The price of Natwest's shares slides in early trade despite the positive results of fiscal year 2024. What is the treatment?

Natwest Group (LSE: NWG) launched its final results this morning (February 14) for the year that ends on December 31, 2024. It reported an attributable gain of £ 4.5 billion, 12% more since last year, but still a deceleration in growth.

In comparison, the results of the third quarter of the bank showed a 26% increase in profits, backed by strong loan growth and client deposits. The return of the group on tangible equity (rotate) is now up to 17.5%, higher than orientation forecasts. Despite the winds against the lowest interest rates, the bank's profits continue to increase, now to 53.5p per share.

Speaking about the results, the recently designated CEO, Paul Thwaite, said: “We are totally focused on delivery, since we shape Natwest Group as a vital and reliable partner for our clients and for the United Kingdom, and in doing so, we create more value for our shareholders.”

A 15.5p final dividend was proposed, which resulted in total 21.5p dividends for the year, 26% higher than 2023.

Growth and dividends

More than 110% in the last year, analysts have been cautious about predicting greater growth for the bank. The average target price of 12 months is 480p, less than an increase of 10% of the current price.

The United Kingdom government has further reduced its participation in Natwest to 6.98% and should privatize completely later this year after it sells its remaining participation. That would be the first time that it was completely private since 2008. Once that happens, it is expected to change its dividend policy, increasing the returns of the shareholders from 40% to 50%.

That can be a reason why it has been proposed as one of the safest dividends actions in the United Kingdom. Since restarting dividends in 2019, they have grown at a rate of 26% per year, from 2p per share to 21.5p. The yield is now 4%, a high percentage considering rapid price growth.

An investment of £ 1,000 in 2020 could have quadrupled to £ 4,000 today (with reinvested dividends). Few actions from the United Kingdom have provided such yields. But can you keep working so well?

Looking to the future

Natwest is the fourth largest bank in the United Kingdom and a key player in the banking sector of the Nation, which serves millions of customers with retail and commercial banking services. Last year he saw notable leadership changes after the controversy about the closure of the Nigel Farage bank account in Coutts. Dame Alison Rose resigned as CEO, marking a significant change in bank leadership.

Since then, it has explored several potential ways to boost growth. The examples include acquiring a portfolio of main residential mortgages of Metro Bank and complete an agreement to buy parts of Sainsbury's Bank operations. The reports suggest Santander He is considering selling his retail division from the United Kingdom to Natwest, hinting up potential expansion opportunities.

However, despite the positive performance, the risks remain. The bank recently announced plans to close 53 branches this year as part of its digital transformation strategy. The measure could crowd the bank's reputation as a key establishment of the street. A lower interest rate environment is another factor to consider, since this could limit revenues based on bank loans.

In general, the bank has been strengthening under its new CEO and it is likely to continue. While the rapid growth of 2024 can decrease a bit, I still think that it is a promising action to consider in 2025.