- Farage gets his full apology after investigation
- Shrinking net margins spook investors
Third quarter results for NatWest (NWB) were somewhat overshadowed by the fallout from the Nigel Farage de-banking affair. That row had already cost former chief executive Dame Alison Rose her job, an outcome that seems to be backed up by an independent review by legal firm Travers Smith LLP. The end result was that the bank apologised profusely to Farage. However, it was operationally a shrinking margin and rising bad debts triggered a share price fall of close to 10 per cent.
NatWest Chair Sir Howard Davies said: "This report sets out a number of serious failings in the treatment of Mr Farage. Although Travers Smith confirm the lawful basis for the exit decision, the findings set out clear shortcomings in how it was reached as well as failures in how we communicated with him and in relation to client confidentiality. We apologise once again to Mr Farage for how he has been treated.”
However, the report had been well trailed and on its own does not explain the highly negative market reaction to Natwest’s third quarter update. At one point, the shares cratered 18 per cent before staging a marginal rally to finish at more than 9 per cent down on the day.
It comes down to the fact that Natwest’s margins, along with other banks in the sector, are shrinking. The bank now expects a net interest margin of above 3 per cent, lower than the previous 3.15 per cent guidance, as customers sought out higher fixed-term deposits and expectations of further Bank of England interest rate hikes diminish. In the third quarter, the net interest margin was 2.94 per cent, compared with 2.99 per cent a year ago.
Another material risk is that bad debt charges seem to be accelerating through the quarters. This was most obvious at the nine-month stage were impairments more than doubled to £452mn, compared with £193mn at this stage in 2022.
