FINANCIAL INSTITUTIONS

CREDIT OPINION National Westminster Plc 2 October 2020 Update to credit analysis

Update Summary The A1 long-term deposit rating and the A2 issuer rating of National Westminster Bank Plc (NWB), the main ring-fenced bank of NatWest Group plc (NWG, Baa2 positive, baa21), reflect the bank's standalone creditworthiness, expressed in a baa1 Baseline Credit Assessment (BCA); very low and low loss-given-failure, respectively, which provide two RATINGS notches of uplift to the long-term deposit rating and one to the issuer rating under our National Westminster Bank Plc Advanced Loss Given Failure (LGF) analysis; and our assessment of a moderate probability Domicile , United of support from the Government of the (Aa2 negative), which leads to an Kingdom Long Term CRR Aa3 additional notch of uplift. Type LT Counterparty Risk Rating - Fgn Curr NWB's baa1 BCA reflects the bank's strong capital and stable retail funding, as well as our Outlook Not Assigned expectation of asset-quality deterioration and profitability challenges as a result of the Long Term Debt Withdrawn economic shock caused by the coronavirus pandemic. Type Senior Unsecured MTN - Dom Curr We also assign BCA and ratings to the other UK ring-fenced of NWG, The Royal Bank Outlook Not Assigned Long Term Deposit A1 of Scotland plc (RBS) and NWB's subsidiary Limited (UBL), in line with those of Type LT Bank Deposits - Fgn NWB, to reflect the high level of operational integration between the three banks. Curr Outlook Positive The outlook on the long-term deposit and issuer ratings of NWB, RBS and UBL is positive.

Please see the ratings section at the end of this report Exhibit 1 for more information. The ratings and outlook shown Rating Scorecard - Key financial ratios reflect information as of the publication date. National Westminster Bank Plc (BCA: baa1) Median baa1-rated banks 25% 25%

20% 20%

Analyst Contacts Liquidity Factors 22.0% Edoardo Calandro +44.20.7772.1097 15% 15% 22.1% VP-Senior Analyst 14.5% 10% 10% [email protected] Solvency FactorsSolvency Laurie Mayers +44.20.7772.5582 5% 5% 1.3% Associate Managing Director 0.0% 0% 0% [email protected] Asset Risk: Capital: Profitability: Funding Structure: Liquid Resources: Problem Loans/ Tangible Common Net Income/ Market Funds/ Liquid Banking Nick Hill +33.1.5330.1029 Gross Loans Equity/Risk-Weighted Tangible Assets Tangible Banking Assets/Tangible Assets Assets Banking Assets MD-Banking Solvency Factors (LHS) Liquidity Factors (RHS) [email protected] Source: Moody's Investors Service Maxwell Price +44.20.7772.1778 Associate Analyst [email protected] MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Credit strengths » Strong capital

» Stable retail funding and sound liquidity

Credit challenges » Profitability challenged by the pandemic-induced shock

» Likely asset-quality deterioration

Outlook The outlook on the long-term deposit and senior unsecured debt ratings of NWB, RBS and UBL is positive. The outlook reflects the balance between on one hand, the benefit provided by the years of restructuring and our expectation that conduct costs will decrease significantly; on the other, our expectation of a weakening in asset quality and profitability deriving from the coronavirus-induced economic shock.

The rapid and widening spread of the pandemic, the deteriorating global economic outlook, subdued oil prices and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. Banking is one of the sectors that have been affected by the shock, given the likely impact on asset quality and profitability. Although the initial shock from the pandemic has been similar across countries, the economic outcomes will differ because of the different capacities of nations to withstand the shock. The overall risks to our baseline forecasts2 for all countries are skewed to the downside.

We regard the pandemic as a social risk under our environmental, social and governance (ESG) framework, given the substantial implications for public health and safety. Factors that could lead to an upgrade The A1 long-term deposit rating and the A2 issuer rating of NWB, RBS and UBL could be upgraded if there is an upgrade of the baa1 BCA or a significant increase in the stock of more junior bail-in-able liabilities of the three banks.

