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Stock Watch

NatWest share price slips, despite decent half-year results

NatWest share price has slipped despite beating on profits and reinstating the dividend

The NatWest share price has slipped this morning, despite beating on profits and reinstating the dividend. The bank has followed in the footsteps of Barclays and Lloyds Banking Group earlier this week by reporting a decent set of half-year numbers, as the unlocking of the UK economy boosts confidence, and a lot of the worst-case scenarios failed to play out.

NatWest share price falls

The NatWest share price is down around 1% to 203p in early trading on Friday morning, but still remains up on the week so far, ahead a fraction shy of 3%.

In Q1, the bank was able to release £102m back on to the balance sheet, which in turn boosted profits to £946m, above expectations of £539.5m. Today the bank released another £605m from reserves, helping to boost first-half profit by £707m, due to the low levels of loan defaults.

As a result, Q2 pre-tax profit came in at £946m, helping to push first-half profits to £1.84bn, with the bank taking the decision to resume its dividend, declaring an interim payment of 3p per share. NatWest Group also said it plans to buy back £750m of its own shares in the second half, after the Bank of England removed restrictions on payouts a few weeks ago.

This also presents a nice windfall for the UK government as it looks to pare back further its now 54% stake in the lender over the course of the next 12 months with the bank saying it expects to distribute a minimum of £1bn per annum to shareholders from 2021 to 2023 via a combination of ordinary and special dividends.

Deposits increase

Like Lloyds yesterday, the bank has seen customer deposits increase, with £5bn being added over the quarter, and £12.1bn over the first half, while also seeing loans increase due to higher levels of mortgage lending, which rose by £7bn in the first half.

Over the half-year income from retail and commercial business was still lower, as a result of the lower yield curve, and lower business activity. Net Interest margin came in at 1.61% for Q2, down from 1.64% in Q1, which is disappointing when you consider Lloyds saw an increase. It is also one of the thinnest among UK banks, and still well below last year’s 1.89%, which means NatWest has plenty of room to improve.

The initial NatWest share price reaction to today’s numbers was a little disappointing, with the shares down by over 1% at the start of trading, however that may have more to do with the fact that markets are down across the board this morning, plus NatWest's shares are already 25% up year-to-date.


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