NatWest Group(NWG) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Customer lending grew 3.2% to GBP 384 billion, while customer deposits increased by 1% to GBP 436 billion [3][4] - Income rose 13.7% to GBP 8 billion, and costs decreased by 1.4% to GBP 3.9 billion, resulting in an operating profit of GBP 3.6 billion and attributable profit of GBP 2.5 billion [4][5] - Return on tangible equity was 18.1%, and earnings per share increased by 28% to 31p [4][5] - Interim dividend announced at 9.5p, up 58%, with TNAV per share growing 16% to 351p [5] Business Line Data and Key Metrics Changes - Retail Banking saw lending growth of 3%, with deposits up 1% [7] - Commercial and Institutional lending increased by 4% and deposits by 2%, driven by project finance and sustainable finance [8] - Private Banking and Wealth Management experienced a 2% growth in lending and net new inflows of GBP 1.5 billion, representing 8.1% of opening AUM [9] Market Data and Key Metrics Changes - The bank attracted over 100,000 new customers through organic growth and the Sainsbury's transaction, which added around 1 million new customers [6][7] - The bank's share in credit cards increased from 9.7% to 11% due to the Sainsbury's acquisition [8] Company Strategy and Development Direction - The company is focused on disciplined growth, customer base expansion, and enhancing customer experience through digitization and simplification [6][10] - A new target of delivering GBP 200 billion in climate and transition finance by 2030 has been set, building on previous achievements [9][10] - The bank is modernizing its technology and operational model, including a strategic collaboration with AWS and Accenture to enhance data capabilities [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to continue delivering broad-based lending growth despite a challenging UK economic backdrop [49][50] - The bank upgraded its 2025 guidance for income to greater than GBP 16 billion and return on tangible equity above 16.5% [15][29] - Management noted that the diversified loan book is performing well, with expectations of a loan impairment rate below 20 basis points for the full year [25][29] Other Important Information - The CET1 ratio remained stable at 13.6%, with strong capital generation allowing for investments and shareholder returns [5][28] - The bank is actively managing its balance sheet, generating 101 basis points of capital in the first half [14] Q&A Session All Questions and Answers Question: On deposit flows and current accounts - Management acknowledged the growth in deposits but noted some loss in current accounts, attributing it to a disciplined pricing strategy amid competitive conditions [34][39] Question: On lending outlook and revenue guidance - Management expressed confidence in continued lending growth, supported by strong volumes and the full run rate from the Sainsbury's acquisition [46][49] Question: On capital management and potential M&A - Management clarified that they are not building a buffer for M&A but are focused on organic growth and maintaining a balanced capital allocation strategy [52][53] Question: On structural hedge and mortgage spreads - Management indicated that the structural hedge is performing well, with expectations of continued support for income, while mortgage spreads are stabilizing [57][63] Question: On FX risk management derivatives - Management explained that FX risk management activities are designed to take advantage of market volatility, contributing positively to overall income despite appearing as negative NII [98][101] Question: On lead reforms and mortgage market opportunities - Management expressed support for lead reforms, anticipating positive impacts on the mortgage market and increased borrowing capacity for first-time buyers [104][106]