Russian central bank says current inflationary pressures have significantly increased to a level above its expectations
Elsewhere this morning, British Airways owner IAG has reported a jump in profits in the last quarter due to strong performances on its North and South Atlantic routes.
IAG reported that operating profits rose to €1.745bn in the July-September quarter, up from €1.216bn in the third quarter of 2022.
“This quarter represents a record third-quarter performance for IAG. This is allowing us to invest in the business and reduce a significant amount of our debt.
“During the third quarter we saw sustained strong demand across all our routes, in particular the North and South Atlantic and in all leisure destinations around Europe.
It’s not been a great year for the NatWest Group share price, and it got even worse this morning, the shares plunging to 30-month lows, after the bank lowered its full year guidance on NIM, as well announcing that the FCA is reviewing the findings of an independent review into its conduct over the Nigel Farage debanking case.
The rot started to set in after the bank downgraded its full year guidance in Q2 even as attributable profits to shareholders came in at just over £1bn pushing H1 profits up to £2.3bn. Net interest margin slipped back in Q2 to 3.13%, from 3.27% in Q1, with the bank cutting the full year forecast to 3.15% from 3.2%.
Net Interest Margin (NIM) declines across the sector have taken a toll on share price performance, while also suggesting that the benefits of higher interest rates have peaked as customers seek higher returns on their cash after years of virtually nil return. The changing deposit mix has been a feature of the reporting season this far, as has the pressure on mortgage margins which has impacted overall NIM.
For NatWest, NIM was 2.94% for the quarter, down from 3.13% in the previous, although holding up at 3.11% for the year to date. This should cause more than a ripple of disappointment given estimates of 3.07%, even though NatWest’s share price decline this week following the read across from other banks needs to be factored in.
“NatWest has been in a pickle of late following a series of governance issues. Along with third-quarter results, NatWest also released findings from stage 1 of its review into the account scandal following the closure of Nigel Farage’s Coutts account. The independent review found no legal breach, but did pick up on several governance concerns with how the decision was reached – something I think we already knew.
Back to results, they were largely disappointing as net interest margin dipped below 3%, and the outlook was lowered. Deposit levels did grow, which is a positive sign that NatWest is pricing itself at the right levels to attract customers searching for higher rates. That trend’s plain to see, with longer-term cash balances jumping to 15% of the book – compared to 11% last quarter. But it’s less profitable business than non/low-interest current accounts. Add in mortgage headwinds as highly profitable business written over the pandemic rolls off, and that’s caused the hit to net interest margin.
