Banking group NatWest (NWG) has announced a share consolidation and further details of its special dividend payment, nudging shares in the lender 0.3% higher to 254.9p.
SHARE CONSOLIDATION
A share consolidation is a corporate action conducted by a company with the intention of reducing the number of its shares trading on the stock exchange.
It does so by reducing the number of shares held by its existing shareholders.
Under the new proposal, NatWest shareholders will receive 13 new ordinary shares for every 14 shares that they currently hold.
Although shareholders will hold fewer shares post the consolidation, they will still hold the same proportion of equity capital in the lender.
The new shares issued will have a different price but will trade in the same way on the London Stock Exchange and carry the same rights.
The share consolidation will apply to shareholders on the register at 6pm (UK time) on August 30th 2022.
SPECIAL DIVIDEND
Shareholders will receive a special dividend of 16.8p per share.
This is equivalent to 7% of the group’s market capitalisation.
It is proposed that that the special dividend, which is subject to the approval of shareholders at the general meeting, will be paid on 16 September.
STANDOUT WINNER FROM INTEREST RATE RISES
Recent second quarter results (29 July) from NatWest were significantly better than market expectations.
Management has significantly upgraded its 2023 return on tangible equity target for the bank to 14%-16% versus previous guidance of ‘comfortably above’ 10%.
Reported profit before tax increased by 20% year-on-year to £1.55 billion, ahead of a consensus forecast of £1.05 billion.
Earnings per share jumped 33% year on year to 10p, considerably ahead of a 6p consensus estimate.
A key reason for the strength of these numbers has been the recent rise in interest rates.
Research by Numis has examined the impact a 25 basis point interest rate increase has on the net interest income of UK banks.
NatWest is the standout winner. For every quarter point rise in interest rates its net interest income experiences a 5.5% uplift to its net interest income.
This has contributed to the bank being able to make the special dividend payment.
