NatWest Group PLC on Friday reported a strong rise in profit in the first quarter as the bank boasted of its capital strength and said it is confident of securing income well above £11.00 billion in 2022 in its core operations.

Shares in NatWest were down 3.0% in London on Friday morning at 216.30 pence each.

In the three months to March 31, the Edinburgh-headquartered bank recorded an operating pretax profit of £1.25 billion, surging 41% from £885 million in the same period a year prior. Attributable profit rose 36% to £841 million from £620 million.

NatWest booked a £38 million credit provision release in the first quarter, down from a £98 million release a year earlier. While not a considerable sum, the release is in stark contrast to its blue chip peers, who reported this week that they are beginning to build credit reserves to deal with potentially slowing economic growth.

‘Despite the challenging environment, I am pleased with our performance as we continue to execute well against our strategy, driving sustainable growth and returns. Income and profits are substantially up, costs are down and we remain well capitalised as we build long-term value and deliver a simpler and better banking experience for our customers,’ Chief Executive Alison Rose said.

NatWest - formerly Royal Bank of Scotland - saw total income rise 17% to £3.03 billion from £2.59 billion. Net interest income rose to £2.05 billion from £1.86 billion, while non-interest income increased to £982 million from £727 million.

‘Excluding notable items, go-forward group income was 8.6% higher than Q1 2021 driven by volume growth, principally in our mortgage book, and favourable yield curve movements. We have also seen increased fee income in Retail Banking, as consumer spending levels recover, and higher transactional banking fee income in Commercial & Institutional,’ NatWest explained.

Its ’go-forward group’ excludes Ulster Bank RoI and discontinued operations.

Its net interest margin improved to 2.46% from 2.32%.

Operating expenses were broadly flat at £1.82 billion versus £1.80 billion the year prior. As a result, the bank’s cost-to-income ratio improved dramatically to 59.7% from 69.2%.

Its CET1 ratio ended the first quarter at 15.2%, dropping from 18.2% at the same point a year earlier.

NatWest’s loan book finished the quarter at £365.3 billion, growing from £358.7 billion a year earlier and up from £359.0 billion at the end of 2021.

Looking ahead, NatWest said its 2022 income excluding notable items to be ‘comfortably’ above £11.0 billion in the ’go-forward group’ - advancing from total income of £10.51 billion in 2021.

Rose added: ‘Government ownership also reduced to around 48% in Q1; the first time it has fallen below 50% since the financial crisis. This was an important milestone for our bank and a further demonstration of the progress we are making as we continue to deliver for our customers and shareholders.’

Separately, Dublin-based consumer lending company AIB Group PLC said Friday it has agreed with NatWest to buy about €6 billion Ulster Bank performing tracker mortgages.

AIB also noted it has received approval from Irish regulators for its previous acquisition of about €3.7 billion Ulster Bank performing corporate and commercial loans from NatWest.

AIB was trading 3.5% higher in London on Friday at 175.90p.

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