NatWest Group(NWG) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Lending has grown 4.4% since year-end to GBP 388 billion, consistent with an annual growth rate of over 4% over the past six years [3][4] - Income increased to GBP 12.1 billion, a 12.5% rise compared to the first nine months of the previous year [5][6] - Operating profit reached GBP 5.8 billion, with attributable profit at GBP 4.1 billion, resulting in a return on tangible equity of 19.5% [6][7] - Earnings per share grew 32.4% year-on-year, and TNAV per share increased 14.6% to 362 pence [7] Business Line Data and Key Metrics Changes - Mortgage lending rose by over GBP 5 billion for the first nine months, supported by new offers for first-time buyers and family-backed mortgages [4] - Unsecured lending grew by GBP 2.9 billion, or 17.3%, aided by the integration of Sainsbury's customers [4] - Commercial and institutional lending increased by GBP 7.9 billion, or 5.5%, particularly in infrastructure and sustainable finance [4][5] - Non-interest income grew due to higher fees from payments, cards, and strong performance in currencies and capital markets [5][9] Market Data and Key Metrics Changes - Deposits increased by 0.8% to GBP 435 billion, reflecting a balance between volume and value in a competitive market [5][11] - Assets under management and administration grew 14.5% to GBP 56 billion, indicating increased customer investment activity [5] Company Strategy and Development Direction - The company is focused on disciplined growth, bank-wide simplification, and effective balance sheet and risk management [3][6] - A new share buyback of GBP 750 million was announced, with 50% already executed [7] - The company aims to support large-scale infrastructure programs and has committed GBP 7.6 billion towards its 2030 Group Climate and Transition Finance target of GBP 200 billion [5] Management's Comments on Operating Environment and Future Outlook - Management noted that despite inflation above the Bank of England's target, the economy is growing with low unemployment and high levels of savings [3] - The company expects one further base rate cut this year, with rates projected to reach 3.75% by year-end [10] - Full-year income guidance has been revised to around GBP 16.3 billion, with returns expected to exceed 18% [6][10] Other Important Information - The cost-income ratio improved by five percentage points to 47.8%, with operating expenses up 2.5% to GBP 5.9 billion [6][12] - The CET1 ratio ended the third quarter at 14.2%, up 60 basis points from the previous quarter [14][15] Q&A Session Summary Question: Deposit momentum and non-interest income drivers - Management discussed that deposits are up around GBP 3.5 billion year-to-date, with different trends across business lines, and highlighted strong momentum in non-interest income driven by cards, payments, and capital markets [19][22] Question: Cost growth expectations and capital management - Management reiterated cost guidance for the year, emphasizing ongoing simplification efforts and the potential for continued cost management [30][34] Question: Loan growth sustainability and income drivers - Management expressed confidence in maintaining loan growth above market levels, with a strong track record and favorable conditions in commercial lending [60][72] Question: CET1 ratio target and deferred tax assets - Management indicated that the CET1 ratio target will be reviewed in February, with expectations for continued capital generation and a slight decrease in deferred tax asset utilization in the coming years [81][83]