Achi news desk-
The results came as the bank announced that the UK Government’s stake in the lender, a legacy of its bailout at the height of the financial crisis, had fallen below 28% (27.93%) as a result of its ongoing trading plan.
One analyst said NatWest’s results were the “best of the bunch” from this week’s reporting season.
“Lloyds and Barclays led the way this week and NatWest has certainly not disappointed with first quarter results almost overwhelmingly against expectations,” said Matt Britzman, equity analyst at Hargreaves Lansdown. “The impairments came in lower than expected, the net interest profit was higher than the previous quarter and customer loan and deposit levels increased.
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“The UK banking sector looks strong. NatWest has followed its peers in calling for a slowing of some of the headwinds that have been affecting performance in recent quarters. The shift of customers to higher rate accounts is slowing as expected loan impairment rates stabilize at low levels, the economic outlook has improved, and balance sheets remain strong.”
Like other banks reporting this week, NatWest saw profits fall amid the “annual effects” of changes in customer behavior seen in 2023. These included customers moving from instant access to fixed term deposits as to rising interest rates and the effects of a “shallow but competitive mortgage market”.
The bank reported total income of £3.48bn for the first quarter, down from £3.54bn in the previous quarter and £3.88bn in the first three months of 2023, but higher than the £3.4bn forecast. The bank’s net interest margin – roughly the difference between the interest charged on loans and that paid on deposits – was 2.05%, six basis points higher than the fourth quarter of 2024 and better than the forecast of 1.98% . The increase in profit followed three quarters of the decrease.
A net impairment charge of £93m was booked against a forecast of £186m, which NatWest said “mainly reflects the continued strong performance of our loan book”. The bank added: “Default levels remain stable and at low levels across the portfolio.”
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NatWest, which said operating costs were “fairly stable”, underlined its decision to return to full private ownership. The bank was bailed out by the UK Government during the financial crisis of 2008 and 2009, and came into public ownership. The proportion held by the Treasury is now just under 28%, having fallen gradually from 45.9% at the end of 2022 through the day trading scheme and a directed purchase of £1.3bn on May 22, 2023.
Chancellor of the Exchequer Jeremy Hunt signed off on the UK Government’s plan to return NatWest to full private ownership in the Spring Budget in March. That is expected to include a retail offer of shares which could take place as early as this summer.
Paul Thwaite, chief executive of NatWest, said: “The NatWest Group has delivered a strong set of results for the first quarter – with an operating profit of £1.3 billion – as we continue to focus on the priorities we set out in February, which will helps. we 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 the NatWest Group to private ownership is a shared ambition and we believe it is in the best interests of the bank and all our shareholders.”
Commenting on the retail offer in a call with reporters, Mr Thwaite said: “I think the retail share offer, if it were to happen, is an important opportunity, because it further dilutes the shares. We are taking the necessary preparatory steps to ensure that, should it happen, we are ready for that.”
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The bank said it had not changed its economic outlook for the year. Katie Murray, chief financial officer, told reporters that despite ongoing economic uncertainty at home and abroad, the bank’s customers are “resilient”. He added that “impairments are low, with a highly diversified main loan book continuing to perform well”.
Ms Murray noted that there were “early signs of improving demand” for mortgages this year. Gross new mortgage lending totaled £5.2bn for the first quarter, compared to £9.9bn at the same stage last year, and £5.6bn in the fourth quarter of 2023.
Ms Murray said the bank had reported a marginal increase in customer deposits to £420bn, “ahead of expectations”, and noted that “migration to higher rate savings accounts remains slow, in line with the trend we have seen in Q4”.
Shares closed up 17.6p, or 6.1%, at 307.4p.
