NatWest Reports Stronger-Than-Expected Results Amid Competitive Market

NatWest, the UK's largest lender to small and medium-sized businesses, has announced a set of financial results that exceeded expectations, prompting an upward revision of its profit forecasts for the year. Although profits were down nearly 16% compared to the same period last year, this decline was anticipated due to fierce competition in the mortgage and savings markets, with customers increasingly seeking better rates. Notably, the bank's net interest margin (NIM) for the quarter ending June was 2.1%, surpassing the 2.05% recorded in the previous quarter. Investors were further encouraged by a significant reduction in loan impairments, which fell from £223 million last year to £48 million this year. The return on tangible equity (RoTE) for the first half of the year was reported at 16.4%, down from 18.2% year-on-year but still above expectations. The bank also saw an increase in its customer base by 200,000 and a rise in its share of the credit card market from 8.5% to 9%. Chief Financial Officer Katie Murray noted that customers are managing higher interest rates well, with low arrears and a trend of paying down mortgage debt. In response to these results, NatWest raised its half-year dividend by 9%, leading to a more than 6% increase in share prices, reaching levels not seen since February 2015. The bank's market value now stands at £28.2 billion. Murray expressed optimism about the UK economy's performance, suggesting that interest rates may decrease in the coming months, with expectations of five cuts next year. While NatWest's progress is attributed to its own strategies, the bank's leadership emphasized the importance of the broader economic context. Mr. Thwaite highlighted the government's decision to reduce its stake in the bank and expressed support for returning NatWest to private ownership. The recent acquisitions of Sainsbury's Bank and Metro Bank's mortgage portfolio have raised questions about whether these moves are defensive strategies aimed at expanding market share amid challenging organic growth conditions.