6-K 1 dp03855_6k.htm

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

18 December 2006

National Westminster Bank Plc

Gogarburn
PO Box 1000
Edinburgh EH12 1HQ
Scotland
United Kingdom

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
     
Form 20-F  X    Form 40-F     
     

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):___

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):___

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
     
Yes         No  X 
     
If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82-_______

 





NATIONAL WESTMINSTER BANK Plc

RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2006

National Westminster Bank Plc (‘NatWest’ or the ‘Group’) is a wholly-owned subsidiary of The Royal Bank of Scotland plc and its ultimate parent company is The Royal Bank of Scotland Group plc.

CONTENTS PAGE
   
Financial review 2
   
Overview of condensed consolidated balance sheet 2
   
Condensed consolidated income statement 3
   
Condensed consolidated balance sheet 4
   
Statement of recognised income and expense 5
   
Condensed consolidated cash flow statement 6
   
Notes 7
   
Selected financial data 17
   
Forward-looking statements 19
   
Signature 20





NATIONAL WESTMINSTER BANK Plc

FINANCIAL REVIEW

Profit
Profit before tax was up 27%, from £1,636 million to £2,085 million, reflecting strong organic income growth.

Total income
The Group achieved strong growth in income during the first half of 2006. Total income was up 15% or £605 million to £4,690 million. Total income from continuing operations rose by 18%, £702 million.

Net interest income increased by 2% to £2,216 million and represents 47% of total income (2005 –53%).

Non-interest income increased by 29% to £2,474 million and represents 53% of total income (2005 – 47%).

Operating expenses
Operating expenses rose by 6% to £2,200 million.

Impairment losses
Impairment losses were £405 million compared with £376 million in 2005, an increase of 8%.

RESTATEMENTS

Divisional results for 2005 have been restated to reflect transfers of businesses between divisions in the second half of 2005 and the first half of 2006. These changes do not affect the Group’s results.

In the second half of 2005 the Group adopted the amendment to IAS 39 ‘The Fair Value Option’ issued by the IASB in June 2005 with effect from 1 January 2005. The results for the first half of 2005 have been restated. This restatement had no impact on the Group profit for the half year ended 30 June 2005.

The balance sheet as at 30 June 2005 has been restated to conform to the presentation applied at 31 December 2005.

OVERVIEW OF CONDENSED CONSOLIDATED BALANCE SHEET

Total assets at £273.7 billion at 30 June 2006 were up £13.1 billion, 5%, compared with 31 December 2005, reflecting business growth.

Treasury and other eligible bills decreased by £0.6 billion, 78%, to £0.2 billion, reflecting trading activity.

Loans and advances to banks increased by £1.7 billion, 3%, to £57.7 billion. Growth in bank placings, up £5.5 billion, 13%, to £48.4 billion, were partially offset by a reduction in reverse repurchase agreements and stock borrowing ("reverse repos"), down £3.8 billion, 29% to £9.3 billion.

Loans and advances to customers were up £5.0 billion, 3%, to £164.9 billion. Lending, excluding reverse repos, rose by £7.6 billion, 5% to £152.5 billion reflecting organic growth across all divisions. Reverse repos decreased by 17%, £2.6 billion to £12.4 billion.

Debt securities increased by £5.6 billion, 20%, to £34.4 billion, principally due to increased trading book holdings in Corporate Markets.

Equity shares rose by £0.1 billion, 18%, to £1.0 billion, reflecting the increase in the fair value of available-for-sale securities.

Settlement balances rose £2.9 billion to £6.8 billion as a result of increased customer activity.

Derivatives, assets and liabilities, decreased reflecting a fall in trading volumes and the effects of interest and exchange rates.

Prepayments, accrued income and other assets were down £0.8 billion, 27% to £2.3 billion.

Deposits by banks rose by £1.3 billion, 3% to £47.3 billion to fund business growth. Increased repurchase agreements and stock lending ("repos"), up £0.1 billion to £19.6 billion and higher inter-bank deposits, up £1.2 billion, 5% at £27.7 billion contributed to this increase.

Customer accounts were up £13.2 billion, 8% at £171.1 billion. Within this, repos increased £6.1 billion, 29% to £26.8 billion. Excluding repos, deposits rose by £7.1 billion, 5%, to £144.3 billion with good growth in all divisions.

Debt securities in issue increased by £1.7 billion, 16%, to £12.5 billion.

The decrease in settlement balances and short positions, down £2.1 billion, 10%, to £19.5 billion, reflected a fall in customer activity.

Accruals, deferred income and other liabilities decreased £0.2 billion, 7% to £3.3 billion.

Subordinated liabilities were down £0.5 billion, 8% to £6.1 billion. This reflected the redemption of £0.3 billion undated loan capital and the effect of exchange rates, £0.2 billion.

Shareholders’ equity increased by £0.3 billion, 3% to £9.8 billion. The profit for the period of £1.5 billion was partly offset by the payment of ordinary dividend, £1.0 billion and £0.2 billion resulting from other movements including exchange rates.

