UK state-backed lender NatWest on Friday reported a profit for 2021 and said it plans to return £750 million to shareholders via a share buyback, and possibly even more.
Net interest income for 2021 rose 1.7% to £7.61 billion from £7.48 billion the year before, though a dip in non-interest income meant total income for the year was flat at £10.51 billion.
The lender swung to a pretax profit of £4.03 billion from a loss of £481 million the year before, benefiting from an impairment release of £1.28 billion versus an expense of £3.13 billion.
The impairment release ‘principally reflects releases in non-default portfolios and the low levels of realised losses we have seen across the year,’ the bank said.
NatWest laid out plans for a £750 million share buyback in the first half of 2022 and said it will consider further repurchases as part of its capital distribution approach. This was alongside a final dividend of 7.5p, more than double 3.0p the year before.
The state-controlled lender also said it will maintain capacity to participate in buybacks of shares held by the UK government.
For 2022, NatWest expects income excluding notable items to be above £11.0 billion in the ’go-forward group’ - which excludes Ulster Bank RoI and discontinued operations - and it plans to invest around £3 billion over 2021 to 2023 while reducing operating costs.
‘As our economy recovers and the trend towards digital services accelerates, we are investing to deliver long term value in the bank and drive sustainable growth. We will do this by building closer and deeper relationships with our customers and by supporting their evolving needs and expectations at every stage of their lives,’ said Chief Executive Alison Rose.
Richard Hunter, head of Markets at interactive investor, said NatWest has an ‘embarrassment of riches’ with a ‘extraordinary’ 18.2% CET1 ratio, so it makes sense that the bank laid out plans for the excess.
‘Paying down a government stake which currently stands at 53% is a painful but necessary drain on capital, but it is also one which the bank is comfortably able to afford,’ he said.
NatWest shares were down 2.0% early Friday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.2% at 7,555.83
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Hang Seng: down 1.9% at 24,327.71
Nikkei 225: closed down 0.4% at 27,122.07
S&P/ASX 200: closed down 1.0% at 7,221.70
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DJIA: closed down 622.24 points, or 1.8%, at 34,312.03
S&P 500: closed down 94.75 points, or 2.1%, at 4,380.26
Nasdaq Composite: closed down 407.38 points, or 2.9%, at 13,716.72
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EUR: unchanged at $1.1370
GBP: flat at $1.3623 ($1.3620)
USD: up at JP¥115.13 (JP¥115.02)
Gold: down at $1,891.80 per ounce ($1,895.50)
Oil (Brent): down at $92.24 a barrel ($92.65)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Friday’s key economic events still to come
1000 CET EU balance of payments
1100 CET EU construction output
1000 EST US existing home sales
1000 EST US leading indicators
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Russia on Friday said it was withdrawing more tanks and other armoured vehicles from areas near Ukraine’s border after running war games that had raised concerns in the West. ‘Another military train carrying personnel and military equipment belonging to tank army units of the western military district returned to their permanent bases in the Nizhny Novgorod region after completing scheduled exercises,’ the Russian defence ministry said in a statement. Separately, it said 10 Su-24 war planes were redeploying from the Moscow-annexed Crimean peninsula to airfields in other regions as part of drills. In a later announcement carried by news agencies, the defence ministry said further tank contingents of the western military district were loading onto trains to return to bases after drills. The drawdowns announced Friday are the latest in a series this week that initially spurred hope for a reduction in tensions between Russia and the West over Ukraine.
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The UK retail sector rebounded at the start of 2022 after a disappointing December hit by the Omicron variant of Covid-19, data from the Office for National Statistics showed. UK retail sales rose 1.9% year-on-year in January after a 4.0% fall in December. This beat expectations of just 1.0% growth, according to FXStreet. ‘After a sluggish December where the Omicron wave had a significant impact, retail sales rebounded in January with their biggest monthly rise since the shops reopened last spring,’ said Darren Morgan, director of Economic Statistics at the ONS. Non-food store sales rose by 3.4% in January as home improvement sales volumes picked up with increased sales in household goods and garden centres. However, food store sales fell below pre-virus levels for the first time after a 2.3% monthly decline in January, as people ate out more and ordered takeaways and meal kits.