The baa1 BCAs of NWB, UBL and RBS could be upgraded if there is an improvement in their asset-risk profiles; and an improvement in profitability, provided that the macroeconomic environment in the UK does not deteriorate beyond our expectations. Factors that could lead to a downgrade A downgrade of the A1 long-term deposit rating and the A2 issuer rating of NWB, RBS and UBL is unlikely, as indicated by the current positive outlook.

The A1 long-term deposit rating and the A2 issuer rating could be downgraded if there is a downgrade of the baa1 BCA or a significant reduction in the stock of bail-in-able liabilities of the three banks.

The baa1 BCAs of NWB, UBL and RBS could be downgraded if there is a deterioration in operating conditions in the UK beyond our current expectations, leading to significantly higher asset risk and lower profitability; a decline in capitalisation; a significant weakening of the subgroup’s liquidity; or a weakening of the intragroup capital and liquidity support mechanisms.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

2 2 October 2020 National Westminster Bank Plc: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Key indicators

Exhibit 2 National Westminster Bank Plc (Consolidated Financials) [1]

06-202 12-192 12-182 12-172 12-162 CAGR/Avg.3 Total Assets (GBP Billion) 359.8 316.0 309.9 339.0 314.1 4.04 Total Assets (USD Billion) 444.5 418.7 394.7 458.6 388.2 3.94 Tangible Common Equity (GBP Billion) 19.3 18.3 18.6 15.8 14.8 7.84 Tangible Common Equity (USD Billion) 23.8 24.3 23.6 21.3 18.3 7.84 Problem Loans / Gross Loans (%) 1.3 1.2 1.5 0.9 1.1 1.25 Tangible Common Equity / Risk Weighted Assets (%) 22.0 22.6 24.6 27.8 23.0 24.06 Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%) 15.2 13.9 14.8 10.4 12.0 13.35 Net Interest Margin (%) 1.7 1.9 1.8 1.8 1.6 1.85 PPI / Average RWA (%) 4.1 2.5 4.6 4.7 2.0 3.66 Net Income / Tangible Assets (%) 0.0 1.2 0.5 0.8 1.9 0.95 Cost / Income Ratio (%) 62.0 78.4 63.8 61.2 78.3 68.85 Market Funds / Tangible Banking Assets (%) 17.6 14.5 15.3 19.8 12.3 15.95 Liquid Banking Assets / Tangible Banking Assets (%) 24.0 22.1 29.3 11.6 35.6 24.55 Gross Loans / Due to Customers (%) 96.0 96.8 86.4 85.4 76.9 88.35 [1] All figures and ratios are adjusted using Moody's standard adjustments. [2] Basel III - fully loaded or transitional phase-in; IFRS. [3] May include rounding differences because of the scale of reported amounts. [4] Compound annual growth rate (%) based on the periods for the latest accounting regime. [5] Simple average of periods for the latest accounting regime. [6] Simple average of Basel III periods. Sources: Moody's Investors Service and company filings

Exhibit 3 The plc (Consolidated Financials) [1]

12-192 12-182 12-172 CAGR/Avg.3 Total Assets (GBP Billion) 90.6 94.5 2.2 537.14 Total Assets (USD Billion) 120.0 120.4 3.0 530.44 Tangible Common Equity (GBP Billion) 4.7 6.5 0.1 642.54 Tangible Common Equity (USD Billion) 6.3 8.2 0.1 634.84 Problem Loans / Gross Loans (%) 2.6 2.7 -- 2.75 Tangible Common Equity / Risk Weighted Assets (%) 16.4 18.7 19.3 18.16 Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%) 25.8 23.0 -- 24.45 Net Interest Margin (%) 1.9 2.6 1.1 1.95 PPI / Average RWA (%) 3.6 5.5 1.3 3.56 Net Income / Tangible Assets (%) 0.7 0.7 0.1 0.55 Cost / Income Ratio (%) 50.8 44.1 78.8 57.95 Market Funds / Tangible Banking Assets (%) 10.0 12.0 12.2 11.45 Liquid Banking Assets / Tangible Banking Assets (%) 31.1 25.4 0.5 19.05 Gross Loans / Due to Customers (%) 72.6 81.8 -- 77.25 [1] All figures and ratios are adjusted using Moody's standard adjustments. [2] Basel III - fully loaded or transitional phase-in; IFRS. [3] May include rounding differences because of the scale of reported amounts. [4] Compound annual growth rate (%) based on the periods for the latest accounting regime. [5] Simple average of periods for the latest accounting regime. [6] Simple average of Basel III periods. Sources: Moody's Investors Service and company filings

