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British high street bank NatWest reported a 27 percent fall in first-quarter profits as the benefits of rising interest rates faded across the industry.
In results for the three months to March, the lender reported pre-tax operating profit of 1.3 billion pounds, compared with 1.8 billion pounds in the same period last year, in line with analysts’ expectations. Sales fell year-on-year to £3.5 billion, just above market expectations.
Its net interest margin – the difference between the interest it receives on loans and the interest rate it pays on deposits – rose overall at the group level to 2.05 percent from 1.99 percent in the previous quarter, but fell slightly to 2 at the retail level. 22 percent back bank due to lower margins and increasing competition in the mortgage market.
NatWest said net loans at its retail bank fell by £1.7bn as more customers paid off their mortgage balances early. Total gross new mortgage lending fell to £5.2 billion in the period, compared to £9.9 billion a year earlier.
NatWest, one of Britain’s largest retail banks, made provisions for bad loans worth £93m, well below the £186m expected by analysts, and reported a “strong performance” in its loan book.
“Despite inflationary pressures and the higher interest rate environment, default rates remain stable and low across the portfolio,” the bank wrote.
NatWest shares have risen more than 31 percent since the start of the year as the bank appoints a new CEO and chairman following a “debanking” scandal last year caused by the closure of politician Nigel Farage’s account at its private bank Coutts has appointed.
The British government, which rescued the bank during the financial crisis, remains its largest shareholder. However, the state stopped holding a controlling stake in NatWest last month after reducing its stake to below 30 per cent.
Chief executive Paul Thwaite said he was “pleased” with the reduction in state ownership.
“Returning NatWest Group to private ownership is a shared goal and we believe this is in the best interests of both the bank and all of our shareholders,” he said.
The government has announced that it will decide on a further sale of its shares – including to the public – in the summer.
The bank’s operating costs rose by £64m year-on-year to £2bn, due to a new Bank of England levy on balance sheets that came into effect in March to provide funding to the BoE, as well as higher staff costs due to the Wage inflation and severance pay costs.
Customer deposits rose 0.2 percent to 420 billion pounds, driven by retail banking growth that offset a 1.2 billion pound decline in commercial and institutional business.