A relationship bank for a digital world 04 2020 financial performance 05 2020 progress against our four strategic priorities 06
In addition to the reports above, we provide key subsidiary reporting, quarterly results, other periodic and archived reporting. Other stakeholder resources are also provided including investor slides, presentations and factbooks and reporting in relation to our GSS bond issuance.
Company announcement and Financial supplement Our latest company information including our financial performance for the year with a focus on key metrics and measurement. The financial supplement provides key financial performance data for the nine quarters ended 31 December 2020.
ESG supplement Provides an overview of Our Purpose in action and key environmental, social and governance matters including progress in 2020. Due to be published in March 2021.
Our 2020 reporting suite brings together NatWest Group’s financial, non-financial and risk performance for the year. The reports are designed primarily to meet the expectations of our investors and debt holders (including green, social and sustainability (GSS) bonds), as well as regulators, ESG conscious investors and our wider stakeholders, including customers, colleagues and society more broadly. The main reports within this suite and their focus areas are detailed below.
NatWest Group is the largest business and commercial bank in the UK, with a leading retail business. We are the biggest supporter of the business sector – banking around 1 in 4 businesses across the UK and Ireland, from start-ups to multi-nationals.
There are three focus areas of Our Purpose where we can make a meaningful contribution to our customers, colleagues and communities: climate, enterprise and learning. We will lead the fight against climate change by playing an active role in the transition to a low-carbon economy. As the champion of businesses in the UK and Ireland we will remove barriers to enterprise and help the economy build back better. And we will build financial capability by helping those who want to take control of their finances and their futures to make the most of their money.
Our strategy is to deliver on Our Purpose and drive sustainable returns to shareholders through four strategic priorities. We will support our customers at every stage of their lives by being more relevant to them and by building deeper relationships as we evolve our propositions to meet their needs throughout their lives. We will be much simpler as a bank and much simpler to deal with for our customers, through a focus on great customer service technology and improving customer journeys. We will be powered by innovation and partnerships by using new technology and digital expertise to deliver an excellent customer experience – harnessing our internal knowledge and experience and partnering with leading external organisations around the world. We will allocate our capital better to drive growth and optimise returns from a safe and secure base.
We champion potential; breaking down barriers and building financial confidence so the 19 million people, families and businesses we serve in communities throughout the UK and Ireland can rebuild and thrive. If our customers succeed, so will we.
Our Strategy Our strategy is to deliver on Our Purpose and drive sustainable returns to shareholders through four strategic priorities.
Challenging conditions resulted in an operating loss before tax of £351 million. Expected credit losses of £3,242 million, 88 basis points of gross customer loans, mainly reflects charges taken in the first half of 2020 due to the uncertain economic environment. The level of Stage 3 defaults remains low, reflecting the impact of government support.
We cannot be certain of the long-term impact of the pandemic. But we can be certain that our bank will continue to support those who need it most as we build back better. By championing potential and helping people, families and businesses to rebuild and thrive, we will succeed together.
2020 highlights and progress 58% of our customers exclusively use digital channels to interact with us.
94% of colleagues feel that NatWest Group supports diversity and inclusion in the workplace.
Artificial intelligence 93% of colleagues feel that our purpose and values are meaningful to them.
BNP Paribas Established new relationship for the execution and clearing of listed derivatives.
Payit We have created a strong culture of innovation with the development of customer propositions such as Payit, our new payment platform launched in June 2020.
Mettle We have enhanced our propositions for our small business customers with our digital only bank Mettle and online offerings such as FreeAgent – our free online accounting software made available through Mettle.
Through simplification and driving efficiency, we will be much simpler as a bank, improving both customer experience and colleague engagement. Customer journeys account for c.30% of our cost base, simplifying and automating customer journeys makes us simpler to deal with and reduces our operating costs.
By harnessing our internal knowledge and partnering with leading external organisations, we will use new technology and digital expertise to deliver an excellent customer experience.
The CET1 ratio of 18.5%, was 230 basis points higher than 2019, including c.100 basis points related to IFRS 9 transitional relief. The liquidity coverage ratio (LCR) of 165%, representing £72.1 billion headroom above 100%, increased by 13 percentage points in comparison to 2019. RWAs decreased by £8.9 billion in comparison to 2019, including a £11.0 billion reduction in NatWest Markets to £26.9 billion, partially offset by volume growth across the retail and commercial businesses with minimal levels of procyclical credit risk inflation.
Note: (1) Excludes 2019 final dividend per share of 3p and special dividend per share of 5p proposed but not paid due to restrictions placed on UK banks by the PRA.
We will use and allocate our capital better to drive growth and optimise returns from a safe and secure base.
Dear shareholders, It is fair to say that 2020 was a year like no other. Politicians, regulators and industry leaders around the globe had to come together and find urgent solutions to a series of rapidly evolving public health and socio-economic challenges caused by the COVID-19 pandemic. And the United Kingdom left the European Union after nearly 50 years of membership.
Group name change Last year also saw us change our group name from The Royal Bank of Scotland Group plc to NatWest Group plc. The Board decided that it was the right time to align our parent company name with the brand under which the majority of our business is delivered.
At the last minute, the trade agreement with the European Union avoided a disorderly exit. But there is still a lot of work to do and significant uncertainty persists, particularly in areas such as financial services. It remains to be seen how cross-border entities will be regulated and what level of regulatory equivalence between the UK and EU will be secured.
As a largely UK-focused bank, the direct impact of Brexit is not as significant for NatWest Group as it is for banks with larger EU or markets operations. We are as prepared as we can be through our well-capitalised and fully operational entities in the EU. Any wider economic impacts will, however, clearly have implications for the bank’s performance. Our focus continues to be on providing support for our customers as the new UK-EU trading relationship develops.
In spite of numerous lockdowns, 2020 was an extremely busy period for many of our colleagues, most of whom were working at home for much of the year. We received over 100,000 applications for the government-backed Bounce Back Loan Scheme in the five days following its launch. And, by the end of 2020, 22% of our mortgage customers had taken a mortgage repayment holiday at some point during the year. We also kept almost all of our branches open. For our colleagues, pay was protected until the end of September 2020, regardless of the need to take time off for COVID-19 related illness, dependants care, isolation or childcare. But our remuneration needs to reflect the difficult economic circumstances. Most of our colleagues do not receive annual bonuses, but for those who are eligible the overall pool has been cut back sharply by around a third.
Outlook Throughout 2020, the UK Government and the Bank of England took unprecedented steps in both monetary and fiscal policy. Substantial government-backed interventions kept entire industries afloat and millions of people in work.
this decision, and having considered a range of factors, we have announced a final dividend of 3 pence per share and, subject to permission from the regulators, we plan to distribute at least £800 million per annum through to 2023 through a combination of ordinary and special dividends, maintaining our 40% pay-out ratio for ordinary dividends.
With a CET1 ratio of 18.5% we are operating well above our target ratio of 13 to 14%. In addition to dividends, this gives us the capacity to participate in directed buy backs from the government for up to 4.99% of issued share capital a year. Any buyback of shares will be at the discretion of HM Treasury, but the Board continues to believe that it would be a positive use of our excess capital.
Board changes and stakeholder engagement During the course of last year, there were a number of changes to the membership of the Board. Baroness Noakes DBE stepped down as a non-executive director in July 2020, with Morten Friis succeeding her as Chairman of the Group Board Risk Committee.
Alison Davis stepped down as a non-executive director in March 2020. Yasmin Jetha was re-appointed as a nonexecutive director on 1 April 2020 and succeeded Alison as Chairman of the Technology and Innovation Committee as well as becoming a member of the Group Sustainable Banking Committee.
Conclusion We could not have imagined that Our Purpose-led approach would be put to the test so soon after it was announced in February last year. In the space of just a few weeks, the UK was in lockdown. Large parts of our economy came to a complete standstill and many of our customers urgently needed our help.
We are grateful to Alison Rose and her senior team for the leadership and energy they have displayed in remarkably challenging circumstances. Looking forward, the Board firmly believes that we have a well-balanced leadership team in place with the necessary experience and expertise to deliver our objectives. By championing potential, we will help people, families and businesses to rebuild and thrive, we will create a bank that has a positive impact on society and we will drive sustainable, long-term returns for our shareholders.
Focus We continue to grow in key areas of focus and our strong levels of capital and liquidity mean we are well positioned to navigate the ongoing uncertainty.
Dear shareholders, The past year presented some extraordinary challenges for our customers, colleagues and communities in the face of an ongoing global health crisis that led to a widespread economic crisis.
But COVID-19 has created opportunities as well as challenges, and it has accelerated a number of underlying trends in customer behaviour, our ways of working and the future shape of our economy.
We look forward with renewed hope and positivity and although we cannot be certain of the long-term impact of the pandemic, this bank will continue to serve our customers and support those who need it most. We will succeed together and, as a result, NatWest Group will drive sustainable, long-term returns for our shareholders.
At 18.5% our CET1 ratio – the key measure of financial strength – is one of the highest amongst our UK and European peers. This capital strength gives us the flexibility to navigate the continuing uncertainty, return capital to shareholders and consider options for creating shareholder value.
In the face of extreme disruption, we made determined progress against the strategy we set out in February 2020 and surpassed our financial targets. We are building a relationship bank for a digital world; a bank that supports customers at every stage of their lives, that is simple to deal with and that is powered by innovation and partnerships, with far sharper capital allocation.
In December 2020, we supplemented the organic growth we continue to achieve in mortgages with the acquisition of a £3 billion mortgage book from Metro Bank plc. This was our first significant acquisition since the financial crisis and represented a positive use of our strong capital position in a key area of focus.
Customers From the start of the pandemic, it was clear that this was not business as usual. By pivoting our business at pace and collaborating with politicians, regulators and industry leaders, we were able to continue to serve our customers in the face of unprecedented demand.
We have more than 800 branches and 16,000 physical points of presence, including our ATM network and our relationship with the Post Office. These remain an important part of how we deliver services to our customers.
The pandemic has also accelerated trends in how our customers want to bank with us. In particular, we have seen a rapid increase in digital adoption. We now have 9.4 million active digital users and 7.7 million active users of our mobile app. 58% of our retail customer base in the UK now exclusively uses digital channels to interact with us, an increase of 12% compared with 2019.
For business customers, we were able to extend over £8 billion of Bounce Back Loans by creating an end to end digital application process within the space of a week.
Communities As a relationship bank that sits at the heart of communities up and down the country, we have a responsibility to provide support to the most vulnerable people in society.
Leveraging existing relationships, part of our Gogarburn HQ was transformed into a food bank distribution hub for the Social Bite, Trussell Trust and Cyrenians charities. We’ve supported these charities to produce over one million meals for those in need since the start of March 2020 and we became a vital distribution network for items such as 240,000 books and education packs, 250,000 items of essential clothing and over 200,000 items of toiletries, masks, hand sanitisers and snacks. Meanwhile, the roof garden at our Coutts office on The Strand donated produce to the Felix Project which delivers surplus food to food banks, schools and charities throughout London.
Our Purpose The COVID-19 pandemic has not distracted us from Our Purpose; we champion potential, helping people, families and businesses to thrive. Nor has it distracted us from the three key areas of focus we set out in February 2020. If anything, it has made them even more important. Our Purpose also has a powerful commercial imperative. If our customers succeed, so will we.
Removing barriers to enterprise We are already the largest supporter of UK business, serving around 1 in 4 UK businesses. However, we know that setting up and running a business is harder than it should be for under-represented groups, including for female and Black, Asian and Minority Ethnic-led businesses. We want to remove these barriers.
In 2020, as a result of the pandemic, we launched an SME response strategy that supported four million of our current customers to help them survive and thrive through the crisis.
Building financial capability Developing good habits can help to transform people’s relationships with money, and this has never been more important given the economic disruption we continue to face. We helped 600,000 (1) customers to start saving with us in 2020, with a view to helping two million by 2023.
Building financial confidence and capability is especially important for young people. Over the last 26 years, our flagship MoneySense financial education programme has reached more than nine million children in 1 in 3 UK schools and last year we reached more than 2.9 million people though our various financial capability interactions.
Leading the climate challenge Climate change is the greatest challenge facing the planet. Tackling it requires collaboration across governments, industries and society.
We are determined to play a leading role in driving positive change. In November 2020, we announced that NatWest Group will be one of the Principal Partners and banking sponsor of the 26th UN Climate Change Conference of the Parties (COP26), taking place in Glasgow later this year.
Lord Stern was appointed as an independent adviser to NatWest Group to help us achieve our ambitions and James Close as our new Director, Climate Change, to co-ordinate and deliver our climate strategy.
Supporting customers at every stage of their lives We will be more relevant to our customers by building deeper relationships and evolving our proposition to meet their needs throughout their lives. We benefit from having strong customer franchises across the business that provide multiple growth opportunities. For example, by bringing together our wealth businesses we can serve our customers better by focusing on the changing financial requirements through each stage of their lifetime.
Following an extensive review and despite the progress that has been made, it has become clear Ulster Bank will not be able to generate sustainable long term returns for our shareholders. As a result, we are to begin a phased withdrawal from the Republic of Ireland over the coming years which will be undertaken with careful consideration of the impact on customers and our colleagues.
A diverse and inclusive bank We continue to focus on building a more diverse and inclusive organisation. At the end of 2020, 39% of the roles in our top three leadership layers were held by female colleagues, a 10% uplift since our targets were introduced.
2020 also brought an increased focus on racial inequality with the tragic death of George Floyd and the rise of the Black Lives Matter movement. Following the establishment of a taskforce led by the co-chairs of our multicultural network, we published a report - Banking on Racial Equality: A Positive Roadmap for Change – looking at what more we could do to champion the potential of colleagues, customers and communities from Black, Asian and Minority Ethnic backgrounds.
The way we live and work is changing. And people’s expectations of companies are changing as well. We won’t always get everything right. But by collaborating with others and demonstrating that we can play a positive role in society, we will help to create a greener, fairer and more inclusive economy for all, allowing us to deliver long-term sustainable value for all our shareholders.
We will continue to champion potential to help the people, families and businesses we serve to recover, rebuild and ultimately to thrive.
At NatWest Group, Our Purpose sits at the heart of our decision making, because we know that when our customers and communities succeed, our economy prospers and we too succeed, driving sustainable returns for shareholders.
Guided by their Five Principles of a Purpose Driven Business, which are outlined below, Our Purpose recognises that our business is made up of a network of relationships with multiple stakeholders with different interests.
We prize fairness and diversity and exercise judgement with thought and integrity.
Black, Asian and Minority Ethnic-led outside London and the South East of front-line colleagues professionally qualified within first 18 months in role people reached each year to improve their financial capability additional customers helped to start saving by 2023 2.5m 2m
Powered by innovation and partnerships 19 million customers Support 1 in 4 businesses
Purpose where we can make a meaningful contribution to our customers, colleagues and communities.
*Since we set our targets in February, there has been a significant change in the macro environment and these targets will be reconsidered as part of our Full Year 2020 reporting cycle.
Our strategy remains unchanged, to deliver on Our Purpose and drive sustainable returns to shareholders through four strategic priorities. These strategic priorities will deliver growth while taking costs out. Combined with a disciplined approach to capital allocation, this will deliver an improvement in returns over the longer-term.
2021 Targets n Cost reduction of c.4% per annum through to 2023 (1)
n CET1 ratio of 13-14% by 2023 n ROTE of 9-10% by 2023
One Bank transformation means looking across the entire organisation and ensuring the right decision making and prioritisation will lead to delivery of the outcomes that really matter; better customer experience, meeting more customer needs, being simpler to deal with, and creating better value for our shareholders.
Our Purpose and strategic priorities will continue to support us, as we strive to be the leading relationship bank for a digital world.
Our execution is centred around Our Purpose, achieving a holistic One Bank transformation and delivering our strategic priorities. We are building on our strengths, to meet our customers’ needs throughout their financial lives, enabling them to thrive.
Our execution 9.0m conversations with Cora, our virtual assistant, a 68% increase on 2019. 40% of conversations required no human intervention.
2019: 5.4m £277m reduction in operating expenses, exceeding our target of £250 million for 2020.(1)
BlackRock Established new relationship with BlackRock to support our investment management processing activity, enabling savings to be passed onto our clients.
£328.8bn +7% net lending growth in our retail and commercial businesses versus >3% target.
Sharpened capital allocation 18.5% CET 1 ratio, c.£7.7-9.4 billion headroom to 13-14% targeted range, more than double our Maximum Distributable Amount.
£26.9bn NatWest Markets riskweighted assets versus a 2020 target of £32 billion. £11 billion reduction since 2019.
As signatories of the UN Principles for Responsible Banking we are committed to an ongoing process to align our strategy with the 2015 Paris Agreement and the SDGs. Our three areas of focus are mapped to seven prioritised SDGs. The business performance sections on pages 33 to 45 highlight progress on our areas of focus and include the SDG icons they seek to positively impact. Our case studies target wider SDG references as we seek to raise awareness of, and further embed, SDGs into our strategy.
Leading bank in the UK and Ireland helping to address the climate challenge incremental new businesses created by 2023 through inspiring and supporting >500,000 people.
of those inspired and supported will be based outside London and the South East.
of those inspired and supported will be Black, Asian and Minority Ethnic.
At least halve the climate impact of our financing activity by 2030.
Learning ClimateEnterprise 1,926 incremental businesses created in 2020, below our 2020 target of 6,500 new businesses, reflecting the impact of COVID-19 on business creation. (1)
80% of 60,788 people inspired and supported identified as female. (1)
36% of Retail Banking mortgages in England and Wales are at or above EPC rating C.(3)
26% of 60,788 people inspired and supported were Black, Asian and Minority Ethnic. (1)
£315m Since launching in October 2020, we have received 1,229 applications for Green Mortgages, with a value of £315 million. These mortgages are only available on the most energy efficient properties.
£12bn climate and sustainable financing and funding(*), enabling us to bring forward our £20 billion target from 2022 to 2021. We expect to exceed this target during 2021.
Note: (1) Data only tracked against select initiatives which included those focused on female and social purpose-led entrepreneurs.
(3) Percentage of £92.9 billion mortgages in England and Wales for which EPC data is available. (4) Includes £5 billion attributable to NatWest Markets, included in the £12 billion climate and sustainable funding and financing figure. (*) Within the scope of EY assurance. Refer to page 66.
Learning Launched the NatWest Group Learning Academy bringing the very best learning together in one central online location for our colleagues.
S tra te g ic R e p o rt 45,000 We migrated our twelve accelerator hubs around the country to digital delivery with over 45,000 entrepreneurs attending 1,016 virtual events across the country.
Supporting our customers, colleagues and communities throughout the UK and Ireland through COVID-19.
37,500 Launched a Wellbeing Hub for colleagues with over 37,500 hits.
£14.1bn of lending approved through government schemes, with c.300,000 applications approved.
95% of colleagues think we are doing a good job of responding to the pandemic.
£1m Coronavirus Response Fund distributed by bank supported charity, Social & Community Capital.
The dramatic spread of COVID-19 has disrupted lives and livelihoods, with effects being experienced throughout communities and businesses worldwide. We moved quickly to set up the necessary infrastructure to support our customers, colleagues and communities. Throughout 2020 we have put in place extraordinary measures of financial and non-financial support, underpinned by something every bit as powerful – humanity, kindness and respect.
