NatWest lifts guidance, reveals £750m share buyback

(Sharecast News) - NatWest Bank on Friday posted slightly better-than-expected interim results and announced a new £750m share buyback. Operating pre-tax profit for six months to June 30 rose 18% to £3.6bn, beating the £3.46bn average forecast by analysts. The bank, reporting first results since its return to private ownership, lifted its dividend by 58% to 9.5p a share.

NatWest said it now expected to achieve a return on tangible equity of 16.5%, from previous guidance of up to 16%. It also forecast annual income to be above £16bn, up from earlier guidance of £15.2bn - £15.7bn.

Provisions for bad loans came in at £193m, lower than the £226mn analysts expected. Income rose to £7.9bn compared from £7.1bn a year ago as lending and customer numbers rose.

NatWest in May announced its return to full private ownership, after an expensive taxpayer bailout in 2008 when banking industry malfeasance sparked the global financial crash.

"NatWest has given investors reason to cheer heading into the weekend with a broad-based beat this morning. It's a similar story to Lloyds yesterday, with better impairments doing most of the work to bring profits in a good clip above expectations," said Hargreaves Lansdown analyst Matt Britzman.

"Unlike Lloyds, NatWest has taken the opportunity to raise its guidance, though this simply aligns management to where consensus is already sitting."

"The overarching story here is a positive one. Borrowers are looking strong, loans and deposits are growing, and costs are under control. That's providing a strong base for the bank's secret weapon, the structural hedge, to sit on top of. "

"The hedge is expected to bring home an additional £1 billion of income this year alone, as 0% products are being reinvested at yields of around 3.7%. This is a multi-year tailwind that's helping underpin a positive outlook for NatWest."

Reporting by Frank Prenesti for Sharecast.com