Profile National Westminster Bank Plc (NWB), its subsidiary Ulster Bank Limited (UBL) and The Royal Bank of Scotland plc (RBS) are the main UK ring-fenced banks of NatWest Group plc (NWG), managing the group's retail, small and medium-sized enterprise (SME), and corporate business.

NWB focuses its activity in , RBS in Scotland and UBL in Northern . NWB and RBS, together with Ulster Bank Ireland DAC (UBI DAC, A2 positive, baa1) are owned by NatWest Holdings Limited, which sits between the operating banks and the ultimate holding company NWG.

3 2 October 2020 National Westminster Bank Plc: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Exhibit 4 NWB, RBS and UBL are NWG's UK ring-fenced banks NWG's simplified structure NatWest Group plc

The Royal Bank of Scotland International NatWest Holdings Limited NatWest Markets Plc RBS AA Holdings (UK) Limited (Holdings) Limited

National Westminster The Royal Bank of The Royal Bank of Scotland International RBS Holdings N.V. Bank Plc Scotland plc Limited

Ulster Bank Limited Ulster Bank Ireland NatWest Markets N.V. (Northern Ireland) DAC

Ring-fenced banks Non-ring-fenced banks Other firms

Source: Moody's Investors Service and NWG

Detailed credit considerations NWB, its subsidiary UBL and RBS are highly integrated operationally, and they have intragroup capital and liquidity support mechanisms. This report, therefore, includes the analysis of the consolidated financials of NWB, which include UBL, and those of RBS, where available.

Likely asset-quality deterioration We assign an a3 Asset Risk score to NWB, three notches below the Macro Adjusted score, to reflect our expectation that problem loans will increase from the current low base, and the high proportion of corporate lending to the sectors that are more at risk. We also make a one-notch qualitative negative adjustment for Corporate Behaviour to reflect the complexity of the multiyear transformation process of NWG's UK ring-fenced entities.

We estimate that NWB's problem loans were 1.3% of total loans as of June 2020 (1.2% as of December 2019), which is low. RBS' problem loans were higher (2.6% as of December 2019), given its higher proportion of commercial loans. We expect the percentage of problem loans of NWG's UK ring-fenced banks to increase in the coming quarters, as the UK economy continues to contract, unemployment increases and the forbearance measures for retail and business clients come to an end.

The level of cumulative expected loss allowances grew significantly in H1 2020 for NWB. As of June 2020, the expected loss allowance was £3.8 billion, up 88% from that as of December 2019.

» NWB's loan book of £263 billion as of June 2020, which includes UBL, comprises residential mortgages (55%), loans to small and medium enterprises and corporates (21%), loans to property and financial institutions (9% each), other personal loans (3%), and sovereign and credit cards (1% each).

RBS' loan book is significantly smaller than that of NWB and more concentrated on commercial loans. As of December 2019 (the latest data available), RBS reported a £55 billion stock of loans, of which 55% related to its commercial banking business (SME and large corporates) and 41% was classified under the UK Personal Banking segment, comprising retail and mass affluent individuals. Only 1% of RBS' loan book related to the Private Banking segment, and 3% of loans were classified under the residual Central items & Others category.

Riskier mortgages with a high loan to value (above 90%) of retail and mass affluent clients for NWB are relatively small, accounting for 1.9% of the total as of June 2020 and below those of NWB's UK peers.

