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Financial instruments - valuation (Tables)

12 Months Ended

Dec. 31, 2023

Financial instruments - classification

Schedule of financial assets and liabilities at fair value by valuation hierarchy


		2023								2022
		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
		£m		£m		£m		£m		£m		£m		£m		£m
Assets
Trading assets
Loans		—		33,388		209		33,597		—		35,260		395		35,655
Securities		8,447		3,493		14		11,954		7,463		2,458		1		9,922
Derivatives
Interest rate		1		43,912		650		44,563		5		52,764		711		53,480
Foreign exchange		—		34,096		65		34,161		—		45,715		114		45,829
Other		—		72		108		180		—		54		182		236
Other financial assets
Loans		—		108		657		765		—		172		727		899
Securities		17,848		10,536		258		28,642		10,380		6,278		203		16,861
Total financial assets held at fair value		26,296		125,605		1,961		153,862		17,848		142,701		2,333		162,882
As a % of total fair value assets		17	%	82	%	1	%	—		11	%	88	%	1	%	—

Liabilities
Trading liabilities
Deposits		—		43,126		1		43,127		—		42,486		1		42,487
Debt securities in issue		—		706		—		706		—		797		—		797
Short positions		7,936		1,865		2		9,803		7,462		2,062		—		9,524
Derivatives
Interest rate		—		38,044		439		38,483		2		47,855		678		48,535
Foreign exchange		—		33,528		58		33,586		—		45,139		98		45,237
Other		—		138		188		326		—		76		199		275
Other financial liabilities
Debt securities in issue		—		1,605		3		1,608		—		1,327		—		1,327
Other deposits		—		1,280		—		1,280		—		1,050		—		1,050
Subordinated liabilities		—		237		—		237		—		345		—		345
Total financial liabilities held at fair value		7,936		120,529		691		129,156		7,464		141,137		976		149,577
As a % of total fair value liabilities		6	%	93	%	1	%	—		5	%	94	%	1	%	—

(1)	Transfers between levels are deemed to have occurred at the beginning of the quarter in which the instrument was transferred.

(2)	For an analysis of debt securities held at mandatory fair value through profit or loss by issuer as well as ratings and derivatives, by type and contract, refer to Risk and capital management – Credit risk.

Schedule of financial instruments valuation adjustments


		2023		2022
Adjustment		£m		£m
Funding valuation adjustments		132		173
Credit valuation adjustments		236		300
Bid–offer		86		130
Product and deal specific		103		141
Total		557		744

Schedule of valuation techniques for unobservable inputs of level 3 financial instruments


								2023				2022
Financial instrument		Valuation technique		Unobservable inputs		Units		Low		High		Low		High
Trading assets and Other financial assets
Loans		Price-based		Price		%		—		123		—		113
		Discount cash flow		Credit spreads		bps		49		119		56		114
		Discount cash flow		Discount margin		bps		174		228		174		222
Debt securities		Price-based		Price		%		—		119		—		255

Equity Shares		Price-based		Price		GBP		—		32,142		—		34,027
		Price-based		Price		%		—		30		—		30
		Discount cash flow		Discount margin		%		7		9		6		8
		Net asset valuation		Fund NAV		%		80		120		80		120

Derivative assets and liabilities
Credit derivatives		Credit derivative pricing		Credit spreads		bps		13		600		7		530
		Option pricing		Correlation		%		(15)		95		(15)		95
				Volatility		%		30		80		30		80
				Upfront points		%		—		99		—		99
				Recovery rate		%		—		60		—		60

Interest rate & FX		Option pricing		Correlation		%		(50)		99		(50)		100
derivatives				Volatility		%		30		111		30		127
				Constant Prepayment Rate		%		2		22		2		21
				Mean Reversion		%		—		20		—		92
				Inflation volatility		%		2		2		1		2
				Inflation rate		%		2		3		2		3

(1)

Valuation for private equity investments may be estimated by looking at past prices of similar stocks and from valuation statements where valuations are usually derived from earnings measures such as EBITDA or net asset value (NAV). Similarly, for equity or bond fund investments, prices may be estimated from valuation or credit statements using NAV or similar measures.

(2)	NatWest Group does not have any material liabilities measured at fair value that are issued with an inseparable third-party credit enhancement.

Schedule of financial instruments carried at fair value on the balance sheet by valuation sensitivities for level 3 balances


		2023						2022
		Level 3		Favourable		Unfavourable		Level 3		Favourable		Unfavourable
		£m		£m		£m		£m		£m		£m
Assets
Trading assets
Loans		209		—		—		395		10		(10)
Securities		14		—		—		1		—		—
Derivatives
Interest rate		650		20		(20)		711		30		(30)
Foreign exchange		65		—		—		114		10		(10)
Other		108		10		(10)		182		10		(10)
Other financial assets
Loans		657		—		(40)		727		—		(10)
Securities		258		20		(50)		203		20		(30)
Total financial assets held at fair value		1,961		50		(120)		2,333		80		(100)

