Shares in NatWest Group surged by nearly 5% this morning after the Royal Bank of Scotland owner beat profit expectations and underlined its “shared ambition” to make full a return to private ownership.
State-backed NatWest reported an operating profit of £1.3 billion for the first quarter, ahead of £1.26bn forecast by analysts, as its net interest margin came in higher than forecast, with impairment provisions lower than expected.
One analyst declared state-owned NatWest was the “best of the bunch” of this week’s bank reporting season.
“Lloyds and Barclays led the way this week and NatWest certainly hasn’t disappointed with first-quarter results very nearly a clean sweep versus expectations,” said Matt Britzman, equity analyst at Hargreaves Lansdown. “Impairments came in lower than expected, net interest margin ticked higher from the previous quarter and both customer loans and deposit levels grew.
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“The UK banking sector looks strong. NatWest has followed its peers in calling out a slowing of some of the headwinds that have been impacting performance in recent quarters. Customers shifting to higher-rate accounts is slowing as expected impairment rates on loans have stabilised at low levels, the economic outlook has improved, and balance sheets remain strong.”
NatWest reported total income of £3.48bn for the first quarter, down from £3.54bn in the preceding quarter and £3.88bn in the first three months of 2023, but ahead of £3.4bn forecast. The bank’s net interest margin – broadly the difference between the interest banks charge on loans and pay on deposits – was 2.05%, six basis points higher than the fourth quarter of 2024.
A net impairment charge of £93m was booked versus a forecast of £186m, which NatWest said “principally reflected the continued strong performance of our lending book”. The bank added: “Levels of default remain stabled and at low levels across the portfolio.”
NatWest, which said operating costs were “broadly stable”, underlined its determination to return to full private ownership. The bank was rescued by a £45.5bn bailout during the financial crisis of 2008 and 2009, which took it into public ownership. The stake held by the Treasury is now just under 30%.
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Chancellor of the Exchequer Jeremy Hunt has signalled a retail offer of the Treasury’s shareholding could take place this year.
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.”
Paul Thwaite, chief executive of NatWest, said: “NatWest Group has delivered a strong set of results for the first quarter – with an operating profit of £1.3bn – as we remain focused on the priorities we set out in February, which will help us shape the future of this bank.”
He added: “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.”
Shares in NatWest were trading at 303.2p at 10am, up 13.3p or 4.6%.
