![]() Third-quarter results, however, showed that – when in doubt – investors still tend to penalise NatWest more than its domestic rival. The taxpayers stake in Lloyds Banking Group has been reduced to just under 20, raising 500 million for the Treasury. NatWest’s restructuring has been even more severe. The stock was down 9% in a day.Ĭompared with 15 years ago, Lloyds and NatWest are now very different animals in terms of the size and focus of their businesses, and their risk appetite in areas such as commercial real estate. ![]() We may monitor or record telephone calls to check out your instructions correctly and to help us improve the quality of our service. Partly because of the stigma of state ownership and the memory of past problems, a lack of clarity on the trajectory of NatWest’s cost base went down particularly badly in its third-quarter results. Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278. The bank’s full return to private ownership came after Lloyds reported its highest full year pre-tax profit in a decade in February and promised to increase dividends over the medium term. There is also no government share-sale overhang at Lloyds, whereas at NatWest there is the real risk that the government may dump a big chunk of shares on the market at any time. At the same time, Lloyds TSB renegotiated its takeover of HBOS to 0.605 Lloyds TSB shares for every one HBOS share, from 0.833 a month earlier. This will provide banks with some protection from the riskiest small business borrowers, as some of this borrowing is now state guaranteed.Īt a time of higher rates, NatWest’s bigger market share than Lloyds in small business customers – partly thanks to the quiet demise of its SME carve out, Williams & Glyn – is also of greater benefit than credit cards in terms of the cheap deposit base it brings.Īt NatWest, there is still the stigma of government ownership, even if this fell slightly below a majority early in 2022. Indeed, under former chief executive António Horta-Osório, Lloyds spent £1.9 billion buying credit card company MBNA in 2017, for example.īut the legacy of the government’s Covid-era Bounce Back Loan programme is one factor in NatWest’s favour. That is arguably partly because NatWest’s restructuring took longer.Īs Lloyds moved on from the previous crisis more swiftly, it was able to focus better on improving its returns, including in its trading book, and building up in areas such as unsecured lending and car loans, as Bank of America analyst Alastair Ryan notes. Rather, it would be primarily because Lloyds is less exposed to the benefits – and more exposed to the downsides – of higher interest rates. If Lloyds did less well than NatWest over the next few years, however, it would not just be because NatWest’s restructuring is almost over. Now, thanks to higher interest rates, they are expecting return on equity in the mid-teens, and many analysts (including those at Citi) are expecting more than 17%. In early 2022, NatWest’s management was still signalling a return on equity of barely more than 10% in 20. Third-quarter results showed that – when in doubt – investors still tend to penalise NatWest more than its domestic rival ![]()
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