As of June 2020, NWB had a £30.5 billion exposure to the sectors that we consider at risk of default during the coronavirus pandemic3, of which £10.4 billion related to loan commitments and contingent liabilities. This amount is more than double NWB's Common Equity Tier 1 (CET1) capital of £14.3 billion as of June 2020. Currently, around 65% of these loans are already classified as Stage 2 under IFRS 9, with a cumulative provisioning allowance of 4%; 3% of the loans that we consider at risk are classified under Stage 3, and they have a cumulative provisioning of 52%.

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Strong capital We assign an a1 Capital score to NWB, three notches below the Macro Adjusted score, to reflect constraints on raising capital at group level and our expectation of a moderate decrease in capital ratios over the next two years because of lower profitability and risk- weighted asset inflation.

NWG's UK ring-fenced banks have strong risk-adjusted capital ratios, which compare favourably with those of most of their peers (see Exhibit 4).

Exhibit 5 NWB has the highest tangible common equity/tangible banking assets among UK ring-fenced banks Main capital ratios of NWB and RBS compared with those of peers as of June 2020

CET1 ratio TCE % RWA UK leverage ratio TCE % TBA 25.0% 22.0% 20.8% 20.0% 18.7% 17.8% 16.3% 16.4% 16.9% 14.6% 14.5% 14.2% 15.0% 13.2% 13.4%

10.0%

6.1% 5.4% 5.3% 5.2% 5.3% 5.8% 5.5% 5.5% 4.7% 4.7% 4.5% 4.5% 5.0%

0.0% NWB RBS Lloyds SanUK HBUK BBUK

The peer group shown in this chart includes plc(Lloyds, Aa3 negative, a3), Santander UK Group Holdings plc (SanUK, Baa1 negative, a3), HSBC UK Bank Plc (HBUK, Aa3 negative, a3) and Barclays Bank UK PLC (BBUK, A1 negative, a3). The ratios for RBS are as of December 2019, because more recent data is not available. Sources: Moody's Investors Service and company filings

The majority shareholder of NWG, which is indirectly the sole shareholder of NWB and RBS, is the UK government, which still owns a 62% stake in NWG following the 2008 bailout. NWG's ability to issue capital as a regular course of business, which could be used to recapitalise NWB and RBS, is constrained by the government ownership.

Profitability challenged by the pandemic-induced shock We assign a ba2 Profitability score to NWB, five notches above the Macro Adjusted score, to reflect our expectation of the bank's profitability over the next two to three years.

Ahead of the ring-fencing, in 2018, several services and functions were transferred to NWB and RBS from other companies within the group. As such, 2019 is the first fiscal year for which the income statement fully represents the current functions of NWB and RBS, and a comparison with previous years would not be like-for-like.

In 2019, NWB reported a net profit of £884 million, 0.28% of the bank's tangible assets, which is weak. The bank calculates a 79% cost-to-income ratio, which is also weak. At the same time, the results incorporate £603 million of charges related to the mis-selling of payment protection insurance (PPI), which we do not expect to recur in the coming years because a few quarters have passed since the deadline of August 2019 for complaints expired. NWB's operating costs also include £907 million of strategic costs, some of which are non-recurring.

On the other hand, RBS reported a net profit of £660 million in 2019, which is equivalent to a good 0.73% return on tangible assets. RBS' better performance reflects the extra PPI charges and strategic costs for NWB, as well as a higher exposure to commercial banking for RBS, which carries higher risks but higher returns.

In the first half of 2020, NWB reported a small £33 million loss. The bank reported a large spike in impairment losses because of the significantly weaker macroeconomic forecasts. In H1 2020, NWB's impairment losses were £1.9 billion, up from just £0.3 billion in the year-earlier period. A £0.4 billion reduction in operating expenses was not sufficient to offset the higher expected losses. Revenue, indicated by the bank as total income, was £4.5 billion, unchanged from that recorded in H1 2019. RBS does not report interim financials.

