NatWest profit in line as cost beat offsets net interest income miss

NatWest Group PLC on Friday reported broadly in-line third-quarter results, with lower-than-expected costs offsetting higher impairments and a slight miss on net interest income.

In response, shares in the Edinburgh-based lender were down 5.9% at 598.00 pence each in London on Friday.

NatWest said operating pretax profit rose 1.9% to £2.23 billion in the third quarter ended September 30 from £2.18 billion a year earlier, just ahead of £2.20 billion consensus.

Profit attributable to ordinary shareholders fell 4.1% to £1.53 billion from £1.60 billion.

Total income increased 7.1% to £4.64 billion from £4.33 billion in line with consensus.

Within this, net interest income grew 8.9% to £3.56 billion from £3.27 billion, missing £3.61 billion consensus.

Net interest margin was 2.50% in the quarter compared to 2.37% the year before.

Impairments picked up to £277 million from £153 million a year ago, and were ahead of £235 million consensus.

The cost-to-income ratio improved to 45.1% from 45.8% on-year, supported by gross cost savings of around £420 million. Operating expenses climbed 7.1% to £2.14 billion from £2.00 billion on-year, with 'other' operating expenses of £2.09 billion, better than the £2.15 billion consensus.

Return on tangible equity was 21.6% compared with 22.3% a year earlier, while its common equity tier one capital ratio ticked up to 13.5% from 13.2% at the end of June.

Chief Executive Paul Thwaite called it "another strong performance" and said the lender continues to see "broad-based growth in our three customer franchises, with lending, deposits and assets under management all increasing during the quarter."

The CEO added: "We are confident in the strengths we've created and in the opportunities we see ahead, as we continue to invest in our capabilities, deepen customer relationships and support growth across the UK."

NatWest reaffirmed its full-year outlook and now expects risk-weighted assets of around £210 billion on January 1, 2027, including the impact of Basel 3.1.

It continues to forecast full-year revenue of around £17.9 billion ex-notable items and a return on tangible items of more than 19%.

NatWest did not announce a dividend or share buyback on Friday in line with expectations.

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