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 £14.70 billion in 2024 from £14.75 billion. Operating pretax profit, however, rose 0.3% to £6.20 billion from £6.18 billion. Total income topped consensus of £14.59 billion, and pretax profit beat consensus of £6.07 billion. Net interest income alone rose 2.0% to £11.28 billion in 2024 from £11.05 billion in 2023.

Operating expenses rose 1.9% to £8.15 billion from £8.00 billion, 3% worse than expected. But impairment losses fell to £359 million from £578 million, 67% lighter than forecast.

Operating profit fell in the Retail Bank to £2.43 billion in 2024 from £2.64 billion a year prior. It picked up in the fourth quarter, however, to £677 million from £585 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 £264 million in 2024 from £291 million a year prior.

In Commercial & Institutional, operating profit increased to £3.59 billion from £3.23 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 £3.83 billion from £3.74 billion, including net interest income of £2.97 billion, up from £2.90 billion. But operating pretax profit fell to £1.49 billion from £1.67 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 £12.9 billion, or 3.6%, to £368.5 billion reflecting a £3.2 billion increase in Retail Banking, of which £2.2 billion relates to the Metro Bank mortgage portfolio, and a £10.0 billion increase in Commercial & Institutional.

Customer deposits grew by £12.2 billion, or 2.9%, during 2024 to £431.3 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 £4.0 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 £15.2-15.7 billion is expected, compared to the £15.5 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.’

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