dated loan capital | date | date | | treatment | | £m | | £m | |
NatWest Group plc |
| |
| |
| | |||
£ | May-25 | Aug-30 | Tier 2 | — | | ||||
£ | Aug-26 | Nov-31 | Tier 2 | | | ||||
€ | Feb-30 | Feb-35 | Tier 2 | | — | ||||
$ | Mar-29 | Jun-34 | Tier 2 | | | ||||
$ | Aug-30 | Nov-35 | Tier 2 | | | ||||
€ | Jun-27 | Sep-32 | Tier 2 | | | ||||
€ | Nov-28 | Feb-34 | Tier 2 | | | ||||
£ | Mar-28 | Jun-33 |
| Tier 2 |
| |
| | |
£ | Oct-29 | Oct-34 | Tier 2 | | | ||||
|
| |
| |
| | |||
Other subsidiaries | |||||||||
€ | Floating rate notes | — | Feb-41 | Not applicable | | | |||
$ | — | Oct-93 | Not applicable | | | ||||
| |
| | ||||||
Fair value hedging | ( | ( | |||||||
| | ||||||||
Undated loan capital |
| |
| |
| | |||
Other subsidiaries | |||||||||
£ | — | — | Not applicable | | | ||||
£ | Sep-26 | — | Not applicable | | | ||||
£ | — | — | Not applicable | | | ||||
| | ||||||||
Preference shares |
| ||||||||
Other subsidiaries |
| |
| |
| | |||
£ | Non-cumulative preference shares of £ | — | — | Not applicable | | | |||
| | ||||||||
Total | | | |||||||
NatWest Group Annual Report on Form 20-F 2025 | 227 |
Notes to the consolidated financial statements continued
20 Other liabilities
Other liabilities are amounts due to third parties that are not financial liabilities, including lease liabilities held at amortised cost. Other liabilities represent, for example, amounts due for goods and services that have been received but not invoiced, tax due to HMRC, and retirement benefit liabilities. Liabilities which have a level of uncertainty regarding their timing or the future cost to settle them are included in other liabilities as provisions for liabilities and charges. |
| 2025 | | 2024 | |
Other liabilities | £m | £m | ||
Lease liabilities | | | ||
Provisions for liabilities and charges | | | ||
Retirement benefit liabilities (Note 5) |
| |
| |
Accruals |
| |
| |
Deferred income |
| |
| |
Current tax |
| |
| |
Deferred tax (Note 7) | | | ||
Other liabilities (1) | | | ||
Total |
| |
| |
(1) | Other liabilities include liabilities of disposal groups of £ |
Litigation | ||||||||||||
Customer | and other | Commitments | ||||||||||
redress | regulatory | Property | and guarantees | Other (1) | Total | |||||||
Provisions for liabilities and charges | | £m | | £m | | £m | | £m | | £m | | £m |
At 1 January 2025 |
| |
| |
| |
| |
| |
| |
Expected credit loss impairment release | — | — | — | | — | | ||||||
Currency translation and other movements | | ( | — | — | | ( | ||||||
Charge to income statement | | | | — | | | ||||||
Release to income statement |
| ( |
| ( |
| ( |
| — |
| ( |
| ( |
Provisions utilised |
| ( |
| ( |
| ( |
| — |
| ( |
| ( |
At 31 December 2025 |
| |
| |
| |
| |
| |
| |
(1) | Other materially comprises provisions for restructuring costs and provision for Bank of England Levy. |
Provisions are liabilities of uncertain timing or amount and are recognised when there is a present obligation as a result of a past event, the outflow of economic benefit is probable and the outflow can be estimated reliably. Any difference between the final outcome and the amounts provided will affect the reported results in the period when the matter is resolved.
For accounting policy information refer to Accounting policy 3.12.
Background information on all material provisions is given in Note 25.
NatWest Group Annual Report on Form 20-F 2025 | 228 |
Notes to the consolidated financial statements continued
21 Share capital and other equity
Share capital consists of ordinary shares and preference shares and is measured as the number of shares allotted and fully paid, multiplied by the nominal value of a share. Other equity includes paid-in equity, merger reserve, capital redemption reserve and own shares held. For accounting policy information refer to Accounting policy 3.10. |
Number of shares | ||||||||
2025 | 2024 | 2025 | 2024 | |||||
Allotted, called up and fully paid | | £m | | £m | | 000s | | 000s |
Ordinary shares of £ |
| |
| |
| |
| |
Cumulative preference shares of £ |
| |
| |
| |
| |
| (1) | The nominal value of ordinary shares without rounding is £ |
Number of shares | ||||
Movement in allotted, called up and fully paid ordinary shares | | £m | | 000s |
At 31 December 2023 |
| |
| |
Share cancellation | ( | ( | ||
At 31 December 2024 |
| |
| |
Share cancellation | ( | ( | ||
At 31 December 2025 |
| |
| |
Ordinary shares
There is
NatWest Group Annual Report on Form 20-F 2025 | 229 |
Notes to the consolidated financial statements continued
21 Share capital and other equity continued
On-market purchases
At the AGM in 2025, shareholders renewed the authority (2025 Authority) for the company to make on-market purchases of up to
The 2025 Programme started on 28 July 2025 and will end no later than 13 February 2026, provided that the term of the 2025 Programme may be extended to end no later than 13 March 2026 to account for any days where usual trading has not been possible because of market events during the term of the 2025 Programme.
As at 31 December 2025,
Off-market purchases
The authority from shareholders to make off-market purchases of ordinary shares from HMT (or its nominee) was renewed at the 2025 AGM.
The company did not make any off-market purchases under this authority in 2025.
Dividends
In 2025 NatWest Group paid an interim dividend of £
The company has announced that the directors have recommended a final dividend of £
Cumulative preference shares
At the AGM in 2025, shareholders renewed the authority for the company to make an off-market purchase of its preference shares. Shareholders will be asked to renew the authority at the AGM in 2026.
NatWest Group Annual Report on Form 20-F 2025 | 230 |
Notes to the consolidated financial statements continued
21 Share capital and other equity continued
Other equity
| | 2025 | | 2024 | | 2023 |
| £m | £m | £m | |||
Additional Tier 1 notes |
| |
| | ||
$ | — | | | |||
$ | ||||||
December 2025 - June 2026 |
| — | | | ||
£ | | | | |||
£ |
| | | | ||
$ | | | | |||
£ | | — | — | |||
$ | | | — | |||
$ | | | — | |||
£ | | — | — | |||
| | |
(1) | Issued in November 2020. In the event of conversion, converted into ordinary shares at a price of £ |
(2) | Issued in March 2021. In the event of conversion, converted into ordinary shares at a price of £ |
(3) | Issued in June 2021. In the event of conversion, converted into ordinary shares at a price of $ |
(4) | Issued in March 2025. In the event of conversion, converted into ordinary shares at a price of £ |
(5) | Issued in May 2024. In the event of conversion, converted into ordinary shares at a price of $ |
(6) | Issued in November 2024. In the event of conversion, converted into ordinary shares at a price of $ |
(7) | Issued in September 2025. In the event of conversion, converted into ordinary shares at a price of £ |
Paid-in equity - comprises equity instruments issued by the company other than those legally constituted as shares.
Additional Tier 1 instruments issued by NatWest Group plc having the legal form of debt are classified as equity under IFRS. The coupons on these instruments are non-cumulative and payable at the company’s discretion. In the event NatWest Group’s CET1 ratio falls below
Capital recognised for regulatory purposes cannot be redeemed without Prudential Regulation Authority consent. This includes ordinary shares, preference shares and Additional Tier 1 instruments.
Merger reserve - the merger reserve comprises the premium on shares issued to acquire NatWest Bank Plc less goodwill amortisation charged under previous GAAP.
