NatWest shares flew 6.8% to 245.8p in early morning trading on Friday in light of a pre-tax operating profit ahead of management expectations of £2.6 billion in HY1 2022.
The banking firm reported a return on tangible equity of 13.1% and a cost:income ratio of 58.3% compared to 67.6% the last year.
NatWest highlighted a Go-forward group income rise of £819 million, representing a 16.2% growth against HY1 2021, as a result of base rate increases and volume growth.
The company announced a bank net interest margin climb of 0.26% to 2.72% on the back of base rate rises.
Meanwhile, the group mentioned a 1.5% dip in other operating expenses in the Go-forward group to £50 million, alongside a HY1 operating profit before impairments rise of 53.5% to £2.7 billion.
NatWest further mentioned a net impairment release of £46 million in the Go-forward group, linked to low levels of realised losses across the company portfolio.
However, the banking giant said it continued to keep a wary eye on the volatile market outlook going forward in FY 2022.
“In a mixed UK bank reporting season so far, there’s no question who is getting the gold star,” said AJ Bell investment director Russ Mould.
“Natwest has knocked it out of the park with its latest results. It’s hard to see what more it could have done to impress the market.”
FY 2022-2023 guidance
The company noted an expected FY 2022 income excluding notable items of £12.5 billion in the Go-forward group, with a NIM greater than 2.7%.
The firm highlighted its £3 billion investment over 2021 to 2023 as it intends to reduce Go-forward group operating expenses by 3% in 2022 and maintain broad stability in 2023.
The group said it expected to reach a return on tangible equity between 14% to 16% in FY 2023.
“Profit ahead of expectations: check. Big shareholder returns: check. Raised guidance: check. It all adds up to suggest that rising rates are helping to boost the profitability of the group,” said Mould.
“If Natwest can keep this sort of momentum up, the Government will be glad it extended the deadline for the final sale of its shareholding by 12 months to August 2023.”
“There will likely be significant obstacles along the way given the clouds hanging over the UK economy, but the business at least looks in decent shape to take on these challenges.”
NatWest confirmed a total dividend of 20.3p for the HY1 financial term, consisting of a dividend of 3.5p and a special dividend of 16.8p per share.
