NatWest’s (NWG.L) first-half pretax operating profit fell by 16% to £3bn, as the lender revealed it has acquired a raft of mortgages from Metro Bank for £2.4bn.
The bank reported earnings results showing pre-tax profits dropped 16% to £3bn for the six months to June 30. Despite the fall, the result was better than the £2.6bn most analysts had expected.
It came as the bank suffered a 2.4% drop in net interest income, which is a key measure of profitability for lenders, and accounts for the difference between what is charged for loans and what is paid out to savers.
NatWest also announced it had agreed to buy around £2.5bn worth of residential mortgages from Metro Bank for £2.4bn in cash, which will see it add around 10,000 borrowers to the group. It follows the lender’s deal last month to buy the retail banking assets of Sainsbury’s, the supermarket group.
“NatWest has echoed the theme from Lloyds Banking yesterday with a creditable half-yearly performance boosted by a strong second quarter,” Richard Hunter, head of markets at Interactive Investor, said.
In a sign of its confidence in its performance for the rest of the year, NatWest lifted its 2024 forecast for return on tangible equity to above 14%, from the 12% expected previously.
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The lender now expects full-year income to come to £14bn, a notable bump from previous forecasts of between £13bn and £13.5bn.
“As with Lloyds yesterday, it’s the quarter-on-quarter numbers that investors are paying attention to. Second-quarter results have pretty much beaten expectations on every key metric, from income to margins,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
“It’s also good to see full-year guidance on net interest income finally get the upgrade investors had been hoping to see, and now supports the numbers analysts had been pencilling in. That’s positive news and helps underpin the stock price which has been on a heater this year.
NatWest announced total shareholder returns of £1.7bn for the first half of 2024. This includes an interim dividend of 6p per share, reflecting a 9% increase from the previous year’s dividend.
“We have made good progress against our strategic priorities, taking decisive action to grow and simplify our business and to manage our capital and costs more efficiently,” said NatWest CEO Paul Thwaite.
“There has been growth across all three of our businesses, we have attracted over 200,000 new customers and our acquisition from Sainsbury’s Bank is expected to add around one million customer accounts on completion. We have also agreed to acquire £2.5bn of UK prime residential mortgages from Metro Bank plc, adding further scale to our Retail Banking business.”
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NatWest has revealed it spent £24m on shelved Tory government plans for a retail share sale in the bank as it also reported a 16% fall in half-year earnings.
The new Labour government has not yet confirmed whether it plans to rekindle the share sale plans.
The lending giant’s bill for the “Tell Sid”-style campaign comes after it was forced to pay for advertising and preparations for the share sale, which had been due to launch in the summer before the surprise July 4 general election announcement.
The bank said this month that the government’s stake in it fell below 20%, moving the lender closer to full private ownership after its state bailout in the 2008 financial crisis.
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