Picture supply: NatWest Group plc
NatWest Group (LSE: NWG) launched its remaining outcomes this morning (14 February) for the 12 months ending 31 December 2024. It reported an attributable revenue of £4.5bn, up 12% since final 12 months, however nonetheless a slowdown in progress.
By comparability, the financial institution’s third-quarter outcomes confirmed a 26% improve in revenue, supported by sturdy lending progress and buyer deposits. The group’s return on tangible fairness (RoTE) is now as much as 17.5%, larger 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 mentioned: “We’re totally targeted on supply as we form the way forward for NatWest Group as an important and trusted associate to our clients and to the UK, and in doing so, create additional worth for our shareholders.”
A remaining dividend of 15.5p was proposed, leading to complete dividends of 21.5p for the 12 months — 26% larger than 2023.
Development and dividends
Up over 110% up to now 12 months, analysts have been cautious about predicting additional progress for the financial institution. The typical 12-month worth goal is 480p, lower than a ten% rise from in the present day’s worth.
The UK authorities has additional diminished its stake in NatWest to six.98% and it ought to turn out to be totally privatised later this 12 months after it sells its remaining stake. That will be the primary time it was totally non-public since 2008. As soon as that occurs, it’s anticipated to vary its dividend coverage, growing shareholder returns from 40% to 50%.
That could be one motive 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 12 months, from 2p per share to 21.5p. The yield now stands at 4%, a excessive proportion contemplating the fast worth progress.
An funding of £1,000 in 2020 might have quadrupled to £4,000 in the present day (with dividends reinvested). Few UK shares have supplied such returns. However can it hold performing so effectively?
Trying 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 consumers with retail and industrial banking companies. The previous 12 months 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 major shift within the financial institution’s management.
It has since explored a number of potential methods to drive progress. Examples embrace buying a major residential mortgage portfolio from Metro Financial institution and finishing a deal to buy elements of Sainsbury’s Financial institution’s operations. Stories recommend Santander is contemplating promoting its UK retail division to NatWest, hinting at potential growth alternatives.
But regardless of the constructive efficiency, dangers stay. The financial institution lately introduced plans to close 53 branches this 12 months 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 earnings.
General, the financial institution has gone from power to power beneath its new CEO and appears more likely to proceed. Whereas the fast progress of 2024 could taper off considerably, I nonetheless suppose it’s a promising inventory to contemplate in 2025.
