NatWest Group PLC (LSE: NWG) has reported strong growth in revenue and profit for the first quarter, although competition has led to a decrease in deposits.
The FTSE 100-listed lender described its Q1 2023 performance as “strong,” reporting an operating profit before tax of £1.82bn, up from £1.22bn from the previous year, and surpassing the City’s expected forecast of £1.6bn.
NatWest Group’s Chief Executive, Alison Rose, stated that the Q1 2023 performance was due to the lender’s robust balance sheet, high levels of capital and liquidity, and well-diversified loan book.
Total income increased by 37.2% to £1.04bn, primarily due to volume growth and yield curve movements. The bank also benefited from a rise in net interest margin, which climbed 7 basis points (bps) quarter-on-quarter to 3.27%.
Payday for many, the last Friday of the month, NatWest Group PLC #NWG in the spotlight. This month saw the disclosure of a significant short position taken by one of the world's biggest hedge fund firms against the lender. #London-based Marshall Wace has revealed a record short… pic.twitter.com/G5eqTeTzYH
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However, customer deposits were reduced by £11.1bn or 2.6% during the quarter, reflecting the impact of higher customer tax payments, competition for deposits, and an overall market liquidity contraction.
The CET1 ratio increased by 20 bps to 14.4%, while operating expenses rose by 12.5% due to higher staff costs and the exit from the Republic of Ireland. The lender made a bad debt provision of £70mln but confirmed that default levels remain stable at low levels.
NatWest Group reported an increase in lending to customers of 1.6% to £352.4bn, reflecting £3.9bn of mortgage growth in Retail Banking and a £1.6bn increase in Commercial & Institutional. The return on tangible equity was 19.8%, nearly double last year’s 11.3%, but down from 20.6% in Q4.
The lender has maintained its guidance for the current financial year despite a decline in deposits.
