NatWest wrapped up 2024 with better than expected Q4 and full-year earnings, alongside a dividend increase that also beat forecasts.
Despite this positive news, shares dipped following a strong run, though they remain at their highest level since 2011.
Tangible net asset value per share has steadily increased, reflecting the bank’s recovery.
Investors are now willing to pay a premium to net asset value on the shares, a shift from the post-2008 period when they paid a discount.
The bank’s return on tangible equity was 17.5% in 2024, with targets of 15% or more for 2025 and 2026.
Higher interest rates are aiding NatWest’s net interest margin and net interest income.
The bank has maintained disciplined loan book management and kept regulatory issues at bay.
Conduct costs totalled £295m in 2024, the second-lowest in 15 years, and write-downs against sour loans were also £295m.
Analysts anticipate conduct costs to remain around £250m a year in 2025 and 2026.
However, loan impairments are expected to rise to about £1bn this year and next.
Pre-tax profit is projected to remain around £6.2bn for the third consecutive year in 2025.
Looking ahead, analysts expect better times as the UK economy gains traction.
The bank returned £4.4bn to shareholders in 2024, equivalent to 12% of its £35bn market cap, through a £1.7bn dividend payment and a £2.7bn buyback.
A full-year dividend of 21.5p a share for 2024 exceeded the forecast of 19.5p and analysts’ expectation for 2025 of 20.8p a share.
Paul Thwaite, chief executive of NatWest, and the board are expected to sanction £1.4bn of share buybacks in both 2025 and 2026.
Russ Mould, investment director at AJ Bell, said: “Full-year profits and the dividend for 2024 were both higher than expected at NatWest and, rather like Barclays, the bank is earning and paying its way back into investors’ affections after an awfully long time in the post-financial crisis wilderness.
“The shares are still a stunningly long way below their pre-crisis peaks but the government’s average bail-in price of around 500p a share from 2008 is getting closer and closer, thanks to solid earnings, no sudden jump in costs for bad loans or conduct and a balance sheet that meets regulatory capital requirements.”
