Natwest skims past profit expectations
Natwest narrowly beat analysts’ annual profit expectations after posting a bump in its consumer lending.
The FTSE 100 lender posted a £6.2bn pre-tax profit, ahead of £6.1bn pencilled in by analysts and up 0.3 per cent on 2023.
Net loans to customers hit £368.5bn, an increase of £12.9bn, which reflected Natwest’s acquisition of Metro Bank’s mortgage portfolio.
The bank recorded a £3.2bn increase in retail banking loans, with £2.2bn relating to the portfolio acquisition.
In the fourth quarter alone, lending to consumers increased by £4.8bn, which the bank said reflected growth within corporate and institutions and higher retail banking mortgage balances.
Despite decreasing interest rates, Natwest expanded its net interest margin by one basis point to just over two per cent in 2024.
Operating expenses increased by £330m in the final quarter, compared to the same period last year.
The bank said this reflected the annual Bank Levy and property exit costs.
The UK Government has also reduced its stake in NatWest Group to 6.98 per cent following a disposal of nearly 80m shares.
The move follows the Government’s ongoing plan to gradually dilute its ownership in Natwest, which first began after the 2008 Financial Crisis.
The Government injected £45.5bn into the Royal Bank of Scotland, Natwest’s parent company after it required a bailout.
In November 2024, the Government sold £1bn worth of Natwest shares back to the bank reducing its stake from 14.2 per cent to 11.4 per cent.
Natwest projects further profits
Looking to the future, the bank said it expects to generate a return on tangible equity of 15 to 16 per cent in 2025
The Big Four bank proposed a final dividend of 15.5p per share, bringing the total for the year to 21.5p, up 26 per cent from 2023.
Gary Greenwood, Equity Analyst, said: “The dividend policy will change with a 50 per cent payout ratio now targeted versus 40 per cent previously, which will drive a consensus dividend forecast upgrade. Buybacks will continue to be considered.
“The shares have had a very strong run over the past year and into these results so we would expect a neutral to slightly positive reaction this morning.”
RBC Brewin Dolphin’s investment manager Zoe Gillespie said: “Natwest is in fine fettle. The bank has beaten expectations, exceeding its own upgraded guidance for 2024, while the government has accelerated the reduction of its stake.
“On this trajectory, Natwest could potentially return to full private ownership this year and, with that, new opportunities may open up to the bank.”
She added: “Natwest has built a solid foundation for its next era and, all things being equal, should be free of the distractions of the past.”
Commenting on the annual results, chief executive Paul Thwaite, said: “We have positive momentum behind us and a clear ambition to succeed with customers as we continue to build a simpler, more integrated and technology-driven bank that is capable of even greater impact.
“As we enter a new, forward-looking chapter for Natwest Group, I am optimistic about the opportunities ahead of us to grow our business as a vital and trusted partner to our customers and the UK itself and, in doing so, create further value for our shareholders.”
The results come as last night Nigel Farage said he was exploring private criminal proceedings against Natwest over its debanking scandal in 2023, as first reported by Sky News’ Mark Kleinman.
After the bank’s subsidiary Coutts decided to close Farage’s account, questions arose about whether it was for commercial or political reasons.
The move led to Natwest’s former chief executive, Dame Alison Rose, resigning in the summer of 2023.