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NatWest Markets Plc - Q3 2019 Interim Management Statement


NatWest Markets Plc

Q3 2019 Interim Management Statement


NatWest Markets Group (NWM Group) reported a loss of £20 million for Q3 2019 compared with a profit of £87 million in Q2 2019 and a profit of £117 million in Q3 2018. NatWest Markets had a challenging quarter, and was impacted by a deterioration in economic sentiment for the global economy and a fall in bond yields.



Income, costs and legacy issues


Income was £106 million in Q3 2019, compared with £230 million in Q2 2019 and £198 million in Q3 2018, reflecting lower Core income in challenging market conditions. Rates income was particularly impacted, due to elevated hedging costs caused by reduced liquidity and wider bid-offer spreads as the market experienced sustained curve flattening across global fixed income markets.


Operating expenses of £182 million in Q3 2019 were stable compared with Q2 2019 and £236 million lower than in Q3 2018, largely due to reimbursement under indemnification agreements and other one-off cost recoveries in Q3 2019 and Q2 2019 respectively.


Balance sheet, capital and RWAs


NWM Group's total assets and liabilities increased by £65.8 billion and £66.4 billion to £313.7 billion and £305.2 billion respectively at 30 September 2019, compared with 31 December 2018. The increases primarily reflect client flow activity as well as an increase in derivative fair values following a downward shift in interest rate yields and weaker sterling.


NWM Plc issued £1.2 billion equivalent of term senior unsecured debt securities in benchmark deals during Q3 2019, bringing the total issuance across benchmark and private placement formats during 2019 to £4.5 billion, in line with the £3-5 billion 2019 funding target.


Total NWM Plc RWAs were £39.4 billion at 30 September 2019, compared with £38.7 billion and £40.8 billion at 30 June 2019 and 31 December 2018 respectively, with the increase since 30 June 2019 primarily due to the requirement to hold higher capital on derivative assets driven by market moves in August and September.


NWM Plc's Common Equity Tier 1 (CET1) ratio decreased to 14.7%, from 15.6% at 31 December 2018, principally reflecting dividends paid and other reserve movements in the period.


NatWest Markets N.V. (NWM N.V.)


NWM N.V., the RBS Group's banking entity in the Netherlands, is operationally ready to ensure continuity of service to European Economic Area (EEA) customers when the UK leaves the European Union.

NWM N.V. is expected to become a subsidiary of NWM Plc in Q4 2019, subject to regulatory approval.