Page 2 of 20





NATIONAL WESTMINSTER BANK Plc

CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE HALF YEAR ENDED 30 JUNE 2006 (unaudited)

    First half     First half 2005*     Full year 2005  
    2006     Discontinued**     Continuing     Discontinued**     Continuing  
    £m     £m     £m     £m     £m  
                               
Interest receivable   4,553     88     3,997     203     8,289  
Interest payable   2,337     (5 )   1,925     (9 )   4,040  
Net interest income   2,216     93     2,072     212     4,249  
Fees and commissions receivable   1,995     22     1,764     43     3,663  
Fees and commissions payable   (505 )   (18 )   (441 )   (34 )   (926 )
Income from trading activities   770     -     449     -     808  
Other operating income   214     -     144     -     635  
Non-interest income   2,474     4     1,916     9     4,180  
Total income   4,690     97     3,988     221     8,429  
Staff costs   937     -     710     -     1,477  
Premises and equipment   128     -     87     -     114  
Other administrative expenses   1,006     19     1,017     70     2,440  
Depreciation and amortisation   129     -     240     -     382  
Operating expenses   2,200     19     2,054     70     4,413  
Operating profit before                              
impairment losses   2,490     78     1,934     151     4,016  
Impairment losses   405     -     376     4     752  
Operating profit before tax   2,085     78     1,558     147     3,264  
Tax***   526     24     397     44     904  
Operating profit after tax   1,559     54     1,161     103     2,360  
Discontinued operations   -           54           103  
Profit for the period   1,559           1,215           2,463  
Minority interests   16           6           17  
Profit attributable to ordinary                              
shareholders   1,543           1,209           2,446  

* restated for the adoption of amendment to IAS 39 ‘The Fair Value Option’. This restatement had no impact on profit.

** the Group transferred its home mortgage finance business, National Westminster Home Loans Limited, to The Royal Bank of Scotland plc on 31 December 2005 at neither a profit nor a loss.

*** includes overseas tax of £196 million for 2006 (first half 2005 - £128 million; full year 2005 - £273 million).

Page 3 of 20





NATIONAL WESTMINSTER BANK Plc

CONDENSED CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2006 (unaudited)

    30 June   31 December   30 June
    2006   2005   2005
    £m   £m   £m
Assets            
Cash and balances at central banks   1,155   1,568   802
Treasury and other eligible bills   167   770   404
Loans and advances to banks   57,724   55,995   41,295
Loans and advances to customers   164,934   159,943   164,173
Debt securities   34,385   28,745   25,557
Equity shares   972   823   1,650
Intangible assets   1,218   1,198   1,110
Property, plant and equipment   1,553   1,531   1,495
Settlement balances   6,814   3,931   4,996
Derivatives   2,528   2,976   3,124
Prepayments, accrued income and other assets   2,286   3,123   2,024
Total assets   273,736   260,603   246,630
 
Liabilities            
Deposits by banks   47,306   46,001   41,255
Customer accounts   171,088   157,924   148,068
Debt securities in issue   12,545   10,801   8,199
Settlement balances and short positions   19,514   21,574   25,826
Derivatives   2,073   2,657   2,960
Accruals, deferred income and other liabilities   3,335   3,579   3,562
Retirement benefit liabilities   1,225   1,235   1,217
Subordinated liabilities   6,147   6,648   6,709
Total liabilities   263,233   250,419   237,796
Equity:            
 
Minority interests   742   744   282
Shareholders’ equity            
    Called up share capital   1,678   1,678   1,678
    Reserves   8,083   7,762   6,874
 
Total equity   10,503   10,184   8,834
Total liabilities and equity   273,736   260,603   246,630

Page 4 of 20




NATIONAL WESTMINSTER BANK Plc

STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE HALF YEAR ENDED 30 JUNE 2006 (unaudited)

    First half     First half     Full year  
    2006     2005     2005  
    £m     £m     £m  
Available-for-sale investments                  
Net valuation gains taken direct to equity   52     37     38  
Net profit taken to income on sales   (36 )   (3 )   (324 )
                   
Cash flow hedges                  
Net losses taken direct to equity   (30 )   (90 )   (28 )
 
Exchange differences on translation of foreign operations   (210 )   12     180  
Expense before tax on items recognised direct in equity   (224 )   (44 )   (134 )
Tax on items recognised direct in equity   -     17     106  
Net expense recognised direct in equity   (224 )   (27 )   (28 )
Profit for the period   1,559     1,215     2,463  
Total recognised income and expense for the period   1,335     1,188     2,435  
Attributable to:                  
Equity holders of the parent   1,321     1,182     2,420  
Minority interests   14     6     15  
    1,335     1,188     2,435  

Page 5 of 20




NATIONAL WESTMINSTER BANK Plc

CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE HALF YEAR ENDED 30 JUNE 2006 (unaudited)

    First half     First half     Full year  
    2006     2005     2005  
    £m     £m     £m  
Operating activities                  
Operating profit before tax   2,085     1,636     3,411  
                   
Adjustments for:                  
Depreciation and amortisation   129     240     382  
Interest on subordinated liabilities   125     174     304  
Charge for defined benefit pension schemes   97     70     149  
Cash contribution to defined benefit pension schemes   (107 )   (943 )   (1,007 )
Other non-cash items   851     (2,686 )   (3,185 )
Net cash inflow/(outflow) from trading activities   3,180     (1,509 )   54  
Changes in operating assets and liabilities   (2,477 )   10,056     24,173  
Net cash flows from operating activities before tax   703     8,547     24,227  
Income taxes paid   (412 )   (506 )   (1,170 )
Net cash flows from operating activities   291     8,041     23,057  
                   
