NatWest Shares Plunge on Damning Farage Report and Earnings Miss

NatWest said the report found the closure of Farage's account had been lawful, but identified "a number of shortcomings" in its own processes

Alliance News 27 October, 2023 | 10:40AM
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NatWest shares took a double hit on Friday morning from a downgrade to its net interest margin guidance, and a damning report into its handling of the closure of Nigel Farage's Coutts bank account.

Shares in NatWest plunged 8.1% to 189.05 pence each in London on Friday morning, and are currently down 10.2%. 

Back in July, the scandal concerning the closure of the Brexit politician's Coutts account culminated in the resignation of NatWest's then-chief executive officer Alison Rose. Its board then commissioned an independent review into the bank's handling of the incident.

Today NatWest said the report found the closure of Farage's account had been lawful, but identified "a number of shortcomings" in the process by which the decision was reached, the bank's communications with him, and its treatment of his confidential information.

"This report sets out a number of serious failings in the treatment of Mr Farage [...] We apologise once again to Mr Farage for how he has been treated. His experience fell short of the standards that any customer should expect," chair Howard Davies has said. Farage has previously said Davies should resign over the incident.

NatWest said it has accepted and will implement all the recommendations made by corporate law firm Travers Smith, which undertook the review.

It also noted the UK Financial Conduct Authority has confirmed it is conducting supervisory work into the governance, systems and controls at both NatWest and Coutts, in order to "identify and address any significant shortcomings."

On Wednesday, the UK information watchdog ruled Rose had infringed on Farage's data protection rights when discussing his Coutts account with a BBC journalist.

The Information Commissioner's Office said the disclosure was "unacceptable". Rose herself admitted that the incident was a "serious error of judgement". The Travers Smith review described it as an "honest mistake" stemming from confusion as to what was a matter of public record at that time.

In a post on X, the platform formerly known as Twitter, Farage branded the report "a whitewash," however.

"Alison Rose did not make an 'honest mistake'. The ICO has ruled she broke client confidentiality and misled the BBC. She should not be exonerated," he said.

This morning the bank also shared its third-quarter results, reporting total income rose to £3.49 billion from £3.23 billion a year earlier. However, it missed company-compiled analyst forecasts of £3.59 billion.

Operating pre-tax profit rose to £1.33 billion from £1.09 billion, but slightly below forecasts of £1.36 billion.

Bank net interest margin fell 19 basis points from the second quarter to 2.94% in the third, which the bank said reflected changes in deposit mix as customers opted to move current account balances to interest bearings savings accounts. Company-compiled analyst consensus had expected a 3.07% figure.

For 2023, it expects a full-year bank net interest margin to be "greater than 3%", which is downgraded from its interim forecast of around 3.15%.

NatWest continues to expect to achieve a return on tangible equity of 14% to 16%. It expects total income excluding notable items to be around £14.3 billion.

In the medium term, NatWest said it expects to return significant capital via dividends and buybacks

"Today's Q3 2023 results show that NatWest is a strong bank which is performing well, generating sustainable profits and returns," chief executive Paul Thwaite said.

"This performance is built on the foundations of strong customer franchises and a robust balance sheet with high levels of liquidity and a well-diversified loan book.

"As a result, credit losses and impairments remain low and we are ready and able to stand by our customers and businesses through the current economic uncertainty."

By Elizabeth Winter, Alliance News senior markets reporter


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