LONDON - British bank NatWest reported forecast-beating annual profit on Friday, boosted by progress in its growth strategy, improving productivity and active capital management.

NatWest - which once boasted assets of 2.2 trillion pounds, more than double the size of the British economy - is now a fraction of that size after a multi-year restructuring and strategic overhaul to focus almost exclusively on domestic business, consumer and mortgage lending.

"We have positive momentum behind us and a clear ambition to succeed with customers as we continue to build a simpler, more integrated and technology-driven bank that is capable of even greater impact," Chief Executive Paul Thwaite said.

Pretax operating profit reached 6.2 billion pounds ($7.79 billion) for the year ended December 31, in line with 2023 levels and surpassing analysts' forecasts of 6.1 billion pounds.

Shares in NatWest have risen 109% in the last 12 months, as investors warmed to its 4 billion pound capital redistribution programme and a spree of recent acquisitions which underlined the lender's ambitions to grow its home loans business amid fierce competition.

The stock fell by as much as 2.2% after the results, but recouped some of those losses and was last down 1.5% at 430 pence. Earlier this week, they hit their highest since 2011.

Thwaite put the bank back on the dealmaking map in 2024 after buying several billions of pounds in assets from retailer Sainsbury's and Metro Bank last summer, and signalled on Friday more was to come.

"In respect of acquisitions, it's a very high bar," Thwaite told reporters, adding that the bank's strength should not be underestimated, and it would continue to consider inorganic opportunities that created shareholder value, added scale or new capabilities.

NatWest set a new performance target of achieving a return on tangible equity of between 15%-16% in 2025 and over 15% by 2027 but has work to do to defend its market share in UK mortgage lending, following Nationwide's takeover of Virgin Money.

The Financial Times newspaper on Friday said NatWest had held talks with Spain's Santander over a potential acquisition of its UK arm.

The Spanish lender has repeatedly insisted the business is not for sale, even though its executives have spoken publicly about its high cost of capital relative to other parts of its operations. NatWest has declined to comment on the speculation.

 

LOAN GROWTH

NatWest's 2024 profit beat and optimistic outlook contrasts with uncertainty in Britain's economy, which has been hit by worries about sluggish growth, weak public finances and the risk of a global trade war led by U.S. President Donald Trump.

But analysts at Jefferies said the results from NatWest supported "the entire thesis on the bank and indeed the sector", noting the shares were already well supported.

The lender reported total loans of 372 billion pounds, up 3.5% year on year in its sixth consecutive year of total loan growth. Impairments also fell to 359 million pounds in 2024, from 578 million pounds in 2023.

The UK taxpayer's stake in the bank fell below 7% on Friday, down from 38% in December 2023, leaving NatWest on course to return to full private ownership this year after its 45 billion pounds government bailout during the 2008 financial crisis.

($1 = 0.7963 pounds)

(Reporting by Sinead Cruise in London and Yadarisa Shabong in Bengaluru; Editing by Sherry Jacob-Phillips, Andres Gonzalez and David Evans)