NatWest Group PLC (LSE:NWG) confirmed the UK banking sector is in rude health as it followed Barclays PLC (LSE:BARC) by upgrading its outlook.
It did so on the back of a 26% increase in third-quarter profit, driven by expanded lending and stable profit margins despite declining central bank rates.
For the July-September period, the high ]-street lender, in which the British taxpayer still holds a 16% stake, reported a pretax profit of £1.7 billion, an increase from £1.3 billion the previous year and surpassing analyst predictions of £1.5 billion.
The bank adjusted its forecast for return on tangible equity to over 15% for this year, up from an earlier estimate of 14%.
NatWest’s quarterly results outperformed those of its major competitor, Lloyds Banking Group, which had also reported slightly better-than-expected third-quarter earnings earlier in the week.
"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," said Natwest CEO Paul Thwaite.
"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."
The early City reaction was positive. "Overall, these results should be taken well by the market," said Shore Capital, which repeated its 'hold' recommendation.
NatWest's return on equity (ROTE) was 18.3% in the third quarter and averaged 17% over the first nine months of the year, showing solid performance that makes the updated target look conservative, said Peel Hunt, which says 'buy' up to 410p.
With stock currently valued at 1.15 times the net asset value per share (now 316p, up 12p from last quarter), there is room for the share price to grow further, it added.