Investor in bank stocks might seem a bit odd. After all, rising interest rates mean banks can make a fatter margin on loans, and unemployment levels are low, which suggests customers will keep paying their mortgages. NatWest boss Alison Rose’s decision to set aside 247 million pounds to deal with the worsening economic outlook, 43% above what analysts were expecting from the UK lender, makes the concern look more valid.
to deal with the worsening economic outlook, 43% above what analysts were expecting from the UK lender, makes the concern look more valid.
Investors already valued NatWest at only 0.8 times its tangible book value, and Friday’s 8% share price fall will push that down further. The bank, still 48% owned by the UK government after a 2008 bailout, is expected to deliver a 13% return on tangible equity next year, RBC analysts reckon. But soaring costs on new UK mortgage products and on small business loans could push up impairment charges further: Rose warned that 2023 expenses would rise by an unspecified level.
suggests that the sector might be under-provisioned, and that investors who have been valuing them below book value were right. ECB stops financing undue bank profits