NatWest Group PLC NWG shares are experiencing a substantial decline of approximately 11% following the release of its Q3 FY23 results.
During this period, NatWest disclosed the key findings from the Phase I investigation conducted by the independent review conducted by Travers Smith in July. The investigation focused on the decision to close the accounts of Nigel Farage, the former leader of the U.K. Independence Party, at Coutts, as well as the potential breach of confidentiality regarding his customer information.
According to the bank, the closure of Farage’s account was deemed legal. However, NatWest identified “serious failings” in the decision-making process, communication with Farage, and the handling of his confidential information.
Sir Howard Davies, the Group Chairman, acknowledged the shortcomings and issued an apology to Mr. Farage. He stated that the treatment Farage received did not meet the standards expected by any customer.
In terms of financial performance, NatWest’s total income for the quarter was £3.488 billion, representing an increase compared to £3.229 million in the same period last year. The net interest margin stood at 2.94%, slightly lower than the 2.99% reported a year ago.
Excluding notable items, total income increased by 3.4% year-on-year. This growth was driven by increased lending, higher market income, and yield curve movements. The increase in interest-bearing deposits and lower deposit balances, however, partially offset these positive factors.
The Commercial & Institutional sector experienced an 11.1% year-on-year growth in total income, reaching £1.841 billion. This increase can be attributed to higher deposit income resulting from interest rate rises and higher markets income. On the other hand, the Private Banking sector’s total income declined by 24.9% year-on-year to £214 million.
In the Retail Banking sector, total income decreased by 2.2% year-on-year to £1.442 billion. This decline was mainly due to lower deposit balances resulting from a shift in deposit mix and continued mortgage margin dilution, as well as higher treasury costs.
Earnings per share (EPS) for the quarter were 9.8p, significantly higher compared to 1.9p in the same period last year. NatWest reported a net impairment charge of £229 million in Q3 2023, reflecting low and stable levels of stage 3 defaults across the portfolio and charges related to unsecured lending.
As of September 30, 2023, NatWest’s total assets amounted to £717.1 billion, and loans to customers (amortised cost) stood at £377.3 billion.
The Common Equity Tier 1 (CET1) ratio remained steady at 13.5% during Q2 FY23.
The total assets under management and administration amounted to £38.2 billion. This figure includes net inflows of £0.2 billion in assets under administration, as well as the impact of muted market movements.
FY23 Outlook: NatWest expects its total income (excluding notable items) to reach approximately £14.3 billion, with a net interest margin greater than 3%.
Additionally, the bank anticipates the impairment loss rate to be lower than its through-the-cycle range of 20-30 basis points.
In the medium term, NatWest expects its CET1 ratio to be within the range of 13-14%.
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Price Action: NatWest shares are currently trading at $4.51, reflecting an 11.06% decline on the last check Friday.
Key Takeaways from NatWest Q3 FY23 Results
NatWest Group PLC (NWG) shares have experienced a significant decline of approximately 11% following the release of its Q3 FY23 results, as well as key findings from an investigation regarding the closure of Nigel Farage’s accounts. The closure was deemed lawful, but serious failings were found in the decision-making process and treatment of Farage’s confidential information.
– Total income for Q3 was £3.488 billion, reflecting a year-on-year increase.
– Net interest margin was 2.94%, slightly lower than the previous year.
– Total income (excluding notable items) increased by 3.4% year-on-year, driven by increased lending and higher market income.
– Commercial & Institutional total income grew 11.1% year-on-year, while Private Banking total income declined by 24.9%.
– Retail Banking total income fell by 2.2% year-on-year.
Other Key Points:
– Earnings per share (EPS) for the quarter were 9.8p, significantly higher than the previous year.
– NatWest reported a net impairment charge of £229 million in Q3, reflecting stable levels of defaults and charges related to unsecured lending.
– Total assets as of September 30, 2023, stood at £717.1 billion, with loans to customers at £377.3 billion.
– The Common Equity Tier 1 (CET1) ratio remained steady at 13.5%.
– Total assets under management and administration amounted to £38.2 billion.
– NatWest expects total income (excluding notable items) to reach approximately £14.3 billion, with a net interest margin greater than 3% for FY23.
– The impairment loss rate is expected to be lower than the through-the-cycle range of 20-30 basis points.
– In the medium term, NatWest aims to maintain a CET1 ratio in the range of 13-14%.
The share price of NatWest has declined by 11.06% to $4.51 following the Q3 FY23 results.