28th Jul 2023 10:53
(Alliance News) - NatWest Group PLC has had a "a week to forget", with the departure of Alison Rose, but it seems like the repercussions are not over yet.
On Friday, however, NatWest delivered a strong set of interim results, with profit soaring.
"While indiscretion may have led to her departure the latest results from NatWest suggest former CEO Alison Rose was making a decent fist of her day job," said Russ Mould, investment director at AJ Bell.
"After years of struggle following its forced nationalisation during the 2007/8 financial crisis, Rose had probably got the bank as close to normality as any of her predecessors and there will be real frustration that NatWest is back in crisis mode, undoing much of that good work."
On Tuesday evening, Alison Rose resigned as chief executive officer after admitting to being the source of an inaccurate news story about the finances of pro-Brexit politician Nigel Farage.
In 2019, Rose became NatWest's CEO. She was the first woman to take the job at one of their four UK banks back in 2019, and leaving means that the handful of women leaders with the FTSE 100 firms has gotten even smaller.
For now, NatWest said that Paul Thwaite will take over as CEO, for an initial period of 12 months.
The board said in a statement that a further process to appoint a permanent successor will take place "in due course".
Meanwhile, the Financial Times on Friday reported that Chair Howard Davies said he intends "to continue leading the bank".
However, CMC Markets Michael Hewson said "it is hard to see how he can [continue as chair]."
"It's quite likely that in order to restore confidence in the management of the bank, pressure could well grow for him to step down in the coming days," Hewson added.
Simply put, Hargreaves Lansdown's analyst Matt Britzman described the last weeks as "a week to forget at NatWest."
NatWest chose to mostly avoid the topic in its interim results on Friday, focusing mostly on a strong set of results.
It reported total income of GBP7.73 billion in the six months ended June 30, up 24% from GBP6.22 billion a year earlier.
Operating pretax profit rose to GBP3.59 billion, up 37% from GBP2.62 billion.
At June 30, the bank's common equity tier ratio stood at 13.5%, compared to at 14.4% at March 31 and 14.2% at December 31.
NatWest announced that it will be paying an interim dividend of 5.5 pence per share, up from 3.5p a year earlier.
It also plans to begin an on-market buyback programme of up to GBP500 million in the second half of 2023. Jefferies said that the buyback announcement "comes as a surprise."
However, AJ Bell's Mould noted that "this is not an unblemished update."
Looking ahead, NatWest left its outlook for the year unchanged, saying it expects net interest margin to be 3.15%, from 3.2%. This is based on the assumption of a Bank of England base rate of 5.5%.
Britzman explained that this reflects "the ongoing deposit shift to accounts that offer better rates as consumers do all they can to make cash savings go further".
"NatWest should be a little more robust than peers in this regard, owing to the fact more of its deposits are held by small and medium-sized businesses which tend to keep more cash current accounts that are more profitable for banks," he continued.
Mould added that the trimmed guidance may hint at the problems for banks. He noted that banks are "under big political and regulatory pressure, of charging more to borrowers without offering more to savers too, particularly with mounting competition in the savings market."
Meanwhile, for investors, CMC Markets Hewson said that focus will be on ensuring how the recent events "are brought to a swift conclusion."
"There is a concern that the uncertainty around current events will prove a distraction to senior management, and there are also serious questions to answer around the judgement of chairman Howard Davies who thought that the conduct of outgoing CEO Alison Rose did not merit a stricter sanction," Hewson said.
"Trust and confidence in banking are a key pillar when it comes to banking relationships with client confidentiality at the core of it."
NatWest shares were up 2.7% to 246.34 pence each in London on Friday morning.
By Sophie Rose, Alliance News reporter
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