14th Feb 2025 08:59
(Alliance News) - NatWest Group PLC on Friday said it exceeded its annual outlook although a "conservative" outlook kept a lid on the bank's share price.
Shares in NatWest were 1.8% lower at 429.10 pence each in London on Friday morning. The wider FTSE 100 was down 0.4%.
"Overall a strong set of results, but focus will be on the 2025 outlook, which is broadly in-line with consensus, but appears to be set conservatively in our view," Andrew Coombs, banking analyst at Citi wrote.
The Edinburgh-based lender said total income in 2024 fell 0.3% to GBP14.70 billion in 2024 from GBP14.75 billion. Operating pretax profit, however, rose 0.3% to GBP6.20 billion from GBP6.18 billion. Total income topped consensus of GBP14.59 billion, and pretax profit beat consensus of GBP6.07 billion. Net interest income alone rose 2.0% to GBP11.28 billion in 2024 from GBP11.05 billion in 2023.
Operating expenses rose 1.9% to GBP8.15 billion from GBP8.00 billion, 3% worse than expected. But impairment losses fell to GBP359 million from GBP578 million, 67% lighter than forecast.
Operating profit fell in the Retail Bank to GBP2.43 billion in 2024 from GBP2.64 billion a year prior. It picked up in the fourth quarter, however, to GBP677 million from GBP585 million.
Here, NatWest explained: "Positive income and net interest margin momentum from the benefit of higher product structural hedge margins, [was] partly offset by the impact of interest rate cuts during 2024."
In Private Banking, operating profit fell to GBP264 million in 2024 from GBP291 million a year prior.
In Commercial & Institutional, operating profit increased to GBP3.59 billion from GBP3.23 billion, reflecting deposit margin expansion, customer lending growth and strong customer activity in capital markets underwriting and markets trading income.
Chief Executive Paul Thwaite said the results exceeded upgraded guidance.
"Throughout the year, we made good progress against our strategic priorities by growing all three of our customer businesses, improving productivity and actively managing our capital."
He also welcomed an "accelerated reduction in the government's shareholding."
A separate filing on Thursday showed the UK government's stake in NatWest has fallen below 7% as of Thursday, from just under 8% previously.
In the fourth quarter, total income rose to GBP3.83 billion from GBP3.74 billion, including net interest income of GBP2.97 billion, up from GBP2.90 billion. But operating pretax profit fell to GBP1.49 billion from GBP1.67 billion.
Net interest margin in 2024 was steady at 2.13%, rising from 2.12% in 2023, and rose slightly in the fourth quarter to 2.19% from 2.18% a year prior.
Return on tangible equity declined to 17.5% in 2024 from 17.8% in 2023, but picked up in the fourth quarter to 19.0% from 18.3% a year prior.
The Common Equity Tier 1 ratio of 13.6% was 20 basis points higher than 13.4% at the end of 2023.
Net loans to customers increased by GBP12.9 billion, or 3.6%, to GBP368.5 billion reflecting a GBP3.2 billion increase in Retail Banking, of which GBP2.2 billion relates to the Metro Bank mortgage portfolio, and a GBP10.0 billion increase in Commercial & Institutional.
Customer deposits grew by GBP12.2 billion, or 2.9%, during 2024 to GBP431.3 billion as lower current account balances within Retail Banking and Private Banking partially offset savings growth.
NatWest lifted its final dividend by 35% to 15.5 pence per share, from 11.5p a year prior. It brings the total dividend to 21.5p per share, up 26%.
"For our shareholders, we generated attractive returns and distributed GBP4.0 billion through a combination of dividends and buybacks, with dividends per share increasing by 26%. We have also confirmed that we intend to increase our ordinary dividend payout ratio from 40% to 50% from 2025," the bank added.
Looking to 2025, it expects a return on tangible equity in the range of 15-16%, compared to the 15.7% consensus. In 2024, it delivered a RoTE of 17.5%.
Income excluding notable items to be in the range of GBP15.2-15.7 billion is expected, compared to the GBP15.5 billion market consensus.
Looking to 2027, it expects a RoTE greater than 15%.
Coombs at Citi said: "Similar to Barclays yesterday, the new 2026 guidance is broadly in-line with guidance, but again seems to be based on conservative assumptions. This suggests limited consensus EPS upgrades today – perhaps low-single digit on the non-NII beat – but that there is still potential for upgrades as the year progresses."
By Jeremy Cutler, Alliance News reporter
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