The group said that the quality of its loan book remains “robust, not seeing signs of deterioration” with a “significant weighting to secured mortgage lending”.
Attributable profit at NatWest stood at £187m in Q3, with a return on tangible equity of 2.9% and 12.1% excluding Ulster Bank Republic of Ireland.
Excluding notable items, income in the Go-forward group increased by £923m, or 36.8%, compared with Q3 the previous year, which the group says “principally reflects the impact of volume growth, increased transactional-related fees and yield curve movements”.
Bank net interest margin of 2.99% was 27 basis points higher than the previous quarter, which was driven by the impact of base rate rises.
Other operating expenses in the Go-forward group were £87m, or 1.8%, higher for the year.
NatWest says it remains on track to achieve its 2022 cost reduction target of around 3%.
A net impairment charge of £242m in the Go-forward group in Q3. The lender suggests that this “principally reflects the revision of scenario weightings, with more weight being placed on the downside scenario, and not due to underlying book performance where conditions continue to be benign”.
Total Ulster Bank RoI including discontinued operations reported a loss of €652m in the quarter, which included a €419m loss associated with the reclassification of Ulster Bank mortgages to fair value.
Meanwhile, NatWest says it expects 2022 income excluding notable items to be around £12.8bn in the Go-forward group and it predicts that the net interest margin will be greater than 2.80% for the full year 2022.
In 2023, the group says it expects to achieve a planned return on tangible equity in the range of 14 to 16%.
However, reflecting changes in the economic outlook since the first half of 2022, the composition of those returns will be different such as income being higher supported by increased interest rates.
The group also says it no longer expects costs to be broadly stable given increased inflationary pressures.
With its loan book performing well, NatWest says it remains comfortable with the through-the-cycle impairment loss rate guidance of 20 to 30 basis points, including in 2023.
NatWest Group chief executive Alison Rose says: “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.”
“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.”
