NatWest Earnings: Deposits and NIM Stabilizing

NatWest reported first-quarter profits before tax of GBP 1.33 billion, 5% ahead of consensus estimates collected by the bank before the release. Performance in the quarter was good, with net interest margins stable across business units. Deposits have stabilized as retail and private banking deposits' growth of GBP 2.1 billion more than offset commercial and institutional outflows of GBP 1.2 billion. The mix between non-interest-bearing and interest-bearing deposits still showed a marginally unfavorable development toward the latter, but migration is slowing. A loan loss rate of 10 basis points in the quarter also stood out positively, reflecting a still-benign level of defaults despite higher interest rates weakening interest coverage ratios for corporates and households. Operating expenses were 3% ahead of the same period a year ago, driven by the Bank of England levies and inflation driving up staff costs. Excluding the higher levies, NatWest retained its 2024 cost guidance to align with 2023 levels.