25 October 2024
If you are covering NatWest’s latest financial results, please find below a comment from Will Howlett, financials analyst at Quilter Cheviot:
"NatWest delivered another strong quarter with its latest results being well received again thanks to a big beat versus consensus and upgraded guidance. NatWest has had a strong run this year and as such the attractiveness of its valuation has been lost somewhat given it now trades in line the European sector compared with an ever present discount post Brexit.
"Profit before tax increased 26% year on year, well above analysts’ expectations with stronger revenues from net interest income and better costs more than offsetting higher loan losses NatWest suffered. Importantly the net interest margin is improving sequentially again (up 8 basis points on the quarter to 218 basis points) driven by the structural hedge (delaying the rate rises of the last couple of years into future years). Loan losses are a small negative in the quarter with a charge of £245m and NatWest highlighting higher stage 3 charges in Commercial and Institutional divisions and also a pick up in Retail. Deposit accounts also grew in the quarter with a modest rise as NatWest stemmed the flow of money out as people sought higher interest paying accounts."
"NatWest does have some real momentum behind it, but how long this can continue as interest rates fall remains to be seen. From a positive perspective, guidance has been raised again with strong income forecasts. However, net interest income makes up over 75% of NatWest’s overall income take, so as rates come down, returns will be harder to come by even if hedges help smooth this effect. Given the valuation it currently sits at, we see more upside at Barclays and Standard Chartered among UK banks."