Since its launch 26 years ago, MoneySense has helped more than nine million young people by providing activities, games and resources for students, teachers and parents to help teach children about money.
During national and local lockdowns many of our customers started to save for the first time. We introduced the new Digital Regular Saver to help our customers start and maintain a long-term savings habit. In the last four months of the year, we opened 215,000 Digital Regular Saver accounts, helping our customers build financial security for the future.
This illustration of our operating environment provides an integrated materiality assessment of the most important considerations with the potential to influence our ability to serve customers and create value for the long term.
In 2020 we added the Global Pandemic and Employment and Enterprise. The impact of COVID-19 runs through all considerations and is reflected in the definitions that follow.
Demographic shifts mean that the needs and behaviours of our customers are changing. In 2020 this was amplified by lockdowns and social distancing leading to some customer segments adopting new technologies for the first time. Key trends continue to impact our customers including retiring later and working longer, renting for longer or buying a house later in life and often with the support of family members and more focus on financial planning for retirement. We are committed to supporting the evolving needs of customers ranging from home ownership to digital banking and supporting customers at every stage of their lives.
Supporting financial capability and confidence sits within our three areas of focus. It goes beyond delivering fair products and great service. It means helping customers, wider society and future generations to develop good money management skills so they are empowered to make better financial decisions. Customers are supported by a diverse range of tailored banking services and products. In 2020 we increased focus on supporting customers facing financial difficulty, or in vulnerable situations, and helping more people to start saving.
We expect to face significant risks in connection with climate change and the transition to a low carbon economy. These risks are subject to rapidly increasing prudential and regulatory, political and societal focus, both in the UK and internationally. We have set an ambition to be a leading bank in the UK and RoI helping to address the climate challenge. Through engagement with key stakeholders, we are working to champion climate solutions and accelerate the speed of transition in line with the 2015 Paris Agreement. In 2020 we became a sponsor of COP26.
Restoring trust and safeguarding reputation remains a key priority for most banks. We strive to build a reputation as a purpose-led bank: championing potential, helping people, families and businesses to thrive. As a relationship bank for an increasingly digital world, our strategic priorities are to be simple to deal with, supporting customers at every stage, powered by innovation and partnerships and sharpened capital allocation. Customer NPS and stakeholder engagement and advocacy act as measures of satisfaction, reputation and trust.
Customer behaviours continue to change, and new business models emerge, through advancing technology. COVID-19 has increased our customers’ reliance on technology with a further shift to digital, reinforcing the need for modern capabilities and resilient systems. Our active digital users across both personal and business customers continued to grow in 2020 and we invested £581 million on technology. Our focus is to reduce year on year cost by simplifying processes, improving our resilience and stability whilst helping to deliver innovative solutions for our customers.
We operate in a highly regulated market which continues to evolve in scope. Areas of regulatory focus include customers in vulnerable situations, climate change, financial crime, capital and liquidity management, use of models and the transition to alternative risk-free rates. We monitor regulatory change, implement new regulatory requirements where applicable and have regular engagement meetings with regulators to discuss key regulatory priorities.
We experience a constant threat from cyber-attacks both directly and to our supply chain, re-enforcing the importance of due diligence with the third parties on which we rely. We continue to invest significant resources in the development and evolution of cyber security controls and work to protect and educate our customers on fraud and scam activity.
To provide continuity of service for customers with minimal disruption, we continue to monitor and assess a diverse and evolving array of threats, both external and internal, as well as developing, strengthening or adapting existing control capability to be able to absorb and adapt to such disruptions.
At NatWest Group, we understand that respecting human rights is the right thing to do. We do not tolerate or condone abuse of human rights within our business, supply chain or within our sphere of influence. Our approach to respecting human rights is guided by the United Nations Guiding Principles on Business and Human Rights and aligned to Our Purpose-led strategy and Our Values of “Doing the Right Thing’ and “Thinking Long Term’. We supported the adoption of the Modern Slavery Act (2015) in the UK and seek to tackle modern slavery through a continued implementation of policies covering our customers, colleagues and suppliers, and by monitoring our financing and supply chain for this activity. In 2020 we published our 2019 Modern Slavery Act Statement and updated our Human Rights Statement. Visit natwest.com for further information.
In 2020, a colleague-led taskforce was brought together to help the bank listen, learn and better understand what more we can do to champion the potential of everyone.
We have published ‘Banking on Racial Equality – A Roadmap for Positive Change’, our report on racial equality for our customers, colleagues and communities. The report includes a set of commitments and targets, to make a meaningful, positive difference to people from Black, Asian and Minority Ethnic backgrounds.
As Black colleagues are particularly under-represented in senior roles across the UK, relative to the UK working population, we have introduced a new target to have 3% Black colleagues in our UK senior roles by 2025. This is in addition to our existing target to have at least 14% Black, Asian and Minority Ethnic leaders in senior UK roles by 2025. As at the 31 December 2020 we have on aggregate 10% Black, Asian and Minority Ethnic colleagues in our top four leadership layers in the UK, representing a 2% increase since targets were introduced.
We are confident our report will spark reflection and action that will pull down the barriers that prevent too many from reaching their potential. We believe future employees of all ethnicities will read this report and aspire to work at NatWest Group because we are a diverse and inclusive place to work, one that works hard to enable everyone to bring the best of themselves to work and doesn’t leave anyone behind.
NatWest Group, as with all companies, continues to deal with a range of significant risks and uncertainties in the external economic, political and regulatory environment.
Expectations regarding the rate of economic recovery continue to change rapidly in response to government measures to limit the spread of COVID-19, expectations around the rollout of COVID-19 vaccines and policy measures to support the recovery.
2021 Outlook We plan on reducing other expenses, excluding OLD, by around 4% in comparison to 2020, excluding any change in the direct cost base of Ulster Bank RoI. We also expect to incur strategic costs of around £0.8 billion during 2021 from the continued refocussing of NatWest Markets and resizing of the Group’s cost base.
We expect NatWest Markets exit and disposal costs and the impact of Commercial Banking capital management actions to total a combined £0.3 billion in 2021.
Our full year 2020 impairment loss rate was 88 basis points of gross customer loans. We expect that the full year 2021 loss rate will be at or below our through the cycle guidance of 30-40 basis points, with losses driven by a combination of the developing economic outlook for the UK and Republic of Ireland and the level of economic distress experienced by our personal and commercial customers as government support measures scale down and restrictions ease.
We are targeting above market rate lending growth across our UK and RBS International retail and commercial businesses, excluding UK Government financial support schemes.
As a result of the decision to withdraw from the Republic of Ireland announced today we would expect the level of RWAs to reduce in the coming years, and for this withdrawal to be capital accretive for NatWest Group across the multi-year process.
Through our relationship, SafeLives has consulted on bank policies and practices to improve outcomes for customers, leading to the innovation of our e-form for survivors to contact the bank safely and the introduction of video banking to prevent impersonation of victims.
Building a purpose-led bank 1. Our resources 2. Our business activities
We support our personal, business, commercial and institutional customers with financial services that meet their needs. Understanding and delivering help for what matters to our customers is what we seek to do every day.
We believe in treating customers fairly, offering flexibility to our customers in how they choose to bank with us and providing extra help to customers in vulnerable situations or financial difficulty. This includes keeping their funds safe and secure, improving financial capability and supporting enterprise.
We rely on an engaged, healthy and inclusive workforce to deliver our strategy to 19 million customers in the UK and Ireland.
We understand we are part of the natural world, benefiting from resources including paper and water to conduct our business activities. We were jointly the first company worldwide to sign up to all the Climate Group initiatives on electric vehicles (EV100), energy productivity (EP100), and renewable power (RE100).
Our critical technology systems have been available 99.98% of the time and typically over 95% of branches have been available each day during the pandemic, other service channels have remained fully available.
Building a purpose-led bank 3. How we create value for our customers and society £32.4 billion gross lending to SMEs and mid-corporates in Commercial Banking.
We have helped over 600,000 customers to start to save and reached 2.9 million people through financial capability interactions.(•) (2)
MoneySense has been running for over 26 years, during which it has helped over 9 million young people.
In 2020, we supported customers with £12 billion climate and sustainable funding and financing through 186 deals, for a range of customers on their decarbonisation ambitions. (*)
One of the largest UK employers with a workforce of 59,822. We recruited 390 graduates, 115 apprentices and 261 interns in 2020.(3)
Payment of £1.14 billion in tax to the UK Government, which supports central government and local authority spending. (4)
Prevented 572,665 cases of attempted fraud amounting to over £252.3 million in the UK. (*)
78% of our active personal current account customers are digitally active, using either mobile or online channels. (*)
We flexed and evolved our existing wellbeing plans to build learning, provide practical tools and support our colleagues during the pandemic.
NatWest Group launched Island Saver in 2020, its first ever educational video game which harnesses children’s enthusiasm for video games as an opportunity to teach them about money management.
Island Saver is available to download for free on PlayStation, Xbox One, Nintendo Switch, PC (via Steam), Android and iOS. The game has received great ratings on all platforms: 10/10 on Steam; 4.8/5 in the Apple App Store; 4.6/5 on Xbox; and 4.5/5 on PlayStation. It was also in the top 20 downloads on Nintendo Switch in Europe and North America in June 2020.
We provide a comprehensive range of banking products and related financial services including current accounts, mortgages, personal unsecured lending and personal deposits. We're here for customers whenever and wherever they need us through a range of convenient ways to bank, from our mobile app and online banking through to our contact centres and high street and mobile branches. Offering 24/7 banking facilities, customers are served through the NatWest and Royal Bank of Scotland distribution channels.
We provide a comprehensive range of financial services through Personal and Commercial Banking divisions. Personal Banking provides loan and deposit products through a network of branches and direct channels, including the internet, mobile and telephony. Commercial Banking provides services to business and corporate customers, including small and medium enterprises.
We offer comprehensive banking and financing solutions to start-up, SME, Commercial and Corporate customers in the UK. We are there for our customers as they start, grow and manage their businesses. Our innovative products and services help customers achieve their growth, environmental and social targets. We deliver a high-quality sales and service experience through our expertise and deep engagement, locally, regionally and nationally through face-to-face, direct and digital channels. We continue to support our customers through the Brexit transition period and beyond.
Through the Coutts and Adam & Company brands, we provide private banking and wealth management services to UK-connected high net worth individuals and their business interests. We continue to focus on delivering the best client experience through a proactive engagement model which supports clients across both sides of their balance sheet. Our client centric strategy is focused on improving returns by deepening client relationships and improving our digital banking capabilities to make it easier for clients to deal with us.
Throughout the COVID-19 pandemic, 95% of branches remained open and we continued supporting customers 24/7 through our contact centres with our virtual assistant Cora being named ‘Best Informational Bot’ at the 2020 AI Breakthrough Awards.
Through Customer Care campaigns set up as a proactive response to the pandemic, we called nearly 600,000 customers to provide support, including almost 480,000 customers in vulnerable situations, in addition to launching dedicated carelines for these customers and NHS staff. We helped shielding customers to access cash and supported every customer to bank safely and conveniently through digital channels and virtual faceto -face appointments with Video Bankers. We helped over 250,000 customers access mortgage repayment holidays and we offered interest-free limits up to £500, removed fees, and deferred planned interest rate increases on customer overdrafts.
We introduced £100 thank you payments to customers borrowing money to make energy efficient home improvements as part of the UK Government’s Green Homes Grant and in October 2020 we launched Green Mortgages which offer lower interest rates for customers purchasing energy efficient homes.
At the end of 2020 we agreed to purchase c.£3.0 billion of prime residential mortgages from Metro Bank plc. The sustainable returns delivered through this acquisition will complement the strong organic growth achieved through our current channels.
(2) Includes instances where customers had existing savings with other banks and transferred them in to their NatWest Group account.
We now have 9.4 million active digital users, up from 8.7 million in 2019 and we added 0.9 million newly active mobile users during 2020, taking the total to 7.7 million. By the end of 2020 we were holding 9,000 weekly video banking conversations with customers, compared to fewer than 100 per week in January 2020 – allowing our colleagues to support our customers with a highly personal service from the safety of their own homes. Our digital services are fast, simple and convenient, making it easy for our customers to manage and look after their money, especially during the disruption of 2020.
Our digital offering continues to be powered by innovation. Cora, our 24/7 AI virtual assistant, had nine million customer conversations in 2020, and she played a crucial role during the pandemic. When payment holiday demands spiked, Cora stepped in, serving customers via our mobile app and online banking, so they didn’t need to go into a branch or wait on the phone. So far, she's had 370,000 customer requests for payment holidays, freeing up colleagues' time to support customers with more complex queries. Requesting a PIN reminder, changing address and even getting balance and recent transaction information can all now be done via Cora. Crucially, when Cora can't help, she can put customers straight through to a colleague, for a seamless experience.
• Enterprise: We worked with the Strategic Banking Corporation of Ireland (SBCI) to deliver a range of loan and working capital schemes for businesses impacted by COVID-19, providing €85 million in lending under these schemes and supporting over 4,500 business customers with payment breaks.
• Climate: In addition to reducing our own environmental impact, we are committed to helping our customers transition to a low carbon future economy. In 2020 this included launching our new four-year fixed rate Green Mortgage for homes with a B2 Building Energy Rating (BER) or higher.
An operating loss of €255 million was primarily due to increased impairment losses and lower income as a result of COVID-19. Net loans to customers reduced by €1.4 billion in comparison to 2019 reflecting lower levels of personal and commercial lending, and increased loan provisions.
Supporting our personal and business customers in the Republic of Ireland through COVID-19 has been a top priority in 2020. Following an extensive review and despite the progress that has been made, it has become clear Ulster Bank in the Republic of Ireland will not be able to generate sustainable long term returns for our shareholders.
As a result, the Group will begin a phased withdrawal from the Republic of Ireland over the coming years which will be undertaken with careful consideration of the impact on customers and our colleagues.
Now in its fifth year, the Ulster Bank Hackathon has a reputation for attracting some of the best and brightest minds.
Working with start-up hub Dogpatch Labs, the Ulster Bank Hackathon is one of Ireland’s most established Hackathons, bringing together coders, data scientists, designers, entrepreneurs and colleagues to ‘hack’ out new ideas and innovations, collaborating to disrupt the future of banking.
Supporting our areas of focus: • Learning: We supported the British Chamber of Commerce with their ‘Restart Renew Rebuild’ campaign to champion economic recovery and we welcomed a new cohort of apprentices into our Social Mobility Apprenticeship Programme with the Leadership Through Sports and Business charity.
• Enterprise: We launched the digital business builder platform supporting start-ups and new businesses with access to learning resources, successfully reaching over 14,200 registrations, with 58% of those supported identifying as female. We also digitised our Dream Bigger programme, to support the next generation of female entrepreneurs.
• Climate: As a leading lender to the UK renewables sector, we supported £3.9 billion of Climate and Sustainable Funding and Financing in 2020 and are proud to support de-carbonisation in the UK. In October 2020, we launched a NatWest Climate Accelerator to provide support, coaching and access to our Climate Partner Panel for our businesses whose core offering is linked to sustainable environmental activities.
As a testament to our passion for innovation, we won a range of awards in 2020: Payit, an Open Banking solution for e-commerce payments settlement launched in June and won the prestigious ‘Innovation Frontier Award’ at Celent Model Bank 2020; and Rapid Cash, our digital working capital solution won best ‘Innovation in the SME Finance Sector’ at the 2020 Business Moneyfacts awards.
We have played a leading role in the COVID-19 crisis response, delivering on Our Purpose-led strategy by helping businesses with a comprehensive package of initiatives, including participation in the UK Government’s financial support schemes. Supporting customers has been our top priority, as we have accelerated our strategy to remain accessible through remote channels, providing digital frontline assistance as well as support from our relationship managers.
In 2020 the NatWest Entrepreneur Accelerator Programme was recognised as the No.1 UK accelerator programme.(1)
Entrepreneur Accelerator is our flagship programme, fully-funded by NatWest Group, to support high growth-potential businesses with ambitions to scale across the UK. We focus on giving entrepreneurs the best possible coaching, in world-class environments, while connecting them to our amazing networks.
We are committed to creating and supporting new businesses and concentrate our efforts on under-represented groups and geographical inequality. The programme has supported 1,230 entrepreneurs, of which 43% were female, 18% were of Black, Asian and Minority Ethnic backgrounds and 81% were outside London and the South East of England. The resulting businesses have raised total investment of £56 million, generating £128 million of total turnover and creating more than 1,000 jobs.
Supporting our areas of focus: • Learning: Our award-winning Coutts Institute continued to support clients with their philanthropic needs. In 2020, we supported over 230 clients with a fraud awareness webinar and more than 4,000 clients attended our live ‘Coutts in Conversation’ speaker series. Internally, we launched a mentor scheme for our Black, Asian and Minority Ethnic colleagues and provided 220 frontline colleagues with sales skills training, using psychology and behavioural science.
• Enterprise: We have supported Entrepreneur clients through a dedicated service which provides capital and connections to business founders. Coutts Investment Club introduces financially sophisticated high net worth individuals to private companies, and in March 2020 agreed to collaborate with the Business Growth Fund (BGF) to develop the UK Enterprise Fund.
• Climate: In September 2020, Coutts became a signatory of the Green Finance Institute’s Green Home Retrofit principles and in November 2020 launched the Green Mortgage pilot, which will support our commitment to ensuring 50% of our clients’ homes achieve at or above EPC or equivalent rating C by 2030. Our Asset Management business reduced the carbon intensity of equity in its portfolios by an average of 29% (3), ahead of our 25% target reduction by 2021 and is on track to meet our target to reduce the carbon intensity across all portfolios by 50% by 2030, in line with the Intergovernmental Panel on Climate Change (IPCC) targets.
In August 2020 we received an A+ accreditation from the Principles for Responsible Investment, the United Nations’ supported international network of investors, and in November 2020 Coutts received The Financial Times’ Banker Magazine and Professional Wealth Management award for best Private Bank for Millennials. Coutts is also currently working towards achieving Benefit corporation (B-corp) accreditation; having both changed its Articles of Association and begun measuring progress according to the B-Corp impact assessment in 2020.
(3) For the period from 1 January 2020 to 30 June 2020, with a baseline of 31 December 2019.
2020 was Coutts second year as a signatory to Principles for Responsible Investment (PRI), a world-wide body that aims to address ESG issues and the role that investors can play in supporting this work. PRI makes an annual assessment of all signatories, which allows for comparisons with other investment managers at a local and global level.
We have worked closely with local governments to implement emergency policies to support local communities and businesses in light of COVID-19. We led the offshore banking sector in the creation of the loan Disruption Guarantee Scheme (DGS), providing financial support to our customers, with loan facilities totalling £858 million, through forbearance, the DGS and payment holidays in 2020.
We have accelerated our digital transformation strategy and are now meeting the increasing customer demand for digital solutions. This change in customer behaviour has also led us to consolidate the branch network in our locations and allowed us to focus more investment into digital services. In 2020 eQ, our multicurrency banking platform for Corporate and Institutional banking customers, released online account opening and a mobile app.
