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Operating expenses

12 Months Ended

Dec. 31, 2024

3 Operating expenses

Operating expenses are expenses NatWest Group incurs in the running of its business such as all staff costs (for example salaries, bonus awards, pension costs and social security costs), premises and equipment costs that arise from the occupation of premises and the use of equipment, depreciation and amortisation and other administrative expenses.

For accounting policy information refer to Accounting policies 3.3, 3.4 and 3.5.


	2024	2023	2022
Continuing operations	£m	£m	£m
Salaries	2,477	2,483	2,250
Bonus awards	411	353	334
Temporary and contract costs	162	199	234
Social security costs	371	352	328
Pension costs	311	313	363
- defined benefit schemes (Note 5)	86	122	205
- defined contribution schemes	225	191	158
Other	329	201	207
Staff costs	4,061	3,901	3,716

Premises and equipment	1,211	1,153	1,112
UK bank levy	142	109	101
Depreciation and amortisation (1)	1,058	934	833
Other administrative expenses (2)	1,677	1,899	1,925
Administrative expenses	4,088	4,095	3,971
	8,149	7,996	7,687

(1)Includes depreciation of right of use assets of £103 million (2023 - £104 million; 2022 - £119 million).

(2)Includes litigation and conduct costs, net of amounts recovered. Refer to Note 20 for further details.

The average number of persons employed, rounded to the nearest hundred, during the year, excluding temporary staff,was 60,700 (2023 - 61,500; 2022- 60,000). The average number of temporary employees during 2024 was 1,400 (2023 - 2,100; 2022 - 2,500).

3 Operating expenses continued

The number of persons employed at 31 December, excluding temporary staff, by reportable segment, was as follows:


Continuing operations	2024	2023	2022
Retail Banking	13,000	14,300	15,100
Private Banking	2,200	2,400	2,300
Commercial & Institutional	12,700	12,400	12,200
Central items & other (1)	31,800	32,500	31,400
Total	59,700	61,600	61,000

UK	40,100	41,500	41,200
India	17,600	16,900	15,700
Poland	800	1,500	1,500
USA	300	300	300
Republic of Ireland	100	400	1,400
Rest of the World	800	1,000	900
Total	59,700	61,600	61,000

(1)	Central items & other includes Ulster Bank RoI. The total number of persons employed in Ulster Bank RoI of 200 (2023 – 500; 2022 – 2,200) includes nil people employed in discontinued operations at 31 December 2024 (2023 – nil; 2022 – 400).

3 Operating expenses continued

Share-based payments


Award plan	Eligible employees	Nature of award	Vesting conditions (1)	Settlement
Sharesave	UK, Channel Islands, Gibraltar, Isle of Man, Poland and India.	Option to buy shares under employee savings plan	Continuing employment or leavers in certain circumstances	2025 to 2029
Deferred performance awards	All	Awards of ordinary shares and conditional shares	Continuing employment or leavers in certain circumstances	2025 to 2032
Long-term incentives (2,3)	Senior employees	Awards of ordinary shares and conditional shares	Continuing employment or leavers in certain circumstances and/or satisfaction of the pre-vesting assessment and underpins	2025 to 2031
Sharing in Success (4)	All	Awards of ordinary shares and conditional shares	Future continuing employment and achievement of pre-defined measures.	2025

(1)	All awards are subject to discretion of Remuneration Committee.

(2)	Long-term incentives include buy-out awards offered to compensate certain new hires for the loss of forfeited awards from their previous employment. Existing Long - term incentives vest over 3 to 7 years.

(3)	The existing Restricted Share Plan scheme would be replaced by Performance Share Plan in 2025.

(4)	In 2024 16 million shares at total value of £49 million were granted and vested under Sharing in Success.


Sharesave	2024		2023		2022
	Average	Shares	Average	Shares	Average	Shares
	exercise price	under option	exercise price	under option	exercise price	under option
	£	(million)	£	(million)	£	(million)
At 1 January	1.59	114	1.63	99	1.61	95
Granted	2.94	24	1.42	43	1.86	25
Exercised	1.52	(32)	1.44	(23)	1.88	(15)
Cancelled	1.60	(5)	1.72	(5)	1.60	(6)
At 31 December	1.93	101	1.59	114	1.63	99

The fair value of Sharesave options granted in 2024 was determined using a pricing model that included: expected volatility of share price determined at the grant date based on historical share price volatility over a period of up to five years; expected option lives that equal the vesting period; estimated dividend yield on equity shares; and risk-free interest rates determined from UK gilts with terms matching the expected lives of the options.

