The bank reported a pre-tax operating profit of £1.3 billion for the three months ending March, marking a 27% decline from the previous year’s £1.8bn, consistent with analyst predictions. Revenues also saw a year-on-year decrease to £3.5bn, slightly surpassing market expectations.

Although the net interest margin improved at the group level, reaching 2.05% from the previous quarter’s 1.99%, the retail bank experienced a slight decline to 2.22%.

This drop was attributed to tighter margins and heightened competition in the mortgage market, leading to a reduction of £1.7bn in net loans as customers paid off mortgage balances early. New mortgage lending plummeted to £5.2bn compared to £9.9bn the previous year.

The bank reported a lower-than-expected provision for bad loans, setting aside only £93m instead of the anticipated £186m, stating: “Levels of default remain stable and at low levels across the portfolio despite inflationary pressures and the higher interest rate environment.”

The group’s chief executive, Paul Thwaite, commented: “Our performance is grounded in the vital role we play in the economy and in the lives of our 19 million customers.

“Though macro-uncertainty continues, customer confidence and activity is improving, with both lending and deposits up in the quarter and impairments remaining low, reflecting our well-diversified business.

“We are ambitious for this bank, and by succeeding for our customers, we will succeed for our shareholders. Our first priority is delivering disciplined growth across our three businesses by serving our customers well. At the same time, we are becoming simpler, more productive and easier to deal with.”

Mr Thwaite continued: “As a result, we aim to generate returns that allow us to support our customers, invest in our business and deliver attractive distributions to shareholders.

“We are also pleased with the recent momentum in the reduction of HM Treasury’s stake in the bank. Returning NatWest Group to private ownership is a shared ambition and we believe it is in the best interests of both the bank and all our shareholders.”

At time of writing, the UK government’s ownership stake in NatWest stands at 27.93%, down from 37.98% in December 2023. The banking group has said it has retained capacity for further directed buyback of up to 4.99%, with the next window coming up in May 2024.