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01/11 04:04
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A session indicate a generally positive outlook. Financial performance and market strategy are strong, with income growth expected beyond 2025 and a focus on strategic areas like payments and wealth. Despite some uncertainties in cost guidance and CET1 targets, the bank's strong operating leverage and loan growth support a positive sentiment. The lack of immediate guidance updates is offset by the bank's confidence in its strategic direction and capital generation, suggesting a positive stock price movement in the short term.
Lending Growth Lending has grown 4.4% since the year-end to GBP 388 billion, in line with the annual growth rate of more than 4% over the past 6 years. Growth was broad-based across 3 businesses, with an additional 70,000 new customers in the quarter. Mortgage lending increased by more than GBP 5 billion for the first 9 months due to new offers for first-time buyers and family-backed mortgages. Unsecured lending grew GBP 2.9 billion or 17.3%, supported by the integration of Sainsbury's customers.
Commercial & Institutional Lending Lending grew GBP 7.9 billion or 5.5% in areas such as infrastructure, social housing, and sustainable finance. GBP 7.6 billion was delivered towards the 2030 group climate and transition finance target of GBP 200 billion.
Deposits Deposits grew 0.8% to GBP 435 billion as customers managed their savings across cash deposits and investments. Assets under management and administration increased 14.5% to GBP 56 billion, contributing to growth in noninterest income.
Income Income grew to GBP 12.1 billion, 12.5% higher than the first 9 months last year, driven by customer activity, higher fees from payments, cards, and good performance in currencies and capital markets.
Costs Costs increased 2.5% to GBP 5.9 billion, resulting in an operating profit of GBP 5.8 billion and attributable profit of GBP 4.1 billion. The cost/income ratio was reduced by 5 percentage points to 47.8%.
Return on Tangible Equity (RoTE) RoTE was 19.5%, reflecting strong financial performance.
Earnings Per Share (EPS) EPS grew 32.4% year-on-year, and TNAV per share increased 14.6% to 362p.
Third Quarter Income Income, excluding notable items, was up 3.9% at GBP 4.2 billion. Total income increased 8.2%, including GBP 166 million of notable income items. Net interest income grew 3% or GBP 94 million to GBP 3.3 billion, driven by lending growth and margin expansion.
Operating Expenses Operating expenses were 2.1% lower at GBP 2 billion due to lower litigation and conduct charges.
Impairment Charge The impairment charge was GBP 153 million or 15 basis points of loans, with no significant concerns about the credit portfolio.
Capital Generation The CET1 ratio ended at 14.2%, up 60 basis points from the second quarter. Risk-weighted assets decreased by GBP 1 billion to GBP 189.1 billion, contributing to strong capital generation.
Mortgage Lending: Increased by more than GBP 5 billion in the first 9 months, with new offers for first-time buyers and family-backed mortgages, and collaboration with buy-to-let specialists.
Unsecured Lending: Grew by GBP 2.9 billion or 17.3%, with integration of Sainsbury's customers into NatWest app.
Sustainable Finance: Delivered GBP 7.6 billion towards the 2030 group climate and transition finance target of GBP 200 billion.
Customer Growth: Attracted 70,000 new customers in the quarter.
Commercial & Institutional Lending: Grew by GBP 7.9 billion or 5.5%, focusing on infrastructure, social housing, and sustainable finance.
Cost/Income Ratio: Reduced by 5 percentage points to 47.8%.
Capital Generation: Generated 202 basis points of capital in 9 months, with a CET1 ratio of 14.2%.
Integration Costs: GBP 68 million spent on integration costs for the first 9 months.
Share Buyback: Announced GBP 750 million share buyback, with 50% completed.
Income Guidance: Revised full-year income guidance to GBP 16.3 billion and returns to greater than 18%.
Inflation and Economic Conditions: Inflation remains above the Bank of England's 2% target, which could impact customer spending and borrowing behaviors. Although the economy is growing and unemployment is low, these conditions could change, affecting the bank's performance.
Regulatory and Base Rate Changes: The bank assumes one further base rate cut this year, which could impact net interest margins and overall income. Regulatory changes like CRD IV model inflation also pose challenges to risk-weighted asset management.
Loan Impairments: The bank reported a net impairment charge of GBP 153 million for the quarter, reflecting potential risks in the loan portfolio. While provisions are deemed adequate, economic uncertainty could lead to higher impairments.
Deposit and Savings Trends: Retail banking deposit balances decreased by GBP 0.8 billion, and private banking balances reduced by GBP 0.7 billion as customers diversified into investments or made tax payments. This trend could impact liquidity and funding.
Integration Costs and Simplification: The bank incurred GBP 68 million in integration costs for the first 9 months, with higher expenses expected in Q4. These costs could strain operational efficiency and profitability.
Market Competition: The competitive market for deposits and savings could pressure margins and customer retention, impacting the bank's ability to grow deposits and maintain profitability.
Full Year Income Guidance: The company has revised its full year income guidance to around GBP 16.3 billion, reflecting continued positive momentum and a clearer line of sight to the year-end.
Return on Tangible Equity (ROTE): The company now expects ROTE for the full year to be greater than 18%, an upgrade from previous expectations.
Net Interest Margin: Net interest margin is expected to benefit from deposit margin expansion and funding and treasury activities, despite the assumption of one further base rate cut this year, with rates reaching 3.75% by year-end.
Loan Impairment Rate: The company expects a loan impairment rate below 20 basis points for the full year, supported by a well-diversified and performing loan book.
Operating Expenses: Other operating expenses are expected to be around GBP 8 billion for the full year, plus approximately GBP 100 million of one-time integration costs. Expenses are anticipated to be higher in Q4 due to the annual bank levy and investment spend timing.
Risk-Weighted Assets (RWA): RWAs are expected to be in the range of GBP 190 billion to GBP 195 billion at year-end, with a greater impact from CRD IV expected in Q4.
Capital Management: The company plans to complete its GBP 750 million share buyback by the full year results and continues to generate strong capital, ending Q3 with a CET1 ratio of 14.2%.
2026 and 2028 Guidance: The company will update its guidance for 2026 and share new targets for 2028 at the full year results in February.
Ordinary Dividend: 50% of attributable profits for the ordinary dividend were accrued, equivalent to 42 basis points of capital.
Share Buyback Program: A new share buyback of GBP 750 million was announced at the half year, with 50% already carried out. The buyback is expected to be completed by the full year results.
The earnings call summary and Q&A session indicate a generally positive outlook. Financial performance and market strategy are strong, with income growth expected beyond 2025 and a focus on strategic areas like payments and wealth. Despite some uncertainties in cost guidance and CET1 targets, the bank's strong operating leverage and loan growth support a positive sentiment. The lack of immediate guidance updates is offset by the bank's confidence in its strategic direction and capital generation, suggesting a positive stock price movement in the short term.
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