Chief Executive, Paul Thwaite, commented:
“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(1) 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.”
Strong Q1 2024 performance
- Q1 2024 attributable profit of £918 million and a return on tangible equity (RoTE) of 14.2%.
- Total income excluding notable items was £3,414 million. The reduction of £28 million, or 0.8%, compared with Q4 2023, was due to the impact of one day fewer, with mortgage margin pressure largely offset by higher markets income in Commercial & Institutional, and £406 million lower than Q1 2023 principally reflecting lower deposit balances and mix changes, and lending margin pressure.
- Net interest margin (NIM) of 2.05% was 6 basis points higher than Q4 2023 principally reflecting notable items and changes within central items, while NIM across the three businesses was stable.
- Other operating expenses were broadly stable compared with Q4 2023 (£13 million lower), and £96 million, or 5.0%, higher than Q1 2023 principally reflecting the Bank of England Levy and increased staff costs due to inflation and severance costs, partially offset by ongoing simplification of our business and lower costs in relation to our withdrawal from the Republic of Ireland.
- A net impairment charge of £93 million, or 10 basis points of gross customer loans, principally reflected the continued strong performance of our lending book. Levels of default remain stable and at low levels across the portfolio.
Robust balance sheet with strong capital and liquidity levels
- Net loans to customers excluding central items increased by £1.4 billion, or 0.4% in the quarter, to £357.0 billion primarily reflecting growth in Corporate & Institutions partially offset by increased mortgage redemptions in the quarter within Retail Banking.
- Up to 31 March 2024 we have provided £68.5 billion of our target to provide £100 billion climate and sustainable funding and financing between 1 July 2021 and the end of 2025.
- Customer deposits excluding central items increased by £0.9 billion, or 0.2%, in the quarter primarily reflecting growth of £2.0 billion in Retail Banking partially offset by a £1.2 billion reduction in Commercial & Institutional due to active management of our commercial deposits and reduced liquidity in the market. Term balances now account for 17% of our book, up from 16% at the end of 2023.
- The loan:deposit ratio (LDR) (excl. repos and reverse repos) was 84% at Q1 2024, with customer deposits exceeding net loans to customers by around £66 billion.
- The liquidity coverage ratio (LCR) of 151%, representing £53.8 billion headroom above 100% minimum requirement, increased by 7 percentage points compared with Q4 2023 primarily due to increased issuance and customer deposits coupled with the replacement of the Cash Ratio Deposit scheme with a Bank of England Levy.
- TNAV per share increased by 10 pence in the quarter to 302 pence primarily reflecting the attributable profit for the period.
Shareholder return supported strong capital generation
- Common Equity Tier (CET1) ratio of 13.5% was 10 basis points higher than Q4 2023 as the attributable profit for the quarter, c.50 basis points, was largely offset by a £3.3 billion increase in RWAs, c.25 basis points, and a £367 million ordinary dividend deduction, c.20 basis points.
- RWAs increased by £3.3 billion in the quarter to £186.3 billion largely reflecting a £1.6 billion increase associated with the annual update to operational risk and lending growth within Commercial & Institutional.
Outlook (2)
- We retain the outlook guidance provided in the 2023 Annual Report and Accounts with the exception of full year 2024 Group operating costs (excluding litigation and conduct costs) which is now expected to be broadly stable compared with 2023 excluding around £0.1 billion increase in bank levies.
