Royal Bank of Scotland owner NatWest suffers first-quarter profit slide but market reaction positive: shares jump

The group posted an operating pre-tax profit of £1.3 billion for the first three months of the year, down 27 per cent from £1.8bn a year earlier, as it became the latest high street lender to feel the effects of more competitive savings and mortgage rates.

Total income fell in the latest quarter as more customers moved money from current accounts and into savings accounts with higher returns. It also came amid greater competition in the mortgage market which has seen rates come down from the highs hit last year.

However, the operating profit figure came in ahead of the £1.2bn that analysts had pencilled in for the quarter, helping to support NatWest’s share price, which was up over 4 per cent in Friday morning trading, and prompting some upbeat comments from analysts.

Richard Hunter, head of markets at Interactive Investor, said the bank had been able to “flex its financial muscles once more”, while maintaining its guidance for the full year. He noted: “There had perhaps been an expectation that there would be an update on the potential retail offer for the government’s remaining stake in NatWest [which now stands at just below 28 per cent as a result of its ongoing trading plan]. Instead, the group stated that it was pleased with the recent momentum in reduction of the stake, edging towards the ‘shared ambition’ of returning NatWest to private ownership. Even so, there is much for investors to appreciate in a generally strong set of numbers.”

John Moore, senior investment manager at wealth firm RBC Brewin Dolphin, added: “Like its peers, NatWest has seen profits fall - but it has still beaten expectations in a more competitive mortgage market and peaking interest rates environment. Costs are stable and returns on equity remain high - albeit, not where they were a year ago.

“The key, as ever, is the sale of the government’s stake, which should be addressed in the near future, and NatWest is in a positive position going into that process.”

NatWest revealed that customer deposits increased by £2bn in the first quarter, reflecting growth in both savings and current account balances since the end of 2023. Total lending grew by £1.4bn, with growth in corporate lending being partially offset by more people paying off their mortgage at the start of the year. The bank also assured that the level of borrowers defaulting on their loans remained low, despite the cost-of-living squeeze.

Chief executive Paul Thwaite, who replaced Alison Rose, who stepped down in the wake of the debanking row involving Nigel Farage last year, said: “Though macro-uncertainty continues, customer confidence and activity is improving, with both lending and deposits up in the quarter and impairments remaining low, reflecting our well-diversified business.

“Our first priority is delivering disciplined growth across our three businesses by serving our customers well. At the same time, we are becoming simpler, more productive and easier to deal with.”

He added: “Returning NatWest Group to private ownership is a shared ambition and we believe it is in the best interests of both the bank and all our shareholders.”