Capital redemption reserve - under UK companies legislation, when shares are redeemed or purchased wholly or partly out of the company’s profits, the amount by which the company’s issued share capital is diminished must be transferred to the capital redemption reserve. The capital maintenance provisions of UK companies legislation apply to the capital redemption reserve as if it were part of the company’s paid up share capital. The nominal value of the shares bought back from market during 2025 and via the Programme during 2025 have been transferred to the Capital redemption reserve.
Own shares held - at 31 December 2025,
The company does not use performance conditions or targets based on earnings per share (EPS), total shareholder return (TSR), and net asset value (NAV) in connection with its employee share plans.
The company has used a total of
NatWest Group plc optimises capital efficiency by maintaining reserves in subsidiaries, including regulated entities. Certain preference shares and subordinated debt are also included within regulatory capital. The remittance of reserves to the company or the redemption of shares or subordinated capital by regulated entities may be subject to maintaining the capital resources required by the relevant regulator.
UK law prescribes that only the reserves of the company are taken into account for the purpose of making distributions and in determining permissible applications of the share premium account.
NatWest Group Annual Report on Form 20-F 2025 | 231 |
Notes to the consolidated financial statements continued
22 Structured entities
A structured entity (SE) is an entity that has been designed such that voting or similar rights are not the dominant factor in deciding who controls the entity, for example, when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. SEs are usually established for a specific, limited purpose. They do not carry out a business or trade and typically have no employees. |
Securitisations
In a securitisation, assets, or interests in a pool of assets, are transferred, or the credit risk is transferred via a derivative or financial guarantee to a SE which then issues liabilities to third party investors.
NatWest Group’s involvement in client securitisations takes a number of forms. It may provide secured finance to, or purchase asset-backed notes from, client sponsored SEs secured on assets transferred by the client entity; purchase asset backed securities issued by client sponsored SEs in the primary or secondary markets; or provide liquidity facilities to client sponsored SEs. In addition, NatWest Group arranges or acts as lead manager or placement agent in client primary markets securitisations. NatWest Group provides portfolio structured derivative hedging solutions to clients. NatWest Group undertakes own-asset securitisations to transfer the credit risk on portfolios of financial assets. In 2025 NatWest Group transacted an own-asset RMBS via a sponsored unconsolidated SE, resulting in £
Other credit risk transfer securitisations
NatWest Group transfers credit risk on originated loans and mortgages without the transfer of assets to a SE. As part of this, NatWest Group enters into credit derivative and financial guarantee contracts with consolidated SEs. At 31 December 2025, debt securities in issue by such SEs (and held by third parties) were £
Covered debt programme
Group companies have assigned loans to customers and debt investments to bankruptcy remote limited liability partnerships to provide security for issues of debt securities. NatWest Group retains all of the risks and rewards of these assets and continues to recognise them. The partnerships are consolidated by NatWest Group and the related covered bonds included within other financial liabilities. At 31 December 2025, £
Lending of own issued securities
Where the NatWest Group issues and retains debt securities it does not recognise them. From time to time the NatWest Group issues, retains, and lends debt securities under bespoke securities lending and repurchase financing arrangements. Under standard terms in the UK and US markets, the recipient has an unrestricted right to sell or repledge collateral, subject to returning equivalent securities on maturity of the transaction. NatWest Group retains all of the risks and rewards of own issued liabilities lent or sold under such arrangements and, where the ability of the recipient to sell or pledge the asset is restricted under a bespoke arrangement, does not recognise them. At 31 December 2025, £
NatWest Group Annual Report on Form 20-F 2025 | 232 |
Notes to the consolidated financial statements continued
22 Structured entities continued
Unconsolidated structured entities
The term 'unconsolidated structured entities' refers to structured entities not controlled by NatWest Group, and which are established either by NatWest Group or a third party. An interest in a structured entity is any form of contractual or non-contractual involvement which creates variability in returns for NatWest Group arising from the performance of the entity. Such interests include holdings of debt or equity securities, derivatives that transfer financial risks from the entity to NatWest Group, provision of lending and loan commitments, financial guarantees and investment management agreements. NatWest Group enters into transactions with unconsolidated structured entities in the normal course of business to facilitate customer transactions, to provide risk management services and for specific investment opportunities. Structured entities may take the form of funds, trusts, partnerships, securitisation vehicles, and private investment companies. NatWest Group considers itself to be the sponsor of a structured entity where it is primarily involved in the set up and design of the entity and where NatWest Group transfers assets to the entity, markets products associated with the entity in its own name, and/or provides guarantees in relation to the performance of the entity.
The nature and extent of NatWest Group's interests in unconsolidated structured entities is summarised in the following table:
2025 | 2024 | |||||||||||
Asset-backed | Investment | Asset-backed | Investment | |||||||||
securitisation | funds and | securitisation | funds and | |||||||||
vehicles | other | Total | vehicles | other | Total | |||||||
| £m | | £m | | £m | | £m | | £m | | £m | |
Assets |
| |||||||||||
Trading assets |
| |
| |
| |
| |
| |
| |
Derivatives |
| |
| — |
| |
| |
| — |
| |
Loans to customers |
| |
| |
| |
| |
| |
| |
Other financial assets | | | | | | | ||||||
Total |
| |
| |
| |
| |
| |
| |
Liabilities |
|
| ||||||||||
Derivatives |
| |
| |
| |
| |
| |
| |
Total |
| |
| |
| |
| |
| |
| |
Off balance sheet |
|
| ||||||||||
Liquidity facilities/loan commitments |
| |
| |
| |
| |
| |
| |
Guarantees |
| — |
| |
| |
| — |
| |
| |
Total | | | | | | | ||||||
Maximum exposure |
| |
| |
| |
| |
| |
| |
NatWest Group Annual Report on Form 20-F 2025 | 233 |
Notes to the consolidated financial statements continued
23 Asset transfers and collateral received
This note provides an overview of assets that have been transferred but where the NatWest Group retains substantially all the risks and rewards of the transferred assets and therefore continues to recognize them on balance sheet. This note also provides an overview of collateral received by NatWest Group, which the Group is permitted to sell or re - pledge. |
Transfers that do not qualify for derecognition
NatWest Group enters into securities repurchase, lending and total return transactions in accordance with normal market practice which includes the provision of additional collateral if necessary. Under standard terms in the UK and US markets, the recipient has an unrestricted right to sell or repledge collateral, subject to returning equivalent securities on settlement of the transaction.
Securities sold under repurchase transactions and transactions with the substance of securities repurchase agreements are not derecognised if NatWest Group retains substantially all the risks and rewards of ownership. The fair value (and carrying value) of securities transferred under such transactions included on the balance sheet are set out below. All of these securities could be sold or repledged by the holder.
| 2025 | | 2024 | |
The following assets have failed derecognition (1) | £m | £m | ||
Trading assets | | | ||
Loans to bank - amortised cost | | | ||
Loans to customers - amortised cost | | | ||
Other financial assets | | | ||
Total |
| |
| |
(1) | Associated liabilities were £ |
Assets pledged as collateral
NatWest Group pledges collateral with its counterparties in respect of derivative liabilities, bank and stock borrowings and other transactions. Under standard arrangements the counterparty has the right to sell or repledge the collateral. Where the NatWest Group retains exposure to the significant risks and rewards of the transferred collateral it is not derecognised from the NatWest Group balance sheet and continues to be disclosed within either Trading Assets, Loans to Customers or Other Financial Assets.
2025 | 2024 | |||
Assets pledged against liabilities | | £m | | £m |
Trading assets | | | ||
Loans to customers - amortised cost |
| |
| |
Other financial assets (1) |
| |
| |
Total |
| |
| |
(1) | Includes assets pledged for pension derivatives and £ |
As part of the covered debt programme £
Collateral received
The fair value of assets accepted as collateral relating primarily to standard securities lending, reverse repurchase agreements, swaps of securities and derivatives margining that NatWest Group is permitted to sell or repledge in the absence of default was £
NatWest Group is obliged to return equivalent securities. These transactions are conducted under terms that are usual and customary to standard securities lending, reverse repurchase agreements, swaps of securities and derivative margining.