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NWB's UK Personal Banking and Commercial Banking divisions were the most affected by the economic shock. The UK Personal Banking division recorded a lower spike in impairment losses, given its lower risks. However, revenue decreased because of lower business activity and persistently low interest rates. The Private Banking division, which represents a much smaller business than the other two, was instead fairly resilient.

Exhibit 6 Commercial Banking recorded the largest spike in impairment losses for NWB Comparison of NWB's H1 2019 and H1 2020 income statements by division

Net interest income Non-interest income Operating expenses Impairment losses/releases Operating pre-tax profit 2,500 2,000 1,500 1,000 500 0 -500 £ million -1,000 -1,500 -2,000 -2,500 -3,000 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 UK Personal Banking Commercial Banking Private Banking Central items & other Sources: Moody's Investors Service and NWB

We expect profit to remain weak for the remainder of 2020, reflecting lower business activity and further credit provisions and loan losses because of the pandemic-induced economic shock. We also expect profitability to partially recover in 2021 and 2022, provided the economy rebounds in line with our macroeconomic forecasts.

Stable retail funding and sound liquidity We assign an a3 Combined Liquidity score, reflecting an a2 Funding Structure score and a baa1 Liquid Resources score, both in line with their respective Macro Adjusted scores.

In line with peers, NWG's UK ring-fenced banks are predominantly deposit funded, and we expect this status to continue. We estimate that NWB's gross loans to due to customer ratio was 96% as of June 2020, and the ratio for RBS was 73% as of December 2019.

Wholesale funding is predominantly internal, with senior, dated subordinated and Additional Tier 1 (AT1) notes issued to NWG. Only a small portion of wholesale funding is external; these are all junior notes issued by NWB several years earlier, and covered bonds. In line with NWG's funding plan, we expect all future unsecured issuances of NWB and RBS to be to NWG and we expect only NWB to issue secured debt in the market.

As of June 2020, NWG's ring-fenced banks had £10 billion funding outstanding under the 's schemes: £5 billion under the Term Funding Scheme (TFS) and £5 billion under the new Term Funding Scheme with additional incentives for SMEs (TFSME). This amount is small in the context of the funding profile of NWB and RBS. We expect the outstanding TFS to be gradually replaced with TFSME in the coming quarters.

Liquidity of NWG's UK ring-fenced banks is sound. As of June 2020, we estimate that NWB's liquid assets were 24% of its tangible banking assets (December 2019: 22%). RBS' liquid assets/tangible banking assets was 31% as of December 2019.

In light of the liquidity support mechanism for NWG's UK ring-fenced banks, liquidity of NWB and RBS is managed as a whole. As of June 2020, NatWest Holdings Limited, which includes the Irish UBI DAC, had a liquidity coverage ratio of 142% and a net stable funding ratio of 137%, which are good.

6 2 October 2020 National Westminster Bank Plc: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

ESG considerations In line with our general view of the banking sector, NWB and the other ring-fenced banks of NWG have low exposure to environmental risks and moderate exposure to social risks. See our Environmental risks heat map and Social risks heat map for further information.

NWB is exposed to some high-carbon emission sectors, which are prone to environmental risks. The bank's exposure to the oil and gas industry was £1.3 billion as of June 2020 (no data available for RBS), which is small relative to the size of its loan book (around 0.5%). This risk exposure is unlikely to translate into a significant credit impact over the outlook horizon.

Our assessment of moderate social risks for NWB, RBS and UBL also takes into account the banks' exposure to the pandemic-induced economic shock. Since 2011, at the group level, NWG has made around £6 billion in provisions for costs and customer redress related to the mis-selling of PPI. We expect any further PPI charges to be marginal, because a few quarters have passed since the deadline for UK consumers to claim for a compensation (29 August 2019), and the outstanding requests that the group needs to process are significantly lower than those in the past. At group level, in Q2 2020 NWG booked a £150 million write-back for PPI.