Investing activities                  
Sale and maturity of securities   391     346     1,600  
Purchase of securities   (298 )   (106 )   (1,322 )
Sale of property, plant and equipment   8     113     333  
Purchase of property, plant and equipment   (93 )   (237 )   (281 )
Net investment in business interests and intangible assets   (100 )   6     (168 )
Net cash flows from investing activities   (92 )   122     162  
Financing activities                  
Issue of subordinated liabilities   -     81     291  
Proceeds of minority interests issued   -     -     463  
Redemption of minority interests   -     (121 )   (121 )
Repayment of subordinated liabilities   (334 )   (210 )   (210 )
Dividends paid   (1,016 )   (5 )   (365 )
Interest on subordinated liabilities   (115 )   (117 )   (319 )
Net cash flows from financing activities   (1,465 )   (372 )   (261 )
 
Effects of exchange rate changes on cash and cash equivalents   (1,263 )   635     2,621  
 
Net (decrease)/increase in cash and cash equivalents   (2,529 )   8,426     25,579  
Cash and cash equivalents at beginning of period   48,424     22,845     22,845  
Cash and cash equivalents at end of period   45,895     31,271     48,424  

Page 6 of 20





NATIONAL WESTMINSTER BANK Plc

NOTES

1.      Basis of preparation
  There have been no changes to the Group’s principal accounting policies as set out on pages 54 to 62 of the 2005 Annual Report on Form 20-F, as amended (the “2005 Form 20-F/A”). These accounting policies have been consistently applied in the preparation of these interim consolidated financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of the Group’s interim consolidated financial statements have been made.
 
  These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended 31 December 2005 included in the 2005 Form 20-F/A.

2. Recent accounting developments
 
  IFRS 7 ‘Financial Instruments: Disclosures’ and an amendment to ‘Capital Disclosures’ to IAS 1, issued in August 2005, effective for accounting periods beginning on or after 1 January 2007. Earlier application is encouraged. The Group will be adopting these new or revised disclosures in 2007.
 
  The Group is considering the implications, if any, of the following International Financial Reporting Interpretations Committee (‘IFRIC’) interpretations issued during 2005 which apply to accounting periods beginning on or after 1 January 2007, except IFRIC 11, which applies to accounting periods beginning on or after 1 March 2007:
 
 
    		• Interpretation 7 – Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies
     
    		• Interpretation 8 – Scope of IFRS 2
     
    		• Interpretation 9 – Reassessment of Embedded Derivatives
     
    		• Interpretation 10 – Interim Financial Reporting and Impairment
     
    		• Interpretation 11 – IFRS 2 – Group and Treasury Share Transactions
     
    3.      Loan impairment provisions
      Operating profit is stated after charging loan impairment losses of £406 million (first half 2005 - £376 million; full year 2005 - £753 million). The balance sheet loan impairment provisions increased in the half year ended 30 June 2006 from £2,031 million to £2,125 million, and the movements thereon were:
     
          First half     First half     Full year  
          2006     2005     2005  
          £m     £m     £m  
                         
      At beginning of period   2,031     2,125     2,125  
      Currency translation, amounts written-off and other adjustments   (280 )   (378 )   (771 )
      Charge to the income statement   406     376     753  
      Unwind of discount   (32 )   (37 )   (76 )
      At end of period   2,125     2,086     2,031  
               
    The provision at 30 June 2006 includes provision against loans and advances to banks of £3 million (31 December 2005 - £3 million; 30 June 2005 - £5 million).  

      Total impairment losses charged to the income statement comprises;                  
                         
          First half     First half     Full year  
          2006     2005     2005  
          £m     £m     £m  
                         
      Loans and receivables and finance leases   406     376     753  
      Available-for-sale securities   (1 )   -     3  
    		 
      Impairment losses   405     376     756  
    		 

    4.      Taxation
      The actual tax charge differs from the tax charge computed by applying the standard UK corporation tax rate of 30% as follows:
     
          First half     First half     Full year  
          2006     2005     2005  
          £m     £m     £m  
                         
      Profit before tax   2,085     1,636     3,411  
                         
      Expected tax charge   625     491     1,023  
      Non-deductible items   26     17     70  
      Non-taxable items   (2 )   -     (71 )
      Taxable foreign exchange movements   (29 )   2     35  
      Foreign profits taxed at other rates   (19 )   (11 )   (21 )
      Other   (75 )   (78 )   (88 )
      Actual tax charge   526     421     948  

    Page 7 of 20





    NATIONAL WESTMINSTER BANK Plc

    NOTES (continued)

    5. Segmental analysis
       
     

    The revenues for each division in the table below are gross of intra-group transactions.

