(Bloomberg) -- NatWest Group Plc raised its outlook for the year after earnings beat estimates in the third quarter, helped by continued appetite for loans and tailwinds from the way it manages interest rates.
Shares in the bank rose to the highest in nine years after it reported an increase in operating profit before tax to about £1.67 billion ($2.2 billion), better than analysts’ expectations compiled by Bloomberg of £1.48 billion.
Net interest margin — a key measure of profitability that shows the difference between what a bank pays for deposits and collects on loans — was 2.18%, better than the previous quarter as the bank’s structural hedge helped protect the balance sheet from the first interest rate fall in four years. Net loans and deposits both rose.
Chief Executive Officer Paul Thwaite said that while impairments rose more than expected to £245 million and consumer confidence has taken a knock, troubled debts remained low. “Customers are proving very resilient, our credit books and asset portfolios continue to perform very well,” he told reporters on an earnings call.
NatWest has transformed into a mostly domestic lender since a government bailout during the 2008 financial crisis. The UK is still its biggest shareholder, with a stake of just under 16%, but this has reduced rapidly over the past couple of years. The bank continues to prune its costs, reducing headcount by 3.2% in the quarter.
Shares in the bank rose as much as 5.4% and reached the highest since July 2015, continuing a rally that’s buoyed many British banks this year.
NatWest’s upbeat statement comes after rival Lloyds Banking Group Plc beat earnings estimates earlier in the week, after its borrowers coped better than expected with repayments. Barclays Plc on Thursday upgraded its outlook for its UK business.
What Bloomberg Intelligence Says:
NatWest’s £14.4 billion raised 2024 revenue guidance, up from £14 billion, with ROTE lifted to more than 15% from above 14% may drive modest consensus upgrades. Slower deposits migration and structural hedges underpin a strong NIM outlook (8-bp beat in 3Q) as CET1 of 13.9% ticks growth and payouts boxes.
— Tomasz Noetzel, BI banking analyst
NatWest 2Q Beat, Upgraded Guidance, Metro Deal Tick Boxes: React
(Updates with share price move, CEO comments throughout)
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