Nat-west's bad debts increased.

NatWest profits missed estimates in the third quarter as the bank took bigger than expected provisions against bad debts and warned of higher costs and a darkening economic outlook, sending shares down more than 9 per cent. The lender announced pretax operating profits of £1.1bn in the third quarter, up almost 20 per cent year on year but missing consensus analyst estimates of £1.2bn. However, in the longer term, said Ian Gordon at Investec, the uplift from higher inflation rates would support the bank’s guidance for 2023 of a return on tangible equity, a key measure of profitability, of 14 to 16 per cent. Total income of £3.2bn, a 16 per cent increase from the same period in 2021 and line with analysts’ forecasts, was driven by rising interest rates, which have boosted lenders across Europe.

The bank’s net interest margin, the difference between the interest it charges on loans and what it pays to consumers for deposits, rose from 1.54 per cent in 2021 to 2.99 per cent, slightly above analysts’ estimates of 2.94 per cent. The bank expects the net interest margin to be greater than 2.8 per cent, up from an expectation higher than 2.7 per cent at the end of the second quarter. NatWest shares closed down 9.2 per cent to 224.9p yesterday.

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