Week Ahead

NatWest ‘needs good narrative’ for investors

Howard Davies
Sir Howard Davies will present his last figures (pic: Terry Murden)

NatWest, trading north of the border as Royal Bank of Scotland, is expected to face questions next week about its search for a permanent CEO and how it can create a strong narrative ahead of a possible sale of the government’s remaining shareholding.

The Treasury has indicated that it wants to sell the remaining 36% stake still overhanging from the 2008 bailout and a retail offer is tipped to be launched in June.

The bank will insist that the sale is a government matter, but its underlying performance and a settled management team will be key to how successful the sale might be. The government will, in any case, make a loss on its holding, having bought the shares at an average price of 502p The shares closed on Friday at 210.75p.

After an eventful year notable for the departure of CEO Dame Alison Rose in the wake of the Nigel Farage debanking furore, the bank’s interim boss Paul Thwaite will be hoping to focus on its year-end figures which will be published on Friday.

This will be the last results statement presented by chairman Sir Howard Davies who is also stepping down and will be replaced by Rick Haythornthwaite.

Charles Donald, the head of UK Government Investments, which manages the state’s holdings in the bank, told MPs this week that the stock market needed “clarity” about NatWest’s next chief executive before a sale of stock to the public could go ahead.

UBS expects final quarter profits of £1.2bn, down 24%, but up to £6.25bn for the full 12 months from £5.1bn in 2022, with AJ Bell expecting a fall back to £4.8bn in 2024.

The shares are down 30% over the past 12 months and slid to a 30-month low in October after the Q3 results prompted the bank to cut its full-year guidance on net interest margin (NIM) to just above 3%.

Analysts at AJ Bell say: “NatWest will doubtless be looking to put aside any lingering after-effects of last summer’s ruckus over Nigel Farage’s bank account and provide a strong narrative that can be used as a launchpad for a major share sale. 

“It is possible to argue a lot of bad news is… already in the price… A forward PE of less than five suggests investors have largely given up on hoping for growth.”

The investor platform expects NatWest to pay a total ordinary dividend of 16.8p a share in 2023, up from 13.5p in 2022, although there is no expectation of a repeat of last year’s special dividend. In 2024, the shareholder distribution is expected to slip slightly to 16.1p a share, to reflect lower profitability. The bank is expected to pay about £350 million in bonuses.

With energy prices softening Centrica boss Chris O’Shea has already cautioned that profits and cashflow at the British Gas owner will be heavily weighted toward the first half.

As a result, analysts assessing the full year figures to the end of December are looking for flat sales at £33bn and lower adjusted operating profit at £2.5bn.

Shareholders in Glasgow-based Smart Metering Systems have until Wednesday 14 February to cast their vote on the  955p per share cash offer from Sienna Bidco a newly-formed company wholly-owned by funds advised by US investor Kohlberg Kravis Roberts.

The bid, valuing SMS at £1.3bn was changed to a straight takeover, enabling it be deemed unconditional if more than 50% of shareholders support it. They will receive payment on or before 28 February.

The Offer is final and will not be increased unless a third party enters the fray before the deadline.

The UK inflation figure will be published on Wednesday, a day after data on wages and jobs. The Consumer Price Index unexpectedly increased to 4% in the year to December, up from an almost two-year low of 3.9% in November, and above economists’ estimates of 3.8%.

There are still hopes that it will fall to the target 2% in April and next week’s data but analysts believe the January will tick up. Full story here.

DIARY

Tuesday 13 February

  • UK unemployment, wages and jobs data

Wednesday 14 February

  • Trading update from United Utilities
  • UK inflation

Thursday 15 February

  • Full-year results from Centrica
  • Trading updates from EnQuest
  • UK Q4 GDP growth
  • UK industrial, manufacturing and construction output

Friday 16 February

  • Full-year results from NatWest
  • UK retail sales


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