NatWest and Standard Chartered reveal substantial investor payouts as interest rate hikes lift lenders’ profits
- NatWest has declared a £1.75bn special dividend and a 3.5p per share dividend
- Standard Chartered revealed a $500m buyback scheme & 4¢ per share dividend
- Both banks achieved a double-digit percentage increase in net interest income
Two British banking giants have announced bumper shareholder rewards after interest rate rises helped their profits to exceed forecasts.
NatWest Group has declared a special dividend totalling £1.75billion, alongside a 3.5p per share interim dividend, as it reported operating pre-tax earnings jumped by around £300million to £2.6billion in the first half of the year.
At the same time, Standard Chartered said investors would benefit from a share buyback programme totalling $500million and an increasing ordinary dividend of 4 cents per share.
Rewards: Standard Chartered and NatWest Group have both announced dividend hikes
The London-listed multinational revealed half-year profits leap by 8 per cent to $2.1billion, thanks to a record performance by its financial markets division and sizeable growth in Europe and the Americas.
Both banks achieved double-digit percentage gains in interest income as central banks put up base rates in response to soaring inflation, primarily resulting from supply chain bottlenecks and surging energy costs.
Standard Chartered saw net interest revenue grow by 12 per cent on a constant currency basis, while NatWest attained a corresponding 15 per cent rise, reflecting the Bank of England’s rate hikes.
Britain’s central bank has raised interest rates on five consecutive occasions since last December after keeping them at an all-time low of 0.1 per cent for much of the Covid-19 pandemic.
NatWest’s income was further lifted by greater mortgage lending, even as housing affordability in the UK continued to worsen and activity levels in the property market have shown signs of slowing.
Its retail banking arm gave out £1.4billion in ‘green mortgages’, where customers can receive lower interest rates on loans if they are buying energy-efficient homes.
Rate rises: The Bank of England has raised interest rates on five consecutive occasions since last December after keeping them at an all-time low of 0.1 per cent from early 2020
AJ Bell investment director Russ Mould was highly complementary of the firm’s results, remarking: ‘In a mixed UK bank reporting season so far, there’s no question who is getting the gold star.
“NatWest has knocked it out of the park with its latest results. It’s hard to see what more it could have done to impress the market.
“Profit ahead of expectations: check. Big shareholder returns: check. Raised guidance: check. It all adds up to suggest that rising rates are helping to boost the profitability of the group.’
NatWest Group shares closed trading 8.1 per cent up at 248.6p on Friday, making it the top riser on the FTSE 100 Index on Friday. In contrast, Standard Chartered shares grew this morning before ending the day 0.5 per cent lower at 564.2p.
Standard Chartered benefited heavily from massive market volatility, yet its results were tempered by a decline in profits from Asia, where it derives most of its business.
At the same time, it incurred major credit impairment charges as a consequence of the downturn in the Chinese commercial real estate sector and the economic and political crisis afflicting Sri Lanka.
Coronavirus restrictions also negatively impacted revenues and earnings in its wealth management arm, though trade in China and Hong Kong remained resilient in the face of extremely strict lockdowns.
Standard Chartered achieved record onshore income in China, and saw its profits from joint ventures and associates lifted by a robust performance at Tianjin-based China Bohai Bank.
Chief executive Bill Winters said the country represents ‘one of its biggest strategic opportunities over the coming years,’ with significant potential to gain from the liberalisation 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 he noted that these problems have been less acute in the firm’s eastern markets.
‘Looking forward, whilst recession risks are rising in the West, we are seeing the early stages of a post-pandemic recovery in many of the markets in which we operate, underpinning our prospects for growth,’ Winters declared.