NatWest income and profits substantially up with costs down

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NatWest Group plc (LON:NWG) has announced its Q1 2022 Interim Management Statement.

Chief Executive, Alison Rose, commented:

“The world has changed considerably during the last three months. Our thoughts are with everyone affected by the invasion of Ukraine and we are doing all that we can to support them. We are also very aware of the challenges and concerns the cost-of-living crisis is causing for many of our customers up and down the country. NatWest Group is focused on providing practical help and support for the people, families and businesses we serve.

Despite the challenging environment, I am pleased with our performance as we continue to execute well against our strategy, driving sustainable growth and returns. Income and profits are substantially up, costs are down and we remain well capitalised as we build long-term value and deliver a simpler and better banking experience for our customers.

Government ownership also reduced to around 48% in Q1; the first time it has fallen below 50% since the financial crisis. This was an important milestone for our bank and a further demonstration of the progress we are making as we continue to deliver for our customers and shareholders.”

Strong Q1 2022 operating performance

  • Q1 2022 attributable profit of £841 million and a return on tangible equity of 11.3%.
  • Go-forward group(1) income excluding notable items increased by £219 million, or 8.6%, compared with Q1 2021 principally reflecting volume growth and favourable yield curve movements.
  • Bank net interest margin (NIM) of 2.46% was 15 basis points higher than Q4 2021 principally reflecting the impact of recent base rate rises.
  • Other operating expenses in the Go-forward group were £78 million, or 4.6%, lower than Q1 2021.
  • A total net impairment release of £38 million, £7 million in the Go-forward group, reflected the low levels of realised losses we continue to see across our portfolio, although the economic outlook remains uncertain.

Robust balance sheet with strong capital and liquidity levels

  • Net lending for the Go-forward group increased by £6.7 billion to £359.0 billion in comparison to Q4 2021 principally reflecting Retail Banking mortgage growth of £2.6 billion and a £2.4 billion increase across Commercial & Institutional.
  • Customer deposits for the Go-forward group increased by £4.2 billion in the quarter to £465.6 billon driven by treasury repo activity and continued growth across the segments.
  • RWAs increased by £0.5 billion to £176.8 billion compared with 1 January 2022.
  • CET1 ratio of 15.2% was 70 basis points lower than 1 January 2022, principally reflecting the impact of the directed buyback.
  • The liquidity coverage ratio (LCR) of 167%, representing £83.3 billion above 100%, decreased by 5 percentage points compared with Q4 2021.

Outlook(2)

  • We retain the outlook guidance provided in the 2021 Annual Report and Accounts, although we now expect 2022 income excluding notable items to be comfortably above £11.0 billion in the Go-forward group.

(1)     Go-forward group excludes Ulster Bank RoI and discontinued operations.

(2)     The guidance, targets, expectations and trends discussed in this section represent NatWest Group plc management’s current expectations and are subject to change, including as a result of the factors described in the NatWest Group plc Risk Factors section on pages 406 to 426 of the 2021 Annual Report and Accounts. These statements constitute forward-looking statements. Refer to Forward-looking statements in this announcement.

Our Purpose in action

We champion potential, helping people, families and businesses to thrive. As a relationship bank for a digital world, we are breaking down barriers, building financial confidence and delivering sustainable growth and sustainable returns by living up to our purpose. Some key achievements from Q1 2022:

People and families

–    We supported customers with 2.8 million financial capability interactions in Q1 2022, with 0.2 million financial health checks carried out.

–    Alongside footballer and campaigner Marcus Rashford MBE, we have created a programme designed to support young people in communities across the UK to learn about and develop a positive relationship with money.

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–    Our new Credit Score Predictor allows customers to simulate different scenarios to see the impact these could have on their credit score, supporting them to improve their financial health.

–    The new Round Ups feature in our mobile banking app helps our customers save their small change every time they use their debit card or contactless device. Since its launch in Q1 2022, 644,000 customers have switched the feature on, saving more than £10 million as a result.

–    We are the first UK high street bank to launch a bill-splitting function – Split Bill – in our banking app using Open Banking, making it simple to split bills with friends and family.

–    From 1 February 2022, the Personal Portfolio Funds (PPF), available through NatWest Invest, Royal Bank Invest and Coutts Invest, include a commitment that a minimum of 50% of assets by value in each fund will be on a Net Zero Trajectory(1).

Businesses

–    £5.6 billion of climate and sustainable funding and financing was completed in Q1 2022, bringing the cumulative contribution to £13.6 billion against our target to provide £100 billion between 1 July 2021 and the end of 2025.

–    Collaborating with CoGo, we launched the pilot of an app to selected manufacturing and transport business banking customers to track their carbon footprint using their transaction data.

–    We announced a collaboration with Workplace owner Meta to offer female business owners training and support, as well as opportunities to expand business connections and networks.

–    As part of our commitment to help businesses benefit from the transition to net zero, we announced a new Clean Transport Accelerator hub in collaboration with the Warwick Manufacturing Group (WMG) at the University of Warwick, providing coaching, workspace and access to clean-energy, manufacturing and automotive experts at WMG.

–    We also announced a new Accelerator hub facility offering specialist support to scale-up businesses across London.

Colleagues

–    We have worked with over 11,000 colleagues, customers and community partners to introduce a refreshed set of values that will guide and inspire us in everything we do.

–    The Ignite leadership development programmes were launched for female and Black, Asian and Minority Ethnic colleagues, with 90 places available on both programmes.

–    We have recently been ranked in the top 50 of the Top 100 Employers in Stonewall’s Workplace Equality Index, rewarding our commitment to being an LGBT+ inclusive employer.

Communities

–    In response to the Russian invasion of Ukraine, NatWest Group colleagues and customers have donated £7.9 million (as at the end of Q1 2022) to the Disasters Emergency Committee’s Ukraine Humanitarian Appeal, which includes NatWest Group matching of £2.5 million.

–    As the cost of living rises, we are doing more to help customers in vulnerable situations. Through our partnership with Citizens Advice, 2,100 customers have been referred by the bank and helped with complex advice needs in the last year alone.

–    We announced that we are giving our shareholders their say on climate through the bank’s first climate resolution. The resolution is intended to promote transparency about the bank’s climate ambitions and strategic direction.

–    In Retail Banking, we completed £234 million of Green Mortgages in Q1 2022, rewarding customers for choosing an energy efficient home.

–    We have installed electric vehicle (EV) chargers in 325 parking spaces across our Gogarburn, Liverpool, Bristol and Belfast offices – the early actions of our goal to have EV charging available for 15% of our car parking spaces by 2025.

–    NatWest Group and NatWest Markets Group won four titles in the 2022 Environmental Finance Bond Awards. The awards won reflect the bank’s impactful role as both an issuer and intermediary.

(1)     Net Zero Trajectory is a commitment, credible plan or action taken to achieve net zero greenhouse gas emissions by 2050.

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