Governance is highly relevant for NWB, RBS and UBL, as it is to all banks. Corporate governance weaknesses can lead to a deterioration in a bank’s credit quality, while governance strengths can benefit its credit profile. Governance risks are largely internal rather than externally driven, and for NWG's UK ring-fenced banks, we do not have any particular governance concern. Nonetheless, corporate governance remains a key credit consideration and requires ongoing monitoring.

Because the ring-fenced banks NWB, RBS and UBL are subject to separate governance arrangements compared with NWG, they have their own boards, which act independently from the group and prioritise the interests of NWB, RBS and UBL over those of NWG. Support and structural considerations Affiliate support We expect a very high probability of support from NWG, reflecting the central role of NWB and the other UK ring-fenced banks within the broader group. However, as the notional BCA of NWG is lower than the BCA of NWB, the affiliate support does not result in any uplift.

Loss Given Failure (LGF) analysis NWB is subject to the UK implementation of the European Union's (EU) Bank Recovery and Resolution Directive, which we consider an operational resolution regime.

We believe that, in a resolution scenario, losses imposed on creditors will typically depend on a country-based division of assets and liabilities and not necessarily on those of the consolidated group. We also believe that NWB, RBS and UBL will be resolved as a single unit, reflecting the capital support agreements between these banks, and because they are all domiciled in the UK. Our Advanced LGF analysis, therefore, takes into account the consolidated financials of NatWest Holdings Limited from which we deduct the tangible banking assets and liabilities of Irish UBI DAC.

Our analysis assumes a residual tangible common equity of 3%, post-failure losses of 8% of tangible banking assets, a 25% runoff in junior wholesale deposits and a 5% runoff in preferred deposits, and assigns a 25% probability to deposits being preferred to senior unsecured debt. We also assume that the junior proportion of NWH's UK deposits is consistent with the estimated EU-wide average of 26%. These assumptions are in line with our standard assumptions.

Our LGF analysis indicates that NWH's UK deposits are likely to face very low loss-given-failure because of the loss absorption provided by subordinated debt (including the debt downstreamed from NWG), and the volume of deposits and senior debt themselves. This results in a two-notch uplift for the long-term deposit ratings from the bank's BCA. The LGF analysis indicates that NWH's UK senior unsecured debt is likely to face low loss-given-failure because of the limited volume of senior debt externally issued by NWB, RBS and UBL. This results in a one-notch uplift for the senior unsecured debt ratings from the bank's BCA.

Junior securities issued by NWB are likely to face high loss-given-failure, given the small volume of debt and limited protection from more subordinated instruments and residual equity. We also incorporate additional notching for junior subordinated and preference share instruments, reflecting coupon features.

7 2 October 2020 National Westminster Bank Plc: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Government support considerations Given the systemic importance of NWB, RBS and UBL to the UK economy, reflecting their combined large market share in SME lending and deposits in the country, there is a moderate probability of government support for the senior unsecured debt and deposits of NWG's UK ring-fenced banks, resulting in a one-notch uplift.

We apply a low government support assumption to junior securities, resulting in no uplift.

Counterparty Risk (CR) Assessments CR Assessments are opinions of how counterparty obligations are likely to be treated if a bank fails, and they are distinct from debt and deposit ratings in that they (1) consider only the risk of default, rather than both the likelihood of default and the expected financial loss; and (2) apply to counterparty obligations and contractual commitments, rather than debt or deposit instruments. The CR Assessment is an opinion of the counterparty risk related to a bank's covered bonds, contractual performance obligations (servicing), derivatives (for example, swaps), letters of credit, guarantees and liquidity facilities.

The CR Assessments of NWB, RBS and UBL are positioned at Aa3(cr)/Prime-1(cr) The long-term CR Assessments, before government support, are three notches above the banks' standalone BCAs of baa1. The uplift results from the buffer against default provided to the operating obligations by substantial bail-in-able debt and deposits. A moderate probability of government support results in one additional notch of uplift. The main difference from the Advanced LGF approach that is used to determine instrument rating is that the CR Assessment captures the probability of default on certain senior obligations, rather than the expected loss. Therefore, we focus purely on subordination and take no account of the volume of the instrument class.

