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(Alliance News) - NatWest Group PLC on Friday rounded off a week of surprisingly good UK bank earnings, swinging to a profit in the third quarter while saying credit provisions for the year will be at the lower end of a range previously guided.
Shares in the FTSE 100-listed lender were up 5.3% in London on Friday morning at 123.40 pence each.
For the quarter ended September 30, net interest income was down to GBP1.93 billion from GBP2.01 billion last year, and total income fell to GBP2.42 billion from GBP2.90 billion.
Banking net interest margin worsened to 1.65% from 1.97% the year before.
NatWest's cost-to-income ratio improved to 74.5% from 92.9% a year before, as operating expenses dropped to GBP1.81 billion from GBP2.70 billion.
The lender, formerly known as Royal Bank of Scotland Group, swung to an operating profit of GBP355 million in the third quarter following a loss of GBP8 million in the same period last year. Attributable profit was GBP61 million, improved from a GBP315 million loss last year.
The bank noted it put aside GBP900 million in the third quarter last year to cover a sharp rise in payment protection insurance claims - which was not repeated in the third quarter of 2020 as the deadline for claims has passed.
"These results demonstrate the resilience of our underlying business and the strength of our balance sheet in the face of significant continued uncertainty. Our sector-leading capital position, strong levels of liquidity and intelligent and consistent approach to risk mean we can continue to provide our customers and communities with the support they need," Chief Executive Alison Rose said.
NatWest booked a further GBP254 million provision for expected bad loans, which is up from GBP213 million a year before but down sharply from GBP2.06 billion in the previous quarter.
Looking ahead, NatWest said its full-year impairment charge is likely to be at the lower end of the GBP3.5 billion to GBP4.5 billion range following the limited level of defaults across lending portfolios and associated expected credit losses stage migration within the third quarter. It also expects risk-weighted assets to be below the previously guided range of GBP185 billion to GBP195 billion at the end of 2020.
Rose added: "Although impairments were relatively low in the quarter and we have seen some positive trends across our customer base, the full impact of Covid-19 remains very unclear. Challenging times lie ahead, especially as the current government support schemes come to an end and as new Covid-19 related restrictions are introduced."
The lender's CET1 ratio ended the quarter at 18.2% compared to 17.2% at June 30 and 16.2% at the end of 2019.
The bank's customer loan book finished the quarter at GBP353.7 billion, up from GBP352.3 billion three months earlier and up from GBP326.9 billion at the start of the year.
Deposits rose to GBP418.4 billion from GBP408.3 billion at June 30 and GBP369.2 billion at December 31.
In the nine-month period, NatWest's attributable loss stands at GBP644 million compared to a GBP1.72 billion profit the year before. Net interest income slipped to GBP5.78 billion from GBP6.01 billion.
By Paul McGowan; paulmcgowan@alliancenews.com
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