NatWest follows Lloyds in pushing up provisions for bad debts

NatWest posted third-quarter profits just below analysts’ expectations, as heavier provisions for bad debts outweighed a boost from rising interest rates.

The UK high-street bank announced group pre-tax operating profits of £1.1bn for its continuing operations in the third quarter on Friday, up almost 20 per cent year on year but missing consensus estimates of £1.2bn.

Like rival Lloyds on Thursday, NatWest took a larger than expected provision for future loan losses, which it said reflected changes in its view of the economy.

The lender took provisions of £247mn, above analysts’ estimates of £173mn and compared with a £242mn release of pandemic provisions in the same period last year.

“Although we are not yet seeing signs of heightened financial distress, we are very conscious of the growing concerns of our customers,” said chief executive Alison Rose, who added that the bank was “closely monitoring any changes to their finances or behaviours”.

Total income of £3.2bn, a 16 per cent increase from the same period in 2021 and in line with analyst forecasts, was driven by the rising interest rates that have boosted lenders across Europe.

The bank’s net interest margin, the difference between the interest it charges on loans and what it pays to consumers for deposits, rose from 1.54 per cent in 2021 to 2.99 per cent, slightly above analyst estimates of 2.94 per cent.

In its guidance for 2022, NatWest said that it expected group income for continuing operations to be about £12.8bn, compared with the £12.5bn it estimated at its half-year results.

Its net interest margin is now expected to be greater than 2.8 per cent, up from an expectation of being higher than 2.7 per cent at the end of the second quarter.