Q1 figures

NatWest profits slide amid tighter competition

Paul Thwaite: focused on priorities

NatWest, trading as Royal Bank of Scotland north of the border, is the latest bank to post a fall in profit for the first quarter amid competitive lending conditions.

Operating profit before tax for the three months to the end of March fell 27% to £1.33bn against £1.82bn last time. The bank said the reduction was driven by tighter mortgage margins and savers seeking out fixed term accounts.

Attributable profit came in at £918 million from £1.3 billion in the corresponding period last year.

The net interest margin rose by 6 basis points from Q4. The impairment charge fell to £93m from £126m in Q4’23.

Chief Executive, Paul Thwaite, said: “NatWest Group has delivered a strong set of results for the first quarter – with an operating profit of £1.3 billion – as we remain focused on the priorities we set out in February, which will help us shape the future of this bank. 

“Our performance is grounded in the vital role we play in the economy and in the lives of our 19 million customers. Though macro-uncertainty continues, customer confidence and activity is improving, with both lending and deposits up in the quarter and impairments remaining low, reflecting our well-diversified business.

“We are ambitious for this bank, and by succeeding for our customers, we will succeed for our shareholders. Our first priority is delivering disciplined growth across our three businesses by serving our customers well.

“At the same time, we are becoming simpler, more productive and easier to deal with. As a result, we aim to generate returns that allow us to support our customers, invest in our business and deliver attractive distributions to shareholders.

“We are also pleased with the recent momentum in the reduction of HM Treasury’s stake in the bank. Returning NatWest Group to private ownership is a shared ambition and we believe it is in the best interests of both the bank and all our shareholders.

Market reaction

Despite the fall in profits, investors responded positively to the figures and further confirmation on Tuesday’s AGM statement that progress is being made towards a retail offer of the government’s shareholding which has fallen to 27.93.%.

Shares in the company rose 17.5p or 6.1% to 307.5p, pushing NatWest to the top of the FTSE 100 which closed 60.97 points, or 0.8%,. higher at to 8,139.83. 

Speaking to reporters after the figures Mr Thwaite said: “Returning NatWest Group to private ownership is a shared ambition and one that we believe is in the best interests of the bank and all our shareholders.

“As we set out in our Q1’24 Results this morning, we retain capacity for further directed buyback of up to 4.99%, and the window would open again in May.”

The government confirmed its plan to return NatWest Group to private ownership by 2025/2026 in its Spring Budget last month, including a potential retail offer that could take place as early as this summer.

John Moore, senior investment manager at RBC Brewin Dolphin, said: “Like its peers, NatWest has seen profits fall – but it has still beaten expectations in a more competitive mortgage market and peaking interest rates environment.

“Costs are stable and returns on equity remain high – albeit, not where they were a year ago.

“Unlike Lloyds and Barclays, NatWest doesn’t have to deal with legacy car finance and investment banking issues, so the bank has those advantages on its side along with its more streamlined business model.

“The key, as ever, is the sale of the government’s stake, which should be addressed in the near future, and NatWest is in a positive position going into that process.”

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