NatWest: Positive For Building Societies

NatWest (A3, BBB+, A) 1Q24 results have pushed the equity price up this morning and its spreads are c.1bp tighter (slightly more than €IG banks’ average). There’s likely a small earnings upgrade here and the lack of negatives on asset quality should underpin spreads but this issuer has already outperformed peers, YTD.

• Revenue outlook: revenues did beat expectations and, interestingly, the better margin is being guided as persistent through the year as mortgage completion spreads have moved positively in the quarter (up 4bp to 74bp). This is a positive for all the mortgage lenders, including the building societies.
• Lack of credit quality: or, more accurately, the lack of any questions on this at all on the call. Metrics looked pretty good at first glance and the analyst community was entirely focused on the revenue picture which, generally, feels like no news being good news.