Counterparty Risk Ratings (CRRs) The CRRs are opinions on the ability of entities to honour the uncollateralised portion of non-debt counterparty financial liabilities (CRR liabilities) and also reflect the expected financial losses in the event that such liabilities are not honoured. CRR liabilities typically relate to transactions with unrelated parties. Examples of CRR liabilities include the uncollateralised portion of payables arising from derivative transactions and the uncollateralised portion of liabilities under sale and repurchase agreements. CRRs are not applicable to funding commitments or other obligations associated with covered bonds, letters of credit, guarantees, servicer and trustee obligations, and other similar obligations that arise from a bank performing its essential operating functions.

The CRRs of NWB, RBS and UBL are positioned at Aa3/Prime-1 The long-term CRRs, before government support, are three notches above the banks' BCAs of baa1. The uplift derives from the buffer against default provided to the operating obligations by substantial bail-in-able debt and deposits. A moderate probability of government support results in one additional notch of uplift. Although NWB, RBS and UBL are likely to have more than a nominal volume of CRR liabilities at failure, this has no impact on the CRRs because the significant level of subordination below the CRR liabilities at the banks already provides the maximum amount of uplift under our rating methodology. Methodology and scorecard About Moody's scorecard Our scorecard is designed to capture, express and explain in summary form our Rating Committee's judgement. When read in conjunction with our research, a fulsome presentation of our judgement is expressed. As a result, the output of our scorecard may materially differ from that suggested by raw data alone (though it has been calibrated to avoid the frequent need for strong divergence). The scorecard output and the individual scores are discussed in rating committees and may be adjusted up or down to reflect conditions specific to each rated entity.

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Rating methodology and scorecard factors

Exhibit 7 National Westminster Bank Plc Macro Factors Weighted Macro Profile Strong + 100%

Factor Historic Initial Expected Assigned Score Key driver #1 Key driver #2 Ratio Score Trend Solvency Asset Risk Problem Loans / Gross Loans 1.3% aa3 ↓↓ a3 Sector concentration Expected trend Capital Tangible Common Equity / Risk Weighted Assets 22.0% aa1 ↓ a1 Access to capital Expected trend (Basel III - transitional phase-in) Profitability Net Income / Tangible Assets 0.0% caa1 ↑↑ ba2 Expected trend Combined Solvency Score a2 a3 Liquidity Funding Structure Market Funds / Tangible Banking Assets 14.5% a2 ↔ a2 Extent of market funding reliance Liquid Resources Liquid Banking Assets / Tangible Banking Assets 22.1% baa1 ↔ baa1 Stock of liquid assets Combined Liquidity Score a3 a3 Financial Profile a3 Qualitative Adjustments Adjustment Business Diversification 0 Opacity and Complexity 0 Corporate Behavior -1 Total Qualitative Adjustments -1 Sovereign or Affiliate constraint Aa2 BCA Scorecard-indicated Outcome - Range a3 - baa2 Assigned BCA baa1 Affiliate Support notching 0 Adjusted BCA baa1

Balance Sheet in-scope % in-scope at-failure % at-failure (GBP Million) (GBP Million) Other liabilities 53,998 13.7% 86,153 21.9% Deposits 315,241 80.1% 283,087 71.9% Preferred deposits 233,279 59.3% 221,615 56.3% Junior deposits 81,963 20.8% 61,472 15.6% Dated subordinated bank debt 4,539 1.2% 4,539 1.2% Junior subordinated bank debt 782 0.2% 782 0.2% Preference shares (bank) 140 0.0% 140 0.0% Senior unsecured holding company debt 7,120 1.8% 7,120 1.8% Equity 11,809 3.0% 11,809 3.0% Total Tangible Banking Assets 393,630 100.0% 393,630 100.0%

