NatWest: Below Tangible Net Asset Value Again After Q1 Results

Company Update (NWG LN) (Buy)

Highlights

• Q1 results demonstrated the stability of NatWest’s business

• Core deposits fell just 2.6% from Q4 despite costing just 0.88%

• 2023 outlook was reaffirmed, including a 14-16% ROTE

• Shares are cheap on 0.94x P/TNAV and 7.7x 2022 EPS

• The Dividend Yield is 5.2% and we see a 30-60% upside. Buy

Introduction

NatWest released their Q1 2023 results in London this morning (Friday, April 28). Shares fell by as much as 7% at open and finished the day down 4%; year-to-date, the share price is down 3.6%:

NatWest Share Price (Last 1 Year)

Source: Google Finance (26-Apr-23).

NatWest shares have again fallen below Tangible Net Asset Value (“TNAV”), despite stable operational performance and a 19.8% Return on Tangible Equity (“ROTE”) in Q1 2023. Core deposits declined by just 2.6% sequentially, even with an interest rate pass-through as low as 40%, and costed only 0.88% on average. Loan growth was healthy, demonstrating NatWest’s ability to take share in key segments. Net Interest Margin rose 2 bps seque…