High street bank NatWest Group moved higher on Friday as it announced forecast-topping results for 2023.
At 225p per share, the FTSE 100 bank was last trading 5% higher in end-of-week business.
NatWest’s total income increased 9.1% in 2023 to £14.8 billion, as net interest income improved 12.3% year on year to £11 billion.
Revenues were boosted by a 19-basis-point increase in the net interest margin (NIM), to 3.04%. The NIM gauges the difference between the interest banks charge borrowers and what they pay to savers.
NIM of 2.86% for the fourth quarter narrowly beat broker forecasts of 2.83%.
NatWest also recorded lower-than-predicted impairments during the fourth quarter. At £126 million, this was down from £229 million during quarter three and bucked predictions of an increase, to £242 million.
As a consequence, the Footsie bank reported operating pre-tax profit of £6.2 billion for the full year. This was up from the £5.1 billion recorded in 2022.
NatWest hiked the full-year dividend a huge 26% in 2023, to 17p per share. This was despite its Common Equity Tier 1 (CET1) capital ratio falling by 80 basis points over the year, to 13.4%.
“Strong Performance”
On Friday NatWest also announced the appointment chief executive Paul Thwaite on a permanent basis He had been operating as chief on an initial 12-month contract since last July.
Commenting on the bank’s full-year results, Thwaite said that “we have delivered a strong performance in an exceptional macro environment.”
He noted that “this year we are focussed 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.”
Thwaite added that “together, these actions will drive long-term, sustainable value for our customers, shareholders, and the wider UK economy.”
For 2024, NatWest predicted lower full-year income (excluding notable items) of between £13 billion and £13.5 billion.
Impressive Q4 Results
Discussing NatWest’s “big profit beat,” analyst Matt Britzman said that “impairment charges were better than expected as customers continued to show remarkable resilience in the face of higher inflation and interest rates.”
He predicted that default rates will remain low through 2024, too. This is assuming that a “major shock to unemployment” doesn’t materialise.
Furthermore, Britzman noted that the number of savings accounts switches away from NatWest “was significantly slower in the fourth quarter than in the prior [quarter].” This suggests that “the peak in migration has come and gone,” he added, which would help boost the company’s NIM.
However, the analyst commented that “investors will be a little put off by NatWest giving no net interest margin guidance, especially considering income for 2024 is guided slightly lower than the consensus was looking for.”
Today’s strong results will fuel speculation that the UK government will soon sell the remaining 35% stake it has held in the bank since the 2008 financial crisis.