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NatWest has reported an increase in annual profits after its loan book grew, margins improved and defaults remained low, despite the UK economy faltering in the second half of last year.
The lender on Friday announced net income of £4.8bn for 2024, up from £4.6bn the previous year.
Its net interest margin — the difference between the interest it receives on loans and the rate it pays for deposits — rose slightly to 2.19 per cent, from 2.18 per cent in the previous quarter, thanks to its so-called structural hedge that offsets the waning benefits of falling rates.
“Against an uncertain external backdrop, we made good progress on our strategic priorities, grew all three of our customer businesses and saw an acceleration in the reduction of the UK government’s shareholding,” said chief executive Paul Thwaite in a statement.
NatWest’s operating expenses rose 5.2 per cent year on year to £2.3bn, as the group flagged “higher severance costs and higher property exit costs”.
The UK government is winding down its stake in the lender, which it rescued with a £46bn bailout at the height of the financial crisis, when it was known as RBS.
The Treasury said on Friday that it had sold more shares in the bank. It now holds just under 7 per cent, down from 38 per cent in December 2023, and is expected to sell its remaining shares over the coming months.
“2025 is also likely to be the year that NatWest Group returns to full private ownership,” said Thwaite. “The acceleration towards privatisation has attracted investment from those that share our growth ambition and will mark a new, forward-looking chapter for the bank.”
A return to full private ownership is expected to liberate NatWest to pursue growth more aggressively. Thwaite has signalled that he is open to acquiring new businesses.
Under his leadership, the high street lender has bought the bulk of Sainsbury’s Bank to expand its unsecured lending business, which lacks scale compared with peers. It also bought £2.5bn of prime residential mortgages from Metro Bank.
NatWest’s return on tangible equity — a key measure of profitability — slipped slightly to 17.5 per cent last year, although its loan and deposit books both grew. It had previously targeted 13 per cent by 2026, but now expects the measure to be above 15 per cent at the end of 2027.
The bank also announced a 26 per cent increase in its full-year dividend to 21.5p, and said it planned to increase the proportion of profits that it pays out as dividends from 40 per cent to 50 per cent.
The results come a year after Thwaite was confirmed as chief executive on a permanent basis. He had been installed as interim head in July 2023 after his predecessor, Dame Alison Rose, abruptly stepped down following political uproar over the “debanking” of Nigel Farage by NatWest’s private bank Coutts.
Shares in NatWest have more than doubled in value over the past year, with increased lending and an upgrade to its profit targets in October.
