Natwest’s margins in focus as lender gears up for year of big changes
Investors will be hoping that Natwest can shrug off margin pressures and draw a line under a headline-grabbing “debanking” scandal as it gears up for new leadership and a much-hyped retail offering.
The group, also made up of Royal Bank of Scotland, Ulster Bank and private bank Coutts, is expected to post bumper annual pretax profits of £6bn and income of £14.6bn on Friday, according to an analysts’ consensus.
Natwest’s third-quarter results triggered its biggest one-day share drop since Brexit after the bank lowered its net interest margin (NIM) guidance.
NIM is a key indicator of a lender’s profitability as it reflects the gap between what the firm pays out in interest to savers and what it brings in from interest on loans.
Investors will be focused on how resilient banks’ margins are in the face of a highly competitive market for deposits and mortgages.
The UK’s biggest banks have reaped the benefits of high interest rates from the Bank of England, meaning they are able to charge more on loans including mortgages.
However, they are also under pressure to pass on the base rate to consumers by offering better deals on savings accounts, which drags down banks’ earnings.
Investors will also be looking to see how banks have rewarded employees on the back of higher earnings.
Sky News reported on Sunday that Natwest’s bonus pool would be £350m for 2023, slightly lower than the £367m it paid out to staff in 2022. The bank declined to comment when approached by City PM
Natwest is emerging from a turbulent year following the departure of chief executive Dame Alison Rose last summer after she admitted to discussing Nigel Farage’s Coutts account with the BBC.
The row between Natwest and the former Ukip leader over the closure of his account, which he claimed was due to his political beliefs, sparked a wide-ranging debate over so-called “debanking” across the sector.
Meanwhile, Natwest is edging closer to becoming fully privatised as the government unwinds the stake it took to rescue the bank during the financial crisis.
The government plans to start offering part of its stake as soon as June, with shares expected to be priced at a discount to make them more appealing.
The Treasury is waiting for the bank to appoint a permanent successor to Rose before launching the retail sale. Rick Haythornthwaite is set to succeed Howard Davies as Natwest’s chair in April.