NatWest Results 26-Apr: Loan Losses, Rates And Revenues

NatWest reports 1Q24 results on 26-Apr: indications from the UK peers have been broadly positive on credit quality but the revenue picture remains muted and the key concern. NatWest’s exit process from state ownership will also be a focus. Doubtful this one will be a spread mover after its recent outperformance.

• Results last time saw a small revenue beat but, perhaps more importantly, loan losses came in much better than expected with guidance for a sustained improvement through the year. Figures from Barclays and Lloyds so far this season have confirmed this though the revenue outlook will remain the other key area of questioning, especially in light of the bank’s relatively hawkish rate view.
• The equity was up 7% on results day last time and has risen another 26% since, only around 2pp behind the sector move. Spreads are c.44bp tighter YTD, 7-8bp more than the peer group, so there’s a reasonable set of expectations already built in.
• EPS estimates are around 5% lower for FY25 post-results, but this year’s figure is only c.1% lower, so far. These are driven by c.1-2% revenue downgrades that ensued, alongside that FY24 loan loss guidance. So, the above equity rally feels more a relief rally than anything more fundamental around earnings expectations.

Results are 0700 (London time) with conf call at 0900 at https://tinyurl.com/ync9hne9