Why British Retail Banking Company NatWest's Shares Are Diving Today

NatWest Group PLC NWG shares are trading lower by around 11% after it reported Q3 FY23 results.

NatWest also disclosed key findings from the Phase I investigation of the Travers Smith independent review in July related to the decision to close Coutts accounts of the former U.K. Independence Party leader, Nigel Farage, and the circumstances covering a potential confidentiality breach regarding his customer information.

The bank stated that the closure of the account was lawful and further added that there were, however, 'serious failings' related to how the decision was reached and communication with Mr Farage, as well as the treatment of his confidential information.

Group Chairman, Sir Howard Davies, said, "We apologise once again to Mr Farage for how he has been treated. His experience fell short of the standards that any customer should expect."

The company's total income was £3.488 billion, an increase from £3.229 million a year ago. Net interest margin stood at 2.94% vs. 2.99% a year ago.

Total income (excluding notable items) increased by 3.4% Y/Y, led by increased lending, higher market income, and yield curve movements partly offset by the continued change in deposit mix to interest-bearing from non-interest-bearing and lower deposit balances.

Commercial & Institutional total income grew 11.1% Y/Y to £1.841 billion on higher deposit income supported by interest rate rises and higher markets income, while Private Banking total income declined 24.9% Y/Y to £214 million.

Also, Retail Banking total income fell 2.2%Y/Y to £1.442 billion on lower deposit balances with a mix shift and continued mortgage margin dilution and higher treasury costs.

EPS was 9.8p vs. 1.9p a year ago. NWG reported a net impairment charge of £229 million in Q3 2023 (vs. £247 million a year ago), reflecting continued low and stable levels of stage 3 defaults across the portfolio and good book charges related to unsecured lending.

As of September 30, 2023, total assets stood at £717.1 billion, and loans to customers (amortised cost) stood at £377.3 billion.

Common Equity Tier 1 came in at 13.5%, the same as in Q2 FY23.

Total assets under management and administration stood at £38.2 billion, reflecting assets under administration net inflows of £0.2 billion and muted market movements. 

FY23 Outlook: NWG expects total income (excluding notable items) to be around £14.3 billion and NIM greater than 3%.

The bank expects the impairment loss rate to be below its through-the-cycle range of 20-30 basis points.

In the medium term, NWG expects a CET1 ratio in the range of 13-14%.

Also Read: NatWest Buys Back Stock Worth £1.26B From UK Government, Reduces Latter's Stake to 38.6%

Price Action: NWG shares are down 11.06% at $4.51 on the last check Friday.