NatWest lowers guidance, as FCA reviews bank conduct

It’s not been a great year for the NatWest Group share price, and it got even worse this morning, the shares plunging to 30-month lows, after the bank lowered its full year guidance on NIM, as well announcing that the FCA is reviewing the findings of an independent review into its conduct over the Nigel Farage debanking case.

The rot started to set in after the bank downgraded its full year guidance in Q2 even as attributable profits to shareholders came in at just over £1bn pushing H1 profits up to £2.3bn. Net interest margin slipped back in Q2 to 3.13%, from 3.27% in Q1, with the bank cutting the full year forecast to 3.15% from 3.2%.

Given what has happened this week with Barclays and Lloyds and their NIM guidance, it wasn’t a surprise to see a further downgrade here, however that isn’t NatWest’s only problem given the fallout from CEO Alison Rose’s departure when it was revealed she was the source of a leak over the details of the bank’s relationship with Nigel Farage.

From a reputational standpoint this is hugely damaging, and even accounting for the increased competition for customer deposits the revelations of unprofessionalism this week about some of its staff could prompt some customers to take their business elsewhere.

Today’s Q3 numbers have confirmed the fears that NIM was likely to be hit with another downgrade with Q3 NIM falling to 2.94% with the bank downgrading its full year forecasts from 3.15% to just above 3%, which is a sizeable downgrade.

This shouldn’t have come as a surprise given the previous assessments were based on a Bank of England base rate of 5.5%, with the new forecasts now based on the new rate of 5.25%.

On profits the bank reported profit after tax of £924m, pushing profits year to date up to £3.3bn.

On impairments the bank set aside another £229m, pushing the total for the year to £452m.

As far as the wider business is concerned net loans rose by £1.8bn to £354.5bn, while customer deposits also increased by £2.4bn to £423.5bn, however this appears to have been achieved at the expense of a fall in NIM.

On the topic of departing CEO Alison Rose remuneration, the bank said that a decision on that would be made as soon as possible.

The bank also revealed some of the findings of the Travers Smith independent reviews covering the decision to close the account of Nigel Farage, as well as the conduct of Alison Rose, and while the report said that the decision to close the accounts was lawful, it still doesn’t make for comfortable reading for NatWest or Coutts.

The report highlighted several potential regulatory breaches, in the governance, systems and controls, all of which are now being reviewed by the FCA.

On the conduct of Alison Rose the report said that her disclosures “probably” amounted to a Personal Data Breach for the purposes of GDPR, as well as a possible regulatory breach by members of NatWest Group, although it added this was a matter for the regulator.