Lawrence White
LONDON (Reuters) – British bank NatWest’s first-quarter profit fell by a less-than-expected 27%, it said on Friday, with revenue falling due to increased competition in savings, lending and mortgage products over the past year.
Rising central bank interest rates, along with politicians and the media’s focus on the rates banks pay depositors, have left fewer customers with fewer deposits while they hunt for higher-paying products.
NatWest’s pre-tax operating profit for the three months to March 31 was 1.3 billion pounds ($1.63 billion), down from 1.8 billion pounds a year earlier and slightly above the average analyst forecast of 1.2 billion pounds.
Despite the challenges, the results showed NatWest is in relatively poor health as it prepares to return to full private ownership for the first time since the 2008 financial crisis.
The company’s shares rose 3.5% to 300p in early trading and are up almost a third this year.
“NatWest is the best of the bunch. Lloyds and Barclays led the way this week and NatWest certainly did not disappoint with first quarter results that almost completely beat expectations,” said Hargreaves Lansdown analyst Matt Britzman.
Barclays reported a slightly smaller-than-expected 12% fall in first-quarter profit, while Lloyds Banking Group’s (LON:) pre-tax profit fell 28% in line with expectations.
“While macroeconomic uncertainty remains, customer confidence and activity are improving, with lending and deposits rising this quarter and impairments remaining low,” NatWest chief executive Paul Thwaite said.
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The bank’s net interest margin, a closely watched measure of lending profitability, rose to 2.05% after three straight quarters of declines.
NatWest is seeking to end what its chairman this week described as the “sad story” of public ownership since the global financial crisis. The company is buying back shares while the government is considering further sales to retail investors to reduce its stake to almost 29%.
Prospects for the sale have been boosted by the bank’s strong recent performance and signs it is emerging from economic difficulties in the UK.
Loan impairments, closely watched as Britain struggles to break out of economic stagnation, totaled 93 million pounds in the quarter, compared with analysts’ expectations of 186 million pounds.
($1 = 0.7998 pounds)