- Both banks please with results
- Buybacks the way to shareholders’ hearts
- NatWest net interest margin target cut
Investors in NatWest (NWG) will be thinking they dodged a bullet today after the bank lowered its outlook but its shares actually went up instead of being sold off.
Holders of Standard Chartered (STAN) will be even more chuffed as they see their shares race to the top of the FTSE 100 after the bank’s first-half results beat forecasts and it announced a big buyback.
A MIXED BAG FROM NATWEST
Like its rivals Barclays (BARC) and Lloyds Banking (LLOY), NatWest published what looked like fairly respectable first-half results showing total income up 25% to £1.485 billion and a return on tangible equity of over 18% which is the best of all the high-street banks so far.
Moreover, it unveiled a surprise new £500 million share buyback on top of the £1.3 billion repurchase programme which it had only just finished last quarter, which probably explains why the shares are in the green.
Digging deeper, however, net interest income of £2.82 billion was mildly below the consensus while operating costs of £1.875 billion were higher, than expected so the earnings ‘beat’ came down to a much lower level of bad loan provisions, which at £153 million for the second quarter were way below those reported by its rivals.
The bank maintains that defaults ‘remain stable and at low levels across the portfolio’ and the increase was simply due to an adjustment to its model to take account of ‘increased economic uncertainty’.
While it maintained its revenue guidance for the full year, the bank cut its net interest margin target to ‘around 3.15%’, the exact same level as Barclays, whose shares were hit for six earlier this week, as customers move cash from their current accounts to interest-bearing ones.
STANDARD CHARTERED FLYING HIGH
Despite posting a second-quarter net interest margin which slightly missed analysts’ forecasts at $2.44 billion and operating costs of $2.83 billion which were above forecasts, the Asia-focused bank still managed to beat expectations by more than 10% with pretax profits of $1.6 billion.
Moreover, according to Joseph Dickerson at Jefferies, the outlook suggests analysts will need to upgrade their full year revenue and earnings numbers, while the unexpected announcement of a $1 billion share buyback was the cherry on top of the cake.
‘We have delivered a very strong set of results for the first six months’, crowed chief executive Bill Winters, adding ‘We remain strongly profitable, highly liquid, and well capitalised. These attributes enable us to return a further $1 billion to our shareholders through a new share buy-back announced today.’
By mid-morning, NatWest shares were up 2% to 245p while Standard Chartered shares were up 6% to 752p.
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