{"id":105755,"date":"2026-08-18T07:15:29","date_gmt":"2026-08-18T07:15:29","guid":{"rendered":"https:\/\/www.europesays.com\/britain\/105755\/"},"modified":"2026-08-18T07:15:29","modified_gmt":"2026-08-18T07:15:29","slug":"natwest-turns-to-buybacks-to-boost-its-yield","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/britain\/105755\/","title":{"rendered":"NatWest turns to buybacks to boost its yield"},"content":{"rendered":"

Few UK companies in recent years will have pleased income investors as much as NatWest (NWG)<\/a>. The high street lender, which pledges to pay out around 50 per cent of its earnings as an annual ordinary dividend, more than tripled its dividend per share between 2021 and 2025 as profits surged thanks to rising interest rates and management\u2019s streamlining of the business. <\/p>\n

Such barnstorming growth is unlikely over the next four years, but there is still plenty to interest income investors, as demonstrated by the recent 25 per cent increase in NatWest\u2019s interim payout. <\/p>\n

Dividend policy: To pay out 50 per cent of attributable profits as an ordinary dividend and return surplus capital via share buybacks.<\/p>\n

Yield: 5.3 per cent\u00a0<\/p>\n

Payment: Semi-annually<\/p>\n

Last cut: 2020<\/p>\n

Analysts are forecasting 10 per cent annual earnings growth through to 2028 as the bank continues to simplify its cost base while growing its balance sheet. This should drive similar growth in dividends per share, implying a 2028 dividend yield of 6.4 per cent, up from just over 5 per cent this year. <\/p>\n

Share buybacks are another driver of per-share growth in earnings and dividends, with NatWest about halfway through its current \u00a3750mn programme, according to Modular Finance. The remaining portion equates to around 0.5 per cent of its market cap. <\/p>\n

The company had signalled a pause in repurchases following its \u00a32.7bn acquisition of wealth manager Evelyn Partners, which completed in June. But management recently brought forward its guidance for the next buyback to the group\u2019s full-year results next February, having previously suggested that July 2027 would be more likely. Any intermission between programmes will be brief. <\/p>\n

Chief executive Paul Thwaite attributed this to the bank\u2019s first-half performance, in which adjusted pre-tax profit beat analysts\u2019 expectations by around 10 per cent.<\/p>\n

Analysts are not anticipating a bumper buyback announcement in February, with most pencilling in \u00a3500mn, or a modest 0.7 per cent of market cap. Factor in the dividend, and NatWest\u2019s total yield rises to a shade under 6 per cent. Further buybacks are forecast later in 2027, which would push the yield higher still.<\/p>\n

\"Bar<\/p>\n

\u201cWe certainly see good value in buying back our shares where they currently are,\u201d said Thwaite at the end of July, even as the bank\u2019s valuation approaches twice its tangible book value, a level unthinkable half a decade ago.<\/p>\n

Analysts are currently pencilling in a further \u00a33.5bn of cumulative buybacks during 2028 and 2029, according to FactSet. But there are a few factors that could derail this. The first is if NatWest\u2019s organic growth exceeds expectations, increasing the capital that regulators require it to retain on its balance sheet. <\/p>\n

The company wants to grow its combined customer loans, deposits and wealth assets by at least 4 per cent annually. These grew by a healthy 3 per cent in the first half of 2026, excluding the Evelyn acquisition. <\/p>\n

The second is if NatWest whips out its own cheque book again, having purchased books of business from Sainsbury\u2019s (SBRY) and Metro Bank (MTRO) in recent years, on top of the Evelyn acquisition. Thwaite says his priority is \u201cvery much on the successful integration of Evelyn\u201d, suggesting this is unlikely. <\/p>\n

The final potential stumbling block is if regulators or policymakers decide to take a cut of NatWest\u2019s surplus capital. Trade unions and others have been campaigning for the government to restore the bank tax surcharge to its previous level of 8 per cent, up from 3 per cent currently. There are few signs of it agreeing so far, but if chancellor John Healey finds himself scrambling for revenues ahead of the Budget on 28 October, the temptation may prove too great. <\/p>\n

NatWest currently assumes that it will require a further \u00a31.3bn of regulatory capital once the Basel Committee\u2019s latest round of banking reforms take effect on 1 January. Should these be delayed or watered down, that may instead be allocated to shareholders.<\/p>\n

Alternative<\/p>\n

NatWest\u2019s larger peer HSBC (HSBA) has itself recently restarted buybacks via a $1bn (\u00a3740mn) programme announced on 4 August. It had paused these in the wake of last autumn\u2019s \u00a310bn buyout of Hang Seng Bank. Analysts had expected something closer to $2bn.<\/p>\n

Like NatWest, HSBC prioritises paying out 50 per cent of profits as an ordinary dividend, with one-off revenue and cost items excluded. This implies a 4 per cent dividend yield for 2026. The bank\u2019s simplification drive has continued apace in recent weeks, and it has sold assets in Singapore, Australia and Egypt. Further such divestments could result in some attractive one-off distributions.<\/p>\n

The IC Income Majors 2026<\/p>\n","protected":false},"excerpt":{"rendered":"Few UK companies in recent years will have pleased income investors as much as NatWest (NWG). The high…\n","protected":false},"author":2,"featured_media":105756,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[21386],"tags":[320,21178,7955,44159,703,702],"class_list":["post-105755","post","type-post","status-publish","format-standard","has-post-thumbnail","category-natwest","tag-ftse-100","tag-income-investing-dividends","tag-natwest","tag-special-reports","tag-standard-article","tag-stocks-shares"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/117115284544691045","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/105755","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=105755"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/105755\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/105756"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=105755"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=105755"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=105755"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}