Natwest narrowly beats profit expectations as it posts bump in consumer lending

Natwest has marginally surpassed analysts' annual profit expectations, following a surge in its consumer lending.

The FTSE 100 lender reported a pre-tax profit of £6.2bn, slightly above the £6.1bn predicted by analysts and marking a 0.3 per cent increase on 2023, as reported by City AM.

Customer loans reached £368.5bn, a rise of £12.9bn, reflecting Natwest's acquisition of Metro Bank's mortgage portfolio. The bank saw a £3.2bn increase in retail banking loans, with £2.2bn relating to the portfolio acquisition.

In Q4 alone, consumer lending rose by £4.8bn, which the bank attributed to growth within corporate and institutions and higher retail banking mortgage balances.

Despite falling interest rates, Natwest managed to expand its net interest margin by one basis point to just over two per cent in 2024.

Operating expenses rose by £330m in the final quarter, compared to the same period last year, which the bank said was due to the annual Bank Levy and property exit costs.

The UK Government has also reduced its stake in NatWest Group to 6.98 per cent after selling nearly 80m shares.

This is part of the Government's ongoing plan to gradually reduce its ownership in Natwest, which began after the 2008 Financial Crisis.

The Government injected £45.5bn into the Royal Bank of Scotland, Natwest’s parent company, after it required a bailout.

In November 2024, the Government sold £1bn worth of Natwest shares back to the bank, reducing its stake from 14.2 per cent to 11.4 per cent.

Natwest has projected further profits, stating that it expects to generate a return on tangible equity of 15 to 16 per cent in 2025.

The Big Four bank proposed a final dividend of 15.5p per share, bringing the total for the year to 21.5p, up 26 per cent from 2023.

Gary Greenwood, Equity Analyst, commented: "The dividend policy will change with a 50 per cent payout ratio now targeted versus 40 per cent previously, which will drive a consensus dividend forecast upgrade. Buybacks will continue to be considered."

He added: "The shares have had a very strong run over the past year and into these results so we would expect a neutral to slightly positive reaction this morning."

Zoe Gillespie, RBC Brewin Dolphin’s investment manager, said: "Natwest is in fine fettle. The bank has beaten expectations, exceeding its own upgraded guidance for 2024, while the government has accelerated the reduction of its stake."

She continued: "On this trajectory, Natwest could potentially return to full private ownership this year and, with that, new opportunities may open up to the bank."

She concluded: "Natwest has built a solid foundation for its next era and, all things being equal, should be free of the distractions of the past."

Paul Thwaite, chief executive, commenting on the annual results, said: "We have positive momentum behind us and a clear ambition to succeed with customers as we continue to build a simpler, more integrated and technology-driven bank that is capable of even greater impact.

"As we enter a new, forward-looking chapter for Natwest Group, I am optimistic about the opportunities ahead of us to grow our business as a vital and trusted partner to our customers and the UK itself and, in doing so, create further value for our shareholders."

The announcement comes in the wake of Nigel Farage revealing that he is considering private criminal proceedings against Natwest following the debanking controversy earlier this year, as initially reported by Sky News' Mark Kleinman.

This follows the decision by the bank's subsidiary Coutts to close Farage's account, sparking debate over whether the closure was due to commercial or political reasons.