NatWest Group (LSE: NWG) launched its last outcomes this morning (14 February) for the yr ending 31 December 2024. It reported an attributable revenue of £4.5bn, up 12% since final yr, however nonetheless a slowdown in progress. 

By comparability, the financial institution’s third-quarter outcomes confirmed a 26% enhance in revenue, supported by robust lending progress and buyer deposits. The group’s return on tangible fairness (RoTE) is now up to 17.5%, increased than steering forecasts. Regardless of headwinds from decrease rates of interest, the financial institution’s earnings proceed to rise, now at 53.5p per share.

Talking on the outcomes, recently-appointed CEO Paul Thwaite stated: “We are fully focused on delivery as we shape the future of NatWest Group as a vital and trusted partner to our customers and to the UK, and in doing so, create further value for our shareholders.”

A last dividend of 15.5p was proposed, leading to whole dividends of 21.5p for the yr — 26% increased than 2023.

Development and dividends

Up over 110% up to now yr, analysts have been cautious about predicting additional progress for the financial institution. The common 12-month price goal is 480p, lower than a ten% rise from immediately’s price.

The UK authorities has additional lowered its stake in NatWest to six.98% and it ought to turn out to be absolutely privatised later this yr after it sells its remaining stake. That may be the primary time it was absolutely non-public since 2008. As soon as that occurs, it’s anticipated to vary its dividend coverage, growing shareholder returns from 40% to 50%. 

That could be one cause it’s been tipped as one of many most secure dividend shares within the UK. Since restarting dividends in 2019, they’ve grown at a price of 26% a yr, from 2p per share to 21.5p. The yield now stands at 4%, a excessive proportion contemplating the speedy price progress.

An funding of £1,000 in 2020 might have quadrupled to £4,000 immediately (with dividends reinvested). Few UK shares have offered such returns. However can it maintain performing so effectively?

Wanting forward

NatWest is the fourth-largest financial institution within the UK and a key participant within the nation’s banking sector, serving thousands and thousands of shoppers with retail and business banking providers. The previous yr noticed notable management adjustments following the controversy over the closure of Nigel Farage’s checking account at Coutts. Dame Alison Rose resigned as CEO, marking a major shift within the financial institution’s management.

It has since explored a number of potential methods to drive progress. Examples embrace buying a chief residential mortgage portfolio from Metro Financial institution and finishing a deal to buy elements of Sainsbury’s Financial institution’s operations. Experiences recommend Santander is contemplating promoting its UK retail division to NatWest, hinting at potential enlargement alternatives.

But regardless of the constructive efficiency, dangers stay. The financial institution not too long ago introduced plans to close 53 branches this yr as a part of its digital transformation technique. The transfer might dent the financial institution’s repute as a key high-street institution. A decrease rate of interest surroundings is one other issue to account for, as this might restrict the financial institution’s loan-based earnings.

Total, the financial institution has gone from power to power beneath its new CEO and appears more likely to proceed. Whereas the speedy progress of 2024 might taper off considerably, I nonetheless suppose it’s a promising inventory to think about in 2025.