The group revealed an operating pre-tax profit of £1.3 billion over the first three months of the year, down 27% from £1.8 billion the previous year.
It is ahead of the £1.2 billion profit that analysts were pencilling in for the quarter.
Total income for the bank fell by a 10th, as more customers moved money from current accounts and into savings accounts with higher returns.
It also came amid greater competition in the mortgage market which has seen rates come down from the highs hit last year.
But NatWest revealed that customer deposits increased by £2 billion in the first quarter, reflecting growth in both savings and current account balances since the end of 2023.
Total lending grew by £1.4 billion, with growth in corporate lending being partially offset by more people paying off their mortgage at the start of the year.
It also assured that the level of borrowers defaulting on their loans remained low, despite the cost-of-living squeeze.
Paul Thwaite, NatWest’s chief executive, said: “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.
“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.”
“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.”
The Government is gearing up to sell its remaining shareholding in NatWest, which it bailed out during the 2008 financial crisis.
A sale of shares to retail investors could come as early as the summer, with the Government hoping to fully offload its stake by 2025 to 2026.
