Shares in NatWest (NWG) moved 1.5% higher to 217.6p despite being fined more than £264 million for anti-money-laundering failures that involved deposits of bin liners stuffed full of cash.
The bank has been fined £264,772,620, and ordered to pay £4,297,466 in costs.
This ruling, linked to its failure to monitor the activities of a specific customer, a Bradford jewellery business, between 2012 and 2016, is the first time a financial institution has faced criminal prosecution by the Financial Conduct Authority (FCA) under anti-money-laundering laws in the UK.
However, Shore Capital analyst Gary Greenwood explained why this wasn't a major concern for investors.
'While this is a serious embarrassment for the group, there should be no impact on forecasts as the group had already incurred £294 million of litigation and conduct costs during Q3, which included provisions for an anticipated fine in respect of breaches of the UK Money Laundering Regulations,' he said.
'NOT MATERIAL TO THE INVESTMENT CASE'
'In addition, it should be noted that our fair value for all the large mainstream UK banks already includes a c.5% haircut for future litigation and conduct costs that have not yet been incurred (with the cash cost of this fine equivalent to just over 1% of NatWest’s market capitalisation). As such, we do not view this news as being material to the investment case.'
Over the last year the shares have risen by more than 9%. This in part reflects expectations that interest rates will rise in response to higher than expected inflationary pressures.
Banks benefit from a rise in interest rates, as they are able to increase their net interest margins (the difference between the rate at which they can secure financing and make loans).
The recent emergence of the Omicron coronavirus variant, has diminished the likelihood that interest rates will rise at the next meeting Monetary Policy Committee meeting on Thursday.
This has several negative implications for NatWest.
First, the market will reduce the outlook for group margins given the lower interest rate environment.
Second, a weaker economic outlook is likely to drive higher levels of insolvencies and could significantly increase impairment charges.