Supporting our areas of focus: • Enterprise: In July 2020 we introduced the Woman in Business accreditation, with 46 colleagues completing the qualification. In tandem we nominated nine customers for the NatWest Everywoman Awards, championing their potential and helping to remove the barriers to business.
In the second half of 2020 we selected six local, social enterprises to support with mentoring, sharing our knowledge and resources with our communities. We also held three virtual Business Builder events which were open to anyone in the community, a first for RBS International. We had 93 attendees, with a third signing up for further support.
• Climate: We continue to help drive the transition towards a low carbon economy. In the fourth quarter of 2020 we provided a €5 million investor backed loan facility (IBLF) for an energy transition fund focusing on clean energy production, energy efficiency enhancements and clean energy utilisation. We also provided a €30 million IBLF for a European fund; that invests in the development, construction and management of subsidy-free and sustainable renewable energy assets.
Throughout 2020 we have sought to increase customer and colleague knowledge on climate by running education sessions on sustainability-linked loans, holding a Climate Awareness month and by enrolling over 100 colleagues on climate education courses; in conjunction with the University of Edinburgh and Cambridge Institute of Sustainability Leadership.
We have accelerated our digital transformation to suit changing customer needs. Leading a digital transformation across the communities we operate in and becoming a bank that is easy to deal with is the best way to fulfil Our Purpose to champion potential.
Through the strong relationships RBSI has built with housing trusts, developers and the local government on Jersey, RBSI is playing a leading role in tackling the issue of overcrowded accommodation on the island of Jersey.
Lending provided by RBSI continues to support the development of social housing, affordable housing and first-time buyer properties in Jersey. And over the course of 2020, we went further, providing lending facilities totalling £92 million to support the building of homes for islanders, working with Les Vaux Housing Trust, CTJ Housing Trust and Andium Homes.
We leveraged our risk management expertise to support required hedging for customers; helped governments access critical financing to support their pandemic response programmes and supported customers’ access to capital markets, including issuing COVID-19 response bonds and accessing the Covid Corporate Financing Facility (CCFF) in conjunction with Commercial Banking.
Our commitment to clients has been recognised by a number of awards and surveys in 2020 including: • UK Corporates FX Service Quality Leader (Greenwich Associates, Global FX-Study, UK Corporates, 2019, awarded April 2020)
• #1 European Government Bonds by Estimated Notional Share – Gilts (Greenwich Associates European Fixed Income Rates 2020)
• Most Impressive FIG House in Sterling (GlobalCapital Bond Awards 2020)
We have played a key role in supporting NatWest Group’s customers during 2020. We have remained resilient in the face of volatile market conditions, delivering strong income performance and safely managing our balance sheet while continuing to support customers through the COVID-19 crisis.
In 2020, NatWest Group delivered £12 billion of climate sustainable funding and financing to customers against our target to deliver £20 billion by the end of 2021.
Renewable energy is a strategically important sector for NatWest Group, Dogger Bank marked our ninth offshore wind project finance transaction in the UK in the past four years. We have been the number one provider of finance to the UK renewables sector over the last 10 years – by total number of transactions over that period – with 79 transactions totaling £3.86 billion (1), supporting more than 8GW of offshore wind development.
We regularly shared information about NatWest Group and its Purpose-led strategy, providing opportunities for our communities to engage with our colleagues and customers. We were in constant contact with our communities, including through our regional boards, leveraging existing and forming new relationships to support society. Examples of how we engage with and support our community partners and charities include payroll giving, community cashback, employee fundraising, employee volunteering, ATM giving and disaster and emergency appeals.
We actively monitored changes in the regulatory landscape and engaged with regulatory consultations and on compliance with regulatory changes. We also attended regulatory engagement meetings on an ongoing basis.
Suppliers Our suppliers, who support us to deliver products and services to our customers.
Suppliers have played a critical role in ensuring continuity of service to our customers during the pandemic.
• Customer satisfaction and trust. • Lending, including fees and charges.
• Supporting businesses. • Supporting customers in financial distress. • Accessible banking. • Security and fraud.
• Launched an online cashflow tool to help businesses through the pandemic. • Introduced case owners to improve the account-opening journey.
Further information: • Our Customers, pages 53-56. • Supporting our customers, colleagues and communities, page 22.
• Home working was quickly made available to most colleagues, and for keyworker colleagues who remained on the frontline, all of our offices and branches were made COVID-secure.
• Set up a COVID-19 Wellbeing Hub for colleagues which received over 37,500 hits. • Our View showed a further improvement in colleague sentiment. • Our work on inclusion has been recognised through a number of external awards. • We continue to support our c.23,000 – strong Employee Led Networks.
• Requests to raise awareness of charities, and enable employee volunteering and fundraising.
• Support with customer giving. • UK and international disasters and emergencies response. • Climate and conservation activity.
• 30,000 trees were planted in a pioneering “tiny forest” in Dagenham with TCV (The Conservation Volunteers).
• Financial performance. • Dividends and share price. • Climate change and sustainable lending.
Further information: • How the Board engaged with investors, page 50. • Virtual shareholder events: natwestgroup.com/investors.
• Responded to various consultations and other requests for comment/input issued by government, regulatory and standard setting bodies.
• Directors and senior management had regular engagement meetings with regulators to discuss key regulatory priorities.
• We requested forbearance across a number of regulatory change programmes as a result of implementing government schemes at pace to support our customers.
• Launched our Supplier Charter, which sets out our aims and expectations in the areas of ethical business conduct, human rights, environmental sustainability, diversity and inclusion, the Living Wage and prompt payment. To support the Supplier Charter and our collaborative approach to improving performance in these areas, we identified and onboarded a new third party provider to undertake independent sustainability assessments of our suppliers – EcoVadis.
• To support our Supply Chain during the COVID-19 pandemic and beyond, we moved all UK and Ireland supplier payments to immediate release, to support all of our suppliers, including SMEs.
In February 2020 the Board approved its annual objectives and confirmed the Board’s key stakeholder groups, as set out in this statement.
The Group CEO and Group CFO met with customers throughout the year to enhance relationships and understand their views.
The Group Sustainable Banking Committee held two sessions that included a focus on customers. The first of these addressed customer treatment in the context of COVID-19. The second session focused on enterprise, and the Committee heard customer testimonies alongside a spotlight from a customer on entrepreneurship and NatWest Group’s role in supporting the sector.
Colleagues Colleague Advisory Panel Our Colleague Advisory Panel (CAP) provided an important two-way communication channel between the Board and colleagues during the pandemic.
The CAP was set up in 2018 to help promote colleague voices in the boardroom and supports our compliance with the UK Corporate Governance Code in relation to workforce engagement. Its membership includes representatives from a range of our Employee Led Networks, unions, management teams and regional locations, as well as volunteer
In December 2020, the Group Sustainable Banking Committee considered a summary of the results of the BSB’s 2020 Assessment report on NatWest Group, in advance of a presentation by the BSB to the Board in February 2021.
The Group Sustainable Banking Committee held a dedicated people and culture session in December 2020 which included culture measurement reporting, and this in turn helped to support the Board on assessing progress on building a healthy culture, and alignment between culture and purpose across NatWest Group.
For further information on the work of the Group Sustainable Banking Committee, refer to pages 116 to 117.
Colleague opinion survey results were another useful culture oversight tool available to the Board. Directors considered the results of colleague pulse surveys conducted in May and June 2020, and in October 2020, reviewed the results of the annual colleague opinion survey, Our View. Key themes noted and discussed by the Board were culture, inclusion, capability, resilience and wellbeing (including financial wellbeing and colleague advocacy).
Executive talent and succession The Board is committed to staying connected with the executive talent population. Although COVID-19 restrictions meant that a planned face to face event for directors to meet senior management colleagues considered to be ‘rising stars’ was cancelled, a virtual session enabled this group to spend time together. Discussion topics included
Directors agreed CAP members should be encouraged to share CAP discussions through their own internal networks.
Feedback provided back to the panel after the Board by the Chair
Summary of views shared with the Board by the ChairFollow up
July: CAP Chair met with Panel members to feed back Board views.
September: At the next CAP meeting, Panel members were encouraged to share CAP discussions through relevant channels.
Board attendees: Lena Wilson (CAP Chair), Alison Rose (Group CEO), Morten Friis and Yasmin Jetha (NEDs).
Our stakeholders how we could continue our momentum towards becoming a purpose-led organisation, and future opportunities for NatWest Group. The Board also held a separate session to discuss executive succession planning.
For further details on colleague engagement and how we are building a healthy culture, refer to pages 57 to 61.
Communication with NatWest Group plc’s largest institutional shareholders continued throughout the year as part of the Investor Relations programme. The Chairman, Group CEO and Group CFO undertook an extensive engagement programme with our largest institutional shareholders, including UK Government Investments (UKGI). Members of the executive management team also took part in meetings with groups of institutional investors for sessions spotlighting their businesses. The Group CEO and Group CFO made additional outreach to major shareholders, ensuring they were kept up to date during the uncertainty caused by COVID-19, and virtual engagement activity was significantly stepped up in the absence of face to face options.
The Chairman’s regular engagement with major shareholders allowed him to understand their views on governance and performance against strategy. The Chairman of the Group Performance and Remuneration Committee met with institutional shareholders to discuss remuneration matters, including the executive directors'
The Board met virtually with representatives from three of our top 30 institutional shareholders, which provided our investors with an opportunity to give feedback and ask questions of the wider Board. Topics covered included our purpose, strategic priorities, dividends and capital. In addition, our Board Committee Chairs met with UKGI, who were undertaking a deep dive into the business as part of their stewardship responsibilities to the UK Government.
Following each quarterly results announcement, executive management hosted an investor presentation in order to provide an update on our financial performance and strategy.
All shareholders usually have the opportunity to ask questions at our Annual General Meeting (AGM) and any other General Meetings which may be held. In 2020 our AGM was held behind closed doors in accordance with requirements put in place in response to the COVID-19 pandemic, with only employee shareholders present to meet quorum requirements. We held an online shareholder event later in the day to allow shareholders to receive answers to pre-submitted questions.
January February March April 14th – 2019 annual results announced; investor presentation + Q&A
October November December 30th – Q3 results announced; investor presentation + Q&A
Regulators The Board recognises the importance of open and continuous dialogue with our regulators. In 2020, the main focus of our regulatory engagement was inevitably on our COVID-19 response, and in particular the support we were offering to our customers, with other topics discussed by directors with the regulators including strategy, operational resilience, board effectiveness, dividends and financial crime.
Representatives from the Prudential Regulation Authority (PRA) attended the July 2020 Board meeting to present and discuss the findings arising from its Periodic Summary Meeting for NatWest Group. In September 2020, representatives from the Financial Conduct Authority (FCA) joined the Board meeting to present and discuss its annual Firm Evaluation letter.
Suppliers The Board is mindful of the role our suppliers play in ensuring we deliver a reliable service to our customers, and of the importance of our relationships with key suppliers, particularly in the current environment.
Although directors were unable to meet with supplier representatives in person, as they have done previously, they were kept informed on progress against relevant key performance indicators, including payment practices, through management reporting. In particular, the Board
In February 2020 we announced our intention to change the company’s name from The Royal Bank of Scotland Group plc to NatWest Group plc. The Board fully supported the move to align the parent company name with the brand under which the majority of our business is delivered but was also mindful of a range of stakeholder interests and how the announcement would be received, particularly from a Scottish perspective.
Colleague communications and messaging were shared with the Board emphasising that the jobs of our colleagues and the service provided to our customers in Scotland would not be impacted by the change of name. The Board also noted that there would be no impact on customers’ day-to-day banking experience, as they would continue to interact with their usual customer brand(s). The Board was strongly supportive of management demonstrating NatWest Group’s continuing commitment to Scotland and the Royal Bank of Scotland brand.
From an investor perspective, the impact was also considered to be minimal. “NatWest Group” would be used as a brand when talking about the Group as a whole and with investors, but there was no anticipated share price or ratings impact.
The Group Chief Administrative Officer provided regular updates to the Board, including on key external partnerships and supply chain resilience.
Our Human Rights Statement was also reviewed by the Group Sustainable Banking Committee and approved by the Board during 2020.
For further details on our Modern Slavery Act Statement and Human Rights Statement, refer to page 26.
Community and environment Directors enhanced their knowledge and understanding of climate issues through a dedicated training session led by management which included a presentation by Lord Stern (NatWest Group's independent climate change adviser) on external developments as well as updates on climate change risks and opportunities. In addition, the Board received a foundational online learning module on the impact of climate change on financial services and directors have been offered further optional training from the Cambridge Institute for Sustainability Leadership.
Management reporting on climate, strategy, ambition and risk management activities features on both Board and Board Committee agendas to support targeted monitoring and oversight. Further information on Board oversight of climate-related risks and opportunities can be found on pages 75 and 76.
In June 2020, in response to the Black Lives Matter movement, the Group CEO asked the global co-chairs of NatWest Group’s Multicultural Network to set up a taskforce to listen, analyse and deliver a set of commitments to address the key barriers facing Black, Asian and Minority Ethnic colleagues, customers and communities (the “Taskforce”).
The Taskforce co-leads were invited to attend a Board meeting in September 2020 to present directly to the Board on the work of the Taskforce. They explained to the Board how the 10 Commitments for engaging with Black, Asian and Minority Ethnic colleagues, customers and communities had been developed; how the outputs of the work would be communicated; and the learnings from the work and that there was clear alignment between the work of the Taskforce and NatWest Group’s purpose in terms of championing potential. Following engagement by the Taskforce with the Group CEO and the Group Executive Committee, a new target of 3% of Black colleagues in senior UK roles by 2025 had been agreed in response to there being a higher under-representation of Black colleagues in senior UK roles. This new target would be in addition to our existing target to have at least 14% Black, Asian and Minority Ethnic leaders in senior UK roles by 2025. The Taskforce co-leads also responded to questions from the Board on topics such as colleague experiences and support from non- Black, Asian and Minority Ethnic colleagues.
We also introduced the Companion Card, enabling customers in vulnerable situations and those in extended isolation to give trusted volunteers a way to pay for their essential goods. The card can by topped up by up to £100 every five days and given to a trusted person or carer to enable them to make purchases on behalf of the individual.
Source: Yonder. Latest quarter’s data. Measured as a net % of those that trust NatWest/Royal Bank of Scotland to do the right thing, less those that do not. Latest base sizes: 547 for NatWest (England & Wales) and 202 for Royal Bank of Scotland (Scotland).
Business Banking: Savanta MarketVue Business Banking, YE Q4 2020. Based on interviews with businesses with an annual turnover up to £2 million. Latest base sizes: 1,072 for NatWest (England & Wales), 447 for Royal Bank of Scotland (Scotland). Question: “How likely would you be to recommend (bank)”. Base: Claimed main bank. Data weighted by region and turnover to be representative of businesses in Great Britain.
We use independent experts to measure our customers’ trust in the bank. Each quarter we ask customers to what extent they trust or distrust their bank to do the right thing. The score is a net measure of those customers that trust their bank (a lot or somewhat) minus those that distrust their bank (a lot or somewhat).
Over the course of 2020, the net trust score improved for NatWest but we narrowly missed our target by 1 point. For the Royal Bank of Scotland, the net trust score also improved, but missed its target by 17 points.(1)
We also track customer advocacy for our key brands using the net promoter score (NPS), a commonly used metric in banking and other industries across the world. This is measured through customer surveys in which customers are asked how likely they would be to recommend their bank to a friend or colleague, on a scale of 0-10, with a score of 10 being ‘extremely likely’ and 0 being ‘extremely unlikely’. The NPS is calculated by deducting the percentage of ‘detractors’ (0 to 6 on the scale) from the percentage of ‘promoters’ (9 and 10 on the scale), responses 7 to 8 on the scale are considered ‘passive’.
Source: Strategic NPS. Question: “Thinking about your recent experiences with NatWest’s Online Banking, how likely are you to recommend their Online Banking to a relative, friend or colleague in the next 12 months?”. Latest base size: 5,601.
Source: Operational NPS. Question: “Thinking about your recent experiences with NatWest’s video banking service, how likely are you to recommend the service to a friend, family member or colleague?”. Latest base size: 470. Note, this is a new metric so data not available for Dec 2019.
We continue to transform our key customer journeys across both Retail, Business and Commercial banking so that customers experience the best of digital mixed with the human touch when they need it. Feedback from customers shows that our frontline have delivered extremely well through COVID-19. The strength of our service proposition alongside a fully end-to-end digitised lending journey for businesses means that we have seen our Commercial Banking day-to-day servicing scores improve steadily throughout the year.
Our eight Group-wide Employee Led Networks (ELNs), with over 23,000 members and allies globally, support our commitment to creating a healthy, diverse, inclusive workplace for all colleagues. Sponsored overall by our CEO Alison Rose, each ELN has an individual Executive sponsor who provides direction, guidance, challenge and support. The ELN Chairs meet with our CEO on a quarterly basis and are invited to attend the Bank Executive Committee, on a rotational basis, to profile their work and provide oversight on their key initiatives. The eight ELNs are the Gender Network, the Multicultural Network, Rainbow – our LGBT+ Network, Enable – our Disability Network, the Families & Carers Network, the Armed Forces Network, the Aspire Network and the Sustainable Futures Network.
Engaging our colleagues is critical to delivering our purpose. By championing the potential of our colleagues we are better placed to help people, families and businesses to thrive.
Building a Healthy Culture One of our core priorities is building a healthy culture. We have clear goals which reinforce Our Values and form part of our leadership team's objectives. We gather feedback from our colleagues through our listening strategy, which includes our colleague opinion surveys, a Colleague Advisory Panel that connects colleagues directly with our Board and 'Workplace', our social media platform. We also track metrics and key performance indicators, and feedback from regulators and industry bodies, including the Banking Standards Board's (BSB) annual assessment of culture in UK banking. After three years of strong and broadly based increases in scores at NatWest Group, the pace of improvement eased back in 2020 across most characteristics of the BSB Assessment Framework to leave scores stable to slightly higher. Having ongoing discussion and engagement with our employee representatives such as trade unions and work councils is vital and we regularly discuss developments and updates on the progress of our strategic direction.
Performance and Reward Our approach to performance management provides clarity for our colleagues about how their contribution links to our purpose and all our employees have goals set across a balanced scorecard of measures. We continue to ensure employees are paid fairly for the work they do and are supported by simple and transparent pay structures in line with industry best practices. We keep our HR policies and processes under review to ensure we do so.
Developing Skills and Capabilities Becoming a purpose-led learning organisation is a strategic priority for us. To prepare colleagues for a sustainable future, we are committed to developing knowledge, skills and behaviours in a number of key critical capability areas that support our ambition and purpose. By encouraging a culture of continuous learning, knowledge sharing and reflective practice, we are ensuring that colleagues stay relevant and employable – and that we can adapt to the changing needs of our customers, communities and context.
Our Leading on Purpose initiative began to immerse senior leaders and influencers in the aspects of personal and organisational change required to realise our Purpose-led strategy and culture. This programme will continue over multiple years, deepening awareness and purpose-led maturity.
The NatWest Group Learning Academy provides access to a wide range of core, common and technical learning content to suit a range of learning styles and support our colleagues develop for their jobs today, and careers tomorrow.