Liabilities
Trading liabilities
Deposits		1		—		—		1		—		—
Short positions		2		—		—		—		—		—
Derivatives
Interest rate		439		10		(10)		678		30		(30)
Foreign exchange		58		—		—		98		—		—
Other		188		10		(10)		199		—		—
Other financial liabilities - debt securities in issue		3		—		—		—		—		—
Total financial liabilities held at fair value		691		20		(20)		976		30		(30)

Schedule of movement in level 3 assets and liabilities


				Other		Other						Other		Other
		Derivatives		trading		financial		Total		Derivatives		trading		financial		Total
		assets		assets (2)		assets (3)		assets		liabilities		liabilities (2)		liabilities		liabilities
2023		£m		£m		£m		£m		£m		£m		£m		£m
At 1 January		1,007		396		930		2,333		975		1		—		976
Amounts recorded in the income statement (1)		(156)		(88)		1		(243)		(313)		—		—		(313)
Amount recorded in the statement of comprehensive income		—		—		32		32		—		—		—		—
Level 3 transfers in		6		15		16		37		7		2		—		9
Level 3 transfers out		(5)		(32)		(190)		(227)		(9)		(2)		—		(11)
Purchases/originations		180		8		275		463		195		2		3		200
Settlements/other decreases		(70)		(8)		(86)		(164)		(51)		—		—		(51)
Sales		(137)		(65)		(52)		(254)		(116)		—		—		(116)
Foreign exchange and other adjustments		(2)		(3)		(11)		(16)		(3)		—		—		(3)
At 31 December		823		223		915		1,961		685		3		3		691

Amounts recorded in the income statement in respect of balances held at period end
- unrealised		67		(39)		1		29		(121)		—		—		(121)

2022
At 1 January		918		740		394		2,052		606		3		—		609
Amounts recorded in the income statement (1)		126		31		(14)		143		382		(1)		—		381
Amount recorded in the statement of
comprehensive income		—		—		(20)		(20)		—		—		—		—
Level 3 transfers in		193		1		532		726		78		3		—		81
Level 3 transfers out		(122)		(147)		(68)		(337)		(61)		(3)		—		(64)
Purchases/originations		355		274		185		814		382		—		—		382
Settlements/other decreases		(40)		(75)		—		(115)		(41)		—		—		(41)
Sales		(423)		(434)		(101)		(958)		(376)		(2)		—		(378)
Foreign exchange and other adjustments		—		6		22		28		5		1		—		6
At 31 December		1,007		396		930		2,333		975		1		—		976

Amounts recorded in the income statement
in respect of balances held at period end
- unrealised		126		31		(16)		141		382		(1)		—		381

(1)	There were £69 million net gains on trading assets and liabilities (2022 - £224 million net losses) recorded in income from trading activities. Net gains on other instruments of £1 million (2022 - £14 million net losses) were recorded in other operating income and interest income as appropriate.

(2)	Other trading assets and other trading liabilities comprise assets and liabilities held at fair value in trading portfolios.

(3)	Other financial assets comprise fair value through other comprehensive income, designated as at fair value through profit or loss and other fair value through profit or loss.

Schedule of carrying value and fair value of financial instruments carried at amortised cost on the balance sheet


												Items where
												fair value
		Carrying		Fair		Fair value hierarchy level						approximates
		value		value		Level 1		Level 2		Level 3		carrying value
2023		£bn		£bn		£bn		£bn		£bn		£bn
Financial assets
Cash and balances at central banks		104.3		104.3		—		—		—		104.3
Settlement balances		7.2		7.2		—		—		—		7.2
Loans to banks		6.9		7.0		—		2.2		0.6		4.2
Loans to customers		381.4		373.2		—		27.5		345.7		—
Other financial assets - securities		21.7		21.6		4.0		6.6		11.0		—

2022
Financial assets
Cash and balances at central banks		144.8		144.8		—		—		—		144.8
Settlement balances		2.6		2.6		—		—		—		2.6
Loans to banks		7.1		7.1		—		4.2		2.8		0.1
Loans to customers		366.3		354.5		—		20.3		334.2		—
Other financial assets - securities		13.1		12.8		3.6		3.2		6.0		—

2023
Financial liabilities
Bank deposits		22.2		22.3		—		15.4		2.7		4.2
Customer deposits		431.4		431.0		—		30.7		48.8		351.5
Settlement balances		6.6		6.6		—		—		—		6.6
Other financial liabilities - debt securities in issue		52.2		52.2		—		41.7		10.5		—
Subordinated liabilities		5.5		5.4		—		5.4		—		—
Notes in circulation		3.2		3.2		—		—		—		3.2

2022
Financial liabilities
Bank deposits		20.4		20.0		—		13.1		2.2		4.7
Customer deposits		450.3		450.3		—		12.7		30.6		407.0
Settlement balances		2.0		2.0		—		—		—		2.0
Other financial liabilities - debt securities in issue		46.7		46.1		—		40.7		5.4		—
Subordinated liabilities		5.9		5.6		—		5.5		0.1		—
Notes in circulation		3.2		3.2		—		—		—		3.2