NATIONAL WESTMINSTER BANK PLC /ENG/ - 20-F - 20040426 - KEY_INFORMATION
ITEM 3. KEY INFORMATION
SELECTED FINANCIAL DATA
NatWest Group's Consolidated Financial Statements
are prepared in accordance with UK GAAP, which differs in certain material respects
from US GAAP. For a discussion of such differences and a reconciliation of net
income and consolidated shareholders’ funds between UK GAAP and US GAAP,
see Note 50 to the Consolidated Financial Statements. The dollar financial information
has been translated for convenience at the rate of £1.00 to $1.7842, the
Noon Buying Rate on 31 December 2003.
Summary consolidated profit and loss account
2003
2003
2002
2001
2000
1999
$m
£m
£m
£m
£m
£m
Amounts in accordance with UK GAAP:
Continuing operations
Net interest income
7,194
4,032
4,134
3,921
3,675
3,620
Non-interest income
5,750
3,223
3,560
3,703
3,818
3,895
Total income
12,944
7,255
7,694
7,624
7,493
7,515
Operating expenses
(6,359
)
(3,564
)
(4,594
)
(4,525
)
(5,259
)
(5,074
)
Profit before provisions
6,585
3,691
3,100
3,099
2,234
2,441
Provisions for bad and doubtful debts
(979
)
(549
)
(508
)
(510
)
(359
)
(237
)
Amounts written off fixed asset investments
(2
)
(1
)
(8
)
(6
)
(14
)
(23
)
Operating profit
5,604
3,141
2,584
2,583
1,861
2,181
Losses on termination of Equities operations
-
-
-
-
-
(14
)
Profit/(loss) on disposal of businesses
-
-
-
-
967
(14
)
Profit before tax - continuing operations
5,604
3,141
2,584
2,583
2,828
2,153
Discontinued operations
Profit on the disposal of interests in discontinued
operations
-
-
-
-
74
110
Profit on ordinary activities before tax
5,604
3,141
2,584
2,583
2,902
2,263
Tax on profit on ordinary activities
(1,690
)
(947
)
(713
)
(733
)
(692
)
(583
)
Minority interests – equity
2
1
(5
)
(5
)
(9
)
(11
)
Profit for the financial year
3,916
2,195
1,866
1,845
2,201
1,669
Preference dividends – non-equity
(69
)
(39
)
(41
)
(43
)
(41
)
(39
)
Profit attributable to ordinary shareholders
3,847
2,156
1,825
1,802
2,160
1,630
Amounts in accordance with US GAAP:
Net income available for ordinary shareholders
3,856
2,161
2,253
2,142
2,743
1,637
6
Preference dividends
2003
2003
2002
2001
2000
1999
$m
£m
£m
£m
£m
£m
Non-cumulative preference shares of £1,
Series A
23
13
13
13
13
13
Non-cumulative preference shares of US$25, Series
B
21
12
13
14
13
12
Non-cumulative preference shares of US$25, Series
C
25
14
15
16
15
14
69
39
41
43
41
39
Ordinary dividends
2003
2003
2002
2001
2000
1999
$m
£m
£m
£m
£m
£m
Interim
4,027
2,257
695
399
3,973
219
Final
-
-
-
400
600
-
Total
4,027
2,257
695
799
4,573
219
7
Summary consolidated balance sheet
2003
2003
2002
2001
2000
1999
Amounts in accordance with UK GAAP:
$m
£m
£m
£m
£m
£m
Loans and advances to banks (net of provisions)
63,182
35,412
23,664
31,269
34,995
28,793
Loans and advances to customers (net of provisions)
183,009
102,572
112,122
100,618
98,824
88,998
Debt securities and equity shares
40,678
22,799
17,913
21,208
34,239
39,844
Intangible fixed assets
487
273
331
284
186
540
Other assets
21,084
11,817
17,857
19,348
18,020
27,585
Total assets
308,440
172,873
171,887
172,727
186,264
185,760
