Full year results:
https://www.investegate.co.uk/natwest-g ... 00042355Q/2022 NatWest Group performance summary
Chief Executive, Alison Rose, commented:
"NatWest Group delivered a strong performance in 2022, with pre-tax profit up more than a third to £5.1 billion. We made considerable progress against our strategic goals, maintained a well-balanced loan book and distributed significant capital to our shareholders, including the UK Government.
Despite not yet seeing significant signs of financial distress among our customers, we are acutely aware that many people and businesses are struggling right now and that many more are worried about what the future holds. Our robust balance sheet, responsible lending and continued capital generation allow us to proactively support those who need it, whilst helping others to get ahead of the challenges to come.
As well as supporting our customers, this financial strength also allows us to continue investing in our business to meet the changing needs of our customers. By building long term relevance, trust and value through our purpose-led strategy, we will deliver sustainable returns and, ultimately, help to drive economic growth across the UK."
Strong financial performance and delivery against our targets
- Full year attributable profit of £3,340 million and a return on tangible equity of 12.3%.
- Excluding notable items, income increased by £2,877 million, or 28.3%, compared with 2021 principally reflecting volume growth, higher trading income and the improved rate environment.
- Bank NIM of 2.85% was 55 basis points higher than 2021. Q4 2022 Bank NIM increased by 21 basis points to 3.20% compared with Q3 2022.
- Total operating expenses were £71 million lower than 2021. Other operating expenses for the Go-forward group(1) were £201 million, or 2.9%, lower than 2021, in line with our cost reduction target of around 3%.
- A net impairment charge of £337 million, or 9 basis points of gross customer loans, principally reflects the latest macro-economics, including updated scenarios and their associated weighting, with more weight being placed on the downside scenario. Underlying book performance remains strong, with credit conditions remaining benign and levels of default remaining low.
- The tax charge for the year includes a £267 million credit in the carrying value of the deferred tax asset in respect of tax losses and a credit of £135 million in respect of an inflationary uplift in the value of UK Government Index Linked Gilt assets that is not subject to corporation tax.
- A final dividend of 10 pence per share is proposed, and we intend to commence an ordinary share buyback programme of up to £800 million in the first half of 2023, taking total distributions deducted from capital in the year to £5.1 billion, or 53 pence per share.
Robust balance sheet with strong capital and liquidity levels
- Net lending increased by £7.3 billion to £366.3 billion during 2022 primarily reflecting £14.4 billion of growth in Retail Banking mortgages, with gross new mortgage lending of £41.4 billion, and a £5.7 billion increase in Commercial & Institutional, partially offset by a £14.6 billion reduction in Central items & other, which included a £6.4 billion decrease as we continued our exit from the Republic of Ireland.
- Customer deposits decreased by £29.5 billion during 2022 to £450.3 billion, principally reflecting a £14.2 billion reduction in Commercial & Institutional due to an overall market liquidity contraction in the second half of the year and reductions in Corporate and Institutions, particularly non-operational accounts in Financial Institutions and professional services with relatively low margin and funding value, and a £12.2 billion reduction associated with our withdrawal from the Republic of Ireland.
- The liquidity coverage ratio (LCR) of 145%, representing £52.0 billion headroom above 100% minimum requirement, decreased by 27 percentage points compared with 2021. Total wholesale funding decreased by £2.3 billion in the year to £74.4 billion.
- The CET1 ratio of 14.2% was 170 basis points lower than the position on 1 January 2022 principally reflecting distributions and linked pension accruals of c.310 basis points partially offset by the attributable profit, c.190 basis points.
- RWAs of £176.1 billion were £0.2 billion lower than 1 January 2022 as lending growth and model changes were offset by a £5.7 billion reduction in the Republic of Ireland .
(1)Go-forward group excludes Ulster Bank RoI and discontinued operations.
Comments on the outlook and future dividends
Outlook (1)
The economic outlook remains uncertain. We will monitor and react to market conditions and refine our internal forecasts as the economic position evolves. The following statements are based on our current expectations for interest rates and economic activity.
Outlook 2023
- We continue to expect to achieve a return on tangible equity for the Group of 14-16%.
- Income excluding notable items for the Group is expected to be around £14.8 billion and full year NIM around 3.20%, based on a Bank of England base rate of 4.00% through the remainder of 2023.
- We expect to deliver a Group cost:income ratio (excl. litigation and conduct) below 52% or around £7.6 billion of Group operating costs, excluding litigation and conduct costs.
- Impairment losses in 2023 are expected to be in line with our through the cycle guidance of 20-30 basis points.
Capital and Funding
- We expect to generate and return significant capital to shareholders through 2023.
- We expect to pay ordinary dividends of 40% of attributable profit, and maintain capacity to participate in directed buybacks from the UK Government, recognising that any exercise of this authority would be dependent upon HMT's intentions and limited to 4.99% of issued share capital in any 12-month period.
- We will also consider further on-market buybacks as part of our overall capital distribution approach as well as inorganic opportunities where the strategic case and returns are suitably compelling.
- As part of the Group's capital and funding plans we intend to issue between £3 billion to £5 billion of MREL-compliant senior instruments in 2023, with a continued focus on issuance under our Green, Social and Sustainability Bond Framework, and up to £1 billion of Tier 2 capital instruments. NatWest Markets plc's funding plan targets £3 billion to £5 billion of public benchmark issuance.
Medium term
- We continue to target a sustainable return on tangible equity for the group of 14-16% over the medium term.
- We expect to deliver a Group cost:income ratio (excl. litigation and conduct) of less than 50%, by 2025.
- We expect that RWAs could increase by a further 5-10% by the end of 2025, including the impact of Basel 3.1.
- We expect to continue to generate and return significant capital via ordinary dividends and buybacks to shareholders over the medium term and continue to expect that the CET1 ratio will be in the range of 13-14%.
And the final dividend (though saying it is increased from 7.5p last year is being economical with the truth as there was a share consolidation which they haven't accounted for and I make last years final dividend to be 8.0769p when you take into account the share consolidation.)
7. Dividends
The company has announced that the directors have recommended a final dividend of £1.0 billion, or 10.0p per ordinary share (2021 - £844 million, or 7.5p per ordinary share) subject to shareholder approval at the Annual General Meeting on 25 April 2023. If approved, payment will be made on 2 May 2023 to shareholders on the register at the close of business on 17 March 2023. The ex-dividend date will be 16 March 2023.