Our female, ethnicity and disability development initiatives focus on supporting our colleagues to reach their full
Our 2020 NextGen talent development proposition has 229 members and during an unprecedented year we continued to provide a blend of development opportunities for high potential colleagues at managerial level, helping them become our future leaders. The learning opportunities available through this programme align to our five critical people capabilities that help colleagues build the right knowledge, skills and behaviours.
To support our Purpose-led strategy we are working with Leadership Through Sport & Business to recruit young people who come from underrepresented backgrounds for apprenticeships, recognising that many can thrive in major firms if they have access to skills building training prior to the recruitment process starting.
Wellbeing As a strong component of making NatWest Group a purpose-led organisation, an established wellbeing strategy is key. Through our People Pledges we committed to support the wellbeing of our colleagues, customers and communities all of which was reinforced through our Group-wide People Strategy. Our work in wellbeing has been recognised externally, winning the Health and Wellbeing category at the HR Excellence Awards 2020.
Understanding and caring for the changing and differing needs of our colleagues remained our priority during COVID-19. We flexed and evolved our original wellbeing plan and quickly built wellbeing and learning into our daily routines. Our "Live Well Being You" COVID-19 Wellbeing Plan placed colleague wellbeing firmly at the centre of our incident response. We developed a wellbeing plan which was reviewed and updated each quarter, and launched a Wellbeing COVID-19 hub, signposting colleagues to public health information, emotional wellbeing support, new physical health interventions, financial wellbeing guidance and support, community and volunteering opportunities, leadership support and guidance on managing bereavement and domestic abuse. Through our business facing teams we also offered support to our SME and personal customers.
During the year, we launched our Wellbeing Champion network which rapidly grew to over 1,000 colleagues who committed to providing wellbeing support to their teams, supported by enhanced learning and a deeper understanding of our wellbeing strategy. Unable to host our annual Mental Health Awareness Conference as a physical event, we created a virtual conference showcasing a number of expert speakers and activities for our colleagues.
10,000 We launched a new mandatory online mental health learning module for over 10,000 managers to help them support colleague wellbeing.
Launched our People Pledge – a set of commitments made in response to what colleagues told us meant most to them. The pledge was split into five promises: Help you develop your skills, Support your wellbeing, Help customers thrive, Invest in our teams; Help you make a difference. Despite the challenges of 2020, we delivered against each of the promises, in many cases accelerating planned work, to provide a purpose-led response for colleagues.
• Our Boardroom Inclusion Policy aims to promote diversity and inclusion in the composition of the Board and reflects the most recent industry targets. The Policy also acknowledges NatWest Group's ambition to aim for a full gender balance across the organisation by 2030. In our Executive Management team we have females in both our Chief Executive Officer and Chief Financial Officer roles, as well as our Chief Marketing Officer, Chief Transformation Officer, Chief Governance Officer and Company Secretary, and Chief Human Resources Officer all being female.
• In 2015 we set targets for our CEO and the Executive Committee to have at least 30% women in the global top three layers of each of their areas by the end of 2020 and to have full gender balance by 2030. At the end of 2020, we have, on aggregate, 39% women in our top three leadership layers, an increase of 10% since targets were introduced and our pipeline (c.4000 of our most senior roles) has 43%. 14 of our 15 business areas are at or exceeding 30 % women in their top three layers.
• We demonstrated our social purpose, including supporting the Financial Alliance for Women to create a How-To Guide on Becoming the Employer of Choice for Women and became a signatory to the British Deputy High Commission’s ‘UK in India’ Network Gender Equality Charter.
• Our goal is to become a Disability Smart bank by ensuring accessibility features in all our products, services, behaviours and key processes.
• For our colleagues with disabilities we support them with workplace adjustments so that they can succeed. If a colleague becomes disabled we will, wherever possible, make adjustments to support them in their existing role or re-deploy them to a more suitable alternative role.
• We hold a gold rating in the Business Disability Forum (BDF) benchmark. We also hosted our second Disability Conference in partnership with the BDF.
• As at the 31 December 2020 we have on aggregate 10% Black, Asian and Minority Ethnic colleagues in our top four leadership layers in the UK, representing a 2% increase since targets were introduced. We currently have c.1% of colleagues who identify as Black in our UK senior roles. Overall, we employ 16% Black, Asian and Minority Ethnic colleagues across the UK. Our disclosure rates remain high, with 83% of our colleagues in the UK
We are proud to be building a sustainably progressive, inclusive and diverse bank where we champion potential, helping people, families and businesses to thrive.
Our inclusion guidelines apply to all our colleagues globally to make sure everyone feels included and valued, regardless of their background. As at 31 December 2020 our permanent headcount was 59,822. 51% were male and 49% female. Our Diversity and Inclusion plans apply globally and are formed around five key priorities:
e p o rt disclosing their ethnicity. As with gender, our targets are supported by a positive action approach. For more information on our approach refer to natwestgroup.com.
• In June 2020, we established a Taskforce led by the Chairs of our Multi-Cultural Employee Led Network to help better understand what more we can do to break down barriers faced by many people, including those from Black, Asian and Minority Ethnic backgrounds. This culminated in the launch of our report, Banking on Racial Equality; A Roadmap for Positive Change, accompanied by a set of targets and commitments, which will set the standard for racial equality in NatWest Group.
• Colleague sentiment on inclusivity remains high at 90 points, 17 points above the GFSN and 13 points above GHPN.
• During 2020 we introduced "Inclusion with Purpose" our diversity and inclusion learning to support being a purpose-led organisation. The learning outlines the role – through intentional, positive and conscious efforts – that each one of our colleagues can play in helping to build a sustainably inclusive workplace.
• We continue to demonstrate our social purpose, including being founding signatories to the EHRc’s Working Forward, meeting the criteria for the London Mayor Good Work Standard accreditation, and ranking top 5 overall as well as in the top 5 for ethnicity, sexuality, socioeconomic status and parenthood in the McKenzieDelis Packer Review.
Note: We report to reflect our organisational (CEO) levels. This method more accurately describes our gender balance at leadership/pipeline levels. As well as being more reflective of our organisational structure, this enables comparison to be made externally.
There were 364 senior managers (in accordance with the definition contained within the relevant Companies Act legislation), which comprises our executive population and individuals who are directors of our subsidiaries.
Note: We report to reflect our organisational (CEO) levels. This method more accurately describes ethnicity at leadership/pipeline levels. As well as being more reflective of our organisational structure, this enables comparison to be made externally. This report only includes colleagues who have disclosed their ethnicity. We report CEO to CEO-3 as a total to comply with GDPR restrictions.
• In line with our commitment to transparency under the UK Government's Race at Work Charter and in anticipation of a requirement to disclose our ethnicity pay gap, we have voluntarily disclosed our ethnicity pay gap for NatWest Group combined UK & Ireland. The mean ethnicity pay gap for NatWest Group is 9.4% (median: 14.1%). The mean ethnicity bonus gap for NatWest Group is 24.1% (median: 2.5%).
Effective risk management is vital to the successful delivery of the Group’s strategy and purpose. Risk is an inherent part of doing business. In day-to-day activities, all organisations must address a variety of risks. These may arise from the external factors such as the economic environment, competitor activity and changes in regulation or from internal factors such as transformation programmes and human error.
Credit Risk Conduct Risk Market Risk Financial Crime Risk Capital Adequacy Risk Operational Risk Liquidity & Funding Risk Regulatory Compliance Risk Pension Risk Model Risk Earnings Volatility Risk Climate Risk Reputational Risk
Areas of focus in 2020 It was a priority to ensure the Group was able to safely support people, families and businesses through the unprecedented events of the coronavirus pandemic. Risk management activities were focused on the material threats arising from the pandemic itself, as well as those that strongly correlated with, or were intensified by, it. Several of the Group’s principal risks were directly affected by the pandemic – especially the credit risks, which deteriorated during the year, and operational risks which were heightened as the Group adapted to new ways of working due to lockdown protocols. Operational resilience, especially in terms of maintaining the continuity of key services, was a focus.
Against this backdrop, the Group played a key role in ensuring that customers affected by the pandemic were able to access support through the government-backed loan schemes. These included the CBILS, BBLS, CLBILS and CCFF initiatives. The Group also facilitated payment holidays for affected customers, within the guidelines set by its regulators. In each case, risk management processes and decisioning were critical in ensuring this support was provided in a safe, sound and helpful way. While the Group’s risk profile relative to appetite continued to be reported regularly to the executive and the Board, additional regular reporting on the impacts of the pandemic was introduced. This ensured a clear and transparent view of the Group’s risk profile as it evolved through the crisis.
Although impairment provisions were significant, driven by IFRS 9 forward-looking expected credit losses on performing assets in Stage 1 and Stage 2, actual Stage 3 defaults were relatively modest (the impairment charge for Stage 3 defaulted assets in 2020 was similar to 2019 at approximately £600 million). The Group anticipates further defaults across the portfolios once the various government support schemes for households and businesses are withdrawn, with the impact mitigated to some extent by the Stage 1 and Stage 2 provisions raised in 2020. Further pressure on UK GDP and an increase in unemployment could increase this risk.
The conduct risk profile was a key focus as the Group made sustained efforts to ensure that it was able to support, at pace, customers, families and businesses affected by the pandemic.
The ongoing low interest rate environment – including the possibility of negative rates – continues to present an industry-wide challenge. In combination with the deteriorated economic outlook resulting from the pandemic, sustained net interest margin compression increases risk to the achievement of the Group’s financial and strategic objectives. While some rebalancing of business activity can mitigate short-term impacts, the effect of prolonged low interest rates over the medium term intensifies threats to the business model. This highlights the importance of the Group’s strong capital position. Dynamic risk management, including consideration of funding structure and off-balance-sheet activities, remains crucial in ensuring that the business objectives remain achievable.
Financial crime compliance and management The Group has continued to enhance the policies, processes and systems used to combat the continuously evolving threat of financial crime. During 2020, a new enterprise-wide Financial Crime Hub was established in the first line to detect and prevent financial crime. The Hub will facilitate a common, consistent approach to managing financial crime. A multi-year transformation plan has also been developed to ensure that - as changes in technology, the economy and wider society take place - risks relating to money laundering, terrorist financing, tax evasion, bribery and corruption and financial sanctions are managed, mitigated and controlled as effectively as possible. To support this, enhancements will also be made to management information. A new Financial Crime executive steering committee has been set up to provide oversight of the plan and its implementation.
Anti-bribery and corruption (ABC) The Group is committed to ensuring it acts responsibly and ethically, both when pursuing its own business opportunities and when awarding business. Consequently, it has embedded appropriate policies, mandatory procedures and controls to ensure its employees, and any other parties it does business with, understand these obligations and abide by them whenever they act for the Group. ABC training is mandatory for all staff on an annual basis, with targeted training appropriate for certain roles. The Group considers ABC risk in its business processes including, but not limited to, corporate donations, charitable sponsorships, political activities and commercial sponsorships. Where appropriate, ABC contract clauses are required in written agreements.
Common Equity Tier 1 ratio NatWest Group maintained a strong CET1 ratio of 18.5% (2019 – 16.2%). This reflected both a reduction in RWAs and the cancellation of the 2019 dividends and associated pension contribution, offset by the inclusion of the 2020 foreseeable dividends and charges (40 basis points) together with the introduction of the Article 36 CRR amendment on the prudential treatment of software assets as well as the adoption of IFRS 9 transitional arrangements on expected credit losses, offsetting associated impairment charges.
NatWest Group is exposed to the economic and political risks facing the UK including a weaker than expected economic recovery from Covid-19, the prospect of negative interest rate policy and the UK’s exit from the EU. A range of complementary approaches is used to mitigate these risks including scenario planning and stress testing. In 2020, the Group implemented plans to prepare for the UK’s withdrawal from the European Union and continues to monitor geopolitical risks alongside domestic political risk including developments in relation to a Scottish independence referendum. In the longer term, demographic change, high levels of debt and inequality could all have financial impacts. As a result, these risks are closely monitored with strategic plans adapted as appropriate.
NatWest Group experiences a constant threat from cyber-attacks both directly and to its supply chain, underlining the importance of due diligence with the third parties on which the Group relies. The Group operates a multi-layered approach to its defences and continues to invest significant resources in the development of cyber security controls and capability designed to minimise the potential effect of cyber-attacks.
Change Risk The implementation of NatWest Group’s Purpose-led strategy and the refocusing of NatWest Markets carry significant execution, operational and people risks. NatWest Group continues to manage and implement change in line with its strategic plans while assessing implementation risks and taking appropriate mitigating action. In addition, the Group continues to monitor and strengthen its control environment through robust governance and controls frameworks.
NatWest Group relies on the effective use of accurate data to support operations and deliver its strategy. Failure to produce high-quality data and/or the ineffective use of such data could result in a failure to deliver the Group’s strategy, including reducing costs and meeting customer expectations. The Group is focused on implementing a long-term data strategy alongside control and policy framework enhancements governing data usage.
Our Board committees In order to provide effective oversight and leadership, the Board has established a number of Board committees with particular responsibilities. The work of the Board committees is discussed in their individual reports. The terms of reference for each of these committees is available on natwestgroup.com.
The full Governance report is on pages 99 to 105 of the 2020 Annual Report and Accounts.
Group Board Risk Committee Provides oversight and advice to the Board in relation to current and potential future risk exposures of NatWest Group, future risk strategy, risk appetite and tolerance. Also responsible for promoting a risk awareness culture within NatWest Group.
Group Performance and Remuneration Committee Responsible for approving remuneration policy and reviewing the effectiveness of its implementation. Also considers senior executive remuneration and makes recommendations to the Board on the remuneration of executive directors.
UK Corporate Governance Code Throughout the year ended December 2020, NatWest Group plc has applied the principles and complied with all of the provisions of the UK Corporate Governance Code issued by the Financial Reporting Council dated July 2018 (the Code) except in relation to provision 17 that the Group Nominations and Governance Committee should ensure plans are in place for orderly succession to both the Board and senior management and oversee the development of a diverse pipeline for succession, and provision 33 that the Group Performance and Remuneration Committee should have delegated responsibility for setting remuneration for the Chairman and executive directors. The Board considers that these are matters which should rightly be reserved for the Board. Our full statement of compliance with the Code can be found on page 151.
Jan Cargill * Francesca Barnes, Graham Beale and Ian Cormack, as the 3 additional independent non-executive directors of NatWest Holdings Limited, also attend NatWest Group plc Board meetings. Further information can be found in the Corporate Governance Report on pages 99 to 105.
Our section 172(1) statement is on pages 48 to 52 and describes how stakeholders have influenced Board discussions and decisionmaking throughout the year.
This Non-financial information Statement provides an overview of topics and related reporting references across our external reporting as required by Sections 414CA and 414CB of the Companies Act 2006. We integrate non-financial and Environmental, Social and Governance (ESG) information across the Strategic Report and wider reporting suite, thereby promoting cohesive reporting of non-financial and ESG matters.
Our colleagues • Culture, Learning, Wellbeing, Performance and Reward • Diversity and Inclusion • Speak Up – Whistleblowing service
• Human Rights • 26 and 47 Statement on Human Rights
Risk management • Risk Overview • Top and emerging risks • Risk and capital management • Risk factors
In accordance with the UK Corporate Governance Code, the Board is required to make a statement in the Annual Report regarding the viability of the Group.
In making its assessment, the Board has considered: The Group’s long-term business and strategic plans; The Group’s risk profile and risk management practices, including the processes by which risks are identified and mitigated; The Group’s principal risks as well as emerging risks that could have a significant negative impact on the Group’s ability to operate or meet its strategic objectives over the medium term, including an assessment of the likely impact of such risks crystallising individually and in combination; The results of internal stress tests, which include consideration of the Group’s principal and emerging risks within the scenario design; The Group’s current capital position and projections over the relevant time horizon; The Group’s liquidity and funding profile, including projections over the relevant time horizon; and
The wider political, economic and regulatory environment within which the Group operates, including uncertainties relating to the geopolitical outlook, the global pandemic and the UK’s exit from the European Union.
A series of varying stress scenarios is used as part of internal stress testing. These are designed to be extreme but plausible and take account of potential risk management actions and mitigation supported by the risk management framework. Reverse stress testing is also used to assess scenarios and circumstances that could make the Group’s business model unviable. The results are reported to the Board Risk Committee and the Board.
In assessing the Group’s future prospects, the Board considers a period of three years to be appropriate. Although strategic and business planning – as well as internal stress tests – are based on a five-year timespan, levels of uncertainty increase as the time horizon extends and therefore the shorter period is considered more suitable for this assessment. The Board will continue to monitor and consider the appropriateness of this period.
The Group’s business and strategic plans, which are reviewed and evaluated on an annual basis at minimum, provide long-term direction. This includes multi-year forecasts assessing the Group’s expected financial position throughout the planning period. Threats to the achievement of those plans – including financial, operational, conduct and financial crime risks – are identified and assessed through the Group’s risk management framework. As part of this, Board-approved risk appetite is a key consideration. Performance against risk appetite for each of the principal risks is reported to the Board on a regular basis together with assessments of emerging risks that could have an impact within the planning horizon. The Group’s principal risks and uncertainties are set out on page 64 of this report. Further detail can be found in the Risk and Capital Management section of the 2020 Annual Report and Accounts (pages 160 to 164).
The Group’s planning and forecasting relative to COVID-19 incorporated several potential recovery scenarios and included: The impact of travel restrictions, social distancing policies, self-isolation and sickness on GDP, employment and consumer spending
The effect on house prices, commercial real estate values and major project finance, as well as
The effect of government interventions such as the Job Retention Scheme and the Coronavirus Business Interruption Loan Scheme.
The Board’s assessment in this regard is that the Group retains adequate levels of capital and liquidity – and is appropriately operationally resilient – in order to continue to be viable across the time horizon even in the most extreme of these COVID-related scenarios.
The impact of the pandemic on both the economy and the Group’s operations has been subject to continuous monitoring with additional focus in the Group’s senior risk committees and at Board level.
In considering the Group’s prospects over the period of the viability assessment, the unprecedented effects of COVID-19 and associated government responses were reviewed against each of the principal risks. Using the macroeconomic stress scenarios developed specifically to assess the range of potential medium-term impacts, iterative analyses were carried out to understand the potential implications for each of the principal risks as well as relevant emerging risks. Real-time insight from the Group’s business segments was also used as part of this exercise to ensure any areas of specific concern were highlighted and addressed.
In drawing its conclusions, the Board also considered the following: • The Group’s robust capital position (CET1 ratio of 18.5%, goal: 13-14% by 2023). The current capital position provides significant headroom above both our minimum requirements and our MDA threshold requirements,
• Drawing capacity of £77 billion under the Bank of England’s Term Funding Scheme with additional incentives for SMEs at 31 December 2020,
We set ourselves the challenge to at least halve the climate impact of our financing activity by 2030, and to do what was necessary to achieve alignment with the 2015 Paris Agreement.
Our ambition is supported by the following key areas of activity: Progress during 2020 includes: • Achieved Net Zero Carbon across our own operations.
• Launched new products and initiatives to support customers transition to low carbon economy, including Green Mortgages.
The Green Mortgage pilot was launched in November 2020. Customers qualify for a discount on 2 Year Base Rate Tracker mortgages by demonstrating that their property's Energy Efficiency Rating has increased to EPC rating A, B, or C. The Green Mortgage discount is available up to 12 months after completion, subject to the customer providing their relationship manager with an upgraded EPC certificate.