Called up share capital
3,793
2,126
2,159
2,197
2,187
2,150
Share premium account
2,295
1,286
1,286
1,286
1,286
1,237
Other reserves
744
417
400
420
347
331
Profit and loss account
9,454
5,299
5,358
4,203
3,236
5,640
Shareholders' funds
16,286
9,128
9,203
8,106
7,056
9,358
Minority interests
5
3
47
110
103
96
Subordinated liabilities
10,247
5,743
5,933
6,396
6,904
7,541
Total capital resources
26,538
14,874
15,183
14,612
14,063
16,995
Deposits by banks
31,327
17,558
17,718
25,246
30,143
27,451
Customer accounts
207,983
116,569
111,477
99,951
109,722
98,117
Debt securities in issue
3,768
2,112
208
5,222
9,172
11,556
Other liabilities
38,824
21,760
27,301
27,696
23,164
31,641
Total liabilities
308,440
172,873
171,887
172,727
186,264
185,760
Amounts in accordance with US GAAP:
Shareholders' equity
16,404
9,194
9,165
8,042
6,487
8,063
Total assets
329,461
184,655
181,531
181,536
186,044
184,870
8
Other financial data
2003
2002
2001
2000
1999
Other financial data based
upon UK GAAP:
Return on average total assets (1)
1.22
%
1.02
%
0.95
%
1.10
%
0.86
%
Return on average ordinary shareholders' equity
(2)
25.7
%
21.9
%
24.3
%
26.6
%
19.4
%
Average shareholders' equity as a percentage
of average
total assets
5.0
%
4.9
%
4.2
%
4.3
%
4.7
%
Risk asset ratio
Tier
1
9.2
%
8.9
%
7.9
%
7.1
%
9.2
%
Total
13.3
%
13.0
%
12.3
%
12.2
%
16.2
%
Ratio of earnings to combined fixed charges
and
preference
share dividends (3)
Including
interest on deposits
2.53
2.04
1.58
1.52
1.45
Excluding
interest on deposits
6.94
3.82
4.30
4.88
3.82
Ratio of earnings to fixed charges only (3)
Including
interest on deposits
2.58
2.07
1.60
1.53
1.47
Excluding
interest on deposits
7.50
4.00
4.56
5.16
4.05
Other financial data based upon US GAAP:
Return on average total assets (1)
1.18
%
1.18
%
1.11
%
1.40
%
0.86
%
Return on average ordinary shareholders' equity
(2)
25.7
%
27.5
%
30.5
%
39.5
%
22.6
%
Average shareholders' equity as a percentage
of average
total assets
4.9
%
4.6
%
3.9
%
3.8
%
4.1
%
Ratio of earnings to combined fixed charges
and
preference share dividends
(3)
Including
interest on deposits
2.50
2.28
1.73
1.67
1.46
Excluding
interest on deposits
6.82
4.48
5.12
5.97
3.86
Ratio of earnings to fixed charges only (3)
Including
interest on deposits
2.55
2.32
1.75
1.68
1.46
Excluding
interest on deposits
7.37
4.69
5.42
6.32
4.03
Notes:
(1)
Return
on average total assets represents profit attributable to ordinary shareholders
as a percentage of average total assets.
(2)
Return
on average ordinary shareholders' equity represents profit attributable
to ordinary shareholders expressed as a percentage of average ordinary
shareholders' equity.
(3)
For
this purpose, earnings consist of income before taxes and minority interests,
plus fixed charges less the unremitted income of associated undertakings
(share of profits less dividends received). Fixed charges consist of
total interest expense, including or excluding interest on deposits and
debt securities in issue, as appropriate, and the proportion of rental
expense deemed representative of the interest factor (one third of total
rental expenses).
