NatWest upgrades income forecast as mortgage lending soars

The bank told shareholders on Friday that it expects to make £12.8bn in total income for the financial year, up from £12.5bn in previous forecasts.

It comes as interest rates increased for mortgage holders – and others – up and down the UK. However, 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 compared to the previous quarter. It comes as the economy has been put under extra strain since the start of the year, with mortgage rates rapidly increasing in a bid by the Bank of England to try to control inflation.

However CEO Alison 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.

“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,” she said.

“The bank’s strong capital and liquidity mean we are able to help those who are likely to need it the most, through support for our community partners, proactive outreach to our customers or targeted lending packages for the most impacted sectors.”

The bank said that it had passed on around 25 per cent 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.”

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.

"The planned withdrawal from the Republic of Ireland through its Ulster Bank subsidiary has led to a charge on the mortgage book of some €420m. In addition, NatWest has succumbed to the necessity of making bad debt provisions in line with most of its peers. Whereas the group bucked the trend in the second quarter by releasing £18m of provisions, for this quarter a charge of £242m has been made. This leaves the cumulative figure for this year as a provision of £193m which compares to a release of £904m in the corresponding period last year, and the £1bn swing has affected overall numbers.”

He added: “The economic outlook in the UK, which is likely to deteriorate from an already likely recessionary environment, will put more pressure on the banks’ customers, for both individuals and companies alike.”