By Iain Withers and Lawrence White
LONDON (Reuters) -NatWest confirmed Paul Thwaite as its permanent chief executive on Friday and reported forecast-beating profit for 2023, as the British bank gears up for a crunch sale of state-owned stock after a scandal-hit year.
The bank's shares climbed 6%, as investors welcomed a 20% rise in profit and clarity on the top job, and took in their stride lower returns guidance due to a gloomy UK economic outlook.
Thwaite, who became interim CEO last July following the abrupt departure of predecessor Alison Rose, will have to repair the group's reputation after a damaging row with former Brexit Party leader Nigel Farage over closure of his accounts that forced out Rose and wealth boss Peter Flavel.
Thwaite, the former business banking boss, will also prepare the ground for a planned retail sale of government-owned stock in the bank - which remains 35% taxpayer-owned after its 45.5 billion pound bailout in the 2008-9 financial crisis.
The sale is a key part of finance minister Jeremy Hunt's plans to try to reinvigorate interest in investing in British stocks, and could take place as early as June.
Thwaite said he was "ambitious and confident" about the future for NatWest, adding that it was up to the government to determine the timings of any retail sale and any discount offered to the stock's market price.
'KITCHEN SINK'
NatWest's results provide an early picture of how Britain's major banks are faring in tough conditions, after official data this week showed Britain entered a recession in late 2023. Barclays, HSBC and Lloyds (LON:LLOY) report results next week.
NatWest's pre-tax profit of 6.2 billion pounds ($7.8 billion) was its biggest since its state rescue, as higher central bank interest rates continued to lift lending revenue.
But increased risk of cash-strapped borrowers defaulting on loans and pressure from fiercer competition for savings and mortgage products are eating into margins.
The bank reduced its returns target for 2024 to around 12%, much lower than an earlier goal of 14%-16% and the 17.8% achieved last year, citing an expected reduction in interest rates as well as the challenging economic outlook.
But analysts at Citi said the guidance was being viewed as "wildly conservative", providing Thwaite with a bar he could later meet or clear. Analysts at Goldman Sachs said the overall update had "the feel of a kitchen sink", where everything was thrown in.
NatWest set aside 578 million pounds for potential soured loans, up from 337 million pounds the prior year - but the figure came in below analysts' forecasts.
The bank said its staff bonus pool shrank to 356 million pounds from 368 million the year before, which it said reflected the fact it had missed some financial targets.
NatWest also announced, as expected, a share buyback of 300 million pounds, as well as a final dividend of 11.5 pence per share.
($1 = 0.7944 pounds)