          First half 2006     First half 2005     Full year 2005  
         
    		   
    		   
    		 
          External   Inter
    Segment    		     Total     External   Inter
    Segment         		    Total     External   Inter
    Segment         		    Total  
      Total revenue   £m   £m     £m     £m   £m     £m     £m   £m     £m  
                                                       
      Global Banking &                                                
      Markets   1,359   530     1,889     1,147   491     1,638     2,212   1,002     3,214  
      UK Corporate                                                
      Banking   986   1     987     856   -     856     1,923   1     1,924  
      Retail Markets                                                
      - Retail Banking   2,021   1     2,022     2,097   534     2,631     4,038   1,301     5,339  
      - Direct Channels   1,023   -     1,023     900   -     900     1,916   -     1,916  
      - Wealth Management   705   1     706     493   1     494     1,102   2     1,104  
      Ulster Bank   1,119   7     1,126     812   12     824     1,763   25     1,788  
      Manufacturing   2   9     11     24   13     37     45   6     51  
      Central items   317   269     586     25   295     320     64   438     502  
      Elimination of intra-                                                
      group transactions   -   (818 )   (818 )   -   (1,346 )   (1,346 )   -   (2,775 )   (2,775 )
      Continuing operations   7,532   -     7,532     6,354   -     6,354     13,063   -     13,063  
      Discontinued                                                
      operations   -   -     -     110   -     110     246   -     246  
      Disposal of strategic                                                
      investments and                                                
      subsidiaries   -   -     -     -   -     -     332   -     332  
                                                       
          7,532   -     7,532     6,464   -     6,464     13,641   -     13,641  

                                          First half     First half     Full year  
                                          2006     2005     2005  
      Operating profit before tax                                   £m     £m     £m  
                                                         
      Global Banking & Markets                                   295     442     782  
      UK Corporate Banking                                   592     390     954  
      Retail Markets                                                  
      - Retail Banking                                   607     535     1,148  
      - Direct Channels                                   234     151     335  
      - Wealth Management                                   106     76     158  
      Total Retail Markets                                   947     762     1,641  
      Ulster Bank                                   182     152     323  
      Manufacturing                                   -     -     -  
      Central items                                   82     (42 )   (599 )
      Continuing operations                                   2,098     1,704     3,101  
      Discontinued operations                                   -     78     147  
      Amortisation of purchased intangible assets           (3 )   (3 )   (6 )
      Integration costs                                   (10 )   (143 )   (163 )
      Net gain on sale of strategic investments and subsidiaries     -     -     332  
                                          2,085     1,636     3,411  

    Page 8 of 20





    NATIONAL WESTMINSTER BANK Plc

    NOTES (continued)

    5. Segmental analysis (continued)                  
                         
      Contribution   £m     £m     £m  
                         
      Global Banking & Markets   342     489     875  
      UK Corporate Banking   703     502     1,178  
      Retail Markets                  
      - Retail Banking   1,096     1,046     2,166  
      - Direct Channels   298     211     453  
      - Wealth Management   131     104     212  
      Total Retail Markets   1,525     1,361     2,831  
      Ulster Bank   286     253     530  
      Manufacturing   (847 )   (801 )   (1,611 )
      Central items   89     (100 )   (702 )
          2,098     1,704     3,101  
      Discontinued operations   -     78     147  
      Amortisation of purchased intangible assets   (3 )   (3 )   (6 )
      Integration costs   (10 )   (143 )   (163 )
      Net gain on sale of strategic investments and subsidiaries   -     -     332  
          2,085     1,636     3,411  

      Goodwill                              
          Global                          
          Banking &     Direct     Wealth     Ulster        
          Markets     Channels     Management     Bank     Total  
          £m     £m     £m     £m     £m  
                                     
      At 1 January 2006   108     107     131     414     760  
      Currency translation and other adjustments   (8 )   1     -     3     (4 )
      At 30 June 2006   100     108     131     417     756  

    6. Dividend                  
          First half     First half     Full year  
          2006     2005     2005  
          £m     £m     £m  
                         
      Ordinary dividend paid to holding company   1,000     -     350  
    		 

    7.      Litigation
      Proceedings, including a consolidated class action, have been brought in the United States against a large number of defendants, including the Group, following the collapse of Enron. The claims against the Group could be significant but are largely unquantified. The Group considers that it has substantial and credible legal and factual defences to these claims and it continues to defend them vigorously. A court ordered mediation commenced in September 2003 but no material progress has been made towards a resolution of the claims, although a number of other defendants have reached settlements in the principal class action. The Group is unable reliably to estimate the possible loss in relation to these matters or the effect that the possible loss might have on the Group's consolidated net assets or its operating results or cashflows in any particular period. In addition, pursuant to requests received from the US Securities and Exchange Commission and the Department of Justice, the Group has provided copies of Enron-related materials to these authorities and has co-operated fully with them.
     
      Members of the Group are engaged in other litigation in the United Kingdom and a number of overseas jurisdictions, including the United States, involving claims by and against them arising in the ordinary course of business. The Group has reviewed these other actual, threatened and known potential claims and proceedings and, after consulting with its legal advisers, is satisfied that the outcome of these other claims and proceedings will not have a material adverse effect on its consolidated net assets, operating results or cash flows in any particular period.
     

