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British bank NatWest reported a 25.7% rise in quarterly profit due to improved margins and growth in its loan and deposit base, raising its outlook for this year.
Pre-tax operating profit for the three months to September was 1.7 billion pounds, compared with 1.3 billion pounds in the same period last year, and above analysts’ expectations of 1.5 billion pounds. Sales rose to £3.7bn, slightly above expectations.
The bank now expects its return on tangible equity, a key measure of profitability, to exceed 15% this year, compared with its previous forecast of 14%.
Net interest margin (the difference between interest received on loans and interest paid on deposits) rose from 2.1% to 2.18% quarter-on-quarter, primarily due to higher deposit margins as we increased our deposit base by £2.2bn. In a quarter.
Its retail banking lending rose 2% in the quarter after it acquired a £2.3bn loan book from rival Metro Bank.
CEO Paul Thwaites said: “Throughout the third quarter of 2024, we expanded our lending to help customers buy homes, remortgage or start and grow their businesses.” .
He added that customer activity is increasing, defaults remain low and there is optimism among businesses and consumers.
However, NatWest has also set aside provisions for bad debts of £245m, higher than expected by £173m, and has warned of an increase in particularly troubled commercial and institutional loans.
The NatWest-owned commercial bank said it had increased its exposure to commercial property and financial institutions this year and regularly reviewed the situation with a “particular focus on sector clusters deemed to be at increased risk”.
NatWest said overall loan default levels remained “stable and low”.
The UK government rescued NatWest’s predecessor RBS at the height of the 2008 financial crisis, but its stake in the country now stands at less than 16%, down from around 38% in December last year.