9
Exchange rates
Except as stated, the following tables show, for
the dates or periods indicated, the Noon Buying Rate in New York for cable transfers
in sterling as certified for customs’ purposes by the Federal Reserve Bank of
New York (the ‘Noon Buying Rate’):
US dollars per £1
March
2004
February
2004
January
2004
December
2003
November
2003
October
2003
Noon buying rate
High
1.8680
1.9045
1.8511
1.7842
1.7219
1.7025
Low
1.7943
1.8182
1.7902
1.7200
1.6693
1.6598
US dollars per £1
31 December
2003
2002
2001
2000
1999
Noon buying rate
Year end rate
1.7842
1.6095
1.4543
1.4955
1.6150
Average rate for the year (1)
1.6450
1.5043
1.4396
1.5204
1.6144
Consolidation rate
(2)
Year end rate
1.7857
1.6128
1.4498
1.4925
1.6165
Average rate for the year
1.6354
1.5032
1.4401
1.5160
1.6178
Notes:
(1)
The average of the Noon Buying
Rates on the last business day of each month during the year.
(2)
The rates used by NatWest
Group for translating dollars into sterling in the preparation of its
consolidated financial statements.
(3)
On 22 April 2004, the Noon Buying Rate
was £1.00 = $1.7684.
10
RISK FACTORS
Set out below are certain risk factors which could
affect NatWest
Group’s
future results and cause them to be materially different from expected results.
NatWest Group’s results could also be affected by competition and other
factors. The factors discussed in this report should not be regarded as a complete
and comprehensive statement of all potential risks and uncertainties.
The financial performance of NatWest Group
is affected by borrower credit quality and general economic conditions, in particular
in the UK
. Risks arising from changes
in credit quality and the recoverability of loans and amounts due from counterparties
are inherent in a wide range of NatWest Group’s businesses. Adverse changes
in the credit quality of NatWest Group’s borrowers and counterparties or
a general deterioration in UK, US or global economic conditions, or arising
from systemic risks in the financial systems, could affect the recoverability
and value of NatWest Group’s assets and require an increase in the provision
for bad and doubtful debts and other provisions.
Changes in interest rates, foreign exchange
rates, equity prices and other market factors affect NatWest Group’s business.
The most significant market risks NatWest
Group faces are interest rate, foreign exchange and bond and equity price risks.
Changes in interest rate levels, yield curves and spreads may affect the interest
rate margin realised between lending and borrowing costs. Changes in currency
rates, particularly in the sterling-dollar and sterling-euro exchange rates,
affect the value of assets and liabilities denominated in foreign currencies
and affect earnings reported by NatWest Group’s non-UK subsidiaries, and
may affect income from foreign exchange dealing. The performance of financial
markets may cause changes in the value of NatWest Group’s investment and
trading portfolios. NatWest Group has implemented risk management methods to
mitigate and control these and other market risks to which NatWest Group is
exposed. However, it is difficult to predict with accuracy changes in economic
or market conditions and to anticipate the effects that such changes could have
on the NatWest Group’s financial performance and business operations.
Operational risks are inherent in the Group’s
business.
NatWest Group’s businesses
are dependent on the ability to process a very large number of transactions
efficiently and accurately. Operational risk and losses can result from fraud,
errors by employees, failure to document transactions properly or to obtain
proper internal authorisation, failure to comply with regulatory requirements
and Conduct of Business rules, equipment failures, natural disasters or the
failure of external systems, for example, NatWest Group’s suppliers or
counterparties. Although NatWest
Group
has implemented risk controls and loss mitigation actions, and substantial resources
are devoted to developing efficient procedures and to staff training, it is
only possible to be reasonably, but not absolutely, certain that such procedures
will be effective in controlling each of the operational risks faced by NatWest
Group.
Each of NatWest Group’s businesses is
subject to substantial regulation and regulatory oversight. Any significant
regulatory developments could have an effect on how NatWest Group conducts its
business and on NatWest Group’s results of operations
.
NatWest Group is subject to financial services laws, regulations, administrative
actions and policies in each location in which NatWest Group operates. This
supervision and regulation, in particular in the UK, if changed could materially
affect NatWest Group’s business, the products and services offered or the
value of assets.
NatWest Group’s future growth in earnings
and shareholder value depends on strategic decisions regarding organic growth
and potential acquisitions
. NatWest
Group devotes substantial management and planning resources to the development
of strategic plans for organic growth and identification of possible acquisitions,
supported by substantial expenditure to generate growth in customer business.
If these strategic plans do not meet with success, NatWest Group’s earnings
could grow more slowly or decline.
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