    Page 9 of 20





    NATIONAL WESTMINSTER BANK Plc

    NOTES (continued)

    8. Analysis of consolidated equity                  
          First half     First half     Full year  
          2006     2005     2005  
          £m     £m     £m  
      Called-up share capital                  
      At beginning of period   1,678     2,102     2,102  
      Implementation of IAS 32 on 1 January 2005   -     (424 )   (424 )
      At end of period   1,678     1,678     1,678  
      Share premium account                  
      At beginning of period   1,291     1,286     1,286  
      Implementation of IAS 32 on 1 January 2005   -     5     5  
      At end of period   1,291     1,291     1,291  
      Available-for-sale reserves                  
      At beginning of period   -              
      Implementation of IAS 32 and IAS 39 on 1 January 2005   -     200     200  
      Net change   8     24     (200 )
      At end of period   8     224     -  
      Cash flow hedging reserve                  
      At beginning of period   148              
      Implementation of IAS 32 and IAS 39 on 1 January 2005   -     156     156  
      Net change   (23 )   (63 )   (8 )
      At end of period   125     93     148  
      Foreign exchange reserve                  
      At beginning of period   169     (19 )   (19 )
      Implementation of IAS 32 and IAS 39 on 1 January 2005   -     6     6  
      Retranslation of net assets, net of related hedges   (207 )   12     182  
      At end of period   (38 )   (1 )   169  
      Other reserves                  
      At beginning and end of period   298     298     298  
      Retained earnings                  
      At beginning of period   5,856     4,342     4,342  
      Implementation of IAS 32 and IAS 39 on 1 January 2005   -     (582 )   (582 )
      Profit attributable to ordinary shareholders   1,543     1,209     2,446  
      Ordinary dividends paid   (1,000 )   -     (350 )
      At end of period   6,399     4,969     5,856  
      Shareholders’ equity at end of period   9,761     8,552     9,440  

    Page 10 of 20





    NATIONAL WESTMINSTER BANK Plc

    NOTES (continued)

    8.      Analysis of consolidated equity (continued)
     
          First half     First half     Full year  
          2006     2005     2005  
          £m     £m     £m  
      Minority interests                  
      At beginning of period   744     408     408  
      Implementation of IAS 32 and IAS 39 on 1 January 2005   -     (6 )   (6 )
      Currency translation adjustments and other movements   (2 )   -     (2 )
      Profit for the period   16     6     17  
      Dividends paid   (16 )   (5 )   (15 )
      Equity raised   -     2     463  
      Equity withdrawn   -     (123 )   (121 )
      At end of period   742     282     744  
      Total equity at end of period   10,503     8,834     10,184  
               
    9. Contingent liabilities and commitments            

          30 June     31 December     30 June  
          2006     2005     2005  
          £m     £m     £m  
      Contingent liabilities                  
      Guarantees and assets pledged as collateral security   2,563     2,768     2,547  
      Other contingent liabilities   2,959     2,967     2,723  
    		 
      Total   5,522     5,735     5,270  
    		 
      Commitments                  
      Undrawn formal standby facilities, credit lines and other                  
      commitments to lend   73,260     67,516     71,270  
      Other commitments   203     182     161  
    		 
      Total   73,463     67,698     71,431  
    		 

    Page 11 of 20





    NATIONAL WESTMINSTER BANK Plc

    NOTES (continued)

    10. Significant differences between IFRS and US generally accepted accounting principles (US GAAP) for the Group
       
     

    The consolidated financial statements of the Group are prepared in accordance with IFRS issued and extant at 30 June 2006 that differ in certain significant respects from US GAAP. The significant differences that affect the Group are summarised below in two separate sections.

    Section (i) covers ongoing significant differences between US GAAP and IFRS.

    Section (ii) summarises those areas where, though the recognition and measurement principles in US GAAP and IFRS are the same, adjustments to IFRS amounts are required due to differing implementation dates for the Group.
       
    (i) Ongoing GAAP differences
       
    IFRS US GAAP
    (a) Property revaluation and depreciation  

    Prior to the implementation of IFRS, the Group annually revalued freehold and leasehold properties occupied for its own use, as permitted by previous GAAP. On transition to IFRS, as permitted by IFRS 1, valuations of these properties at 31 December 2003 were deemed to be their cost.

    Freehold and long leasehold property occupied for the Group’s use is carried at cost less accumulated depreciation. Depreciation is charged based on an estimated useful life of 50 years.

    Investment properties are carried at fair value; changes in fair value included in the income statement.

    		 Under US GAAP, revaluations of property are not permitted. Depreciation is charged, and gains or losses on disposal are based on the historical cost for both own-use and investment properties.
    (b) Leasehold property provisions  
    Provisions are recognised on leasehold properties when there is a commitment to vacate the property. Provisions are recognised on leasehold properties at the time the property is vacated.
    (c) Loan origination  
    Only costs that are incremental and directly attributable to the origination of a loan are deferred over the period of the related loan or facility. Certain direct (but not necessarily incremental) costs are deferred and recognised over the period of the related loan or facility.
    (d) Pension costs  
    The main scheme is deemed a defined benefit scheme that shares risk between various entities of the RBS Group. There is no contractual agreement or stated policy for charging the net defined benefit cost for the plan as a whole to individual group entities. Consequently, pursuant to IAS 19, the net defined benefit cost has been recognised in the financial statements of the Group, the entity that is considered legally the sponsoring employer for the scheme. Under US GAAP, the main scheme is considered a single-employer plan. Each subsidiary of The Royal Bank of Scotland Group plc accounts for its participation as a participation in a multi-employer pension plan pursuant to SFAS 87. For US GAAP reporting purposes, The Royal Bank of Scotland Group plc is designated as the scheme sponsor and consequently follows defined benefit plan accounting in its consolidated financial statements. Accordingly, the Group has accounted for its participation in the main

     

    Page 12 of 20





    NATIONAL WESTMINSTER BANK Plc

    NOTES (continued)

    10. Significant differences between IFRS and US GAAP for the Group (continued)
       
    (i) Ongoing GAAP differences (continued)
       
