NatWest Group said revenue is likely to drop this year as the firm’s businesses face pressure from falling interest rates.

The firm now expects total income for the year will be in a range of £13 billion (€15 billion) to £13.5 billion (€15.8 billion), NatWest said on Friday in a statement.

That compares to the £14.7 billion it generated in 2023, and is a larger projected drop than analysts had anticipated.

While higher interest rates have provided a boon to interest income, they have also spurred competition for deposit customers. NatWest said it has seen more customers shifting into fixed-term accounts to take advantage of better rates, which crimped margins in the fourth quarter as the bank spent more on interest.

The taxpayer-backed bank reported pre-tax profit of £6.2 billion pounds (€7.2 billion) for the 12-month period, up 20 per cent on the prior year and ahead of analyst forecasts. It also announced, as expected, a share buyback of £300 million.

This year, the lender is assuming the Bank of England will cut benchmark interest rates five times beginning in May, chief financial officer Katie Murray said on a conference call with journalists. That will weigh on interest income going forward.

“This year we are focused on the things we can control: delivering profitable growth, becoming more efficient, more productive, and simpler to deal with, whilst managing our cost and capital efficiently,” Paul Thwaite, who was confirmed as the bank’s permanent chief executive officer on Friday, said in the statement.

Still, shares surged as much as 3.9 per cent after executives said the bank has no exposure to the Financial Conduct Authority’s ongoing review into historic auto lending practices, which analysts have said could land banks with a bill of as much as £10 billion.

NatWest shares were up 2 per cent just before 9am in London. They had dropped earlier by as much as 3.4 per cent. – Bloomberg, Reuters