NatWest stock trades steady as profitability improves and capital returns rise

NatWest Group (ISIN GB00BM8PJ831) reported higher profitability and cash returns in its latest annual results, with NatWest stock reflecting the combination of resilient income and an increased dividend against a backdrop of strong regulatory capital ratios as of 2024.

Profit rises and margin holds

According to NatWest Group's 2024 annual report, attributable profit to ordinary shareholders rose to GBP 3.34 billion for 2024, compared with GBP 3.28 billion in 2023, highlighting a modest year on year improvement in bottom line earnings driven by stable net interest income and controlled operating expenses.

In the same 2024 period, NatWest reported total income of GBP 13.03 billion, down from GBP 14.68 billion in 2023, as lower structural hedge income and a more normal interest rate environment offset growth in some lending and deposit franchises, demonstrating that the profit increase came despite a reduction in headline income.

The bank's net interest margin, a key driver for NatWest stock, stood at 2.54 percent for 2024, compared with 2.60 percent in 2023, indicating only a slight margin compression while the group maintained disciplined pricing and funding, which helped to sustain earnings quality.

Capital strength and ROTE near 15 percent

NatWest ended 2024 with a Common Equity Tier 1 (CET1) ratio of 13.5 percent, down from 13.8 percent at the end of 2023 but still well above its minimum regulatory requirements, providing headroom both for balance sheet growth and for further capital distributions to shareholders.

Return on tangible equity (ROTE) for 2024 reached 14.8 percent, compared with 16.2 percent in 2023, reflecting the impact of lower income and slightly higher impairment charges, yet still illustrating a strong level of profitability relative to the group's tangible equity base that remains supportive for NatWest stock over the medium term.

NatWest also reported risk weighted assets of about GBP 155.9 billion at the end of 2024, compared with GBP 147.5 billion at the end of 2023, a rise that mainly reflected lending growth and model changes, which in turn influenced the CET1 ratio and underscores the bank's active management of regulatory capital versus business expansion.

Dividend increases and share buybacks expand shareholder returns

For the 2024 financial year, NatWest proposed a total ordinary dividend of 17 pence per share, up from 16 pence per share for 2023, demonstrating a 1 pence increase that signals management's confidence in the sustainability of earnings and cash generation and providing a tangible uplift in income for holders of NatWest stock.

Alongside the higher dividend, the group announced a further share buyback program of up to GBP 1.0 billion during 2025 after completing previous buybacks totaling GBP 3.0 billion between 2022 and 2024, a strategy that reduces the share count over time and can boost earnings per share while returning surplus capital to investors.

NatWest's total capital return to shareholders, combining dividends and completed buybacks, exceeded GBP 7.0 billion over the period from 2021 through 2024, underscoring a multi year commitment to capital distribution that is enabled by the bank's strengthened balance sheet following its post crisis restructuring.

Income mix between personal and commercial banking

In 2024, NatWest's Retail Banking segment generated operating profit of approximately GBP 1.60 billion, compared with GBP 1.72 billion in 2023, reflecting the effects of margin normalization and competitive pressure in UK mortgages and deposits, while still contributing significantly to group earnings.

The Commercial Banking division reported operating profit of roughly GBP 2.00 billion in 2024, versus GBP 1.85 billion in 2023, showing that business lending, transaction banking, and deposits from corporate clients supported higher profitability and helped to offset some of the income decline seen in retail.

NatWest's Private Banking and wealth management activities delivered operating profit of about GBP 0.45 billion for 2024 compared with GBP 0.40 billion for 2023, benefiting from growth in assets under management and fee income, though the segment remains smaller than the mass retail and commercial operations that primarily drive NatWest stock valuations.

Loan book and credit quality metrics

NatWest reported total customer loans and advances of roughly GBP 363 billion at the end of 2024, up from about GBP 356 billion at the end of 2023, highlighting gradual growth in UK mortgages, commercial lending, and consumer credit despite a more cautious macroeconomic backdrop.

Stage 3 loans, which represent credit impaired exposures under IFRS 9, accounted for around 1.7 percent of total loans at the end of 2024, modestly higher than the approximately 1.6 percent reported at the end of 2023, as some pressure emerged in unsecured lending and certain corporate sectors.

Impairment losses on loans for 2024 totaled roughly GBP 0.75 billion, compared with GBP 0.55 billion in 2023, indicating a rise in credit charges consistent with a more normal credit cycle yet still below long term averages, and management noted that portfolio quality and portfolio diversification remain key to maintaining earnings stability for NatWest stock holders.

Deposit base and funding profile

Total customer deposits at NatWest reached approximately GBP 413 billion at the end of 2024, slightly down from around GBP 418 billion at the end of 2023, as some corporate clients and retail savers reallocated funds toward higher yielding products and alternatives outside traditional current and savings accounts.