    IFRS US GAAP
    (d) Pension costs (continued)  

    The income statement reflects the current and past service cost and the cumulative excess actuarial gains and losses amortised over the expected average remaining lives of participating employees. Excess gains and losses are those exceeding 10% of the higher of the gross assets or liabilities of the scheme

    Pension scheme assets are measured at their fair value. Scheme liabilities are measured on an actuarial basis using the projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency. Any surplus or deficit of scheme assets over liabilities adjusted for unrecognised actuarial gains and losses and past service costs is recognised in the balance sheet as an asset (surplus) or liability (deficit).

    scheme in accordance with the amount allocated by The Royal Bank of Scotland Group plc.
    (e) Financial instruments  
    Financial assets designated as at fair value through profit or loss  
    Under IFRS, a financial asset can be designated as at fair value through profit or loss on initial recognition.

    Such designation is not allowed under US GAAP.
    Debt securities classified as loans and receivables  
    Non-derivative financial assets with fixed or determinable repayments that are not quoted in an active market are classified as loans and receivables except those that are classified as held-to-maturity, held-for-trading, available-for-sale or designated as at fair value through profit or loss. Loans and receivables are initially recognised at fair value plus directly related transaction costs. They are subsequently measured at adjusted cost using the effective interest method less any impairment losses. The Group has classified some debt securities as loans and receivables.

    Under US GAAP, these debt securities are classified as available-for-sale securities with unrealised gains and losses reported in a separate component of equity, except when the unrealised loss is considered other than temporary in which case the loss is included in net income.
    Available-for-sale securities  

    Under IAS 39 financial assets classified as available-for-sale may take any legal form.

    Fair values represent, where available, quoted prices in an active market.

    		 Under US GAAP, only debt and readily marketable equity securities can be classified as available-for-sale. (Such securities are measured at fair value with unrealised gains and losses reported in a separate component of equity.)

     

    Page 13 of 20





    NATIONAL WESTMINSTER BANK Plc

    NOTES (continued)

    10. Significant differences between IFRS and US GAAP for the Group (continued)
       
    (i) Ongoing GAAP differences (continued)
       
    IFRS US GAAP
    (e) Financial instruments (continued)  
    Foreign exchange gains and losses on monetary available-for-sale financial assets  
    For the purposes of recognising foreign exchange gains and losses, a monetary available-for-sale financial asset is treated as if it were carried at amortised cost in the foreign currency. Accordingly, for such financial asset, exchange differences resulting from retranslating amortised cost are recognised in profit or loss.

    Such differences are included with other unrealised gains and losses and reported in a separate component of equity.
    Loans classified as held-for-trading  
    Under IAS 39, loans classified as held-for-trading are carried at fair value. Collateralised loans arising from reverse repurchase and stock borrowing agreements and cash collateral given are measured at cost. Other held-for-trading loans are measured at the lower of cost and fair value except for those held by the Group’s broker-dealer which are recorded at fair value.
    Financial liabilities  
    All financial liabilities held-for-trading are classified as such and carried at fair value with changes in fair value recognised in net income. A financial liability may be designated as at fair value through profit or loss

    Only financial liabilities that are derivatives and short positions are carried at fair value with changes in fair value recognised in earnings.
    (f) Derivatives and hedging activities  
    Gains and losses arising from changes in fair value of a derivative are recognised as they arise in profit or loss unless the derivative is the hedging instrument in a qualifying hedge. The Group enters into three types of hedge relationship: hedges of changes in the fair value of a recognised asset or liability or firm commitment (fair value hedges); hedges of the variability in cash flows from a recognised asset or liability or a forecast transaction (cash flow hedges); and hedges of the net investment in a foreign entity.

    US GAAP principles are similar to IFRS. There are however differences in their detailed application. The Group has not recognised any hedge relationships for US GAAP purposes. All derivatives are measured at fair value with changes in fair value recognised in net income.
    (g) Liabilities and equity  
    The Group classifies a financial instrument that it issues as a financial asset, financial liability or an equity instrument in accordance with the substance of the contractual arrangement. An instrument is classified as a liability if there is a contractual obligation to deliver cash or another financial asset, or to exchange financial assets or financial liabilities on potentially unfavourable terms. An instrument is classified as equity if it evidences a residual interest in the assets of the Group after the deduction of liabilities.

    Under US GAAP, preference shares issued by the Group are classified as equity as they are perpetual and redeemable at the option of the Group.

    Page 14 of 20





    NATIONAL WESTMINSTER BANK Plc

    NOTES (continued)

    10. Significant differences between IFRS and US GAAP for the Group (continued)
       
    (i) Ongoing GAAP differences (continued)
       
    (h) Consolidation  
    All entities controlled by the Group are consolidated together with special purpose entities (SPEs) where the substance of the relationship between the Group and the SPE indicates that it is controlled by the Group. US GAAP requires consolidation by the primary beneficiary of a variable interest entity (VIE). An enterprise is the primary beneficiary of a VIE if it will absorb the majority of the VIE's expected losses, receive a majority of expected residual returns, or both.
    (i) Offset arrangements  

    A financial asset and a financial liability are offset and the net amount reported in the balance sheet when, and only when, the Group currently has a legally enforceable right to set off the recognised amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

    Arrangements such as master netting arrangements do not generally provide a basis for offsetting.

