NatWest posts a full year operating profit for fiscal 2023 of £6.2bn, up 20% y-o-y and ahead of analyst forecasts.
The part-government owned lender continues to benefit from higher rates. The key net interest margin rises by 19 basis points to 3.04 percent.
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The annual profit is the bank’s highest since 2007. Meantime, NatWest names Paul Thwaite as its permanent CEO. He replaces Alison Rose who resigned last year after the saga relating to the closure of politician Nigel Farage’s bank account.
UK government plans final sell-off of NatWest stake
Rick Haythornthwaite, chair Designate of NatWest Group said: “Paul has shown an unrivalled understanding of this business, our customers, and the opportunities for growth. We are both ambitious for this organisation. I fully expect his potent blend of NatWest knowledge and thoughtful, imaginative approach to leadership to prove key to forging success in the rapidly changing landscape of banking. The board agreed that he was the outstanding candidate and the right person to shape the future of NatWest”.
The UK government continues to hold a 35% stake in NatWest. The state has been trying to return NatWest to full private ownership for years. The original government bail out to RBS, as the group was then branded, amounted to £46bn in 2008.
A final share sell off may be scheduled for as early as June this year
Chief Executive, Paul Thwaite, said: “We have delivered a strong performance in an exceptional macro environment. Our operating profit was up 20% on the year before, with a return on tangible equity of 17.8% and £3.6bn of distributions to shareholders. The strength of our balance sheet allows us to support our customers. Our performance is grounded in the services we have provided to help them reach their financial goals and manage their money better.”
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By GlobalDataNatWest dividend rises by 26%, reports climate action plan progress
The NatWest dividend rises by 26% y-o-y. In 2023, NatWest increased lending to customers by £9bn. It opened over 100,000 new start-up accounts for entrepreneurs, and over a million new personal current accounts. Other highlights include helping 379,000 retail banking customers to buy or re-mortgage their home. The bank also reports progress against its climate transition plan in 2023.
It says it is working to support customers’ transition to net zero across a range of sectors. For example, it has been a leading loan arranger to the UK power infrastructure and renewables sector over the last 10 years. It has now provided £61.9bn in climate and sustainable funding and financing against its target of £100bn between 1 July 2021 and the end of 2025.
Analyst comment
Matt Britzman, equity analyst, Hargreaves Lansdown, said: “NatWest is out with a big profit beat as Paul Thwaite gets confirmed as permanent CEO. Impairment charges were better than expected. Customers continue to show remarkable resilience in the face of higher inflation and interest rates. Absent any major shock to unemployment, low default rates are expected to continue over 2024.
Retail customers continue to go in search of better rates from longer-term savings accounts. But crucially for NatWest, the pace of deposit migration was significantly slower in the fourth quarter than in the prior. Perhaps a sign that the peak in migration has come and gone – good news for net interest margins.
Investors will be a little put off by NatWest giving no net interest margin guidance. This is especially [so] considering income for 2024 is guided slightly lower than the consensus was looking for.
UK banks continue to suffer from a post-Brexit valuation slump. While it looks like net interest income has peaked, there are enough tailwinds on the horizon to make the sector worth attention at current valuations. NatWest’s scandal-filled end to 2023 means its valuation is even more attractive. It should be one of the biggest benefactors of its structural hedge rolling on to higher yields – an ongoing income tailwind.”
