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NatWest annual profit climbs 20%, Thwaite confirmed as CEO

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NatWest profit climbs 20%, Thwaite confirmed as CEO By Reuters

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Published Feb 16, 2024 07:08
Updated Feb 16, 2024 09:05

© Reuters. FILE PHOTO: People walk past a Natwest Bank branch in central London, Britain November 22, 2023. REUTERS/Isabel Infantes/File Photo

By Iain Withers and Lawrence White

LONDON (Reuters) -NatWest confirmed Paul Thwaite as its permanent chief executive on Friday and reported forecast-beating profit for 2023, as the British bank gears up for a crunch sale of state-owned stock after a scandal-hit year.

The bank also revised down its guidance for future returns in a sign of the potential challenges facing Thwaite, citing an expected reduction in interest rates and changes in customer behaviour as well as the worse economic outlook for the UK.

NatWest (LON:NWG) shares climbed 2% after an initial fall, outpacing a 0.7% gain in the benchmark FTSE 100 index, as investors took the lower performance guidance in their stride.

“The appointment of a new CEO provides NatWest with greater clarity over its future direction, after months of flux,” said Stuart Lamont, investment manager at RBC Brewin Dolphin.

The taxpayer-backed bank reported pre-tax profit of 6.2 billion pounds ($7.8 billion) for the 12-month period, up 20% on the prior year and ahead of analyst forecasts.

NatWest also announced, as expected, a share buyback of 300 million pounds.

Thwaite becomes CEO on a permanent basis with immediate effect, the bank said. He took on the role on an interim basis last July following the abrupt departure of his predecessor Alison Rose.

The former business banking boss will be tasked with repairing the group’s reputation after a damaging row with former Brexit Party leader Nigel Farage last year over closure of his accounts that forced out Rose and wealth boss Peter Flavel.

Thwaite will also prepare the ground for a planned retail sale of government-owned stock in the bank – which remains 35% taxpayer-owned after its 45.5 billion pound bailout in the 2008-9 financial crisis.

The sale is a key part of finance minister Jeremy Hunt’s plans to try to reinvigorate interest in investing in British stocks, and could take place as early as June.

MARGIN PRESSURES

The bank’s results provide an early picture of how Britain’s major lenders are faring, with Barclays (LON:BARC), HSBC (LON:HSBA) and Lloyds (LON:LLOY) all due to report results next week.

NatWest’s profit was its biggest since its state rescue, as higher central bank interest rates continued to lift lending revenue.

But a greater risk of cash-strapped borrowers defaulting on loans and pressure from fiercer competition for savings and mortgage products are eating into margins.

The lender reduced its returns target for 2024 to around 12%, much lower than an earlier goal of 14%-16% and the 17.8% achieved last year.

NatWest set aside 578 million pounds for potential soured loans, up from 337 million pounds the prior year – but the figure came in below analysts’ forecasts.

The bank said its staff bonus pool shrank to 356 million pounds from 368 million the year before, which it said reflected the fact it had missed some financial targets.

It announced a final dividend of 11.5 pence per share.

($1 = 0.7940 pounds)

NatWest profit climbs 20%, Thwaite confirmed as CEO

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