NatWest Group PLC (LSE:NWG) shares plunged 11% in early exchanges after the bank lowered full-year net interest margin guidance and admitted "serious failings" in the treatment of Nigel Farage's banking account closure.
Reporting third-quarter results, the high street lender said net interest margin (NIM) of 2.94% in the quarter ended September was 19 basis points lower than the second quarter, with the reduction largely due to changes in deposit mix.
Customers have shifted balances from non-interest bearing current accounts to interest bearing savings accounts, while there is also a continued impact on mortgage margins as the higher margin Covid-era book rolls off and is replaced at lower margins, it said.
NatWest now expects full-year NIM to still be greater than 3% down from previous guidance of 3.15%.
“Given what has happened this week with Barclays and Lloyds and their NIM guidance, it wasn’t a surprise to see a further downgrade here,” said Michael Hewson at CMC Markets, adding that the cut from 3.15% to “greater than” 3%, is a “sizeable downgrade".
Analysts at Jefferies felt the drop in NIM shouldn’t come as a significant surprise but said “the 'something new' in the results is the CET1 miss on higher risk weighted assets (RWAs): investors will not welcome either the 30bps capital miss, or the 2025 RWA guide at the high-end of prior guidance”.
In the third quarter, NatWest said total income rose to £3.49 billion from £3.23 billion a year ago with attributable profit of £866 million, up from £187 million and a return on tangible equity of 14.7%.
The bank also admitted to “serious failings” in the treatment of Nigel Farage and “clear shortcomings” in how the decision to close his bank account with Coutts came about.
The high street lender was commenting after findings from the Travers Smith independent review into the decision to close the account of the former UKIP leader and a potential breach of confidentiality.
The debacle claimed the head of the previous chief executive Dame Alison Rose after she disclosed details of the account closure to the BBC’s Business Editor, Simon Jack.
The review also identified a number of shortcomings in how the decision was reached, how the bank communicated with Farage and how it treated his confidential information.
CMC's Hewson said the findings were from a reputational standpoint “hugely damaging”.
He suggested the revelations could prompt some customers to take their business elsewhere.