NatWest Group Annual Report on Form 20-F 2025 | 234 |
Notes to the consolidated financial statements continued
24 Capital resources
NatWest Group’s regulatory capital is assessed against minimum requirements that are set out under the UK Capital Requirements Regulation to determine the strength of its capital base. This note shows a reconciliation of shareholders’ equity to regulatory capital. |
| | 2025 | | 2024 |
£m | £m | |||
Shareholders’ equity (excluding non-controlling interests) |
| |
| |
Shareholders’ equity |
| |
| |
Other equity instruments |
| ( |
| ( |
| |
| | |
Regulatory adjustments and deductions |
|
| ||
Own credit |
| |
| |
Defined benefit pension fund adjustment |
| ( |
| ( |
Cash flow hedging reserve |
| |
| |
Deferred tax assets |
| ( |
| ( |
Prudential valuation adjustments |
| ( |
| ( |
Goodwill and other intangible assets |
| ( |
| ( |
Expected loss less impairment |
| ( |
| ( |
Foreseeable ordinary dividends | ( | ( | ||
Adjustment for trust assets (1) | ( | ( | ||
Foreseeable charges (2) | ( | — | ||
Adjustment under IFRS 9 transitional arrangements |
| |
| |
| ( |
| ( | |
CET1 capital |
| |
| |
Additional Tier 1 (AT1) capital |
|
| ||
Qualifying instruments and related share premium |
| |
| |
AT1 capital |
| |
| |
Tier 1 capital |
| |
| |
Qualifying Tier 2 capital |
|
| ||
Qualifying instruments and related share premium |
| |
| |
Tier 2 capital |
| |
| |
Total regulatory capital |
| |
| |
| (1) | Prudent deduction in respect of agreement with the pension fund to establish legal structure to remove dividend linked contribution. Refer to Notes 5 and 32. |
| (2) | For December 2025, the foreseeable charge of £ |
It is NatWest Group policy to maintain a strong capital base, to expand it as appropriate and to utilise it efficiently throughout its activities to optimise the return to shareholders while maintaining a prudent relationship between the capital base and the underlying risks of the business. In carrying out this policy, NatWest Group has regard to the supervisory requirements of the PRA. The PRA uses capital ratios as a measure of capital adequacy in the UK banking sector, comparing a bank’s capital resources with its risk-weighted assets (the assets and off-balance sheet exposures are weighted to reflect the inherent credit and other risks); by international agreement, the Pillar 1 capital ratios should be not less than
A number of subsidiaries and sub-groups within NatWest Group, principally banking entities, are subject to various individual regulatory capital requirements in the UK and overseas. Furthermore, the payment of dividends by subsidiaries and the ability of members of NatWest Group to lend money to other members of NatWest Group may be subject to restrictions such as local regulatory or legal requirements, the availability of reserves and financial and operating performance.
NatWest Group Annual Report on Form 20-F 2025 | 235 |
Notes to the consolidated financial statements continued
25 Memorandum items
Contingent liabilities and commitments
NatWest Group provides its customers with a variety of services to support their businesses, such as guarantees. These are reported as commitments. Contingent liabilities are possible obligations dependent on a future event or present obligations which are either not probable or cannot be measured reliably. |
The amounts shown in the table below are intended only to provide an indication of the volume of business outstanding at 31 December 2025. Although NatWest Group is exposed to credit risk in the event of a customer’s failure to meet its obligations, the amounts shown do not, and are not intended to, provide any indication of NatWest Group’s expectation of future losses.
| 2025 | | 2024 | |
£m | £m | |||
Contingent liabilities and commitments | ||||
Guarantees |
| |
| |
Other contingent liabilities |
| |
| |
Standby facilities, credit lines and other commitments |
| |
| |
Total |
| |
| |
Banking commitments and contingent obligations, which have been entered into on behalf of customers and for which there are corresponding obligations from customers, are not included in assets and liabilities. NatWest Group’s maximum exposure to credit loss, in the event of its obligation crystallising and all counterclaims, collateral or security proving valueless, is represented by the contractual nominal amount of these instruments included in the table above. These commitments and contingent obligations are subject to NatWest Group’s normal credit approval processes.
Guarantees – NatWest Group gives guarantees on behalf of customers. A financial guarantee represents an irrevocable undertaking that NatWest Group will meet a customer’s specified obligations to a third party if the customer fails to do so. The maximum amount that NatWest Group could be required to pay under a guarantee is its principal amount as disclosed in the table above. NatWest Group expects most guarantees it provides to expire unused.
Other contingent liabilities - these include standby letters of credit, supporting customer debt issues and contingent liabilities relating to customer trading activities such as those arising from performance and customs bonds, warranties and indemnities.
Standby facilities and credit lines - under a loan commitment, NatWest Group agrees to make funds available to a customer in the future. Loan commitments, which are usually for a specified term, may be unconditionally cancellable or may persist, provided all conditions in the loan facility are satisfied or waived. Commitments to lend include commercial standby facilities and credit lines, liquidity facilities to commercial paper conduits and unutilised overdraft facilities.
Other commitments - these include documentary credits, which are commercial letters of credit providing for payment by NatWest Group to a named beneficiary against presentation of specified documents, forward asset purchases, forward deposits placed and undrawn note issuance and revolving underwriting facilities, and other short-term trade related transactions.
Contractual obligations for future expenditure not provided for in the accounts
The following table shows contractual obligations for future expenditure not provided for in the accounts at the year end.
2025 | 2024 | |||
| £m | | £m | |
Capital expenditure on property, plant and equipment |
| | | |
Contracts to purchase goods or services (1) |
| | | |
| | |
(1) | Of which due within 1 year: £ |
NatWest Group Annual Report on Form 20-F 2025 | 236 |
Notes to the consolidated financial statements continued
25 Memorandum items continued
Trustee and other fiduciary activities
In its capacity as trustee or other fiduciary role, NatWest Group may hold or place assets on behalf of individuals, trusts, companies, pension schemes and others. The assets and their income are not included in NatWest Group’s financial statements. NatWest Group earned fee income of £
The Financial Services Compensation Scheme
The Financial Services Compensation Scheme (FSCS), the UK’s statutory fund of last resort for customers of authorised financial services firms, pays compensation if a firm is unable to meet its obligations. The FSCS funds compensation for customers by raising management expenses levies and compensation levies on the industry. In relation to protected deposits, each deposit-taking institution contributes towards these levies in proportion to their share of total protected deposits on 31 December of the year preceding the scheme year (which runs from 1 April to 31 March), subject to annual maxima set by the Prudential Regulation Authority. In addition, the FSCS has the power to raise levies on a firm that has ceased to participate in the scheme and is in the process of ceasing to be authorised for the costs that it would have been liable to pay had the FSCS made a levy in the financial year it ceased to be a participant in the scheme.
Litigation and regulatory matters
NatWest Group plc and certain members of NatWest Group are party to various legal proceedings and are involved in, or subject to, various regulatory matters, including as the subject of investigations and other regulatory and governmental action (Matters) in the United Kingdom (UK), the United States (US), the European Union (EU) and other jurisdictions.
NatWest Group recognises a provision for a liability in relation to these Matters when it is probable that an outflow of economic benefits will be required to settle an obligation resulting from past events, and a reliable estimate can be made of the amount of the obligation.
In many of the Matters, it is not possible to determine whether any loss is probable, or to estimate reliably the amount of any loss, either as a direct consequence of the relevant proceedings and regulatory matters or as a result of adverse impacts or restrictions on NatWest Group’s reputation, businesses and operations. Numerous legal and factual issues may need to be resolved, including through potentially lengthy discovery and document production exercises and determination of important factual matters, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before the probability of a liability, if any, arising can reasonably be estimated in respect of any Matter. NatWest Group cannot predict if, how, or when such claims will be resolved or what the eventual settlement, damages, fine, penalty or other relief, if any, may be, particularly for Matters that are at an early stage in their development or where claimants seek substantial or indeterminate damages.
