Stock prices of Natwest surged, fueled by an increase in stamp duty transactions and market turmoil, amplifying the bank's earnings.
Revved-Up NatWest Reports Q1 Profits
Banking giant NatWest outshone analyst predictions, raking in a whopping £1.8bn pre-tax profit, compared to the £1.6bn expected. With shares soaring over 3% during early trading on Friday, it's clear the market’s feeling the buzz.
Total revenue climbed a robust 3.8% to hit £4bn. An increase of £3.4bn in net loans to customers, excluding central items, boosted the figure to £371.9bn, propelled by a massive surge in mortgage lending. As Brits raced to meet the March 31 deadline for the Chancellor Rachel Reeves’ stamp duty changes, NatWest struck gold.
The deadline reworked the zero rate thresholds for main residences, plummeting from £250k to £125k, with first-time homebuyer thresholds taking a tumble from £425k to £300k.
The bank's net interest margin, a critical gauge for a bank’s profitability, expanded 8 basis points from the end of 2024, settling at 2.27%. The trading income rocketed £218m from the fourth quarter in 2024, hitting £284m, propelled by geopolitical tension ignited by Donald Trump’s fiery rhetoric.
Trump's aggressive speeches sparked market downturns, primed by recession fears that piqued investor anxiety.
NatWest netted a handsome £56m in commercial and institutional revenue, representing a 2.7% increase compared to the fourth quarter in 2024. The bank attributed this rise to brisk client activity in markets.
Operating expenses took a tumble, down 8.5% to £2bn, thanks to the bank's citation of the seasonally high costs of the last quarter. Expenses slipped £93m lower compared to the first quarter in 2024.
John Moore, senior investment manager at RBC Brewin Dolphin, commended NatWest's performance: "NatWest’s recent success has been spurred by relentless cost-cutting, maintaining simplicity, and preserving a tight capital base. This fortifies the bank’s balance sheet and establishes a firm foundation for growth."
"As some of its peers mull over retreating from the UK, this potential vacuum may open up opportunities for acquisitions or expansion, thus providing additional scale while sticking to the pillars of the bank’s strategy," added Moore.
In response to the lingering economic uncertainties, NatWest boosted provisions similar to its FTSE 100 contemporaries like HSBC, Barclays, and Lloyds. Expected credit loss increased by £100m to £3.5bn, retaining post-model adjustments of £0.3bn related to economic uncertainty, accounting for 8.7% of total impairment provisions.
Peering into the future, NatWest firmed up its 2025 guidance. The bank anticipates income to settle at the higher end of its initial range of £15.2bn to £15.7bn. The lender also expects Return on Tangible Equity (RoTE) to remain at the higher end of the 15 to 16% range.
With the UK government having slashed its stake in NatWest Group to less than 2%, a full privatization is on the horizon. The exact timeline isn’t specified, but the bank is edging closer to shedding its government-owned status, fifteen years and a bailout after the 2008 financial crisis.
Paul Thwaite, NatWest's CEO, expressed optimism: "In spite of growing global economic uncertainties, customers remain resilient, and we witnessed robust activity throughout the first quarter of 2025. Our balance sheet's strength enables us to assist customers in navigating any challenges while continuing to invest in our business and reward our shareholders. As the government pursues economic growth, NatWest Group stands ready to play a crucial role, laying the groundwork as a key partner to our customers and to the UK itself."
- The banking giant, NatWest, surpassed analyst expectations, reporting a pre-tax profit of £1.8bn for Q1.
- Revenue climbed 3.8% to £4bn, with an increase of £3.4bn in net loans to customers boosting the figure.
- Mortgage lending played a significant role in the surge, stemming from Brits racing to meet the March 31 deadline for changes to stamp duty thresholds.
- The bank's net interest margin expanded 8 basis points, settling at 2.27%.
- Geopolitical tension, fueled by Donald Trump's rhetoric, contributed to a £218m increase in trading income.
- John Moore, senior investment manager at RBC Brewin Dolphin, commended NatWest's cost-cutting and strategic moves that fortified the bank's balance sheet and provided a solid foundation for growth.
- In response to economic uncertainties, NatWest increased provisions to match those of its FTSE 100 counterparts.
- With the government's stake in NatWest Group diminished, full privatization may be imminent, signaling the end of the bank's government-owned status fifteen years after the 2008 financial crisis.