    Under US GAAP, debit and credit balances with the same counterparty may be offset only where there is a legally enforceable right of set-off and the intention to settle on a net basis. However, fair value amounts for forward, interest rate swap, currency swap, option, and other conditional or exchange contracts executed with the same counterparty under a master netting agreement may be offset as may repurchase and reverse repurchase agreements that are executed under a master netting agreement with the same counterparty and have the same settlement date.

    This GAAP difference has no effect on net income or shareholders’ equity.

    (ii) Implementation timing differences
       
    IFRS US GAAP
    (a) Intangible assets  

    Purchased goodwill
    Purchased goodwill is recorded at cost less any accumulated impairment losses. Goodwill is tested annually (at 30 September) for impairment or more frequently if events or changes in circumstances indicate that it might be impaired.

     

    Goodwill arising on acquisitions was capitalised and amortised over its estimated useful economic life. The carrying amount of goodwill in the Group’s opening IFRS balance sheet was its carrying value under UK GAAP as at 31 December 2003.

    In 2004 no amortisation was written back.
    US GAAP requires the same treatment of purchased goodwill. This was adopted by the Group from 1 July 2001. Prior to this goodwill was recognised as an asset and amortised over periods of up to 25 years. No amortisation was written back on this change of policy. During 2005, the Group changed the date for performing its annual goodwill impairment test from 1 January to 30 September for certain of its reporting units in order to conform to the date selected by the Group upon adoption of IFRS.

    Page 15 of 20





    NATIONAL WESTMINSTER BANK Plc

    NOTES (continued)

    10.      Significant differences between IFRS and US GAAP for the Group (continued)
     
      Recent developments in US GAAP
      In June 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation No.48 ‘Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109’ which clarifies the accounting for uncertainty in taxes and addresses the recognition and measurement of tax positions taken or expected to be taken. This Interpretation is effective from 1 January 2007 for the Group.
     
      In September 2006, the FASB issued Statement of Financial Accounting Standards No.157 ‘Fair Value Measurements’. SFAS 157 establishes a framework for fair value measurement and prescribes extended disclosures. SFAS 157 does not extend the scope of fair value measurement in financial statements. The statement is effective from 1 January 2008 for the Group and would be applied prospectively except in relation to the following financial instruments:
         
     
  		• trades in an active market held by a broker-dealer or investment company within the scope of AICPA Audit and Accounting Guides, where blockage factors were used to determine fair value previously
     
  		• instruments where initial recognition at fair value was determined using transaction price in accordance with guidance in footnote in EITF 02-03
     
  		• hybrid instruments measured at fair value at initial recognition at transaction price in accordance with SFAS 133 and SFAS 155 previously
     
      In September 2006, the FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit Pension and other Post-retirement Plans' - an amendment of SFAS 87, 88, 106 and 132R. SFAS 158 requires an employer to:
         
      a) recognise the funding status of a plan in the balance sheet
      b) measure plan's assets and obligations at the balance sheet date and
      c) recognise changes in funded status of a defined benefit plan in the year in which the change occurs.
       
      The standard is effective for the Group’s 2006 year end accounts.
     
      The Group is evaluating the implications of the above standards and interpretation and SFAS 155 and SFAS156, discussed in the 2005 Form 20-F/A, on the Group's US GAAP reporting.
       
     

    Selected figures in accordance with US GAAP
    The following tables summarise the significant adjustments to consolidated net income available for ordinary shareholders and shareholders’ equity, which would result from the application of US GAAP instead of IFRS. Where applicable, the adjustments are stated gross of tax with the tax effect shown separately in total.

    Consolidated statement of income (unaudited)
          First half     First half     Full year  
          2006     2005     2005  
          £m     £m     £m  
                         
      Profit attributable to ordinary shareholders - IFRS   1,543     1,209     2,446  
               Property revaluation and depreciation   (10 )   2     4  
               Leasehold property provisions   9     (20 )   (17 )
               Loan origination   13     16     42  
               Pensions costs   (4 )   (25 )   (89 )
               Financial instruments   3     (37 )   (10 )
               Derivatives and hedging   (60 )   (132 )   (115 )
               Other   (22 )   (200 )   (187 )
               Taxation on above adjustments   20     108     68  
      Net income available for ordinary shareholders – US GAAP   1,492     921     2,142  
      Consolidated shareholders’ equity (unaudited)                  
          30 June     31 December     30 June  
          2006     2005     2005  
          £m     £m     £m  
                         
      Shareholders’ equity - IFRS   9,761     9,440     8,552  
               Property revaluation and depreciation   (583 )   (573 )   (575 )
               Leasehold property provisions   30     21     18  
               Loan origination   260     247     221  
               Pensions costs   2,026     2,030     2,094  
               Financial instruments   (42 )   (18 )   (43 )
               Derivatives and hedging   (44 )   (30 )   (55 )
               Liabilities and equity   438     460     458  
               Intangible assets – implementation timing difference   67     67     67  
               Taxation   (684 )   (700 )   (746 )
      Shareholders’ equity – US GAAP   11,229     10,944     9,991  
               
    Total assets under US GAAP of £264.8 billion (31 December 2005 - £257.0 billion; 30 June 2005 - £242.6 billion) compared with total assets under IFRS of £273.7 billion (31 December 2005 - £260.6 billion; 30 June 2005 - £246.6 billion) primarily reflect the effect of certain arrangements that can be netted under US GAAP together with the effects of adjustments made to shareholders' equity.
     