There are situations where NatWest Group may pursue an approach that in some instances leads to a settlement agreement. This may occur in order to avoid the expense, management distraction or reputational implications of continuing to contest liability, or in order to take account of the risks inherent in defending or contesting Matters, even for those for which NatWest Group believes it has credible defences and should prevail on the merits. The uncertainties inherent in all Matters affect the amount and timing of any potential economic outflows for both Matters with respect to which provisions have been established and other contingent liabilities in respect of any such Matter.
It is not practicable to provide an aggregate estimate of potential liability for our Matters as a class of contingent liabilities.
The future economic outflow in respect of any Matter may ultimately prove to be substantially greater than, or less than, the aggregate provision, if any, that NatWest Group has recognised in respect of such Matter. Where a reliable estimate of the economic outflow cannot be reasonably made, no provision has been recognised. NatWest Group expects that in future periods, additional provisions and economic outflows relating to Matters that may or may not be currently known by NatWest Group will be necessary, in amounts that are expected to be substantial in some instances. Refer to Note 20 for information on material provisions.
Matters which are, or could be, material, either individually or in aggregate, having regard to NatWest Group, considered as a whole, in which NatWest Group is currently involved are set out below. We have provided information on the procedural history of certain Matters, where we believe appropriate, to aid the understanding of the Matter.
For a discussion of certain risks associated with NatWest Group’s litigation and regulatory matters (including the Matters), refer to the Risk Factor relating to legal, regulatory and governmental actions and investigations set out on page 286.
NatWest Group Annual Report on Form 20-F 2025 | 237 |
Notes to the consolidated financial statements continued
25 Memorandum items continued
Litigation
London Interbank Offered Rate (LIBOR) and other rates litigation
NatWest Group plc and certain other members of NatWest Group, including NWM Plc, are defendants in a number of claims pending in the United States District Court for the Southern District of New York (SDNY) with respect to the setting of USD LIBOR. The complainants allege that certain members of NatWest Group and other panel banks violated various federal laws, including the US commodities and antitrust laws, and state statutory and common law, as well as contracts, by manipulating LIBOR and prices of LIBOR-based derivatives in various markets through various means.
The co-ordinated proceeding in the SDNY relating to USD LIBOR now includes
On 25 September 2025, the SDNY granted summary judgment to the defendants on the issue of liability and dismissed all claims in both the class action and the non-class actions. The decision is being appealed in the United States Court of Appeals for the Second Circuit (US Court of Appeals).
In addition to the USD LIBOR cases described above, there is a class action relating to derivatives allegedly tied to JPY LIBOR and Euroyen TIBOR, which was dismissed by the SDNY in relation to NWM Plc and other NatWest Group companies in September 2021. That dismissal is now the subject of an appeal to the US Court of Appeals.
On 22 August 2025, the US Court of Appeals reversed the SDNY’s decision in the Euribor case, reinstating claims against NWM plc. That case has therefore returned to the SDNY for further proceedings.
On 15 September 2025, the US Court of Appeals affirmed the SDNY’s dismissal of the Pound Sterling LIBOR case.
NatWest Group Annual Report on Form 20-F 2025 | 238 |
Notes to the consolidated financial statements continued
25 Memorandum items continued
Foreign exchange litigation
NatWest Group plc, NWM Plc and/or NWMSI are defendants in several cases relating to NWM Plc’s foreign exchange (FX) business.
In May 2019, a cartel class action was filed in the Federal Court of Australia against NWM Plc and
In May 2025, NWM Plc executed an agreement to settle the claim in the Federal Court of Australia, which the court approved in August 2025. The settlement amount is covered in full by an existing provision.
In July and December 2019,
In March 2022, the CAT declined to certify either application as collective proceedings on an opt-out basis. This decision was appealed by the applicants and was the subject of an application for judicial review.
The CAT, in its judgment, allowed the applicants
In its amended judgment in November 2023, the Court of Appeal allowed the appeal and decided that the claims should proceed on an opt-out basis. Separately, the court determined which of the
In December 2025, the UK Supreme Court reinstated the CAT’s decision to refuse the application for a collective proceedings order on an opt-out basis.
The applicants sought the court’s permission to amend their motions to certify the class actions. NWM Plc filed a motion challenging the permission granted by the court for the applicants to serve the consolidated motion outside the Israeli jurisdiction. That NWM Plc motion remains pending. In February 2024, NWM Plc executed an agreement to settle the claim, subject to court approval. The settlement amount is covered in full by an existing provision.
In December 2021, a summons was served in the Netherlands against NatWest Group plc, NWM Plc and NWM N.V. by Stichting FX Claims on behalf of a number of parties, seeking declarations from the court concerning liability for anti-competitive FX market conduct described in decisions of the European Commission (EC) of 16 May 2019, along with unspecified damages. The claimant amended its claim to also refer to a 2 December 2021 decision by the EC, which described anti-competitive FX market conduct. NatWest Group plc, NWM Plc and other defendants contested the jurisdiction of the Dutch court. In March 2023, the district court in Amsterdam accepted that it has jurisdiction to hear claims against NWM N.V. but refused jurisdiction to hear any claims against the other defendant banks (including NatWest Group plc and NWM Plc) brought on behalf of the parties represented by the claimant that are domiciled outside of the Netherlands. The claimant is appealing that decision. The defendant banks have brought cross-appeals which seek a ruling that the Dutch court has no jurisdiction to hear any claims against the defendant banks domiciled outside of the Netherlands, irrespective of whether the claim has been brought on behalf of a party represented by the claimant that is domiciled within or outside of the Netherlands. The Amsterdam Court of Appeal has stayed these appeal proceedings until the Court of Justice of the European Union has answered preliminary questions that have been referred to it in another matter.
In September 2023, a second summons was served by Stichting FX Claims on NatWest Group plc, NWM Plc and NWM N.V., on behalf of a new group of parties. The claimant seeks declarations from the district court in Amsterdam concerning liability for anti-competitive FX market conduct described in the above referenced decisions of the EC of 16 May 2019 and 2 December 2021, along with unspecified damages. NatWest Group plc, NWM Plc and other defendants are contesting the Dutch court's jurisdiction. The district court has stayed the proceedings pending judgment in the above-mentioned appeals.
NatWest Group Annual Report on Form 20-F 2025 | 239 |
Notes to the consolidated financial statements continued
25 Memorandum items continued
In January 2025, a third summons was served by Stichting FX Claims on NatWest Group plc, NWM Plc and NWM N.V., on behalf of another new group of parties. The claimant seeks similar declarations from the district court in Amsterdam to those being sought in the above-mentioned claims, along with unspecified damages.
NatWest Group plc, NWM Plc and other defendants are contesting the Dutch court's jurisdiction. The district court has stayed the proceedings pending judgment in the above-mentioned appeals.
Certain other foreign exchange transaction related claims have been or may be threatened. NatWest Group cannot predict whether all or any of these claims will be pursued.
Swaps antitrust litigation
NWM Plc and other members of NatWest Group, including NatWest Group plc, as well as a number of other interest rate swap dealers, are defendants in several cases pending in the SDNY alleging violations of the US antitrust laws in the market for interest rate swaps.
In June 2021, a class action antitrust complaint was filed against a number of credit default swap dealers in New Mexico federal court on behalf of persons who, from 2005 onwards, settled credit default swaps in the United States by reference to the ISDA credit default swap auction protocol. The complaint alleges that the defendants conspired to manipulate that benchmark through various means in violation of the antitrust laws and the Commodity Exchange Act.
In May 2025, the US Court of Appeals affirmed a January 2024 decision by the SDNY which barred the plaintiffs in the New Mexico case from pursuing claims based on conduct occurring before 30 June 2014 on the ground that such claims were extinguished by a 2015 settlement agreement that resolved a prior class action relating to credit default swaps.
The case in New Mexico (which had been stayed pending the appeal of the SDNY’s decision) has now resumed. The defendants have filed a motion to dismiss, which is pending.
