Reaction: RBS owner NatWest upgrades FY expectations after 'mixed' Q3 performance

Royal Bank of Scotland (RBS) parent NatWest Group has upgraded expectations for the year as its mortgage book grew and chief executive Alison Rose said it is seeing "no signs" of families in added financial distress.

The lender has revealed that it expects to make £12.8 billion in total income for the financial year, up from £12.5bn in previous forecasts. The company's retail arm lent £11bn in new mortgages in the three months to the end of September, nearly £3bn higher than this time last year, and up 12 per cent from the previous quarter. It comes as the economy has been put under extra strain since the start of the year.

Yet Ms Rose said that while customers are worried, their pain is not yet showing up in the bank's books. "At a time of increased economic uncertainty, we are acutely aware of the challenges that people, families and businesses, are facing up and down the country,” she said.

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"Although we are not yet seeing signs of heightened financial distress, we are very conscious of the growing concerns of our customers, and we are closely monitoring any changes to their finances or behaviours. The bank's strong capital and liquidity mean we are able to help those who are likely to need it the most."

The bank, which rebranded from RBS Group in 2020 and earlier this month announced that it was closing 43 bank branches across the UK, said it had passed on around 25 to 30 per cent of the increased interest rates to savers since the last quarter of 2021. Total income reached £3.23bn in the third quarter of the year, up from £2.7bn a year before, and just surpassing expectations. Pre-tax operating profit hit £1.1bn, up from a little under £1bn a year earlier.

Ms Rose added: "In a challenging environment, NatWest Group continues to deliver a strong financial performance; supporting our customers, responsibly growing our lending and making significant investments to transform the bank."

Michael Hewson, chief market analyst at CMC Markets UK, said the third-quarter numbers “are a reminder if any were needed of how vulnerable banks are to the economic winds blowing through the economy, after the bank posted a modest Q3 attributable profit of £187m, a sharp drop from the £1bn profit in Q2”.

Richard Hunter, head of markets at interactive investor, commented “NatWest has rounded off the banks’ reporting season in mixed fashion, with some enforced financial writedowns blotting the overall copybook. There are similar themes throughout the release to the rest of the sector. The bank has felt the need to take a conservative approach to the possibility of bad debts, even though at present there is little sign of customer behaviour switching towards default.

The RBS owner said pre-tax operating profit hit £1.1 billion, up from a little under £1bn a year earlier. Picture: Daniel Leal/AFP via Getty Images.The RBS owner said pre-tax operating profit hit £1.1 billion, up from a little under £1bn a year earlier. Picture: Daniel Leal/AFP via Getty Images.
The RBS owner said pre-tax operating profit hit £1.1 billion, up from a little under £1bn a year earlier. Picture: Daniel Leal/AFP via Getty Images.

“In terms of the share price, the bank’s considerable strength has enabled it to weather the storm more favourably than most of its peers. Prior to today, the shares had fallen just 1 per cent over the last year, as compared to a decline of around 2.5 per cent for the wider FTSE100, and the last six months had seen a tentative recovery… for the longer term the shares remain the preferred play in the sector, with the market consensus still coming in at a strong buy.”

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