Shares in NatWest Group PLC rose on Friday as first quarter profit surpassed City forecasts, despite falling sharply from the year before.
Shares in NatWest rose 3.7% to 300.50 pence in London on Friday morning. The wider FTSE 100 rose 0.4%.
The Edinburgh-based lender said operating profit fell 27% to £1.33 billion in the first three months of 2024 from £1.81 billion a year before, but it highlighted ‘improving’ confidence amongst customers.
This profit decrease reflected a 10% drop in total income to £3.48 billion from £3.88 billion. Within this, net interest income decreased 8.6% to £2.65 billion from £2.90 billion.
NatWest said this principally reflected lower deposit balances and mix changes, and lending margin pressure.
Gary Greenwood at Shore Capital noted the operating profit figure beat consensus expectations by around 5% reflecting positive variances on net interest income, impairment and litigation and conduct charges that were partly offset by negative variances on non-interest income and costs.
NatWest said operating expenses edged up to £2.05 billion from £1.99 billion a year before, but were lower than £2.15 billion posted in the previous quarter.
Net interest margin dropped to 2.05% from 2.25% a year before, but ticked up from 1.99% in the previous quarter.
NatWest said NIM across its three businesses was ‘stable’.
In the first quarter, the return on tangible equity declined to 14.2% from 19.8% while the Common Equity Tier 1 ratio was 13.5%, down from 14.4% the year before.
Provisions for impairments rose modestly to £93 million from £70 million.
‘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,’ Chief Executive Paul Thwaite commented.
He said the bank had delivered a ‘strong set of results’, adding: ‘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.’
NatWest is preparing for what is poised to be the country’s most high-profile privatisation this year, with the UK government preparing to sell some of its remaining 28.9% stake to retail investors in the coming months.
During his autumn statement, Chancellor Jeremy Hunt said the UK government was ‘exploring’ a possible retail share offer for NatWest over the next 12 months, though this would be subject to market conditions and ‘value for money’.
The UK government first began building its majority stake in the bank in October 2008 during the financial crisis, as it looked to inject funds into the banking system.
NatWest said loans to customers, excluding central items, increased by 0.4% in the quarter, to £357.0 billion from £352.4 billion the year before. This primarily reflected growth in Corporate & Institutions, and was partially offset by increased mortgage redemptions within Retail Banking.
Customer deposits, excluding central items, increased by 0.2% to £432.8 billion from £430.5 billion 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 commercial deposits and reduced liquidity in the market.
NatWest reiterated financial guidance for 2024.
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