Natwest Group PLC

Natwest Group PLC managed to surpass the revenue expectations as well as the earnings expectations of Wall Street. The bank has a solid deposit franchise, a diversified funding mix for the business, and a good liquidity position as of date. With the liquidity portfolio being predominantly composed of central bank deposits, the liquidity coverage ratio was 141%, providing Natwest with a comfortable excess above the minimum requirements. Despite difficult market conditions, the bank has made considerable progress toward meeting its funding requirements in the first half, attaining over 60% of its annual issuance requirements for holding and operational firms. Moreover, their cumulative pass-through for instant access deposits is currently over 50%, up from 40% in Q1 and considering pricing changes made following the base rate hike to 5% in May. The company also generated more net lending growth in the quarter. Gross client loans increased across their three divisions. Mortgage balances increased when retail and private banking were combined. Among other updates, they introduced an SME switcher that targets firms with a turnover of up to $2.55 million, presenting an opportune moment for consumers to obtain a reduction or exemption in their banking charges potentially. We give Natwest Group PLC a ‘Hold’ rating with a revised target price.