9 2 October 2020 National Westminster Bank Plc: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Debt Class De Jure waterfall De Facto waterfall Notching LGF Assigned AdditionalPreliminary Instrument Sub- Instrument Sub- De Jure De Facto Notching LGF Notching Rating volume + ordination volume + ordination Guidance notching Assessment subordination subordination vs. Adjusted BCA Counterparty Risk Rating 21.8% 21.8% 21.8% 21.8% 3 3 3 3 0 a1 Counterparty Risk Assessment 21.8% 21.8% 21.8% 21.8% 3 3 3 3 0 a1 (cr) Deposits 21.8% 6.2% 21.8% 6.2% 2 2 2 2 0 a2 Dated subordinated bank debt 4.4% 3.2% 4.4% 3.2% -1 -1 -1 -1 0 baa2 Junior subordinated bank debt 3.2% 3.0% 3.2% 3.0% -1 -1 -1 -1 -1 baa3 Non-cumulative bank preference shares 3.0% 3.0% 3.0% 3.0% -1 -1 -1 -1 -2 ba1

Instrument Class Loss Given Additional Preliminary Rating Government Local Currency Foreign Failure notching notching Assessment Support notching Rating Currency Rating Counterparty Risk Rating 3 0 a1 1 Aa3 Aa3 Counterparty Risk Assessment 3 0 a1 (cr) 1 Aa3(cr) Deposits 2 0 a2 1 A1 A1 Dated subordinated bank debt -1 0 baa2 0 Baa2 Junior subordinated bank debt -1 -1 baa3 0 Baa3 (hyb) Baa3 (hyb) Non-cumulative bank preference shares -1 -2 ba1 0 Ba1 (hyb) [1] Where dashes are shown for a particular factor (or sub-factor), the score is based on non-public information. Source: Moody’s Investors Service

10 2 October 2020 National Westminster Bank Plc: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Ratings

Exhibit 8 Category Moody's Rating NATIONAL WESTMINSTER BANK PLC Outlook Positive Counterparty Risk Rating Aa3/P-1 Bank Deposits A1/P-1 Baseline Credit Assessment baa1 Adjusted Baseline Credit Assessment baa1 Counterparty Risk Assessment Aa3(cr)/P-1(cr) Issuer Rating A2 Subordinate -Dom Curr Baa2 Jr Subordinate Baa3 (hyb) Pref. Stock Non-cumulative -Dom Curr Ba1 (hyb) Commercial Paper P-1 ULT PARENT: NATWEST GROUP PLC Outlook Positive Baseline Credit Assessment baa2 Adjusted Baseline Credit Assessment baa2 Senior Unsecured Baa2 Subordinate Baa3 Jr Subordinate Ba1 (hyb) Pref. Stock Non-cumulative Ba2 (hyb) Pref. Shelf Non-cumulative (P)Ba2 Commercial Paper P-2 Other Short Term -Dom Curr (P)P-2 ULSTER BANK LIMITED Outlook Positive Counterparty Risk Rating Aa3/P-1 Bank Deposits A1/P-1 Baseline Credit Assessment baa1 Adjusted Baseline Credit Assessment baa1 Counterparty Risk Assessment Aa3(cr)/P-1(cr) Issuer Rating A2 Source: Moody's Investors Service

Endnotes 1 The bank ratings shown in this report are the bank’s deposit rating, senior unsecured debt rating (where available) and Baseline Credit Assessment. 2 Our latest macroeconomic forecasts are included in our Global Macro Outlook 2020-21 (August 2020 Update): Economic recovery remains tenuous as pandemic fears persist, published on 25 August 2020. 3 Based on NWB's disclosure, we consider the following sectors more at risk of default during the pandemic: airline and aerospace, land transport and logistics, leisure, oil and gas, retail and shipping. NWG classifies these sectors as “in focus for management”.

11 2 October 2020 National Westminster Bank Plc: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

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REPORT NUMBER 1242989

12 2 October 2020 National Westminster Bank Plc: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

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13 2 October 2020 National Westminster Bank Plc: Update to credit analysis