Odd lot corporate bond trading antitrust litigation
On 2 September 2025, the SDNY dismissed the class action antitrust complaint alleging that, from August 2006 onwards, various securities dealers, including NWMSI, conspired artificially to widen spreads for odd lots of corporate bonds bought or sold in the United States secondary market and to boycott electronic trading platforms that would have allegedly promoted pricing competition in the market for such bonds. The plaintiffs did not appeal the SDNY’s decision and the case is now closed.
Spoofing litigation
In December 2021,
In July 2022, the defendants filed a motion to dismiss these claims, which have been consolidated into
Madoff
NWM N.V. was named as a defendant in
The claims were previously dismissed, but as a result of an August 2021 decision by the US Court of Appeals, they are now proceeding in the discovery phase in the bankruptcy court, where they have been consolidated into
NatWest Group Annual Report on Form 20-F 2025 | 240 |
Notes to the consolidated financial statements continued
25 Memorandum items continued
Offshoring VAT assessments
HMRC, as part of an industry-wide review, issued protective tax assessments in 2018 against NatWest Group plc totalling £
NatWest Group plc was informed in late 2024 that the other bank had settled its case with HMRC by agreement. NatWest Group plc is progressing its appeal before the Tax Tribunal in its own name. NatWest Group plc will also continue to review next steps relevant to the judicial review.
The amount of £
US Anti-Terrorism Act litigation
NWM N.V. and certain other financial institutions are defendants in several actions filed by a number of US nationals (or their estates, survivors, or heirs), most of whom are, or were, US military personnel who were killed or injured in attacks in Iraq between 2003 and 2011. NWM Plc is also a defendant in some of these cases.
According to the plaintiffs’ allegations, the defendants are liable for damages arising from the attacks because they allegedly conspired with and/or aided and abetted Iran and certain Iranian banks to assist Iran in transferring money to Hezbollah and the Iraqi terror cells that committed the attacks, in violation of the US Anti-Terrorism Act, by agreeing to engage in ‘stripping’ of transactions initiated by the Iranian banks so that the Iranian nexus to the transactions would not be detected.
The first of these actions, alleging conspiracy claims but not aiding and abetting claims, was filed in the United States District Court for the Eastern District of New York in November 2014. In September 2019, the district court dismissed the case, finding that the claims were deficient for several reasons, including lack of sufficient allegations as to the alleged conspiracy and causation. In January 2023, the US Court of Appeals affirmed the district court’s dismissal of this case.
On 30 September 2025, the district court denied a motion by the plaintiffs to re-open the case to assert aiding and abetting claims that they previously did not assert. Another action, filed in the SDNY in 2017, which asserted both conspiracy and aiding and abetting claims, was dismissed by the SDNY in March 2019 on similar grounds as the first case, but remains subject to appeal to the US Court of Appeals.
Other follow-on actions that are substantially similar to those described above are pending in the same courts.
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
It is claimed that Coutts & Co Ltd is liable as a constructive trustee for having dishonestly assisted the directors of 1MDB in the breach of their fiduciary duties by failing (amongst other alleged claims) to undertake due diligence in relation to a customer of Coutts & Co Ltd, through which funds totalling c.US$
Coutts & Co Ltd filed an application in January 2023 challenging the validity of service and the Malaysian court’s jurisdiction to hear the claim, and a hearing took place in February 2024. In March 2024, the court granted that application. 1MDB appealed that decision and a prior decision by the court not to allow them to discontinue their claim. Both appeals were scheduled to be heard in November 2025 but did not progress as 1MDB withdrew their appeal and discontinued the claim.
Coutts & Co Ltd (a subsidiary of RBS Netherlands Holdings B.V., which in turn is a subsidiary of NWM Plc) is a company registered in Switzerland and is in wind-down following the announced sale of its business assets in 2015.
NatWest Group Annual Report on Form 20-F 2025 | 241 |
Notes to the consolidated financial statements continued
25 Memorandum items continued
Oracle Securities Litigation
On 14 January 2026, a class action complaint was filed in New York state court against Oracle Corporation and the underwriters of a September 2025 bond offering by Oracle, including NWMSI. The complaint alleges that the offering documents for the bonds were materially misleading because they failed to disclose that, at the time of the bond offering, Oracle was already planning to further increase its debt to fund its Artificial Intelligence infrastructure expansion.
The complaint seeks damages under the U.S. Securities Act of 1933 (the ‘Securities Act’), as amended, on behalf of those who purchased Oracle’s bonds. In connection with the bond offering, Oracle agreed to indemnify the underwriters against certain potential liabilities, including disclosure-based liability under the Securities Act.
Tandanor Litigation in Argentina
In October 2012, a claim was filed in the District Court of Buenos Aires by ‘Argentina Talleres Navales Dársena Norte Sociedad Anónima Comercial, Industrial y Naviera’ (“Tandanor”) (a naval repair business) against what is now the Representative Office of The Royal Bank of Scotland NV, Argentine Branch (in liquidation) (the “Representative Office”) and
The claim was dismissed on limitation grounds in 2018, and the plaintiffs were unsuccessful in subsequent appeals. In November 2024, however, the Argentine Supreme Court set the appealed judgments aside and, in June 2025, the Argentine Federal Court of Appeal returned the case to the Argentine Federal District Court for further consideration. In December 2025, the plaintiffs filed an update quantifying damages at USD
Regulatory matters (including investigations and customer redress programmes)
NatWest Group's businesses and financial condition can be affected by the actions of various governmental and regulatory authorities in the UK, the US, the EU and elsewhere. NatWest Group has engaged, and will continue to engage, in discussions with relevant governmental and regulatory authorities, including in the UK, the US, the EU and elsewhere, on an ongoing and regular basis, and in response to informal and formal inquiries or investigations, regarding operational, systems and control evaluations and issues including those related to compliance with applicable laws and regulations, including consumer protection, investment advice, business conduct, competition/anti-trust, VAT recovery, anti-bribery, anti-money laundering and sanctions regimes. NatWest Group expects government and regulatory intervention in financial services to be high for the foreseeable future, including increased scrutiny from competition and other regulators in the retail and SME business sectors.
Any matters discussed or identified during such discussions and inquiries may result in, among other things, further inquiry or investigation, other action being taken by governmental and regulatory authorities, increased costs being incurred by NatWest Group, remediation of systems and controls, public or private censure, restriction of NatWest Group's business activities and/or fines. Any of the events or circumstances mentioned in this paragraph or below could have a material adverse effect on NatWest Group, its business, authorisations and licences, reputation, results of operations or the price of securities issued by it, or lead to material additional provisions being taken.
NatWest Group is co-operating fully with the matters described below.
NatWest Group Annual Report on Form 20-F 2025 | 242 |
Notes to the consolidated financial statements continued
25 Memorandum items continued
US investigations relating to fixed-income securities
In December 2021, NWM Plc pled guilty in the United States District Court for the District of Connecticut to
The DOJ and USAO CT paused the monitorship in May 2025 and, following a review, determined that a monitorship was no longer necessary as a result of NWM’s notable progress in strengthening its compliance programme, certain of NWM’s remedial improvements, internal controls, and the status of implementation of Monitor recommendations, and that reporting by NWM to the DOJ and USAO CT on its continued compliance programme progress provided an appropriate degree of oversight. The court approved the agreement and extended NWM’s obligations under the plea agreement and probation until December 2026.
In the event that NWM Plc does not meet its obligations to the DOJ, this may lead to adverse consequences such as increased costs, findings that NWM Plc violated its probation term, and possible re-sentencing, amongst other consequences. Other material adverse collateral consequences may occur as a result of this matter, as further described in the Risk Factor relating to legal, regulatory and governmental actions and investigations set out on page 286 of the NatWest Group plc Annual Report on Form 20-F.