In the first half of 2020, Coutts Asset Management reduced the carbon intensity on equity holdings of all funds and portfolios by 29% on average. This includes the Personal Portfolio Funds (the investments for our NatWest Invest and Royal Bank Invest digital investment platforms), which saw a reduction of 33% on average. The 29% reduction resulted from deliberate action taken within the funds and portfolios to shift to lower-carbon investments and by engaging with the companies and funds we invest in to reduce their carbon emissions. Carbon intensity is calculated as carbon emissions per million dollar of sales. Currently, this is only measured for equity holdings as data availability for these holdings is better than for other assets in the funds and portfolio. On average, equity holdings make up 60% of the total assets in the funds.
Various NatWest Group has financed 73 pure e-buses by working with multiple operators and the emerging ‘as-a-service’ ecosystem.
Over 2020 the Lombard Vehicle Solutions car fleet has doubled the number of vehicles that are wholly powered by battery.
NatWest Markets actively developed new and innovative products across the yield curve to support green activities and customers’ transition journeys. In collaboration with Commercial Banking, NatWest Markets structured the first synthetic green securitisation based on a renewable energy loan portfolio within the bank.
At least 25% of the spaces in our Accelerator Hubs will be reserved for businesses whose core offering supports sustainable environmental activities.
Entrepreneurs Of the 1,085 businesses on-boarded to the Entrepreneur Accelerator in 2020, 268 were businesses whose core offering supports sustainable activity, which meets our 25% ambition.
We set ourselves the challenge to at least halve the climate impact of our financing activity by 2030, and intend to do what is necessary to achieve alignment with the 2015 Paris Agreement. To do this, we plan to quantify our climate impact and set sector-specific targets by 2022.
S tra te g ic R e p o rt 5. Making our own operations Climate Positive by 2025
Make our own operations Net Zero Carbon in 2020 and Climate Positive by 2025
In 2020 we achieved our interim target of 90% renewable electricity coverage.
This was achieved through a combination of: • 91% of our UK and RoI electricity is from renewable sources.
During 2020, 20 charge point connections were installed in Belfast and all remaining sites were surveyed ready to deliver the rest of the programme. We have engaged with a third party to support the programme roll out which will include the installation of over 250 chargers at our Gogarburn Headquarters.
During 2020 we set the strategy for transition and agreed vehicle criteria including price, specification and range. From 2021, upon lease expiry of current diesel vehicles and where homebased infrastructure allows, we will start providing colleagues with an electric vehicle and home charge point.
We have increased energy productivity (FTE per GWh) by 36% since 2015. Our EP100 target is supported by a decrease in energy consumption. Across our global portfolio, electricity consumption decreased by 22% and natural gas consumption decreased by 14% when compared to 2019.
(1) Our Own Operational Footprint reporting year runs from October 2019 to September 2020.
NatWest Group is taking significant steps to develop scenario analysis capabilities to better understand and act on the implications of climate-related risks and opportunities for our business and customers. This aligns with the increased regulatory supervisory expectations on the management of climate-related risks using forward looking climate scenarios. It will help to ensure we can meet the requirements of the Bank of England 2021 Climate Biennial Exploratory Scenario (CBES) regulatory stress test that will explore the resilience of the financial system to the physical and transition risks from climate change. This section summarises some of the risks we have identified by undertaking forward-looking climate scenario analysis and how we plan to manage these risks.
During 2020, we have developed and tested a methodology to use scenario analysis to quantify the size of a range of climate-related risks and opportunities for our commercial and retail customers. Since climate-related risks are unevenly distributed and can be highly specific to either locations or individual companies and assets, we have taken a granular and customer specific modelling approach as recommended in the Bank of England CBES 2021 Discussion Paper (December 2019). This first generation of climate modelling will help to provide the foundation for our scenario analysis capability build to support execution of the CBES in June 2021.
c. We translated each scenario into economic impacts for firms and households. This is done by modelling granular transition and physical risk shocks disaggregated by sector and geography, and integrating this into a microeconomic and financial model of firm-level impacts and response, accounting for abatement and adaptation action, and competitive dynamics within sectors.
e. Based on preliminary insights from the scenario analysis work, we are working to develop response plans, a number of which will require direct engagement with our customers around their own mitigation plans.
3. In scenarios with stronger climate action, there is potential for large variation in companies’ performance within the same sector: Among the companies tested, variation in climate impacts between companies in the same sector can be as large as variation between different sectors.
5. A disorderly transition would be most disruptive: with a greater impact on valuations in the Disorderly scenario than the Orderly scenario. In the disorderly scenario, the economy has to change at a much faster rate due to the action in cutting emissions commencing a decade later and therefore greatly impacting highemitting sectors like energy. The impact on valuations also exceeded those observed in the Hot House World scenario.
Retail insights 1. Future climate-related risks amplify current risks. Initial modelling with a limited sample indicates that physical and transition risks will intensify over a period of time, example properties with poor EPC ratings or those with existing risk of flooding. NatWest Group has launched various initiatives like Green Mortgages to support customers transition to low carbon economy.
S tra te g ic R e p o rt Climate-related disclosures 3. There is significant regional variation in physical hazards. Acknowledging this insight, in 2021 NatWest Group will build more granularity into our flood risk modelling to understand precisely where risks lie and prepare management plans to address these insights.
• The Board oversees progress made on our Purposeled strategy announced in February 2020. In October 2020 the Board received a comprehensive update on NatWest Group’s progress towards becoming a purposeled bank and progress against external sustainability commitments, including the climate ambition, covering achievements to date and future priorities.
• The Group Board Risk Committee discusses financial risk from climate change on a quarterly basis. These updates focus on risk-related matters such as scenario analysis and stress testing, data and investment challenges.
The GCCP ESG includes cross-franchise, functional and entity representatives from across NWH Group and NWM Group; and ensures alignment of underlying franchise initiatives and working groups.
• Climate risk was included as a factor in setting sector oversight classifications, which drive the frequency and level at which sector credit risk appetite is reviewed. Within the wholesale portfolio, thirteen sectors were identified as exposed to heightened climate risk based on this initial analysis of transition and physical risks.
Climate-related disclosures – Metrics and targets This section includes metrics used by NatWest Group to assess climate-related risks and opportunities. Refer to the 2020 Climate-related disclosures report for further details on climate metrics and targets.
Total exposure to heightened climate-related risk sectors has increased by £22.8 billion during 2020, primarily relating to the following: • The increase in residential mortgages of £16.7 billion reflected strong customer demand as well as the £3.0 billion acquisition of an owner-occupied mortgage portfolio from Metro Bank.
Exposure also increased in several wholesale sectors, primarily related to: • Construction and land transport and logistics sectors increased by £1.7 billion and £1.4 billion respectively, reflecting the increased lending activity under the COVID-19 government lending schemes.
• Housing associations increased by £1.1. billion, primarily reflecting support for development of affordable homes.
• Exposure to the oil and gas sector has decreased £0.8bilion, in line with tighter lending criteria and increased focus on credible transition plans now in place for this sector. At December 2020, exposure to oil and gas majors amounted £1.3 billion (December 2019: £1.4 billion).
(1) Includes a portion of secured lending in Private Banking, in line with Expected Credit Loss (ECL) calculation methodology. (2) 2019 data has been restated for the accounting policy change for balances held with central banks. Refer to Accounting policy changes effective 1 January 2020.
• Enhancements have been made to the ESE Framework to mitigate reputational risk from carbon intensive sectors and support the transition to a low carbon economy. This includes reduction in coal lending thresholds for the mining and metals and power generation sectors from 40% to 15%. In addition, prohibitions on project financing for new exploration in the oil and gas sector, including fracking were put in place.
S tra te g ic R e p o rt Climate-related disclosures
In February 2020, NatWest Group announced that it would support an additional £20 billion funding and financing (including underwriting but excluding mergers and acquisitions advisory activities) for climate and sustainable finance between 2020-2022. As a result of the progress made during 2020, the timeline for this target has been brought forward to 2021. We expect to exceed our £20 billion target during 2021. NatWest Group used its 2020 Climate and Sustainable Finance Inclusion Criteria (CSFI criteria) published in 2020 to determine the assets, activities and companies that are eligible to be counted towards this target. The CSFI criteria are currently focused on supporting a transition towards a low carbon and climate resilient economy.
The assets and activities which are in scope of the CSFI criteria are in line with the eligibility criteria of one or more of the ICMA Green Bond Principles (2018), Loan Markets Association (“LMA”) Green Loan Principles, and relevant transactions (that include a specific carbon or climaterelated metric) under the LMA’s Sustainability Linked Loan Principles.
£12 billion climate and sustainable funding and financing during 2020 comprised £7.2 billion in NWM Group, £3.9 billion in Commercial Banking, £0.8 billion in RBS International and £0.1 billion in other segments.
The table below shows our progress during 2020, compared with activity during 2018 and 2019 against previous target of £10 billion climate and sustainable funding and financing related to these years. This demonstrates the increased support provided to customers over the years to help transition to a low carbon economy.
(2) Lending amounts represent total commitment and include any undrawn portion of committed credit limits.
We have met our ambition to be Net Zero Carbon (1) across our own operations in 2020 (2). We achieved this through a combination of emissions reductions, in line with our 1.5-degree science-based target commitment, alongside offsetting residual Scope 1, 2 and 3(3) emissions through the purchase of internationally recognised TIST Carbon Credits (4).
Notes: (1) NatWest Group define Net Zero Carbon as “a state where no incremental greenhouse gases are added to the atmosphere, with remaining emissions output being balanced by the removal of carbon from the atmosphere”
(2) Our Own Operational Footprint reporting year runs from October 2019 to September 2020.
(3) Scope 3 emissions from business travel, paper, waste and water.
(4) TIST projects remove carbon from the atmosphere through tree planting. All TIST carbon credits are dual-validated and verified under the Verified Carbon Standard (VCS) and Climate, Community and Biodiversity Standards (CCB).
Emissions from the combustion of fuel and operation of any facility (Scope 1(2) Direct) CO2e (tonnes)
Total gross CO2e emissions (Scope 1, location-based Scope 2, Scope 3) (tonnes)
Intensity ratio: Location-based CO2e emissions per FTE (Scope 1, 2 and 3) (tonnes/FTE)
In February 2020, we set ourselves the challenge to at least halve the climate impact of our financing activity by 2030 and to do what is necessary to achieve alignment with the 2015 Paris Agreement. Financing activity refers to the loans and investments (debt securities and equity shares) on NatWest Group’s balance sheet. We use financed emissions as a key metric to estimate the climate impact of our financing activity on the real economy. Financed emissions are absolute GHG emissions that NatWest Group finances through its lending and investment activity. These activities fall within Scope 3, category 15 of the GHG protocol.
Financed emissions refer to the total GHG emissions of an asset class or sector that is attributable to NatWest Group. In line with PCAF’s The global GHG accounting and reporting standard for the financial industry, we have calculated absolute emissions based on Scope 1 and 2 emissions attributable to those loans and investments analysed for the specified sector or subsector analysed. In addition, for our oil and gas extraction and automotive manufacturing sectors, we have included Scope 3 emissions based on downstream use of products sold as they constitute a large proportion of the overall estimated emissions in these sectors. In general, as per the PCAF standard, financed emissions are estimated based on the formula shown below: The attribution factor is calculated by determining the share of the outstanding amount of loans and investments of a financial institution over the total equity and debt of the borrower or investee company. We used total assets to calculate the attribution factor for automotive manufacturing and oil and gas, and original property valuation for residential mortgages.
Currently, there are data limitations primarily related to lack of granular and sub-sector customer data availability. The PCAF standard provides guidance on data quality scoring methodology to help assess data quality challenges and recognise areas for improvement. PCAF’s ratings generally assign directly collected customer emissions data a better score and estimated or extrapolated achieve lower scoring. In practice, data limitations mean that sectors are generally footprinted using a mixture of customer specific and estimated data at a sub sector level. PCAF therefore suggests assigning a ‘weighted’ score to reported sectors based on the relative exposure associated with different methodologies.
Although the pandemic has impacted and delayed the delivery of many energy efficiency and decarbonisation investment projects, a number of key projects were still completed in 2020. Notable highlights include: • UK data centre environments – We replaced the chillers that provide the necessary internal space cooling at one of our data centres, reducing electricity use by more than 600,000 kWh annually.
• Lighting upgrades – We have implemented lighting upgrades at two of our major office buildings in Belfast and London, resulting in a c.420,000 kWh electricity reduction annually across both locations.
Residential mortgages (5) 2.2 39 kgCO2e/m2 12 4.1 19 kgCO2e/m2 20 kgCO2e/m2 0.1 kgCO2e/m2
(primary farming) 3.6 2,205 tCO2e/ £m revenue 940 4.3 1,103 tCO2e/£m revenue 1,449 tCO2e/£m revenue 1,165 tCO2e/£m revenue
Automotive manufacturing(7) 0.01 0.53 168 gCO2/km 1,790 2.1 3.1 84 gCO2/km 121 gCO2/km 31 gCO2/km
(1) Emissions intensity refers to emissions relative to a specific business metric, such as production output or financial performance of a company (e.g. tonne CO2e per tonne product produced or revenue).
(3) Physical emissions intensity: Financed emissions divided by an output value.
(4) Economic emissions intensity: Financed emissions divided by the loan and investment amount. This helps understand how the emissions intensity of different portfolios (or parts of portfolios) compare to each other per monetary unit.
(6) Where detailed information on physical activity is not available, PCAF permits use of revenue-based intensity. We have used revenue based intensity metric for the agriculture sector. tCO2e/£M revenues is tonnes of carbon dioxide equivalent emitted per million of revenue.
(8) For oil and gas extraction, quantity of energy produced by each fuel source has been used to assess emissions intensity. tCO2e/TJ is tonnes of carbon dioxide equivalent emitted per terajoule.
In February 2020, NatWest Group committed to support our UK and RoI mortgage customers to become more energy efficient with an ambition that 50% of our mortgage book is at or above EPC C or equivalent rating by 2030. To estimate financed emissions, we used EPC data as an estimate of the underlying climate impact. EPC assesses the energy efficiency of a property, graded from A (most efficient) to G (least efficient). EPC data is sourced from publicly available customer information for England and Wales for the year of inspection by qualified EPC surveyor. As EPC ratings only need to be updated every 10 years or after significant retrofits, point of sale or lease, not all properties have current EPC ratings.
This is based on the assumption that properties without EPC ratings have the same emissions intensity profile as those with available EPC ratings. This results in PCAF data quality score of 5.
Estimated 2030 and 2050 emissions intensity: Our preliminary estimates for the Paris aligned emissions intensities for 2030 and 2050 are based on the CCC's sixth Carbon Budget, “Balanced Net Zero”, emissions pathway and UK floorspace projections. We project floor space to 2050 using the CCC's estimates of “new homes” in the UK between 2019 and 2050, in conjunction with the UK’s housing stock in 2019.These are then multiplied by the average floorspace in the UK (as derived from the National EPC data). The current Scope 2 estimate is based on CCC’s estimated household electricity consumption and the overall emissions intensity of UK electricity. The intensity estimate was calculated using SBTi SDA. We estimate that by 2030, our average financed physical emissions intensity will need to fall significantly to be aligned with the 2015 Paris Agreement, from an estimated 39 kgCO2e/m2 in 2019 to 20 kgCO2e/m2 in 2030, and then further still to 0.1 kgCO2e/m2 in 2050.
How we will support customers to transition Our ambition for Paris alignment for the residential mortgage portfolio is challenging. It reflects the fact that reducing the carbon emissions from residential property in the UK is a complex and challenging goal, which will require a systemic response from parties across the sector, including government, energy suppliers, housebuilders and lenders. We have a clear role to play within the ecosystem to engage and inform customers and provide product solutions to fund home improvements and continue to develop our plans.
We are clear that we can play an important role engaging with our mortgage customers to inform and increase awareness of the benefits and options available, helping them to improve home energy efficiency through making home improvements. Building on the launch of our Green Mortgage product, we will continue to develop green financial products to reward and incentivise the purchase of the most energy efficient properties, measured by their EPC, but also to allow customers to fund home improvements that increase the energy efficiency of existing properties. We will also take a proactive stance to sector engagement, working with government, as well as across the finance sector with NGOs (e.g. Green Finance Institute) to align to industry standards and create consistency for customers regarding Green Financing.
Financed emissions estimate: As primary farming activities do not have a homogenous unit of output base (i.e. farmers sell different products), constructing an emissions intensity metric based on physical output is challenging. We have used UK-specific sector level revenue emissions intensity metrics from EXIOBASE 2011 and applied these to customer revenues to estimate absolute emissions. Availability of more detailed customer level data will allow us to use customer specific emissions factors.
PCAF data quality score: a. Publicly available data: Emissions intensity for £2.5 billion of agriculture primary farming balances reviewed was estimated using sector level emissions factors from EXIOBASE, achieving data quality score of 4.
According to the CCC’s sixth carbon budget, decreasing emissions in the agriculture sector will be driven by several decarbonisation strategies, such as improved soil management practices, improved livestock health and breeding, reductions in food waste and diet changes that will reduce the demand for and production of beef and thus, the associated emissions.
We are currently working on a pilot with individual farming customers to develop a universal approach in understanding the sustainability and climate impact of their farms. If successful, further development will enable the bank to understand the impact of our agriculture portfolio whilst providing our farming customers with individual support on their climate journey.
These tailpipe emissions factors are applied to global sales data (by model type) taken from customers’ annual reports to calculate Scope 3 tailpipe emissions.
In line with guidance from Katowice banks, we also estimate the Scope 3 tailpipe emissions intensity (in gCO2/km) for our automotive manufacturing portfolio. This is calculated based on the estimated Scope 3 tailpipe emissions, data on customer financials and reported sales, and an assumption of average vehicle lifecycle of 150,000 kms based on the IEA Global EV Outlook report.
(ii) Extrapolated data: For the remaining 3%, we estimated emissions data based on the emissions profile of the rest of the population, achieving data quality score of 5.
We used reported emissions and production data from our customers' annual reports (where available) to construct emissions intensity estimates for 2019.
PCAF data quality score: a. Publicly available data: For 96% customers, we sourced Scope 1, Scope 2 and Scope 3 emissions data from their sustainability reports. Where any of this information was missing, we estimated the emissions using reported production and estimated emissions factors. For directly sourced emissions, we achieve a data quality score of 2 whereas for the portion of the portfolio that we estimate the emissions for, we achieve a data quality score of 3.
Page Presentation of information 84 Segmental reporting 84 Financial summary 85 Segment performance 90
Presentation of information The Royal Bank of Scotland Group plc or the ‘parent company’ was renamed NatWest Group plc on 22 July 2020.
In the Report and Accounts, unless specified otherwise, ‘parent company’ refers to NatWest Group plc, and ‘NatWest Group’ or ‘Group’ refers to NatWest Group plc and its subsidiaries. The term ‘NWH Group’ refers to NatWest Holdings Limited (‘NWH’) 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 ‘NWM N.V.’ refers to NatWest Markets N.V. 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 ‘UBI DAC’ refers to Ulster Bank Ireland DAC. The term ‘RBSI Limited’ refers to The Royal Bank of Scotland International Limited.
