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NatWest Group PLC on Friday said it intends to launch a £800 million share buyback programme in the first half of 2023, as profit in 2022 grew on higher net interest income and lower expenses.
The Edinburgh-headquartered lender reported an operating pretax profit of £5.13 billion, 0.6% higher than company-compiled consensus of £5.10 billion and up 34% from £3.84 billion posted for 2021. Post-tax profit rose 8.5% to £3.60 billion from £3.31 billion.
NatWest shares were down 8.3% to 280.20 pence each in London on Friday morning following the announcement.
Richard Hunter, head of markets at interactive investor, called the early market response to the results ‘slightly perplexing’ but noted the stock was up nearly a quarter in the past three months. He said NatWest is ‘delivering across the board’.
Total income was £13.16 billion in 2022, 1.0% higher than the £13.02 billion expected, and beating 2021’s £10.43 billion by 26%.
Net interest income grew to £9.84 billion, higher than the expected £9.83 billion, and 31% up from £7.54 billion in 2021. Non-interest income rose by 15% to £3.31 billion from £2.89 billion.
Meanwhile, operating costs in 2022 decreased 0.9% to £7.69 billion from £7.76 billion.
NatWest’s Common Equity Tier 1 ratio was 14.2% at year-end, 170 basis points lower than at January 1, 2022, reflecting distributions and linked pensions accruals of around 310 basis points, it said. NatWest expects a CET1 ratio of 13% to 14% over the medium term.
NatWest’s fourth quarter was notably stronger than a year prior. Operating pretax profit in the quarter ended December 31 surged to £1.43 billion from £543 million a year prior. Net interest income grew 49% to £2.89 billion from £1.92 billion. Operating expenses decreased 8.2% to £2.14 billion from £2.33 billion.
The bank declared a final dividend of 10.0p per share for 2022, up 33% from 7.5p in 2021.
NatWest added: ‘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.’ It added that in 2023, it expects ‘to generate and return significant capital to shareholders through 2023’.
The UK government continues to hold a 46% stake in the bank following a tax-payer bailout during the financial crisis of 2008.
Looking ahead, NatWest said the economic outlook is uncertain. It expects to achieve a return on tangible equity of 14% to 16%, up from 12.3% in 2022. It anticipates income excluding notable items of around £14.8 billion, up 13% from £13.06 billion in 2022, and a net interest margin of 3.2%, higher than 2.85% in 2022, based on a Bank of England base rate of 4.00% for the rest of 2023.
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