For so long NatWest Group has been the ugly duckling of the UK banking sector, but over the past 18 months there have been growing signs that it is putting its legacy problems behind it.
Earlier this year, NatWest stock price hit three-year highs before falling to one-year lows following Russia’s invasion of Ukraine, but has since recovered there. where it had started the year, outperforming Lloyds and Barclays.
At the end of its last financial year, the bank recorded total profits of £2.95 billion, compared to a loss of £753 million the previous year. After today’s first half numbers, the bank looks on track to comfortably beat that number for the current fiscal year, and more importantly, this year’s numbers so far haven’t been flattered by the release of loan loss reserves.
Last year, those add-ons totaled £1.28billion, but even then shareholders had plenty to cheer about, of which the UK government is the main one.
Since then, the government’s stake has fallen to 48.1% after selling £1.2bn of shares at the end of March.
CEO Alison Rose said earlier this year that the bank plans to maintain ordinary dividends of around 40% of attributable profit and distribute a minimum of £1bn in 2022 and 2023, via a combination of ordinary dividends and specials, and in today’s figures, she’s started to deliver on that.
The bank had a decent start to the year, posting first quarter attributable profits of £841m, helped by the release of £38m from credit write-downs, with total income reaching over £3bn. pound sterling.
If we look at today’s second quarter figures, that momentum appears to have been maintained despite the deteriorating economic outlook, with another total revenue of £3.2bn, taking first half revenue to 6, £2 billion.
Profit attributable to shareholders rose to just over £1bn, pushing first-half profits up to £1.89bn, with net interest margins dropping to 2.46% in the first quarter from 2.46% in the first quarter. .72% in the second quarter, bringing the first-half NIM to 2.59%.
While other banks are starting to add back to their depreciation funds due to the rising cost of living, NatWest seems to be going against this, adding £54 million back in the first half.
It’s worth noting that the retail side of the business recorded write-downs in the first half of £26 million, but this was more than offset by additions in other parts of the business.
Net loans to customers reached £188.7 billion, compared to £184.7 billion in the first quarter and £6.5 billion in the first half. Of that, £5.9bn was in the form of mortgages, with loans evenly split between the first and second quarters, with the remaining £600m made up of credit card balances and loans.
Customer deposits increased to £190.5 billion.
The bank said it was on track to meet cost targets, with hopes it would see a net interest margin of 2.7% for the full year in the Go-Forward group.