Investment advice review
In October 2019, the FCA notified NatWest Group of its intention to appoint a Skilled Person under section 166 of the Financial Services and Markets Act 2000 to conduct a review of whether NatWest Group’s past business review of investment advice provided during 2010 to 2015 was subject to appropriate governance and accountability and led to appropriate customer outcomes. The Skilled Person’s review has concluded and, after discussion with the FCA, NatWest Group is undertaking additional review / remediation work, which is expected to conclude in H1 2026.
Review and investigation of treatment of tracker mortgage customers in Ulster Bank Ireland DAC
In December 2015, correspondence was received from the Central Bank of Ireland setting out an industry examination framework in respect of the sale of tracker mortgages from approximately 2001 until the end of 2015.
The redress and compensation process has now largely concluded, although a small number of cases remain outstanding relating to uncontactable customers.
Ulydien (formerly UBIDAC) customers have lodged tracker mortgage complaints with the Financial Services and Pensions Ombudsman (FSPO). UBIDAC challenged
Decisions are awaited from the FSPO in respect of these cases.
Other customer remediation in Ulster Bank Ireland DAC
Ulydien identified other legacy issues leading to the establishment of remediation requirements, and progress is ongoing to conclude activities.
NatWest Group Annual Report on Form 20-F 2025 | 243 |
Notes to the consolidated financial statements continued
26 Non-cash and other items
This note shows non-cash items adjusted for in the cash flow statement and movement in operating assets and liabilities.
| 2025 | | 2024 | | 2023 | |
£m | £m | £m | ||||
Impairment losses | | | | |||
Depreciation and amortisation |
| |
| |
| |
Change in fair value taken to profit or loss of other financial assets |
| |
| |
| ( |
Change in fair value taken to profit or loss of other financial liabilities and subordinated liabilities |
| |
| |
| |
Foreign exchange recycling losses/(gains) | | | ( | |||
Elimination of foreign exchange differences |
| ( |
| |
| |
Income receivable on other financial assets |
| ( |
| ( |
| ( |
Loss on sale of other financial assets |
| |
| |
| |
Share of (profit)/loss of associates |
| ( |
| ( |
| |
(Gain)/loss on sale of other assets and net assets and liabilities |
| ( |
| ( |
| |
Interest payable on MRELs and subordinated liabilities |
| |
| |
| |
Gain on redemption of own debt |
| — |
| — |
| ( |
Charges and releases of provisions |
| |
| |
| |
Change in fair value of cash flow hedges | | | | |||
Other non-cash items |
| |
| |
| |
Defined benefit pension schemes |
| |
| |
| |
Non-cash and other items |
| |
| |
| |
Change in operating assets and liabilities |
|
|
| |||
Change in trading assets |
| |
| ( |
| |
Change in derivative assets |
| |
| ( |
| |
Change in settlement balance assets |
| |
| |
| ( |
Change in loans to banks |
| ( |
| |
| |
Change in loans to customers |
| ( |
| ( |
| ( |
Change in other financial assets |
| |
| ( |
| |
Change in other assets |
| ( |
| |
| ( |
Change in assets of disposal groups |
| — |
| |
| |
Change in bank deposits |
| |
| |
| |
Change in customer deposits |
| |
| |
| ( |
Change in settlement balance liabilities |
| ( |
| ( |
| |
Change in trading liabilities |
| ( |
| |
| |
Change in derivative liabilities |
| ( |
| ( |
| ( |
Change in other financial liabilities |
| |
| |
| |
Change in notes in circulation |
| ( |
| |
| |
Change in other liabilities |
| ( |
| ( |
| ( |
Change in operating assets and liabilities |
| |
| ( |
| ( |
NatWest Group Annual Report on Form 20-F 2025 | 244 |
Notes to the consolidated financial statements continued
27 Analysis of the net investment in business interests and intangible assets
This note shows cash flows relating to obtaining or losing significant influence in associates or control of subsidiaries and net assets and liabilities purchased and sold. These cash flows are presented as investing activities on the cash flow statement. |
| 2025 | | 2024 | | 2023 | |
| £m |
| £m |
| £m | |
Fair value given for business acquired | — | — | ( | |||
Acquisition of interest in associates |
| ( |
| ( |
| — |
Additional investment in associates | — | ( | ( | |||
Cash paid for assets and liabilities purchased | | ( | — | |||
Net inflow/(outflow) of cash in respect of acquisitions |
| |
| ( |
| ( |
Disposal of net assets and liabilities |
| — |
| |
| |
Loss on disposal of net assets and liabilities |
| — |
| ( |
| ( |
Net inflow of cash in respect of disposals |
| — |
| |
| |
Dividends received from associate | | | | |||
Net cash expenditure on intangible assets |
| ( |
| ( |
| ( |
Net (outflow)/inflow of cash |
| ( |
| ( |
| |
28 Analysis of changes in financing during the year
This note shows cash flows and non-cash movements relating to the financing activities of the Group, including movements in share capital, share premium, paid-in equity, subordinated liabilities and MRELs. |
Share capital, share premium, | ||||||||||||||||||
and paid-in equity | Subordinated liabilities | MREL instruments | ||||||||||||||||
| 2025 | | 2024 | | 2023 | | 2025 | | 2024 | | 2023 | | 2025 | | 2024 | | 2023 | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | ||||||||||
At 1 January |
| |
| |
| |
| |
| |
| | | | | |||
Issued |
| |
| |
| — |
| |
| |
| | | | | |||
Redeemed |
| ( |
|
|
| ( |
| ( |
| ( | ( | ( | ( | |||||
Interest paid | ( | ( | ( | ( | ( | ( | ||||||||||||
Net cash flows from financing activities |
| ( |
| |
| — |
| ( |
| ( |
| ( | | | ( | |||
Shares repurchased | ( | ( | ( | |||||||||||||||
Effects of foreign exchange |
|
|
|
| |
| ( |
| ( | ( | ( | ( | ||||||
Changes in fair value | | | | | | | ||||||||||||
Loss on redemption of own debt | — | — | ( | — | ||||||||||||||
Interest payable | | | | | | | ||||||||||||
Other |
|
|
|
| |
| |
| | | | — | ||||||
At 31 December |
| |
| |
| |
| |
| |
| | | | | |||
NatWest Group Annual Report on Form 20-F 2025 | 245 |
Notes to the consolidated financial statements continued
29 Analysis of cash and cash equivalents
Non-cash and other add back items and movements in operating assets and liabilities are adjusted for in the cash flow statement. Loans to banks and treasury bills with an original maturity of less than three months that are readily convertible to known amounts of cash and subject to insignificant risk of change in value. |
| 2025 | | 2024 | | 2023 | |
£m | £m | £m | ||||
Cash and balances at central banks |
| |
| |
| |
Trading assets (1) | | | | |||
Other financial assets |
| |
| — |
| |
Loans to banks |
| |
| |
| |
Cash and cash equivalents |
| |
| |
| |
(1) | Includes cash collateral posted with bank counterparties in respect of derivative liabilities of £ |
Certain members of NatWest Group are required by law or regulation to maintain balances with the central banks in the jurisdictions in which they operate. NatWest Markets N.V. had mandatory reserve deposits with De Nederlandsche Bank N.V. of €
30 Directors' and key management remuneration
Directors and key management are remunerated for services rendered in the period. The executive directors may participate in the company's long-term incentive plans, executive share option and Sharesave schemes and details of their interests in the company's shares arising from their participation are given in the Directors' remuneration report. Details of the remuneration received by each director are also given in the Directors' remuneration report. |
Key management comprises members of the NatWest Group plc and NWH Ltd Boards, members of the NatWest Group plc and NWH Ltd Executive Committees, and the Chief Executives of NatWest Markets Plc and RBS International (Holdings) Limited. This is on the basis that these individuals have been identified as Persons Discharging Managerial Responsibilities of NatWest Group plc under the new governance structure.
| 2025 | | 2024 | |
Directors' remuneration | £000 | £000 | ||
Non-executive directors emoluments |
| |
| |
Chair and executive directors emoluments |
| |
| |
| |
| | |
Amounts receivable under long-term incentive plans and share option plans |
| |
| |
Total |
| |
| |
Compensation of key management
The aggregate remuneration of directors and other members of key management during the year was as follows:
| 2025 | | 2024 | |
£000 | £000 | |||
Short-term benefits |
| |
| |
Post-employment benefits |
| |
| |
Share-based payments |
| |
| |
| |
| |
Short term benefits include benefits expected to be settled wholly within twelve months of balance sheet date. Post-employment benefits include defined benefit contributions for active members and pension funding to support contributions to the defined contribution schemes. Share-based payments include awards vested under rewards schemes.
