British high street lender NatWest Group PLC reported what it described as a strong set of numbers but profits still fell short of City expectations as bad loan charges from a worsening economic outlook took the shine off income boosted by rising interest rates.
Total income for the third quarter was £3.23bn, up from £2.68bn in the same period last year, while operating profit before tax was £1.08bn, up from £976mln but below analysts' expectations of around £1.2bn.
The CET1 ratio of 14.3% was flat when compared to the second quarter of 2022 as the attributable profit and reduction in risk-weighted assets (RWAs) was offset by accruals for foreseeable dividends and pension contributions.
The bank set aside an additional £242mln in the quarter to reflect the deteriorating picture, denting its profits.
The planned withdrawal from the Republic of Ireland through its Ulster Bank subsidiary led to a further charge on the mortgage book of some €419mln.
NatWest said it still expects to reach its return on equity target - a key measure of profitability - of 14-16% in 2023, but said the route to achieving that would be different as both income and costs increase amid rising interest rates and inflation.
The bank forecast 2022 income to be around £12.8bn with a net interest margin greater than 2.80% for full year 2022 in the Go-forward group.
NatWest Group chief executive Alison Rose, commented: "At a time of increased economic uncertainty, we are acutely aware of the challenges that people, families and businesses are facing up and down the country."
"Although we are not yet seeing signs of heightened financial distress, we are very conscious of the growing concerns of our customers and we are closely monitoring any changes to their finances or behaviours."