NatWest Group Plc: Q1 2025 Financial Summary
Business Context and Reporting Period
This Form 6-K filing reports the unaudited financial results for NatWest Group Plc for the quarter ended 31 March 2025. The report covers the Group's performance across Retail Banking, Private Banking, and Commercial & Institutional segments. The filing was submitted on 2 May 2025.
Key Financial Metrics
| Metric | Q1 2025 | Q4 2024 | Q1 2024 |
|---|---|---|---|
| Total Income | £3,980 million | £3,825 million | £3,475 million |
| Operating Profit | £1,812 million | £1,492 million | £1,330 million |
| Profit Attributable to Ordinary Shareholders | £1,252 million | £1,248 million | £918 million |
| Earnings Per Share (Basic) | 15.5 pence | 15.3 pence | 10.5 pence |
| Return on Tangible Equity (RoTE) | 18.5% | 19.0% | 14.2% |
| Net Interest Margin (NIM) | 2.27% | 2.19% | 2.05% |
| Cost:Income Ratio (excl. litigation) | 48.6% | 55.3% | 58.4% |
| Net Impairment Charge | £189 million (19bps) | £66 million (7bps) | £93 million (10bps) |
| Common Equity Tier 1 (CET1) Ratio | 13.8% | 13.6% | 13.5% |
| Liquidity Coverage Ratio (LCR) | 150% | 150% | 151% |
| Risk-Weighted Assets (RWAs) | £187.0 billion | £183.2 billion | £186.3 billion |
Material Changes vs. Prior Periods
- Income Growth: Total income increased by 4.1% quarter-on-quarter (QoQ) and 14.5% year-on-year (YoY), driven by deposit margin expansion, balance growth, and increased trading income.
- Expense Reduction: Operating expenses decreased by 12.7% QoQ and 3.6% YoY, reflecting lower strategic costs related to property exits and seasonal factors.
- Impairment Increase: Net impairment charges rose to £189 million (19bps) compared to £66 million in Q4 2024, primarily due to the non-repeat of good book releases and higher Stage 3 charges in Commercial & Institutional.
- Balance Sheet: Net loans to customers decreased slightly by 0.4% QoQ to £398.8 billion, while customer deposits increased by 0.3% to £434.6 billion.
- Capital: The CET1 ratio improved by 20 basis points to 13.8%, supported by profit generation, partially offset by an increase in RWAs of £3.8 billion (driven by operational risk updates and lending growth).
Guidance, Outlook, and Risks
2025 Guidance Updates: Management now expects to achieve the upper end of its previously guided ranges for income (£15.2-15.7 billion) and RoTE (15-16%). Operating costs are expected to be around £8.1 billion (excluding litigation/conduct), and the loan impairment rate is targeted below 20 basis points.
2027 Targets: The Group aims for a RoTE greater than 15% and a CET1 ratio in the range of 13-14%.
Capital Distribution: The Group expects to pay ordinary dividends of around 50% of attributable profit from 2025 and will consider buybacks as appropriate.
Risks and Contingencies:
- Economic Uncertainty: Forward-looking statements are subject to risks including inflation, interest rate changes, and geopolitical developments.
- Climate Risk: Disclosures regarding climate and sustainability metrics involve significant judgment and are not subject to formal IFRS processes.
- Post-Balance Sheet Event: On 1 May 2025, NatWest completed the acquisition of Sainsbury's Bank retail assets (credit cards, personal loans, savings), adding approximately £2.5 billion in gross customer assets and resulting in a day-1 ECL charge of c.£0.1 billion.
- Litigation: An agreement was executed in May 2025 to settle FX litigation in Australia, covered by existing provisions.
Investor Verification Checklist
- Impairment Trends: Verify the sustainability of the 19bps impairment rate against the guidance of <20bps, noting the increase in Stage 3 charges.
- Cost Efficiency: Confirm the ability to maintain the 48.6% cost:income ratio amidst ongoing transformation and integration costs (e.g., Sainsbury's Bank).
- RWA Management: Assess the impact of the £3.8 billion RWA increase on future capital generation and the ability to meet the 13-14% CET1 target.
- Acquisition Integration: Monitor the integration of Sainsbury's Bank assets and the associated day-1 ECL charge impact on Q2 2025 results.
- Dividend Policy: Validate the execution of the 50% payout ratio and potential share buybacks against actual capital generation.