NatWest shares surge as Q3 profits climb 26%, driven by robust lending growth

Shares in Natwest Group saw a significant surge today after announcing its third quarter profit had jumped by 26%, propelled by a robust performance underpinned by its lending operations.

For the third quarter of 2024, the banking giant reported an operating pre-tax profit of £1.7bn, marking a substantial increase on the £1.3bn posted in the same period last year, as reported by City AM.

Investors greeted the news with optimism, as evidenced by Natwest's share price leaping nearly five per cent at market opening.

The 'Big Four' bank enjoyed an increase in total income excluding notable items to £3.77bn, up by over five per cent from the preceding quarter, largely due to lending expansion, boosted deposits and an improved net interest margin (NIM).

Other operating expenses were down £144m in comparison to the previous quarter but stood £38m higher, discounting charges linked to a retail share offering, than during the corresponding quarter in 2023.

Impairment losses recorded by the bank amounted to £245m, with loan defaults "remaining at low levels" across the portfolio.

In terms of lending activity, net loans extended to customers, not counting central items, climbed £8.4bn, supported by a £2.3bn purchase of Metro Bank's mortgage portfolio complemented by growth across all segments of the bank's business.

Significantly, mortgage balances swelled by £1.4bn throughout the quarter. Likewise, customer deposits, taking out central items, experienced a £2.2bn influx, with savings accruing across each of the business's units.

The banking group has expressed a commitment to adapt to changing economic landscapes by keeping a close watch on market shifts and revising its internal forecasts as necessary.

Natwest has set its sights on achieving a return on tangible equity greater than 15% by 2024, with anticipated income, excluding notable items, expected to reach around £14.4bn.

The group anticipates stable operating costs for the year, setting aside litigation and conduct-related expenses, although it expects some increases due to bank levies and the costs associated with a retail share offering.

Paul Thwaite, the Chief Executive, commented on the company's performance: "Throughout the third quarter of 2024, we have grown our lending, helping customers to buy or remortgage their homes or to start and grow their businesses."

He further noted the company's strong position, saying, "With customer activity increasing, defaults remaining low and optimism amongst businesses and consumers, we are well placed to succeed with our customers and for our shareholders in the months and years ahead,".

Meanwhile, Matt Britzman, Senior Equity Analyst at Hargreaves Lansdown, remarked, "NatWest marks the third major UK bank to report better than expected results this week, but this time it's not driven by impairments."