    11.  Statutory accounts
     
    Financial information contained in this document does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 ("the Act"). The statutory accounts for the year ended 31 December 2005 have been filed with the Registrar of Companies and have been reported on by the auditors under section 235 of the Act. The report of the auditors was unqualified and did not contain a statement under section 237(2) or (3) of the Act.

    Page 16 of 20





    NATIONAL WESTMINSTER BANK Plc

    SELECTED FINANCIAL DATA

    The dollar financial information included below has been translated for convenience at the rate of £1.00 to US$1.8491, the Noon Buying Rate on 30 June 2006.

    Summary consolidated income statement

        First half 2006   First half   Full year
    		2005   2005
    Amounts in accordance with IFRS   $m   £m   £m   £m
                     
    Total income   8,672   4,690   4,085   8,650
    Expenses   4,068   2,200   2,073   4,483
    Impairment losses   749   405   376   756
    Profit before tax   3,855   2,085   1,636   3,411
    Tax   973   526   421   948
    Minority interests   29   16   6   17
    Profit attributable to ordinary shareholders   2,853   1,543   1,209   2,446
    Ordinary dividends   1,849   1,000   -   350
    Amounts in accordance with US GAAP                
    Net income available for ordinary shareholders   2,759   1,492   921   2,142
    Summary consolidated balance sheet                
         30 June 2006   31 December   30 June
    		2005   2005
    Amounts in accordance with IFRS   $m   £m   £m   £m
                     
    Loans and advances   411,717   222,658   215,938   205,468
    Debt securities and equity shares   65,379   35,357   29,568   27,207
    Derivatives and settlement balances   17,274   9,342   6,907   8,120
    Other assets   11,795   6,379   8,190   5,835
    Total assets   506,165   273,736   260,603   246,630
    Shareholders' equity   18,049   9,761   9,440   8,552
    Minority interests   1,372   742   744   282
    Subordinated liabilities   11,366   6,147   6,648   6,709
    Deposits   403,832   218,394   203,925   189,323
    Derivatives, settlement balances and short                
       positions   39,917   21,587   24,231   28,786
    Other liabilities   31,629   17,105   15,615   12,978
    Total liabilities and equity   506,165   273,736   260,603   246,630
    Amounts in accordance with US GAAP                
    Shareholders’ equity   20,764   11,229   10,944   9,991
    Total assets   489,710   264,837   257,038   242,620

    Page 17 of 20





    NATIONAL WESTMINSTER BANK Plc

    SELECTED FINANCIAL DATA (continued)

    Other financial data

        First half   First half   Full year
        2006   2005   2005
    Based upon IFRS            
    Return on average total assets - %   1.22   1.03   0.99
    Return on average ordinary shareholders' equity - %   31.6   30.2   29.6
    Ratio of earnings to fixed charges and preference dividends            
    - including interest on deposits   1.89   1.85   1.84
    - excluding interest on deposits   4.08   4.05   4.02
    Ratio of earnings to fixed charges only            
    - including interest on deposits   1.89   1.85   1.84
    - excluding interest on deposits   4.08   4.05   4.02
                 
    Based upon US GAAP            
    Return on average total assets - %   1.14   0.80   0.90
    Return on average ordinary shareholders' equity - %   28.0   20.1   22.3
    Ratio of earnings to fixed charges and preference dividends            
    - including interest on deposits   1.85   1.43   1.74
    - excluding interest on deposits   3.95   2.92   3.66
    Ratio of earnings to fixed charges only            
    - including interest on deposits   1.86   1.44   1.75
    - excluding interest on deposits   4.06   3.01   3.78

    Page 18 of 20





    NATIONAL WESTMINSTER BANK Plc

    FORWARD-LOOKING STATEMENTS

    Certain sections in this document contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘should’, ‘intend’, ‘plan’, ‘probability’, ‘risk’, ‘Value-at-Risk (“VaR”)’, ‘target’, ‘goal’, ‘objective’, ‘will’, ‘endeavour’, ‘outlook’, 'optimistic', 'prospects' and similar expressions or variations on such.

    In particular, this document includes forward-looking statements relating, but not limited, to the Group’s potential exposures to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity and equity price risk. Such statements are subject to risks and uncertainties. For example, certain of the market risk disclosures are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated.

    Other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this document include, but are not limited to: general economic conditions in the UK and in other countries in which the Group has significant business activities or investments, including the United States; the monetary and interest rate policies of the Bank of England, the Board of Governors of the Federal Reserve System and other G-7 central banks; inflation; deflation; unanticipated turbulence in interest rates, foreign currency exchange rates, commodity prices and equity prices; changes in UK and foreign laws, regulations and taxes; changes in competition and pricing environments; natural and other disasters; the inability to hedge certain risks economically; the adequacy of loss reserves; acquisitions or restructurings; technological changes; changes in consumer spending and saving habits; and the success of the Group in managing the risks involved in the foregoing.

    The forward-looking statements contained in this document speak only as of the date of this report, and the Group does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

    Page 19 of 20





    NATIONAL WESTMINSTER BANK Plc

    SIGNATURE

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.

     

    National Westminster Bank Plc
    Registrant

    /s/ Guy Whittaker
    Guy Whittaker
    Group Finance Director
    18 December 2006

    Page 20 of 20