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UK bank NatWest has reported a 25.7 per cent rise in quarterly profits and upgraded its forecasts for the year thanks to improved margins and growth in its lending and deposit base.
Pre-tax operating profit in the three months to September was £1.7bn, compared with £1.3bn in the same period last year and above analyst expectations of £1.5bn. Revenues rose to £3.7bn, slightly above forecasts.
The bank now expects its return on tangible equity — a key measure of profitability — to be above 15 per cent this year, compared with a previous forecast of 14 per cent.
Its net interest margin — the difference between the interest it receives on loans and the rate it pays for deposits — rose from 2.1 per cent to 2.18 per cent quarter on quarter thanks mainly to deposit margin growth as it increased its deposit base by £2.2bn in the quarter.
Loans at its retail bank grew 2 per cent in the quarter after its purchase of a £2.3bn loan book from rival Metro Bank.
Chief executive Paul Thwaite said: “Throughout the third quarter of 2024, we have grown our lending, helping customers to buy or remortgage their homes or to start and grow their businesses.”
He added that customer activity was increasing, defaults remained low and that there was optimism among businesses and consumers.
However, NatWest also set aside £245mn in provisions for bad loans, higher than expectations of £173mn, and flagged a rise in troubled commercial and institutional loans in particular.
NatWest’s commercial bank said it had increased its exposure to commercial property and financial institutions this year and reviewed the situation regularly with “with particular focus on sector clusters deemed to represent a heightened risk”.
NatWest said its overall levels of loan default remained “stable and at low levels”.
The UK government bailed out Natwest’s predecessor RBS at the height of the 2008 financial crisis, but the state now owns less than 16 per cent, down from about 38 per cent last December.