NatWest Group Annual Report on Form 20-F 2025 | 246 |
Notes to the consolidated financial statements continued
31 Transactions with directors and key management
This note presents information relating to any transactions with directors and key management. Key management comprises directors of the company and Persons Discharging Managerial Responsibilities (PDMRs) of NatWest Group plc. |
For the purposes of IAS 24 Related party disclosures, key management comprises directors of the company and PDMRs of NatWest Group plc. Key management have banking relationships with NatWest Group entities which are entered into in the normal course of business and on substantially the same terms, including interest rates and security, as for comparable transactions with other persons of a similar standing or, where applicable, with other employees. These transactions did not involve more than the normal risk of repayment or present other unfavourable features.
Amounts in the table below are attributed to each person at their highest level of NatWest Group key management, and relate to those who were key management at any time during the financial period.
| At 31 December | |||
2025 | 2024 | |||
£000 | £000 | |||
Loans to customers - amortised cost |
| |
| |
Customer deposits |
| |
| |
At 31 December 2025, amounts outstanding in relation to transactions, arrangements and agreements entered into by authorised institutions in NatWest Group, as defined in UK legislation, were £
32 Related parties
A related party is a person or entity that is related to the entity that is preparing its financial statements. This includes subsidiaries, associates, joint ventures, post-employment benefits plans, Key management personnel and their close family members and entities controlled by them. Transactions between an entity and any related party are disclosed in the financial statements in accordance with both accounting standards and relevant listing rules to ensure readers are aware of how financial statements may be affected by these transactions. |
UK Government
In May 2025, the UK Government through His Majesty’s Treasury (HMT) sold its remaining shareholding in NatWest Group plc. Under UK listing rules the UK Government and UK Government-controlled bodies remained related parties until 12 July 2025,
NatWest Group enters into transactions with many of these bodies. Transactions include the payment of: taxes – principally UK corporation tax (Note 7) and value added tax; national insurance contributions; local authority rates; and regulatory fees and levies (including the UK bank levy Note 3) and FSCS levy (Note 25) - together with banking transactions such as loans and deposits undertaken in the normal course of banker-customer relationships.
Bank of England facilities
NatWest Group may participate in a number of schemes operated by the Bank of England in the normal course of business.
In March 2024 Bank of England Levy replaced the Cash Ratio Deposit scheme. Members of NatWest Group that are UK authorised institutions having eligible liabilities greater than £
NatWest Group provides guarantees for certain subsidiaries, liabilities to the Bank of England.
Other Related Parties
In accordance with IAS 24, transactions or balances between NatWest Group entities that have been eliminated on consolidation are not reported.
The primary financial statements of the parent company include transactions and balances with its subsidiaries which have been further disclosed in the relevant notes.
NatWest Group Annual Report on Form 20-F 2025 | 247 |
Notes to the consolidated financial statements continued
32 Related parties continued
Associates, joint ventures (JVs) and equity investments
In their roles as providers of finance, NatWest Group companies provide development and other types of capital support to businesses. These investments are made in the normal course of business. To further strategic partnerships, NatWest Group may seek to invest in third parties or allow third parties to hold a minority interest in a subsidiary of NatWest Group. We disclose as related parties for associates and joint ventures and where equity interest are over
Amounts included in the NatWest Group financial statements, in aggregate, by category of related party are as follows:
Associates and | Equity | |||||
| joint ventures | | shares (1) | | Total | |
31 December 2025 | £m | £m | £m | |||
Investments |
| |
| |
| |
Loans to customers - amortised cost |
| — |
| |
| |
Customer deposits |
| |
| — |
| |
Other comprehensive income | — | | | |||
Other operating income |
| |
| |
| |
31 December 2024 | | | | |||
Investments |
| |
| |
| |
Loans to customers - amortised cost |
| — |
| |
| |
Customer deposits |
| |
| |
| |
Other comprehensive income |
| — |
| ( |
| ( |
Other operating income |
| |
| — |
| |
(1)Represents investments in entities where ownership is more than
Post employment benefits
NatWest Group recharges NatWest Group Pension Fund with the cost of pension management services incurred by it. NatWest Group Pension Fund holds bank accounts held with the NatWest Group plc. At 31 December 2025 these balances amounted to £
NatWest Group Pension fund also holds certain interest rate swaps, inflation swaps, credit derivatives, cross currency swaps and forward exchange rate agreements where subsidiaries of NatWest Group act as counterparties. These transactions are on commercial terms and carried out on an arms-length basis.
During February 2023, NatWest Group entered into an agreement to establish a new legal structure to hold assets, consolidated on NatWest Group’s balance sheet, to meet potential future contributions required by the Main section of the Group’ Pension Fund. This transaction required transfer of £
NatWest Group Annual Report on Form 20-F 2025 | 248 |
Notes to the consolidated financial statements continued
33 Post balance sheet events
A post balance sheet event is an event that takes place between the reporting date and the date of approval of the financial statements. Significant events are included in the financial statements either to provide new information about conditions that existed at 31 December 2025 (reporting date), including estimates used to prepare the financial statements (known as an adjusting event) or to provide new information about conditions that did not exist at 31 December 2025 (non-adjusting events). This note provides information relating to material non-adjusting events. |
On 9 February 2026, NatWest Group plc announced that it had reached an agreement to acquire Evelyn Partners for an enterprise value of £
As part of the ongoing on - market share buyback programme, NatWest Group plc has repurchased and cancelled a further
Other than as disclosed in the accounts, there have been no other significant events subsequent to 31 December 2025 which would require a change or additional disclosure.