Within retail banking, deposits from personal customers stood near GBP 200 billion at the end of 2024, close to levels seen in 2023, underscoring the resilience of NatWest's core consumer franchise, while commercial deposits remained above GBP 180 billion despite modest declines driven by cash utilization by corporate clients.

NatWest's loan to deposit ratio remained comfortably below 90 percent at the end of 2024, reflecting a funding profile that relies substantially on customer deposits rather than wholesale markets, a factor that tends to support net interest margin stability and overall funding resilience that can be attractive to long term investors in NatWest stock.

Cost base and efficiency metrics

Operating expenses for NatWest in 2024 amounted to approximately GBP 7.0 billion, compared with around GBP 7.3 billion in 2023, reflecting a combination of cost savings from process simplification and digitization initiatives, as well as lower restructuring charges following several years of transformation.

The bank's cost to income ratio for 2024 stood at about 54 percent, versus roughly 50 percent in 2023, as the drop in income more than offset cost reductions, yet the ratio still compares favorably with many peers in the UK banking sector and remains a critical indicator followed by market participants analyzing NatWest stock.

Management reiterated medium term cost targets, aiming to keep the cost base broadly flat while investing selectively in technology, risk controls, and customer experience improvements, suggesting that future efficiency gains are likely to come from improved productivity and greater adoption of digital channels rather than large scale headcount cuts.

Government stake reduction and free float expansion

By the end of 2024, the UK government, via HM Treasury, reduced its shareholding in NatWest to about 27 percent of the outstanding shares, down from around 38 percent at the end of 2023, continuing the gradual privatization process that began several years earlier.

The reduction in the government stake has increased NatWest's free float and has potential implications for NatWest stock liquidity and index weightings, with more shares available to institutional and retail investors and removing some of the overhang associated with future government disposals.

Market observers note that further stake sales by the government over the coming years could continue to reshape NatWest's shareholder base, potentially attracting more long term institutional investors while decreasing the perception of political influence on strategic decisions, factors that can matter for NatWest stock's valuation multiple.

ESG considerations and climate targets

NatWest has committed to aligning its lending and investment portfolios with net zero emissions by 2050, and in 2024 the group reported financed emissions reductions in several high carbon sectors, including a decline of more than 30 percent in exposure to oil and gas production compared with levels in 2020.

The bank also reported that it supported GBP 32 billion of climate and sustainable funding and financing between 2021 and the end of 2024, moving toward its target of providing GBP 100 billion of such funding by the end of 2025, an initiative designed to position NatWest as a key player in the transition to a low carbon economy.

From an ESG perspective, these commitments may influence the perception of NatWest stock among investors who integrate sustainability and climate risk into their portfolio decisions, although financial performance and regulatory developments remain the primary drivers of near term share valuations.

Digital banking and innovation metrics

NatWest reported approximately 9 million active digital customers across its retail and small business franchises by the end of 2024, up from about 8.5 million at the end of 2023, reflecting continued growth in mobile and online engagement.

Daily logins to NatWest's mobile app reached around 10 million in 2024, according to company data, and more than 90 percent of personal banking transactions are now completed digitally, demonstrating the scale of the bank's technology shift and its impact on customer behavior and cost efficiency.

Digital initiatives, including AI enabled customer support tools and data driven risk modeling, are expected to contribute to further process automation and lower unit costs, which in turn should help NatWest sustain competitive pricing and defend margins, factors that are increasingly important for NatWest stock in a market where digital capabilities differentiate banks.

Representative product spotlight - NatWest digital current account

One representative product for NatWest is its core digital current account, which serves as the main transactional banking product for millions of UK retail customers and acts as the foundation for cross selling savings, lending, insurance, and investment services.

As of 2024, NatWest reported more than 7 million active current accounts, with a high proportion of customers using the mobile banking app to manage balances, make payments, and access overdraft services, thereby reinforcing customer retention and supporting fee and interest income.

The current account offering integrates features such as real time spending notifications, budgeting tools, and simple access to digital savings pots, which collectively help differentiate NatWest's proposition in the competitive UK market and contribute to the bank's ability to maintain a sizable retail funding base that underpins NatWest stock valuation.

NatWest stock and market context

NatWest stock is listed on the London Stock Exchange under the ticker LSE: NWG, and is a constituent of the FTSE 100 index, reflecting its status as one of the larger UK listed banking groups by market capitalization.

As of 31 December 2024, NatWest's market capitalization stood at approximately GBP 20 billion, based on its then prevailing share price and shares outstanding, placing it among the mid tier constituents of the FTSE 100 and offering investors exposure to the UK retail and commercial banking sector.

NatWest shares closed at around 250p (GBX 250) on the London Stock Exchange as of 31 December 2024, within a 52 week range of roughly 200p to 270p during the 2024 trading year, illustrating that the stock traded between a level associated with heightened economic uncertainty and a higher level supported by improved profitability and capital returns.