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People in the UK were being urged to postpone travel plans as Storm Eunice wreaks havoc with transport networks. Train operators across Britain urged passengers to avoid travelling on Friday as emergency 50mph speed limits are in place in many areas. This is to make it easier for train drivers to brake if they spot objects on the track or damage to overhead wires caused by strong winds. Great Western Railway warned that it expects to ‘significantly reduce’ the number of long-distance services it runs, while the main line through South Wales and some branch lines in Devon and Cornwall will be closed. Among the firms advising customers not to travel on Friday included Avanti West Coast, CrossCountry, Great Northern, London North Eastern Railway, Southern and Thameslink.
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Japan’s core consumer prices edged up just 0.2% in January, slightly less than expected, though the increase was the fifth monthly rise, government data showed. The core consumer price index, which excludes volatile fresh food prices but includes fuel costs, was up 0.2% in January year-on-year, following similar rises from September to December. The advance follows 18 months of declines or stagnation during the depths of the pandemic, but fell slightly short of economist expectations for a 0.3% rise. The increase was also much weaker than the 0.5% registered in December, and when both food and energy prices are excluded, prices fell 1.1%.
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BROKER RATING CHANGES
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Berenberg starts Aveva with ’buy’ - price target 3550 pence
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Deutsche Bank starts Aveva with ’hold’ - price target 3000 pence
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RBC cuts Moneysupermarket.com target to 240 (260) pence - ’sector perform’
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COMPANIES - FTSE 100
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Warehouse property investor Segro reported an adjusted net asset value per share of 1,137 pence at the end of 2021, up 40% from 814p a year before. This beat company-compiled consensus of 998p. Pretax profit for 2021 multiplied to £4.36 billion from £1.46 billion in 2020. ‘2021 was a highly successful year for Segro as reflected in our full year results which include a £4.1 billion portfolio valuation uplift and record levels of rental growth. Investor and occupier supply-demand dynamics in the industrial and logistics sector remain very favourable, led by the long-term trends of digitalisation, supply chain resilience and an increasing focus on sustainability,’ said Chief Executive David Sleath.
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GlaxoSmithKline said it has voluntarily paused enrolment and vaccination in the Grace phase three trial evaluating its potential respiratory syncytial virus maternal vaccine candidate, as well as two other trials investigating this candidate in pregnant women. ‘This decision was made following a recommendation from the Independent Data Monitoring Committee based on an observation from a routine safety assessment. Monitoring safety signals is an integral part of the clinical development process for potential new vaccines,’ the pharmaceutical firm said, adding it will provide a further update in due course. This decision does not affect the AReSVi 006 phase three trial for RSV older adults, with results from this study on track for the first half of 2022.
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NortonLifeLock said it has postponed the closing of its merger with Avast to April, having been previously expected to close later this month. NortonLifeLock said talks with competition bodies in the UK and Spain are ongoing. As a result of the delay, Avast said it plans to proceed with the payment of a 11.2 cent dividend. The closing is expected to be on April 4, delayed from February 24, with Avast shares delisted on April 5.
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COMPANIES - GLOBAL
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Renault returned to net income profit in 2021 despite the impact of semiconductor shortages and rising raw material prices. The Boulogne-Billancourt, France-based car manufacturer swung to net income of €967 million from a loss of €8.05 billion in 2020. Earnings per share also turned green, rising to €3.26 from a loss of €29.51 a year prior. Revenue rose 6.3% to €46.21 billion from €42.47 billion year-on-year. However, revenue was down 17% when compared to 2019, when revenue stood at €55.53 billion. Chief Executive Luca de Meo said: ‘Renault group largely exceeded its 2021 financial targets despite the impact of semiconductor shortages and rising raw material prices. This reflects the sustained pace of the in-depth transformation of the Group, initiated within the framework of ’Renaulution’.’
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Friday’s shareholder meetings
Helical PLC - GM
SimiGon PLC - GM re merger with Maxify, Power Breezer
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