Sheel Shah

Sheel Shah from J.P. Morgan asked about NatWest's future cost growth trajectory, considering the strong Q3 performance and ongoing simplification efforts, and whether a 3% growth rate is appropriate. He also questioned the expected CRD impact in Q4 and the strategy for operating within the 13-14% capital range, including any M&A considerations.

Answer

CEO Paul Thwaite emphasized strong momentum in the simplification agenda, enabling investment while maintaining cost control, and reiterated the current year guidance of £8 billion plus £100 million integration costs. CFO Katie Murray stated that the majority of CRD4 impact is expected in Q4, with Basel 3.1 in 2026, and confirmed the bank is comfortable operating down to 13%, balancing consistent capital return with RWA generation.

Sheel Shah from J.P. Morgan asked about the sustainability of the strong underlying lending growth given the UK economic outlook, and sought clarity on capital allocation, including any buffers for M&A and the definition of surplus capital.

Answer

CEO Paul Thwaite expressed confidence in the bank's ability to continue its broad-based lending growth, pointing to a track record of outperforming the market. He emphasized that strong capital generation supports shareholder returns and organic growth, explicitly stating that NatWest is not building a capital buffer for M&A and remains focused on its balanced capital approach within the 13-14% CET1 target range.

Sheel Shah of Autonomous Research inquired about the sustainability of the strong Q1 income performance, particularly the noninterest income component, and asked for the drivers behind the 2 basis point increase in lending margins.

Answer

CFO Katie Murray explained that while Q1 performance was strong, leading to an upgraded full-year income guidance, the noninterest income level should not be considered a run rate. She noted tailwinds from the structural hedge and the Sainsbury's portfolio are partially offset by expected rate cuts and economic uncertainty. The lending margin increase was attributed to a favorable mix shift towards higher-margin unsecured and corporate lending.

Sheel Shah from J.P. Morgan asked about the deposit outlook, specifically the potential risk to deposit flows from UK policy encouraging investment over savings, and the resulting impact on the bank's funding and loan-to-deposit ratio.

Answer

Executive Director & CFO William Chalmers expressed confidence that the overall deposit base would remain strong, as any shift to investments would likely come from lower-margin savings, and the 95% LDR provides ample funding capacity. Group Chief Executive Charlie Nunn added that Lloyds' bankassurance model is uniquely positioned to benefit from this gradual, multi-year shift, turning a potential risk into a strategic opportunity.