NatWest Group Plc Q1 2025 Performance Summary
Business Context and Reporting Period
This Form 6-K filing covers the first quarter of 2025 (ended March 31, 2025) for NatWest Group Plc, a UK-based banking group. The report details financial performance, risk management, and capital adequacy. Management highlights strong momentum across Retail Banking, Private Banking, and Commercial & Institutional segments, driven by deposit margin expansion and balance growth. The UK Government's stake in the group has reduced to less than 2%.
Key Financial Metrics
| Metric | Q1 2025 | Q4 2024 | Q1 2024 |
|---|---|---|---|
| Attributable Profit | £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% |
| Total Income (excl. notable items) | £3,952 million | £3,872 million | £3,414 million |
| Net Interest Margin (NIM) | 2.27% | 2.19% | 2.05% |
| Operating Expenses (excl. litigation) | £1,935 million | £2,114 million | £2,028 million |
| Net Impairment Charge | £189 million | £66 million | £93 million |
| 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
- Profitability: Attributable profit increased 36.4% year-over-year (YoY) to £1,252 million, driven by higher income and lower operating costs. RoTE of 18.5% exceeds the upper end of the 2025 guidance range (15-16%).
- Income: Total income excluding notable items rose 2.1% quarter-over-quarter (QoQ) and 15.8% YoY. Growth was primarily due to deposit margin expansion and increased trading income, partially offset by two fewer days in the quarter.
- Costs: Other operating expenses decreased 8.5% QoQ and 4.6% YoY, reflecting lower strategic costs related to property exits and the timing of business transformation.
- Impairments: Net impairment charges increased to £189 million (19 basis points of gross loans) compared to £66 million in Q4 2024, driven by higher Stage 3 charges and reduced good book releases, though default levels remain stable.
- Balance Sheet: Net loans to customers (excl. central items) grew by £3.4 billion to £371.9 billion, led by mortgage growth in Retail Banking and lending in Commercial & Institutional. Customer deposits increased by £2.1 billion.
Guidance, Outlook, and Risks
2025 Guidance Update: Management now expects to achieve the upper end of its previously guided ranges for both income (£15.2-15.7 billion) and RoTE (15-16%). Group operating costs are expected to be around £8.1 billion. The loan impairment rate is expected to remain below 20 basis points.
Capital and Dividends: The CET1 ratio target remains 13-14%. 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: Management notes increased global economic uncertainty and geopolitical risks, maintaining post-model adjustments of £0.3 billion (8.7% of total provisions) to cover these risks.
- Litigation: Litigation and conduct costs were £44 million in Q1 2025. A settlement regarding FX litigation in the Federal Court of Australia was executed in May 2025, fully covered by existing provisions.
- Acquisition: The acquisition of Sainsbury's Bank retail assets completed on May 1, 2025. This adds approximately £2.5 billion in gross customer assets and is expected to decrease the CET1 ratio by 16 basis points.
Key Facts for Investor Verification
- RoTE Achievement: Verify the sustainability of the 18.5% RoTE against the revised upper-end guidance of 15-16% for the full year.
- Impairment Trends: Monitor the net impairment charge of £189 million and the 19 basis points loan impairment rate to ensure it remains below the 20 basis points guidance target.
- Cost Efficiency: Confirm that operating costs remain on track for the £8.1 billion full-year target, particularly regarding ongoing transformation and property exit costs.
- Capital Impact of Acquisition: Assess the impact of the Sainsbury's Bank acquisition on the CET1 ratio and RWAs in subsequent reporting periods.
- Deposit Margin Sustainability: Evaluate the durability of the deposit margin expansion driving NIM growth in a potentially changing interest rate environment.