NatWest results beat forecasts as new chief confirmed

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NatWest confirmed the permanent appointment of Paul Thwaite as chief executive on Friday as it reported better than expected results boosted by higher interest rates.

The UK bank’s pre-tax operating profit in the three months to December fell 12 per cent year on year to £1.3bn, broadly in line with analyst expectations. Revenues, meanwhile, dropped 5 per cent year on year to £3.5bn but surpassed market expectations of £3.4bn.

For its full year, the lender reported a 20 per cent jump in profits to £6.2bn, beating forecasts of just under £6bn. Shares rose 2 per cent in morning trading on Friday.

NatWest said that its net interest margin — the difference between the interest it receives on loans and the rate it pays for deposits — fell 8 basis points in the fourth quarter to 2.86 per cent, as customers moved into higher-returns savings products. However, its annual net interest margin improved from 2.85 per cent to 3.04 per cent year on year.

NatWest did not provide guidance on its net interest margin for the next year, a closely watched measure at a time of expected interest rate cuts. The bank also lowered its outlook for return on tangible equity (Rote), a key measure of bank profitability to a target of about 12 per cent next year and more than 13 per cent by 2026.

“This used to be a bank that was expected to return a 14 to 16 per cent Rote in the medium term,” said Benjamin Toms, an analyst at RBC Capital Markets. “Now it’s a bank that is expected to deliver a 13 per cent Rote in 2026,” he said, adding there were “likely to be earnings downgrades”.

The high-street lender said customer deposits at its retail bank decreased by £400mn throughout the year due to lower current account balances, partially offset by growth in its higher-yielding fixed-term products. NatWest said 16 per cent of all customer deposits were…