Natwest shares jump as stamp duty rush and market chaos boost income
Natwest beat analysts’ first-quarter profit expectations after market volatility and a rush to beat stamp duty boosted takings.
The FTSE 100 giant booked a £1.8bn pre-tax profit, surpassing the £1.6bn pencilled in by analysts.
Shares in the lender rose over three per cent during early trading on Friday.
Total income rose 3.8 per cent to £4bn.
Net loans to customers, excluding central items, increased by £3.4bn to £371.9bn. This was driven by a surge in mortgage lending, as Brits flocked to beat the March 31 deadline.
Chancellor Rachel Reeves changed zero rate thresholds for main residences, which dropped from £250k to £125k with first-time homebuyer thresholds dropping from £425k to £300k.
The firm’s net interest margin – a key metric for a banks profitability from lending – expanded eight basis points from the end of 2024 to 2.27 per cent.
The firm’s trading income increased £218m from the fourth quarter of 2024, hitting £284m. This was on the back of geopolitical tensions triggered by President Donald Trump’s bombastic rhetoric.
Trump triggered numerous market sell-offs after recession fears spooked investors.
Natwest pocketed £56m in commercial and institutional revenue, 2.7 per cent higher than the fourth quarter of 2024, which the bank said reflected strong customer activity in markets.
Meanwhile, operating expenses fell 8.5 per cent lower to £2bn, as the bank cited the “seasonally high costs” of the last quarter. Costs were £93m lower than the first quarter in 2024.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “Natwest’s recent success has been built on cutting costs, simplicity, and keeping its capital base tight, providing it with a strong balance sheet and solid foundation to build on.
“With some of its peers potentially retreating from the UK, that may open up opportunities for acquisition or other forms of expansion, which would provide further scale while sticking to the three pillars of the bank’s strategy.”
Natwest ups provisions after economic turmoil
Whilst Trump’s ‘Liberation Day’ levies narrowly missed the first quarter, Natwest followed suit with FTSE 100 peers HSBC, Barclays and Lloyds in making provisions.
Expected credit loss increased by £100m to £3.5bn.
The bank said: “We retain post model adjustments of £0.3bn related to economic uncertainty, or 8.7 per cent of total impairment provisions.”
Looking to the future, Natwest upped its guidance for 2025. The lender said it expects income to be at the higher end of its initial guidance of £15.2bn to £15.7bn.
The firm also said it expects return on tangible equity to be at the higher end of 15 to 16 per cent.
Natwest is expected to fully enter private ownership in the coming months, as the government continues to whittle down its historic stake in the bank.
Paul Thwaite, chief executive of Natwest, said: “In the face of increased global economic uncertainty, our customers remain resilient and we saw good levels of activity through Q1 2025.”
He added: “The strength of our balance sheet means we are well placed to help our customers navigate any challenges, whilst also investing in our business and delivering returns to shareholders.
“At a time when there is a clear intent to deliver economic growth, NatWest Group is able to play an important role, shaping our future as a vital and trusted partner to our customers and to the UK itself.”