Natwest Group Plc ((NWG)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for NatWest Group Plc painted a picture of robust financial health, marked by significant growth in income, lending, and an expanding customer base. The company demonstrated improved cost efficiency, although it faced challenges with deposit stability and mortgage margin pressure. Despite these hurdles, the overall sentiment was positive, underscoring the company’s growth and profitability.
Strong Lending Growth
Lending at NatWest has seen a substantial increase, growing by 4.4% since the year-end to reach GBP 388 billion. The bank reported a notable rise in mortgage lending, which increased by over GBP 5 billion in the first nine months. Unsecured lending also saw a significant boost, growing by GBP 2.9 billion or 17.3%, while commercial and institutional lending rose by GBP 7.9 billion or 5.5%.
Robust Income and Profit Growth
NatWest’s income surged to GBP 12.1 billion, marking a 12.5% increase compared to the first nine months of the previous year. The operating profit stood at GBP 5.8 billion, with an attributable profit of GBP 4.1 billion. The return on tangible equity was reported at an impressive 19.5%.
Increased Customer Base and Engagement
The bank successfully attracted 70,000 new customers during the quarter. It made significant strides in integrating Sainsbury’s customers and enhancing customer engagement through the NatWest app, reflecting a growing and engaged customer base.
Capital and Shareholder Returns
NatWest reported a CET1 ratio of 14.2% and announced a new share buyback of GBP 750 million, half of which has already been completed. Earnings per share increased by 32.4% year-on-year, highlighting strong shareholder returns.
Improved Cost Efficiency
The cost/income ratio improved by 5 percentage points to 47.8%. Although operating expenses grew slightly by 1% due to integration costs, the overall cost management was effective, demonstrating improved cost efficiency.
Deposit Stability Challenges
The bank faced challenges with deposit stability as retail banking deposit balances decreased by GBP 0.8 billion. This was attributed to lower fixed-term saving balances following large maturities, indicating some instability in the deposit mix.
Mortgage Margin Pressure
NatWest’s mortgage margins are under pressure due to intense competition, with new writing falling below the average book margin of 70 basis points, posing a challenge to the bank’s profitability in this segment.
Impairment Charges
The bank reported a net impairment charge of GBP 153 million for the third quarter, which is equivalent to 15 basis points of loans on an annualized basis, reflecting cautious provisioning amid economic uncertainties.
Forward-Looking Guidance
Looking ahead, NatWest Group has provided an optimistic full-year guidance for 2025, expecting total income, excluding notable items, to reach approximately GBP 16.3 billion. The bank anticipates a return on tangible equity greater than 18%. Lending is projected to grow by 4.4% to GBP 388 billion, with mortgage and unsecured lending playing a significant role. Deposits are expected to rise by 0.8% to GBP 435 billion, and assets under management are forecasted to increase by 14.5% to GBP 56 billion. The cost/income ratio is expected to improve further, supported by a 2.5% increase in costs to GBP 5.9 billion. NatWest plans to complete a GBP 750 million share buyback by the end of the year.
In conclusion, NatWest Group Plc’s earnings call highlighted a strong financial performance with significant growth across various sectors, despite facing some challenges. The positive sentiment was driven by robust income and profit growth, an expanding customer base, and effective cost management. The forward-looking guidance suggests continued optimism for the bank’s future performance.