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NatWest warns profit boost from UK rate hike may have peaked

NatWest warned that rising interest rates won’t continue to boost earnings this year, casting a shadow over its strong fourth-quarter results and sending its stocks sharply lower on Friday.

The Bank of England’s pre-tax operating profit tripled to £1.4bn in the three months to December from £543m in the same period last year, in line with analyst expectations. Revenue rose 43% to £3.7bn compared to the consensus forecast of £3.6bn, boosted by a rate hike by the Bank of England.

But the group’s shares fell as much as 9% in subsequent morning trading. nut west Net interest margins — the difference between the interest you receive on loans and the interest you pay on deposits — will remain at 3.2%, the level in the fourth quarter of this year, he warned.

Analysts had expected it to rise to 3.38% following a series of rate hikes by the BoE, but this month 4%, the highest in 15 yearsNatWest’s guidance is based on the BoE keeping interest rates stable for the remainder of 2023.

Citi analysts also noted a 2023 earnings outlook of £14.8bn, below expectations of £15bn.

“Overall, these results will be disappointing for the weak outlook for 2023,” they said.Results reflect the disappointment of those around us Barclays performance On Wednesday, this also caused stocks to plunge.

NatWest’s weaker guidance was in line with analyst estimates for full-year pre-tax operating profit of £5.1bn, just over three years higher than last year, after a strong performance in 2022. Earnings increased by more than 25% to him at £13.2bn, just above the consensus forecast of £13bn for him.

Retail Banking revenues increased 27% year-over-year as higher interest rates offset increased competition in the mortgage market. Interest rates have fallen significantly since the UK’s disastrous ‘mini’ budget in September.

Following the results, the bank said it plans to launch a £800m share buyback program in the first half of 2023 and has proposed a final dividend of 10p per share.

The bad debt provision was £144m, below analyst estimates of £247m and compared with the release of Covid-related provisions of £269m a year ago.

The continuing Ulster Banking business in Ireland had an operating loss of £354m in the fourth quarter, with the majority of costs attributable to exiting the market.

“From our perspective, we are well positioned for growth,” Chief Executive Officer Alison Rose said on a media conference call, adding: [the] Today’s stock price,” followed by a question about the bank’s performance.

Despite Friday’s decline, NatWest’s stock is up 10% over the past 12 months.

The bank’s bonus pool increased by 23% to £367.5m, which it said reflected “strong performance and progress against strategy”.

Rose’s total remuneration, including salary, pension and bonuses, was £5.2m compared to £3.6m in 2021.

NatWest Chairman Howard Davis said the direct comparison was “apples and pears” as the bank will change its remuneration policy at its 2022 annual meeting to include annual bonuses totaling £643,000.

After a £46bn bailout in 2008, known as the RBS, lenders, who still hold about 44% of their stake in the UK government, are under pressure to pass on the gains of rate hikes to savers squeezed by banks. is one of the banks receiving Cost of living crisis.

Last week, Rose and other bank executives were accused by lawmakers of moving too slowly to boost savings deals while rapidly increasing mortgages following a “mini” budget. Rose initially refused to go to the meeting, before deciding to participate.

https://www.ft.com/content/c5eba3b8-f504-49bc-bf5f-919899a557bd NatWest warns profit boost from UK rate hike may have peaked

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