NatWest Markets (NWM); helps NatWest Group’s corporate and institutional customers manage their financial risks safely and achieve their short-term and long-term sustainable financial goals.
Central items & other; includes corporate functions, such as NatWest Group Treasury, finance, risk management, compliance, legal, communications and human resources. Central functions manages NatWest Group capital resources and NatWest Groupwide regulatory projects and provides services to the reportable segments.
Business Developments In December 2020, we acquired a £3.0 billion portfolio of prime UK mortgages from Metro Bank plc. Growing the mortgage book is an important strategic priority, as NatWest Group builds a bank that delivers sustainable returns for shareholders. The addition of this loan book will supplement the strong organic growth that we continue to achieve.
Financial summary NatWest Group’s financial statements are prepared in accordance with IFRS. Selected data under IFRS for each of the last five years is presented below.
Return on tangible equity (%) (2.4) 9.4 (11.8) Bank NIM (NatWest Group NIM excluding NWM) (%) (1) 1.71 1.99 (28bps) Average interest earning assets (NatWest Group excluding NWM) (£m) 455,542 413,112 42,430
Notes: (1) Net interest margin is net interest income of the banking business less the NatWest Markets (NWM) element as a percentage of interest-earning assets of the banking business less the NWM element. (2) Cost:income ratio is total operating expenses less operating lease depreciation divided by total income less operating lease depreciation.
Average interest earning assets 181,383 26,352 163,143 23,806 31,700 37,929 nm 493,471 Third party customer asset rate (3) 2.89% 2.30% 2.86% 2.53% 2.52% nm nm nm Third party customer funding rate (3) (0.19%) (0.07%) (0.08%) (0.11%) (0.01%) nm nm nm
(2) Operating lease depreciation included in income £145 million (2019 - £138 million). Refer to the Non-IFRS financial measures section for details of the basis of preparation.
(3) Third party customer asset rate is calculated as annualised interest receivable on third-party loans to customers as a percentage of third-party loans to customers only. Third party customer funding rate reflects interest payable on third-party customer deposits, including interest bearing and non-interest bearing customer deposits. This excludes intragroup items, loans to banks and liquid asset portfolios. Intragroup items, bank deposits and debt securities in issue are excluded for customer funding rate calculation. Comparatives have been restated. Net interest margin is calculated as net interest income as a percentage of the average interest-earning assets without these exclusions.
Net fees and commissions 2,012 2,511 (499) (19.9%) Income from trading activities 1,149 1,012 137 13.5% Other non-interest income (114) 2,683 (2,797) (104.2%)
 Income across the retail and commercial businesses, excluding notable items, decreased by 10.0% reflecting the lower yield curve, mortgage margin dilution, subdued business activity and lower consumer spending. Increased lending, whilst maintaining a disciplined approach to risk, has partially offset, with gross new mortgage lending of £31.5 billion in Retail Banking and drawdowns against UK Government lending schemes in Commercial Banking.
 Bank net interest margin (NIM) of 1.71% was 28 basis points lower than 2019, principally reflecting the impact of the falling yield curve and mortgage margin dilution, although this partly receded in the latter part of the year.
 Structural hedges of £159 billion generated £1.1 billion of incremental net interest income for the year, compared with £0.6 billion of incremental net interest income on a balance of £159 billion in 2019.
Write down of goodwill and intangibles 2 — 2 nm 2020 compared with 2019  Operating expenses excluding litigation and conduct costs, strategic costs and operating lease depreciation, decreased by £277 million, or 4.0%, reflecting the continued transition from physical to digital, the optimisation of our property footprint, lower investment spend and reductions in NatWest Markets in line with the strategic announcement in February 2020. Headcount reduced by c.4,100, or 6.4%.
 Litigation and conduct costs of £113 million represent £473 million of additional charges offset by various releases as programmes conclude, including a £277 million PPI release, with final agreement reached on 18 February 2021 with the Official Receiver in relation to a portfolio of historical PPI claims. The additional charges mainly represent increased cost of review and execution of Other Customer Redress as well as Litigation provisions.
Note: (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.
2020 compared with 2019  A tax charge of £83 million for the year ended 31 December 2020 arises rather than the expected tax credit of £67 million based on the UK
statutory tax rate of 19%. The higher tax charge reflects a reduction in the carrying value of the Group's deferred tax asset in respect of Irish tax losses, UK banking surcharge, and other non-deductible items such as UK bank levy. These factors have been partially offset by the impact on the Group's UK net deferred tax asset of the increased tax rate from 1 April 2020, enacted by the Finance Act 2020. Further details can be found in Note 7 to the consolidated financial statements.
Assets Cash and balances at central banks* 124,489 80,993 43,496 54%
 Total assets of £799.5 billion as at 31 December 2020 increased by £76.5 billion, 11%, compared with 31 December 2019. This was primarily driven by increases in cash and balances at central banks, loans to customers and derivatives, partially offset by reductions in trading assets, settlement balances and other financial assets.
 Loans to customers - amortised cost, increased by £33.6 billion, 10%, to £360.5 billion including £13.4 billion in Retail Banking, as a result of strong new gross mortgage lending and retention, £7.0 billion in Commercial Banking as £12.6 billion drawdowns against UK Government lending schemes were partially offset by lower specialised business lending and increased loan provisions and £12.5 billion in Treasury as part of liquidity management.
 Customer deposits increased by £62.5 billion, 17%, to £431.7 billion including increases of £21.5 billion in Retail Banking, £32.7 billion in Commercial Banking and £3.8 billion in Private Banking as customers retained liquidity in light of economic uncertainty, combined with the impact of government and central bank actions in response to COVID-19 schemes.
 Other liabilities decreased by £1.2 billion, 15%, to £6.4 billion mainly due to reductions in provisions and accruals in the year.
2020 compared with 2019  Throughout 2020 Retail Banking helped approximately 258,000 customers with a mortgage repayment holiday and as at 31 December 2020 had 16,000 active mortgage repayment holidays, representing 1% of the book by volume. Additionally, approximately 17,000, or 2% of Retail Banking personal loan customers were active on repayment holidays as at Q4 2020.
 NatWest Group acquired a £3.0 billion prime UK mortgage portfolio from Metro Bank plc on 18 December 2020. The impact on full year 2020 operating profit was a £58 million loss on acquisition, a £2 million increase in net interest income and a £9 million increase in impairment losses. The impact on the Q4 2020 balance sheet was to increase net loans to customers by £3.0 billion and RWAs by £1.2 billion. The portfolio will be earnings accretive within two years.
 Net interest margin decreased by 34 basis points reflecting the impact of the lower yield curve on deposit returns, lower unsecured balances and mortgage margin pressure, as front book margins were lower than back book margins.
 Impairment losses of £792 million largely reflect significant Stage two ECL uplifts taken in H1 2020 for expected future economic deterioration.
(15% prior to Q1 2020) of the period average of segmental risk-weighted assets incorporating the effect of capital deductions (RWAes), assuming a nil tax rate. (2) Ratios have been presented on a Euro basis. Euro comparatives have been restated.
Net loans to customers (amortised cost) 20.0 21.4 (1.4) (7%) 18.0 18.2 (0.2) (1%)
 Other expenses decreased by €25 million, or 4.7%, reflecting a 6.9% headcount reduction following the scale-down of functional teams and lower marketing, back office and project costs, partially offset by higher pension costs due to a one-off credit in 2019.
 Net loans to customers decreased by €1.4 billion, or 6.5%, as repayments exceeded gross new lending of €2.1 billion, combined with a €0.3 billion de-recognition of non-performing loans (NPLs) from a sale agreed in Q4 2019, and increased loan provisions.
 Customer deposits increased by €0.1 billion, or 0.5%, due to a large one-off placement at the end of the year, partially offset by earlier reductions in commercial balances due to pricing changes, including the implementation of negative rates on large and midsized corporate customers and non-bank financial institutions.
 RWAs decreased by €2.1 billion, or 13.7%, reflecting the impact of NPL de-recognitions and lower lending volumes.
Net interest margin 1.68% 1.95% (0.27%) Cost:income ratio 59.9% 58.9% 1.0%
Customer deposits (excluding repos) 167.7 135.0 32.7 24% Loan:deposit ratio (excluding repos) 65% 75% (10%) (13%)
2020 compared with 2019  Commercial Banking continues to support customers through a comprehensive package of initiatives including participation in the UK Government’s financial support schemes. During 2020, £8.6 billion BBLS, £3.9 billion CBILS and £1.3 billion CLBILS had been approved. Since 22 March 2020 Commercial Banking provided payment holidays on over 74,000 customer accounts and as at 31 December 2020 had active payment holidays on c.11,000 customer accounts, representing 4% of the lending book by value.
 Total income decreased by £360 million, or 8.3%, reflecting lower deposit returns and subdued transactional business activity, combined with a £21 million increase in fair value and disposal losses, primarily through risk mitigation actions.
 Impairment losses of £1,927 million primarily reflect the deterioration of the economic outlook as a result of the COVID-19 pandemic driving significant stage two charges, with total stage three charges of £318 million, including a small number of single name charges.
 Net loans to customers increased by £7.0 billion, or 6.9%, as £12.6 billion drawdowns against UK Government lending schemes were partially offset by lower specialised business lending and increased loan provisions. Revolving credit facility (RCF) utilisation decreased to c.22% of committed facilities, below Q4 2019 pre-COVID-19 levels of c.27% and significantly lower than the peak of c.40% in April 2020.
 Customer deposits increased by £32.7 billion, or 24.2%, as customers built and retained liquidity in light of economic uncertainty combined with the impact of government and central bank actions in light of COVID-19.
 RWAs increased by £2.6 billion, or 3.6%, reflecting volume growth and £2.4 billion higher risk parameters, partially offset by a £0.8 billion reduction related to active capital management and a c.£1.5 billion reduction reflecting the CRR COVID-19 amendment to accelerate the planned changes to the SME supporting factor and the introduction of an Infrastructure supporting factor.
 Other expenses, excluding OLD, increased by £18 million, or 0.9%, as £80 million higher back office operations costs, increased innovation spend and £19 million lower VAT recoveries were partially offset by a headcount reduction of 1.0% following operating model efficiencies in the second half of 2019 and COVID19 slowing down investment spend.
(2) Comprises assets under management, assets under custody and investment cash. (3) Private Banking manages assets under administration portfolios on behalf of Retail Banking and RBSI and receives a management fee for providing this service.
 Total income decreased by £58 million, or 7.1%, primarily reflecting lower deposit funding benefits and a reduction in fee income partially offset by balance sheet growth.
 Net Interest margin decreased by 35 basis points reflecting lower deposit funding benefits and higher liquidity portfolio costs.
 Other expenses increased by £19 million, or 4.3%, reflecting higher investment spend focused on enhancing the client proposition and a number of one-off items partially offset by lower back office operations costs.
 Net loans to customers increased by £1.5 billion, or 9.7%, supported by £0.7 billion of mortgage lending growth and £0.3 billion drawdowns against UK Government lending schemes. RWAs increased by £0.8 billion, or 7.9%, primarily reflecting increased lending volumes.
Total loans to customers (amortised cost) 13.4 14.1 (0.7) (5%) Loan impairment provisions (0.1) — (0.1) — Net loans to customers (amortised cost) 13.3 14.1 (0.8) (6%)
 Total income decreased by £113 million, or 18.5%, primarily due to the impact of the interest rate reductions on deposit income and lower fee income reflecting the economic response to COVID-19.
 Net Interest margin decreased by 43 basis points due to lower deposit funding benefits as a result of central bank interest rate reductions.
 Impairment losses of £107 million primarily reflect a more uncertain economic environment and refreshed staging and maturity date analysis.
 Net loans to customers decreased by £0.8 billion, or 5.7%, as customers repaid facilities to position themselves in the uncertain environment, partially offset by increased investment activity in the latter part of 2020.
Notes: (1) The NatWest Markets operating segment is not the same as the NatWest Markets Plc legal entity (NWM Plc) or group (NWM or NWM Group). For 2019, NWM
(2) Asset disposals/strategic risk reduction in 2020 relates to the cost of exiting positions and the impact of risk reduction transactions entered into, in respect of the strategic announcement on 14 February 2020.
 By accelerating its transformation to become a more integrated and sustainable part of NatWest Group, NatWest Markets has focussed on what it does best and what matters to NatWest Group’s customers. The product offering has been simplified and in Q2 2020 NatWest Markets entered an agreement with BNP Paribas to provide ‘house’ Futures and associated back office services. NatWest Markets has consolidated certain customer coverage teams and services and functional teams with their counterparts from across NatWest Group, enhancing our collaborative approach to customers.
 Impairment losses of £40 million reflect the impact of stage two charges taken in the first half of 2020 compared with a net impairment release of £51 million in the prior year for a small number of legacy cases.
 RWAs decreased by £11.0 billion, or 29.0%, as market risk and counterparty credit risk decreased by £3.6 billion and £3.5 billion respectively and credit risk decreased by £3.4 billion as the business exceeded its target for RWA reductions over the course of 2020.
Group Audit Committee Group Nominations and Governance Committee Group Performance and Remuneration Committee Committee Chairman
Group Board Risk Committee Group Sustainable Banking Committee Technology and Innovation Committee 1 Howard Davies Appointed: 14 July 2015 (Board), 1 September 2015 (Chairman) Experience: Howard was a non-executive director of Prudential plc from 2010 to 2020; Chair of the UK Airports Commission between 2012 and 2015; Chairman of Phoenix plc from 2012 to 2015; Director of the London School of Economics and Political Science from 2003 until May 2011; Chairman of the UK Financial Services Authority from 1997 to 2003; and Deputy Governor of the Bank of England from 1995 to 1997.
External appointments: Member of the Regulatory and Compliance Advisory Board of Millennium Management LLC; Chair of the International Advisory Council of the China Securities Regulatory Commission; Member of the International Advisory Council of the China Banking and Insurance Regulatory Commission; and Chairman of Inigo Limited.
3 Katie Murray Appointed: 1 January 2019 Experience: Katie joined NatWest Group as Director of Finance in November 2015 and was appointed as Deputy Chief Financial Officer in March 2017. She was appointed as Chief Financial Officer in January 2019. Katie has worked in Finance and Accounting for nearly 30 years with experience in capital management, investor relations, financial planning and all areas of financial services. Katie was previously the Group Finance Director for Old Mutual Emerging Markets, based in Johannesburg from 2011 to 2015, having held various roles across Old Mutual from 2002. Prior to this Katie worked at KPMG for 13 years.
Katie is a Chartered Accountant having trained in Scotland and is a member of the Institute of Chartered Accountants in Scotland.
External appointments: Chairman of NortonLifeLock Inc; non-executive director of Arqiva Group Limited; and non-executive director of IHS Towers.
External appointments: Member of the board of directors of the Harvard Business School Club of Toronto; and non-executive director of Jackson National Life Insurance Company.
overnance 7 Robert Gillespie Appointed: 2 December 2013 Experience: Robert had a long career in investment banking, specialising in corporate advisory work. He was Director General of the Takeover Panel from 2010 until 2013 and prior to that held a number of senior management positions at UBS including being global head of investment banking from 1999 until 2005, Chief Executive of UBS for EMEA from 2004 to 2006 and Vice Chairman of UBS Investment Bank from 2005 to 2008. He commenced his career at Price Waterhouse where he qualified as a Chartered Accountant and in 1981 joined S.G. Warburg which subsequently became part of UBS.
8 Yasmin Jetha Appointed: 1 April 2020 Experience: During her executive career, Yasmin held Chief Information Officer roles at Bupa and also the Financial Times, where she became the Chief Operating Officer. She previously had a career spanning nearly 20 years at Abbey National PLC, latterly serving as an executive director on the board. In addition to being Vice Chair of the Board of Governors at the University of Bedfordshire from 2008 to 2011, Yasmin also served for over ten years, until April 2017, as Vice Chair of the National Committee of the Aga Khan Foundation (UK) Ltd, a non-denominational charity.
9 Mike Rogers Appointed: 26 January 2016 Experience: Mike was previously Chief Executive of Liverpool Victoria Group for 10 years. Mike has extensive experience in retail banking and financial services. He joined Barclays in 1986 where he undertook a variety of roles in the UK and overseas across business banking, wealth management and retail banking and was Managing Director of Small Business, Premier Banking and UK Retail Banking.
10 Mark Seligman Appointed: 1 April 2017; Senior Independent Director since 1 January 2018 Experience: Mark is a former senior investment banker with broad financial services knowledge, has substantial FTSE 100 Board experience gained in various industry sectors, including as a Committee Chair and Senior Independent Director. During his executive career, he held various senior roles at Credit Suisse/BZW (including Deputy Chairman, CSFB Europe and Chairman, UK Investment Banking, CSFB); and previously SG Warburg (ultimately as Managing Director, Head of Advisory). He has also previously served as a nonexecutive Director of BG Group plc, as Deputy Chairman of G4S plc and as Senior Independent Director of Kingfisher plc.
Dear Shareholder, I am pleased to present the Corporate governance report for 2020.
2020 has been an extraordinary year. As the UK entered a national lockdown in March, our Board transitioned swiftly and smoothly to frequent virtual meetings. The Group Chief Executive Officer (Group CEO) and wider executive management team kept the Board informed on our pandemic response, supporting effective Board oversight and challenge as the organisation pivoted its operations at pace, focusing on our customers’ financial health, prioritising colleague safety and wellbeing, and helping our local communities.
Further details on how the Board operated during 2020, including principal areas of Board focus, are set out on page 101.
 On 1 August 2020 Morten Friis assumed the Chair of the Group Board Risk Committee and joined the Group Nominations & Governance Committee.
 Robert Gillespie stepped down as a member of the Group Sustainable Banking Committee on 31 July 2020 and joined the Group Audit Committee on 1 August 2020.
Board effectiveness In 2020, the Board and Committee evaluation was conducted by the Chief Governance Officer and Company Secretary. The review concluded that the Board and its Committees continue to operate effectively and within their terms of reference. Further information on the 2020 internal evaluation can be found on page 104.
The following number of ad hoc Board Committee meetings also took place: one N&G meeting, two GAC meetings, three BRC meetings, two SBC meetings, one TIC meeting and eight RemCo meetings. In accordance with the Code, the Chairman and the non-executive directors met at least once without executive directors present.
Board and Committee membership and scheduled meeting attendance in 2020 Group Group Group
Committee Committee Risk Committee Committee Committee Committee Board (N&G) (GAC) (BRC) (SBC) (TIC) (RemCo)
Howard Davies 6/6 4/4 — — — — — Alison Rose 6/6 — — — — — — Katie Murray 6/6 — — — — — — Frank Dangeard 6/6 — — — — 3/3 7/7 Patrick Flynn 6/6 4/4 5/5 8/8 — 3/3 — Morten Friis (1) 6/6 2/2 5/5 8/8 — — — Robert Gillespie (2) 6/6 4/4 2/2 8/8 2/2 — 7/7 Yasmin Jetha (3) 5/5 — — — 5/5 3/3 — Mike Rogers 6/6 — — — 5/5 — 7/7 Mark Seligman 6/6 4/4 5/5 — — — 7/7 Lena Wilson (4) 6/6 — — 3/3 5/5 0/0 5/5 Former Directors Alison Davis (5) 1/1 — — — 0/0 0/0 2/2 Baroness Noakes (6) 3/3 2/2 3/3 5/5 — — —
(2) Robert Gillespie stepped down from SBC on 31 July 2020 and was appointed to GAC on 1 August 2020. (3) Yasmin Jetha was appointed to the Board, SBC and TIC and assumed the role of TIC Chair on 1 April 2020. (4) Lena Wilson stepped down from TIC on 31 March 2020, was appointed to RemCo on 1 April 2020 and appointed to BRC on 1 August 2020. (5) Alison Davis resigned from the Board on 31 March 2020. (6) Baroness Noakes resigned from the Board on 31 July 2020.