The exercise price of options and the fair value on granting awards of fully paid shares is the average market price over the five trading days (three trading days for Sharesave) preceding grant date. When estimating the fair value of the award, the number of shares granted and the prevailing market price as defined on page 138 of exhibit 15.2 are used. The fair value of the award is recognised as services are provided by employees over the vesting period.

Options are exercisable within six months of vesting; 8.9 million options were exercisable at 31 December 2024 (2023 – 19.0 million; 2022 – 5.1 million). The weighted average share price at the date of exercise of options was £4.03 (2023 - £2.20; 2022 - £2.59). At 31 December 2024, exercise prices ranged from £1.42 to £2.94 (2023 - £1.12 to £1.89; 2022 - £1.12 to £2.27) and the remaining average contractual life was 2.35 years (2023 – 2.25 years; 2022 – 2 years). The fair value of options granted in 2024 was £28.3 million (2023 - £27.3 million; 2022 - £22.1 million).


Deferred performance awards	2024		2023		2022
	Value at	Shares	Value at	Shares	Value at	Shares
	grant	awarded	grant	awarded	grant	awarded
	£m	(million)	£m	(million)	£m	(million)
At 1 January	76	35	93	46	132	65
Granted	50	23	52	20	46	20
Forfeited	(3)	(1)	(2)	(1)	(4)	(2)
Vested	(57)	(27)	(67)	(30)	(81)	(37)
At 31 December	66	30	76	35	93	46

3 Operating expenses continued

The awards granted in 2024 vest in equal tranches on the anniversary of the award, predominantly over three years.


Long-term incentives	2024		2023		2022
	Value at	Shares	Value at	Shares	Value at	Shares
	grant	awarded	grant	awarded	grant	awarded
	£m	(million)	£m	(million)	£m	(million)
At 1 January	49	23	49	23	44	21
Granted	9	5	11	5	16	7
Vested/exercised	(11)	(5)	(10)	(4)	(10)	(4)
Lapsed	(7)	(4)	(1)	(1)	(1)	(1)
At 31 December	40	19	49	23	49	23

The market value of awards vested/exercised in 2024 was £19.3 million (2023 - £9.5 million; 2022 - £11.7 million).


Bonus awards	2024		2023		Change
	£m		£m		%
March awards (1)	63		43		47	%
Deferred cash awards	324		262		24	%
Deferred share awards	61		51		20	%
Total deferred bonus awards	385		313		23	%
Total bonus awards (2)	448		356		26	%
Bonus awards as a % of operating profit before tax and bonus awards	7	%	5	%
Proportion of bonus awards that are deferred
- deferred cash awards	86	%	86	%
- deferred share awards	14	%	14	%

Reconciliation of bonus awards to income statement charge


	2024	2023	2022
	£m	£m	£m
Bonus awarded	448	356	370
Less: deferral of charge for amounts awarded for current year	(144)	(114)	(127)
Income statement charge for amounts awarded in current year	304	242	243

Add: current year charge for amounts deferred from prior years	109	115	94
Less: forfeiture of amounts deferred from prior years	(2)	(4)	(3)
Income statement charge for amounts deferred from prior years	107	111	91
Income statement charge for bonus awards (2)	411	353	334

(1)	March cash awards are limited to £2,000 for all employees.

(2)	Excludes other performance-related compensation.

3 Operating expenses continued

Year in which income statement charge is expected to be taken for deferred bonus awards


	Actual			Expected
					2026
	2022	2023	2024	2025	and beyond
	£m	£m	£m	£m	£m
Bonus awards deferred from 2022 and earlier	94	115	17	8	6
Bonus awards deferred from 2023	—	—	92	8	9
Less: forfeiture of amounts deferred from prior years	(3)	(4)	(2)	—	—
Bonus awards deferred for 2024	—	—	—	122	22
	91	111	107	138	37