NatWest Returns to Profit in 2021

NatWest Group (LON: NWG) (NYSE: NWG) returned to profit in 2021, driven by the recovery of the economy which allowed the British bank to recover provisions for unpaid debts.

Key Results

Full-year attributable profit was £2,950 million pounds, compared with a loss of £753 million a year earlier. The bank took a net impairment reversal of £1,278 million reflecting the low levels of realized losses observed throughout the year.

Retail and commercial lending activity saw growth of 2.6%. Revenue was stable over one year, at £10.28 billion.

NatWest achieved cost reductions of £256 million, or 4%, in 2021, in line with its target for the year.

The group will distribute a dividend of 7.5 pence per share and announces a program to buy back ordinary shares up to £750 million for the first half of the current year.

CEO Commentary

NatWest Group CEO Alison Rose said, “We are delivering our strategy through four strategic priorities, with the aim of driving long-term sustainable value and delivering on our 2023 targets, which we are now updating. As the economy recovers, we feel more confident about income and so we are providing guidance for the first time. In 2022, we expect to deliver income excluding notable items of above £11.0 billion in the Go-forward group. We are amending our cost reduction target to around 3% per annum for 2022 and 2023, reflecting higher inflation and our ongoing investment in the business. Nevertheless, we maintain a strong focus on continued cost discipline. We retain our 2023 CET1 ratio of 13-14%, and we have upgraded our return on tangible equity target in 2023 to comfortably above 10% for the Group.”

Wall Street’s Take

On February 15, Credit Suisse analyst Omar Keenan kept a Buy rating on NWG and 310p price target. This implies 32.2% upside potential.

The rest of the Street is cautiously optimistic on NWG with a Moderate Buy consensus rating based on eight Buys and three Holds. The average NatWest Group price target of 290.50p implies 23.9% upside potential from current levels.

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