NatWest Group Plc Q1 FY2025 earnings call

• Key priorities: Disciplined growth, bank-wide simplification, active balance sheet and risk management.
• Recent progress: Completed Sainsbury's Bank transaction adding 1 million accounts, launched new mortgage for first-time buyers, 10th anniversary of Accelerator program with new ambition, upgraded social housing lending, collaborated with OpenAI, relocated private banking operations, optimized RWAs.
• Financial highlights: Strong start to the year, income and profit growth, updated 2025 guidance based on first quarter strength.

In the first quarter, customer lending grew 0.9% to GBP 375 billion. Customer deposits increased 0.5% to GBP 433 billion. Assets under management and administration were GBP 48.5 billion with net AUM inflows of GBP 0.8 billion. Climate and sustainable funding reached GBP 101 billion since July 2021. Income was GBP 4 billion, up 15.8% year-on-year, costs were GBP 1.9 billion, resulting in operating profit of GBP 1.8 billion and attributable profit of GBP 1.3 billion. Return on tangible equity was 18.5%, CET1 ratio was 13.8%, and government shareholding reduced to less than 2%. Revenue contribution: Customer lending, deposits, AUM, climate funding all contributed to the overall financial performance.

• Updated 2025 guidance to be at upper end of income and returns range.
• Expect income excluding notable items at upper end of GBP 15.2 billion to GBP 15.7 billion range.
• Return on tangible equity at upper end of 15% to 16% range.
• Other operating expenses around GBP 8 billion plus GBP 100 million onetime integration costs.
• Loan impairment rate below 20 basis points.
• RWAs between GBP 190 billion and GBP 195 billion.

• Heightened global economic uncertainty affecting customer borrowing and investment decisions.
• Impact of base rate cuts on deposit pass-through and customer/competitor behavior.
• Uncertainty in macroeconomic assumptions affecting impairment charges.

Q: On noninterest income sustainability and lending margins A: Paul and Katie discuss noninterest income not expected to be run rate, NIM driven by mix, margin expansion from various segments like corporate lending and deposit margin.

Q: On ring-fencing A: Paul discusses need for review, impact on costs and customer service, citing customer-driven and cost-distorting aspects Q: On Sainsbury's Bank and cash flow hedge A: Paul and Katie discuss Sainsbury's strategy to tap into customer base and cash flow hedge decay and its implications