NatWest Group posts drop in 1H operating profits

26th Jul 2024 07:12

(Sharecast News) - NatWest Group posted a decline in interim profits as net interest margins fell and costs rose, but raised its full-year income guidance.

Separately, citing people familiar with the situation, Bloomberg reported that the Chancellor was "leaning" towards selling a "substantial" portion of the government's £5.6bn stake to institutional investors.

That would be on top of the gradual winddown already underway via open market sales.

During the first half of its fiscal year, NatWest Group posted a decline in operating profits before tax of 15.6% to reach £3.03bn.

Net interest margins fell by 16 basis points to 2.07%, but improved by 5bp in the second quarter to 2.1% (Estimate: 2.01%).

In parallel, the cost-to-income ratio worsened from 49.3% to 55.5% during the half.

Returns on tangible equity declined from 18.2% one year before to 16.4%.

Levels of default remained stable and at low levels across the portfolio, according to the lender.

The loan impairment rate was down by nine basis points at the half-year stage.

Significantly, impairments ran at £45m during the second quarter, against estimates for £161m, Matt Britzman, senior equity analyst at Hargreaves Lansdown noted.

Management said that it now saw full-year income, excluding notable items, of approximately £14bn and expected the lender's return on tangible equity would increase to over 14%.

The former was up from a previous range of £13-13.5bn.

The interim dividend payout was hiked by 9% to 6p.

"NatWest has just delivered a knockout set of results," Britzman added.

"Second-quarter results have pretty much beaten expectations on every key metric, from income to margins.

"[...] That's positive news and helps underpin the stock price which has been on a heater this year."

As at 0847 BST, shares of NatWest were jumping 7.01% to reach a fresh a multi-year high of 361.8p.

-- More to follow --