NatWest Q1 2023 posts a strong set of numbers and easily beat analyst forecasts. The only cloud on the horizon is a drop in deposits reflecting a competitive market and an overall market liquidity contraction. Specifically, customer deposits reduce by £11.1bn, or 2.6%, in the quarter.

Pre-tax profits rise by 50% y-o-y to £1.8bn with profits after tax ahead by 48% y-o-y to £1.34bn.

NatWest Q1 2023 earnings highlights

  • Net interest margin (NIM) of 3.27% is 7 basis points higher than Q4 2022;
  • Net loans to customers increase by £7.9bn in Q1 2023. This primarily reflects £3.9bn of mortgage lending growth in retail banking and a £1.6bn increase in Commercial & Institutional;
  • Total income increases by 28.9% y-o-y to £3,877bn;
  • Private banking delivers a return on equity of 28.5%, and an operating profit of £133m up 62% y-o-y;
  • NatWest’s cost-income ratio improves by more than 7 percentage points from 57.1% ((Q1 2022) to 49.8%

CEO Alison Rose said: “NatWest Group’s strong performance in Q1 2023. This is underpinned by our robust balance sheet, our high levels of capital and liquidity and our well-diversified loan book. Through a period of significant macro disruption and uncertainty, we continue to stand alongside the people, families and businesses we serve, providing targeted support and growing our lending responsibly.

“Our disciplined and consistent approach to risk management means that arrears and impairments remain low. By monitoring customer behaviour and looking closely for signs of financial distress, we are able to put in place proactive measures to help those who are struggling right now and those who are worried about the future.”

NatWest maintains full year guidance

NatWest continues to target a return on tangible equity of 14-16%. Income excluding notable items is expected to be around £14.8b with and full year net interest margin of around 3.20%, based on a Bank of England base rate of 4.25% through the remainder of 2023. It expects to deliver a cost: income ratio below 52% or around £7.6 bn of operating costs, excluding litigation and conduct costs. Impairment losses in 2023 are expected to be in line with its through the cycle guidance of 20-30 basis points.