NatWest Group Annual Report on Form 20-F 2025 | 249 |
Non-IFRS financial measures
NatWest Group prepares its financial statements in accordance with UK-adopted International Accounting Standards (IAS), and International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). This document contains a number of non-IFRS measures, or alternative performance measures, defined under the European Securities and Markets Authority (ESMA) guidance, or non-GAAP financial measures in accordance with the Securities and Exchange Commission (SEC) regulations. These measures are adjusted for notable and other defined items which management believes are not representative of the underlying performance of the business and which distort period-on-period comparison. The non-IFRS measures provide users of the financial statements with a consistent basis for comparing business performance between financial periods and information on elements of performance that are one-off in nature. The non-IFRS measures also include the basis of calculation for metrics that are used throughout the banking industry. These non-IFRS measures are not a substitute for IFRS measures and a reconciliation to the closest IFRS measure is presented where appropriate. |
Measure | Description |
Cost:income ratio (excl. litigation and conduct) Refer to table 2. Cost:income ratio (excl. litigation and conduct) on page 253. | The cost:income ratio (excl. litigation and conduct) is calculated as other operating expenses (operating expenses less litigation and conduct costs) divided by total income. Litigation and conduct costs are excluded as they are one-off in nature, difficult to forecast for Outlook purposes and distort period-on-period comparisons. |
Customer deposits excluding central items Refer to Segment performance on pages 17-18 for components of calculation. | Customer deposits excluding central items is calculated as total NatWest Group customer deposits excluding Central items & other customer deposits. Central items & other includes Treasury repo activity. The exclusion of Central items & other removes the volatility relating to Treasury repo activity and the reduction of deposits as part of our withdrawal from the Republic of Ireland. These items may distort period-on-period comparisons and their removal gives the user of the financial statements a better understanding of the movements in customer deposits. |
Funded assets Refer to Consolidated balance sheet on page 154 for components of calculation. | Funded assets is calculated as total assets less derivative assets. This measure allows review of balance sheet trends exclusive of the volatility associated with derivative fair values. |
Loan:deposit ratio (excl. repos and reverse repos) Refer to table 5. Loan:deposit ratio (excl. repos and reverse repos) on page 255. | Loan:deposit ratio (excl. repos and reverse repos) is calculated as net customer loans - amortised cost excluding reverse repos divided by total customer deposits excluding repos. This metric is used to assess liquidity. The removal of repos and reverse repos reduces volatility and presents the ratio on a basis that is comparable to UK peers. The nearest ratio using IFRS measures is: loan:deposit ratio. This is calculated as net loans to customers - amortised cost divided by customer deposits. |
NatWest Group Return on Tangible Equity Refer to table 7. NatWest Group Return on Tangible Equity on page 255. | NatWest Group Return on Tangible Equity comprises annualised profit or loss for the period attributable to ordinary shareholders divided by average tangible equity. Average tangible equity is average total equity excluding average non-controlling interests, average other owners’ equity and average intangible assets. This measure shows the return NatWest Group generates on tangible equity deployed. It is used to determine relative performance of banks and used widely across the sector, although different banks may calculate the rate differently. The nearest ratio using IFRS measures is return on equity - this comprises profit attributable to ordinary shareholders divided by average total equity. |
NatWest Group Annual Report on Form 20-F 2025 | 250 |
Non-IFRS financial measures continued
Measure | Description |
Net interest margin and average interest earning assets Refer to Segment performance on pages 17-18 for components of calculation. | Net interest margin is net interest income, as a percentage of average interest earning assets (IEA). Average IEA are average IEA of the banking business of NatWest Group and primarily consists of cash and balances at central banks, loans to banks - amortised cost, loans to customers - amortised cost and other financial assets. It excludes trading balances and assets in treasury repurchase agreements that have not been derecognised. Average IEA shows the average asset base generating interest over the period. |
Net loans to customers excluding central items Refer to Segment performance on pages 17-18 for components of calculation. | Net loans to customers excluding central items is calculated as total NatWest Group net loans to customers excluding Central items & other net loans to customers. Central items & other includes Treasury reverse repo activity. The exclusion of Central items & other removes the volatility relating to Treasury reverse repo activity and the reduction of loans to customers as part of our withdrawal from the Republic of Ireland. This allows for better period-on-period comparisons and gives the user of the financial statements a better understanding of the movements in net loans to customers. |
Operating expenses excluding litigation and conduct Refer to table 4. Operating expenses excluding litigation and conduct on page 254. | The management analysis of operating expenses shows litigation and conduct costs separately. 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 period-on-period comparisons. |
Segment return on equity Refer to table 8. Segment return on equity on page 256. | Segment return on equity comprises segmental operating profit or loss, adjusted for paid-in equity and tax, divided by average notional equity. Average RWAe is defined as average segmental RWAs incorporating the effect of capital deductions. This is multiplied by an allocated equity factor for each segment to calculate the average notional equity. This measure shows the return generated by operating segments on equity deployed. |
Tangible net asset value (TNAV) per ordinary share Refer to table 3. Tangible net asset value (TNAV) per ordinary share on page 254. | TNAV per ordinary share is calculated as tangible equity divided by the number of ordinary shares in issue. This is a measure used by external analysts in valuing the bank and allows for comparison with other per ordinary share metrics including the share price. The nearest ratio using IFRS measures is: net asset value (NAV) per ordinary share - this comprises ordinary shareholders’ interests divided by the number of ordinary shares in issue. |
Total customer assets and liabilities (CAL) Refer to table 6. Total customer assets and liabilities (CAL) on page 255. | CAL comprises customer deposits and gross loans to customers (amortised cost), across the Retail Banking, Private Banking & Wealth Management and Commercial & Institutional segments. For the Private Banking & Wealth Management segment, CAL also includes AUMA, with an adjustment to deduct investment cash to avoid double counting, as investment cash is recognised within both customer deposits and AUMA. The components of CAL are key drivers of income and provide a measure of growth and strength of the business on a comparable basis. |
Total income excluding notable items Refer to table 1. Total income excluding notable items on page 252. | Total income excluding notable items is calculated as total income less notable items. The exclusion of notable items aims to remove the impact of one-offs and other items which may distort period-on-period comparisons. |
NatWest Group Annual Report on Form 20-F 2025 | 251 |
Non-IFRS financial measures continued
1. Total income excluding notable items
| 2025 | | 2024 | | 2023 | |
£m | £m | £m | ||||
Continuing operations |
| |
| |
| |
Total income |
| 16,641 |
| 14,703 |
| 14,752 |
Less notable items: |
| |||||
Commercial & Institutional | ||||||
Own credit adjustments (OCA) | 1 | (9) | (2) | |||
Tax interest on prior periods | — | — | 3 | |||
Dividend received on restructuring of a strategic investment | 51 | — | — | |||
Central items & other | ||||||
Liquidity Asset Bond sale (losses)/gains | — | — | (43) | |||
Share of gains/(losses) of associate - Business Growth Fund | 70 | 21 | (4) | |||
Property strategy update | — | — | (69) | |||
Interest and foreign exchange management derivatives not in hedge accounting relationships | 185 | 150 | 79 | |||
Foreign exchange recycling (losses)/gains | (27) | (76) | 484 | |||
Loss on reclassification to disposal groups under IFRS 5 | (39) | — | — | |||
Tax interest on prior periods | — | (31) | (35) | |||
241 | 55 | 413 | ||||
Total income excluding notable items |
| 16,400 |
| 14,648 |
| 14,339 |
NatWest Group Annual Report on Form 20-F 2025 | 252 |
Non-IFRS financial measures continued
2. Cost:income ratio (excl. litigation and conduct)
2025 | 2024 | 2023 | |||||
£m | £m | £m | |||||
Continuing operations |
| |
| |
| |
|
Operating expenses |
| 8,262 |
| 8,149 |
| 7,996 |
|
Less litigation and conduct costs |
| (167) |
| (295) |
| (355) |
|
Other operating expenses |
| 8,095 |
| 7,854 |
| 7,641 |
|
Total income |
| 16,641 |
| 14,703 |
| 14,752 |
|
Cost:income ratio | 49.6 | % | 55.4 | % | 54.2 | % | |
Cost:income ratio (excl. litigation and conduct) |
| 48.6 | % | 53.4 | % | 51.8 | % |
NatWest Group Annual Report on Form 20-F 2025 | 253 |
Non-IFRS financial measures continued
3. Tangible net asset value (TNAV) per ordinary share
Year ended | ||||
31 December | | 31 December | ||
2025 | 2024 | |||
Ordinary shareholders’ interests (£m) |
| 38,028 |
| 34,070 |
Less intangible assets (£m) |
| (7,292) |
| (7,588) |
Tangible equity (£m) |
| 30,736 |
| 26,482 |
Ordinary shares in issue (millions) (1) |
| 7,995 |
| 8,043 |
NAV per ordinary share (pence) | 476p | 424p | ||
TNAV per ordinary share (pence) |
| 384p |
| 329p |
(1) | The number of ordinary shares in issue excludes own shares held. |
4. Operating expenses excluding litigation and conduct
Litigation | Other | Total | ||||
and conduct | operating | operating | ||||
costs | expenses | expenses | ||||
Year ended 31 December 2025 | |
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Filing: 20-F - NatWest Group plc (NWG,RBSPF) |
FAQ
How did NatWest Group (NWG) perform financially in 2025?
What happened to NatWest Group’s income and net interest margin in 2025?
What are NatWest Group’s key capital ratios and balance sheet figures for 2025?
What dividends and share buybacks did NatWest Group announce for 2025?
How did credit quality and impairments evolve for NatWest Group in 2025?
Which NatWest Group segments drove growth in 2025?
What climate and transition finance did NatWest Group provide in 2025?
