NatWest Falls as Rising Prices Force it to Trim Cost-Cutting Aim

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NatWest Falls as Rising Prices Force it to Trim Cost-Cutting Aim

By Dhirendra Tripathi – NatWest Group stock (LON: NWG ) traded 2.2% lower in London Friday after the lender lowered its cost-cutting target, citing rising prices for the decision.

A final dividend of 7.5 pence and promise to pour in another 750 million pounds ($1.02 billion) in share buyback didn’t reverse the erosion in the stock price.

The U.K.’s biggest corporate lender reduced its annual cost-cutting target to 3% from 4% for each of the next two years, citing inflation pressures and reinvestment. The revision comes even as NatWest met the 4% cost-cutting target for 2021.

“It seems certain that inflation will continue to increase in the short term at least – especially as energy prices remain high. And we are yet to see the full impact that the end of government support schemes will have on the employment or housing markets,” NatWest said in a statement after disclosing its annual numbers .

The bank grew its net interest income as lending rates hardened while the economy stayed strong. It expects the net interest margin – derived out of the difference between lending and deposit rates – to improve in the current year.

Recovery in the economy translated into healthier assets, allowing the bank to release funds set aside to meet contingencies. In the fourth quarter, NatWest released another 341 million pounds.

Operating profit before tax was 635 million pounds, with mortgage demand and customer deposits growing.

According to Reuters, the bank expects its income to grow to 11 billion pounds this year, up from 10.5 billion pounds in 2021.

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