NatWest Group PLC (NWG) Q2 2024 Earnings Call Transcript

Daily EarningsSaturday, Jul 27, 2024 12:45 pm ET

2min read

In the first half of 2024, NatWest Group, one of the leading financial institutions, delivered a strong performance, as evidenced by a significant increase in income and a disciplined approach to managing costs and capital. The company's strategic initiatives, including acquisitions and organic growth, position it well for future growth and long-term shareholder value creation.

Financial Performance and Strategic Priorities

Paul Thwaite, Chief Executive Officer of NatWest Group, highlighted the company's strong financial performance in the first half of 2024, with income reaching £7 billion, operating profit before tax of £3 billion, and attributable profit of £2.1 billion. This growth was underpinned by a disciplined approach to lending and a focus on supporting customers, as evidenced by an increase in customer base by over 200,000. The company also announced a reduction in its government shareholding to less than 20%, signaling a move towards privatization.

NatWest Group's strategic priorities include disciplined growth, bank-wide simplification, and active balance sheet and risk management. These priorities are evident in the company's acquisition of a £2.5 billion portfolio of prime UK residential mortgages from Metro Bank, which is expected to close in the second half of the year. Additionally, the company's focus on improving efficiency, such as reducing the number of telephony systems from 20 to 5, and enhancing digital transformation, underscores its commitment to streamlining operations and improving customer experience.

Customer Activity and Market Trends

NatWest Group's strong financial performance is supported by robust customer activity across both sides of the balance sheet. Deposit growth across the three businesses exceeded £6 billion, and record flows to ISRE accounts were recorded. The company's disciplined approach to lending and focus on customer needs have resulted in low arrears and stable retention levels. These trends reflect the improving consumer and business confidence and the positive impact of higher interest rates.

The company's market share in unsecured lending increased to 9%, and it is expected to grow further with the acquisition of Sainsbury's Bank. This expansion into the unsecured lending market underscores NatWest Group's strategic focus on diversifying its revenue streams and catering to the evolving needs of its customers.

Capital Management and Dividend Policy

NatWest Group's capital management strategy is a key driver of its financial strength. The company's Common Equity Tier 1 ratio remains within its target range, and it has announced an interim dividend of 6p, up 9% on the previous year. This dividend, along with the £300 million on-market buyback completed in February, reflects the company's commitment to generating capital and returning value to shareholders.

The company's disciplined capital management strategy, including active risk asset management and the reduction of risk-weighted assets, has enabled it to maintain a strong capital position. This focus on capital generation will continue to support the company's strategic priorities and enable it to optimize shareholder returns.

Looking Ahead

NatWest Group's strong financial performance in the first half of 2024 and its strategic initiatives position it well for future growth. The company's disciplined approach to growth, focus on efficiency, and active balance sheet and risk management will continue to drive value for shareholders. The acquisition of Metro Bank's mortgage portfolio and the expected completion of the Sainsbury's Bank transaction underscore the company's strategic focus on expanding its presence in key markets and diversifying its revenue streams.

Looking ahead, NatWest Group's confidence in its performance and outlook is reflected in its upgraded guidance for 2024. The company's focus on disciplined growth, bank-wide simplification, and active balance sheet and risk management will continue to support its financial strength and create value for all stakeholders.

In conclusion, NatWest Group's strong performance in the first half of 2024 and its strategic initiatives underscore its commitment to delivering long-term value for shareholders. The company's disciplined approach to growth, focus on efficiency, and active capital management will continue to drive its financial strength and support its strategic priorities. With a clear focus on customer needs and a disciplined approach to risk management, NatWest Group is well positioned for future growth and success.

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