- Revenue and profit top forecasts
- Analysts hold back on upgrades
- Shares climb in line with rivals
With Barclays (BARC) and Lloyds Banking Group (LLOY) having already posted first-quarter results and seen their shares rally in response, the onus was on NatWest Group (NWG) not to let the side down and the bank duly delivered a positive update with earnings a touch above estimates despite a weak year-on-year performance.
Investors responded positively, sending the shares up 10p or 3.5% to the top of the FTSE 100 leader board and a new 12-month high.
SMALL BEAT
The bank reported first-quarter net interest income of £2.65 billion, which was slightly ahead of market expectations although it represented a 9% fall on the previous year even though the net interest margin actually increased marginally.
Like its rivals, NatWest is seeing a decrease in loan income and an increase in deposit costs as savers switch their money into interest-bearing accounts.
Non-interest income fell 15% to £824 million, which was below estimates, but lower loan loss provisions of £93 million against £186 million last year helped the bank report adjusted pre-tax profits of £1.27 billion, down 27% on last year but slightly ahead of market forecasts.
Newly-confirmed chief executive Paul Thwaite said NatWest had posted ‘a strong set of results’ and observed that ‘though macro-uncertainty continues, customer confidence and activity is improving’.
Thwaite also referenced the government’s latest sale of NatWest shares and said returning the group to private ownership later this year was ‘a shared ambition’.
EXPERT VIEWS
Jefferies banking expert Joseph Dickerson described the results as ‘roughly ticking the boxes’ excluding the miss at the non-interest income level but suggested there was nothing in the report to prompt an earnings upgrade for the full year.
AJ Bell investment director Russ Mould commented: ‘While NatWest is affected by the same headwinds as other banks – greater competition on mortgages and customers moving their money into accounts offering higher rates of interest – its first quarter numbers still came in ahead of expectations and there are signs these headwinds are starting to ease.
‘This beat hasn’t been backed up by an increase in full-year guidance but a conservative approach provides scope for NatWest to deliver a positive surprise down the road’, added Mould.
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Ian Conway) and the editor (Martin Gamble) own shares in AJ Bell.
