NatWest Group’s Earnings Call Highlights Strong Q1 2025

Natwest Group Plc ((NWG)) has held its Q1 earnings call. Read on for the main highlights of the call.

NatWest Group’s recent earnings call painted a picture of robust financial health and strategic success, marked by significant income growth and a successful acquisition. Despite some concerns about global economic uncertainties and regulatory challenges, the overall sentiment was positive, driven by strong performance metrics and strategic advancements.

Strong Financial Performance in Q1 2025

NatWest Group reported a remarkable 15.8% increase in income year-on-year, reaching GBP 4 billion. The operating profit stood at GBP 1.8 billion, with an attributable profit of GBP 1.3 billion. Earnings per share saw a substantial rise of 48% to 15.5p, while the tangible net asset value per share increased by 15% to 347p. The return on tangible equity was an impressive 18.5%.

Successful Sainsbury’s Bank Transaction

The acquisition of Sainsbury’s Bank proved to be a strategic win for NatWest, adding around 1 million new customer accounts. This transaction also brought in GBP 2.5 billion of unsecured lending and GBP 2.7 billion of savings, boosting NatWest’s credit card stock share to approximately 11%.

Updated 2025 Guidance

NatWest has revised its 2025 guidance, now expecting income to be at the upper end of the GBP 15.2 billion to GBP 15.7 billion range. The return on tangible equity is also anticipated to hit the upper end of the 15% to 16% range, reflecting confidence in continued strong performance.

Growth in Customer Deposits and Lending

The bank experienced growth in both customer deposits and lending, with deposits increasing by 0.5% to GBP 433 billion and lending growing by 0.9% to GBP 375 billion. This growth underscores NatWest’s ability to attract and retain customer trust and engagement.

Strong Capital Position

NatWest’s capital position remains robust, with a Common Equity Tier 1 ratio of 13.8%. The bank generated a strong capital of 49 basis points before shareholder distributions, highlighting its financial resilience.

Impairment Charge and Economic Uncertainty

A net impairment charge of GBP 189 million was reported for the first quarter, equivalent to 19 basis points of loans on an annualized basis. Despite maintaining post-model adjustments at around GBP 300 million, there are ongoing concerns about the impact of global economic uncertainty.

Higher Operating Expenses Expected

While first quarter costs decreased to GBP 1.9 billion, NatWest anticipates operating expenses to reach around GBP 8 billion for the full year, with an additional GBP 100 million in onetime integration costs.

Potential Impact of Regulatory Environment

NatWest expressed concerns about the impact of ring-fencing regulations, which could increase the cost and complexity of serving customers, potentially affecting the bank’s ability to support the economy effectively.

Forward-Looking Guidance

Looking ahead, NatWest Group has updated its 2025 guidance, projecting income at the upper end of the GBP 15.2 billion to GBP 15.7 billion range. The bank expects other operating expenses to be around GBP 8 billion, with a loan impairment rate below 20 basis points. The return on tangible equity is anticipated to be at the upper end of the 15% to 16% range, indicating a positive outlook.

In conclusion, NatWest Group’s earnings call highlighted a strong start to 2025, with significant income growth and strategic acquisitions bolstering its financial position. While there are concerns about economic uncertainties and regulatory impacts, the overall sentiment remains positive, reflecting confidence in the bank’s strategic direction and financial health.