NatWest and Standard Chartered reveal substantial payouts to investors as interest rate rises boost lenders’ profits
- NatWest has declared a special dividend of £1.75bn and a dividend of 3.5p. by action
- Standard Chartered unveils $500 million buyback plan and 4¢ per share dividend
- Both banks achieved a double-digit percentage increase in interest margin
By Harry Wise That’s what money is for
Published: 10:52, 29 July 2022 | Updated: 20:04, July 29, 2022
Two British banking giants have announced shareholder rewards after rising interest rates helped their profits beat forecasts.
NatWest Group has declared a special dividend totaling £1.75bn, along with an interim dividend of 3.5p per share, as it reported pre-tax operating profits rose by around £300m up to £2.6 billion in the first half of the year.
At the same time, Standard Chartered said investors would benefit from a share buyback program totaling $500 million and a growing ordinary dividend of 4 cents per share.
Rewards: Standard Chartered and NatWest Group have announced dividend increases
The London-listed multinational revealed that half-year profit rose 8 percent to $2.1 billion, thanks to a record performance in its financial markets division and strong growth in Europe and the Americas.
Both banks posted double-digit percentage gains in interest income as central banks hiked key rates in response to rising inflation, mainly as a result of supply chain bottlenecks and the increase in energy costs.
Standard Chartered saw net interest income grow 12 per cent on a constant currency basis, while NatWest achieved a corresponding rise of 15 per cent, reflecting the Bank of England’s rate hikes.
Britain’s central bank has raised interest rates five times in a row since last December after keeping them at a record low of 0.1% for much of the Covid-19 pandemic.
NatWest’s income was further boosted by higher mortgage lending, although housing affordability in the UK continued to worsen and levels of property market activity showed signs of slowing.
Its retail banking arm gave away £1.4 billion in “green mortgages”, where customers can receive lower interest rates on loans if they buy energy-efficient homes.
Rate rise: The Bank of England has raised interest rates five times in a row since last December after keeping them at a record low of 0.1 percent since early 2020
AJ Bell chief investment officer Russ Mold was very complimentary of the company’s results, commenting: “In a mixed UK banking reporting season so far, there is no doubt who will get the gold star.
“NatWest has knocked it out of the park with its latest results. It’s hard to see what else it could have done to impress the market.
“Earnings ahead of expectations: check. Big returns for shareholders: check. High guidance: check. All of this suggests that higher rates are helping to boost group profitability.”
Shares in NatWest Group closed up 8.1% at 248.6p on Friday, making it the biggest gainer on the FTSE 100 on Friday. By contrast, shares in Standard Chartered rose this morning before ‘end the day 0.5 per cent lower at 564.2p.
Standard Chartered benefited greatly from massive market volatility, but its results were tempered by a decline in profits from Asia, where it gets most of its business.
At the same time, it incurred significant credit impairment charges as a result of the downturn in the Chinese commercial real estate sector and the economic and political crisis affecting Sri Lanka.
The coronavirus restrictions also hurt revenue and earnings at its wealth management arm, although trading in China and Hong Kong remained resilient in the face of extremely tight lockdowns.
Standard Chartered achieved record revenue in China and its joint venture and associate profits increased thanks to a strong performance from Tianjin-based China Bohai Bank.
Chief executive Bill Winters said the country represents “one of its biggest strategic opportunities over the next few years”, with significant potential to gain from the liberalization of financial and capital markets.
He warned that the economic “environment” is likely to remain challenging, given the impacts of Covid-19, supply chain disruption and the war in Ukraine, but noted that these issues have been less acute in eastern markets of the company.
“Looking ahead, while recession risks are rising in the West, we are seeing the early stages of a post-pandemic recovery in many of the markets we operate in, which underpins our growth outlook,” Winters said.
Share or comment on this article:
Some links in this article may be affiliate links. If you click on them, we may earn a small commission. This helps us fund This Is Money and keep them free. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.