How the Board operated in 2020 In March, reflecting the scale of the pandemic and lockdown restrictions, the Board’s operating rhythm was revised to facilitate regular updates from the Group CEO and executive management team. A cycle of weekly meetings, later moving to fortnightly, supplemented the Board’s scheduled meetings, and all meetings took place virtually.
 A look ahead paper at each ExCo and Board meeting setting out key items that will be discussed at the next meeting.
Colleagues  COVID-19 updates  Executive appointments and executive succession planning  Talent session  Colleague opinion survey results
The Board also held two strategy sessions with the executive management team, in June and October 2020. This provided an opportunity for the Board to assess opportunities and risks to the future success of the business, the sustainability of the company’s business model and how its governance contributes to the delivery of its strategy.
NatWest Holdings Limited (NWH) is the holding company for our ring-fenced operations, which include our retail, commercial and wealth management services. A common board structure is operated such that directors of NWH are also directors of The Royal Bank of Scotland plc, National Westminster Bank Plc and Ulster Bank Limited. Known collectively as the NWH Sub Group, the boards of these four entities meet concurrently.
An integral part of NatWest Group’s governance arrangements is the appointment of three Double Independent Non-Executive Directors (DINEDs) to the boards, and board committees, of the NWH Sub Group.
The governance arrangements for the boards and board committees of NatWest Group plc and the NWH Sub Group have been designed to enable NatWest Group plc to exercise appropriate oversight and to ensure that, as far as is reasonably practicable, the NWH Sub Group is able to take decisions independently of the wider Group.
The Group Nominations and Governance Committee monitors the governance arrangements of NatWest Group plc and its subsidiaries and approves appointments to the boards of principal and material regulated subsidiaries, as described in the Group Nominations and Governance Committee report on page 106.
overnance 2018 UK Corporate Governance Code Throughout the year the company has applied the Principles and complied with the Provisions of the Code, except in relation to:  Provision 17 that the Group Nominations and Governance Committee should ensure plans are in place for orderly succession to both the board and senior management positions and oversee the development of a diverse pipeline for succession; and
 Provision 33 that the Group Performance and Remuneration Committee should have delegated responsibility for setting remuneration for the Chairman and executive directors.
In addition, the Board has delegated two particular aspects of the Code’s provisions to Board Committees, with regular updates provided to the Board as appropriate:  The Group Audit Committee retains responsibility for reviewing and monitoring NatWest Group’s whistleblowing procedures.
 The Group Sustainable Banking Committee considers key workforce policies and practices (not related to pay) to ensure they are consistent with NatWest Group’s values and support long-term sustainable success.
For further information please refer to the relevant Committee reports on the following pages.
Board Committees The Board has established a number of Board Committees with particular responsibilities. Please refer to page 65 of the Strategic report for more details. Board committee terms of reference are available on natwestgroup.com.
Purpose, values, strategy and culture In February 2020, and following an extensive period of stakeholder engagement, the Board approved NatWest Group’s purpose and strategy. Our purpose has been a galvanising force across the organisation as our response to the pandemic has evolved, acting as an important point of reference during Board discussions, debate and decision-making. In October 2020 the Board received an update on NatWest Group’s progress in becoming a purpose-led bank, covering achievements to date and future priorities. Further information on progress against our purpose and strategic priorities can be found on pages 6 to 7 of the Strategic report.
The Board is responsible for leading the development of NatWest Group’s culture, values and standards. The Board assesses and monitors NatWest Group’s culture in several ways. In February 2020, representatives from the BSB joined a Board meeting to present the results of their 2019 industry-wide survey and thematic reports, together with their 2019 Assessment report on NatWest Group. The Board also discussed an internal review of the BSB’s thematic reports on ‘Technology & Culture’ and ‘DecisionMaking ’ from a NatWest Group perspective, including impacts for customers and employees.
In December 2020, the Group Sustainable Banking Committee considered a summary of the results of the BSB’s 2020 Assessment report on NatWest Group, in advance of a presentation by the BSB to the Board in February 2021
Directors are mindful of their responsibility to set the ‘tone from the top’ and take every opportunity to role model the desired culture both within the boardroom and beyond.
While opportunities for face to face interaction with colleagues were significantly curtailed during 2020, directors continued to engage with colleagues virtually where possible, for example through Colleague Advisory Panel events, Committee function visits and a virtual talent engagement session.
The activities described above have supported the Board in meeting the Code requirement to satisfy itself that the company’s purpose, values, strategy and culture are aligned.
NatWest Group’s Colleague Advisory Panel was set up in 2018 to help promote colleague voices in the boardroom and supports our compliance with Code requirements in relation to Board engagement with the workforce.
For further details on Board engagement with shareholders and other stakeholders, including how planned engagement activity was adapted in light of COVID-19 restrictions and the role and activities of the Colleague Advisory Panel, refer to the section 172(1) statement on page 48 of the Strategic report.
Each director is required to notify the Board of any actual or potential situational or transactional conflict of interest and to update the Board with any changes to the facts and circumstances surrounding such conflicts. Situational conflicts can be authorised by the Board in accordance with the Companies Act 2006 and the company’s Articles of Association. The Board considers each request for authorisation on a case by case basis and has the power to impose conditions or limitations on any authorisation granted as part of the process. Details of all directors’ conflicts of interest are recorded in a register which is maintained by the Chief Governance Officer and Company Secretary and reviewed annually by the Board.
Director biographies and details of the Board Committees of which they are members can be found on pages 97 and 98.
The balance between non-executive and executive directors enables the Board to provide clear and effective leadership across NatWest Group’s business activities and ensures no one individual or small group of individuals dominates the Board’s decisionmaking.
Details of the key responsibilities of the Chairman, Group CEO, Senior Independent Director and non-executive directors are available on natwestgroup.com.
The Chief Governance Officer and Company Secretary is responsible for advising the Board and individual directors on all governance matters, and also facilitates Board induction and directors’ professional development.
Executive Management The Group CEO is supported by Group ExCo, which considers strategic, financial, capital, risk and operational issues affecting NatWest Group and reviews relevant matters in advance of Board submission. Group ExCo’s membership comprises the Group CEO, Group CFO and the Group Chief Risk Officer; who are also members of the wider executive management team. Biographies of the executive management team can be found on natwestgroup.com.
Time commitment It is anticipated that non-executive directors will allocate sufficient time to the company to discharge their responsibilities effectively and will devote such time as is necessary to fulfil their role. Directors have been briefed on the limits on the number of other directorships that they can hold under the requirements of the fourth Capital Requirements Directive.
The Code emphasises the importance of ensuring directors have sufficient time to meet their board responsibilities. Prior to appointment, significant commitments require to be disclosed with an indication of the time involved. External appointments require prior Board approval, with the reasons for permitting significant appointments explained in the annual report. No such disclosures are required for 2020.
The Board continues to monitor the commitments of the Chairman and directors and is satisfied that they are able to allocate sufficient time to enable them to discharge their duties and responsibilities effectively.
Information All directors receive accurate, timely and clear information on all relevant matters and have access to the advice and services of the Chief Governance Officer and Company Secretary. In addition, all directors are able, if necessary, to obtain independent professional advice at the company’s expense.
Induction and professional development Each new director receives a formal induction on joining the Board, which is co-ordinated by the Chief Governance Officer and Company Secretary and tailored to suit the requirements of the individual concerned. This includes visits to NatWest Group’s major businesses and functions and meetings with directors and senior management. Meetings with external auditors, counsel and stakeholders are also arranged as appropriate.
All new directors receive a copy of the NatWest Group Director Handbook. The Handbook operates as a consolidated governance support manual for directors of NatWest Group plc and the NWH Sub Group, providing both new and current directors with a single source of information relevant to their role. It covers a range of topics including NatWest Group’s corporate structure; the Board and Board Committee operating model; Board policies and processes and a range of technical guidance on relevant matters including directors’ duties, conflicts of interest, and the UK Senior Managers’ Regime. The Handbook forms part of a wider library of reference materials available via our resources portal.
With significant demands on Board time due to COVID-19, our Board training programme prioritised key areas of focus including financial crime and climate.
Board Committees also comprise directors with a variety of skills and experience so that no undue reliance is placed on any one individual.
Further information on Board appointments and succession planning can be found in the Group Nominations and Governance Committee report on page 106.
In accordance with the UK Listing Rules, the election or re-election of independent directors also requires approval by a majority of independent shareholders.
2020 Board Evaluation In accordance with the Code, an external evaluation of the Board, its Committees and individual directors takes place every three years. An internal evaluation takes place in the intervening years. The last external evaluation was conducted in 2018.
Progress following the 2019 evaluation A number of actions were progressed during 2020 in response to the findings of the 2019 internal performance evaluation.  A set of Board objectives was agreed for the year. Similar to 2019, these guided agenda planning and helped to ensure appropriate focus on the longer-term and strategic issues.
 A comprehensive review of Board composition and succession planning was carried out by the Group Nominations and Governance Committee, including a review of the Board skills matrix and the overall balance of skills, knowledge, experience and diversity on the Board. Following this review, the Board approved the Board and Board Committee membership changes described earlier in this report. These changes addressed a number of focus areas identified during the 2019 evaluation, including reducing Board size, adding technology experience to the Board and improving Board diversity.
 A virtual talent session enhanced the Board’s visibility of the executive talent pipeline.
 Purpose and strategy – Directors agreed that NatWest Group’s purpose was clear and compelling, and that it was starting to embed and guide Board discussions and decision-making. The annual Board objectives were considered useful, but directors said a shorter list of focus items would be more impactful.
 Board stakeholder engagement – Engagement activity during the year had been worthwhile, despite limited opportunities for face to face meetings. Board sessions with institutional investors had been particularly useful, and the Colleague Advisory Panel was working well. Directors were keen to explore different options to engage with customers and understand their views. They were also interested in deeper customer insights and further focus on key supplier relationships.
 Board culture and dynamics – The 2019 evaluation had identified Board dynamics as an area for further improvement. In 2020, directors commented positively on Board culture and dynamics, noting an improvement over the past 12 months. Relationships were considered to be good, although directors missed the opportunity for informal interaction due to COVID-19 restrictions. Directors felt the balance of responsibilities between the Board and Board Committees was appropriate.
 How the Board operates - The Board’s operating rhythm and increased meeting frequency had worked well. Directors expressed an interest in more in-depth business discussions and some observed there was scope to streamline Committee Chair reporting. Directors appreciated the enhanced approach to management reporting and observed that Board paper templates continued to drive better and shorter papers.
Board objectives for 2021.  Explore different options for directors to engage with customers.  Review potential enhancements to Board
Committee evaluations Details of the Board Committee evaluations carried out during 2020 can be found in the Committee reports.
Individual director and Chairman effectiveness reviews The Chairman met each director individually to discuss their own performance and continuing professional development and establish whether each director continues to contribute effectively to the company’s longterm sustainable success. The Chairman also shared peer feedback provided to the Chief Governance Officer and Company Secretary as part of the individual evaluation process.
Remuneration The directors’ remuneration report on pages 119 to 130 provides information on the activities of the Group Performance and Remuneration Committee, the decisions taken on remuneration during the year and why the Committee believes these are the right outcomes in the circumstances. The report also details how the remuneration policy for executive directors supports the delivery of the company’s strategic goals and purpose, with significant delivery in shares to provide long-term alignment with shareholders. Information is also included on wider workforce remuneration and the steps taken to ensure fair pay and a healthy culture.
Dear Shareholder, As Chairman of the Board and Chairman of the Group Nominations and Governance Committee I am pleased to present our report on the Committee's activity during 2020.
Role and responsibilities The Committee is responsible for reviewing the structure, size and composition of the Board, and membership and chairmanship of Board Committees and recommends appointments to the Board. In addition, the Committee monitors NatWest Group’s governance arrangements to ensure that best corporate governance standards and practices are upheld and considers developments relating to banking reform and analogous issues affecting NatWest Group. The Committee makes recommendations to the Board in respect of any consequential amendments to NatWest Group’s operating model.
Principal activity during 2020 As highlighted in the Board’s 2019 effectiveness review, the Committee acknowledges the tenure of a number of current Board directors and therefore made succession planning a priority in 2020. The Committee reviewed the contribution of a number of Board members under the Board Appointment Policy which sees non-executive directors appointed for an initial three year term, subject to annual re-election at the AGM. Following assessment by the Committee, they may then be appointed for a further three year term. Non-executive directors may continue to serve beyond six years, subject to a maximum tenure of nine years.
In addition to reviewing the structure, size and composition of the NatWest Group plc Board, the Committee has also continued to oversee work aimed at further enhancing the Group’s subsidiary governance framework. A number of our material regulated subsidiaries made appointments to their boards during 2020, which the Committee has overseen. Spencer Stuart and Green Park have been engaged during the year to support NatWest Group’s subsidiary board search activity. The firms are members of the retained executive search panel of suppliers (managed by NatWest Executive Search). Spencer Stuart also provide leadership advisory and senior executive search and assessment services to the Human Resources function.
The Committee holds a minimum of four meetings per year and meets on an ad hoc basis as required. In 2020, there were five meetings – four scheduled meetings and one ad hoc. Individual attendance by directors at these meetings is shown in the table on page 100.
Tenure of non-executive directors The tenure of non-executive directors as at 31 December 2020 is set out below.
Boardroom Inclusion Policy The Board operates a Boardroom Inclusion Policy which reflects the most recent industry targets and is aligned to the NatWest Inclusion Policy and Principles applying to the wider bank. This policy provides a framework to ensure that the Board attracts, motivates and retains the best talent and avoids limiting potential caused by bias, prejudice or discrimination. The policy currently applies to the most senior NatWest Group boards: NatWest Group plc, NWH Ltd, NWB Plc, RBS plc and Ulster Bank Limited. A copy of the Boardroom Inclusion Policy is available on natwestgroup.com>who we are.
Objectives and targets The Boardroom Inclusion Policy’s objectives ensure that the Board, and any Committee to which it delegates nominations responsibilities, follows an inclusive process when making nomination decisions. That includes ensuring that the nomination process is based on the principles of fairness, respect and inclusion, that all nominations and appointments are made on the basis of individual competence, skills and expertise measured against identified objective criteria and that searches for Board candidates are conducted with due regard to the benefits of diversity and inclusion.
The Committee is responsible for overseeing and challenging the processes undertaken by management in the preparation of the published quarterly financial information. It also assists the Group Board in carrying out its responsibilities relating to accounting policies and internal control functions.
In 2020 the Committee’s primary focus has continued to be on reviewing the integrity and quality of NatWest Group’s published financial information, including the quarterly, interim and full year results announcements, Annual Report and Accounts, Pillar 3 and Form 20-F releases. In each case the Committee received detailed reports on the judgements applied by management in the preparation of the financial statements and legal and regulatory developments. Consideration was also given to management’s assessment of the internal controls over financial reporting and the GAC also received reports from both the internal auditors on the internal control environment and the external auditors on internal controls over financial reporting and key accounting and judgemental matters.
The unprecedented impact the pandemic has had on the UK and global economies, coupled with the extensive government support for those affected by the pandemic, has presented challenges to all banks in modelling the likely impact under IFRS9. In the absence of relevant historic data points to model the impact of the crisis, the Committee found the benchmarking information provided by external parties particularly helpful. The Committee has supported enhancements to internal modelling processes implemented by management during 2020. In light of the economic conditions throughout the year it was necessary to overlay judgements to the modelled outputs. While such decisions are never easy, as by their nature they are highly subjective, the Committee was satisfied the approach taken by management to apply overlays and post-model adjustments was robust and consistently applied. The internal and external auditors also undertook work to provide comfort to the Committee in this respect. In addition, the Committee was satisfied with the assessments of the internal control environment, particularly given the challenges resulting from the COVID-19 pandemic, and supported management’s plans to further enhance it.
As well as reviewing financial information, the Committee also considers NatWest Group’s non-financial reporting. In this respect, the Committee reviewed the climate-related disclosures published alongside this report. The Committee is satisfied that the information contained in the document is consistent with that published in the Annual Report and Accounts and subject to robust controls.
“Throughout nearly all its work in 2020 the COVID-19 pandemic has been a key consideration”
Oversight of the performance of the internal audit function and ensuring its independence is a key responsibility of the Committee. In order to maintain the perceived independence of the Chief Audit Executive, I oversaw the process to appoint a new individual to the role in 2020. I was pleased that there was a highquality pool from which we selected a strong candidate, who takes on the role in February 2021. I am grateful to the outgoing Chief Audit Executive for his professionalism and support during the process and his significant contribution to the bank over the past 9 years.
I would like to take this opportunity to thank all Committee members for their diligent contributions in 2020, including Baroness Noakes who stood down from the Board in July 2020. I was pleased to welcome Robert Gillespie to the Committee in August 2020, who brings with him a wealth of experience.
Membership Full biographical details of the members of the Committee during 2020 are set out on pages 97 and 98. The members are all independent non-executive directors who also sit on other Board committees in addition to the GAC (as set out in their biographies). This common membership helps facilitate effective governance across all finance, risk and remuneration matters and ensures that agendas are aligned, and duplication of responsibilities is avoided.
The annual programme of visits to control functions – held in conjunction with the Board Risk Committee – was undertaken virtually this year in order to comply with social distancing requirements. Constructive and insightful discussions were held with Risk, Internal Audit and Finance.
The GAC then recommended the quarterly, interim and full year results announcements, the Annual Report and Accounts, together with supporting documentation (including Pillar 3 reports, financial supplements and investor presentations) and the Form 20-F to the Group Board for approval.
Treatment of goodwill – Given the economic uncertainty caused by the COVID-19 pandemic, the Committee considered the treatment of goodwill throughout the year, in particular in Commercial Banking. Significant challenge and discussion took place in the context of the H1 interim and full year results with both management and the external auditor to ensure the most appropriate course of action was followed. The Committee was satisfied with the carrying value of goodwill and that appropriate disclosure was made and supported the ongoing close monitoring of goodwill by management in the context of the continued market disruption.
Fair, balanced and understandable – The GAC oversaw the review process which supports the Committee and Board in concluding that the disclosures in the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provided the information necessary for shareholders to assess the company’s position and performance, business model and strategy. The process included: central co-ordination of the annual report and accounts by the Finance function; review of the Annual Report and Accounts by the Executive Disclosure Committee prior to consideration by the GAC; and a management certification process. Particular consideration was given to the way in which information around the impacts of the COVID-19 pandemic was presented. The External Auditor also considered the fair, balanced and understandable statement as part of the year end audit process.
