NatWest Group plc Q3 FY2025 earnings call

Management Statement and Operational Highlights:

• Strong Q3 performance with income up 12.5% in 9 months to GBP 12.1 billion. Operating profit GBP 5.8 billion, attributable profit GBP 4.1 billion.
• Lending grew across segments: mortgage lending up over GBP 5 billion, unsecured lending up GBP 2.9 billion, commercial/institutional lending up GBP 7.9 billion.
• Deposits grew 0.8% to GBP 435 billion. Cost/income ratio reduced by 5 percentage points to 47.8%. Capital generation of 202 basis points in 9 months, CET1 ratio 14.2% at end of Q3.

Segment Performance:

• Retail Banking: Mortgage lending up over GBP 5 billion in 9 months, unsecured lending grew GBP 2.9 billion (17.3%). Deposits had mixed trends with retail deposits down but current accounts up.
• Private Banking and Wealth Management: Assets under management and administration grew 14.5% to GBP 56 billion. Noninterest income increased due to higher investment management fees.
• Commercial and Institutional: Lending growth of GBP 7.9 billion (5.5%) in areas like infrastructure and sustainable finance. On track to meet 2030 climate and transition finance target with GBP 7.6 billion towards it.

Guidance:

• Revised full-year income to around GBP 16.3 billion and return on tangible equity to greater than 18%.
• Expect 1 further base rate cut this year, reaching 3.75% by year-end.
• Lending growth expected to continue with balanced growth across segments.

Risks:

• Market volatility impacting noninterest income.
• Regulatory changes affecting capital requirements and RWA.
• Deposit and funding dynamics, including potential impacts from interest rate changes and customer behavior.

Q: On deposits, talk about deposit momentum and pricing decisions, and trajectory for deposits going forward. On noninterest income, discuss momentum and business drivers.

A: Paul Thwaite said deposits up ~1% YTD with different trends in segments. Retail had fixed term outflows but current accounts up. Noninterest income has good momentum in areas like cards, payments, and C&I markets.

Q: On costs and capital, talk about cost growth and CRD impact.

A: Paul Thwaite mentioned cost momentum from simplification efforts. Katie Murray discussed CRD impact timing and capital management approach.

Q: On 2026 income drivers and longer-term targets, discuss structural operating leverage.

A: Katie Murray said confident in income growth trajectory, Paul Thwaite mentioned sharing '28 targets in February and confidence in operating leverage.

Q: On NatWest Markets and loan growth, discuss noninterest income strategy and lending momentum.

A: Katie Murray talked about NatWest Markets strategy benefits, Paul Thwaite discussed lending growth track record and broad-based growth.

Q: On equity Tier 1 and deferred tax assets, discuss capital targets and DTA utilization.

A: Katie Murray discussed CET1 buffer and DTA utilization expectations.

Q: On NII and NIM, clarify funding and asset margin drivers.

A: Katie Murray explained funding and asset margin components and their impact.

Q: On liquidity and deposits, discuss spread pickup and maturity issues.

A: Paul Thwaite and Katie Murray talked about liquidity portfolio and deposit maturity dynamics.

Q: On returns and M&A, discuss appropriate return levels and inorganic growth.

A: Paul Thwaite discussed balance between returns, customer support, and investment.

Q: On capital return and hedge maturity, discuss dividend payout and hedge duration.

A: Katie Murray talked about dividend policy and hedge duration based on behavioral assumptions