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NatWest’s profits rose by more than a third in the first quarter even as it set more money aside to cover the cost of bad loans due to economic uncertainty triggered by Donald Trump’s trade war.
The British bank’s pre-tax operating profits rose 36 per cent to £1.8bn in the three months to March, compared with £1.3bn a year ago, beating analyst expectations of £1.6bn.
Revenues rose year on year to £4bn, with the improved financial performance driven by higher deposits in NatWest’s retail and commercial banking operations and increased mortgage lending activity.
The group set aside a higher than expected £189mn for bad loans in part due to “economic uncertainty”. That included a £78mn provision for its commercial bank, where NatWest said it was fielding “demand to support clients’ risk management and funding needs during volatile markets”.
However, the high-street bank said default levels remained “stable” across its portfolios. “In the face of increased global economic uncertainty, our customers remain resilient and we saw good levels of activity through [the first quarter],” said chief executive Paul Thwaite.
His comments come after Lloyds on Thursday revealed it had set aside more than expected to cover bad loans, after adding a £35mn provision to account for the fallout from US tariffs. Chief financial officer William Chalmers said the bank had relatively little exposure to businesses that export to the US, but was “vigilant for any potential second order impact” to the UK economy.
NatWest said that its net interest margin — the difference between the interest it receives on loans and the rate it pays for deposits — rose to 2.27 per cent, from 2.19 per cent in the previous three months as it increased its deposits and improved margins in its retail bank.
The bank is nearing a return to full private ownership, 17 years after its crisis-era government rescue, when it was known as Royal Bank of Scotland.
On Thursday, the Treasury said it had sold more shares in the bank, taking its holding to just under 2 per cent, down from 38 per cent in December 2023. It is expected to sell its remaining shares in the coming weeks.
Thwaite will have room to pursue growth more aggressively once the lender is free from government ownership and has signalled that he is open to acquiring new businesses.
The high-street lender has already bought the bulk of Sainsbury’s Bank and £2.5bn of prime residential mortgages from Metro Bank under his leadership and has discussed purchasing Santander’s UK retail business with the Spanish bank, the Financial Times previously reported.
Along with rival Lloyds, NatWest was among the signatories of a letter that last week called on the UK to abolish the ringfencing regime which requires banks with more than £25bn — soon £35bn — in deposits to firewall their retail operations from their investment banking ones.
The regime was designed in the wake of the financial crisis to prevent bailouts and protect consumers from being exposed to trading losses.
https://www.ft.com/content/9a3f4eef-e8c7-4993-ae88-6cf7eea73d01
