Bank surges

Thwaite takes top job as NatWest unveils bumper profit

Royal Bank of Scotland HQ Gogarburn
NatWest is headquartered at the RBS offices in Gogarburn (pic: Terry Murden)

NatWest, trading as Royal Bank of Scotland north of the border, has posted a profit for 2023 at the top of expectations and confirmed Paul Thwaite as its permanent chief executive as it seeks stability ahead of a sale of the taxpayers’ remaining stake in the company.

The bank, nominally headquartered in Edinburgh but operationally led from London, reported pre-tax profit of £6.2 billion, up 20% on £5.1bn last time. It is the biggest profit haul since the bank’s rescue in 2008.

It has proposed a final dividend of 11.5 pence per share and a share buyback of £300 million. The bonus pool is slightly down to £356m from £367.5m in 2022.

The bank said its net interest margin – a key measure of lending profitability – dipped quarter-on-quarter to 2.86% at the end of December, down from 2.94% at end-September.

Mr Thwaite, who took over as CEO following the controversial departure of Dame Alison Rose in the wake of the Nigel Farage “debanking” row, said: “We have delivered a strong performance in an exceptional macro environment.

New CEO: Paul Thwaite

“The strength of our balance sheet allows us to support our customers and our performance is grounded in the services we have provided to help them reach their financial goals and manage their money better.

“As we look ahead, I am ambitious and confident for the future of NatWest Group. We should not underestimate the strength of our foundations or the opportunity to build deeper relationships with our 19 million customers. Our number one priority is to serve our customers well and provide them with the products, services, and expertise they need.

“This year we are focussed on the things we can control; delivering profitable growth, becoming more efficient, more productive, and simpler to deal with, whilst managing our cost and capital efficiently. Together, these actions will drive long-term, sustainable value for our customers, shareholders, and the wider UK economy.”

Among Mr Thwaite’s tasks will be preparing for a sale of the government’s 35% stake which has been steadily reduced since its £45.5 billion bailout in the 2008-9 financial crisis.

His remuneration package includes a base annual salary of £1.155 million, a fixed share allowance set at 100% of salary, standard benefit funding of £26,250 per annum and a pension allowance of 10% of salary on the same basis as the wider workforce.

Mr Thwaite’s “variable pay” will consist of an annual bonus “subject to performance, with a maximum opportunity of 100% of salary delivered equally in cash and shares and a restricted share plan award with a maximum opportunity of 150% of salary delivered in shares.”

“The remuneration package for the NatWest Group CEO continues to represent pay restraint in comparison to the market,” said NatWest.

“Any further increases will be reviewed annually, subject to satisfactory performance and development in role.”

Market reaction

Stuart Lamont, investment manager at RBC Brewin Dolphin, said: “The appointment of a new CEO provides NatWest with greater clarity over its future direction, after months of flux. Still, the bank is in relatively good shape – the process of simplifying its business and delivering cost efficiencies is yielding results, with a solid net interest margin and a return on tangible equity that is comfortably ahead of previous guidance.

“NatWest’s balance sheet is also strong and, while there are likely to be challenges ahead, it is well placed to manage any costs associated with bad loans. The government’s intention to sell down its stake will likely hang over the share price for now, but attractive shareholder distributions should provide some consolation until that matter is resolved.”

FY’23 financials

  • Operating profit before tax – £6.2bn, vs £5.1bn in FY’22. Up 20% year on year.
  • £1.26bn for Q4‘23 vs. £1.43bn in Q4’22. 
  • Attributable profit – £4.4bn vs. £3.3bn in FY‘22. Up 31.6% year on year.
  • £1.23bn for Q4‘23 vs. £1.26bn in Q4’22. 

Financial performance against targets

  • ROTE – 17.8% vs. 12.3% in FY’22.
    • Targeting 14% – 16% in 2023.
  • Income – £14.3bn vs. £13.1bn in FY’22.
    • 9.8% increase.
  • Costs – £7.6bn, in line with guidance.
    • 5% increase in 2023.
  • Capital – 13.4% CET1 ratio vs. 14.2% at FY’22.
    • In line with 13-14% target.


  • £126m charge in Q4’23 vs. £229m in Q3’23.
    • Loan impairment rate for 2023 was 15bps of gross customer loans – in line with 2023 guidance of <20bps of loans and below through the cycle guidance of 20bps – 30bps.
    • £578m impairment charge in FY’23 vs. £337m impairment charge in FY’22.
  • 2024 guidance: Unchanged from 2023. Expect loan impairment rate <20bps, no sign of significant macro deterioration.
  • Well diversified, de-risked, prime loan book.
  • Personal – 93% secured, average mortgage LTV of 55%.
  • Wholesale – well diversified, no sector – including Commercial Real Estate – >5% book.

Capital returns & government ownership

  • £3.6bn of distributions paid and accrued ’23.
  • £1.5bn dividends – £1bn final (11.5p/share), £500m interim (5.5p/share).
  • Up to £800m on market buyback, including new £300m announced today.
  • £1.3bn directed buyback in May 2023.
  • Total of £1.8bn back to UK government in dividends and buybacks for 2023.
  • Government ownership now below 35%, down from 46% at FY’22.
  • Between 2021 and 2023 we returned a total of £12.5bn to shareholders.

Supporting our customers in 2023

  • Lent an additional £9 billion into the UK economy – supporting business owners and homeowners.
  • Opened more than 100k new start-up accounts for entrepreneurs.
  • Opened over a million new current accounts and 1.6 million savings accounts for individuals.
  • Helped 379k Retail banking customers to buy or re-mortgage their home.


  • £419bn in deposits across three customer businesses. £5.3bn paid out in interest to customers in 2023.
  • £21bn saved in Fixed Term Accounts during 2023 – now 16% of all customer deposits in Fixed Term Accounts, up from 6% at the end of 2022.
  • Loan to deposit ratio of 84%.

Financial targets – 2024 guidance

  • ROTE – ~12% in 2024, greater than 13% in 2026.
    • Adjustment to target due to macro-economic environment, coupled with an expected reduction in interest rates and changes in customer behaviour.
  • Income – income (excluding notable items) in the range of £13bn – £13.5bn, assuming a UK base rate of 4% by the end of 2024.
  • Costs – Group operating costs, excluding litigation and conduct costs, to be broadly stable compared with 2023.
  • Capital – We continue to target a CET1 ratio in the range of 13-14%.
  • Distributions – maintain ordinary dividend payout ratio of around 40%,with capacity for directed buybacks.

Bonus pool

  • Bonus pool of £356m vs £367.5m in 2022.

o   Reduction reflects the impact of a more challenging environment and missed guidance against our stretching financial targets that we set at the start of 2023.

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