- NatWest shares hit a two-year low
- Serious failings over Nigel Farage
- Bank cuts full year outlook
Shares in NatWest (NWG) were down over 10% to 184p as the UK high street bank reported mixed results for the three months ending 30 September 2023 and cut its full year outlook.
NatWest shares have fallen 32% year-to-date.
Total income excluding notable items, was £49 million lower than the second quarter of 2023 ‘reflecting asset margin pressure and changes in deposit mix partially offset by higher markets income in commercial & institutional’.
The UK high street bank reported an operating pre-tax profit of £1.33 billion for the third quarter compared to £1.09 billion in the same period a year ago, slightly below consensus estimates of £1.4 billion.
Russ Mould investment director at AJ Bell said: ‘Guidance on the net interest margin has been lowered as any benefit from higher interest rates seems to be evaporating.
‘Competition for savings and mortgage products, coupled with some regulatory pressure, means the banks are no longer seeing such a big gap between what they charge on borrowings compared with what they pay out for deposits.
‘While bad debts remain under control for now, the market is clearly wary of a deterioration here as the pressures on households and businesses continue to mount.
‘Higher interest rates have not been the panacea for the sector that some might have hoped, with Natwest shares notably trading below the level they traded at before the current rate hiking cycle began.’
The bank’s NIM (net interest margin) of 2.94% was 19 basis points lower than the second quarter of 2023 ‘principally reflecting lending margin pressure of 12 basis points and 14 basis points due to continued changes in deposit mix as customers shift to lower margin fixed term accounts.’
NatWest added ‘we expect some further pressure on bank NIM as this shift continues, albeit at a slower rate.’ Full-year guidance for a NIM of 3.15% has been downgraded to above 3%.
FARAGE FALLOUT
It was hard for investors (as well as NatWest) to ignore the spectre of the Nigel Farage ‘debanking scandal’.
NatWest issued a statement apologising once again for the closure of the politician’s personal bank account with Coutts, but at the same time an independent review by law firm Travis Smith determined that the closure was lawful.
NatWest group chairman, Howard Davies, said: ‘We apologise once again to Mr Farage for how he has been treated. His experience fell short of the standards that any customer should expect.’
The UK high street bank said it was making updates to its policies and procedures ‘to ensure that the lawfully protected beliefs or opinions of customers do not play any role in exit, retention or onboarding decisions.’
FINANCIAL CONDUCT AUTHORITY WADES IN
The FCA also stepped into the ring and said that it would be investigating potential ‘regulatory breaches’ committed by NatWest when it closed Nigel Farage’s bank account.
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DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Tom Sieber) own shares in AJ Bell.
