By Lawrence White and Sinead Cruise
LONDON (Reuters) – NatWest reported a forecast-beating 36% rise in first-quarter profit on Friday, thanks to healthier margins on deposits and higher loan balances, enabling the lender to upgrade a key return target despite rising economic uncertainty.
While other UK banks nervously await the economic fallout from the highest U.S. trade tariffs in decades, NatWest benefited from its focus on domestic, services-based corporate customers in the period, sending its shares as much as 4% higher in early trading.
“Our strong first quarter performance demonstrates the positive momentum in our business as we deliver against clear strategic priorities, and we now expect to be at the upper end of our income and returns guidance for 2025,” Chief Executive Paul Thwaite said.
The bank reported operating profit before tax for January-March of 1.8 billion pounds ($2.40 billion), up from 1.3 billion pounds in the same period a year ago and better than analysts’ average forecast of 1.6 billion pounds.
It posted a first-quarter return on tangible equity of 18.5% compared with 14.2% a year ago, and said its full-year ROTE would be at the top end of previous 15-16% guidance.
NatWest shares were trading 2.1% higher at 0743 GMT, compared with a 0.7% rise in the FTSE 100. The stock has risen more than 22% so far in 2025 but, at 486.5 pence, remains some way short of its 502 pence bailout price.
Thwaite told reporters he felt confident NatWest could use excess capital to grow its business organically after completing a deal to buy Sainsbury’s Bank on Thursday that added 2.5 billion pounds in customer loans and 1 million customer accounts. Fresh dealmaking faced “a very high bar”, he said.
The results come as NatWest prepares to return fully to private ownership for the first time since its state rescue at the height of the 2008 financial crisis.
The bank’s chairman earlier in April said the lender’s upcoming exit from state ownership represents an inflection point for the bank, as it pivots from years of post-crisis restructuring to a domestic growth-focused strategy.
The government’s stake in NatWest fell below 2% on Thursday. It has cut its shareholding from nearly 40% in December 2023. Thwaite said the board would review potential for share buybacks at the half-year.
BUSINESS SENTIMENT WEAKENS
The domestic focus has so far insulated NatWest from the deepening global trade tensions, although it is on alert for economic shocks across Britain, where business sentiment has fallen to its lowest in three months, and the government has put pressure on the financial sector to support its growth agenda.
NatWest booked a net impairment charge of 189 million pounds, with default levels at 19 basis points of the overall loan book, within its guidance of under 20 basis points, and said levels of default were stable.
KBW Analysts noted there were no additional impairments for tariff-related risks, but Thwaite and Chief Financial Officer Katie Murray told reporters they were confident NatWest was comfortably positioned in terms of provisions.
Around 70% of the bank’s corporate credit exposure was to the services sector, which is so far less impacted by tariffs, Murray said. Customers exporting to the U.S. accounted for a low single-digit percentage of lending and assets, Thwaite added.
Bank of England data on Thursday showed a surge in mortgage borrowing in the first quarter as buyers pushed to seal property purchases before a change in UK stamp duty taxes.
Quilter Cheviot analysts said they expected the spike in borrowing to be anomalous, with an equally sharp slowdown likely in the coming months.
($1 = 0.7512 pounds)
(Reporting by Lawrence White and Sinead Cruise. Editing by Mark Potter)
