NatWest shares slump despite profit surge, £800m buyback

Shares in Britain’s NatWest slumped on Friday despite the bank reporting annual profits up by more than a third and unveiling an £800m share buyback as it cashed in on surging interest rates.

The lender, still 46% owned by the British taxpayer, on Friday posted pre-tax profit of £5.1bn for 2022, up 33.5% from £3.84bn a year earlier and in line with forecasts. It is the bank's biggest earnings since the financial crash of 2008 when it took a £45bn government bailout.

A final dividend of 10 pence was declared and NatWest continued to expect to achieve a return on tangible equity of 14-16%.

Despite the numbers, the shares tumbled 10% in early London trade. Steve Clayton, head of equity funds at Hargreaves Lansdown said suggestions that margins "will expand no further from here" may have harmed sentiment.

"With the stock having stormed 20% higher so far this year, some will be expecting more than that from the group. That explains the sharp tumble the shares have taken this morning," he said.

The bank added that a net impairment charge of £337m “principally reflects the latest macro-economics, including updated scenarios and their associated weighting, with more weight being placed on the downside scenario. Underlying book performance remains strong, with credit conditions remaining benign and levels of default remaining low,” NatWest said.

Net interest margin – the difference between what bank charges on loans and savings - rose 55 basis points to 2.85%. NatWest also increased the bonus pool for its bankers by nearly £70m to £367.5m.

Chief executive Alison Rose said that despite not yet seeing significant signs of financial distress among the bank's customers amid the cost-of-living crisis "we are acutely aware that many people and businesses are struggling right now and that many more are worried about what the future holds".

Reporting by Frank Prenesti for Sharecast.com