Systems of internal control relating to financial management, reporting and accounting issues is a key area of focus for the Committee. In 2020 it received reports throughout the year on the topic and evaluated the effectiveness of NatWest Group’s internal control systems, including any significant failings or weaknesses.
Whistleblowing – The GAC monitored the effectiveness of the bank’s whistleblowing process and received updates on the volume of whistleblowing reports and any common themes. The results of the annual Our View survey indicated that colleagues’ awareness of how to raise concerns was high and that the majority of colleagues felt it safe to do so. The GAC Chairman acts as the Group Whistleblowers’ Champion, in line with PRA and FCA regulations, and meets regularly with the whistleblowing team. Discussions regarding subsidiary whistleblowing matters were held with the relevant subsidiary audit committee chairmen as required.
Legal and Regulatory Reports – Quarterly reports on the material, current and emerging legal and regulatory investigations, risks and developments affecting NatWest Group enabled the Committee to assess the related disclosures in the financial statements.
Taxation – The GAC received an update on the bank’s tax position and discussed matters including tax disclosures and provisions, tax risks, NatWest Group’s tax compliance status, the relationship with HMRC, employment tax matters, ongoing tax projects, the UK Bank Levy and emerging and forthcoming tax issues (including those relating to uncertain tax positions).
Risk and Control Disclosure – The GAC also reviewed the disclosure on internal control matters in conjunction with the related guidance from the Financial Reporting Council.
Capital – The GAC reviewed NatWest Group’s controls over the calculation and reporting of Risk Weighted Assets and related regulatory developments.
Internal audit The GAC is responsible for overseeing the Internal Audit function. In addition to considering quarterly opinions from Internal Audit, the GAC is required to monitor the function’s effectiveness and its independence. The GAC was fully satisfied in this regard.
Opinions – Quarterly opinion reports were provided to the Committee by Internal Audit, setting out its view of the overall effectiveness of NatWest Group’s governance, risk management and internal control framework, current issues and the adequacy of remediation activity. Internal Audit also outlined material and emerging concerns identified through their audit work. The Committee noted the responses of management to the points highlighted by Internal Audit and welcomed their commitment to addressing any control environment weaknesses. The impact of manual processing on the control environment was a particular focus for the Committee, and efforts to increase automation, particularly in Finance, will be monitored in 2021. In addition, Internal Audit reviewed the consistency of disclosures in NatWest Group’s quarterly Pillar 3 reporting and their report was provided to the Committee Chairman prior to the disclosures being approved for release.
External Audit Reports – EY’s lead audit partner, Jonathan Bourne, reported to the GAC each quarter on the audit related work and conclusions of the External Auditor. This included EY’s view of the judgements made by management, their compliance with International Financial Reporting Standards and their observations and assessment of effectiveness of internal controls over financial reporting. The GAC also received helpful benchmarking information from EY during the course of the year and in particular relating to the accounting treatment of the impacts of the COVID-19 pandemic. The Committee received all communications from EY required by UK auditing standards, SEC and NYSE rules, including 2020 audit quality and transparency reports.
Audit Plan and fees – The GAC considered EY’s 2020 plan and thereafter discussed the impact of the COVID-19 pandemic on the external audit. In line with the authority granted to the Committee by shareholders at the 2020 Annual General Meeting (AGM) to fix the remuneration of the External Auditor, the GAC approved the 2020 audit fees including the fee for the 2020 interim results. The Committee received confirmation from the external auditor that the fees were appropriate to enable delivery of the required procedures to a high quality.
External Auditor Report to the PRA – The GAC considered the outcome of EY’s written auditor report to the PRA under supervisory statement SS1/16 for the year ended 2019, noting that the matters identified were already being addressed by management.
The GAC reviews and approves NatWest Group’s non-audit services policy at least annually. Under the policy, audit related services and permitted non-audit service engagements may be approved by the Chief Financial Officer up to certain financial thresholds. Engagements in excess of these limits require the approval of the GAC chairman. Where the fee for a non-audit service engagement is expected to exceed £100,000, a competitive tender process must be held and approval of all GAC members is required. The policy permits the External Auditor to undertake engagements which are required by law or regulation or which relate to the provision of comfort letters in respect of debt issuances by the NatWest Group, provided prior approvals are in place in accordance with the policy. The policy also allows NatWest Group to receive services from EY which result from a customer’s banking relationship, provided prior approvals are in place in accordance with the policy. All such approvals are reported to the GAC bi-annually. During 2020, approval was granted under the policy for the external auditors to undertake one significant engagement which related to a review of regulatory reporting. The GAC was satisfied that the engagement did not impact the External Auditor’s independence. Further details of the non-audit services policy can be found on natwestgroup.com. Information on fees paid in respect of audit and non-audit services carried out by the External Auditor can be found in Note 6 to the consolidated accounts.
“BRC has amended its focus during 2020 to ensure appropriate oversight of the management and mitigation of risks driven by COVID-19.”
2020 has been an unprecedented period and BRC has amended its focus to ensure appropriate oversight of the management and mitigation of risks driven by COVID-19 whilst continuing to have oversight of the wider risk agenda. The cancellation of prescribed regulatory stress tests and a decision by the Regulator to delay certain other regulatory programmes ensured sufficient focus by BRC on key risk areas throughout the pandemic. This has included the control environment, operational risk and resilience, financial crime, fraud, incident management decisions impacting risk appetite, and the non-financial risks associated with the Government lending schemes and additional support measures.
Patrick Flynn is chairman of the Group Audit Committee of which Robert Gillespie and I are also members. Robert is also chairman of the Group Performance and Remuneration Committee (RemCo) and Lena Wilson sits on this Committee. This common membership across Committees helps to ensure effective governance across the committees.
Meetings and visits There were eight scheduled meetings of the Committee held in 2020. In addition, three ad hoc meetings were arranged to consider time critical matters such as capital distributions and the impact of COVID-19 on NatWest Group’s risk profile. Meetings have been held virtually throughout the pandemic. Details of meeting attendance can be found on page 100.
The Committee held a dedicated session to discuss its performance. The session was structured around a number of themes: operating rhythm; focus and priorities; effectiveness; and culture and dynamics. The Committee considered that it continued to operate effectively and identified some areas for potential enhancement. In 2021, there will be focus on streamlining and simplification of the Committee through prioritisation; reduction in volume of papers and length of meetings; improvement in paper quality; and an inclusive culture at meetings. The Committee will track progress during 2021.
Time was spent at every BRC meeting reviewing NatWest Group’s current and future risk profile relative to risk appetite, with a particular focus on COVID-19 impacts, and scrutinising management’s actions to monitor and control exposures.
Updates from Executive and Subsidiary Risk Committees – Regular updates were received from the Executive Risk Committee, covering management’s oversight of risk. In H1 2020, in response to the COVID-19 pandemic, management met with increased frequency to ensure effective management of the impacts of the pandemic on NatWest Group and associated actions and controls. Where appropriate, BRC received additional reporting from these meetings. In addition, quarterly reports were received from the chairmen of the risk committees of the segments and material regulated subsidiaries.
Risk Function – Oversight of the Risk function has been an area of focus, with the Committee receiving updates on changes to the organisational structure and work being undertaken to optimise the operating model and enhance effectiveness.
Bank of England Stress Tests – The 2020 Bank of England Annual Cyclical Scenario and climate change Biennial Exploratory Scenario stress tests were cancelled following the COVID19 pandemic.
Risk Appetite Framework - During 2020 BRC reviewed the Risk Appetite Framework and considered the methodologies used to calibrate and align limits and triggers across key risks with the aim of enhancing the quality of the framework and ensuring the integrity of the overall approach to Risk Appetite *. The Committee considered the planned enhancements for Risk Appetite Measures during 2021. *In accordance with the framework, the Committee continued to review escalated breaches of risk appetite together with the action taken by management in response.
Financial crime – Management and oversight of financial crime risk continues to be a key priority of NatWest Group. NatWest Group’s programme to improve and remediate customer due diligence standards and build sustainable processes and controls for the future remains ongoing. BRC received regular updates, including on impacts of the COVID-19 pandemic on progress; revision of the management operating model to provide enhanced focus and oversight; and the return to appetite plan. BRC received reports on the new Enterprise-Wide Financial Crime Risk Assessment process launched in 2020, designed to provide a more dynamic and insightful understanding of financial crime risk profile, and considered the outputs of the first exercise. BRC also reviewed the annual Group Money Laundering Reporting Officer’s Report* and considered risk appetite metrics and performance relative thereto.
Credit and Market risk – In addition to reporting on credit and market risk, with a particular focus on COVID-19 impacts, specific updates were received in relation to the non-financial risks associated with COVID-19 Government lending scheme products and additional support measures, including associated controls and assurance testing. BRC also reviewed separate reports on the retail and wholesale credit risk portfolios, which provided the Committee with insight to the portfolio profile, including asset quality, risk management approach and risk appetite.
Data Management and GDPR - BRC received reports on data management risk profile, including the risk implications of proposed data strategy changes, required to support NatWest Group’s refreshed Purpose-led strategy. BRC considered management’s plans to enhance data management and capability, including updates on the use artificial intelligence and machine learning. The Committee also received regular updates on compliance with GDPR and BCBS239, including the impact of COVID-19 on progress.
Financial Risk from climate change – The Committee reviewed NatWest Group’s progress relating to the management of the financial and non-financial risks arising from climate change, including progress made against regulatory commitments.
BRC continued to provide oversight over the risk dimension of performance and remuneration arrangements, working closely with RemCo.
Accountability – The Committee regularly considered developments in significant material events and investigations. This included resultant accountability recommendations, with the Committee having the ability to advise RemCo on any concerns as to the appropriateness of the recommendations from a risk perspective.
“The Committee has played a key role in supporting the Board in the organisation’s purpose-led journey”
Driving the Sustainable banking agenda Sustainable banking and stakeholder engagement remain of vital importance as NatWest Group continues its transition to becoming purpose-led.
With shareholder, regulatory and societal expectations intensifying, embedding sustainable banking principles and targets within NatWest Group’s broader strategic agenda will be critical. By continuing the Committee’s focus beyond traditional environmental, social and governance (ESG) matters we have sought to ensure that the SBC continues to play a forward-looking role.
As a Committee we have continued to be reassured by the energy shown by colleagues across the organisation in driving the sustainable banking agenda.
 Key topics debated included the organisational response, franchise specific updates from Retail Banking and Commercial Banking, conduct implications, potential future areas of focus and ensuring that our response was aligned to our Purpose.
 This topic has continued to be re-visited, with particular updates on the COVID-19 response in our Retail, Commercial and Private Banking teams. The sessions provided insights into the ongoing support being provided to customers and plans for continued support as the pandemic’s impact on the economy progresses.
 We benefitted from external perspective provided by the Green Finance Institute who provided an overview of the relevant science, climate modelling and the case to de-carbonise.
Enterprise  The Committee has spent time understanding how the bank is approaching becoming the Champion of UK business and removing barriers to ensure everyone has the same opportunity to progress.
 Against notable disruption of the sector as a result of COVID-19, the Committee sought updates from management on the support being provided to customers and progress against our targets in this area.
 External insights from customers were shared with the Committee via recorded customer testimonies and a presentation by one of our Enterprise customers.
Conduct & Ethics  The Committee considered certain aspects of NatWest Group’s decision-making framework to support its oversight of the safety and soundness of NatWest Group’s commercial decisions. This included spotlights on Ethical Conduct by Colleagues and the new internal ‘Yes Check’. It also considered NatWest Group’s Modern Slavery and Human Rights obligations within the business and supply chain in support of discussion on the organisation’s role in shaping societal responses to these challenges.
 Areas of focus included measurement of the impact of the updated colleague framework and support, the introduction of a Supplier Charter and the extent of NatWest Group’s responsibilities in relation to Modern Slavery and Human Rights.
 We benefitted from the external perspectives provided by a speaker from Blueprint for Better Business who shared insights and challenges in relation to ethics and the interplay between organisational ethics and Purpose.
People & Culture  The Committee, on behalf of the Board, debated how NatWest Group builds an engaged workforce and healthy culture for the future, given the importance of both in supporting NatWest Group’s Purpose.
 The Committee, on behalf of the Board, considered workforce policies and practices to ensure they are consistent with NatWest Group’s values and support long-term sustainable success. In particular, the Committee reviewed the fair pay charter, and received updates on pay gap reporting and the 5-year inclusion and diversity update report.
Membership, Meetings and Escalation Robert Gillespie stepped down from his role on the SBC with effect from 31 July 2020. Thereafter, the Group SBC membership comprised three non-executive directors as members and two non-executive directors from our ring-fenced bank board observing, along with management attendees. More details of membership and attendance at meetings can be found on page 100 of the Corporate governance report.
Letter from Yasmin Jetha Chairman of the Technology and Innovation Committee
“Technology and innovation are enabling fundamental shifts in the way financial services are delivered. The Committee has had oversight of actions being taken to transform capabilities across the bank.” Dear Shareholder, I am delighted to present my first report as Chairman of the Technology and Innovation Committee (the Committee or TIC).
Role and responsibilities During this unprecedented year, TIC has continued to support the Board in overseeing, monitoring and challenging the actions being taken by management in relation to technology and innovation and in doing so giving due consideration to NatWest Group’s purpose.
COVID-19 resulted in NatWest Group having to respond quickly to support colleagues and customers and ensure seamless uninterrupted delivery of all services.
The Committee considered how technology has been an enabler throughout the pandemic and how previous investment in the portfolio allowed NatWest Group to react at pace. This included actions taken to allow colleagues globally to work from home where appropriate, and customers to bank safely remotely as well as use data and analytics capabilities to allow NatWest Group to support the Government Loan Schemes, mortgage repayment holidays and loan deferrals.
Membership and meetings Following Alison Davis’ departure from the Board on 31 March 2020, the Committee is comprised of three non-executive Director members; Frank Dangeard, Patrick Flynn and myself. More details of membership and attendance at meetings can be found on page 100 of the Corporate governance report.
Performance evaluation The Committee held a dedicated session to discuss its performance. The session was structured around themes, including effectiveness; focus and priorities; operating rhythm; and escalation. The Committee considered that it continued to operate effectively and act in accordance with its terms of reference. It agreed that in the coming year it would focus on digitisation of the core; transformation of data and technology capabilities; and ventures, partnerships and innovation. There would be deep dives on specific topics to support more focussed discussion.
Together with my fellow directors, we will retain our focus on monitoring the future technology and innovation landscape and its impact on NatWest Group. The Committee will continue to shape opportunities arising from management’s response to both threats and opportunities that align with NatWest Group’s purpose.
Page Chairman’s letter 119 Approach to executive director and wider workforce remuneration 124 Annual report on remuneration 133 Other remuneration disclosures 147
Letter from Robert Gillespie Chairman of the Group Performance and Remuneration Committee
The challenge for the Committee, as we now look back on 2020, lies in striking an appropriate balance between acknowledging the macroeconomic environment, but at the same time addressing the business imperative of retaining and motivating colleagues, protecting our franchises and scarce skill sets, and recognising the significant efforts of colleagues in delivering an extremely strong business response to the pandemic.
The pandemic resulted in the majority of employees working from home, which put an immense strain on the maintenance of internal systems in order to allow this to happen seamlessly and without creating incremental operational risk. The Committee also felt it was appropriate to recognise the extraordinary efforts to achieve this outcome.
Executive director pay policy The policy was renewed at the AGM in April 2020 for another three years with over 90% of votes in favour. The Committee believes the policy is continuing to work well. It incentivises executive management in a manner that is easily understood and demonstrates to the wider workforce that we are following a restrained but fair approach within a culture of prudent risk-taking.
We recognise that the construct has some unique features which require explanation. Engagement with stakeholders, therefore, continued during 2020.
Executive director pay for 2020 Alison Rose Ms Rose’s salary and pension was unchanged over the year while her fixed share allowance (FSA) was reduced from £1,100,000 to £673,922, as a result of her decision in April 2020 to forgo 25% of her total fixed pay for the rest of the year. NatWest Group made a comparable donation to the NET Coronavirus Appeal.
While Ms Rose confirmed in April 2020 that she did not wish to receive a 2021 LTI award, the Committee was still required to assess her performance over the year. The Committee also agreed that, while it did not intend to grant Ms Rose a 2021 LTI, in line with her request, it was important to agree a notional 2021 LTI award for her, in order to assist with future benchmarking.
Against the pre-set 2020 performance targets, underlying financial performance was deemed very respectable, despite the impact of COVID-19 on full year results, and there had been progress on customer scores. People scores performed very strongly in a difficult year for colleagues and the new climaterelated targets were all met.
Understandably, the enterprise target relating to the creation of new businesses had not been achieved due to the pandemic, but a switch to support existing customers had been effective with 6.4m interventions aimed at helping customers survive and thrive throughout the pandemic having been logged. The risk control environment was one area where performance had not improved sufficiently to meet the target. Full details of the 2020 performance assessment for executive directors can be found on page 135 to 138.
Katie Murray Ms Murray’s fixed pay remained unchanged during 2020. Ms Murray’s performance was assessed against the same core goals that applied to Ms Rose. The performance of the Finance function was also taken into account.
The impact of these decisions against maximum levels is shown below.
Looking ahead, no changes are proposed to remuneration levels for executive directors in 2021, while salaries for the wider workforce will be increased by around 2% on average. In making increases across the wider workforce, the majority of the funding is targeted to our more junior colleagues.
2018 LTI award vesting outcome Ms Rose received an LTI award in 2018 while CEO of Commercial & Private Banking. The pre-grant assessment of performance over 2017 led to a reduction of 13.33% from the maximum award level. Ms Murray was on a different remuneration construct at that time and did not receive a 2018 LTI award.
In considering the underperformance of the share price since 2017, we did not believe this was due to factors within management’s reasonable control. The reduction in our share price showed a clear correlation with other large UK banks over the period. While customer NPS had declined in three of the six areas since 2017, this was primarily due to management actions in subsequent years and had been accounted for in adjustments to the relevant LTI awards. Therefore, we did not believe any further adjustments were necessary for these areas.
2018 LTI award to Alison Rose Maximum Granted Shares to vest
The £0.65m value reflects both an aggregate reduction of 18.33% of the maximum LTI award level for Ms Rose across pre-grant and pre-vest stages and also the fall in the share price over the performance period.
Executive pay in a market context The Committee receives annual updates that compare executive remuneration at NatWest Group to a broad peer group, consisting primarily of UK and overseas-based banks but also some insurers. A further comparison is made against the FTSE30. The latest analysis shows that CEO target total compensation at NatWest Group remains at the lower quartile of the FTSE30 and is also at the lower end of the main UK banks. The position against the broad peer group is around median.
The CFO is positioned slightly higher against the market with target total compensation at median against the FTSE30 but again at the lower end of the main UK banks. The position against the broad peer group is above median.
Approach to windfall gains This has been a focal point for shareholders in 2020 due to share prices being highly volatile and we have given the matter a great deal of thought. Over an executive’s tenure it is likely that there will be some years where awards will be granted at times when the share price appears low compared with the long-run trend and other times where the opposite will occur. The key principle here is alignment with shareholders and our heavily share-based construct, with shares granted at different prices over the years, already creates close symmetry with market movements in either direction.