NatWest reports £3.4bn profit for 2024 as rising costs weigh on earnings

National Westminster Bank Plc (NWB), a subsidiary of NatWest Holdings Limited, has released its 2024 annual results, reporting a £3.43 billion profit, reflecting a 2% decline from £3.51 billion in 2023. The dip in profit was primarily due to rising operating costs and lower non-interest income, even as net interest income showed moderate growth.

Total income for the year stood at £11.97 billion, a £113 million decline from the previous year, driven by reduced economic hedging gains and the absence of a debt redemption gain that had bolstered 2023 results. However, net interest income increased by £185 million to £8.21 billion, supported by higher lending activity and strong net bond performance. The rising cost of deposits, with customers shifting toward interest-bearing accounts, partially offset these gains.

What factors contributed to NatWest’s profit decline?

The decline in profit was largely attributed to higher operating expenses, which climbed 3% to £6.96 billion. The increase in costs was driven by restructuring-related staff expenses, investment in technology, and higher depreciation and amortisation charges. Despite these cost pressures, the bank benefited from lower impairment losses, which fell 31% to £347 million, reflecting post-model adjustments and good book releases.

Loans to customers saw a notable increase, growing by £13.5 billion to £332.0 billion. This growth was largely fueled by commercial lending expansion and the acquisition of a Metro Bank mortgage portfolio, further strengthening NatWest’s position in the UK banking sector. Meanwhile, customer deposits rose by £4.5 billion to £318.3 billion, reflecting an increase in savings balances as more customers moved to interest-bearing products.

How did different banking segments perform?

NatWest operates through three primary divisions—Retail Banking, Private Banking, and Commercial & Institutional Banking—each of which played a significant role in shaping the bank’s 2024 performance.

Retail Banking remained a key revenue driver, generating £4.88 billion in total income. Growth in mortgage lending, particularly following the Metro Bank mortgage portfolio acquisition, contributed significantly to this segment’s strength.

Private Banking, which serves high-net-worth individuals, reported £938 million in total income, reflecting a slight decline compared to the previous year. However, increased Assets Under Management and Administration (AUMA) provided a cushion against some of the downward pressures.

Commercial & Institutional Banking performed well, generating £4.79 billion in total income, benefiting from higher corporate lending volumes. This segment remained a crucial revenue contributor, supporting business banking, mid-market commercial enterprises, and institutional clients.

How has NatWest managed capital and risk exposure?

NatWest maintained a strong capital position despite a minor decline in its Common Equity Tier 1 (CET1) ratio, which fell from 11.6% to 11.4%. This decrease was driven by a £2.8 billion rise in risk-weighted assets (RWAs), primarily due to increased lending activity and the Metro Bank mortgage portfolio acquisition. The CET1 capital base saw a £0.1 billion increase, which was offset by interim and foreseeable dividends.

The bank’s loan impairment provisions dropped by £0.1 billion to £2.7 billion, reflecting an improved economic outlook and releases from post-model adjustments. The Expected Credit Loss (ECL) coverage ratio declined from 0.88% to 0.81%, suggesting a lower overall risk profile compared to the previous year.

NatWest also saw a £7.6 billion increase in other financial assets, driven largely by liquidity risk management strategies and net bond purchases. This helped offset the decline in cash and balances at central banks, which fell by £13.2 billion due to liquidity management measures.

What legal and regulatory challenges does NatWest face?

NatWest continues to navigate regulatory scrutiny and litigation risks, with ongoing cases that could impact financial performance. The bank remains involved in LIBOR-related litigation in the United States, where it has faced allegations of price-fixing and collusion in setting interest rates. While the United States Court of Appeals recently upheld a dismissal of the case, legal uncertainties persist.

The bank is also engaged in offshoring VAT disputes with HM Revenue & Customs (HMRC), dating back to 2018. NatWest has contested tax assessments totaling £143 million, with the matter currently under review. In addition, investment advice practices from 2010 to 2015 remain under scrutiny by the Financial Conduct Authority (FCA), with potential remediation actions required.

What is NatWest’s outlook for 2025?

Despite the profit decline in 2024, NatWest remains financially resilient, supported by strong lending growth, a diversified income base, and a robust risk management framework. The bank is expected to continue investing in technology, digital banking capabilities, and operational efficiencies to drive long-term growth.

Looking ahead, interest rate movements, economic conditions, and regulatory developments will play a crucial role in shaping NatWest’s 2025 performance. While cost pressures and compliance challenges may persist, the bank’s solid capital base, strategic acquisitions, and customer deposit growth provide a strong foundation for sustained financial stability.