The FTSE 100-listed NatWest Group (GB:NWG) published its Q3 2023 earnings report with a reduced profit margin outlook for the year, sending the shares down. The bank has reduced its full-year margin guidance to be just above 3%, down from the previous forecast of around 3.15%, as customers seek higher returns on their deposits. The shares went down by around 10% on Friday, experiencing their biggest one-day loss since 2016.
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Along with the results, on Friday, the Financial Conduct Authority (FCA) also disclosed its investigation, revealing possible regulatory gaps and “serious failings in the treatment of Farage.” In July, the bank’s CEO, Alison Rose, abruptly resigned from her position in response to the closure of Nigel Farage’s account at its subsidiary, Coutts.
Q3 2023 Earnings Snapshot
In Q3 2023, the bank posted a pre-tax profit of £1.3 billion, up from £1.1 billion a year ago. NatWest’s total income increased by 3% year-over-year, driven by the impact of volume growth and favorable yield curve movements. For the year to date, total income increased by 17% to £10.9 billion.
The net interest margin (NIM) declined by 19 bps to 2.94% in the third quarter as compared to the previous quarter. The bank witnessed a shift in its customers towards interest-bearing accounts, impacting its margins.
In Q3, the net impairment charge amounted to £229 million, equivalent to 24 basis points of gross customer loans. This demonstrates the bank’s current low and stable levels of stage 3 defaults across its portfolio.
What is the Target Price for NatWest Stock?
Analysts expressed dissatisfaction with the bank’s Q3 numbers and are concerned about the various headwinds impacting the stock price. Analysts at Barclays stated the results as a “very weak update.” Susannah Streeter at Hargreaves Lansdown characterized this week as a challenging one for NatWest, facing multiple headwinds.
According to TipRanks, the NWG stock has a Moderate Buy rating, which is based on a total of nine recommendations. This includes four Buy and five Hold recommendations. The NatWest share price forecast is 309.44p, implying a growth of almost 70% on the current trading levels.
Year-to-date, the stock has been trading down by almost 30%.
