NatWest banks surging profits but shares tank

LONDON: British bank NatWest on Friday posted a jump in annual profits as it trimmed costs and the sector benefitted from rising interest rates.

Its share price tanked more than six percent, however, despite NatWest announcing a big buyback of shares, with analysts blaming profit-taking after the bank’s stock value climbed strongly in the final quarter of 2022.

There is also a fear that the sector could face a surge in bad loans with Britain facing a cost-of-living crisis as UK annual inflation remains above 10 percent despite recent easing.

NatWest said net profit climbed 13 percent to £3.34 billion ($4 billion) last year.

Revenue increased 26 percent to £13.2 billion.

“A slightly perplexing reaction has hit the shares in early trade, perhaps in light of some profit taking after the share price spike of 24 percent over the last three months, while a weaker market generally is also clouding sentiment,” said Richard Hunter, head of markets at Interactive Investor.

Shares in rival Barclays shed as much as 10 percent earlier in the week after it warned of surging bad loans linked to the cost-of-living crisis.

As for NatWest, last year was notable for it no longer being under majority state control.

The UK government in March cut its stake to below 50 percent for the first time since the global financial crisis.

NatWest, then known as Royal Bank of Scotland, had been rescued with £45.5 billion of taxpayers’ cash in the world’s biggest banking bailout at the height of the 2008 meltdown.

“NatWest Group delivered a strong performance in 2022, with pre-tax profit up more than a third to £5.1 billion,” chief executive Alison Rose said in the earnings statement.

“We made considerable progress against our strategic goals, maintained a well-balanced loan book and distributed significant capital to our shareholders, including the UK government.

“Despite not yet seeing significant signs of financial distress among our customers, we are acutely aware that many people and businesses are struggling right now and that many more are worried about what the future holds,” added Rose.