Picture supply: NatWest Group plc
NatWest Group (LSE: NWG) launched its last outcomes this morning (14 February) for the yr ending 31 December 2024. It reported an attributable revenue of £4.5bn, up 12% since final yr, however nonetheless a slowdown in development.
By comparability, the financial institution’s third-quarter outcomes confirmed a 26% enhance in revenue, supported by sturdy lending development and buyer deposits. The group’s return on tangible fairness (RoTE) is now as much as 17.5%, greater than steering forecasts. Regardless of headwinds from decrease rates of interest, the financial institution’s earnings proceed to rise, now at 53.5p per share.
Talking on the outcomes, recently-appointed CEO Paul Thwaite stated: “We’re absolutely centered on supply as we form the way forward for NatWest Group as an important and trusted companion to our clients and to the UK, and in doing so, create additional worth for our shareholders.”
A last dividend of 15.5p was proposed, leading to whole dividends of 21.5p for the yr — 26% greater than 2023.
Progress and dividends
Up over 110% up to now yr, analysts have been cautious about predicting additional development for the financial institution. The typical 12-month value goal is 480p, lower than a ten% rise from in the present day’s value.
The UK authorities has additional lowered its stake in NatWest to six.98% and it ought to develop into absolutely privatised later this yr after it sells its remaining stake. That may be the primary time it was absolutely non-public since 2008. As soon as that occurs, it’s anticipated to vary its dividend coverage, growing shareholder returns from 40% to 50%.
Which may be one cause it’s been tipped as one of many most secure dividend shares within the UK. Since restarting dividends in 2019, they’ve grown at a price of 26% a yr, from 2p per share to 21.5p. The yield now stands at 4%, a excessive proportion contemplating the fast value development.
An funding of £1,000 in 2020 might have quadrupled to £4,000 in the present day (with dividends reinvested). Few UK shares have offered such returns. However can it hold performing so effectively?
Wanting forward
NatWest is the fourth-largest financial institution within the UK and a key participant within the nation’s banking sector, serving thousands and thousands of shoppers with retail and industrial banking providers. The previous yr noticed notable management modifications following the controversy over the closure of Nigel Farage’s checking account at Coutts. Dame Alison Rose resigned as CEO, marking a big shift within the financial institution’s management.
It has since explored a number of potential methods to drive development. Examples embody buying a primary residential mortgage portfolio from Metro Financial institution and finishing a deal to buy components of Sainsbury’s Financial institution’s operations. Stories counsel Santander is contemplating promoting its UK retail division to NatWest, hinting at potential enlargement alternatives.
But regardless of the constructive efficiency, dangers stay. The financial institution lately introduced plans to close 53 branches this yr as a part of its digital transformation technique. The transfer might dent the financial institution’s fame as a key high-street institution. A decrease rate of interest atmosphere is one other issue to account for, as this might restrict the financial institution’s loan-based revenue.
Total, the financial institution has gone from power to power below its new CEO and appears prone to proceed. Whereas the fast development of 2024 could taper off considerably, I nonetheless suppose it’s a promising inventory to contemplate in 2025.
