Natwest Group (GB:NWG) shares rose more than 7% on Friday after the British bank announced upbeat Q4 profit and named interim CEO Paul Thwaite as the permanent head, addressing a major uncertainty. The bank’s fourth-quarter pre-tax operating profit declined about 12% year-over-year to £1.26 billion but surpassed analysts’ consensus estimate of £1.02 billion.
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Thwaite, who previously headed NatWest’s business banking division, assumed the role of the interim CEO in July 2023 when Alison Rose stepped down following a controversy triggered by the closure of politician Nigel Farage’s accounts with the bank’s subsidiary Coutts.
Natwest’s 2023 Results and Outlook
For the full-year 2023, Natwest’s pre-tax operating profit increased 20% to £6.18 billion. Net interest income (NII) increased 12% to £11 billion, thanks to higher interest rates. The net interest margin expanded by 19 basis points to 3.04% in 2023. However, Q4 net interest margin declined 8 basis points sequentially to 2.86%, as more customers opted for fixed-term accounts to take advantage of high interest rates.
Meanwhile, Natwest announced a final dividend payment of 11.5p per share. This brings the full-year 2023 dividend to 17p, reflecting a 26% year-over-year increase. Overall, the bank declared £3.6 billion of shareholder capital returns. The bank also expressed the intention to start a buyback programme of up to £300 million this year.
Looking ahead, Natwest expects total income (excluding notable items) in the range of £13.0 billion and £13.5 billion in 2024. This guidance fell short of analysts’ total income forecast of £13.8 billion. The guidance reflects the bank’s expectation of falling interest rates. Natwest also issued disappointing guidance for return on tangible equity (RoTE), a key profitability metric. It expects RoTE of about 12% in 2024, down from 17.8% in 2023. It expects RoTE to improve to more than 13% in 2026.
Is Natwest a Good Stock to Buy?
Analysts have a Hold consensus rating on NWG stock based on four Buys, two Holds, and two Sells. The Natwest Group share price target of 259.29p implies nearly 13% upside potential. Shares have declined more than 19% in the past year.
