NatWest Group(NWG) - 2024 Q2 - Quarterly Report

Financial Performance - Profit attributable to ordinary shareholders for the half year ended 30 June 2024 was £2,099 million, down from £2,299 million in the same period of 2023, representing a decrease of 8.7%[11] - Return on equity for the half year ended 30 June 2024 was 11.2%, compared to 12.6% for the same period in 2023, indicating a decline of 1.4 percentage points[11] - Total income for the half year ended June 30, 2024, was £7,134 million, down from £7,727 million in the same period last year, representing a decrease of 7.7%[20] - Operating profit for H1 2024 was £3,029 million, with a return on equity of 11.2% and a return on tangible equity (RoTE) of 16.4%[64] - The company reported a profit for the period of £2,239 million, down 7.5% from £2,420 million in H1 2023[61] Equity and Capital - Adjusted total tangible equity as of 30 June 2024 was £25,626 million, slightly up from £25,210 million a year earlier, reflecting an increase of 1.7%[11] - Average total equity for the half year ended 30 June 2024 was £37,535 million, compared to £36,562 million for the same period in 2023, showing an increase of 2.7%[11] - The Common Equity Tier 1 (CET1) ratio increased to 13.6%, reflecting a 10 basis points rise from Q1 2024 due to attributable profit and a reduction in RWAs[59] - The company targets a CET1 ratio in the range of 13-14% and expects RWAs to be around £200 billion by the end of 2025[60] Operating Expenses - Operating expenses (excluding litigation and conduct) for the half year ended June 30, 2024, were £4,057 million, up from £3,915 million in the same period last year, reflecting a rise of 3.6%[23] - The cost:income ratio (excluding litigation and conduct) for the half year ended June 30, 2024, was 55.5%, compared to 49.3% for the same period in 2023, indicating increased operational costs relative to income[21] - Operating expenses for H1 2024 were £2,150 million, up from £1,987 million in H1 2023[97] Loans and Deposits - As of June 30, 2024, NatWest Group's loans to customers (excluding reverse repos) amounted to £354.37 billion, slightly down from £354.89 billion as of March 31, 2024[24] - Customer deposits (excluding repos) reached £426.13 billion as of June 30, 2024, compared to £421.36 billion as of March 31, 2024[24] - The loan-to-deposit ratio (excluding repos and reverse repos) was 83% as of June 30, 2024, an increase from 84% as of March 31, 2024[24] - Customer deposits increased to £433.0 billion, with total assets reaching £690.3 billion[131] Risk and Impairment - Net impairment charge of £48 million in H1 2024, representing 3 basis points of gross customer loans, with stable default levels[58] - The loan impairment rate improved to (5) basis points, with impairment provisions totaling £3.3 billion[131] - The ECL (Expected Credit Loss) provision at 1 January 2024 was £3.645 billion, with adjustments reflecting changes in economic forecasts and risk metrics[153] Acquisitions and Agreements - NatWest Group announced an agreement to acquire retail banking assets and liabilities from Sainsbury's Bank for approximately £2.5 billion, expected to complete in the first half of 2025[38] - The company agreed to acquire Sainsbury's Bank's credit card, unsecured personal loans, and savings balances, expected to add around one million customer accounts to its Retail Banking business[59] Economic Outlook - The ongoing economic and political risks, including inflation and interest rate fluctuations, may adversely affect NatWest Group's business and financial condition[25] - The Bank of England's base rate is expected to average 5.10% in 2024, with a downside scenario suggesting a rate of 4.69%[143] - The unemployment rate is projected to peak at 5.8% in Q3 2025, with a downside scenario suggesting a peak of 8.5% in Q4 2025[146] Customer Segments - Retail Banking reported an operating profit of £1.1 billion and a return on equity of 18.4% for H1 2024[114] - Commercial & Institutional reported a total income increase of £52 million, or 1.4%, compared to H1 2023, supported by client-driven capital markets activity[123] - Private Banking's total income decreased by £123 million, or 21.7%, compared to H1 2023, reflecting a change in deposit mix[118]