NatWest posts strong profits as government stake falls below 7%

In February 2025, the British government-backed bank, NatWest, announced that it achieved an operating pre-tax profit of £6.2 billion for the year 2024, which is a 0.3% increase over the preceding year. This figure exceeded analysts' expectations. The increase in profits was attributed to a slight rise in the group's net interest margin, despite ongoing reductions in interest rates by the Bank of England, which have been cut from a 16-year high of 5.25%. These financial results reflect the bank's resilience despite a changing economic environment characterized by lower interest rates aimed at stimulating growth in the economy. As government ownership stakes fall below 7%, NatWest is nearing a return to full private ownership, which is anticipated to occur during the first half of 2025. The Chief Executive of NatWest, Paul Thwaite, emphasized that shedding the government's shareholding marks the beginning of a 'new, forward-looking chapter' for the bank. Investors were informed that a payout of £1.2 billion can be expected for shareholders as part of this transition, reiterating the bank's commitment to returning value. The Treasury stands to gain approximately £84 million from this distribution. Despite these positive financial results, NatWest's shares saw a decline of around 3.8%, reflecting market reactions to the lack of strong forward guidance and concerns surrounding the influence of potential economic changes on future earnings. Additionally, the bank's bonus pool for employees has increased to £409 million, indicating a robust performance relative to the previous year. The anticipated pay rise for Mr. Thwaite, which could reach 43%, is set to face a vote at the company's Annual General Meeting (AGM) in April. Throughout 2024, NatWest is also restructuring by reducing its workforce by over 3%, including a 10% reduction in retail banking operations. The reduction in headcount is representative of the bank's efficiency efforts in light of changing market dynamics. Therefore, as the bank approaches privatization, it is also looking for growth opportunities that align with the changing economic landscape. Mr. Thwaite is confident that prospects for both growth and increased spending are favorable as interest rates decline and household savings continue to rise.